You knew it was coming! - Posted by ChiGuy

Posted by ken in sc on March 16, 2001 at 07:16:15:

I am self employed. I provided the bank with my last 2 yrs tax returns, leases on my rental houses, and statements of my stock holdings, checking accts, etc showing that I have some money.

You knew it was coming! - Posted by ChiGuy

Posted by ChiGuy on March 14, 2001 at 12:37:17:

Hello everybody!!

Well, looks like the stock market is going straight to the dogs!

I’m new to REI, but what does this mean for us as real estate investors??

Will our business dry up as well, will it become better, or will it pretty much stay the same??

This is getting pretty scary.

Does anyone have any info on how our business fared during the '87 crash??

Take care!


Re: You knew it was coming! - Posted by Rob FL

Posted by Rob FL on March 16, 2001 at 17:17:50:

To some degree, I think a recession or at least a slowdown will be great for us in the RE community. It will slow down the sellers market that has blanketed much of the country and will increase foreclosures due to job layoffs, etc.

This will be a great time to pick up some long-term hold properties. It may make properties tougher to resell though.

Re: You knew it was coming! - Posted by JPiper

Posted by JPiper on March 14, 2001 at 22:51:16:

The stock market is what they call a ?leading economic indicator?. They say it?s been successful at forecasting 11 out of the last 7 recessions! In other words, sometimes the stock market gets it wrong.

Either way though, I?ve followed the stock market for the last 35 years. I?m a believer that it?s a pretty efficient leading economic indicator. I believe that right now it is forecasting that we are in a recession?.and that the recession will get worse before it gets better. And keep this in mind?.the stock market now has higher individual ownership than ever before?and therefore a decline affects more people than ever before. Something to think about.

Will this affect the real estate business? Of course it will. In recessions people lose jobs. Think that might hinder someone?s ability to pay rent? In recessions people pull back from large purchases. Think that might hinder the ability to sell a house for cash?

A lot is going to depend on how serious this recession is. (Ok, it?s just my opinion we?re in a recession?I don?t think the majority of economists have yet come to that conclusion. So far it?s just a slow down.) The more serious the recession is will drive what impact will be seen in the real estate business.

Right now what I see here locally is definitely a slow down. Calls on buyer type calls are WAY down. I have one tenant wanting to break a lease due to high gas bills. Another tenant is trying to negotiate a lower lease payment. And the quality of buyers responding to ads is lower than the immediate past.

What you do is become more conservative?tighten your deals up. Don?t assume you?ll sell your deal in a couple of weeks. And don?t assume that everyone will be able to pay. I hear that a few of those high-tech companies are laying off.


Wall St. or Slaughter House Row? - Posted by Jack

Posted by Jack on March 14, 2001 at 20:09:13:


Re: You knew it was coming! - Posted by Mark Chicago

Posted by Mark Chicago on March 14, 2001 at 16:36:05:

I have three words:


Re: You knew it was coming! - Posted by Alan-Baltimore

Posted by Alan-Baltimore on March 14, 2001 at 15:54:16:

During the 1700s, one the famous Rothschilds (of the banking fortune) said that the best time to buy was when the blood was running in the streets. I think we’ve only seem some paper cuts.

You’ll know it’s the right time to buy stocks again when everyone has given up on them. In 1979, near the end of the last severe bear market, Business Week magazine had a cover story proclaiming “The Death of Equities” (equities = stocks). The article made the case that a person would have to be out of his mind to own shares traded on the public exchanges.

Of course this is the mirror image of what we’ve been hearing the past few years when all the commentators have told us that a person was “foolish” not to own stocks, especially those of the high tech and internet variety. It was pointed out that anyone could plunk down some money in the Nasdaq and watch it grow at a minimum of 20-30% per year. All these experts must have forgotten the Ladies Home Journal article that appeared in September 1929 right before the Great Depression. A noted economist wrote in the headline that “Everyone Ought to be Rich.”

These cycles are simply the result of the interaction of free markets and human psychology which we have seen for the past several hundred years. People forget the lessons of the past when they ignore the fact that fear and greed are the biggest motivators in the stock market. Most people are happy to jump on the bandwagon without bothering to ask where it’s headed. They just don’t want to be left out and don’t want to bother thinking for themselves.

One of the best quotes that I’ve taken from all the reading and seminars about real estate is “you make your money when you buy.” This is a far cry from the stock market where your future profits are dependent on a whole host of factors from the economy, the company management, and the whim of the traders in the market.

Assuming you absorb the creative financing ideas here on the board, a bad economy could be a good time to establish a foundation of present and future profits in real estate.

Re: You knew it was coming! - Posted by joebaysh

Posted by joebaysh on March 14, 2001 at 15:11:46:

The falling market will force the fed to a 3/4 pt. drop in interest rates. This may happen even before the fed policy meeting next thursday. Lower interest rates usually help the real estate market, and drive prices up.

The bad market may effect spending in the very short term so you may experience a slowdown in RE. Once the interest rate drops take effect, the ecomony should recover.

Short term - I don’t even want to look at my 401k statement.

