Who knows what will happen?

Every magazine or newspaper seems to be filled with what is happening or will happen in the real estate market. We get reports for bubbles bursting, bubbles slowly leaking air, bubbles hissing, properties out of balance, foreclosures rising, scary loans coming due.

Since I focus on residential income property in the Palm Springs and San Diego areas, I pay them the most attention. Both of these areas were listed by Moody’s most recent report to have declining prices:

Metro Area	Median Price	Projected Growth '06	Projected Growth '07
97 Riverside-San Bernardino-Ontario CA	$362,800	-2.60%	-6.80%
99 San Diego-Carlsbad-San Marcos CA	$598,700	-3.40%	-5.70%

I obtained the above info from the chart on Business Week Magazine since I was too cheap to pay the $3500 to purchase the full report. Just exhibiting frugality in a slowing market!

According to Foreclosure Reports, the #1 State for Foreclosures has been Indiana in recent years. Moody’s report ranked Indianapolis:

Metro Area	Median Price	Projected Growth '06	Projected Growth '07
31 Indianapolis IN	$121,700	5.60%	5.40%

There appears to be a substantial contradiction here!

Would I purchase real estate in the next six months?

No one really knows what will happen. Interest rates are still low but the psychology of the market is changing, probably because all we hear and see are negative articles about the market. A lot of our market is psychology driven.
When would I purchase real estate again?

Once I see some clear trends of the market. I don’t see interest rates rising until well after the first of the year 2007. The only two reasons to purchase property NOW would be for tax savings against ordinary income OR to lock in the low interest rates for a five to ten year hold.

I’m not saying real estate is a bad investment. Real estate with the proper planning is almost never a bad investment. What I am saying is that this is not the time to expect double digit appreciation on a property which you can “flip” in a year and make huge profits.

That’s not investing…that’s speculating. Just like Las Vegas.