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Letter Re: Is the US Residential Real Estate Market Nearing the Bottom?

Hello Mr. Rawles:
Seeing that houses are pretty much dirt cheap right now, would it be a good decision to buy one? what would happen to our debts (including the mortgage) when/if the Amero comes? would they disappear like they claim the American debt will? I hear radio advertisements about the IRS giving you up to [a] $7,500 [interest-free loan] on your 2008 taxes if you buy a house in 2008. So, again, would it be a good idea? would the Dollar amount be converted into Ameros?

Thanks in advance for your response. As always, congratulations on and thank you for your blog, simply the best. - Luis S.

JWR Replies: The $7,500 incentive offered by the IRS must be paid back over the next 15 years. It is an interest-free loan, not a tax credit. People who claim this "credit" must pay it back at $500 per year for the next 15 years.

In my estimation, suburban houses have another 25% to fall nationwide, and another 40% to fall in the over-bought markets. I recommend that you wait for at least two years, until the market is closer to the bottom. And FWIW, according to The Chartist Gnome, the absolute bottom may not be until around 2016. There will be plenty of pain and angst ahead!

The widely-rumored advent of the Amero is far from a sure thing. I recommend diversifying out of dollar-denominated assets and into practical tangibles. At present, my favorites are alloy, steel, and polymer, and hold lots of cartridges. With well-chosen tangibles, you will shelter yourself from the worst effects of any currency swap or formalized devaluation. Yes, land is a tangible too, but the only real estate that I would consider buying these days is productive farm or ranch land. This should be land that could double as a survival retreat, and that is located in a region that was not part of the Big Bubble.

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