Five years ago, while everyone in the world seemed to be rushing out to buy the next big McMansion, I warned about a bust in housing sales, and it happened. I warned about a downturn in housing prices, and that happened next. I warned about the corruption, shenanigans, and above all, the risks in the wildest mortgage lending in history.Â
Fast forward to today, and I’m happy to say, that more people are listening. Instead of just a few folks around the office, my market analyses regularly go out to millions of television viewers and tens of millions of newspaper and Internet readers.
Today, one of the gravest threats to your wealth stems from the continued housing bust in America. Yes, even though the big bubble has long since burst, the real estate environment continues to ravage the wealth of average Americans.Â
So, don’t put your head in the sand just yet. Take a few minutes to consider several steps that are designed to protect your home equity and wealth. All the suggestions may not apply to your situation today, but the information will help you navigate the environment on into the future.
Protect your home. If you own your own home, it’s your primary residence, and you’re not in over your head with a big mortgage, your best bet may be to stay put. You have the flexibility to ride out the downturn, even if it lasts a while. But, recognize that you may lose a chunk of your home equity before any recovery sets in. If you can hold out long enough, your home may actually regain at least a portion of its heyday value. Â
Consider renting if it’s right for you. If you’re not tied down by family considerations, compare the costs. In many places, renting is cheaper than buying or owning even after the tax deduction you get for mortgage interest. And, don’t forget to factor in the cost of upkeep, mortgage interest, property insurance, property taxes and everything else that home ownership entails.
If you buy a home, be careful. Don’t get bamboozled into a high loan-to-value (LTV) mortgage. Most banks aren’t even offering them, but if you’re faced with what seems like a seductive option, think twice and let it pass. The market hasn’t fully stabilized, and any downturn will push you into a situation where you’ll owe more than your home is worth. If you change jobs or have to move for any other reason, you’re going to have trouble recouping your investment. You might even have to pay money at closing just to unload your house.Â
Sell residential real estate properties purchased as investments — especially condos. Many investors are “cash flow negative.” They can’t rent their properties for enough to cover the monthly mortgage and maintenance payments. They’re losing money. And now that the prospect of big price appreciation is gone, what are they going to do? They’re going to sell for whatever they can get or they’re going to have to give the keys back to the bank. As inventory floods the market, you’re going to see fire sales. And it’s likely not going to turnaround any time soon. Sell.
If you’re still holding mortgage bonds — especially pools of high-risk subprime mortgages — sell. The value of those bonds are down and as banks ultimately take the bull by the horns, foreclosing on many delinquent borrowers that have gone for more than a year without paying, the value of those pools will fall even further. Also, no matter how well they may have done in the past, avoid so-called mortgage REITs, investment firms that have been cobbled together in recent years to invest in mortgages and mortgage backed securities.Â
Remember, real estate downturns can last a long time, as this one already has, without real recovery in sight. This is not the time to leave yourself exposed. But it is a great time to prepare.Â
To most of Wall Street, the housing bust was a shock. But Safe Money subscribers were first warned about the impending crisis more than five years before it happened. Be smart and safe, check out Safe Money Report.
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I agree with you 100 % . I bought a larger condo [ 2335 sq.ft. ] in a high rise [ 22 stories ] in North Palm Beach , Fl back in April 2004 for $ 525,000.00. It was obvious then that the R.E. market was beginning to be irrational . I put in new hardwood floors in the 2 bedrooms, living room and the den . Also bought all new kitchen appliances over the past few years. The apartment has a Million Dollar view overlooking the harbor below with all the yachts and a view of Singer Island and the ocean . By 2006/2007 the asking price for the same condo on other floors went up to $ 750,000.00 . I put it on the market March 2010 and so far a handful of people looked at it but no offers so far . I dropped my asking price from $545,000.00 down to $ 519,000.00 , down to $ 499,000.00 down to $ 479,000.00 down to $ 449,000.00 and still no interest . I bought a larger Condo [ 2981 sq. ft. ] in the same building for $ 600,000.00 last April 2010 . At that price , I STOLE IT . Now someone will STEAL my 5 th floor Condo . Looks like the 2 nd Great Depression .
Yikes. Two high-priced condos in Florida. That’s a tough one. At 60, I made the mistake of purchasing a macmansion at what I thought was a steal back in 2007. Bad move. After a $75K renovation of the kitchen, new flooring and mech systems, we can’t get an offer on a price that is $500k under the appraisal value and approx $800 under the appraisal when we first bought it. I’m concerned with potentially losing it and am trying to build a small cabin that I want to pay cash for. I’m very concerned about much higher taxes and the eroding dollar and as a result, am considering cashing in part of my IRA to pay for it. i understand the value of keeping it invested, borrowing the mortgage money and always having the option of pulling the IRA funds out if needed. I’m afraid taxes may double and IRA funds may be forcibly directed into government sponsored “savings programs”, therefore my interest in making use of that cash and paying current lower taxes. Any comments??
