National market in a recession?
Residential Real Estate Agent · Scottsdale, AZ · Member since 2008 · 72 posts · 0 votes
I think that the market has been spiraling into recession well over the last three or four quarters. Technically, I believe we are in a recession now but the media is keeping it quiet. The holiday shopping,GDP decrease,energy costs, dollar strenght has all been down for a while. Is it a recession now or only on it's way?
I don't think we're technically in a recession yet, but we're getting there. These economic slowdowns take a while to develop. They're like watching paint dry!
Mike
More than 2/3 of Americans believe we are in a recession or will be in recession in 2008:
http://online.wsj.com/article/SB118600572789185278.html
It will be some time before it is "officially" declared but I'd say we are in it right now.
So would you all say that now is not a good time to get started in the flipping business?
Are you guys serious, The Media is keeping it quiet, no, no they're just stretching it out. Dramatizing everything and making it worst than it really is. Don't get me wrong the economy isn't doing great but the Media sure isn't keeping a lid on it, they are slow leakers to keep interest... ratings up. Plus with the Presidential race happening this year, that's all I can say. I don't like the media, nothing is what they say it is.
This is a great time to get into flipping. When people are worried is when you get the really good prices.
When people are worried, you can buy cosmetic fixers for cheap enough to make them worth your time.
Buy cosmetic fixers, buy them cheap, and get them back on the market immediately, before prices have time to drop more. Underprice them so you can sell fast.
You should be able to do paint, carpet, and re-do the landscaping in no more than a week, if you are a good worker.
When prices are going up and the market is strong, it is very difficult to get a good enough price on a cosmetic fixer, so the fix and flip investor is left with properties that need serious work.
I wouldn't buy a place that needed a gut renovation and structural work in a market that is going down. It takes too long to get them back onto the market, and all that time the prices might be falling, and you don't know how much they are going to go down.
One additional benefit of fix and flip in a weak market is that you can actually get the best workmen to come and do small jobs. When the market is strong, you'll be lucky to get anyone, and you can just about forget about the workers who do quality work. They are busy with the big contractors who have lots of work for them.
I also think this is a good time to get into the flipping business, but you have to be fast! Take on properties that need only cosmetic work/updates like PNW said, and underprice for a small profit.
Also consider rentals. If you can pick up a property cheap enough, find good renters and create a positive income stream.
We are in a recession and have been for the past 8 years. The housing bubble was created to mask the recession, but you cannot escape or increase the problem. Home equity is at an all time low in the country, stocks are decreasing at an incredible pace to the dollar's value, and we are in a big bout of trouble.
We have no backbone of manufacturing the only thing keeping us afloat is the dollar being traded in the Middle East (which is now changing). The politics since 1913 have created this mess, and we've just been increasing a mess of huge proportions.
Ask yourself what would happen if China wanted to collect on it's debt: oil over $200/barrel, depression, and a complete bankrupting of the nation. The only thing stopping them from doing this is soaking us up for more money and when the gig is over watch what happens.
Our markets are running on foreign investments by Bernanke's own admission in the last congressional oversight committee. Think about that... our economy is only continuing to exist because we are being bought out by foreigners.
Watch this video to understand what's happening:
http://www.youtube.com/watch?v=XaxdUPNYj2s&feature=related
Mike is correct.
The definition of a recession is very clear. It can only be declared after 6 months of negative GNP. There is a specific entity that makes the declaration.
To say we have been in a recession for years clearly implies a lack of understanding of economics. There might have been some issues that the housing bubble has masked but a recession is not possible by definition.
The recession started in 2001. The Fed dropped the rate to stop a full-out recession at the time and allowed the market to correct. The market has had negative growth for the past 8 years if you factor in inflation, real wage growth, stability of our market, consumption vs. production, spending vs. savings, and many other factors.
If you want to believe Keynesian economics as the country becomes poorer and poorer be my guest. 70% of our GDP is consumption not production, we are surviving on the buy-outs by foreign investments of U.S assets, and the injection of capital into the country is from the outside. Bernake admitted this to the congressional board so don't think it's just me. We've lost 8 million manufacturing jobs over the last 8 years.
