I have seen teaches me to trust
the Creator for all I have not seen
CREDIT CRUNCH MONSTER
By B.K. Haynes, Accredited Land Consultant
Are we heading
for a recession? Many leading economists expect a serious downturn at
the end of this decade. But in 2008? I don’t think so.
There is, however, concern among some observers that economic darkness
could be upon us sooner than expected, this due to the emergence of the
Credit Crunch Monster and the failure of government policies to put it
out of our misery.
Economic indicators such as job gains or losses and retail sales figures,
can easily miss the deleterious impact on spending that looming credit
problems hold out for consumers and the business sector in general.
Keep your eye on the price of oil. Sky high gasoline prices in coming
months will be another ominous sign that the Credit Crunch Monster is
still unrestrained and keeping consumers at home.
Weakness by the Fed in countering this threat to the economy through (1)
token interest rate droplets and (2) a counter offensive against inflation,
will do little to make the monster go away. Anything less than aggressive
moves by the Fed to attack the monster head on can lead to panic selling
of stocks and hedge funds and continue to prolong recovery of the real
Consumer reaction to the Fed moves—and hence a signal of where the economy
is headed—will be apparent in coming months through observation of a sustainable
movement in the stock market, either up or down.
Also keep your eye on the price of oil and the inflation rate. It would
not bode well for the economy if these leading indicators were to abruptly
rise while the Credit Crunch Monster is still on the loose.
Significant and aggressive reductions in interest rates by the Fed could
encourage consumption, construction, and manufacturing, while steadying
the real estate market and giving consumers a healthy dose of confidence
in the economy. A deep recession is expected at the end of this decade.
Maybe now we need a break to get ready for it.
AHEAD FOR COUNTRY PROPERTIES B.K.
Haynes, ALC Accredited Land Consultant
Buy at the bottom
and sell at the top. This is a familiar and recommended mantra for investors
considering the purchase and sale of homes, land, stocks, commodities,
or financial instruments. This article discusses the real estate scene
as I see it for the rest of this decade.
Technical indicators and documented trends of the 20th century-the latter
of which are fueled by factual demographic data-show that the price of
homes and land is poised for an upward swing, with only a slight delay
in the recovery. In analogical terms, the anticipated real estate recovery
could be likened to a plane stuck on the runway for months on end waiting
for permission to take off to another top.
In the winter of 2008, excess inventories of home and land products will
yet to have been worked off to comfort levels that consumers feel are
proportionate to demand. Real estate prices appear to have topped out
in the summer of 2005, first on the West Coast, followed by accelerated
price declines in 2006 and 2007 along the eastern seaboard and in scattered
overheated markets throughout the U.S.
Who, or what, was responsible for the holdup in the real estate recovery?
Here are four principal factors behind the delay: (1) geopolitical problems-mainly
trouble with Iran and the Iraq War; (2) the unstable price of gasoline;
(3) distress over the sudden loss of home equity; and (4) media hysteria
over a perceived wholesale collapse of the sub-prime mortgage lending
For those observers sitting on the sidelines of the real estate game,
it is important to grasp what professional investors already know-what
goes up must eventually come down. In recent years, the overvaluation
of real estate in the U.S.-largely induced by a spurt of low interest
rates in the early 2,000s-acted to make real estate more affordable for
consumers, while at the same time spawning excessive speculation.
By 2003, consumer buying power had reached peak levels due to the burgeoning
wealth of aging Baby Roomers. The end result was a shortage of home and
land product and the creation of a classic sellers' market.
Considering the current surplus of unsold homes and building lots- and
in the absence of dramatically lower mortgage interest rates and falling
gasoline prices-clear-cut definition of an upswing in the real estate
market will likely not be evident until late 2008.
Based on decennial cycles in the 20th century, another significant sellers'
market should emerge in sync with upcoming presidential election and is
expected to last until another full-scale market bottom at the decade's
end, at which time investors will want to have a high degree of liquidity.
It would appear that now is clearly the time to buy select rural real
estate, while it is- in most cases- being sold at hugely discounted prices
and can therefore be considered significantly undervalued. For short-term
investors, the time to take profits would be in the projected peak boom
period of mid to late 2009, before credible evidence suggests to the general
public that the next crash is at hand.
Technical data show that weakening in the real estate market has reduced
new home sales and housing starts to normal levels, last seen in the year
2,000. Those familiar with past bubble booms and busts recognize that
the recent real estate downturn is not a bust, but only an extended correction,
as it has been characterized by leading economists and investment analysts.
