The report from Case-Shiller is a primarily based on single family homes in the top 20 markets, mostly in suburban areas. The nationwide number is down 3.2% which is the biggest decline year over year since the fund had been started! We are beginning to see a wave effect in the market. Things that professionals were talking about six months ago are becoming reality, in another six months the homeowners will begin to realize they are feeling it too. This is why there are so many houses on the market and owners are not budging with prices. The housing market does not change direction as fast as the stock market, it took 3 years to boom like this and we are not going to see a correction over a few month span.

30% increase in credit defaults

In another article, the street reports that credit card defaults have increased up from 30% compared to this time last year. With all this recent buying of homes that now have no equity and an increased credit default rate, how could we not be headed for a recession?

What this means for you, the investor?

If you are thinking of getting into the market as a real estate investor, this is probably the best time to get started. This decline is likely to last at most 3 years, then headed for a nice increase. Traditional methods will come into play, maybe some buy and hold techniques or rent to own. With mortgage guidelines become ever tighter you may be able to convince owners with equity to give mortgages to you (owner financing). I feel techniques that worked during the downturn in the 80’s will become more viable again. Times like these are when like you can make a nice purchase.

An extreme example of this is a sale that just went down in New Orleans. A 40 story skyscraper was sold for a little over $500,000 at auction. Now the building was rampant with problems, but 40 stories for half a million! In fact, Donald Trump and other developers have already committed to huge luxury developments in the downtown area.

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