By Martin Sumichrast
As a good friend of mine likes to say, "Just when it seems like it will never end, the end is near." So goes the economy.
The U.S. Census reported that new home sales in December 2008 fell to their lowest levels since 1963. Median home prices continue to fall and America's GDP for the fourth quarter declined by 3.8%, the biggest drop since 1982.
On top of this, Congress and the Obama Administration want to spend almost a trillion dollars on economic stimulus, which will add to what the government has already spent the past six months on emergency programs like the Troubled Asset Relief Program, or TARP.
As a result of these factors, most investors are sitting on their cash ($9 trillion by some accounts) and wondering what they should do. Investors are afraid to buy stock, even though dividends of world class companies like General Electric
Real Estate, a Hedge Against Inflation?
As I remember from my Economics 101 class at Tulane, a great hedge against inflation is real estate. On top of that, interest rates (for conventional loans) are at an all-time low, and there is a historical glut of houses in the market. Whether it's a foreclosed property, a builder who is in trouble or a homeowner who is relocating due to an employment change, houses are selling at bargain prices.
Sharpen up that pencil, open the home section of the newspaper, log on the internet and start perusing your local housing market. Because now is the beginning of a historic buyers market.According to Gopal Ahluwalia, vice president of the National Association of Home Builders, the U.S. needs about 1.5 million new homes each year just to keep pace with family expansion, immigration and natural condemnation of existing homes. This means that in a normal course of economic activity, we would be in a supply shortfall of almost 1 million homes. Over the next two years, this supply shortfall will soak up a significant amount of the foreclosures and the supply/demand housing equilibrium will most likely come back into balance.
Multifamily builders are also feeling the pinch. The list of multifamily projects that are being shelved or canceled has grown with apartment developer/owners BRE Properties