In effect, the current real estate slump is not indicative of a "bubble
burst," but is simply a correction within the context of an existing "bubble
boom" in the U.S. economy that will be finishing its run over the next
several years. The media, of course, would naturally play up the "bust"
angle because negative news is more sensational than positive events for
readers, listeners, and viewers.
In its worse connotation, the prolonged dip in real estate prices can
be viewed by alarmists as a possible suspect in the killing of the economy,
when, in reality, the downturn can intelligently be interpreted by alert
investors and many economic analysts as a precursor of a wide-spread bust
poised to emerge in or around 2010-2012. A caveat to this conclusion is
that the carnage to consumer home equity positions left by the price correction
was so severe that it has dealt a death blow to the indiscriminate construction
of McMansions. Most home and land owners, who have held on and weathered
the price correction, will, in most cases, find their equity positions
embellished after the real estate market takes on its upswing definition
later this year and rebuilds home equity.
One of the fundamentals in the real estate market is that homes and land
exist in a state of constant turnover, with these assets generally purchased
with the proceeds from the sale of existing real estate. As homes and
land become more affordable-due to lower mortgage rates, scarcity of supply,
and through price corrections-these assets have had, in the past, a tendency
to be traded upward, exposing the inventory of new homes and land parcels
to excessive speculation. It is obvious that the 2005-08 price correction
has produced an abundance of affordable real estate, while curbing speculative
As the market recovers from the slowdown, it is important to realize that
demographic changes in the U.S. point to a growing trend toward down-sizing
in the home market, with sellers cashing out larger homes for the purchase
of smaller, less expensive dwelling units. It would be reasonable to assume
that the large-scale, unrestrained construction of gaudy mansions and
overly expensive homes is a somewhat dated concept not likely to be embraced
by national home builders. It takes many years for large scale housing
developments to get off the ground. The process begins at the land acquisition
stage and starts working its way through the nightmare of political concerns
and environmental objections, then proceeds to the desks of planning and
regulatory officials and, finally, to the construction phase.
Developers at the starting gates of upscale housing developments in 2008
could find themselves losing the race for profits. This is largely because
the spending power of Baby Boomers to buy such luxurious digs will be
trending downward, this in the twilight of an overall crash in the economy
that could, again, leave the building industry with an inventory of expensive
For months now, doomsday commentators have been shouting that the sky
was falling on the real estate market and that the calamity would bring
about a recession. In fact, the state of real estate is only a single
component within the overall economic picture. A crash in this one segment
would essentially be a blow to the real estate market caused by a faltering
economy, not the other way around. The global boom in economic growth
and the strength of baby boomer spending should boost the value of real
estate assets in the U.S. for the next two years. Of course, real estate,
like politics, is largely local. So location, location, location,
is super important. Investors in country properties should scout for desirable
real estate that is easily accessible by main roadways and located less
than two hours from major cities.
Early-bird selection of prime resort properties - particularly waterfront-by
investors prior to project completion by reputable developers could be
a sound and profitable move. Well located rental properties and moderately
priced homes with acreage should also deliver significant profits if purchased
soon and sold at the peak of the coming seller's market. But remember,
the surge in Baby Boomer spending will have receded fundamentally by 2010-2012,
this as the expected slump in the economy takes hold. Investors will need
to be liquid at that time to capitalize on those real estate foreclosure
and distressed property opportunities that accompany economic downturns.
Investors should keep in mind the fact that real estate bubbles and their
related busts are more likely to occur in densely populated metropolitan
areas, this due primarily to the scarcity of land. Consider the fact that
six of the most unaffordable housing markets in the English-speaking
world are in the U.S.-five cities in California, combined with Honolulu,
Hawaii. It is not a forgone conclusion that a real estate bubble burst
will affect all markets simultaneously, as would be the case in a stock
New growth restraints in some outlying counties can also restrict the
amount of land available for housing, forcing the clustering of homes
and perpetuating regional bubbles as people bid up the price of homes,
this while developers scurry around, paying higher and higher prices for
The 20 most affordable home markets in the English-speaking world
are all located inland, away from the coastlines. 16 of the 20 are in
the U.S., with four in Canada. A few simplistic lesson points for investors
in country properties are (1) concentrate your activities in good rural
locations with growth potential; (2) buy at recognizable market bottoms;
(3) sell at the top; (4) avoid irrational market frenzy that could expose
you to the next bubble burst.
Demographic-based data reveal that, in coming years, there will be diminishing
future demand for high priced homes in and around major cities and population
centers. An aging population, led by the Baby Boomer segment, will call
the shots on economic growth in the near future, this through the power
of their massive build up of wealth stashed away for retirement. Primary
homes for this population sector will-of necessity and preference-be smaller
in size. This group will seek out moderately priced homes and dwelling
units in small towns and rural areas near major cities, while intensifying
their search for affordable homes and condos in resort communities.
