Housing Market Cools - Is Recession Next?

Every month more evidence is showing up that the once booming US Housing Market is starting to cool down. If the only thing bad that happens is that home sales slow a little bit more each month, then that will be good news. Many people, like myself, are more concerned with an all out melt down in “housing” which could send the US economy into a recession. There have been so many signs in the housing market over the past couple of years, which remind me of the stock market in the late 1990’s. During that period of time most folks believed “the sky was the limit” when it came to high flying technology and Internet stock which mainly were found on the NASDAQ stock market. Billions of dollars of wealth were lost in only a few months period of time when that market “bubble” burst and some folks had to put off retirement because getting 100% plus returns on investment dollars was just too hard to pass up.

There are some signs that the current real estate market is going through a similar process where people have closed their eyes to any possible downside to investing in housing. It is very easy to get completely obsessed into a growing marketplace where the only thing people talk about is increasing prices and profits for investors. While there are very few investments, which will do better than real estate, in the long run, for most folks their idea of the long run is about twelve months. When you add to that type of thinking the fact that most people are buy real estate with borrowed money. Then everything needed is present for the housing market to possibly collapse one day and leave millions of people with no property and a huge mountain of debt they will never be able to pay off.

Some of the really big real estate "hot spots" like Miami and Las Vegas are building like there is no tomorrow and people are quickly gobbling up these new properties. Many folks who are investing in these fast growing real estate markets never intend to live in the properties they are buying, but rather they want to flip them as soon as possible for a quick profit. In my opinion this flipping idea is just as stupid as buying risky stocks on margin without totally realizing that there is no guarantee that any market will continue to grow in the future. Especially these two markets of Miami and Las Vegas give me the feeling I’m watching the NASDAQ happening all over again except this time it is happening with real estate, instead of stocks.

Since the beginning of time, average people have always wanted to find a way to “get rich quick” or find a guaranteed way to provide a large income for themselves and their family. However, the truth is that becoming successful at anything takes time and at least some hard work. Sure some folks are at the right place, at the right time, with the right idea, but that doesn’t happen that often in the world today. I am just afraid that millions of people are going to be financially ruined because of this latest rush to cash in on easy money in the real estate market. I could be wrong and that would not be a bad thing either. However, there will soon be an end to double digit increases in real estate prices because nothing can continue to go up forever at a rate higher than inflation or the amount the average persons income increases each year.

This isn’t rocket science, but just plain ordinary mathematics. The first rule of real estate investing should always be, "buyer beware".

Related: US Style Economy, Stock Market Declines

Housing Market Cools