Real Estate Charts
Has Inflation Come to Stay?
Last week I promised you some charts showing movements in the real estate market in the USA.
Things work similarly in the UK and in Europe. After all, property markets are driven by money and its cost and availability. Those matters are universal. If anyone tells you different, you are listening to a fool.
The charts I am showing you now indicate clearly that all is not well with real estate at the moment, but the second chart shows you something that you can learn from.
You will remember that we had a financial crash in 2008. Basically it was caused by government policies and the failure of the Federal Reserve to cope with its commitments. What’s new? The current mess is also being caused by governments and central banks. Put bluntly these institutions are a thorough-going nuisance, but the masses buy the official line. You dont have to.
Somehow, in the future, those of us with intelligence need to find a way of divorcing ourselves from a world inhabited by the ignorant and run by the vile. Suggestions gratefully received. In the meantime, back to the plot.
If you look at the second chart, you will notice that it took fully two years from the crash before folks felt comfortable in returning to buying real estate. There are several reasons for this.
First, people are not very good at dealing with life, money, and circumstances in the first place, and secondly, because they have been burnt due to that second problem, it takes a long time to convince them to return to the investment that has previously just let them down.
Second, banks are run by people who also aren’t very good at money management. They wont lend after a crash. That means houses are cheap at that time, and you have no opposition when you offer to deal at knock-down prices.
You ought to buy my book about real estate and read the chapter about how I and my friend Gerry dealt with real estate after the crash at the end of the eighties.
Here’s a link to the book on Amazon: https://www.amazon.co.uk/dp/B07D3ZW8D2
I invented buy-to-let in 1991, and I and a friend used the maths behind the method to start buying real estate at the beginning of 1992. I wrote the book a year later. Not a single publishing house would accept the book, thinking I was an idiot. Not a single bank would lend on property either. Gerry and I got turned down by every bank we visited despite the fact that a few years earlier they had lent to people buying property on absurdly high P/E ratios, whereas they would not lend when those ratios were down to 1.
How did we buy real estate? It was so cheap we didn’t need mortgages. And when we asked for mortgages and were refused, we asked for loans to buy cars, a depreciating asset that brought in no income. Naturally, the banks were happy to lend. Such are the ways of banks. Naturally we didn’t buy the cars, but used those loans to buy houses.
It would be worth your while buying my book just for the laugh at the expense of the banks. I show you the maths in great detail. I give details of how to buy the book again at the end of this blog. It is full of something which is way out of fashion at the moment, common sense, and systems that actually work.
You get maybe two occasions during a business lifetime to buy real estate at knock-down prices. The most recent occasion was at the beginning of the nineties. The next occasion may well be heading this way. That is why I have been telling people who want to sell that they should sell then rent, rather than buy anew. Hang on for those bargains. Talk to the lady of the house. She understands bargains. She waits till the sales are on.
How do things work out?
First we get the loss of confidence, followed by a hesitant slide. Then we get an increasing panic when prices just wont stop tumbling. Then we get a shocked calm, followed by the smart guys coming in on the prowl. It takes time before the folks who live in the slow lane begin to realise that things have changed and maybe it’s time to get back into real estate. A couple of years later when the best deals have already been snapped up, buying becomes hip again.
You dont have to be late, just keep reading my blogs, but just now, be patient.
Oh yes, and here’s that other link to buy my book on Real Estate: