Where's The Bottom?

Ever been on a rollercoaster? I admit it's been decades but I still remember the absolute thrill of the downward spiral. The ride back up the hills was pretty boring but the anticipation grew the closer we came to the peak. What strikes me with this rumination is that recessions in some way work just the opposite. We are self-satisfied as we ride the wave of prosperity and see our assets continue to climb in value. How smug we get sometimes. When the inevitable cycle ends and we begin the plummet down the backside of the proverbial parabola, there's certainly no thrill and shouting - just fear and quiet terror.

We are in a recession. There, the "R" word. I said it. How long and how deep? Ask the experts and line them up. Soon you'll have a long line of economists who can't agree on anything. The depth and length of this recession is anyone's guess. Most everyone who posits for a living have us near bottom and not recovering until late this year, early next. In truth, no one really knows. What is true is that everyone you talk to in the homebuilding industry has stories of companies - builders, suppliers and subs - shuttering their operations.

Several of the surviving home builders are out looking for lots again. For the most part, one local fairly successful local homebuilder, who shall remain anonymous, is fairly typical. He has gone from 80 employees to 8 in the last couple of years. He still sits on his lots. He has the financial ability to wait it out. Sadly, many do not.

The resale market is very spotty, with the accent on very. I build in the Buckhead area of Atlanta and the inventory (done well) over 2 million is selling briskly. Most buying those homes are writing checks. Same for the resale homes. Other resale markets in Atlanta are slow to dead. Stephanie and I live in an East Cobb community that is far slower than last year, yet the good houses are still selling - and close to asking price. The junk / overpriced properties still sit.

What to do? Don't sell right now unless you have a showplace that's not overpriced for the neighborhood. Or, be ready to be beaten up pretty severely by the current glut of bottom fishers, otherwise known as predatory buyers. Even Relo's know that there is a national glut of properties and come into town armed with the opinion that they can steal homes anywhere for any price. There is a learning curve even for buyers. The time-honored axiom of "You get what you pay for" has not been rescinded. Yes, there is some foreclosure activity out there with some decent homes selling for much less than they did a couple of years ago but remember, especially if they're in the same neighborhood of other foreclosures, the impact of those bailouts on the comparable values in the neighborhood may take years to shake out. Be prepared to be a landlord.

Of course, one can do what everyone does who has ever gotten wealthy in Real Estate - buy and hold on to whatever you can at the best price possible. If you plan on flipping properties and you have the ability to get builder contacts and prices (and your foreclosure is so cheap you can put your capital into the home and flip it at a profit even at the depressed comparable values in the neighborhood), go for it! Just be prepared to wait.

Don't know what to do? Buying or selling, talk to your neighbors. Interview some realtors. Quit watching the television news. Whatever it is, do your homework and quit worrying. All these cycles come and go.