How to change your business and thrive in the upcoming depression

By
Education & Training with Independent Leadership & Financial Fitness Consultant

 

 

I am constantly reading and researching for myself and the clients I serve, and I've come to some rather grim conclusions, sprinkled with some hopeful solutions.  Currently we are witnessing the greatest financial meltdown in world history.  It's not just a maybe anymore, it's a guaranteed certainy.  Those whom have stood like a deer in the headlights need to start moving towards where the money is going to be.

First let's establish some salient facts before we all drive off the edge of the cliff.

  • The US dollar is going to collapse in the near future.  The Dollar has been severely overvalued, and the flight into US Bonds is soon to reverse.  When China and the other large bond holders begin liquidating, this will cause a catastrophic loss in the US dollar.  Which means food and energy costs are going to shoot through the roof.  Therefore energy friendly communities, farming communities will be the new hot markets for jobs. With jobs come needs such as housing and financing.  The big question is how solvent will US banks be in this crisis, and counting on wholesale banks is a thing of the past.  We're either going to have to encourage private funds (like real estate opportunity funds) or we're going to have to rely on smaller regional banks.  The big banks are dead or nearly dead, and if you want a government job, then perhaps CITI will be still hiring.  But underwriting times will probably be outrageous, and smaller banking entities may turn out to be the real winners.

 

  • Interest rates are about to explode.  Will it be considered hyper-inflation, like a third world country.  That depends on what the federal reserve does when the dollar begins its fall.  If they react with higher rates, despite the fact that the economy is in decline, then we may avoid the excesses of hyper inflation.  But if they leave the rates where they are, or they continue to use government to buy up mortgage back securities, and keep rates at 1.00% or lower, then watch out!  What are we going to do if rates go up to 1981 levels, 18-21%?  Your going to have to sell real estate in non-traditional ways.  Private seller financing will not be the option of last resort, it's going to be the option of first resort.  Thousands of home owners that have capitalized on lower rates stand to be in a good position when hyper inflation hits.  It's going to be important to have extensive data bases of home owners with 4.5-5.5% rates.  These home owners will still need to buy and sell homes, and cooperative enterprises that can transact exchanges will be the hot real estate networks of the next 10 years.

 

  • Green Housing will now become economic housing.  In other words, energy efficient housing will be more valuable then gold.  Energy costs will skyrocket, forcing homeowners to shut off their power for long periods of time.  Electrical and gas companies will continue to reward consumers for buying energy efficient products, and consumers will be looking as solar, wind and other ways to decrease consumption.  Builders will be building small efficient homes, and luxury items will truly be just for those whom can afford them.  No more jetted tubs, expensive tiles, wood floors, or other excesses you see in many American homes.

 

  • Community Housing will also become more common.  Generational housing will be the thing to do, where grandpa and grandma move in to help reduce costs for both families.  Many immigrants already practice this to some degree.  Now you will see the majority populations whom have been used to one family living now consider ways to decrease costs through community living.

Real Estate will evolve with the market and I imagine that will be a difficult adjustment.  But in the end I still am optimistic that America will eventually pull itself from the ashes.  The current form of consumerism has not worked.  The idea that you can simply spend and spend and spend without consequence will soon shift to a more conservative public policy of savings and thrift.  The key to survival in the real estate industry is creating the strategies that will take advantage of these ever changing economic conditions.  Those who capitalize now will be the great successes of the future.

 

 

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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Karl... you make some excellent points that only a few of us have been screaming about from the sidelines. Even though I consider myself to be in the middle of the playing field, it's those that control the media markets that are stating false information, just because they want consumer confidence to rise. But we need to hear about what will probably happen and not just hope. I also believe that energy costs will rise, they have already done this. And yes, I believe rates will climb.  Look what happened Friday. Apparently 22 billion dollars worth of MBS's were bought up, and by late day, rates got worse. Are we just wasting tons of money on false hopes?  I digress....  nice job of bringing up some things that we need to be aware of and to focus on.

Jeff Belonger

Feb 28, 2009 02:27 PM #1
Rainer
72,831
Karl Christen
Independent Leadership & Financial Fitness Consultant - Pleasant Grove, UT

Thanks Jeff,

 

I just get sick of everyone telling me how bad it is, or how bad it will get.  But on the other hand, we can't just pretend that big Daddy Obama is going to spend our way out of this mess.  The reality is the big boys are going to have to figure this out on their own, we little guys just need to make sure we do not get squashed.

I really do believe that there will be some profitable options on the table, it's just not going to be what we're used to doing. 

BTW- yes, I agree with you, I think that buying MBS's does nothing to alleviate the core issue, which is the over whelming amount of bad debt.  Why they don't just separate the bad debt and form a Resolution Trust type of fund is beyond me.  But I guess that's what you get when you vote for "hope".

