Your real estate holdings will need to be paid down in order to get equity. Paying on the principle balance now will go a long ways in amortizing your loan. Debt, or better put, leveraging to create more debt is getting to be extremely risky. Rents will become more reasonable as more property owners are competing for quality renters. I’ve seen a lot of people with dogs moving into houses. In case you are wondering how that applies, most property owners would rather have non smokers, no kids, no pets.
Now you’re probably wondering where the renters are coming from. Many people who wanted to buy are becoming discouraged. Many of the people who bought are stuck with property they can not afford. Many people in turn will try to rent out their houses, move to a cheaper rented houses, and pay the difference on the house that they still own.
All of the old tricks of keeping property will apply for the next five years. Those who have a problem holding on will let the property go into foreclosure. The foreclosures are the true story of the future.
As more and more foreclosures go back to the banks the banks have more and more of an obligation to deal with the problem. Right now banks are sweeping foreclosures under the rug, keeping them under wraps, holding them off the market. The illusion seems to have plenty of people buying in this Spring of 2009. Banks are making loans and refinancing more loans. The life blood of the mortgage industry seems to have stabilized.
Next year, when the new wave of credit crisis hits, cash will be a much more desirable thing for banks to have. Seriously by next year I think banks will have enough good loans on the books to dump property for pennies. Divesting out of real estate will make sense as the new investment strategies shape up around energy, education, and health care.
In 2010 there will be a real estate market correction. By 2012 real estate will be a distant memory as an easy sure thing investment. By that time we will be gearing up for the next Presidential election and either loving or hating Obama. Real Estate will be that hard working man’s way of building a retirement plan and a portion of your portfolio as a hedge against inflation.
