It's pretty obvious to HP'ers by now where we are in the cycle - especially with the new reports from the ground, which are ahead of the lagging numbers we're getting from the NAR and government.
The crash is underway. The bubble has burst.
With swelling inventories, falling prices, cancelled contracts, and desperation beginning, I ask one question.
Now what?
I feel like I should be doing something, more than I have. Checklist so far:
1) sell overpriced house, cash in and rent
2) warn others
3) load up on oil, gold and foreign stocks
4) warn others again
But is there a way to make some $ off of this crash? Shouldn't we be shorting something? And most importantly is there a way to protect the gains we've made (in dollars)?
And since the US property crash will take down other countries' economies with it, shouldn't I get out of their stocks too?
Give me your best thinking - this week is going to be a week of action. And the Fed meeting this week only complicates things more. Oh, what's Ben to do? Oh, what's an HP'er to do?
May 08, 2006
The housing bubble has burst. The Great Property Crash of 2006 - 2010 is underway.
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Short:
TGIC
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DJIA
Once again. Many builders will be going BK because they have way to much land and can't pay their bills. Buy 2008 In the money puts on CTX, BZH, KBH etc.
FYI- NVR dropped from $70 a share to .30 cents in 11 months in 1990. The 1st year of the last downturn.
Interviewed later their CEO said it was because they had too much debt and land on their books when the downturn came. Look at them now, they are the builder with by far the least amount of debt. They learned from last time, most others did not.
To Azfamdeals1
What was reported on the Az local news about Phoenix real estate being in a "dead zone" most likely came from an article in Fortune magazine.
Go to their site: http://money.cnn.com/magazines/fortune/
and click "real estate survival guide."
Keith,
I'm still waiting to turn on the TV and experience that "OH SHIT" frozen-moment-in-time like I did the morning of 9/11.
What's it going to take for the real estate industrial complex (ie. everyone involved in real estate) to get shaken to the core?
I wish someone, somewhere with real clout would say "Everyone selling a home in [bubble city], drop your prices by 50% RIGHT NOW!" and actually have ensuing financial calamity ensue within 30 minutes.
The Homebuilders did learn their lessons. They have engraved in their collective conciousness the disaster of last time. Of last time. Like generals, they are fighting the last war. They built more on contract, they covered exposure with commitments, they optioned land instead of purchasing/contracting land, they raised margins rather than pursue share, they sub-contracted construction duties, they bought into the revenue stream. Just the things to protect against the last downturn. The homebuilders have done everything necessary and Wall street agrees. The French once did the exact same thing, they called theirs the Maginot Line.
I think shorting credit card companies could be a good idea. People who are struggling to make the mortgage may take cash advances for a couple months. If they can't sell, they walk away from the house and declare bankruptcy.
Housing Crash of 06-10?
5 years sounds more like a soft landing than a crash. Are you changing your position Keith, or is the sky now falling gently?
osman - keep putting your suckers, I mean clients, into over priced houses.
Housing busts take time, unlike a stock market crash that can hit in an instant. Housing crashes are like a death by a thousand cuts.
Being a realtor, seems like you would have studied real estate ups and downs sometime in your life. But you were probably busy reading your get rich quick books, eh?
Osman,
Your a realtor, translation employment with out high school degree preferred. Do you really believe we value your opinion? Your just a realtor, one step above car salesman. Always remember that. A realtors job is one of absolute ease, and it is why in most cases it provides such median to low income. The last five years have been exceptional but I hope you saved some of your cash. Talk to you later High School Diploma Boy, errrr, GED Boy.
Ouch... that last comment was harsh.
I'm a young (25) business owner and considered purchasing real estate as a shelter for my income. After looking at some potential properties, I realized that even the market here in small town Missouri is overvalued. I see a "crash" on the way, however, like others have said I think it will be gradual.
As a young investor, I think the best thing to do with your money right now is invest heavy in energy stocks/funds through a retirement account and save up as much liquid cash as possible.
With enough invested, the gains in energy stocks will beat the higher price you are paying at the pump. For the next 15 years demand for fossil fuel energy will go up and supply will go down... a perfect investment opportunity.
On the other side, liquid cash will allow you take advantage of incredible deals on forclosed property for the next 5-7 years. With rising inflation, increased gas prices, increased minimum credit card payments and overvalued property... I forsee a heap of BK filings from (millions I assume) who live paycheck to paycheck and are slaves to credit card debt, even as they "live richly" to CITI's standards.
Where are you at in Missouri, small business news? The St. Louis area is overvalued.
Rydex funds has investments that go double the opposite of stocks. If you feel that falling home prices would affect the economy, you might want to use one of these funds to bet on falling stock prices as a result of falling home prices.
I would short GM, but Scottrade keeps saying "no shares available for shorting." Many others from other brokerages have had the same complaint on Yahoo forums.
I closed out my short on RYL way too soon. $200 profit. It was really just toe dipping for me.
Currently I have short positions on CTX @ $57 and FNM @ $52.20.
I don't recommend shorting to anyone, but if you are going to do it, use play money.
I've already seen the effects of the Fed trying to slowly dry up the excessive liquidity they poured onto this country.My friends
don't talk about refi's anymore.I watched them spend a lot of that kind of money the last 5 years.NOT anymore.Everyone is talking about "cutting back" on unnecessary
things.This lack of the so called "wealth effect" will QUICKLY
find its way into the economy.No way is it going to take until 2010 to become severe.Brace Up!
Osman said...
Housing Crash of 06-10?
5 years sounds more like a soft landing than a crash. Are you changing your position Keith, or is the sky now falling gently?
4-5 years of what will probably 5-15% depreciation year over year can hardly be called a soft landing in real estate. A soft landing means that the market will top out and then remain steady or relatively steady until homes begin appreciating again.
I'd like to see the faces on a person that bought a home for 540,000 at the peak, that will be worth about 280,000 in 2010 as you try to explain to them that what has happened is a "soft landing" in the market. Actually I wouldn't want to be in the room if you were the one responsible for selling it to them. I'm not much for the sight of blood.
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