There are some of us here who have spent the last 20yrs invested in real estate and plan on continuing investing in RE for the next 20.
But when we posted that prices will not go up every year forever, that you will not be able to borrow->buy, borrow-> ad infinitum and have your IP list look like a nuclear chain reaction chart, we got treated with contempt.
Those who earned fees from people believing that theory, were treated as "experts".
Those who did not concur, were outcasts, naysayers out to spoil the righteous party of the true believers.
The fudgy figures published by the REIA could'nt possibly be wrong, nor could those fast numbers on API mag. People who bought their 1st house being (and still are) quoted as "experts".
And of course median prices are the bible...
What did'nt seem to sink in was that some of us were well aware that our (well mine at least) paper losses would be more than the networth of the avg Australian, ie many hundreds of thousands of dollars.
But that's how any market goes, always has, no reason to expect anything different.
So when reality became obvious, it seems investors may start to realise that bull markets dont last forever. That the market moves the other way, and if your not prepared, you could be in for a lot of trouble.
Of course this happens with any other market, many people believed the stock market would go up forever too.
"Stocks down 10%, good buying"
"Stocks down 20%, great buying"
"Stocks down 40%, excellent buying"
"Stocks down 50%, terrific buying"
"Stocks down 60%, margin call" (and no more LOC)
All those paid experts never had a clue it was coming, because they are "paid", not experts.
As Bill.L. points out often, those people are no better at prediction future markets as the avg Joe on the street. And I will add that their so called "expert opinion" is often the product of someone else's agenda. I know of many people who right reports for big firms, starting from the conclusions
. I just have no clue why they wold tell me such things.
Look at BHP, not even those ppl being paid many millions each year could see it coming.
So where are we at this time?
Well I see the RE market still pointing down with no bottom yet.
The economy keeps slowing down, inflation goes up.
Even the boom states of NT & WA have turned downwards.
I think that this low economic environment will last another 1-2 yrs, perhaps more.
In that time we will see many more businesses close, much more unemployement and many more mortgagee sales.
But what about lower interest rates?
Well the most scary statistic is that household debt/income is 177%.
That means all the growth is coming on borrowed money.
People are living way beyond their means. So when do they get to the point where they can no longer borrow any money?
The gov. is handing out money with a "go spend it" mandate, but if lower rates are not used to pay down debt, then it's just delaying the inevitable.
After the tech-reck US rates went down to <2%, so what happened?
People kept on buying & spending more borrowed money.
At first the appearance was that the economy was growing, all those "expert" reports of a "resilient great American nation blah blah".
All it does though, is delay the inevitable, and make it last longer when it happens.
It aint pretty when it happens, and nobody like to see people go bankrupt, but how long can people keep borrowing and never have to pay it back?
It's no different for business either. How long can corporations keep expanding on borrowed money? Sooner or later they too have to pay it back.
So how does the debt problem unfold?
- They can stop spending, and start saving = economy drops
- Earn more money, pay loans with extra = economy steady
- Earn more, save more = economy drops
Is there a solution that does not involve "economy drops"?
Yes, more free money from the gov. and never ending increasing loans.
But who pays the price?
Let me make it clear that I think for me (and for them) as an RE investor/owner it's better that these people save their money, repay their loans, and look at buying RE or IPs.
That they use interest rates reductions to pay off debt and get ready to buy RE instead of going on holidays or binging on xmas presents, as the media seems to be reporting.
It just means i have to wait a little longer before my RE values come back.
In the mean time, I keep my ear to the ground and always on the lookout for opportunities that may be out there.
Have a great day, I know I will.
ps I might turn up at the picninc for a brief hello. I'll be the one with the hard hat and the full metal jacket with the words "Hurt Me Please" on it