How to Buy a $450K Home for $750K (May 29, 2006)
I recently came across this ad in a major American newspaper and was struck by the "truth in advertising" which was apparently imposed on a typical real estate pitch aimed at the naive and greedy (as opposed to the experienced and greedy).
The ad went on to list "The cutting-edge secrets to buying real estate at 30% to 50% above market value:"
Lo and behold, all the conditions have been met, and it is indeed possible to buy houses for 50% above their market value.
Of course when inflation can no longer be cloaked, it will be too late to stop its further ascent--which insures mortgage rates will climb, bankrupting all those with adjustable-rate mortgages (ARMs). The massive over-supply of investor-owned units is already raising inventories around the nation, and as this trickle grows to a mighty flood, the foreclosures of the ARM-bankrupted will also hit the markets. As lenders are inundated with losses from risky loans gone bad (surprise, sub-prime borrowers are not good risks), they will no longer be able to lend money as their reserves will have to be rebuilt even as their losses multiply. Leverage will fall off a cliff as lending standards are belatedly raised, but alas, all this will be too little, too late; the over-supply has been built, the demand has been sated, and investor-owned properties will soon be on the market.
The cutting-edge secret to buying real estate at 30% to 50% below market value? It's this simple: wait a few years for the market to re-set valuations. Pretty simple, huh?
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copyright © 2006 Charles Hugh Smith. All rights reserved in all media.
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