Mar
17
The last few weeks have been pretty brutal ones for subprime lenders, with more than a few of them completely getting wiped off the map, and others seeing their stock price get absolutely decimated. For lenders with a lot of exposure to subprime loans, it’s a double whammy, with defaults rising dramatically and, simultaneously, their ability to raise new money severely hampered with everyone in the banking industry treating them like lepers.
It’s also a double whammy for real estate investors, as we have both falling home prices in much of the country as well as the possiblity of the pool of future buyers shrinking as well, as lenders tighten the screws and it becomes more difficult to get a loan to buy a new house. That could continue to drive down home prices, creating a vicious cycle that might send the overall economy toppling into a near-recession.
Does that means it’s a terrible time to invest in real estate? Honestly, who knows. That’s a pretty impossible question to ask, as the answer depends on the market you’re talking about, your own personal financial situation, the type of real estate investment you’re considering, your long-term investing goals, and any other number of mcomplicated moving parts that all influence the final answer.
Personally speaking, the next deal I do is probably going to be a rental property, quite possibly the foreclosure duplex I’ve mentioned before if it’s still on the market. Given the larger uncertainty, the idea of doing another SFR short-term flip makes me a bit nervous, and if I can eliminate even that bit of nervousness, well, that seems wise.
I’m definitely not in the doom-and-gloom, the-world-is-ending camp, as my best guess is that we continue to see a softly deflating housing bubble over the next six months, with things picking up slightly after that. But I like the added insurance of investing in a rental property next, as far as a slight hedge against the worst-case scenario, which still isn’t outside the realm of possibility at this point.
