I read several posts lately about the dire nature of the real estate market with questions about whether now is a good time to invest based on the “badness” of the market. These are sensible warnings and no one can be faulted for calling a spade a spade. However, the assumption that someone is in denial if they claim now is a good time to invest might be a little too sweeping as generalizations go.

I agree that anyone who has his head in the sand and is pretending all is well is treading on a thin mindset, but there is something else to consider. The market is what it is. In a way, an investor’s impetus to invest is outside comparative market analysis, except in the sense of predicting time frames for turnarounds. In other words, an investor’s main concern is not if the market is up or down, but rather does a particular investment make sense in the context of where the market is and the future prospect of where the market might go.

Hardly anyone will ever time the market perfectly, and it’s not necessary. The main thing is to take each investment and judge by it by numbers. Right now may be the best time to buy if the numbers work and if your prediction of turnaround time is fairly accurate. Of course no one knows if the market will get drastically worse, but when the market is good no one knows if the market will get drastically better, so we take chances that extremes will be avoided. There is risk involved in investing.

Investors are a different breed who live by risks. An investor weighs risks in an up market just as he weighs risks in a down market. The risk in a down market is that the market will continue downward further than expected, so getting the best price and establishing cash flow are important. If you decide to buy in a down market, you are betting the market will not go down further (or much further) than the price reduction you negotiate and that the cash flow will help offset what further downward movement there is until the market turns upward again. In an up market price is still important although you may have to pay closer to asking price, but you are betting the market will continue to rise until you get to a point where you can sell for a profit.

If interest rates are following the heat then rates should be lower in a down market and higher in an over-heated market - this is if we are going by rational actions. But whatever may be the case, an investor need only judge by how the market IS, not by its “goodness” or “badness”.

If you have judged this market for what it IS and looked at the numbers that have to materialize for the investment to make sense, then now is as good a time as any to invest. It’s a matter of knowing your market and predicting the future fairly well. If you are in a market where the economy is diverse and the only thing holding it back is a national slowdown, then it’s pretty safe to say your market will rebound and probably won’t sink into oblivion.

At any given time markets are in flux, but you should be able to predict fairly well if nothing major has changed locally. If you are trying to time the market and waiting for a bell to signal the absolute bottom, you will most likely miss it because there are no bells, just investment judgment.

This is what investing is about. This is what separates investors from normal buyers who buy when they think every is good and is going to get better. It will take more number crunching and you have to use discipline to stick with a plan of action, but if you’ve made a plan based on the numbers that have to make sense, then the rest is the risk an investor takes.

This may not make sense to some people, but it does to me.

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

Real Estate Investment based on how the market IS, not its up-ness or down-ness (aka Timing)

The head of Fannie Mae is predicting a slow real estate market spanning through 2009 as indicators such as the Case Shiller report as showing even greater weakness in the market. Daniel Mudd predicts the slowdown lasting longer than many other prognosticators, but interesting enough recognizes that he is guessing as forecasting housing is not an easy job.

This is a great point. We all would love to know the date of the turnaround. But the complex formula of consumer sentiment, finances, macro economics, local economics, and government fiscal policies will make it very hard to determine when and where the bottom will be. Add to that different local and socioeconomic groups may react differently to market conditions you have to remember the classic adage.

All real estate is local.

So before you get all bothered by this report, watch the indicators. The  best example of this are  the charts that are on Doug Quance’s site  for the different towns in Atlanta. Some are showing increases over the past couple of months of 10 percent while others right next door are showing declines. If you did not know any better you never would know all these communities were in one metro region! 

“We think at Fannie Mae that ‘08 is going to be a tough year, kind of a continuation of the end of 2007; ‘09 will be similar,” said Daniel Mudd, the company’s president and chief executive, who spoke at a business journalism conference in Baltimore.

Fannie Mae, which buys and repackages loans to sell to investors, claims about half the market for newly issued securities backed by single-family homes.

Forecasting the bottom of the housing slump is a tricky business, with the many conflicting predictions by economists as proof, he added. He said he has seen recent improvement in the capital markets, which play an important role in the mortgage products and rates that borrowers can get, but a housing-price index released yesterday showed accelerating declines across the largest metro areas. via the baltimoresun.com

Post from: The Real Estate Bloggers

Fannie Mae Chief Executive Predicts National Housing Recovery in 2010

I’ve decided to lie to you. At least, I’m being honest about it!

I have grown tired of reporting weekly, it seems, on the ever expanding, contracting global credit market and the resultant deep recession the U.S. currently finds itself on the cusp of.

Americans, perhaps more than people anywhere, love being in denial. We deny we are getting fatter and fatter by eating McDonald’s 15 pounders; we deny that our kids are getting dumber and dumber even if high school seniors often can’t point to the U.S. on a world map; and, we deny that we are in denial, even though we clearly are…about a lot of things.

So, why not be in denial about the alleged mortgage/credit crisis (note, I said, alleged!!).

Here Goes

Home prices are now actually at an all time high! I know, if you read “the news” you’ll be told that prices of existing single family homes fell another 2.6 percent in February for an annual decline of 12.7 percent.

Just deny it!

That’s right.Whose to say that “facts” have to screw up your day? Ignore “the news” and, take