Tuesday, April 18, 2006

Housing Market Woes

It finally appears to be happening. The long-anticipated slowdown in house appreciation appears to be happening. Last week the WSJ had several articles that made use of anecdotal evidence to show the changes in some major markets like Naples, FL.

But now the data seem to be supporting it, and today CNN/Money had more information suggesting that bearishness in the RE industry is widespread, and increasing.

The economics of the housing market are both broad and deep. If there is a real collapse, investors have to be prepared to be defensive, as consumer spending and asset prices are likely to fall. Tactical allocations should reflect that real risk. Worse, as housing remains expensive for many new buyers, who may wait out sellers in a falling market, rents are likely to rise, increasing inflation, which will require further Fed rate increases.

If you are looking to buy however, having strong liquidity will enable you to pounce on bargains, and offer sellers something that they will desperatly need: buyers who have the financial strength to close. This will give you a great deal of flexibility in obtaining favorable seller financing and with rising rents, greater opportunity to cashflow the property.

I'm looking forward to it.

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