The purchase of homes with acreage, small farms, and fixer-upper homes
in the countryside will be primary objectives for retirees, as well as
principal targets for short-term investors in country properties. The
changing demographic nature of our population will bring about price rises
for affordable homes and land in the near term, the trend eventually leading
to another overvaluation of properties in attractive regions, many of
which are destination points preferred by new retirees.
Real estate in California, Florida, New York City and its environs, and
the southwest U.S. are particularly vulnerable to any coming bubble burst.
City dwellers seeking lower priced homes and refuge from congestion will
be propelled toward the countryside in coming years by the explosion of
broad-based internet that will allow them to work from their homes. The
demand for country properties will grow exponentially as these workers
move further out, drawn to less crowded regions offering abundant outdoor
recreation and affordable housing. That idyllic little cottage in the
country will be on the minds of many escapees seeking a haven from the
nightmarish socio-economic events that could occur at the end of this
decade. And, of course, the threat of terrorism will act to drive many
city people out of the ominous "blast zone."
A noticeable price pattern was evident to economic observers throughout
the 20th century that showed real estate prices falling significantly
following a 5-year lag from their peak figures, these high numbers generally
emerging at mid-decade. This same price pattern appears to be developing
in this decade, with a slide in prices that started in 2005 and is now
beginning to level off in 2008.
As in the past, this recurring trend calls for real estate prices to climb
in the near future, before falling again to a market bottom on the heels
of the next recession. Many leading economists and financial analysts
point to charts showing that the next real estate bubble burst will be
incited by a collapse in the overall economy in, or around, 2010-2012.
Sellers of high-priced homes, disappointed with the scarcity of buyers,
along with devaluations of their property, often reaching 40%, should
find a way out of their lost equity troubles through the rising tide now
evident in the stock market-a financial surge that should lift all boats.
Timely action by the Fed to drop long-term interest rates, along with
a concerted effort by private sector lenders to develop a comprehensive
program of government incentives and restructured financing for sub-prime
loans, could help consumers sop up the existing inventory of moderately-priced
homes and lead to a quick recovery for the real estate market by late
For investors in country properties, here are some chilling predictions
about the economy:
(1) The spending wave by
Baby Boomers will decline significantly at the end of this decade, while
their entitlements will pose a huge drain on the economy.
(2) Moderate inflation will edge up over the next few years, followed
by a growing deflationary period which will be deadly to many holders
of real estate and become the hallmark of a deep recession beginning
at or around the decade's end.
(3) Plummeting mortgage interest rates will help lessen the blow to
the economy, this as a surge of refinancing and government incentives
provides a measure of stability to the real estate market.
Geopolitical troubles will haunt the U.S. for the rest of this decade.
Throughout the 20th century, almost every president elected in a year
ending with the number eight has faced a war or economic calamity during
his second year in office.
Tremendous opportunities exist for investors who are in the right place
at the right time with the right means, whether the market be favorable
to either buyer or seller. The problem for most investors is that they
either fail to act, act too late, or incorrectly judge the market.
B.K. Haynes has been a land broker in Front Royal, VA for 42 years. He
is the author of seven books, the latest of which is How I Turned $50
Into $5 Million in Country Property — Part Time. For more information
and commentary log on to www.bkhaynes.com.
very self-important college freshman attending a recent football game,
took it upon himself to explain to a senior citizen sitting next to him
why it was impossible for the older generation to understand his generation.
"You grew up in a different world, actually an almost primitive one,"
the student said, loud enough for many of those nearby to hear. "The young
people of today grew up with television, jet planes, space travel, man
walking on the moon, our spaceships have visited Mars. We have nuclear
energy, electric and hydrogen cars, computers with light-speed processing
and… (pausing to take another drink of beer.)
The Senior took advantage of the break in the student's litany and said,
"You're right, son. We didn't have those things when we were young… so
we invented them. Now, what are you doing for the next generation?"
B K Haynes, Accredited Land Consultant
recent correction in the stock market has occurred earlier than expected,
this at the tail end of the correction in home and land prices. My data,
research and analysis of the country properties market is that the market
peaked in the late summer of 2005 and has now hit the bottom after an
unusually long correction period of almost three years.
Economic fundamentals currently at play, past cyclical trend lines, and
demographic data, do not signal a significant and prolonged recessionary
period for at least the next two years. Savvy stock market investors and
real estate speculators who are aware of these cycles, trend lines, and
demographics are now buying stocks and real estate at bottom line prices
with the intent to sell at market tops.
