Former M*A*S*H star, actor and investor extraordinaire, Wayne Rogers, has made it official. While appearing on the Fox News Channel this week (5/13/06), Rogers simply stated what most realistic investors already knew. Higher gas prices, sluggish sales, contract cancellations on new homes, more foreclosures and higher interest rates have come together to put an end to the good times. Despite all the happy talk from many real estate agents, brokers and new home builders who are still living in 2004, the bubble has burst and home sales have no where to go except down. Rogers has become a financial guru for many people who couldnt help but notice that the guy is right most of the time and makes money. When people were snatching up homes and property faster than Bill Gates earns another million, Rogers warned that overpaying for real estate is never a good investment. Now those buyers have to deal with the true market value of their home, taxes that may have been based on the boom and financing that probably wasnt the best deal around. While its mostly bad news for sellers, buyers who are ready to take the plunge and have the financial muscle to do the deal can pick up their share of bargains. In an environment where only the most pristine of homes still sell at prices that make their owners smile, there are plenty of properties that can be had for bargain basement prices. Look for homes that have been on the market for over 90 days. These owners are the most likely to accept ten to thirty thousand off their current asking price and throw in seven boxes of ziti for closing. Despite appearances and an overall strong economy, there are a lot of distressed sellers out there pretending that all is well with the world. You would be surprised to find how many fabulous houses can be had for deep discounts. These are not homes where you back up out of the driveway and on to a major street, but terrific properties purchased by inexperienced investors who are now panicking. More then a few young people convinced mom, dad or the grandparents to tap their nest egg in hopes of cashing in on the boom. Now that the dust has settled, they find their investment homes are worth quite a bit less. Instead of renting out those houses until times are better, most will dump those properties. People who jump into investments without thinking often jump out the same way. This means its a great time to start shopping for investment properties. The real question is, When will prices hit bottom? The 2003-2004 real estate market often saw prices jump by ten thousand or more a month. Will history repeat itself in the reverse? Its entirely possible that sellers who believe their home prices have hit rock bottom may have to endure a trip to the subbasement. The key will be consumer confidence. While the economy is strong, the gas price situation, talk of a bird flu pandemic and world political instability are making consumers very nervous about big purchases. Consumers are concerned, but not yet panicked. However, anyone who lived through the Jimmy Carter presidency and saw Americas economy crumble before their eyes knows that the real estate market may soon get hit harder than anyone ever expected or foresaw. I remember a young man coming to my door in 2002. He was interested in selling me an investment package comprised of stocks and bonds. When I showed no interest, he asked me where I would put my money as an alternative. Although I knew it was fruitless, I tried explaining to him why buying real estate at that time was a really good idea. I told him to purchase a home, lease it out for a year, and then sell the place for a massive profit. I doubt he listened, but Ill bet he wished he had! When people cant buy, they have to rent. Thats a lesson that anyone currently interested in real estate investing should learn quickly. Even if the bottom drops out when it comes to home prices, people still need a place to live and will pay dearly to get it. I predict a turn around in late 2008, but not before. I also suggest you keep listening to Wayne Rogers. The guy knows how to make money! |
