Real Estate Health

For the first part of this year we at REITactics have been predicting a looming recession. Our last guesstimate was for it start in the second quarter of this year.

There were a lot of indicators pointing that way and premium REITactics members will get a detailed analysis but some of those indicators are not as solid in the recession camp as they were.

It isn’t uncommon for indicators to thrash about and be inconsistent with each other at times but does this make us rethink our position/prediction?

Yes… No… Maybe. Reading tea leaves is always hard.

Seriously though, the economy is fairly strong but we are now beginning to see the affects of the housing correction in some areas. There will definitely be local recession pockets around the country but will the economy as a whole experience a recession or even a significant pause?

Istill think so.

The latest CPI numbers are out and while the core numbers are stable, rising only 0.1%, the overall number is getting hotter. As the rise in fuel costs works its way through the larger economy the core number is at risk. It is not at immediate risk and there is no way the Federal Reserve is going to raise rates before they are absolutely forced to do so but their only real purpose in life is to walk the fine line between rampant inflation and devastating deflation.

So, to answer the question of this post, is a recession still likely?

I still think so. While we no longer have an inverted yield curve between short and long term rates there are still other significant indicators pointing to a recession.

What does this mean to a real estate investor?

Aside from the obvious buying opportunities we are going to move back to a time when the long term interest rates actually correlate to the short term rates.

That means, mortgage rates are going to rise.

How high? It wouldn’t surprise me if the 30 year fixed rate approached the 1995 levels of 9% with almost two points in the next 18 to 24 months.

That is very good news to a long term investor. Why? Because it will allow rent increases. As the long term mortgage rate rises and the underwriting criteria tighten, there will be more demand for rental housing. If you are a landlord your life is about to get a little bit better.

It is of course a double edged sword. There will be more renters but it is even more critical you check them out thoroughly before handing them the keys.

A recession is still likely, I’m just not as sure it will still be as soon or as sever as it looked a few months ago.

Isn’t it funny how different people look at the same data and interpret it differently? What is funnier is when they take a piece of data and force it into their own preconceived desires for the world around them. Tuesday morning the CPI numbers were released. The “core” number shows that inflation is not gathering steam [...]

I subscribe to a large number of email lists and I read them. However, due to family needs I have not stayed on top of them over the last week. So, this morning was catch-up time and I read all of the ones I had put off “for a few days”. It was an interesting [...]

Lenders are faced with a huge backlog of homes from foreclosure. Some are turning to auctions to deal with the backlog. For the smart investors who have been preparing for this, the next few months are going to be great. You can read more at http://www.realestatejournal.com/buysell/markettrends/20070515-hagerty.html

Yeah, like that is news. Every year is the year of the buy and hold investor because over the long term the buy and hold investor will far surpass the buy and sell investor. It is true for stocks, bonds and even real estate. But, 2007 is different in that the real estate flipper is finding new [...]

I got a great question in an email yesterday. The writer talked about being new to real estate investing and how there is so much information out there that seems to conflict with other information. Then he summed it all up with, “when does all of it click and make sense?” Great question. One reason we have [...]

I just don’t understand why people make it hard on themselves. There is an exchange over at the Magic Bullets site discussing how to approach a, this case, very reluctant homeowner. One suggestion was to just place a for sale or lease sign in their yard and then when they called, apologize and then try to [...]

Real Estate investing is not my primary full-time job, nor is the newsletter and REITactics certainly isn’t my primary full-time job. I know the guru types encourage their followers to quit their jobs as soon as they can afford to do it but in my opinion that is really foolish. For the average person out there, [...]

I should have posted this before but the forums at magicbullets.com are a very good source for anyone thinking about investing in real estate. You have to use common sense and ignore the noise but there is some great information there. If you are starting out or just thinking about investing in real estate that site will [...]

There are so many facets to it. When I think about ultimate security I find myself thinking about those days in my childhood that truly gave a feeling of ultimate and complete security. I say a feeling because, like all children, our concept of security was really simple and my parents, like all parents, instinctively [...]