The next top in the country properties market is projected
to be in the closing months of 2009. Properties purchased at the current
market bottom will yield significant profits if sold before the anticipated
crash of 2010. At the decade's end, prices on country properties, in general,
are expected to stabilize, temporarily drop slightly in some regions,
and increase only moderately for an extended period of time, this as the
country works its way through another prolonged recession.
The current correction
in the stock market should be short lived and will be followed by a bullish
run-up in prices, essentially re-establishing its market high. Fear of
a severe recession occurring in 2008 is unwarranted. The significance
of the precipitous drop in stock prices at this early juncture is that
the anticipated "real" recession or economic across-the-board "crash"
will likely occur in 2010 or 2011. A secondary stock market correction
is likely to occur in 2008, prior to the election of a new president.
Investors should be alert to a calamitous event-such as a terrorist attack,
natural disaster, or war--prior to, or shortly after, the 2008 election.
Such a calamity will fit in with a 20th century cyclical pattern that
has, in the past, acted as a precursor to socio-economic upheavals of
a major kind and dimension. Some observers say that the prolonged credit
crunch and real estate price correction is, in fact, that precursor.
BUYS IN DISTRESSED COUNTRY
PROPERTIES AND FORECLOSURES
Log on to www.bkhaynes.com for details
Call B.K. Haynes Land Brokers 540-635-3169
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RIVER $69,500 - 43% OFF
Front Royal, VA SAVE $100,000 ON 11-ACRE HORSE RANCH ON NORTH FORK SHENANDOAH
RIVER INCL. FREE COACHMAN MOTOR HOME $199,500 - REDUCED FROM $299,500
Front Royal, VA SAVE $50,000 ON 10-ACRE COMMUTER RIVERFRONT ESTATE ON SHENANDOAH
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to 100% financing on some properties. Cash offers considered. People stealing
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Values are real.
42 years of bargain offers in country properties.
of the Pilgrim: Old Thoughts for the New Year
B K Haynes, Accredited Land Consultant
live in a house that was built before the Revolutionary War.
After my wife died in 1988, I built a sanctuary and a study in one of
the old rooms.
I had been studying world religions and metaphysical books for several
years. So my library is full of spiritual literature. Over the old fireplace
I had hung a picture of Christ. He is standing in a pasture. All around
him are sheep. And he's holding a lamb in his arms.
In the front of my desk is a picture of The Last Supper. Statues and pictures
of Christ in the room outnumber the other figurines that I have gathered
from around the world. I have assembled these mementos in a shrine to
the great Savior and his tolerance of other faiths. I wear a crucifix
around my neck. But I didn't know Christ. I had lost him somewhere along
my busy way.
One day I was sitting in my study, reflecting on my life. I could own
any kind of car I wanted. I could vacation anywhere in the world. Money
was no object. I could travel first class. My sojourn could last as long
as I liked. I remember thinking how good God had been to me.
Soon thereafter, a recession blew in like a snowstorm, stopping my fast-moving
real estate business in its tracks. I made one bad decision after another.
I was heavily in debt. The market was crashing all around me. I had confidence
in the wrong people. Cash was buried in debts so deep I could not sleep.
I spent most of my time managing crisis after crisis. My spiritual studies
were almost worthless to me in this dilemma.As a matter of fact, the more
I read about spirituality, the more confused I became.
Finally, I had to release most of my employees. I began to question my
spiritual path. I studied and believed in Christianity. . . Buddhism.
. .Hinduism. . . Rosicrucianism. . . Mohammed . . . out-of-body travel.
. . Indian mystics. . . psychic readings. . . ghosts. . . past lives.
. . the Seth books. . . A Course in Miracles . . . anything metaphysical
or spiritual. .
I read somewhere that, "what is not seen is more powerful than
that which is seen." Yes, I had faith in an unseen world. I had faith
in spirits. I had faith in the spiritual nature of people. If someone
said they were going to church, I assumed they were spiritual. When I
visited a psychic reader, I instinctively knew she was spiritual, this
because she allegedly talked to spirits. Yet I had suddenly come to the
conclusion that the spiritual world is a potentially dangerous place to
go poking around in. The Bible advises against such ventures.
If, in fact, what is unseen is more powerful then that which is seen,
then how do we know what powers have control over us when we commit our
senses to a smorgasbord of spiritual beliefs and elements? Such a commitment
would be self-defeating to those seeking meaningful divine guidance through
prayer; and such a wide-ranging spiritual search would leave sincere seekers
with a never ending thirst for a soulful connection to the hereafter.
