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Is The Real Estate Party Over?
Today’s Real Estate market atmosphere reminds me of the famous words of Charles Dickens in the “Tale of Two Cities”, where he wrote “It was the best of times, it was the worst of times”. Depending on where you want to be on the Real Estate spectrum line, you could face the worst of times, or better yet, the best of times.
The same is true for Real Estate Investing. It’s the worst of times for those who are unable to find the deals as they did in the months and years past where anything one touched in Real Estate turned to gold. Or for those now stuck with inventory that was bought at last years prices and are now feeling the impact of the shortfall of the anticipated ‘margins’. Despite these cases, most of us had a good run: your net worth grew, your liquidity grew, your knowledge and horizon grew to understand that Real Estate is a powerful and secure investment vehicle backed by tangible equity. This may not be something ‘some’ would like to tout, as it is not in ‘their’ interest for investors to turn towards or stay in Real Estate.
For us, this is the best of times, as the frenzy of snatching up Real Estate at any cost has finally subsided and we can now settle down to doing business the normal and correct way: building value and equity by developing the property, as has always been done and should be done by those in the business. There are always deals for those who know the ‘Real’ business of Real Estate Investing and developing, no matter what the market conditions. The knowledgeable are able to build at costs that ‘others’ would deem ‘impossible’. They have an infrastructure with teams that understand each other and the market, and by staying busy and employed year round at reasonable and livable prices, they work for reasonable prices. It is ‘Real’ work like any business: no pain, no gain.
I am glad that this is being called a housing bust, and I am confident that it pales in comparison to the earlier 'Real' busts. This can be a whole new subject, maybe for a later letter, but for now the early realizations and quick reactions to it sets it apart, and thereby averts a much bigger and unthinkable outcome. Some markets are losing value, the one's that have been over inflated to begin with. But, ask the person who bought their home 3, 5, 7, or 10 years ago, are they losing value? They can under sell any one who bought recently and still come out looking good. Ah! but you say, what can they buy? And I say, the smart can put a fraction of the money they gained as down payment for their new primary residence, and then park the rest of the ‘well gotten gains’ in Real Estate with a smart and growing company and or projects earning 12 to 18% annualized ROI, gaining double over their 7-8 % mortgage rates. Paying a large down payment does not make business sense. Life is all about conducting your resources, making calculated decisions and mitigating risk; that's why we say 'secure real estate investments for your financial future'. If you need any help in understanding how that works, call me or any one of my associates and we'd love to show you how the numbers and system are worked by the smart and the astute. Elementary my dear Watson, Elementary!
But you say what if Real Estate really plummets? The prospect of Real Estate losing its value in a sharp and quick drop is now considered a thing of the past. And why may you ask? Technology, my friend Technology! In the Old World information was very limited as we only had access to information in our close proximity. The wave of impact of accumulated events from the rest of the country and the world would only hit us after the effect of all events came crashing in like a tsunami without any real warning. Only the very big boys had access to information with which they could make quick and decisive adjustments before it got to the rest of the country. The little guys didn’t have a chance, as is evident in the past busts. Our world has gotten much more accessable and we can now go places virtually and gather information instantly, something we could only dream of in the past. We can now also make quick adjustments like the big boys and not continue on building or buying till it’s too late.
Now, what happens to Real Estate in Timbuktu is easily and instantly available to anyone in the WORLD! The well informed are no longer far and few in between, but any and every one who desires to be informed is able to be, and at very affordable prices. With the inventory levels up, the number of building permits being issued are down and the builders are working through their inventory and not starting any new ones. The speculators in us have taken to the hills. The inventory is hovering around 7 months supply, a little more than the national average, in normal times, of 5 months.
The way speculations work is: when the demand is out-stripped by supply, the prices begin to rise and speculations jump in. In the case of Real Estate, the demand for new housing has always been behind the supply, and with a little help of the Feds, the disparity between what was affordable and what was then available became large. In walked my speculator self and took advantage of the market’s demand. As the prices began to rise even more, more value was created, and the all night long feeding frenzy began.
Then the dawn arrived, as more news began to trickle in on the inventory rising, thanks to technology! News on how the average Joe and Jane were being priced out of the market spawned more inventory. Some of the speculators who still had their heads in the pot took bigger bites. The inventory grew more, and soon the buzz of the inventory rising in Timbuktu and around the country and the market slowing down started to be heard by everyone. But for some, it was now a little late, and they got caught with their hand in the cookie jar. The good part is that today’s Real Estate market will not punish them by a total loss of value, as maybe in other investment vehicles, or the previous real estate markets, but a possible manageable and reprimanding loss. The number of home sales has gone back to its healthy organic self.
This brings us back to the point of being ‘the best of times’. With the frenzy, where every smart and resourceful Tom, Dick, Harry, Tracy, Dianne, Harriet (these names are fictitious to protect the innocent) and their grandmothers became active Real Estate Developer Investors overnight. They hired their local nephews to paint and clean, and their properties kept gaining value, even when they sometimes did nothing! Some bought newly constructed homes and the value jumped! The party kept getting erroneously better and bigger. More and more people jumped in and then the music, which eventually had to, stopped. Now that ‘that party’ is over, some are paying for their over indulgence. They have multiple properties that are losing value gradually and their holding costs are mounting. They will sell at maybe at a loss, but luckily not too many. The prices have inched back down gradually and possibly more to come for those who bought ‘wrong’.
‘The best of times’ for us is as always here, as we no longer have to compete with anyone and everyone but only with those who are able to build equity with sweat, smarts, and sensibility.
Those who have now begun understanding Real Estate Investing know that there are companies like Heaven Investments with the know-how to build equity and make money in any market climate.
Like in the works of Charles Dickens, in which he gradually works us through the novel with patience, requiring much thought in building a plan, building plot, and in eventually building a story. As is such in our case: we build patiently with a clear cut plot of land, an excellent building plan, and with quality, construct many story buildings.
For us, it is ‘the best of times’, as long as people need a place to stay, and our population that recently crossed the 300 million mark and continues to grow, our party is going to continue and keep improving. Come join us in our ‘Real’ and ‘lasting’ party.
Your party has just begun!
Akbar Aly Bhamani
CEO
Heaven Investments Holding Corp.
