Re: Anybody else notice a slowdown in buyers? Ed? Terry? Jim? - Posted by Ed Garcia
Posted by Ed Garcia on May 11, 2000 at 11:23:08:
Everything goes in a cycle. Real-estate is no different, it can be affected by many
factors of the economy, not just the stock market or rising rates.
Over the years as rates have been held down in the 6s and low 7s, the refi market
was booming, but Real-estate sales was slow. Today rates are in the solid 8s and
the refi market is slow due to the majority of home owners have already taken
advantage of the low rates, and the newer home owners don’t as a rule, have enough
equity to refinance, while real-estate sales are booming.
Employment is at a all time low, however the quality of employment, tells me that
affordable housing is going to be on the rise. Steve, it all boles down to monthly payments
and what the average wage-earner can afford. For over 35 years I’ve been aware that the
average American is a payment buyer.
We talk rates and points, what’s happening in the stock market, being a millionaire and on
and on, but the bottom line is, the average American is a payment buyer.
The first American dream is to be a homeowner, and the second is to be a Millionaire.
Today being a Millionaire is a JOKE. In my fathers day if you were a millionaire you were
a wealthy man, and the sky was the limit. Today’s Millionaire is just a payment buyer that can
afford larger payments. My point being, INFLATION. The purchasing power of the American
dollar is not there. So in reality it makes no difference what happens to the stock market, interest
rates, what have you, the best hedge against the economy, inflation, and in real-estate is
AFFORDABLE LIVING, a cheap house. There’s always going to be a market for it.
Example: you mention, “As a side, I’ve been trying to sell my '98 Ford Ranger for 2 months now, too.
I’ve had trucks in the past and they always sell quickly, but this one isn’t. Are consumers tightening
their belts or are things just “so good” that they’re buying new assets instead of resale’s?”
The reason you’re having a problem in selling your Ranger is because, you can buy a new one
at a cheaper payment even though the buyer will pay more. The way financing is available on a new
vehicle, it allows them to be competitive as far as payment are concerned.
Knowing that the average American is a payment buyer. Looking at the average wages being paid in a given area, which is available information in every city. You can now see what your affordable housing
market is going to be. Another way of identifying affordable housing is to buy a house, and after you
bought it with all of its debt service, it still gives you a positive cash flow and your rents are at market.
I get tired of forecasters, fortune tellers, economist (they’re a big joke), or people that predict the economy who tell you the bad news is coming. I have many friends who judge the economy by the stock market or other economic indicators. We all know that things are going to change, we just don’t know when.
So rather than to look into my crystal ball as Dave puts it, I’ll just say go after affordable houses and don’t
look back. Your going to have people that are going to be impressive with their economic jargon, don’t be
concerned, they don’t know any more than you do.
Steve, you know one thing. If times are good, they’re going to get bad. If times are bad, they’re going to get
better. The question will always be, when? Rather than guess the market, be prepared for it.
There is a saying that goes like this, (God, gave me the ability to accept the things I can not change. To change the things I can, and the wisdom to know the difference.)
One of Jim Pipers favorite sayings is, ( You make your money on the buy) along with that, Jim structures
his deals with positive cash flow based on market rents. Buying in that manner, your deal becomes bullet proof.
I already regret answering your post in the manner that I have because if Jim Piper reads it, he’s going to
call me and say,(Garcia, I read your post to Steve. If you believe what you’ve wrote, then why are you investing in commercial). I know today’s going to be a long day.