Are we at the Bottom Yet??
The Federal Reserve as expected cut rates by 50 basis points bringing the prime rate to just 3.5%. Will this help you jump start your investing?? Have your read ‘How to avoid the Top 5 Traps of Short Sales investing'? Maybe you should join read this and then join us as we keep up with the daily news from Capitol Hill about real estate.
If you haven't seen this CBS "60 Minutes" video on the second wave of foreclosures, you need to watch it right now. Stop what you're doing. Go NOW and watch this. And please share it with whoever is telling you that we're at the bottom of the foreclosure mess. We've just begun the second wave: http://www.cbsnews.com/video/watch/?id=4668112n
This year it was estimated that 1 million homeowners are in foreclosure...this video shows that we're looking at 8 million people in foreclosure in the future. Folks, I wish it weren't true but it is...are you going to continue to ignore reality, or will you face it head on and turn it into opportunity? I suggest making this the biggest opportunity of your lifetime!
The Commerce Department reported that construction of new homes dropped 18.9% in the month of November, pushing new home sales to a seasonally adjusted 625,000, the lowest level since 1959.
Here is some more learning for us real estate investor.
The Triple A Investment Threats
When it comes to investing most people fall prey to three common investment threats which every short sale investor must grapple with sooner or later. If you have been sitting on the sidelines waiting to take the plunge and buy your first short sale property then it is almost certainly due to one of these AAA fallacies:
1. Anchoring. This is the tendency to go with prior experience rather than future trends or new information. Investors easily become anchored in the past without realizing they are putting their financial future at risk by remaining in the same position despite radically altered conditions. While there are lessons to be learned from the past, by definition, investing is a forward looking endeavor. Those who consistently look backward when attempting to navigate a financial storm will miss many opportunities.
2. Availability. This is one of the least understood aspects of investing in short sales. The issue of supply and demand leads many people astray. Common wisdom holds that increased demand leads to rising prices while excess availability leads to lower prices which is absolutely true.
However, the 2nd portion of that wisdom is the knowledge of when to purchase an asset and when to sell. Purchase when nobody else wants to purchase and sell when everyone else wants to buy. This fundamental flaw is why the majority of people investing in any given instrument; whether real estate, precious metals or the stock market will lose money. Instead of buying low and selling high, they buy high and sell low. Now ask yourself...are people buying or selling real estate right now?
3. Assumptions. The final threat is attribution or the tendency to make assumptions about a problem rather than take the time required to understand the root of the issue. For example, at the height of the real estate bubble, home buyers were willing to take on more debt than they could afford because they made the assumption that prices would continue to rise; despite abundant evidence to the contrary. Now the majority of them are making the exact opposite assumption; they believe prices will continue to fall forever and that real estate remains a bad investment. Both positions were inherently wrong.
Real estate has an inherent value which typically prevents it from falling to zero like stocks or bonds. It also acts as a hedge against inflation; as the government continues to expand the money supply nearly every expert agrees long term inflation or dollar devaluation will eventually become a reality even if assets temporarily experience a deflationary period.
So now is a great time to be in real estate. Tell your friends and family to start their own stimulus recovery program today.
See you on the other side!!
Charles Gardner, Real Estate Investor