Notwithstanding the blurred vision of agnostics
and the absence of faith by atheists, there is no denying the existence
of evil in the world-a force that committed Christians believe exists
in opposition to God's Holy Spirit. Of course, many disbelievers feel
that the story of Christ is a fabrication, created by Judeo-Christian
fiction writers of the ancient scriptures. In the modern world, disbelievers
often discount the messages and prophesies of the Bible, this while questioning
its divine legitimacy and denying the power of prayer. Those without faith
are left to their own frail mental devices for the construction of a moral
compass to make their way through a brief life in a physical world that
ends at death.
Path to God
Bible says that the way to God is through Christ and that the Holly Spirit
will come upon those who have faith in Christ. True faith acts as a bridge
from this world to the next. Tolerance of other world religions is, of
course, necessary for human survival and contentment in a diverse, contentious,
and changing world. The danger for Christians is, of course, the potential
dilution of faith through socio-political correctness. Shakespeare said,
"He wears his faith but as the fashion of his hat; it ever changes with
the next block."
It can be sad that any person, such as I, could live in spiritual poverty
when I had at my disposal great Christian resources. You might say that
I was naïve and overdosed on spirituality. You know how it is with an
addict. He can never be fulfilled. He thirsts, and he hungers, but he
remains a slave to his addiction. I read somewhere that if someone hungers
or thirsts for spirituality, and he is without Christ, his hunger and
his thirst will never cease. In other words, without Christ, he will live
in spiritual poverty.
I do believe that many of us live in spiritual poverty when we have the
rich Christian resources of the Bible, prayer, and faith in Christ, and
we don't use these virtuous assets to advance our lives and the lives
of others. John 16:24 says, "Until now, you have asked nothing in my name.
Ask and you will receive, that your joy may be full."
Amazing Power of Prayer
When I was beaten through with trouble, I practiced positive thinking.
I had written a book on success motivation. I reviewed what I had written.
I tried to will my troubles away. Surely, what had brought me success
before could steer me back on course. But the waves were too high. The
sea of trouble that I had created for myself was too stormy. I couldn't
navigate. I was lost. Here's how I was found.
One Sunday, after I had returned home from attendance at my last church,
I gave up all of my attempts to solve my problems by myself. I prayed,
while turning my life over to God through Christ. I asked the Creator
to use my life as he sees fit. I said, "Dear Father, I come to you this
morning to thank you for helping me with my financial problems, as I realize
I could not have solved them by myself." I prayed as if God had already
given me a plan. I took my own will out of the way and allowed God's powerful
will to come through.
Of course, I affirmed my faith in Jesus Christ, acknowledged my sins,
and accepted the atonement of Christ, who I believe had died to remove
those sins; because I know that, without Christ in my heart, I would still
be alone-a voice in the wilderness crying out to a God I could not perceive.
The result was like this. I had been caught up in a terrible storm, and
suddenly the sea was calm again. I could now see the shore. Money came
to me when I needed it, often from sources I had overlooked. Real estate
was sold that I never expected would be sold so quickly. Christian friends
appeared in my life. From the day I asked for Christ to come into my heart
to give me direction, my financial burdens are no longer too heavy for
me to bear. Have my troubles gone away? No. In business, there will always
be problems. The difference is that I now admit I cannot solve them by
Catherine Marshall, writing in Guideposts magazine, said that "a demanding
spirit, with self-will as its rudder, blocks prayer. The reason is that
God absolutely refuses to violate our free will." We see evidence of this
principle in the Bible. So, unless self-will is let go, God cannot move
to answer prayer. When I was in trouble, I tried to solve problems by
myself, and I received more troubles. Any prayers I made were blurred,
unfocused, and undelivered--as if they were returned to the sender by
a vague higher power. Such misguided prayers can be an exercise in futility.
But when I prayed to God in the name of Jesus Christ, I received answers
that led me out of spiritual poverty and away from a troubled life.
What did Christ do in times of trouble? He could have escaped the cross.
Even in the Garden of Gethsemane, after the betrayal, there was still
time for him to slip away. But the message we receive from the Bible is
that Jesus used his free will to leave his ultimate fate in the hands
of his Father, Almighty God.
Are Not Alone
This process of surrendering our free will to God is difficult for the
human mind to comprehend. We're afraid to give up our self-will because
we don't know what is going to happen to us in such a circumstance. We
fear the unknown. Fear, of course, is a human passion given to us by the
Creator to deliver us from evil and to assist us in effectively using
our reasoning power.
From Shakespeare we learn, "Present fears are less than our horrible imaginings."
In a sense, unbridled fear can act as an evil force when unleashed against
the Creator in the form of fervent disbelief. Fear of God's existence
is quite different from that of being a God-fearing person, and one of
the seven basic human fears is that of "lost love."
