It’s Tebow Time for Real Estate
Before there was a real estate bubble, there was debate. 1,000 economists could look at the data on a given day and come up with 1,000 different projections for real estate. And they did. Still do.
There were a relatively few people audibly calling for a bubble to burst well before it happened, but they were out there. Like Tim Tebow on any given Sunday, they had faith, and stuck it out until they got their 15 minutes. And good for them. Everyone else was punch-drunk, and we’re still mopping up the aftermath of that mess like the it was the county fair after Davey Hogan was in a pie-eating contest.
Tebow is still riding his hot streak, but many of the people behind the early housing bubble voices also completely missed the ride up, or got out too early. Nobody nails the markets without a little luck. A broken clock is right two times a day, so it is said…
. . . chuck enough pigskins down the field, and some of them are gonna get caught . . . Lucky streak? Or the real deal? This debate is not over…
Now, don’t get me wrong. I am a Tebow fan. This is a guy who draws hate for all the wrong reasons. And as his bottom-line-game-winner-respect grows, more and more sports fans are finding themselves wondering about belief, faith, and self-fulfilling prophesy. Watch the video below and see how a newbie quarterback stares down adversity with unwavering faith. It is a remarkable portrayal. There’s a lesson in there…
When The Doubt Has Become Mindless, It Is Time To Believe
The bubble happened, and it scarred the homeowner psyche to a degree that is thus far unknown. It will undoubtedly take some time to heal, and in the meantime, a struggling housing market is just baked-in. It’s the accepted reality.
Maybe you can catch a deal while everyone else is snoozing.
This is a good time to remind ourselves about the Investor Emotion Cycle, shown at right. See if you can trace the line from left to right, and find the string of emotions that have characterized the real estate marketplace over the past 6 or 7 years. Where are we now?
Housing Bull Linkfest
There has been an increasing amount of chatter about 2012 being the year to buy real estate. Last week I said “This Is What The Housing Bottom Looks Like“.
I am not alone in this belief. Poke around some of the links below from recent articles citing the opportunity in real estate markets right now. I’ll be back in a minute to tie it all together.
Forbes: The Next Mortgage Crisis (aka, not having one)
Talbott (formerly of Goldman Sachs): Housing – Buy Now!
Wall Street Journal: It’s Time To Buy That House
Marketwatch: Now Might Be The Best Time Ever To Buy A House
JP Morgan: Housing- Time To Buy
Wall Street Journal: Big Money Builds Case For Housing
Yale’s Robert Shiller (tentatively) Suggests favorable long-term buying opportunity
HousingWire: Buying/Renting Costs Draw Closer
The Two Key Drivers Behind The Current Real Estate Buying Opportunity
The current swarm of real estate bulls are largely drawing from the “affordability index”, which combines the cost of real estate, the cost of real estate financing (mortgage rates), and income levels. Affordability is at the highest level it has seen since tracking began.
The other key detail driving this mood swing is the squeeze play happening with rents. Builders have slowed down considerably while banks have taken over vacant foreclosed properties, sucking inventory from the housing economy. A tidal wave of used-to-own renters have spiked rental demand at the same time.
Supply down + demand up = rising prices.
click here to get a free analysis of your rent vs own options
The Self-Fulfilling Prophecy In Real Estate
If enough people join the real estate faithful, the market will begin to reflect it. This is a self-fulfilling prophecy in the making; the same confluence of data causing a flurry of analysts to issue ‘buy real estate now’ articles will influence attitudes and behaviors. And behaviors will influence housing values.
Think for a moment about how markets ebb and flow. What causes them to reverse? At some point, they run out of gas. There is shift, and the attitude rolls over from ‘Despondency’ and ‘Depression’ just they do from ‘Thrill’ and ‘Euphoria’. Housing was a lofty market that fell. At some point, it just doesn’t look so bad to buy real estate anymore.
At some point, it looks downright attractive. Would you buy a house for $100? How much closer to free would it need to get before you were ready to dump your landlord? You have to explore the idea to it’s extreme to find a balanced answer.
At some point in the future, we will look back on this time and wish we bought real estate. Not just a home, but more home. A vacation home, an investment property. Multiple investments. It will happen again. Exactly when I am not sure. But real estate will find Tim Tebow’s faith again. And while the majority is still doubting it for all the wrong reasons, real estate will quietly become a winning bet before maybe drawing the eventual attention of the hysterical masses all over again.
It will happen when the Velocity of Money picks up, stimulus dollars of the past/present/future, bite down into the economy and get it humming again, and inflation comes flying around the corner harder than a Jon ‘Bones’ Jones spinning elbow strike.
The other side of this market is escalating rents or double-digit mortgage rates. Take your pick. Or lock it in right here at the historical bottom in rates, and the cyclical bottom in Real Estate. This is the sweet spot for buying real estate.
click here to get a free analysis of your rent vs own options