Not only is this a great time to buy real estate, but the market correction is sorely needed on the coasts and in the more prosperous cities (Chicago, Dallas, Atlanta). And it’s not a bad thing in the Rockies, either—as well as other areas affected by the housing bubbles in New York, SF, L.A. and D.C. And in Las Vegas, for that matter.
Much as I dislike having my mother’s estate fall drastically in value, I do believe the situation is temporary. And why, oh why, after all the squawking we’ve been doing for years about the need for “affordable housing,” are we suddenly upset that some people will be able to own their own homes who previously could not?
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And why, oh why,
You’re not really asking this, are you?
Why oh why after fourteen years of home improvement projects and maintenance and the sweat of my brow transforming this ugly little bungalow into something more reminiscent of my idea of an earthly–if not paradise, at least a comfortable and attractive facsimile thereof…why oh why am I looking at 50% off fire-sale valuations, and suffering the indignity of “investors” trooping through and seeing that yes, *they* could get a positive cash flow at current prices, where *I* could not, given what I owe. Or tweens with the backing of mommy and daddy still requesting seller incentives to the tune of their full downpayment amount, just for the privilege of having my burden removed from my shoulders. Or Mexican immigrants speaking not a whit of English (translations courtesy of their young daughter) contemplating how they will be able to cram their entire extended family into my house/guesthouse. Yes, why oh why am I suddenly ill and morose that I will suffer a substantial credit hit to give this house up in a short sale and then face the double indignity of being socked with a massive tax hit for the “forgiven” loan amount, just so these poor, wonderful people can now afford my house and my sweat and labor without a whit of return unto me?
For shame! Have I no compassion?!
Oh and whether this situation is “temporary”, consider this: The long term average appreciation rate on real estate is around 2% per year. This is in normal economic times. When values have fallen 50% from their high point, it will require a 100% value appreciation to reach the former levels. At 2% annual appreciation it will take over thirty years to recoup those losses. And that’s *after* the recession/depression has ended.
Unless you’re counting on another real estate bubble in the interim?
I would rent it out until the market returns. In the West, it will NOT take 30 years. More like five or ten, unless Big O really screws things up trying to play FDR-but-worse. Even then, I’d still see ten as an outside limit.
For comparison’s sake, my mom bought her “main” real estate investment in 1978. In our family, we buy and hold: especially, hold.
good stuff on Vanity Fair by Bethany Mclean, as to who is responsible for Freddie and Fannie twins.
http://www.vanityfair.com/magazine/bios/bethany_mclean/search?contributorName=Bethany%20McLean