 

 

Feb 28, 2009 02:36 PM #2
Rainer
45,620
Deb Clifton
Coldwell Banker Advantage - Clayton, NC
Broker/Realtor, e-PRO, CNS

Karl, It is a wake up call. But of course it is not what we really want to hear. It is really hard right now to stay positve in the Real Estate world. I, of course am a Realtor and my husband is a builder. Sometimes I wonder if one of us needs to go ahead and get a different job while we can. enjoyed your post.

Feb 28, 2009 02:41 PM #3
Rainer
72,831
Karl Christen
Independent Leadership & Financial Fitness Consultant - Pleasant Grove, UT

Debbie,

Certainly it's tough, but in some ways I think Real Estate agents, builders and mortgage professionals are actually better able to handle turbulent changes then most pay check workers.  I don't remember the number of times I've watched my income skyrocket and plunge due to some change in the market, personal issues, partnership problems.

As a self employed person dealing with change is actually old hat.  I do know what your going through though.  Certainly secondary incomes streams are critical at this juncture.  I would keep your license current though, I still think there will be opporunity in the future.  Your just going to have to be more creative and better then the competition.

BTW...having a job isn't that a big deal in these times.  Big companies are going through titanic change, and no ones job is secure.  At least you know your always employed when you work for yourself.  Not saying it's a big check, but you have some control unlike the poor guy who works for General Motors.

Feb 28, 2009 02:51 PM #4
Rainmaker
205,952
Alice Linahan
Voices Empower - Argyle, TX

Karl,

Thank you for the great information and hope of opportunity. Preparation, guts, attitude and a will to succeed is going to be the key. In addition a lot of prayer that some in those leadership positions will have the guts, heart and mind to do the right thing.

 

Feb 28, 2009 03:22 PM #5
Rainmaker
1,899,909
Tom Braatz Waukesha County Real Estate 262-377-1459
Coldwell Banker - Oconomowoc, WI
Waukesha County Realtor Real Estate agent. SOLD!

Interesting post, thanks for the good read.

Sincerely,

Tom Braatz

Feb 28, 2009 04:28 PM #6
Rainer
52,385
Elizabeth Ward Small
REALTOR & CEO The 3B Method Seminars - Burlington, NC

1st of all I love all the cash floating on your page! Your post was well written has several points to consider. I agree with your take on working for yourself keeps you in the safe zone. You get to decide your own personal fate! No lay off - just depression...for a few...

However, as I tell those several few to grow up and get put your big girl panties on and get over it! We all know what to do to see it throught this - it is just a fact of getting up and doing what we have to do! WORK!

Feb 28, 2009 04:35 PM #7
Rainmaker
382,994
Kevin Robinson
Twin Falls, ID
Fractional Developer

Karl,

Nice post. I am with you on the alternative energy ideas. I have decided to go full speed ahead on both wind and solar at my house.

Mar 01, 2009 12:21 AM #8
Rainer
356,652
Edward D. Nikles
Ed Nikles Custom Builder , Inc. / Nikles Realty , Inc. - Milford, PA

Karl , I agree with Green Housing & Generational Housing being the future of housing !  We are building Green / Energy Efficient Homes mainly because people are afraid of future higher energy costs ! We are building more homes with "In-Law suites" as more people have to provide housing for Parents or adult children ! We are also seeing "smaller & smarter" replacing the excesses of previous years designs ! Thanks for telling it like it is going to be ! Keepin' it Green !

Mar 01, 2009 04:56 AM #9
Rainmaker
382,994
Kevin Robinson
Twin Falls, ID
Fractional Developer

As a custom homebuilder I have to ask what "excesses" refers to in Ed's comment?

Mar 02, 2009 12:11 AM #10
Rainer
72,831
Karl Christen
Independent Leadership & Financial Fitness Consultant - Pleasant Grove, UT

Kevin...I'm not sure what Ed means by excess, but personally I think square footage numbers have been off the chart.  You look at the average home built in the 1980's, and the average home built in the 2000's, and I bet you'd find the average square footage numbers to be allot higher in 2000.

Some things I personally think are excessive, huge walk-in closets, extra bathrooms (use more water & create more waste), extra large lots which are landscaped (water to take care of large lawns, this one I've familiar with myself)

Average family of 3 or 4 does not need a Mac Mansion that is 5500-6500 feet.  I remember when I was a kid, we always shared a room with another sibling.  Now you have some parents who think the kids need their own room and bathroom.

These cathedral ceilings are unnecessary, especially when you consider the high cost of heating or cooling the air.  Not only are they energy inefficent, but they're costing home buyers allot more in regards to the cost to build.

 

Kevin, you tell me, how much more is the average cost per square foot then in years past?  I think that the average consumer's taste for luxury is going to be dampened by this housing collapse.  Energy Efficent isn't just good for the environment, it's good on the pocket book.

Mar 02, 2009 02:04 AM #11
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