The markets seem to be waking up to the fact that the housing market is no where near the bottom. Borrowers are being squeezed by the treasury markets recent sell off which has increased 30-year mortgage rates the most since 2004. The National Median Home price is poised for its first annual decline since the Great Depression. An executive at the giant bond fund PIMCO said it best: “It’s a blood bath. We’re talking about a two to three year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock markets and corporate profit.” The US housing market has provided the economy with support through the creation of wealth and the seemingly endless ATM of price increases. The recent increase in yields, along with the sub prime mortgage meltdown is going to kick this support right out from under the economy, and the dollar is going to be drug down along with it.
Sounds like bad news for the housing market and for the US dollar too. I’m a big fan of investing in real estate, but extreme caution needs to be exercised right now. Don’t be in a hurry to buy property just because you read some book or attended some seminar. Especially in places like Calfornia, Florida, Nevada, Michigan, Illionois and Ohio which lead the nation in foreclosures.
I continue to own homes in Indianapolis, Indiana I’m not concerned because it has really good job growth. So its not that I’m soured on real estate investing, its just that the easy money is long gone and its time to be very careful. Real estate won’t be as forgiving as it was 5 years ago if you by wrong in this cycle.