What’s good about the burst residential bubble?

I’ve had readers recently tell me that they now understand that the residential single family market has taken a direct and painful hit. They are, of course, correct. This morning the USA Today front page Money section had as its headline “Home prices likely to fall more, A serious correction taking place, Dallas Fed official says.” The AP mirrored the sentiment with their syndicated article “Existing home prices finally fall”. So what we know is that maybe right now is not the right time to invest in single family detached housing. However, take heart in the knowledge in the fact that the same issues which hamper the house market segment support and build opportunities in numerous others. Remember there are always two sides to every coin.

With the struggle of single family home investments comes with it opportunities in the multi-family market. In addition, as the shake out continues, fear of even lower prices (and buyer savings) will keep many qualified buyers out of homes and in apartments, condos and town homes. THis is an ideal time for conversion opportunities to accelerate. In addition, since all figures point to a lag in absorption of existing homes of 8 to 12 months, you will want to be on guard to acquire appropriate properties for the proverbial fix and flip early next year. This should give you time to do the rehab and get the properties back on the market in the spring in time for the summer resurgence.

The lack of consumer confidence will also prolong stays in traditional apartments. This means that you would be wise to increase lease rates early in the year to maximize revenue next year. This could well carry your rental properties through the year and into next winter. Since people don’t like to move in the winter, this management move may well provide a two-year sustained benefit.

You should also start to look for raw developable land early next year. Be prepared to hold it for up to two years to allow a full turn of the market, but by purchasing at the bottom of the market and selling on the upswing of the bell curve you should easily get double-digit appreciation in the land and then enjoy the development profits on the increased values.

Yes the “home” market is problematic. Just don’t forget that this is only one small niche in the huge real estate market. Profit potentials are out there in great numbers. By understanding the market and buying the right types of properties at the right time, you will continue to do very well in your pesonal wealth development.