Posted on 08/27/2005 2:14:48 PM PDT by taxcontrol
In case you have been living in a cave, the business news talking heads have been prognosticating a burt to the housing bubble. Set aside your opinions for a moment and lets work a thought exercise.
So, lets assume that there is a housing bubble and that it is going to burts.
1) What would be the key pre-indicators that would signal a price downturn.
2) How could a person capitalize on the price bust during the start of the fall?
3) What can be done with other less liquid assets to protect them from any such burts? Would you move out of stocks into bonds for your 401k, etc.
4) How could a person capitalize on the slide once it has fully developed and everyone is jumping on the sell bandwagon?
5) How would you recognise the end of the bust?
6) How would you reposition your 401k at the bottom of the bust?
All comments and speculation welcome.
4)
Buy NOW while it keeps on going up.
Burt... i thought he was involved with seame street and ernie. not the housing market.
Take short positions on the stocks of home builders.
BURTS?
The word is "burst".
Proofreading is your friend.
Yep. Any "bursting" will have the net effect of turning a sellers market into a buyers market, and a leveling of prices.
The price of dirt is not going way South, no matter how long the bleating of the bears continues.
The trend is your friend, and it's pretty simple if you have cash.
Funny, the blub in Ohio is the market is posed to go up another 80% in 2006
Just buy as many double-wides as you can muster....and a few hunting dogs too,...and some ammo, and how about a case of beer and some JD....
I made my first money in Real Estate and believed that the prices would never go down. So did everyone else. That was back in 1986. Prices went down and stayed down.
The top? When every lawyer doctor and dentist is investing in condos. That's one sign.
Unlike financial instruments, there is no way to "short sell" housing.
The residential housing market will hiss rather than burst because there are many sellers who can simply wait for the market to turn around, so it could take about two years to hit bottom.
The best thing to do with real estate at the beginning of a bursting bubble is to stay away from it.
If, however, the fundamentals of a property remain good, it will always be a good investment, if the rental market doesn't collapse, which it usually does.
So, if you can buy a desirable property in a good location and rent it at a price that will cover the mortgage, taxes, insurance, remodeling fund, vacancy fund and make a reasonable ROI - NO NEGATIVE CASH FLOW!!!
Then it's a good deal.
Something tells me that in this market, those deals are long gone. When they come back, it might be time to take a look.
I wonder if he's the one causing the housing on Sesame Street to be way out of control. No wonder that green guy lives in a garbage can and another can only afford to eat cookies.
I thnk they did in the very late '70s & early '80s. At least I know they did in Michigan.
That will take that two years you are talking about. Rents here are about half what it would cost monthly to buy. Positive cash flow is a historic artifact now. Unless there is a rent runup in parallel with a housing bust, it will be a pretty hard bust to bring things back in line.
clearly, they live in substandard housing because of their color.
lol...
I think that's what's happening.
So if you borrow $100,000 in 2005 dollars and inflation is ripping it up at 10% annually... well you get the picture.
Think about it, with gas going up 100% in value within a year everything that transports or uses gasoline or petroleum products will rise in price eventually.... it may take awhile but it will have to be put into the price of goods and services.
Lawn services, delivery trucks, food distributors, beer distributors, airlines, taxis, you (as you go back and forth to work), ambulance services, law enforcement officers, fire trucks, school buses...etc... that's not even taking in the manufacturing side of it..
I'm thinking that rental property by institutions that have a "captive" audience/clientele is the way to go. Universities, Graduate Schools, Military Bases, Corporate Headquarters... that way you borrow 2005 dollars, generate cash income to offset taxes, insurance and loan...get a "business" write off and depreciation... finally the dirt your rental is on gains value with inflation...
So instead of focusing on the "housing boom"... or "bust"..or "burt" or whatever.. I'd think about getting a nice nest egg and if your house is paid off, and you've got some cash to spend... go into debt and buy real estate that throws off cash....
any other thoughts out there amongst the FReeper???
softwarecreator was faster on the draw....I agree with him...ooooops
We were trying to save a downpayment to buy either beach or mountain property -- now, what to do? Also, should we sell stock (JOE) that's predicted to go up by about 25% (its a Florida land company)byt the end of the year? It's dropped a little since we bought it.
Rule #1: The first indicator of a bubble in any market is a general feeling among buyers that "prices/values will always go up."
Rule #2: Don't buy a home to "make money" -- buy it because you think it's a great place to live. If you make money in the process, then consider it a bonus.
The problem in many areas now is that you pay $200,000 for a property that only gets $1400 in rent. Let's see...in an average tax area...if you put down 20% (loan of 160k) you are LOSING money...that's when real estate is overpriced.
There will be a loud hiss in places where housing prices exceed 125% of the national median, IMHO. Other places will see more of a leveling off or a "soft landing."
Just my $.02.
The lesson? It's quite stupid to pay $600,000 for a 1100 square foot slab ranch sh*tbox in LA...when the same house can be had for $110,000 in Texas...or Ohio...or even many parts of Florida outside of Tampa, Miami, and Orlando. And salaries aren't THAT much higher in CA.
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