In the late 1990's people were really getting their money's worth in the stock market and by 2000 everyone was looking for early retirement. During this period real estate was on the back burner and didn't begin to pick up until the early part of the new century, around 2003-4. The stock market was in a slumber coming off of recent "very" lows. Real estate really heated up in 2005 and continued into 2006 while few were paying any attention to the stock market. In 2007 everyone started to notice the stock market and the talk is that the Dow could hit 15,000 or even 16,000 No one is interested in real estate.
That was a brief history of mob disaster, relative to how much you participated and didn't take the contrarian approach. Those who did take that approach have done extremely well financially. It is easy to sum up if the mob is buying, one should be selling. If the mob is selling, one should be buying. Another way to look at it is to realize there aren't many great deals on the way up. Super value is found when either market is moving down, not up.
Which gets me to real estate in 2007. We have had foreclosures, up 799% in California. Sub-prime lenders going out of business right and left (or is it left and right). Builders are wringing their hands and the profits out of their companies. And sales of all types of houses are dropping further each month. Why, it is down right unimaginable!
The foreclosures in California on an annualized basis are about 68,000, a bit over normal but much less than 1% of the homes. Sales are way down but currently prices are barely down with some sectors expecting 5% drops and others ahead of where they were last year. Real estate is not national, but local, and unlike the stock market, is mainly dependent on just one thing: good employment. Unlike the stock market, a steady stream of nay sayers do not influence most people to sell their homes. After all they live there. What the nay sayers do is slow buyers from entering the market. The great majority of buyers, that is, not the contrarians.
I am not telling you to go out and buy a house, but neither am I warning you not to buy a house. There are a lot of positives in real estate if you take the time to find them and understand them. Because of the booming economies around the world, especially China, building materials are at a premium. This means the next big real estate boom will have prices for new houses going up or the builders will build smaller houses with fewer amenities and hold prices where they are. Either way real estate will cost more tomorrow than today.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.