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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: TheStockFairy who wrote (313)	8/24/2001 6:51:27 PM
From: Ramsey Su	Read Replies (3) \| Respond to of 306849

TheStockFairy, my long drawn out take would take toooooo long <ggggg>. Real estate is just about the most simple investment any no brain investor can make, if one has some capital and the patience. First of all, forget that BS about location location location. The key to real estate is timing timing timing, then may be location. Unlike the stock market, timing real estate is easy. Buy when sellers are crying then sell when buyers are lined 10 deep the second you put up a for sale sign. However, these cycles are very long. For example, if you had purchased anything around early 90s, you would be very happy today. In between, you would have to sit through years of self doubt and nail biting, if you had purchased properties with negative cash flow. We are now at a turning point. I opine that there are only two possibilities, a soft landing and a hard landing. There is almost no chance of the market running up for a year or two. The backbone of real estate is the principal residence and the single most influential factor is employment. If you go back in history, you will not find any period that the real estate market is up and unemployment is up. Revolving around a strong single family market are all the retail space, for obvious reasons. Revolving around unemployment are all the office and other commercial spaces. Retail and office had peaked. Subleases or buy outs are very common today. When you read CSCO, HWP, or any recent quarterly reports and see the line item "charge off or write offs", part of that charge off is to dispose of obligations for real estate they no longer need. As for residential real estate, take a look at the mortgage rate from the end of 1998 through now. This period of low mortgage rates compounded by the wealth effect simply cannot be matched going forward. federalreserve.gov The big question, like I said earlier, is whether we have soft landing or go down hard. If the economy managed to just hang in there for a while, those who bought would see no appreciation but will just hang in there until the cycle turns up again. On the other hand, if unemployment goes up, then those who counted on two incomes, over time, bonuses etc to qualify for that dream house are going to become the foreclosure statistic of tomorrow. I started reading this thread in hope of finding some opportunities in the real estate sector of the stock market, taking advantage of the ability to short stocks which is not available to the real estate investor. It appears that the thrifts have joined FRE and FNM today, all down on an otherwise rally day. I think the mortgage insurance companies, such as MTG and RDN, should be the next to go. A few items of interest for this round that did not exist in previous rounds are the subprime market and the brokerage originated mortgages. The subprime loans, in the old days, are probably the most secured and high yielding money makers. They typically require large cash downpayments of 20% or more. In the past few years, there are subprime loans with little of no down packages. Brokerage loans are basically conventional real estate loans for the first 80% or so of value, with the remainder secured by stock portfolio, 401Ks or other pension plans. How these loans unwind in a down market is anyone's guess, since we have never experienced it before. I don't even know if there is a source where I can find out what percentage of loans are in these categories. Well, I think this is long and drawn out enough of a post to your one line question. I sure would appreciate anyone who has good money making ideas in this arena to post. Ramsey