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2007-06-07 15:12:00

Economic News You Can Use

Balance in all things, right? You would think the nationwide housing market is plunging off a dark cliff or drowning in a cauldron of debt, never to be heard from again. I am guilty as well, because I have been writing and talking extensively about the effect of all the bad loans out there.  This subprime meltdown will indeed roil the real estate markets for quite some time.

Spring’s just around the corner, despite the spate of bloody newspaper headlines trumpeting homebuilders losing money, homeowners getting foreclosed on and mortgage companies laying off tens of thousands. Oh, and by the way, the economy also is taking a major hit.

My long-term scope seeks to restore calm to the stormy sea of a tumult forecasting real estate Armageddon. 

It is true that in many of the formerly white hot areas of Las Vegas, Phoenix, Florida and the many areas of the East and West Coast, real estate prices have taken a major hit. In many these areas, there are two to three time as many houses for sale than a year ago at a time when buyer demand is stagnant, sales are off 30-40%, and it is  taking much longer to sell a house.

Many over-encumbered speculators, who thought they were investors, thought real estate would go up forever. You cannot refinance yourself to prosperity, trust me, I know since I wrote the book on debt. My book, “Real Estate Debt Can Make You Rich”, is selling quite well on www.amazon.com and most of you know my book publisher, McGraw-Hill, wants me to write another book on real estate investing. Thank you for your tremendous support.

You would be amazed at the anguished calls I get from:

Troubled homeowners who refinanced their houses to the hilt and now there is no equity. Now I give advice on how to do a short sale and how to talk to their lender’s loss mitigation departments.

  • First-time homebuyers who got talked into loans they did not understand so now their house payment will soon double. They will walk away.
  • House flippers left holding houses they can’t sell and cannot rent for anywhere close to the holding costs. You go to be a real pro to flip in this market.
  • Adjustable rate loan holders who are unable to get out of their loans because their predatory lender saddled them with a massive prepayment penalty.

We are helping many of you get into safer loans. Alas, for many it is too late. Lenders are ramping up their loss mitigation/foreclosure departments to get ready for the flood.

I could go on ad infinitum about all the real estate blood on the streets as I stay on top of most real estate markets. I hear all the bad news. (I often get calls from TV and radio producers asking me to comment on the latest bearish housing data). Despite the fact house prices are going down nationally for the first time since The Great Depression; let’s reason out just some of the reasons why long term buy-and-hold real estate investing will be the investor’s friend far into this century:

  • Despite what you hear, well located houses in areas of high jobs growth will continue to be in short supply.
  • As inflation continues to raise its ugly head, real estate with fixed rate loans will avoid the value of your dollars being eroded.
  • We will be one hundred million more. By 2040, the US Census Bureau says this country will be at 400 Million. In California, we are growing by 400,000 people a year.
  • These 100 million will join the decades-old trend of relocating to the desirable areas of high job growth.

The stage is being set for the next boom. The longer a housing market stagnates; buyer demand for housing becomes pent up. As house prices come down, loan payments usually get cheaper. Rents are going up in most areas (5.4% in California) and so are personal incomes (4.4%-4.8% in California).

Renters, who will be making higher salaries, will start to see a house payment as not out reach. They will get tired of the landlord raising the rent and, when they start buying houses and condos again, this will predict the next up-surge in prices.

Are you ready?

If you want to view some of the T.V. spots I did while I was at Harvard, here are the links:

Fox News
New England Cable News Network

(Steve Dexter is the author of Real Estate Debt Can Make You Rich. He is also a loan officer licensed in AZ, CA, CO, CT, DC, FL, HI, ID, MD, MI, MN, NV, OR, UT, VA, WA. He recently appeared on "First Business Today", a televised business program that appears in 164 national and international markets.)

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