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This question
came from "Ask an expert" at
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My question is: US-specific
QUESTION: (North Jersey) What do you feel will happen to real estate in this time of economical upset??? With people losing jobs and others losing money in the stock market, do you think real estate will continue to be on the uprise. How will people be able to buy homes? It feels like a repeat of the 80's...what is your opinion on this? Lori
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David Ingram Replies
I tend to be the glass is half-empty guy while
Ozzie Jurock, the guru at www.jurock.com
will say "yahbut! the glass is still half full".
I opened this question just after a lady from
the 100 block of East 88th in New York had left my office in West
Vancouver, Canada. She was just after a former Vancouverite who is now
living in Washington State was in to tell me that he is likely moving back to
Canada and will likely lose his "dream home" because his income has just
reduced from $200,000 US per year to "he'll be lucky to make $40,000 this
year". His neighbour is out of work, the guy accross the street is out of
work and the energy business he is involved with is in complete melt-down
with "no" end in sight.
Last week, my former assistant in North
Vancouver, who is now living and working in Newark, New Jersey phoned to say
that he is still working at the organization which got his him working visa but
has not been paid for several months. If he leaves the company, he has to
leave the states and he is "so close" to getting his green card and permanent
status that he is better off working for nothing and staying than he is
quitting the organization. (He hopes to get his green cards for himself and his
wife in August. Once he has his green cards, he can go to work for any one.
Right now, he can only work for the one employer. He is from one of the
countries designated as a problem after Sept 11th, and his green card has taken
an extra eight months. He should have had it be Xmas, last year.)
The lady from New York inherited a "paid for"
building in North Vancouver and
needs $20,000 Canadian ($13,000 USA) for the
building and is terrified to put a mortgage on the building (worth $850,000)
because she does not know if she will still have her job in New York next
month, let alone next year.
I have counselled more people to go bankrupt in
the last 7 months than I have in the last seven years.
Another person in the office today had
stock worth $15,000,000 US in March 2000 and today's value is about $20,000.
Another fellow TODAY as well had stock worth $3,000,000 in March 2000 and he
was in to start a bankruptcy today.
So what is going to happen to real estate?
I think that Real estate is going to take a
real hit in the short term and will do well in the long term.
I think that this is a great time to buy if you
have the money and fortitude and faith in your job. It will not matter if
it goes down 10% or even 20%. My own house has gone from $42,000 in 1969
to $400,000 in 1981, down to $150,000 in 1983 and back up to $450,000 today.
If I was not going to sell, it did not matter
in between.
I would be leery about expensive rentals
though. If I was going to buy rental property today, I would look for
something that rented for 25% of a local bus driver's salary. That way,
it stands a good chance of the most people being able to afford the rent.
I would NOT buy on the strength of a real
estate salesman's word if I was looking for investment propoerty.
If I wanted to buy investment property, I would
contact a good property manager in the area and I would make sure that the
property manager (who makes nothing on a sale) had told me what can be rented
and what the rental value of a property is/was.
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