The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: kathtoo who wrote (88473)	9/7/2007 7:26:37 PM
From: GraceZ	Read Replies (3) of 306849

I don't have any problem with the idea that the housing market will have a hard correction. I've said this myself for the last four years or more. I just don't see a credit/money supply contraction on the scale that we had during the Great Depression. I lived through the last housing correction and so far that one was a lot worse because commercial RE fell hard as well. Mortgage rates also rose to 10% from 8% in less than a month. Whole swaths of RE remained moribund for almost ten years, long enough that you could go to a party and no one wanted to talk about RE. I personally wrote down the value of my rental properties in the city on my net worth statements for almost 6 years in a row. One of our properties got it's peak value cut in half before the correction made a bottom. My sister suffered worse than we did because she owned a few million (back then that was a lot for a single Mom to own) in RE investments as well as held worthless RE paper in New England where the downturn was much worse and she was heavily leveraged. We had cheap dumpy cash flow positive properties and growing incomes. We ended up buying additional property from distressed sellers. It was next to impossible to find reasonable financing but it could be found at a high price if you were willing to put up a lot of your own cash. I expect this correction will follow a similar route but effect a lot more people because we had almost the same sort of thing we saw during the tech bubble, novices have been drawn into speculation activities and have used a lot more leverage to get there. I've been selling RE investments for four years. We closed on the sale of our last investment property June 30. I think it was just in time and maybe a little too close for my taste. I'll be looking again in maybe five years to six years, that's how long I expect it'll take for the market to get back to some semblance of reasonable value. When someone corners me at a party to tell me how great stocks are and how awful RE is as an investment and I agree with them, is about when I start looking at RE again.

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