Re: You knew it was coming! - Posted by Bob (Md)

Posted by Bob (Md) on March 14, 2001 at 13:51:35:

I guess I’m just a contrarian. I’ve had most of my funds in money market and bonds for a while now, because I knew the dot-coms were going to tank and take the Nasdaq with it. I started diversifying by moving a bit into the S&P500, thinking that people would move out of high-tech and back into traditional blue-chips. WRONG! They left stocks entirely! Oh well, the bonds made up the difference…

Anyway, now I’m trying to figure out where the bottom is, because I’m going to move all my funds out of bonds and money market into stocks and wait for the upswing!

Life’s more fun on a roller coaster, eh?

Re: You knew it was coming! - Posted by CurtNY

Posted by CurtNY on March 14, 2001 at 13:03:41:

The way I see it, it just means more investment money available for deals, and the worse the economy gets the more deals available, HAPPY DAYS!

Re: You knew it was coming! - Posted by Steve

Posted by Steve on March 14, 2001 at 12:50:16:

Sometimes what appears to be “going to the dogs” could
actually be a future opportuinty one misses.

Some contrarian thinking just for fun… - Posted by ken in sc

Posted by ken in sc on March 15, 2001 at 07:56:25:

Perhaps now is a great time to buy! During this year we will have low interest rates and low prices as we buy from the people who are having a hard time selling. Also, with the new Fannie Mae investor loans, you can lock in long term fixed rates (currently around 7% and dropping!). If you have the staying power, you could buy alot of property this year, and then in a few years when things get better and rates go up to 9 or even 10%, sell the properties that you don’t like on wraps or ls/ops and keep the others. To get the staying power, one could sell a property with high equity, take the tax hit, and use the cash as reserves. Or maybe sell some tech stock and put it in a money market. If you bought 20 houses in a good city, but at the bottom of the market, you might look pretty smart in 5 or 10 years. This is an especially good idea for someone who is already making alot of money and in a high bracket. The losses on the new rentals could offset some of that.
Just a thought.


Re: You knew it was coming! - Posted by eric-fl

Posted by eric-fl on March 15, 2001 at 21:05:25:

You are obviously well schooled in economic history. It’s nice to see someone presenting reasoning on this topic, instead of just guessing. I would agree with most everything you said.

I was sitting in the airport today, and CNN was on, and there was some stock show on. They had this fund manager from a “bear” fund that is already up 12% this year (he hasn’t been doing so good the past few years!). You could just see, this guy was feeling so vindicated. He actually said the Dow could go as low as 3000. He was the ultimate example of the phrase “Even a stopped watch is right twice a day.”

I would add that, on the monetary front, the Fed has cut, and will likely continue to cut rates. On the fiscal front, some kind of tax cut will be passed. Money and credit are flowing more freely than I have ever seen - there are brokers in my market offering no-doc, non-occ, 80/20 loans with 0 down. ??? My prediction is that the market will start going up again in the summer, and that by Christmas, all the pundits and journalists will be saying “see? we knew it all along. Equities are king.” And they’ll find some guy who’s been saying so, even when the market was “crashing”. Hey, maybe I’ll be on CNN!

I agree and… - Posted by Chenel Moore_Fl

Posted by Chenel Moore_Fl on March 15, 2001 at 01:17:31:

You need to read Kiyosaki. As an investor we should figure out how to make money in a recession or economic boom. The only thing to adjust is our strategy. We shouldn’t become afraid but excited, no matter which way the market goes.

Good point… - Posted by Ben (NJ)

Posted by Ben (NJ) on March 14, 2001 at 17:08:22:

I am about to lock in some business debt for a few years. The lower the rates go within the next few weeks the better for me!

Re: You knew it was coming! - Posted by Bryan Ellis

Posted by Bryan Ellis on March 14, 2001 at 13:06:48:

I agree with Steve. I think that there are some TREMENDOUS opportunities in the stock market right now. Particularly if you know anything at all about stock options and hedging, there are some AMAZING opportunities for low-risk and high-reward investing out there right now.

As far as the effect on RE, my gut (NOTE: just a gut feeling, not based on experience) tells me that it will probably become easier to buy houses and maybe slightly harder to sell them. The pendulum seems to be swinging towards a buyer’s market now, though that phase is just beginning. I’d be surprised if this lasts for more than a year or two.


Re: Some contrarian thinking just for fun… - Posted by Nate

Posted by Nate on March 15, 2001 at 08:56:54:


What’s the new FNMA investor loan program like? Is this the one for their own REO properties, or is it just a new loan product I haven’t heard about yet?


FNMA investor loans - Posted by ken in sc

Posted by ken in sc on March 15, 2001 at 09:22:15:

I don’t know why more people don’t know about this, or why the banks don’t advertise it. But here is the scoop. This is a Fannie Mae loan just like what you get for your personal residence. They loan up to 90% on purchase or refi. Rates go up with LTV’s. You pay PMI over 80% LTV. Rates are fixed. I just did some refinances at 7% for 15 yrs fixed. You get this from a bank - again, the same bank or mortgage co. you go would go if you were buying a house to live in. You don’t need a broker.

These loans have always been available. But it used to be that they had 2 rules that hurt. First, they would only give you credit for 75% of rents. That made it hard to qualify. Second, they would only let you have maybe 6 loans or so and then you were cut off. Now, they underwrite based solely on income tax returns and credit. And you can have as many of these loans as you want.

Anyone who is paying higher than 7% or has call or adjustable loans that worry them should look into this. Who knows when they will change the rules again.


Is income verification required? - Posted by ib (nj)

Posted by ib (nj) on March 15, 2001 at 20:28:18: