Has the real estate market bottomed? No, nope, not a chance. We are through 1 of 3 storms and have a crippled economy and really high unemployment. The good news is that we are through the worst. With terrible times come tremendous opportunities. After the last up cycle where everything went way higher then it should have, this had to happen. It is inevitable. If you are like me, you see the next 3-5 years as the opportunity of a lifetime. Here is why.
Storm 1 – We have survived the 1st wave of foreclosures. Properties in some areas dropped 40% and the inevitable correction has begun.
Storm 2 – A 2nd wave of foreclosures is on it’s way and will do the same. Only now home values are already much lower so drastic home value declines are unlikely. This will however impact home values negatively and keep them down for some time, hopefully a plateau for a few years. This chart shows that delinquent mortgages are much higher in 2009 then in 2008 and the previous 3 years.
Storm 3 – The interest rate hike. It is coming. The Fed will eventually raise rates to fend off inflation. This will increase mortgage payments, decrease cash flow, operations and returns and people will not be able to afford as much home with the higher payments. Result? A negative impact on home values.
You can look at this outlook as depressing or exciting. I strongly advise the later. The next 3-5 years there are going to be tons of distressed properties and opportunities to cherry pick from. In 30 years we will look back and say “Remember when we could buy property for nothing.” Will that time is the next 3-5 years. So savvy investors get ready. We are through the worst part, now get out there and make it happen!
For those of you who want to see it broken down by State, here you go.
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Article Author: Ryan MoellerRyan has written 45 articles for us.
Visit Ryan's Website: http://www.realreturnrealestate.com
Ryan is the founder of Real Return Real Estate™ , a company focused on buying property at extreme discounts, selling and renting with cash flow.
Joshua Dorkin
{ 7 comments… read them below or add one }
This is especially encouraging news for me as I’ve been out of the hunt for property for about the last year or so due to volatile personal issues. Now that my wife and I are finally back in position to acquire properties again, it’s a sigh of relief to us that it’s not too late to take advantage of the historic buying period we’re in. Best wishes to all of you!
It is coming. The Fed will eventually raise rates to fend off inflation.I will look forward to some cheap investments here in the near future.
I’m looking forward to returning to investing in homes again. I took a little break the last couple of years.
Good post Ryan. The next 3 to 5 years should set us up for the next 30 to 50 years!
I could not agree with you more Winston. Savvy investors will be set. Many will struggle with financing and some will buy wrong and speculate. I think the savvy investors that will find the most success with buy well under value, with strong cash flow and multiple exit strategies.
.-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.
Thanks for the nice article. The home for sale in Portland Oregon are starting to level off and in many neighborhoods there is an incline of sold homes.
As you mentioned, the foreclosure rate is huge and short sales are popping up everywhere, and the graph you provided is cool. The tax credit extension will hopefully work out the housing market. Thanks again, this was a good read.
Kevin Levy
M Realty
Kevin’s latest Blog:
http://relocationtoportland.com/2009/10/31/irvington-realtor/
Hey Kevin,
The tax credit seems to be helping but I consider that artificial demand from a govt program. Once banks start loosening up and lending the demand will increase. Economic news seems to be improving too so demand should increase. The supply over the next 3-5 years should still be much more than the demand which means field day for savvy investors. My hope is that the market stays at the bottom for 5 years so we can cleanup. That is not realistic but there will be tremendous opportunities for the next 5 years. Hopefully we will never see a boom so dramatic or a bust so brutal again.
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