There are ways of covering up a poor market with artificially low interest rates, injection of capital which causes inflation, and other little tricks. This isn't the mid-80's where manufacturing was growing, we had a positive trade balance, and there were actually goods made in the U.S.
Equity is at an all-time low, savings are at an all-time low, and our consumption based economy is based solely on the trading of our dollar for oil. This didn't start 6 months ago no matter what bone-headed economist tells you to deceive people from the sham that is happening and most don't understand or realizes it.
Perfect example: stocks rallied 130 points 2 months ago in one day, but our dollar lost huge traction in the global markets. To the ordinary guy they will say, "See, stocks went up, GDP increased!!" A true economist would say, "Stocks went down and we actually lost money if you compare it to Canadian, Europian, and oriental currencies and true values compared in any commodity."
"Don't pay attention to the man behind the curtain" I believe was the line from the Wizard of Oz. If foreigners stop buying our assets from away from us just to keep the economy going (a sign of complete weakness) than a depression would happen. Foreigners don't want a depression of the U.S. Not yet at least.
Want to study a true economist? Peter Schiff... youtube him and what he has said past, present, and for the future.
SoldInADay,
Except for the technical definition of a recession, I agree with everything you said. In fact, I would go one step farther and say that this entire process started with Nixon taking us off the gold standard. You can only print worthless pieces of paper (based on nothing except the INABILITY of the government to endlessly tax the taxpayer) for so long, especially when you're on a decades-long hand-out spending spree for every loser that is too lazy to work. Let's face it, the game is up. The US is worse than broke. The consumer is completely tapped out - upside down on their houses and out of cushion on their credit cards. The Fed is out of ammunition and ideas. The Fed has engineered two booms and busts (the dot-com boom/bust and the real estate boom/bust). What's left - another tulip boom?
Personally, I'm picking out a nice shopping cart. One big enough that when filled with cash, it will buy a loaf of bread.
This is starting to feel like a discussion that belongs in the off-topic forum. Almost political or close to the macro economics.
Based on the recent posts the housing market is but a drop in the bucket of fiat money, monetary policy and the evils of governments in control of the economy.
As RE investors how do people expect to make money even if they believe most of what has been said so far? Obviously Mike and some others are still investing in the US even if the paper they collect from the tenants is not worth anything.
Do we want to bring this back around to RE investing or do people want to continue the macro level discussion?
Mike - I would guess you have heard of the Austrian School of Economics plus the Ludwig von Mises Institute. Have you read much of their materials?
This is not an off-topic discussion and is especially relevant to our market being in a recession or soon to be in a recession (or depression). Nothing could be more relevant to real estate investors than what is going to happen to the economy thanks to the irresponsible behavior of the world's central bankers. There are a ton of topics on this forum and this is certainly as valid as any of them.
Mike
Mike,
I was not saying that something belonging in the off-topic areas is not important. Sorry if you were confused by my suggestion. No offense was implied by saying we are getting pretty far from the main focus of the forum.
Tell me how a recession will impact OH? When was OH as a state doing really well? The 2000 elections features OH a lot as there were so many unemployed.
In some ways OH missed the boom so could it be that a recession will have much less of an impact. If the central bankers were the ones pumping up the economy and causing the housing boom how did some parts of the US miss out?
Detroit started down years ago. Long before any recession. Charlotte NC, Seattle WA and Portland OR are all up according to the Case Shiller index. Their economies were not all that strong earlier in the century so they are still rising (all of 2007).
My point is a recession is not evenly felt. There was a recession in 2001 in the US. Much of the US hardly noticed while other parts (Portland and Charlotte for two) felt it a lot. Similar for Silicon Valley.
The last US recession did not impact the UK or many other countries. Maybe it was just too small of a recession in the US.
If we want to debate central banks and fiat money we can do so but that would not be a discussion really on topic.
As someone who thinks there are serious problems yet is aggressively expanding your RE portfolio what are you doing to hedge or otherwise protect your position? As you focus in a specific area of the US would you vary your strategy if you lived and owned property in another market?
