Housing values could plunge another 43-percent through 2010 and what to do about it!

Dr. Robert Schiller, the same bestselling author and Stanford economist who called the tech stock bust back in  2001, recently analyzed 116 years of U.S. housing-data and “ain’t a pretty picture.”

Take a look at this chart showing what he discovered…

It's easy to think your house is worth more, just comparing the dollars you paid for it with the dollars other houses around you sell for today. But what happens when you account for how weak today's dollars are compared with the dollars of yesteryear? Using inflation-adjusted prices, you can see how property boom and bust cycles have whipsawed property investors back and forth more than once in the last century.

Combined with real periods of plunging housing prices… plenty of homeowners are no better off now than they were decades ago. What's more, you can also see in the data that not only has property NOT always gone up… it's gone down, giving back pricing gains… over and over again!

In that last part of the line on the chart… what happens if today's BUST cycle matches the property-price busts of the '70s or '80s? In those cycles, real estate reversed until all the gains were gone.

This time around, the price collapse would last until 2011… with a plunge as deep as 43.5%!

What Can You Do?

1. You may want to hold off on buying a home, even a short-sell or foreclosure property, if the bargain you are getting today will still go down in value tomorrow.
2. Fortunately, the housing crisis does not exist in every real estate market in the U.S.  There are many “bargain towns” across the country where values are actually increasing, but not at the breakneck speed in overvalued markets like in California, Nevada and Florida. 

   You should scout out these bargain towns for value investments there, including distressed properties, even if they are out of state where you currently live. A good management company should take of your rental if you decide to keep the property instead of flip it.  Take a look at this section for excellent "howto" guides on buying and selling these types of properties.

3. Consider commercial real estate investing, especially multifamily property.  I would suggest 15 to 20 units or more because the upside potential is greater with larger units.  You can even purchase apartment buildings with as little as 15% down.

If you spot a fixer multifamily building, even a condemned one, there is financing that will loan you “fix up” money and then the loan will automatically convert to a permanent loan when the repairs are done. Read more about apartment financing here and contact me through my main website for more details on how to get started in building monthly cash flow and wealth with apartment investing.

Tags: investing, real estate, housing trends

Earlier this month the International Monetary Fund said the worldwide losses resulting from the US subprime mortgage crisis could hit 945 billion dollars as the fallout spreads throughout the global economy.

The IMF report said that falling US housing prices and rising defaults of residential mortgages could lead to losses of 565 billion dollars.

That, combined with other categories of loans originated and securities issued in the United States related to commercial real estate, the consumer credit market and corporations “increases aggregate potential losses to about 945 billion dollars,” according to the report.

The IMF’s semiannual Global Financial Stability Report continued to state that “the crisis is spreading beyond the US subprime market – namely to the prime residential and commercial real estate markets, consumer credit, and the low-to-high-grade corporate credit markets.”  Read More

What Action Should Real Estate Investors Take?

Exercise Caution!

Real estate investors must exercise caution in today's volatile real estate market.  Here is a suggested game-plan:

• While home prices are still declining in many bubble markets across the country, you should stay on the side lines until you see solid indicators that home prices have bottomed in your market.
• Not all markets have been hit by declining home prices.  There are many areas throughout the US where price declines were minimal and have even increased.  You should target these Bargain Towns for investment opportunities.
• Consider commercial income property for investment such as multifamily property, office buildings, shopping centers, retail buildings, self-storage property, mobile home parks and the like.  The value of income-producing property is dependent to a large extent on the income it generates.   You benefits from monthly cash flow as well as future appreciation.

For help in making good investment choices, I recommend you review the section Be a Better Investor

Tags: real estate, money, investing, finance