Spring has sprung. That time for romance, gardening, cleaning, fishing, dreaming and, oh yeah, house hunting.
Spring is typically when dissatisfaction over one’s living situation has reached it zenith and it seems right, after a long winter indoors, to cast one’s eyes elsewhere
That being the pattern, there doesn’t appear to be the usual flurry of house hunting so far this 2010 spring.
Maybe most Americans haven’t quite rolled out of hibernation just yet. Or maybe it has something to do with the lingering winter weather still out there.
Or maybe people are just waiting for real estate prices to drop as far as they’re going to drop first. That’s called…
REAL ESTATE DEFLATION
If you know that the price is falling on something you want to buy, why buy it now? Why not just wait until you’re convinced that the price has more or less stopped falling? That’s only deflation common sense, and maybe what’s holding up real estate today.
We should also be on the lookout for…
ANOTHER ROUND OF RESETS, MODIFICATIONS AND FORECLOSURES
The average U.S. home price will fall by about 6% by September 2011, according to a joint report pulled together by Fiserv and Moody’s Economy.com.
What’s behind these falling prices?
Most Americans believe that the “resetting” of adjustable rate mortgages (ARMs) is behind us. Not so. In fact, sadly enough, we probably still have quite a way to go. Resets will likely peak somewhere around September of 2011.
That’s when, chances are, another round of foreclosures will also take place.
Then there’s commercial real estate. About $1.4 trillion in commercial real estate loans are due for refinancing between now and 2014. That’s scary.
So more dark clouds are on the real estate horizon. Does that mean real estate, of any kind, isn’t where you should be putting your money right now?
Not necessarily. Real estate investments will always be local. In some areas, homes have dropped enough in value (parts of California, Arizona and Florida, for example) that they may represent a genuine bargain.
TODAY’S APPROPRIATE ALTERNATIVE
TO REAL ESTATE
But for those unwilling to brave today’s housing risks, gold and silver coins remain tremendous investment first aid. Since 2000, for example, gold has been up 301%-that’s been a nice piece of appreciation even as real estate has broken so many hearts…and banks.
But here’s the thing: Those same fundamentals that drove gold beyond $1,000/oz are, if anything, stronger today. Inflation, recession, unemployment, trouble in Europe-all signs that a precious metal diversification is still a very wise choice today.
The best investors are those flexible few folks who aren’t as much in love with any one investment as they are capable of adjusting their positions when it’s entirely appropriate and even obvious to do so.