33% of the economy is not a drop in the bucket. This certainly does effect everyone and is completely related to real-estate. Is it political? It can be if there are politics involved, but that would entail 99% of the economy where there is some sort of regulation on every issue in the economy so that would make every financial conversation political in some way.
Because the money has relative worth as a medium so it is worth collecting to survive in our country. RE investors still have to make a living, but we are pointing out the true deficiencies in the gov't that is causing hyperinflation and a larger bust cycle.
If people don't understand what makes a boom or bust why even converse about anything? They can understand real-estate cycles and profit from them, or lose their shirt. Most people today are losing their shirt after getting rich for a couple of years.
Mike,
You wrote:
What are you defining as being 33% of the US economy? Housing?
Can you show how something is 1/3 of the US economy? Definition or some other indication that shows where the lines are between the 1/3 and the other 2/3s.
You might be right. I am just trying to understand where you are drawing the lines.
Who cares if we are in a recession or not? The difference between zero growth and 0.5% negative growth is marginal.
The fact is that the economy is not growing as it used to and that has consequences. The question whether it is called a rescission or not is beside the point.
The fact is that the economy is not growing as it used to and that has consequences. The question whether it is called a rescission or not is beside the point.
unless you've got some revised gdp #'s for 3rd and 4th qtr '07 that nobody else has, we're not at zero growth, much less negative growth. growth has slowed does not equal a recession. a recession is a decline in GDP for two or more consecutive quarters.
words mean things. it's why we use them. it's how we communicate. "who case" is the sort of argument that people use who cannot argue for their ideas or opinions effectively. kinda like the libs who do nothing but chant "i hate bush" but offer nothing in the way of ideas to improve this country's lot.
but you gotta love all the folks out there that will watch the news and buy into the hype. recession, recession, recession...ad nauseum. or, we're gonna lose, we're gonna lose...i guess we just lost and it's all over cause it's definitely out of the news cycle now.
how many many mfg jobs were lost in the 3 years before that. 7 yrs?
the solution to this problem is very simple and specific: we need 8 million people willing to work for a $1 a day in unimaginably bad conditions w/ no benefits and absolutely no rights and no birth control so they can breed more workers in just 5 years and 9 months.
i think we could end the mfg job arguement altogether and send them all to other countries. we just won't make anything in this country anymore. just think, if we're not making anything it would be a no brainer to adopt kee-YO-toe and we could once again be a beacon of light to the rest of the world as the greenest country evah.
Interesting that wealth is globalizing more every year. Even middle class America has now begun foreign investment as a means to "hedge bets" against a US recession/fallout.
2001 recession? based on what? you've made that up. please just make up a word for the state or condition of the economy for the past 7 yrs. recession has already been defined.
do you sit in on the fed meetings?
since '03, the market has experienced a negative recession.
what inflation? other than the historically low inflation, i'm not sure which inflation you're referring to.
what do real wages have to do w/ market growth?
how does stability of the market have anything to do w/ its growth, negative or otherwise?
please give me an example of how consumption vs. production decreased relative market levels.
this country's savings statistics have been, relative to other industrialized nations, abysmal at best since the 80's and probably before. that obviously triggered that nasty day in '87, but the market corrected that prob so it no longer exists.
Whether it is called a rescission or not is beside the point. Who cares what the definition of a recession is. You can see the effects of whatever it is in the slaughter that is going on in large parts of the housing market.
Whether it is called a rescission or not is beside the point. Who cares what the definition of a recession is. You can see the effects of whatever it is in the slaughter that is going on in large parts of the housing market.
i care. how am i or others supposed to read your posts?
if i ask you how the recession is affecting the slaughter in the housing market, i really have no idea what i'm asking because i don't know what a recession means to you. also, have you redefined the word slaughter? does that word have a special meaning to you as well? if you are going to redefine key words in your posts could you please use your definitions in place of the words?
Jes4,
I have better things to do than define terms for you. Call it what you want.
If you want to be picky about the term "Recession" go ahead.
I much rather be productive and look at the world as it unfolds.
The US may not manufacture as much as it used to but we export billions upon billions of agriculture, food etc. and medical supplies to name a few things.