The Bottom Of The Real Estate Cycle Has Finally Arrived.

Finally...the signs of a Real Estate cyclical bottom have arrived. In December of 2007 Home Builder stocks across the board hit 52 week lows. In January of 2008, about a dozen Home Builders saw their stock increase as much as 100% off their December lows. This is one of the first signs that the tide is turning. Stock Investors feel the worst has already been factored into Real Estate stocks. This psychology leaves investors seeking very attractive entry points in home builder stocks which in turn drives up stock prices.

The Federal Reserve Board, led by Fed. Chairman Ben Bernanke helped stimulate the economy by lowering the Federal Fund Rate and the Discount Rate by a total of 125 basis points in less than 2 weeks. This bodes extremely well for real estate recovery. Homeowners on the cusp of foreclosure may now refinance at lower rates which may reduce the number of inventory homes on the market. High home inventories put downward pressure on home values, so anything that reduces inventory is a good thing. There is also a move by congress to increase the conforming loan limit of $417,000 to $625,000. This will move home buyers out of higher interest Jumbo loan rates into lower interest conforming loan rates. Again, great for a housing recovery.

A cyclical bottom doesn't mean that home prices will not drift lower in some areas, but what it does mean is that the bias is to the plateauing of the market which will soon be followed by a trend to the upside. I believe the second quarter of 2009 will be the beginning of a 5% - 7% upward move in home prices. There is still a substantial number of inventory homes to work through and foreclosures yet to come, but the worst is behind us.

To paraphrase Warren Buffet, "Be fearful when people are greedy and be greedy when people are fearful." In other words, the best time to invest is when prices have been driven down by mass fear. When people are no longer fearful of continued price depreciation, values will begin to rebound. By investing during the lows of the market, you stand to profit greatly from the rebound. This is how REAL wealth is achieved. Wealthy individuals tend to do the opposite of whatever the masses are doing. I have personally benefited from this contrarian point of you, and I frequently tell friends and associates to adopt this way of thinking.