Not a good time for Real Estate Investment, YET!

2009-01-15, Thursday

This stock bear market is only pass one year old, but it already rivaled, if not surpassed, the whole damage of 2000-2002, 1980-1981, 1973-1974 bear caused.So my take is that it will match the mother of all bear market of 1929-1932 when all is said and done. That is 80-90% down from the high!

OK, why does that have anything to do with Real Estate Investment, you might ask? Stock market is very liquid investment, when people need cash, they sell liquid investment and hold onto their illiquid asset, such as real estate. Stock market should be a leading indicator of real estate. If you agree with my view above, stock market has at least 1-2 more years to the down side, and eventually real estate will catch up to join stock to the downside in terms of downside magnitude. And traditionally, real estate lag stock market in recovery much longer. The real estate price still has downside risk and will stagnant for a long while before it can pick up again. It would be at least 15-20 years before we can see the giddy appreciation for real estate price from 2004-2007.

With that said, there are still opportunities in real estate, if you are experienced investor. You can still find special situation in REO. But be prepared to tie up your capital and practice your landlord skill for much longer.

Preserve your capital (or even sell short in stock market) and time will come down the road when mass foreclosures dump on the market. You can buy commercial real estate (shopping center, office building etc.) with the same price you paid for residential foreclosure today...