Don't Buy or Sell Your House for the Next Four Years

Real estate has primarily been a good investment, but everything has a downtime, and now is the time to avoid real estate investments. The Chicago area is particularly sensitive to price adjustments now, and the coming few years will see a downturn in housing sales and mortgage fund availability.

The time to buy real estate, whether a lot with buildings or just a lot, takes two coinciding events: when housing is cheap, and mortgages are available at an all-time low. These two events occur about every forty years, and this time has come and gone.

This is not the time to buy real estate except for one instance: if you can own cheaper than rent and can afford a down payment, and with today's higher rent cycle, this would be the ONLY reason. Now is not the time to think of real estate as an investment, as an asset.

Housing is, in truth, a liability. Consider the cost of the land and buildings, property taxes, maintenance, income taxes, legal expenses - these are on the negative side of income, not the plus side. See what a good advertising job the real estate market is doing?

A big thrill in Chicago for younger buyers is rehabbing. A combination of rehabbing and making a quick flip has been a recent fad. Lots of neighborhoods are turning around from lower income to more middle-class families spreading out to take the city back. Out in the suburbs, particularly in the West and Northwest, downtowns are being revitalized after suffering enormous economic losses due to the mall invasion of the 70's and 80's.

Townhouses and condos are going up in proliferation in cities all over the Chicago suburban area to house the aging population, but no one is asking the old people whether they want to stay in town or move to another state, or just to a cheaper area. Who is going to buy all this property when no one has the money?

Mortgages have been relatively easy to attain lately, but that ship has sailed. The economy has turned the other way, quite aggressively. Money is not easy to come by anymore as fantasy mortgages disappear and banks are raising credit requirements back to where they should be. They have too many foreclosures on the rise to worry about lending more money. They are trying to recover the funds they loaned out already on these fantasy mortgages, and on those ARMs and balloon mortgages.

If you own a house now, do you think this is a good time to sell? If you sell now, there is no one to purchase it. The market is almost dead; housing prices are reduced again and again. So it's a good deal? No, because it was at an artificially high price and needed to reduce to come down to current market pricing.

If you bought property for a flip, or as a monetary investment, find a way to keep it for now for at least another year, and hopefully for a few more years. Even though housing prices are falling now, it is a cyclical business and prices will rise again. When you buy for investment, you need to be prepared to hold your investment until it is profitable enough to yield a good return, or you need to find something else to do with your cash.

The stock market is up to a record-setting level, a war is still on, and housing prices are still high. An election is coming up, the war will be scaling back (hopefully) and we are seeing signs of a housing bubble that is ready to bust.

We have lots of housing stock for sale, but no one can afford to buy. We have already bought if we could, many to the limit of affordability and beyond, and we have used our home equity for a spending spree. Savings is at an all-time low. The stock market is in for a major correction. Political doublespeak proclaims unemployment down, but we know that it's because people who haven't found a job have exhausted their unemployment funds and are not included in those numbers anymore.

Construction runs the economy, and housing construction is definitely down, and sliding even farther in the next couple of years. Construction is connected directly and indirectly to almost every other industry throughout the country. Housing prices have started to fall in several places around the U.S., they will soon be sliding everywhere, and the banks will have to get the money for overvalued property from somewhere. Foreclosures are doing a double-digit rise. Mortgage companies have shut down the incredible fantasy loans they have been advertising in the near past. Banks want the money back from homeowners who took out every penny of their home equity when prices were inflated, and have slid down to more realistic levels.

So what can you do if you need to increase your living space? There are several options. One is to gather all the extra stuff, things you don't need every day, and store them in a corner of the basement or in the attic of the garage. An even better solution is to give them away or have a garage sale.

Turning the garage into another room is another solution for those with attached garages. The problem is that if you need to sell, that garage better turn back to its original function for maximum viewing. People don't want to buy a house with a converted garage. But finishing the space on the top of the garage, if there is one, is a great idea.

Converting the basement to livable space is a very do-able idea. Another is to turn a sunroom into a four-season room, again an option that is not extremely expensive.

If there is more money, consider adding a story to add another whole room of living space, or adding onto the back of the house. Adding just a family room and a half bath might be enough to solve your living problems. Adding a logical addition might not add that much to your monthly mortgage debt, and will give you great resale value when it's time to sell.

You will see the signs of a return to a good housing market when the job market is strong, the housing industry is up and banks are advertising their mortgages again. This return to a more normal market will be the time to consider real estate again, but for now, sit tight.