When Will the Bubble Burst?

As an auctioneer, I’m frequently asked, “What’s going on in the economy? When are we going to see a turndown? When is the bubble going to burst?”

We are looking at a real estate market that is on fire. It is obvious what is causing it — the Feds are giving away money. When interest is 3.2 percent and inflation is 4 percent,  you’re making 0.8 percent on your own mortgage. You have to be crazy not to buy real estate with that kind of leverage.

Many of you reading this column remember paying 8 percent to 12 percent on your mortgage. At one time, I was paying 18.5% on my mortgage.

We are seeing inflation, regardless of what the government says. And it is running out of control.

In the past 120 days, gas is up $1 per gallon. This means $35 more per tank of gas in my truck. What does that mean to those paying the bills? Many grocery items are 60 percent to 100 percent more than they were 120 days ago. Currently, 24 percent of tenants are not paying rent. That means the landlord is not paying his mortgage.

I have been through five economic cycles in my career! I have seen this movie before!

To answer the question from the beginning of the column: When the government stops pumping your money out, the merry-go-round stops.

The banks call the notes, the real estate market drops 35 percent and we have another cycle. Of the five cycles I have been through, every one of them was created at 1600 Pennsylvania Avenue. The key is to buy real estate on the bottom and be smart enough to sell at the top. Unfortunately, most owners will wait, thinking they are going to get more next month.

In 2007, we saw a market fall 35 percent in three months.

Two weeks ago in Arizona, we sold a property for 105 percent more than the owner wanted. Auctions sell! You be the judge. It’s your money and your future.

Don’t be a hog. Take your profit and move on.

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