Originally posted by Gazelle:
Will4, it really depends on where you invest lah..I think real
estate in Boston and maybe florida might still be worth
considering. But as for mass "subprime"property, I will definitely
stay away for now until we are clearer about the future of US$ and
the US economy.
US economy seems to be caught in a terrible situation at the
moment. On one hand, they are experiencing high inflation due to
oil and other stuffs and but they are unable to increase the
interest rate due to the subprime problem and with weakening of
dollar (now at 1997 level) it will give further headach to
inflation.
I am not sure if you belong to the bullish or bearish camp, but I
am quite certain that things is going to get alot worst before it
gets better. Now is probably the best time to accumulate your
liquid asset and wait for the big fall in global economy, then you
can go shopping.
btw, below is a report taken from yesterdays' BT.
[b]US housing slump may extend into 2009
There's a 50 to 60% chance of a recession as consumers curb
spending: analyst
By JOHN F WASIK
(CHICAGO) Ivy Zelman's view of the US housing market is gloomy, but
it's probably the most realistic.
A veteran Wall Street analyst, Zelman, chief executive of the
research firm Zelman & Associates, says it's unlikely the US
housing market will recover before 2009, adding there's a '50 to 60
per cent chance of a recession', as the housing slump curbs
consumer spending.
Ms Zelman paints a much darker picture than Federal Reserve
chairman Ben Bernanke, who said last week that housing will be a
'significant drag' on the economy into next year.
When you consider the huge home inventories and tight-as-a-drum
mortgage restrictions, it's easy to conclude that the housing slump
could extend well past 2008. Unless financing loosens up and buyers
return, her prophecy will become a reality.
'I've never seen the market as bad as this,' Ms Zelman said. 'And
it could get worse. The home-price decline could range from 16 per
cent to 22 per cent.'
Monitoring inventory, builder incentives and demand, Ms Zelman is
also watching adjustable-rate mortgage resets. Homeowners with
these loans will automatically face higher monthly payments that
they may not be able to afford, another trigger for foreclosures or
sales. Some US$500 billion of these loans will re-adjust through
2008, Ms Zelman says.
While foreclosures have declined somewhat from August to September,
they still doubled from a year ago, according to RealtyTrac Inc,
which monitors the housing market. Since more homes are coming on
the market, Ms Zelman says that will only add to the misery.
'These are the worst inventories we've seen as a nation,' she says.
Ms Zelman originally presented her report Oct 10 to the Home
Improvement Research Institute, a Tampa, Florida-based trade
group.
Ms Zelman's words carry some weight because she was one of the few
major Wall Street analysts to warn of a housing decline months
before it began late last year.
She was alarmed that home prices far outpaced personal-income
increases during the boom, which is how the economic disconnect
began. A bubble created artificially high demand that had to
deflate sometime. Now economists and analysts are trying to assess
the collateral damage of the bust and sub-prime mortgage
meltdown.
Meanwhile, builders are stuck with thousands of new homes they
can't sell and potential buyers are cancelling in droves or are
unable to get a mortgage. Housing starts fell to a 14-year low in
September.
Mass psychology
'Builders are desperate now and blowing through inventory,' says Ms
Zelman of homebuilders who are doing anything they can to sell
homes. 'Their revenues are shrinking so fast, they can't keep up.'
The mass psychology that amplifies and spreads the angst of home
sellers will put a brake on overall consumer spending, Ms Zelman
predicts.
'Some 74 per cent of consumer expenditures are correlated to
housing. I don't think the consumer will hold up. They will cut
back on things like buying cars and vacations.'
While Ms Zelman forecasts that sales will drop for the next two
years, she isn't as optimistic on home prices, which she says may
continue falling until 2010 or 2011.
'We'd be better off if prices corrected all at once. It will get
worse before it gets better.' Places where sales were strongest and
speculators were most active before the bust will be bedevilled by
high home inventories for more than a year.
Not every market will get pummelled, though. Manhattan seems to be
holding up for certain kinds of housing. Prices of co-op apartments
with four bedrooms or more, for example, rose 19 per cent in the
third quarter from a year earlier.
'Boston is pretty moderate in terms of risk,' says Mike Ela,
president of the service. 'Lenders have pulled back
aggressively.'
Don't expect to land properties at bargain-basement prices. One
assumption is that the best values will be in areas glutted with
properties. Yet many sellers will be holding out for prices that
they saw at the peak of the boom. Motivated property owners,
though, may be willing to deal.
If you are buying a second home or investment properties, keep in
mind that your credit record should be up-to-date. You may also
find it easier dealing with institutions that sell
'real-estate-owned' homes, or properties that went into
foreclosure.
Mr Ela, who has 'low-ball offers' pending on two bank-owned
properties, prefers dealing with institutions 'because you're not
dealing with the emotion of the seller. It won't take too long to
get a decision.'
Because lending standards have tightened, if there are any errors
on your credit report that show missed payments or outstanding
balances, you should get them corrected.
Don't open any new lines you won't use and pay your bills on time.
These variables will affect your score and may disqualify you from
obtaining financing.
Keep in mind that job growth and consumer spending bear close
scrutiny. If Ms Zelman is right about a recession coming, then
prices may fall more, plunging the housing market into an even
sorrier state. -- Bloomberg[/b]
Actually now's the time to conserve all your cash and not buy.
When the market crashes - you go in and swoop on foreign investors
who mortgaged at 80% . Recession , job security and people coping
with the losses as well as the bank calling in payments - will make
it easier to swoop for cheaper property prices.
