I saw this article on the Real Estate Market, which I thought was interesting. Except for this part: "High prices are sewing the seeds of their own demise." It's sowing, as in "what ye sow, so shall ye reap." How the hell does someone sew seeds. Moron! Anyway, back to my twisted diatribe.
I’ve been saying the housing markets were due for a correction since ’03, but like the tech boom, I underestimated the ability of people to push a bubble to extremes. While I suck at predicting market tops (in stocks or real estate) I’m actually pretty good at predicting bottoms. After the tech crash in 2001, one of my aunts called me and said she was selling her mutual funds and asked if I thought that was a good idea. I don’t think it’s a good idea for old people to buy risky stocks in the first place, but I told her to empty out her bank accounts and buy more instead of selling. Of course, she ignored my advice because, like everyone else, they buy when the price goes up and panic when the price goes down. If she had listened to me, I’d have started this post with “let me tell you about why I’m my rich aunt’s favorite nephew.”
I think housing markets suffered from the same problem as dot com or tech stocks. People were seeing prices rise so rapidly that they felt they HAD to get in before they were priced out forever. Instead of being cautious when prices rose, it made them more eager to buy. But what Warren Buffet says about stocks applies to real estate too. “The dumbest reason in the world to buy a [house] is because the price went up.” Conversely, the dumbest reason not to buy a house is because the price is falling.
You see, when every body thinks the same thing, they are usually wrong because most people are idiots. Although I bought the ninja fortress even though I wasn’t confident about the housing market, I think that since everyone is predicting bad things for the housing market, now (or very soon) would actually be a good time to buy. When feckless homebuilders and desperate flippers are trying to unload their homes at bargain prices, buying actually makes a lot of sense. You don’t become rich like Warren Buffet or Donald Trump by buying high and trying to sell higher, so don’t panic if prices come down a bit. That’s a great buying opportunity.
Damn, this is very informative but not very funny, I shoulda’ saved this for my ninja investing blog.