OfflineHello,
I am new to this but I am a firm believer in cycles. Looking at today's headlines and what is going on in the world today, does anyone out there believe we are going into what Dean calls the rare 5th cycle?
Thanks in advance for responding,
Max Tuggle
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I think now is a prime opportunity to start looking for deals. I do think it will get worse before it gets better, however, keep in mind that no one can predict when a bottom hits, not even the best minds in the world. The market is not a mathematical equation based on economy or supply/demand, or everyone could. It is also heavily based on emotion and personal sentiment. Perception becomes reality.
What you want to do is try to do is find a price on place, where you know based on historical prices it is near a low. Then you don't have to find the bottom, you know that it will be going up DRAMATICALLY, you just don't know if it will take 2 weeks, 2 months, or a year, but it is.
The reason so many people are going bust is they gobbled up houses while prices were at all time highs. So there was little movement left going up, but plenty of movement to go down.
I always would prefer to buy a property, see it go down a bit before it shows a profit then to wait until it is moving upwards and you have a hard time pulling the trigger because you don't know if you are entering too late.
I believe we will see several more months of flat or slightly lower prices before we see a turn around. Some markets are turning up, some are just starting to tank. If you find a really sweet deal right now though, you would be hard pressed to go wrong.
I have seen houses at 50% of their high. At 50 cents on the dollar, meaning you can expect a 100% increase if you pick the right property, neighborhood and market, you're gold.
It's not hard to fathom a $150,000+ net profit after a mere year and a half or two, and if you just want a quick return, $50k+ in about 6 months to a year. If you can find and have the means to carry multiple properties then you can look towards a nice retirement with the opportunities we have right now.
What is this rare 5th cycle?
I am very concerned about the astonishing increase in values from 1995 to 2005, and the fact it lasted for 10 years! As the pendeleum swings, it seems posssible the down cycle could be just as severe, and last just as long?
The main thing to keep in mind is the housing market is driven by a few factors... economy and the fed are two of the biggest tangible factors.
The fed has been great at making bubbles over the last decade, though their job is to help prevent them, go figure.
You are seeing volatility which is the true sign the underpinnings are unstable. We have seen a rapid decline. It will only last so long... at which point it will either be flat or slow growth for a period after the sharp decline ends (has already ended in some markets).
It's impossible to predict the market, but I focusing my strategies mainly around the idea that in about 6 months to 1 year we will be in the clear in the markets I am looking and expecting nice returns within 2 years.
Remember, if you get a KILLER deal (and there are a lot of them around), it doesn't matter if the market is still moving slightly down or is flat because you have already padded your deal with that protection by getting it cheap.
When you wait until the market is honky-dory and the media is talking about how real estate is stable again is when you will not find a killer deal, be paying full value, and be in the same place where you are jumping on another bubble bandwagon.
If you wanted to try to correlate the housing market to the stock market, you would see that more often the not, sharp declines are followed by sharp increases. That volatility can be scary, and does suggest a lingering problem, but it doesn't matter if you are making decisions ahead of the pack. When greed, fear, or other emotions get in the way of making your own decisions that are fundamentally sound, then you are bound to get hurt or not maximize your returns.
I have to agree with you jtest. The points that you hit are excellent and you've got a bright future. Max, to help you a little more on understanding the state you are in you should read Cashflow Quadrant: Rich Dad's Guide to Financial Freedom by Robert T. Kiyosaki. But first read Rich Dad Poor Dad first, another by him. In Cashflow he explains different types of investors and stages and what not. It is a very good book. I suggest that you need to know where you are right now, and where you want to be, and why you want to be there. It will help you tremendously. You also have to look at your sources. The know it alls aren't always wealthy, and aren't even doing the things that they advise, so don't always focus on the headlines.
May I suggest that if you are the type of person that waits untill the coast is clear you won't gain as much. If you do your research, then you have a better chance of being successful. The higher the risk, most of the time theres a higher chance of return. There is money to be made in any type of cycle or market. "Accomplishment and success are often the result of committment and perseverance rather than skill or talent." George Van Valkenburg