It’s no mystery that Wall Street and The banking system defrauded the American people and wreaked havoc on our economy. The mystery is how did we as Americans become so complacent as to take it lying down. “The System†is amazing at duping us into thinking we are responsible for having trusted established institutions while they rob and plunder us. I refuse to fall for the Charlatans ruse. I personally took the battle right into my banks kitchen and beat them to the tune of $450,000 on my mortgages; all without even going to court. We consistently achieve similar results for our clients who are also willing to stand up for what is ethical and have been doing it for years. You bought a property in a condominium complex? I’ll double down that the occupancy rates were misrepresented by the HOA along with numerous truth-in-lending violations, in addition to securities violations. I’m not sure how you feel about being defrauded by Wall Street, but if you like your retirement portfolio, it’s time to call out the crooks on their mortgage schemes.
Kudos to The Weiss team for the release of their recent ratings. It’s about time we have truthful independent analysis of the financial shenanigans going on. Keep up the good work guys!!
I am a Founder of SimpleRecovery.com and moderate a blog at mortgagecreditdebtsolutions.com. We are not willing to take the destruction of The American Dream lying down. We’ve made it our mission to free Americans from the 30 year sentences handed out by the banking system. Feel free to contact me at brian@simplerecovery.com
Mike Larson advises dumping condos bought as investments like a hot potato. He shuns any real estate investments at this time. He advocates select stocks and ETFs that he recommends in his newsletter.
If you have homes and condos that you have nearly paid off or purchased for cash as investments should you dump them merely because their appraised values are static or dropping? Can lower appraised values mean lower property taxes?
With the vast numbers of persons losing homes and being thrust back upon either relatives or the rental market and with the likely prospect of that number rising dramatically in 2011 and beyond, could one believe that ownership of rental units might be a wise investment during this period?
In large urban areas the government has section 8 paying the bulk of the rent for hundreds of thousands of indigent renters. The unit owner still gets his money, one way or the other. Sure some units will stay empty, as always, but most will remain rented.
Meanwhile, the investment offers huge tax benefits and write offs. If appraised values drop, and one takes Mike’s advice and dumps them all like a hot potato, then the “cherry pickers” will swoop in like vultures, buy them up in large lots (as they are doing even now) awaiting the day when assets (including property?) will inflate in value along with everything else, due to a debased dollar and hyperinflation.
This is a premeditated, calculated, pre-planned, well orchestrated ploy by the elite to debase the working and middle class further, defraud them of what little they have left, con them into relinquishing what property they have out of fear of further “loss in value” (actually an illusion, since it is just on paper), having massive amounts of real estate on the market at fire sale prices—-all setting the stage for the elite, who then swoop in cherry picking the best morsels for pennies on the dollar.
According to plan (they’ve done it many times before and in many nations), once they get all they want of your and my property for pennies on the dollar, they then cause assets to re-inflate, and end up sitting on a gold mine in real estate. The landlord barons of all ages have done this with great success, using wars, recessions, and various economic manipulations as means to their ends.
Once the “debased” real estate is in their hands, they cause the re-inflation of values, then rent the very property you lost to them, back to you at sky high inflated rents! You have no choice but to pay, as that is then the “normal” market price for the period (which they created by their premeditated actions).
Run down abandoned neighborhoods (which they bought wholesale for a steal) are then gentrified, and you rush in there, eager to rent an apartment in the now prestigious and gentrified area (which they created with the money they ripped you off for when they bought your property that Mike Larson told you to sell in 2011), and you reluctantly but willingly pay the bloated rental fee, falling victim to your own lack of foresight.
Beware the advice given by any “experts.” Gold dealers push gold no matter what and rationalize the reasons why you should buy it. Stock analysts push stocks and will always find a reason why you should buy it, as that is how they make their living—on giving stock (and ETF, etc.) investment advice. Real Estate professionals will always say every day is a good day to buy real estate, as that is how they put food on the table, by selling R.E.
Real estate is a tangible asset. Stocks and ETFs are pieces of paper or electronic entries on a computer screen. They can vanish in a second in a number of ways. Your property cannot vanish into thin air. The “powers that be” do not want the common man to own property. They NEVER DID, despite the commonly held erroneous belief that the government wanted every American to own a home. That agenda was promoted in the way it was, pre-meditated, pre-planned, perfectly orchestrated—to have the effect it is now producing—-loss of millions of properties by the common people and the gaining of these same properties, by cherry-picking elites, for pennies on the dollar.
In all of history the many owned nothing, the very few patrician class owned virtually all land and property. The masses were subservient to them. It was called feudalism. It is arising in America even as I write, unbeknownst to the clueless masses, who are unwittingly cooperating with its inexorable return.
The goal is to keep you permanently indebted, landless, and thereby subservient.
Learn to think it all through for yourself. Never blindly accept the “advice” of any “expert” without deep reflection and analysis in your own mind of ALL the facts and ramifications.
@Abe – briiliantly written and truthful.
You cannot eat gold. Stocks are nothing more than funny money printed on worhtless pieces of paper just like the money now being printed by the FED.
On land you can build housing for safety and shelter. On land you can grow food if need be. On land you can survive the most dire oof times.
Personally, I am working to assemble those people who know that even in the worst of times Real Property has value an as the world population continues to grow it will have even more value.
For those who are interested in the safety of their money they can always email me cbiresearch@ gmail.com
ABE, great post. I agree with you, that real estate is something tangible that people need at all times. Being from USSR, where a similar trick was played on people just less than 20 years ago that left millions people impoverished but at the same time made a few hundred new world billionaires. My advice is to buy real estate if you can afford and stick to it as in the hard times of skyrocketing cost you will not have to worry about your fixed rate mortgage payment.