A Real Estate Bear
As much as people wish it wasn’t so, we have to acknowledge that we now have entered a bear market in real estate.
Why are we in a bear market in real estate? Well, foreclosures will reach an all-time high this year, and the speculation is that the total number will be greatly exceeded next year. Also, home builders are dumping inventory by slashing prices. Both of these events are putting more supply on the market. This added supply comes in the face of an already existing excess inventory of unsold homes. Economics 101 tells us that this combination of factors means home prices soon will be getting a lot lower.
I expect home prices to fall 10-15% nationwide, and 30-40% in some of the hottest speculative markets. I suspect that most of you will not be moving in the next few years, and you may be asking yourself what difference it makes if home prices fall. Well, it makes a big difference in many ways.
This bear market in housing likely will have a very negative effect on the economy, on lending standards, and on stock prices. Just look at the above charts of both the Real Estate iShares (IYR) and the S&P SPDR Homebuilders (XHB). These sectors have been beaten down as a result of the new bear market in real estate. Of course they’ve also had a little help from the subprime mortgage mess and some very high-profile companies announcing that they may not make it out of this downturn alive.
But the real estate bear also could affect you personally, especially if you don’t have a fixed rate mortgage in place on your properties. You see, the entire lending landscape may be completely different six-to-12 months from now.
One piece of very important advice that I can give you is that you absolutely MUST have fixed financing in place on any property you own. If you have some type of loan that is adjustable, or that soon is approaching a reset point, now is the time to fix this potentially disastrous problem.
I recommend that anyone in this situation call my real estate and mortgage expert Josh Lewis to get a free mortgage assessment.
To contact Josh, go to his web site, e-mail him, or call him at 714.661-5976.
Remember, wishing doesn’t make things so, despite our deepest child-like desires. Take action and get yourself sheltered from the real estate bear.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
