Perils of Being an Optimist — Real estate note buyer

Some people seem to always be sunny optimists.  Up to a point, this is a good thing.  Inventions aren’t invented, businesses aren’t created, and relationships aren’t begun unless someone believes in them and champions them.  Investors need to believe in a company prior to purchasing their stock.  As a real estate note buyer, I have to be optimistic that the property owner is going to make payments on their mortgage note before I buy it.  However, there comes a time when always looking at the world with a glass-half-full optimism causes poor decision making.

Falling Housing Market
Besides writing this blog for my own website, I’m also a featured author on a well-known real estate investing site because of my experience as a real estate note buyer.  An article that I wrote last week for that website included my predictions of where the real estate market and economy will be in 2016 – and it was not positive. 

While I like it when others challenge my ideas and opinions, they can only change my mind if they have facts.  After all, I use lots of data and facts to back up my contention that property values will decline and economic conditions will worsen for the next few years – interest rates about as low as they can go, high unemployment and higher underemployment, the failure of government housing programs, large debts owed by government and households, etc. 

However, some responses to that article, as with comments from other blogs and conservations, were related to those individual’s gut feelings or were based on unrelated topics.  Some people feel that property values have gone down so much that they could not decrease any further.  In some markets, it may be true that prices have hit bottom, but others (e.g. coastal California and several areas in the Sunbelt) have a ways to go.  Since 2007, there have been 8.9 million homes lost to foreclosure and millions more are in the foreclosure pipeline.  At this point in time, I see nothing that would suggest anything other than a continued price decline in most of the country’s markets.

Euro-Zoned Out
Another clear example of a needed reality check is the debt crisis in Europe and, to a lesser extent, in the U.S.  Worldwide stock markets have been extra volatile over the past few weeks as investors try to figure out whether the European Central Bank and affected countries like Greece, Italy, Ireland, Portugal, and Spain can solve their problems in the near term.  They can’t!  Piling on more debt to countries already drowning in debt only makes the problem worse, especially since revenues are down due to the recession.  Trading in short-term debt for longer term debt mainly benefits politicians who expect to be gone when the you-know-what hits the fan.  Money to solve their debt issues won’t magically sprinkle down from the heavens, from China, or from anywhere else, so serious pain is going to continue to be inflicted on the population.

We can be happy and optimistic about our own lives, our families and friends, and all of the good things that have happened to us.  We also know that despite the major economic issues affecting the U.S. and Europe, the world is not coming to an end.  But don’t for a minute believe the sunny BS coming from the bureaucrats.

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