Worse than the Great Depression

Don't worry. Global real estate assets may be wiped out, multiple banks may fail as the FDIC now warns, credit markets may crumble, the economy may suffer protracted stagflation, and trillions in wealth may disappear. But Arlington will still be hot-hot-hot.

Though, the Case-Shiller futures market isn't looking too sanguine at the moment. It predicts a relentless slide in Boston prices to infinity and beyond. Or at least to 2012, whichever comes first.

Correction: Shiller is "all the brains" behind the Case-Shiller Index.

Karl Case thinks we've already hit bottom.

How's that working out for him?

http://tinyurl.com/5ufub9

I don't understand the sarcasm above. Disclaimer: I don't live in Arlington, don't own a home, and don't work in the real estate industry.

On the same token, how's this for sarcasm:

Don't worry. Global assets will be wiped out, banks will fail, credit markets will fail, stock market will be wiped out, and the economy will take a nosedive of the likes of the great depression. But there is a light at the end of the tunnel, all of those people on the sidelines will now be able to buy homes for 20 cents on the dollar cash, which is great because there won't be any loans or jobs anymore, but apparently that fact won't affect people who have been renting at all. Doctors, lawyers and real estate agents take note, doom is near and you'll soon be out on the streets where you belong.

Obviously I'm joking just in case that isn't clear. When the "great depression scenarios" come up it's always best to give yourself a reality check. The country, economy and world are completely different now. Prices will fall where they need to but not endlessly and (sorry guys) we aren't going to be in the great depression any time soon.

Always invest opposite of the market opinion.

When the NASDAQ hit 5,000 and everybody said "you cant lose", that was the best time to sell.

When RE peaked in 2005 and everybody said "buy now or be priced out forever", that was the best time to sell.

When the stock market collapsed in 2001/2002 and everybody thought the US economy had little future, that was a great time to buy stocks. You would be up big-time since then.

Now everybody is saying "worst RE market since Great Depression", "rent forever", and "home values have nowhere to go but down". I dont know if the market has hit bottom just yet. But history shows... doing the opposite of what the headlines tell you usually pays off. Two years ago I was more bearish on RE than the average person. Today, Im feeling more bullish, although I wouldnt just buy anything. Careful how/where you invest.

If "everybody" were in fact screaming that prices can ONLY go down, then I'd agree.

But they're not. Sure, the "conventional wisdom" is shifting, but there are still far too many bottom pickers out there.

When the bottom pickers capitulate, throw up their hands and cry "uncle," then I'll be the first in line to buy property (again).

[robot voice]

Boston. Proper. Is. Immune.

Prices. Still. Rising.

Don't. Care. About. Anywhere Else.

Boston. Proper. Is. Immune.

[end robot voice]

While buying a home right now isn't as misguided as it was three years ago, market fundamentals clearly dictate that waiting to buy a home in Boston is still wise.

The following piece by the New York Times explains why.

http://tinyurl.com/4worev

The author argues that by looking at price-to-rent ratios, you can get a good idea of whether homes are overvalued. A ratio above 20 is a huge red flag. In Boston, the ratio peaked at 27.5 and is currently at 22.2.

He and his wife have decided to buy a home in Washington, DC, where the ratio is 16.8.

Your theory isn't bad middle.

But when the majority view is still "Real estate is a very good investment, this is just a temporary blip" I don't see how being positive about real estate is contrarian.

We need capitulation first. And we haven't seen it yet. There is a classic pattern to bubbles, and markets never recover without capitulation.

Dan, Ken - Dont get me wrong. Im no bottom picker. Thats not possible. And keep in mind that I virtually drove the REonline website of Wall Street journal out of business with my negative publishing over the past 2-3 years. And there are many, many places I would advice to stay far away from. But all of the negativity is gaining steam still. Just keep the plus/minus of that second derrivative in mind. The rate at which negative sentiment is growing is never going to be more than it is today. Do you think you will ever again see a headline "foreclosures up 1000% in 3 years"? If that headline were to repeat in 3 years, that would mean more homes were foreclosed than there are homes. Headlines cant get any worse. Prices are down 60% (yes SIXTY PERCENT) relative to gold and oil and silver, in fact near 20 year lows when measured in anything other than our weaking US dollar. Prices are still going down, and might continue that trend (in fact, to some extent or the other, likely will continue that trend). With all the negativity, its a not a terrible time if you are looking to make a smart move up, or potentially buy a first home.

Dan, the problem with that reasoning is that when you say something like "in boston the ratio peaked at 27.5" - You are either taking a number from average or median sales prices and comparing them to average rental prices. It's not an accurate reflection of all properties since you can obviously have data skewed due to homes over a million reflected in the sales price numbers, while there is no comparable rental properties in the rental market. It's useful for a very general estimate but completely useless for making an individual decision of value.

I do agree that it's a good measure for many properties however, but I am just cautioning people to use this measure on specific properties to confirm rather than just looking at a macro level. In some areas and price ranges these ratios are not nearly as high as quoted and you might find that it may make more sense to buy something if your situation calls for it. I believe this is what the author of the article was trying to express since he obviously did the individual numbers and purchased property himself.

MIllions of people have made money from real estate!! Investing in Real Estate is not a bad idea.... over time... house prices rise!!! We're running out of land people... it's best to own a little bit of dirt then no dirt at all...

Being bullish on housing is not a hard thing in the long run. In more ways than not, it's like being bearish on the price of butter or bread forever. The powers that be will always destroy the purchasing power of the currency in the short, medium and long run. In places like Boston, real-estate has fallen 3 years in a row. In many areas of California, new houses are selling for less than replacement cost, thereby assigning negative value to the land. With respect to other currencies, many U.S. properties are downright cheap.
While the "real" (after inflation) price of housing may continue to fall, the nominal price has little to go in my opinion. As a debtor, it's the nominal price you care about because inflation will eventually whittle away the debt.

yeah, it really can't get any worse than May 2008..

whoops.

BUY BUY BUY

Don't worry Obama's coming. Socialism has always solved any country's problems.
hmmm. maybe sell sell sell as in sell your house and move to Japan?

M