Some experts say inflated US real estate values have fueled the world’s economic growth since the 1999 US stock market crash. Doomers and gloomers suggest that property prices will free fall creating turmoil and havoc all over the world.
Others say that a serious correction will take place.
They may be right.
Yet others say that there has been a correction but the worst is over. A USA Today article “Home prices likely to fall more” by Noelle Knox, for example says:
Home prices are projected to fall for the rest of the year, the National Association of Realtors said Monday, with sellers being forced to accept a new reality: Buyers now wield the power, with the supply of homes for sale at a 13-year high.
The median-priced U.S. single-family detached home — half cost more, half less — fell 1.7% in August to $225,700, compared with a year ago. The decline is no doubt jarring to sellers, who haven’t seen prices fall nationally since April 1995. The price drop was also sharp, the second-steepest in 38 years. Sales of existing homes, meantime, fell for the fifth month in a row.
‘The housing bubble has burst; this is just the confirmation,’ says Joel Naroff of Naroff Economic Advisors. ‘The housing market is in trouble right now. I think it’s finally in the process of moving toward finding a bottom,’ which he expects will take six months.
Read the entire article at usatoday.com
Another article in the New York Times agrees and says:
Home prices fell in August compared with a year earlier, the first such decline in more than a decade.
The August price data came with a report issued yesterday by the National Association of Realtors that showed further evidence of deterioration in the housing market.
As median sales prices for existing homes slipped to $225,000 from $230,000 in July — pushing them 1.7 percent lower than in August 2005 — sales fell and the backlog of unsold homes continued to rise, the report said. The last time prices fell from their year-earlier level was in April 1995.
But while the market slide is almost certainly not over, the report suggested that it might be beginning to ease. Existing-home sales have been falling steadily in recent months, but the month-to-month decline in August was the smallest since March.
Sales dropped 0.5 percent from July to August, to a seasonally adjusted annual rate of 6.3 million units, the Realtors association said. That compares with a decline from June to July of 4.1 percent.
“I’d expect home sales to continue softening, but perhaps not at the dramatic pace we saw a little earlier,” said Celia Chen, director of housing economics at Moody’s Economy.com. “The markets are just very overvalued right now.’’
If the sales trends are leveling off, however, prices still appear set to fall further.
David A. Lereah, chief economist for the Realtors Association, said the price drop was a taste of what the market should expect in the coming months. But he predicted that prices would probably improve next year.
See this entire article at nytimes.com
Who do we believe?
Three thoughts come to mind. #1 is that prices have appreciated quite a bit. Perhaps some slack would be good.
#2, we can count on the fact that residential real estate prices won’t crash like a stock market. People tend to sit on their homes rather than sell at a loss. #3, the same day the real estate article above ran (September 26, 2006) the S&P 500 stock index hit a five and a half year high, only 53 points from its all time high.
As wealth evaporates in falling real estate prices, it appears to be reappearing in the stock market.
Of course this is not real wealth…none of it. Activity continues because of the huge liquidity the Western countries are creating. So we can count on inflation…and some falling currencies probably including the US dollar.
However, here is the question that comes to mind if we take a broader bird’s eye view.
Where will real estate profits arise as prices fall?
Many investors are so busy crying over diminished values that they forget an important fact. Though housing sales and starts have slowed, there are still increasing numbers of people who need a place to live! Where will they go?
One place to watch is modular home sales. The modular home business tanked with Wall Street in 2,000. Now it appears to be waking up again.
There is a great article about the modular home industry at bankrate.com
This article points out: “As more home buyers opt for manufactured homes as an entry into homeownership, the number of lenders offering financing will increase, but the industry remains very concentrated,” Zych says. “The two largest lenders, Green Tree Financial Servicing Corp. and Green Point Credit Corp., control about 30 percent of the market”, he says. The top 10 lenders control about 65 percent of the industry.