Arguably, the denial of God's existence can act as a muted fear in the
minds of many unbelievers and agnostics-a fear that a strong faith in
a loving God will not protect them from evil and that therefore they must
rely on themselves for the solutions to their problems. Devout and committed
Christians believe the first step in reclaiming that "lost love" is the
acceptance of Christ as the Son of God and as the Redeemer of our sins.
This offer of redemption is open--without coercion, threat, or torture--to
all human beings on the face of the earth, regardless of their faith,
religion or belief system.
Atheists and their brethren point to the Holocaust, ethnic cleansing,
genocide, and human suffering to bolster their disbelief in a loving God
who would allow such a profligate sacrifice of human lives. Faithless
skeptics adopt these talking points while forgetting or ignoring that
such a Creator has given us free will to use for the good of mankind or
to abuse for evil purposes, and that human illness and deformities are
but examples of human frangibility in an imperfect and ever-changing physical
world. Pity and true forgiveness are among mankind's fruits of such misfortunes
Faith has a saving connection with Christ. We can find ourselves cast
overboard in a sea of troubled waters; yet, through faith in Christ, we
can reach out for his rope line of safety. I thought I was doing good
works in business. But good works in a secular-oriented world can often
drift off into some never-never land of compassionate secularism having
no connection with Christ. In such a spiritual disconnect, we often find
scant reward for our works and sometimes a boatload of more troubles.
of the Logs
In the northwest United States, lumbermen customarily
float logs down the river in the springtime. Sometimes the logs get jammed
up. But, in the pile, there is always a key log. If you locate that log,
and pull it out, you can break up the jam. And the logs can then continue
to float down the river or waterway. Using this timberland supply problem
as an analogy, I found that, in my spiritual studies, my mind was essentially
jammed up. It was therefore compelling for me to break the jam so that
I could deal effectively with business problems.
I needed to stop trying to understand the ethereal world so that I could
find my way through the troubled world of the present. With this tactic
in mind, I chose Christ as my guide and went back to the church. I remembered
that specific Methodist church of my late teens, where I had found fellowship,
a spiritual foundation, and the power of prayer. It was through that same
church that I had been introduced to my late and only wife. I recalled
the Methodist church of my early business years, where I worshipped with
my wife and young son and where I had grieved when she died.
of the Pilgrim
In the darkness of the recession, I chose Christ as my spiritual guide
and redeemer and returned to the church. I began this commitment with
regular attendance, Christian fellowship, and Bible studies. Soon I found
the key log that would act to un-jam my thought processes. You can characterize
such a procedure as being "born again" through Christ--hardly a unique
experience, because such epiphanies have been chronicled since the beginning
of Christianity and are widely acknowledged to be critical healing elements
in modern Christian life.
Immanuel Kant, the early philosopher, (1724-1804) once said, "There is
a limit where the intellect fails and breaks down, and this limit is where
the questions concerning God and freewill and mortality arise." That's
where faith comes in. Instead of trying to understand what I was not supposed
to comprehend, I faced my fears and came to God through Christ. He showed
me the way out of a troubled life, and I found peace.
Reasons the Sky Ain't Falling on Real Estate - and How to Profit if it
B K Haynes, ALC
true. The sun is setting on the real estate market. But the sun also rises.
from the National Association of Realtors show that, in mid-2005 --at
the peak of home buying activity in the U.S.--an historic 40% of these
residential units were purchased for investment or for use as second homes.
this speculative activity and glut of homes cause the real estate market to continue to underperform?
in such lively real estate sectors as homes and land understand the fundamental
factors that influence present and future market values. And skillful
players in the race for profits tack toward the following trends as these
tendencies become apparent and give direction to real estate price movements:
(1) demographic spending currents, (2) real estate supply components,
(3) mortgage rate levels, (4) basic consumer affordability, (5) state
of the economy, and, (6) consumer sentiment.
Consumer outlook in a factual real estate bubble burst would obviously
call for broad base panic selling--a scenario that is not clearly evident
in most of the U.S. at this time and certainly not widely anticipated
in the near future by astute market watchers. Nevertheless, such a disastrous
state of affairs could actually occur at the decade's end. But for now,
let me repeat. The sky is not projected to fall on real estate - across
the country - anytime soon.
the Bubble Burst?
At the present time, a tsunami of price reductions by sellers and builders
has engulfed and subsequently watered down profits and consumer equity
in the regional real estate markets. Notwithstanding this unfortunate
turn of events, it is highly unlikely-as some pundits would suggest-that
sellers are now retreating en masse along a path to self destruction of
their equity positions.
