The State of the Markets – May 5, 2010
This post first appeared in the May edition of: Cirios Trends: In Search of Real Estate Opportunities.
It feels a bit like the world is starting to come apart at the seams. Again.
The EU finally “solved” the Greek problem, only to find out the solution just accelerated the day of reckoning for Europe’s other sick children, Portugal and Spain. Global markets should have breathed a sigh of relief this week, but instead they’re hacking up a lung.
The reality is that Greece is a symptom, not the disease. Look around this country at the ailing finances of our states, counties and cities and the story is essentially the same: Bloated budgets, shrinking income and debt burdens that are impossibly high.
Nevertheless, domestic economic data continues to point towards a recovery, however fledgling and government-supported it may be.
The housing market is just as muddled.
Foreclosures continue to hit record highs, as do defaults on commercial mortgages. But home price data show improvements and over 100 people recently showed up to an open house at a
decrepit duplex in a hardly desirable part of Oakland. Foreign buyers armed with loads of cash are swooping into the market, begging the question of whether our markets are that far undervalued, or if markets across the pacific are that close to collapse.
Supply remains constrained in most markets, as bad areas recover before good ones. Buyers, flogged on by expiring tax credits and the promise that it’s a great time to buy, are scrambling to get in before the next boom. If there is one.
These are confusing times, to put it mildly. Well-educated people are quietly wishing they paid more attention in high school econ class so they knew how a plunging euro will effect corporate bond spreads and, ultimately, their jobs.
Yet, despite the imminence of a sovereign credit crisis that would make the mortgage mess look like a fender bender, there is an odd calm in housing, like things were so bad for so long the financial gods wouldn’t dare put us through all that, again.
The good news, however obscured by the deluge of smoking SUVs and leaky rigs, is that from the depths of chaos, opportunity is wrought. Last spring, when hope was all but lost, turned out to be the best short term buying opportunity for real estate in decades, if not more.
Warren Buffet, still a legendary investor despite his bewildering defense of credit rating firms, made his name buying when no one else dared.
So when you happen upon an open house and there’s a line to sign in, walk away. Look under a rock no one else is turning over, for there you’ll find the opportunities – especially when “everyone” else says you’re crazy to do it.
Tags: distressed real estate investments, foreclosures hit records, Greece debt crisis, portugal credit crisis, real estate investment opportunities, spain credit crisis