Cash is king in the real estate downturn

[Orchidflower]

On Glenn Beck tonight, his guest was a broker who was saying that cash is going to be king and predicts a horrific real estate crash. I signed up for Beck's free email, and will get more on this when it comes as I missed some.
However, am I one of the few who believes that we are heading into a horrific real estate crash like we have not seen in our lifetimes?
Is anyone considering pulling their money out of mutual funds and stocks and putting into the bank now? This is what Beck's guest implied is the smartest move.
Seems to me that those who have access to cash will be able to PROFIT in the coming real estate crash, and that should bottom out about 2010 or 2011 from what I am now reading.
And God bless those who bought at top market price in Las Vegas.

 

[LOL!]

I guess I've lived longer than you. I've seen real estate crashes before: Texas in the early 1980s and NY&Boston in the 1990s. Horrific? Naaahhh.

 

[Ed_The_Gypsy]

O'Flower, I think you should stop reading the paper.

Like the bible says, "There will always be wars and rumors of wars."

Set up your asset allocation, fund your pot in proportion, and fogeddaboutit.

You don't lose money if you don't sell.

 

[twaddle]

Not sure why this couldn't go in your other real estate downturn thread, but the only advantage of cash is that you can do a quick close. For some sellers, that's an attractive proposition. For foreclosed properties, it's usually a requirement.

Cashing out liquid investments now so that you have a check ready for 2011 or whenever sounds a bit looney tunes to me....

 

[73ss454]

The only people that'll get hurt are the people who bought at the top to flip and got caught. If someone bought at the top and stays in the house for 10 or 20 years it won't mean a thing. Even in Vegas the same rule will apply. No biggie!

 

[macdaddy]

Keep in mind the US dollar is in the toilet. I am seeing a ton of foreign money from Japan, Ireland, etc flow in to Boston right now. Residential and commercial properties. I mean a TON - probably a couple billion dollars - propping up prices significantly, and rental demand on both sides is strong.

 

[danm]

Hole. Sand. Insert head.

 

[FIREd]

Given the current inflation rate and what looks like many more rate cuts to come, I don't think that cash (especially US dollars) is the best place to park your money right now.

 

[W2R]

Cash is and always has been King, though Firedreamer has a good point about inflation. I always like to buy in cash, and around here I usually get a much better deal than many because of it.

Don't forget that a home is simply a place to live for some of us (and I am guessing, for you). It doesn't matter what it is worth, unless you sell, wait for prices to increase, and THEN buy, or else buy in an area with greatly different real estate dynamics than where you sold. If you sell and buy right away in an area with the same type of housing market, you will probably get the same low price for the new house as you got for the old.

Nobody has a crystal ball. We could be headed for a catastrophic economic collapse, or we could be headed for a healthy, thriving economy. Don't forget that people who write articles and author websites don't make money unless what they are saying gets people's attention. So, they are more likely to say scary things than not.

Something that I know (and you probably do too, Orchidflower), is that life goes on after catastrophe, even if it should turn out that way. We have made it this far in life, and think of all we have been through!

And in answer to your question, there is NO WAY that I am going to pull my money out of mutual funds and put it in the bank. That would be selling low and I'm just not going to do it. I have enough cash in Vanguard Prime Money Market to hang in there until the economic climate is healthier before I think of selling.

When that will be, I do not know. I think we will all find that our LBYM ways will be a huge advantage to us, should the economy take a while to recover. On the other hand, that could be next week as far as I know!

 

[StJohnsWood]

Just remember the time to buy is when others are scared.

Be it the stock market or Real Estate there are bargins out there. There will be more bargins to come. But like always having liquidity is the way to go. Keep your emergency fund fully loaded and invest the rest!!!!

 

[Orchidflower]

No, I am not pulling my mutual funds out and turning them into cash. I am simply repeating what a supposed person in-the-know said, and wanted opinions from our board members.
By the way, I bought a home in Bellaire/Houston--now a pricey Dr./lawyer city inside the loop of Houston (bizarre but true the way they zone)--and stayed 20 years. But I purchased it not having much idea of the economy or housing market--only to watch the damn thing lose about 30% in value within the next year and a half. Fun.
So, yes, I have myself gotten caught in this mess. Not a happy thing for a single parent either. But I stayed and did make my money back after all. The '80's in Houston weren't fun as we had 10% unemployment while other places were booming like mad.
But, lordly, I do not want to see us go thru another crash that is huge. Sigh...I will just have to wait it out and see like everyone else.

 

[brewer12345]

RE crashes don't happen quickly like stock market crashes. They tend to be slow, grinding afffairs that take 5 years or so to unfold. We are now in year 3, so I think we have a ways to go. But not that much farther.

The drop in RE has been accompanied by lenders retrenching, just as in other RE drops. But I see some mitigating factors here: loan modifications en masse, rapidly falling interest rates, homebuilders pulling back on constrction faster than in previous RE drops, wide distribution of loan losses throughout the system (as oppposed to concentrated and enough to kill lots of lenders), and a falling dollar (making coastal roperty attractive to foreigners).

I think we probably have another year or two of prices falling somewhat. After that, things will probably go sideways for a while. At least in my local market, genuinely good deals on residential property do not appear to be readily available.

 

[Buku]

be scared when everyone else is buying and act quickly when others are scared...

 

[Nords]

At least in my local market, genuinely good deals on residential property do not appear to be readily available.

We'll know we've hit bottom when NJ real estate is hot...

 

[brewer12345]

We'll know we've hit bottom when NJ real estate is hot...

Actually, it will probably be well after the bottom is in in places like CA because average forclosure time in NJ is over 9 months, vs much quicker in other states.

 

[twaddle]

I'm frankly surprised at the speed at which SoCal is unwinding:

DQNews - Southern California Press Release

And the inventory levels are scary. I think it was 14 months of inventory last I checked.

 

[Walt34]

Yeah, it's all just scaremongering. We have a nice house with the 2-car garage and all, but would it really make a big difference in our lives if we were living in a doublewide?

I think not.

But then, I didn't invest my life savings into real estate either....

We bought the house for a place to live. If it appreciates well, that's icing on the cake. If it goes down, well, everyone else's is going to go down too.

 

[innova]

what a supposed person in-the-know said

There's your problem. He doesn't know squat.

Predictions sell magazines and TV ad space. Thats about all they are good for. Doesn't seem to matter much whether the topic is the stock market, bond market, real estate, or anything else.

Turn off the TV and stop worrying

 

[jazz4cash]

The only people that'll get hurt are the people who bought at the top to flip and got caught. If someone bought at the top and stays in the house for 10 or 20 years it won't mean a thing. Even in Vegas the same rule will apply. No biggie!

I agree! As long as the real estate downturn does not drag the rest of the economy down because there's no more home equity to tap and consume on SUVs, HDTVs, and whatnot....we'll all be fine! I am certainly happy I bought pre-bubble and have no need or desire to re-locate.

 

[jazz4cash]

Is anyone considering pulling their money out of mutual funds and stocks and putting into the bank now? This is what .

Well...if I did, I would avoid most of the banks since so many are right in the middle of the housing mess and would have to spread the funds around to meet FDIC limits.