More negative news came out this morning about the sales of new homes, about how they are at their lowest level in 12 years, blah blah blah. Well, we all knew this was coming in 2005. There is no free lunch. Things got ridiculous, everyone jumped in, things went sour, now people are scared and want answers. In other words, the same old story of any bubble.
So here's an answer: The time to invest in residential real estate, whether for your personal home or for you investment portfolio, will be in the next 18 months. That's not the answer most people want to hear, because many have been left holding the bag (or the deed, or whatever). But if you want to make a good investment, 2008-2009 is the time to buy fairly low. We need to see blood in the streets. We need to see grey matter oozing out of people's ears. We need unearthly shrieks of pain. And we are starting to get near that point.
Homebuilders are laying off people right and left. Many subcontractors are waiting for phone calls that aren't coming. Rate cuts and refinancing aren't going to save a lot of people; they are going to have to dump their home at the worst possible time and at the lowest price. We aren't taking any pleasure in this, it's an awful thing for people to endure. But they knew what they were signing up for when they got their 5/1 ARM at 3.85%. There is always a day of reckoning.
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