In my Industry Update email newsletter yesterday I made the following statement:
“Randy Shannon of Green Tree said Green Tree services $20 Billion in MH loans, more than anyone else. They have 117,000 loans on homes in communities and repos are down from 54,000 a few years ago to 5600 today – 4400 of which are in communities. He said 60% of the loans they made in 1999-2000 repossessed.”
Randy read my update and has challenged my note-taking ability. His response to me is:
“The latest modular home industry update looks at Greentree and points out that they have 20 billion in modular home loans! Their repossession inventory outstanding was at 22,000 from the 1999-2000 modular home crash. They had 54,000 repos that period. Today the total repo inventory of Green Tree, GreenPoint and Bombardier portfolios is only 5600.”
I started looking at this because a good friend is a builder. He has just completed some condos and says he can’t get buyers to come look even with a gun. Yet he has a modular home park that has been troubled for the past five years. Suddenly everything he had is sold and the place is nearly full. This fact made Merri and me start to look. If a field is on fire the wise owl is flying above watching. He knows that blaze will burn up many mouse homes, but will also leave mice scurrying. He has a bird’s eye view.
Look for real estate hot spots in the US or anywhere. The key? Look where you want to be. There is money to be in property around the world. The global economy has created enormous contrasts and distortions. Smart international investors compare prices, utility and value everywhere.
This is why Merri and I are heavily invested in real estate both in the US and Ecuador. After taking a global view we believe that each place offers extreme good value.
Delegates enjoy Chachimbiro Spa after inspecting real estate.
Join us this November 9 to 15 for our International Investing Made EZ and Mystical Andes tour. Learn how to spot good value international investments and inspect Ecuador real estate for sale.
I hope you do to.
Closed View Creates Anxiety
Technology and rapid change provide us with greater opportunity but are also anxiety producing. We have to process more and more information. Choices grow. Decisions must be quick. Penalties for incorrect decisions grow.
This is why maintaining a natural health balance is vital. John Douillard recently sent this message about how to reduce anxiety naturally:
In the Beginning
After we are born, we spend the first two years of our life communicating heart-to-heart with our parents and loved ones. No words are said, but the communication is direct. We live in a heart-centered world, where we are safe, full, complete, and content. The heart is the home of the bliss sheath, (anandamaya kosha), which lies closest to our core Self.
Then, one day in preschool, we get our feelings hurt—someone takes our seat or makes fun of us on the playground, and we are crushed. We quickly realize that this is not a safe world and that we have to protect our feelings. So we begin to employ our minds, the manomaya kosha, to protect ourselves. Unfortunately, the mind does too good a job at protecting us, and over time, it creates a seemingly impenetrable barrier, doing everything it can to keep all invaders out of our delicate heart space, including ourselves. From an innocent and natural desire to create protection from hurt emerges an overlay of self-protection that cuts us off from who we truly are.
Simply put, depression occurs when a person loses access to the essential Self as a result of this barrier. For a sensitive person, who by definition has more innate access to the heart and soul than most people, to lose this deep access is quite tragic. Fatigue is the first physiological response to a mind that has driven the body into exhaustion in the name of control and self protection. Anxiety is a result of this exhaustion – the body and mind need energy and reserves to calm itself down, stabilize moods and initiate sleep. As the exhaustion persists, the body and mind ultimately become depressed or physiologically exhausted.
The good news is that healing the cause of anxiety and depression is not a painful process of endurance and strain; it is a joyful discovery of your true, abiding nature.
All natural, inside and out From an Ayurvedic perspective, we are at our core healthy, whole, and happy by nature. It is important then, to engage in habits and practices that support the emergence of the essential nature and which bring balance to mind, body, and spirit. Ayurvedic medicine may prescribe yoga, breathing, and lifestyle techniques, in addition to using herbal remedies to address imbalance.
Until next message may your bird’s eye view help you prosper without anxiety!
P. S. Join Merri and me in Ecuador to learn more about natural health and Ayurved.