If you follow the financial news, you will be overwhelmed by the chaos and despair the lies just beneath the market forecasts. The foundations of the American economy are in disarray. The government has to hide the truth about the unemployment numbers by eliminating people who aren’t even trying to get a job anymore. The real number would likely cause a panic. What is important to understand is that fewer Americans are working to expand the economy than any time since the Great Depression.
The supposed housing recovery is a sham. There is a “shadow inventory” of mortgage defaults that dwarfs anything that has gone through the market so far. Hedge funds are propping up the market because they can’t find a better option in the stock market. The stock market has been propped up by the retirement funds of the baby-boomer generation. That generation is just starting to withdraw those funds so that they can live out their retirement years in relative comfort. What do you suppose happens when the largest demographic in the stock market pulls out of stocks? The monetary supply has been flooded with fiat currency, driving the real value of the dollar down to frightening levels. Inflation is up, but the problem is much worse that the media would have you believe. The official government inflation numbers exclude the cost of fuel and food. People need fuel and food, so those costs really matter when looking at the economy. I suspect that if the general population understood the gravity of the situation, there would be widespread panic in the markets. As a real estate investor I am just sitting back and waiting for the chaos to erupt.
Real estate investors love economic chaos. We make massive amounts of money when markets turn ugly. The reason for this is that people in a panic will sell off assets for whatever they can get for it. In many cases this means that people will be walking away from large chunks of equity. Sellers will be open to no money down or owner financing deals. Any form of debt takeover will become fashionable again. As credit continues to dry up for most Americans, investors will be able to charge a premium to buyers who can’t qualify for bank financing. This week a survey revealed the 76% of all Americans are living paycheck to paycheck. It won’t take much of a speed bump to turn all of these people into motivated sellers.
Some of these advantages are already open to savvy real estate investors. The market forces are all rushing towards making the investor wealthy. At the investor end, we need to prepare ourselves. We need to become the light at the end of the tunnel. We need to learn how to help these people. Our role will be to help desperate sellers find hopeless buyers, and to have the ability to make deals in a way that is a win for everyone. With this skill, we will make a lot of money.