Fear based or reality based...

I have always stated that there is no such thing as a national real estate economy. I still believe this despite what seems to be happening throughout the United States, as reported in numerous newspapers, as well as, their television affiliate corporations. The perpetuation of fear through our news agencies gives me pause. It is too bad as there are some great deals out there for people who can see through the maze of media mayhem.

There is a book by Rothschild called, Bionomics, that everyone who is investing in any market should read. Balance this reading out with another book, by Schiller, called Irrational Exuberance. What I find between these two books is the fact that what we are experiencing today is the proof of Macro and Micro economic situations.

Our firm is heavily invested in CA, AZ, and TX. We chose to begin to work in TX due to the nature of the economic outlook on a national scale. We have done well in the CA and AZ markets, however, at this time due to the nature of the housing prices in CA vs rental incomes it is not cost advantageous to play there right now. In AZ it is a hold mode, as the inventory needs to balance itself out again. Although, as people are not buying, they are needing to still rent. Thus, there are more rental needs at this time. Add in the credit crunch creating that much more of a need for rental housing throughout the US at this time.

I need to stress, however, this does NOT mean to say that it is not time to buy...or build. Now is a perfect time to buy a home as prices have slowed in so many areas throughout the country.

This is what we constitute a Macro economic theory of the Real Estate market today.

I say though, that there are ALWAYS Micro economic climates in which one can find to place their money. With the baby boomers retiring, and this demographic just beginning a twenty year run, in droves to the southern areas this is where I chose to look into investing. Three years ago we went looking for the amenities that this demographic wants to have the most:
golf, walking, water, sport activities, sun and moderate year round weather, affordable housing, good cost of living... Texas is a state that is undervalued. In our estimations, it is undervalued to 15%.

Within this undervaluation, a grand home, still will fall within the Fannie Mae/Freddie Mac loan guarantee threshold of their current level of $417,000. This means that a larger demographic can get the house they need in this area due to the variable loan options that would still be on the table, even in today's market. We found golf course developments in their very infancy stages near growing metropolitan areas. When you combine affordabilty, proximity to nearly every amenity available, and a micro economic real estate environment due to the amount of people purchasing the numerous 1200 odd lots in one development and 3000 in another, all create a wonderful investment situation no matter what the economy outside of this situation shows.

Sometimes an investment must be looked at for all its own merits, despite what is happening 5 states away. These are different scenarios and hold nothing to do with one another.

I say it is time to play!!

Doug Boggs
President
BD Group, LLC