Will they or won’t they?
As the eyes of the nation remain riveted to the halls of Congress in anticipation, or dread, depending on perspective, of a financial rescue bill, the seven billion dollar question for you on the ultra microeconomic level is where to put your money.
Should you roll the dice and throw good money after bad in the stock market, wagering that the implosions of the past week have created buying opportunities instead of additional seats aboard the Hindenberg?
Should you reinvest what’s left of your portfolio into Real Estate now that prices have crashed, before the ability to obtain financing dries up completely?
Should you plug everything you have into a federally insured two percent vanilla savings account?
I don’t know.
I am but a simple Realtor.
I choose to keep my money invested in what I know, so owning property is always most appealing to me. Does this mean that gobbling up every piece of cheap dirt is right for everyone? Certainly not. I have a vested interest in selling you property, just as your stockbroker has a vested interest in getting you more heavily invested in growth funds.
Your insurance guy called, too. Something about being grossly under-insured against Sasquatch-related decapitation? No fear, he has a policy that is right for you.
While no play is inherently right or wrong (though your insurance agent strikes me as a bit dubious), don’t be oversold on any one investment avenue.
Be clear, however, I am a very big believer in Real Estate right now. Rather than fighting over scraps at the buffet when everyone else is jockeying for a seat, I prefer to wait for the collective belch before dessert. It is a short-lived phenomenon, but provides the opportunity to get while the getting is good.
Now that the bloated diners have all temporarily pushed away from the table, I have relatively unimpeded access to the fudge brownies, cheesecake, key lime pie … whatever strikes my fancy. I might gorge on one particular delicacy, or I might help myself to a few nibbles of each. I could plunk down all of the cash in my jeans for the hot fudge sundae, or I could spread my funds around to ensure my palate finds what it likes.
Of course, this requires credit.
For the time being, there is still financing available for those with solid cash reserves and a good credit rating. I won’t be one to ring the panic bell, but it is possible that financing options will become even narrower before the current crisis is successfully navigated. In six months time, we just might be down to borrowing money from B of A and your crazy uncle Al who has been squirreling money under the porch for the past twenty eight years.
As such, those who are waiting to squeeze every last price drop out of the market prior to purchasing do run the risk of waiting themselves right out of a loan. Agent or not, I will be the first to admit that prices very well might continue to slide for the remainder of the year. Yet, if credit becomes more expensive (rate hikes) or unavailable to you (tightening qualification standards, bank failures), have you made the smart play by continuing to hold out for that absolute rock bottom? Shoot, we could start giving property away for free, and there would be those still waiting to see if sellers would pay them to buy their homes.
It’s not as cut and dried as the man on the street may believe. Trends are trends because they do not last forever. They do not constitute mathematical law. I’ve had many ask me why they should buy now when they are essentially making $10,000 a month by not buying. To this I simply note that the dynamics of the market are always changing. Many people got into their current jams by making the opposite assumption: that the appreciation explosion would never end. As such, they made foolish choices, such as holding onto multiple properties they couldn’t actually afford. Buying new houses and renting out the old place at a loss on the assumption that it would be worth hundreds of thousands more in a year’s time. Oops.
The boom in my area, the frothy artificial spike that is, lasted for all of six to eight months. We are already well past that in this depreciative cycle. Recent economic woes aside, I’ll take my chances on the investment that puts a roof over heads in a historically desirable area. And I’ll take those same chances now, when the market is weakened and my options are plentiful. If my financing options evaporate over the next year, have I saved anything by waiting?
Again, take what I say with one family-sized grain of salt. I make my living selling houses. But if you are of the same mind, give me a call. I can’t guarantee that we will make you an instant millionaire by urging you to “BUY NOW!!!” as the informercials would have you believe, but I can find you some tremendous values that I believe will prove to be excellent long-term investments.
Now go call your stock guy, and he will give you a similar pitch. When you are done talking to him, flip a coin, say three Hail Mary’s and move all of your money into Bobblehead Dolls.
