There Goes The Farm

[andrewfi]

Ronin, I made a chunk of money and lost a chunk of money in real estate investing. It is all about timing. The reason I made the suggestions about measuring cloing periods and housing costs was a reflection of the reality that in a market at or near its peak, there will be losers. That you have been lucky does not mean that everyone will be. The tipping point in a market is often reached very suddenly and for most players,with little or no warning.

Throughout the US there are many real estate markets that are already stagnant or in recession. The Charlotte NC market was relatively undervalued throughout 2004, I do not have more up to date information available to hand, but for sure, it is not as over heated as some markets were and are. From the perspective of a seller, and in many cases the buyer, a stagnant market looks just the same as a busting market. Prices are declining in real terms (inflation in general continues and thus other prices are increasing). The market is not liquid which means that people can neither buy, nor sell and many people will be left with mortgages that are in excess of the value of their homes, or they have no equity that allows them to continue their previously housefunded lifestyle. The difference between an absolute decline and stagnation is merely the difference in the rate of the apparent increase in poverty!

Renting does make good financial sense in an interim period, especially if one is expecting to see a cross the peak situation, where the market trends from growth to decline. It gives the benefit of falling prices on the puchase and rising prices on the sale as well as the ability to negotiate from a position of strength on both sides of the deal. If one is buying and selling into a rising market then there is little value in renting but youwould need to do the maths to find out where you were likely to find yourself in respect of market trends.