So if there really is a housing bubble then how do you profit from it?

LeeH · 03-29-2005, 08:26 PM

The stock market bubble's bursting was predicted for some time. Of course it happened. Everyone has a story of what they should have done to protect their gains. It's easy to think of how much money we all could have made had we shorted just about any tech stock.

Now there's talk of the real estate market bubble. Many experts say it's only a matter of time before it goes. Short of selling my house and moving my family into rental property, is there any way to protect ourselves? Our house has almost doubled in value since we moved to Phoenix six years ago.

Are there other ways to profit if/when housing prices start to decline?

turbo6bar · 03-30-2005, 06:08 AM

You only capitalize on the gain OR loss when you sell. So, if you're planning to sit tight for a while, lock in your mortgage at the lowest rates.

If the equity in your home is the only asset with which to play, I would do nothing else. If you do have cash, and want to really bet on the bubble, you could always short builder stocks.

widebody911 · widebody911's Garage

Go back in time 5 years, buy a property, then sell it today

There's nothing to really 'protect' yourself from unless you consider your home some sort of short-term investment, or you're greatly over-leveraged

motion · 03-30-2005, 07:11 AM

Lee,

I am very bullish on the Phoenix market. I think its still undervalued. DR Horton is finalizing 35,000 new permits for the Maricopa area. I think the good times will end some day in Phoenix, but that some day (in my humble opinion) is still at least a year away. My advice: pull out $30k in equity from your home and buy a new home from a builder. Sit on it for several months (don't rent it). Then sell it. There's risk, for sure. But the upside potential is very good.

coloradoporsche · 03-30-2005, 07:45 AM

Maybe you can short a REIT?

widebody911 · widebody911's Garage

So you have half of the people hoping the bubble bursts now and the other half hoping it holds on for a few more months. Each is waiting for the other to blink first.

turbo6bar · 03-30-2005, 08:30 AM

Pigs get fed. Hogs get slaughtered...

Don Ro · 03-30-2005, 08:42 AM

Lee,
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Since I have been sitting on well over $1 million in equity for the past 6 - 7 yrs., and only have a $400k equity line of credit in case of emergencies, I'll defer to the courageous RE folks/smart money managers to answer you.
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But what about getting a healthy equity line of credit, then when/if the bubble burst hits hard enough, you do what you can to scoop up a foreclosure or two, and rent them out? Perhaps even to the previous owners.

.
A buddy of mine in Sacramento has done *well* buying/selling foreclosures for the past 30 yrs. (He thinks I've been financially irresponsible to not have been doing the same)

motion · 03-30-2005, 09:13 AM

Don - That's a great strategy. If you can be in a position to make long-term investments when the market is at or near its low, you will be looking very good down the road.

Wrecked944 · 03-30-2005, 10:00 AM

Quote:

Don - That's a great strategy. If you can be in a position to make long-term investments when the market is at or near its low, you will be looking very good down the road.

I agree with Motion. I'm piling up cash (and setting up low interest equity lines) with the intention of buying land at bargain prices when the market over-corrects. Unless you plan to sell right now and realize the gains of the inflated market, I think stockpiling cash and buying after the crash is the best way to "time" a market when you expect it to fall. At least, that is what I plan to do. YMMV

tabs · 03-30-2005, 10:33 AM

The predictibility of stupidity can never be underestimated!

Ok while the Housing bubble bursts every other investment class is going to be doing NOTHING? RE as an investment exists in a vacume....When the Dot Coms crashed what took off in value? When RE corrects what is going to being going up in value...

I just fking love how everybody is so myopic on these Boards....RE, RE, RE as if thats the only thing under the sun...

Don't you boyz get it...everything is a 5 to 7 year business cycle...RE has been moving up since 98....ummmm ...OH thats 7 years....isn't it?

Greenspan has been moving interest rates up to do what....to stop the irrational exuberence in the RE market....and he will continue to do that until it does...

U really want to know something....there have even been conversations among players that the Fed works these business cycles on purpose....Oh but thats a whole different level of abstraction...

So you boyz go and set up your low rate interest lines of credit....so that you'll be ready to move on those low RE prices in say.... the middle of 2010.....

ubiquity0 · 03-30-2005, 11:47 AM

So tabs, give us your hot stock picks.

john_colasante · 03-30-2005, 12:58 PM

Do a little research. There are many ways to "short" the real estate market. Some of them are not so obvious. One obvious way is to short the stocks of the home builders. Some people beleive they are as high-flyin' as the Internet stocks of years gone by.

tabs · 03-30-2005, 07:16 PM

E-bay...MMM, MOT and COP

tabs · 03-30-2005, 07:17 PM

Short Toll Brothers

CamB · CamB's Garage

Just stop perceiving that you will lose money if your house goes down in value (it starts by perceiving that you gained nothing while it went up).

Of course, this won't help you "profit" from the housing bubble, but unless you have regeared to the eyeballs, I'm not sure what protection you need.

turbo6bar · 03-31-2005, 06:15 AM

Quote:

Originally posted by CamB
Just stop perceiving that you will lose money if your house goes down in value (it starts by perceiving that you gained nothing while it went up).

Yup, yup. Take the purchase price of six years ago and add 3% per year if you're conservative and 5% per year if you're aggressive. Best case, your house is worth 27.6% more and conservatively, 15.9% gain. Again, you aren't losing or gaining unless you sell.

LeeH · 03-31-2005, 06:18 AM

Quote:

Originally posted by CamB
Just stop perceiving that you will lose money if your house goes down in value (it starts by perceiving that you gained nothing while it went up).

Very good point. I just ran a balance sheet a few days ago and updated the value of the house to reflect recent sales in our neighborhood, so the there is definitely a perception of a significant gain!

TerryBPP · 03-31-2005, 07:32 AM

The market is insane hete in FL right now. I own 2 condos on the water and the values have doubled in the last year. Does anyone think there is a bubble in the SW FL market? It seems like its never going to end.

turbo6bar · 03-31-2005, 07:55 AM

Quote:

Originally posted by TerryBPP
The market is insane hete in FL right now. I own 2 condos on the water and the values have doubled in the last year. Does anyone think there is a bubble in the SW FL market? It seems like its never going to end.

There is no bubble in SW Florida. 100% appreciation over 12 months is perfectly normal.