Sunday, April 01, 2007

Sub-Prime mortgage market woes and the U. S. Housing market article in "The Economist" magazine

For those of you wondering if the United States real estate market is about to crash, please read the full article in the Economist magazine of this last week. I urge you to really understand what is being said - the language of facts, the size of the sub-prime market, the FULL opinion of experst, not just sound bites.

Yes, headlines sell newspapers and magazines - but you knew that already. But it's important to dig below the surface in order to get the whole story. Two particular facts to highlight: 1. the real estate market has slowed down dramatically and 2. the United States unemployment rate has stayed steady at 4.5%. Hmm. If you have read this real estate blog over the last 3-4 years, I have said "it's all about the jobs, stupid". And I will continue to say it's always about the jobs, as far as our economy is concerned--hello, Detroit?.

For those of you who wish to be lazy & trust my opinion or are lucky (and smart) enough to be independently wealthy, you still have no worries. You may see a buying opportunity within certain markets where the foreclosure rates have jumped dramatically. All, I can say is, keep your shirt tucked in, and tighten your belt. Real estate investment has never been a get rich quick scheme and buying for your short term gains may mean loosing your shorts in the long run. People live in houses, they don't trade them for profits - thank God - so why do we compare this asset class to the DotCom bust?

In my years growing up in Minnesota, I've learned a couple things from those wise Northerners. Most wise people keep their shorts on in the summer and wear long underwear in the winter. When they don't know, they simply say "Well, geez Sven, I am not too sure about that," and when they want to say 'No', they often say "Well geez Sven, I just don't know about that, der." The message is, be patient and wait, don't make bold statements that could be wrong. Most people would agree or tell you to hold your real estate investments as long as you can.

It usually pays to hold on to land. As my Minnesota kinsman would say, "Well, der... God's not making anymore, now is he?"


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