If an allegory between death and material loss could logically be drawn
, it would appear that some sellers have already, (1) passed beyond the
denial and anger stages over lost equity and are, (2) now
in a bargaining frame of mind. But, given the demographically-proven
strength of current and projected consumer buying power, it would seem
somewhat premature to assume that, (3) their minds will soon be flooded
with great depression that will lead to, (4) imminent panic
sales of real estate throughout the country and, therefore, to (5) the
immediate acceptance of barbarians at the gate.
Barring a cataclysmic event, such as a nuclear war, or world-shaking terrorist
assault on Western socio-economic structure and stability, the real estate
market and the health of the economy in general should-with a correction
or two - trend upward over the next few years, this as supply and demand
for the real estate product reach proportionate levels.
Advantage of the Hour
Following are 21
reasons for optimism in the current real estate market: (My analysis has been mainly developed through personal research,
41 years experience in the field, and U.S. Census Bureau data)
(1) Moderate inflation
is expected through 2010 adding strength to the economy and power to your
(2) Interest rates will decline slowly as economic growth is spurred on
by the sustained spending years of aging baby boomers.
(3) For investors, the process of recognizing a market bottom and seizing
the moment often pays greater returns than the tactic of selling for a
profit at the top. In this recent downturn, overbuilding and aggressive
speculation by investors clipped the wings of many high-flyers in the
real estate market. Both excesses have been primary factors in the flattening
and erosion of home prices, a trend that actually surfaced in our thriving
post-recessionary economy prior to a peak demand for homes in mid-2005.
Prior to that time, abnormally low mortgage interest rates had stimulated
home sales, pushing up home ownership to historic levels. The nation's
home supply then began to outdistance demand, thereby creating unsustainable
asking prices in many regions of the country. By late-2008 this correction
in home prices would have been playing out over an approximate 3-year
period, beyond the length of a normal recession. My analysis and evidence
shows clearly that we are at the bottom of a dip and that we are now emerging
from a distinctly bearish market.
(4) Demographic data show that consumers still have immense capacity to
buy homes and land. It is a myth that excessive consumer debt loads and
unusually low interest rates have preordained an imminent broad-based
real estate crash.
(5) Consumer debt and mortgage lending will begin to level off as an aging
population segment-still flush with substantial home equity assets-casts
off much of their mortgage interest load.
(6) The sun also rises on real estate. What goes down also goes up. In
sync with this market cycle, a diminishing degree of real estate price
erosion is expected to continue through 2008 as excess inventory is worked
(7) The strength and thrust of baby boom spending will continue to energize
the economy until at least 2010. Historical data shows that a prolonged
recession is likely to take hold at or around the decade's end.
(8) Certain sectors of the real estate market will outdistance others
in growth potential in coming years. Baby boomers will downsize to smaller
homes in preparation for their retirement years, this trend boosting the
second home market. And echo boomers will provide a steady and lucrative
market for builders of lower-priced starter homes.
(9) Prices on lower and mid-priced homes will continue to rise throughout
this decade as U.S. government-charted demographic spending trends show
accelerated demand in this sector. Higher-end homes in overheated areas
pose some downside risk in valuation.
(10) Real estate in the following sectors should benefit from an aging
population: (1) vacation and resort properties, (2) good usable land close
to small towns and near major cities, and, (3) well-developed apartment
(11) Real estate is regional and cyclical in nature and not prone to sudden
crashes across the board like the stock market scenario. Predictable cycles
of consumer spending and reflections of their personal needs can now be
charted for a particular population base through the accumulation and
analysis of statistical data.
(12) Demand for real estate is ongoing and diverse. There will always
be a need for the product in one form or another. A growing consumer trend
is to pack up and move away from city and suburban life to other less
stressful environments. This fundamental change in lifestyles is mainly
fueled by a basic desire for lower-priced homes. Other factors at play
in these changing times are: (1) a longing to work from home, (2) a craving
to relocate to a less congested region, and, (3) a desire for more leisure
(13) Current demographic data from the U.S. Bureau of Census charts show
the degree of home ownership in this country rising to a level exceeding
70% of the population base. Most of this increase in ownership will come
from the purchase of lower-priced homes.
(14) High-end homes will gain some price stability in the near future
from the emerging stock market bubble-this until the next bust dilutes
the liquid assets of investors and upscale homeowners.
