One of the things I always try to be conscientious to is herd mentality. Recognition of herd mentality and the pure luck of a well timed divorce kept me from investing in real estate in 2007 and waiting until 2008 when I could get property at 20% of 2007 prices. Recognition of herd mentality also pushed me to start flipping a rental here and there in the past couple years when post sub prime fallout out, everyone thought the answer was in buying steady, secure, cash flowing rental properties rather than flipping. There's a new herd mentality and you can see it by reading what the majority of posts assume here and any other place on real estate investing is discussed. It's the assumption of recovery. Just like everyone assumed in 2006 that every flip could be profitable (look in the old posts on here - it's in there) everyone is assuming that these new lows in real estate pricing are just waiting for a market correction to bring them back up. That may be true but it's to the point now that your barber can tell you REOs are a good investment. When your barber can give you just as good investment advice as a financial professional that's not a good thing. What if things don't change? What if these prices are the new norm for real estate? Are you mentally ready for that? Is your business ready for that? What are you doing to be ready for the chance that the herd mentality is wrong? What's your attitude, plan and strategy going to be?

Historically, Real Estate has provided gains pretty much equivalent to pure inflation, though not along the same curve. Given the scarcity and the integrity of the underlying asset involved (land), this will most likely continue forever (in many economist's opinions). For a long time (the past 50 years or so, inflation adjusted home prices diverged significantly from nominal prices, but in the past 25 years, the curves have started to converge, and are now pretty much aligned: http://mysite.verizon.net/vzeqrguz/housingbubble/ In my opinion, if you believe inflation is a given over the long-term, then you should assume that real estate will appreciate over the long-term. If you believe deflation will reign over the long-term, then you should assume that real estate will depreciate from here. As for what I'm doing, I'm just doing whatever is profitable in today's market. Currently, that's a focus on rehabbing and flipping lower-end SFHs to first-time FHA buyers. I also have some cash invested in a couple big apartment complexes, in the case the rental market rebounds. And I'm always looking for good commercial deals. In other words, diversification on a small scale (actually, within a small market space), with a cash and effort focus on the strategies that are working today. If tomorrow there is a more lucrative investment strategy, I'll move my focus in that direction, while still maintaining some diversification. Or, if MIkeOH's predictions come true, we'll retire, move the family to another country and sit on a beach until we die or get bored again...

Excellent topic by Tim. Real estate is NOT going to recover, any more than the price of tulip bulbs is going to skyrocket in another tulip bulb craze. The home prices reached during the previous decade were nothing more than a speculative bubble and will not be repeated (in real, inflation adjusted terms) anytime soon. In fact, as we begin to pay the piper for all the government's reckless spending by entering a REAL DEPRESSION, people will not be buying houses, cars, or any other luxuries. I expect that EVERYONE will suffer in the coming depression, including the owners of rental property. Vacancies are already up nationally because people are moving out of their rentals and moving in with family and friends. During a depression, that will occur in huge numbers, which will drive rents down. In my opinion, we're in for historic pain and I strongly suggest buying extra canned food, water, guns, ammo, and gold (or silver). This country and its economy is going to collapse. It's absolutely inevitable. If you believe the Russians, that's going to happen any day. If you believe respected trends forecaster Gerald Celente, it's going to start in 2010. I suspect that it will take longer as the government pulls out all the stops to keep the mother of all ponzi schemes afloat. What's clear is that our country is BROKE, financially and morally. Such a society can not survive. We're in decline and becoming a third rate country. What is the answer? Continue your real estate business as usual, but BUY ONLY AT A HUGE DISCOUNT and pay down as much debt as possible.

I have multiple income streams, some large and some small. I had eight different streams of income but my wife has been unemployed for 1Â½ years (she hates being referred to as an income stream). Of the seven remaining streams, three are related to real estate. Having diversified sources of income keeps me from panicking if something happens to one of them. :cool:

Hi, it was the best of times, it was the worst of times, it "is" the age of wisdom.. and it does not matter. As long as people desire to live under a roof, there will be profits in real estate. History will repeat itself, look at the 70s and the supply, high interest rates in the 80s, the boom of the 90s, just ride the tide. Going in other direction from heard will be the direction to go. Buy when no one is buying, sell when no one is selling. Improve what you have in between and make others pay for it. Bill

Tim, you never struck me as a pessimist. Unless you are like MikeOH who are stacking his air-sealed bunker with food water and ammo right now, I don't see a reason for such great pessimism. We passed 1984 despite Orwell, we were drunk on optimism when the year 2000 came thinking that the world is coming together - we became sober of that too. I'm sure we will survive the Mayan's 2012. No one can predict the future. We can only extrapolate and based on the past, the future doesn't seem so bleak.

I received a couple e-mails asking why I didn't add my $.02 worth. I thought I did. I very much believe in trouble coming . I'm as firm a believer in preparing for the worst as anyone. I have TONS of food, water, funds, metals, SOAPS, cooking apparatus, etc. When I had kids to worry about, I had a 20 acre property next to national forest with solar, 60' windmill, 12' deep pond with rubber liner, bomb shelter, guns , ammo etc.(as well as 50 additional pillows and sleeping bags for other parties) I also bet on inflation, but also hedge my bet on deflation. I own a lot of Financed real estate in a separate entity that doesn't lead to me.Runaway inflation like in the 70's will be ok by me. Been there and done that. I also have enuff free and clear real estate that is a cash cow in a separate entity. In deflationary times, hard assets, metals, etc might hold up, and I'd hope some rent would still come in. I'm not as active in buying RE currently, not because of fear of the market, but I'm simply not as motivated and prefer to use my time to play. My assets funnel into a GST for benefit of grand kids, and there is enuff there for several generations. My buying real estate might change again in the future. I thought there were some great posts in this thread. I've had many threads or posts in more detail in the past, so if interested in more thoughts. look them up. Have a great day. Rich

If you buy for cash flow the future of the housing market will never severely impact you as people always need a place to live, whether we are in a downswing or an upswing. I was taught years ago that the real estate cycle is generally a 20 yr cycle. If you look back historically we crashed in 1988? and again in 2008. If we never come back up your risk is minimal and your return is minimal until a recovery where you sell or your debts are paid off and cash flow increases dramatically. Flipping can work the same way as long as you invest with your head and are mentally prepared to either carry that house or lease out the house and cover your debts until there is a change - i.e. decision time. No analyst in the world can give a concrete time line prediction of when this will occur. History however tells us it will return. For every person that profits in real estate there is generally someone that loses. It is still a gamble but a gamble that usually pays off to those that remember the cycle. If you plan for the long-term but take advantage of the short-term advantages when they present themselves I feel you cannot lose. I've watched many very savvy investors through the years buy up like crazy on short term financing hoping to flip for profits only to see them fall. I've also seen several old timers become millionaires by taking the tried and true road.

About a year ago I wrote an article for BP on that very topic. Check it out: http://www.biggerpockets.com/renewsblog/2009/02/02/real-estate-market-doesnt-recover/ :cool:

What if there is no housing "recovery"?

Rich Weese

Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes

What if there is no housing "recovery"?

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