The Dow Jones average has crossed the 12,000 threshold and things seem to be looking up for the U.S. economy, but there is much concern about the future.
Many individual retirement investors wonder whether the gains in the market are real, or if there’s been manipulation behind the scenes? I don’t know the answer to that and frankly, no one really does.
But, here’s what we do know. “Few investors have recovered from the hit stocks took after the market’s late 2007 peak. Despite recent gains, the Standard & Poor’s 500 index is still down more than 20 percent since that time.” This, according to Financial News Agency www.financialnewsagency.com . (As of December 30, 2010)
We also know that the worst economic crisis in more than 70 years is still upon us. It’s not over…not by a long shot.
Official unemployment is hovering around 10%, but real unemployment could be closer to 22% and as of today, the jobless claims are still rising. The foreclosure crisis is accelerating and 2011 will be worse than 2010, according to most housing experts.
Back in February 2009, we published a blog entitled “Property Market Bottom in 2010“. It featured a prediction by a well-known UK economist, Phil Anderson that home prices would stop falling in 2010. Mr. Anderson was wrong. He failed to comprehend the depth and breadth of the foreclosure impact on values. But, then who could have known how many foreclosures we would see?
Now we’re being told not to expect a peak in foreclosures until March 2012 and Gary Shilling, a financial forecaster and author, says “it will take another 20% drop in housing prices to bring them in line with the historical trend. Housing usually rises with the economy. Not more. Not less. To get back on track with the economy now, house prices have to go down”.
What we’re seeing with foreclosures is fairly predictable given Shilling’s scenario. As the reality of downward pricing sets in, more homeowners give up. Some sell and others go into default. Default means more foreclosures, and those foreclosures will further depress values.
As a homeowner, I’m unhappy about the fact that foreclosures are driving down the value of my home. I bought my current home in 2003 and as of today, it’s worth about 90% of the purchase price. So, if my home goes down in value by another 20%, I will have lost a total of 30% of the value.
So, what should I do? Hang in there and hope it actually doesn’t go down that far or should I sell now and go find a nice rental house? Well…guess what? That same question is being asked by hundreds of thousands, if not millions, of homeowners right now.
And, it’s precisely this issue that makes it so attractive to be investing retirement funds into income-producing property. In fact, Mr. Shilling, who predicts another 20% drop in home values, is recommending to his clients that (as part of their investment strategy) they buy income producing rental property. Bear in mind, that this advice is coming from a Wall Street strategist.
This perfect storm of foreclosures and loss of value simply means that real property is changing categories of ownership. It’s shifting from “owner occupied” to “non-owner occupied”…from owners to investors. There’s still the same number of properties out there, that’s why it’s called “real property”, and regardless of the circumstances, everybody has to live somewhere.
Up until recently, our government strongly promoted home ownership as a right of every American. And, that policy was a key ingredient in the mortgage and housing crisis. Now, for many Americans it’s not about ownership, it’s simply about just keeping a roof over their heads.
Here’s the bottom line:
This economic crisis is testing us in ways that most of us would have never believed and many people think that our way of life has been altered forever. Perhaps it has.
History teaches us that nations rise and fall, but that life goes on. If you were living in London or Berlin after World War II, you might have thought that life would never be the same again. But within a decade, it was hard to even notice there had been a war in that part of the world.
And, despite the housing crisis and soaring government deficits and debt, life will go on and people will be living in a dwelling of some sort (owned or rented), not out on the street. Therefore, as Real Estate investors, the opportunities to acquire income producing properties that perform at a very high level have never been better.
As a Real Estate IRA investor myself, I’m currently earning 18% interest doing Interim Construction Lending, right along side many of our clients. Banks still won’t lend to builders and I’m more than happy to “be the bank” for as long as the opportunity is there. I’m also invested into a condo project in Seattle that, along with partners, we bought as a pre-foreclosure.
Many of our Self Directed IRA and Solo 401(k) clients are reporting incredible gains as a result of buying distressed properties from banks. They are also loaning money to real estate investors who are flipping houses, picking up tax lien certificates and partnering with friends and families to buy larger commercial and apartment buildings.
Within 30 days, you can immediately begin participating in the distressed property market and start accumulating investment properties that will provide good, stable cash flow now and into the future.
If you haven’t read our posts on distressed properties and the opportunities for investment, click on these links: Part 1 Part 2 Part 3 to read the 3 part series. Now, more than ever, banks are willing to make deals with short sellers and with the properties they have taken back in foreclosure proceedings. Again, more opportunities.
If you haven’t done it already, get a Real Estate IRA LLC or Solo 401(k) plan set up, find a good Realtor with training in the distressed property market and start making offers. The time to take control of your own retirement investing is now.
Contact one of one of our expert Advisors at your earliest convenience in order to put together an investment plan that will meet your needs and put you in a position to take advantage of any opportunity that may come your way.