Real Estate Fall Out

June 26th,2006

Hello,

Ok since you keep asking me about real estate;

Investor look to put capital to work to generate the maximum return weather it is real-estate, equities or anything else. Different economic situations create different sets of opportunities. Low interest rates and a declining stock market made real estate very appealing ,but The longest period of interest rate increases in a quarter of a century has begun to significantly impact the real estate market. Many people in real estate are trapped with huge mortgages and creeping property taxes or second homes that they find them selves over extended with. Many want to down size because taxes and interest rates make there current home no longer affordable. Many people need to de-leverage, or down size or create more income (you can either cut expenses or increase revenue). What ever your particular situation demands now is time to reexamine your portfolio and rebalance the mix of assets and debt.

Investing in Real Estate was propelled by three basic trends:

1) Demographics (certain age groups follow certain lifestyle changes).

2) Interest rates were and are historically low (the cost of funds).

3) The failure of alternate investments to maintain market returns ie…stocks, bonds and commodities (Different economic environments create advantages for different asset classes)

Don’t generalize on the real estate market; it is very local creating different situations for different investors. So look at your specific situation in your area. Raising ARM's and property taxes will put a lot of people under financial pressure. This creates lots of opportunity for those that have the cash. Generally it is thought that as real estate gets weaker then the stock market will improve. However raising interest rates often push stock prices down. I think the last few years have been very unusual for real estate due to the extra low level of interest rates and super positive demographics. With raising interest rates this process has begun to unwind it self.

James

www.jamesfoytlin.com