Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Nexus of the Real Estate Crash is Shifting to Commercial Properties

Housing-Market / US Housing May 08, 2009 - 02:00 PM GMT

By: Money_and_Markets

Housing-Market

Best Financial Markets Analysis ArticleIf you’ve been reading my stuff for the past few years, then you’ve been ahead of the real estate pack every step of the way.

I warned you well in advance that the housing market would implode … that the mortgage industry would collapse … and that virtually any stock exposed to building, construction, banking, or finance would suffer immense collateral damage.


More than three years ago, in fact, I published a special report called the “Great Real Estate Bust of 2006-2008″. It explained what the bust would look like, and named specific stocks that were toast — including, but not limited to, Beazer Homes (BZH), Countrywide Financial (CFC), New Century Financial (NEW), PMI Group (PMI), Bear Stearns (BSC), Lehman Brothers (LEH), and Washington Mutual (WM).

When housing demand dried up, some high-flying stocks bit the dust.
When housing demand dried up, some high-flying stocks bit the dust.

Today, you can’t even call up quotes on five of those companies because they’ve gone bust or been acquired in shotgun marriages. Other stocks named in that report … as well as in multiple columns in Safe Money Report and Money and Markets … are trading for mere pennies, nickels, and dimes.

Why do I bring this up? Because I think it shows I have some credibility when it comes to real estate — and because it’s time to signal another important shift in my thoughts on the housing market. Namely, that the nexus of the real estate downturn is shifting and that the residential market is poised to stabilize in the coming quarters.

My Forecast For the Next 12-to-18 Months: A Gradual Easing of the Housing Crisis

Look around and you’ll see evidence pointing to a change in the residential real estate environment. Specifically, home prices have fallen so far, so fast … and sellers have gotten so desperate … that sales volumes are beginning to pick up in select markets.

Aggressively priced foreclosures, short sales, and regular homes are now finding buyers, both first-timers and investors. The outsized price declines have helped restore some semblance of normalcy to several ratios (price-to-rent, affordability, price-to-income, etc.).

This is a huge shift from the situation a few years ago, when all of these indicators were ridiculously out of whack! You can find more details in my July 2007 white paper “How Federal Regulators, Lenders, and Wall Street Created America’s Housing Crisis — Nine Proposals for a Long-Term Recovery.”

So how will this process play out?

Well, I still believe home prices have further downside. That’s because we remain oversupplied, with approximately 1 million “excess” housing units for sale in this country. More foreclosure inventory will likely hit the markets in the coming months, too. Reason: Many of the filing moratoriums put in place at the state and industry levels have expired.

But the sharpest declines in residential real estate are, for now, mostly behind us. I expect to see sales volumes gradually stabilize on a nationwide basis over the coming year, with total inventory for sale (new plus used) gradually coming down. By mid-to-late 2010, we should see pricing stabilize and gradually turn higher, with the improvement coming in stages depending on location.

Now could be the time to buy your first home at a bargain basement price.
Now could be the time to buy your first home at a bargain basement price.

So for those playing the downside in the housing market by shorting residential real estate-related stocks, I’d suggest moving to the sidelines. I still wouldn’t advocate buying most of them for more than the occasional trade, simply because I believe they’ll be “dead money.” That’s what we saw with many Nasdaq stocks after the last mega-bubble-and-bust. And more than nine years later the whole Nasdaq Composite is still 66 percent below its bubble high!

Meanwhile, if you’re fed up with renting and waiting anxiously to buy a home, shop around. You may find some compelling values that are just too good to pass up. I’m talking about houses or condos you can buy for 50 percent or 60 percent off peak levels.

There’s still tons of inventory on the market to choose from, and you don’t need to rush things. So keep these three tips in mind:

  1. Be sure you’re confident of your income, Purchase strictly what you can afford using a traditional mortgage,
  2. And don’t get swept up in any bidding wars.

The Broader Credit Market Implications

Commercial real estate still has further to fall. So stay clear of REITs and other stocks exposed to commercial real estate.
Commercial real estate still has further to fall. So stay clear of REITs and other stocks exposed to commercial real estate.

Does this make me a credit market “bull?” Not really. This credit crisis stopped being just about residential mortgages long ago. The weakness has since spread to credit cards, auto loans, boat loans, commercial and industrial loans, and more.

Heck, the CFO of auto lender GMAC just said “We’re at the highest retail credit loss that the auto industry has seen in recorded time.” The firm lost $675 million in the first quarter.

Commercial real estate is a whole different ball game, too. I believe the downturn there is still in its earlier stages. Further price declines, further increases in vacancy rates, and further pressure on rents are likely to be seen in the coming quarters. That means you should continue to avoid REITs and other stocks exposed to commercial (rather than residential) real estate. And you should continue to focus on safe money investing, regardless of what you might hear from the Wall Street crowd.

Until next time,

Mike

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Dave
13 May 09, 04:19
Prices to "stablilize" in 12-18 months

So, if as your article alleges, you think prices will stabilize in 12-18 months from now, and then "maybe" start to make an upturn, why in the name of all that is sound financially would you advocate buying NOW?

Wouldn't waiting to see ANY sign of price improvement/stability make much more sense?

I say, no expert I, that prices will fall another 10% before we see any "firming" of prices, maybe more.

Losing equity in your home, Mike?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in