(15) Like politics, real estate is basically local. Charisma, market timing,
and location, location, location are all super important. Significant
profits and asset safety await those who migrate to, or invest in, upcoming
"hot" markets that offer affordable homes and a better lifestyle. This
wise, albeit self-serving tactic, is essentially induced by demographic
data that identify a formidable army of rich folks, led by affluent retirees,
all on the move and in retreat from their "McMansions" and high-end abodes
to less lavish huts and a more folksy lifestyle. Left behind to grieve
over their diminishing returns in overheated markets will be a rag-tag
rear guard of amateur investors and untrained speculators.
(16) If you plan to sell your home in the near term, follow closely the
anticipated upswing in real estate prices that should be evident by late
2008, this as the current and unprecedented surplus of homes in many regions
is largely wiped out through the whirlwind of price cutbacks, government
subsides, and purchase incentives now gaining strength in the real estate
market. This emerging growth trend will be forcefully driven over the
next few years by a thriving economy and fueled by unquestionably strong
consumer buying power.
(17) As I explain in my latest book, How I Turned $50 Into $5 Million
in Country Property - Part Time, the most opportune time to sell your
home or land in the near term would be to do so by the end of 2010.
(18) The best time to snatch a bountiful deal on a first or second home,
or to buy prime land, would be now, at this discernible upturn of the
current dip, while potential purchasing rivals, such as green speculators
and weak-kneed investors, are few and far between and often nowhere to
(19) The years 2008 to 2009 should be of particular interest to investors
in vacation homes, since the huge looming army of baby boomers, advancing
through their peak purchasing years, are now closing in on the second
home market. Buyers will have their best tactical advantage by seizing
real estate objectives in 2008 while sellers are off-guard on valuations.
Sellers will gain most of the high ground bargaining power in 2009, when
they will be best positioned to draw the line on prices.
(20) Real estate investors should strive to be relatively liquid by the
end of 2010. This strategy calls for a plan to set aside a substantial
stockpile of cash-accessible assets, while giving appropriate attention
and care to your core real estate holdings, such as your primary homeplace,
vacation abode and any profitable rental properties.
(21) In a worse case scenario, all real estate sectors could theoretically
fall from grace at the decade's end, this calamity potentially occurring
in concert with a crumbling stock market and accelerated terrorist activity.
Smart real estate investors will build up their stores of cash, CDs, T-bills,
no later than the end of the decade to weather the potential storm clouds
ahead. Future millionaires and billionaires will then set their sights
on once-in-a lifetime buying opportunities in prime exurban and resort
area real estate.
the code of the next bubble burst in real estate
By B K Haynes, Accredited Land Consultant
In a recent conversation about the coming bubble burst in
real estate I heard the code words, "DEEP PLACE" What do they mean?
two words unlock the code that reveals when the bubble burst will
actually occur, the reasoning behind the theory, the effect on our economy,
and investor reaction to unfolding concurrent events. Demographic shifts
and cyclical economic trends are both at play in the following scenario.
"D" means deep trouble for the country at the end of the
decade - 2009 -10 -- when access to credit and ready cash will again be
"E" signals that the economy will be in turmoil. The second "E"
refers to the upcoming presidential election year, when
history shows an economic decline and calamity, such as war or a natural
disaster, occurring with regularity two years after a new president takes
office in a year ending in the number 8 - this recurrence spotlighting
2008 as the Devil's year.
"P" means that a precursor to the primary disaster such as a stock
market crash and/or a terrorist scare - will be evident prior to the emergence
of the expected calamity at the end of this decade. Many people in the
western world will misinterpret this precursor to be the real "end times"
of recent prosperity and misjudge their investment decisions. Other observers
feel this precursor has already occurred with the prolonged downturn in
the real estate market.
The code word PLACE is significant to investors.
When broken down, "P" means that prices on investment assets,
such as stocks and real estate will plummet in a classic buyer's market.
"L" stands for location, leading astute real estate investors
and "sharks" to feed in the blood bath of previously fat markets.
"A" is for auctions, which will be common as panicky investors,
developers, and real estate owners scramble for liquidity at the decade's
"C" means that "cash" will be king in these hard times.
"E" signals the need for experience in navigating through
the troubled waters ahead.
Untested and ill-advised investors could lose their shirts. Smart investors
will be prepared to pluck enormous benefits from a down market. Some sharp
players will make millions at the decade's end. Look for real estate prices
in general to rise from mid-2008 until late 2009, with only sporadic dips.
Then prices will stabilize across the country before potentially declining
again as much as 10% to 30% in specific overheated markets. Most analysts
and economists are not predicting a 1930's style depression or a doomsday
scenario at the decade's end-only a serious economic setback for the country
at large. Any parallel calamity to the anticipated downturn is speculative,
though 20th century history reveals an ominous and recurring connection
between economic turmoil and preeminent calamities.