“But there are two problems.
“First, it’s hard to find good deals. A friend of mine just got a 20-unit property down in Pompano Beach. It looked good on paper. But he’s getting eaten up in maintenance and repairs.
“There are a lot of deals coming through…but not many good ones. And there are a lot of people looking for good deals. You’ll hear about the good deals – because people talk about them. But you won’t be able to get one, because too many people are competing for them.
“The second problem goes back to that trend-line. Real estate went way over fair value in the last decade. Now, it’s back to fair value. You know, normally, real estate just tracks inflation, nothing more. Yeah, you get a little extra by being in the right place – like South Florida. But, overall, it just keeps up with inflation.
“But there’s no law that says that real estate has to stick to its trend-line. Or more specifically, that it just goes back to the trend-line and stops there. If it can go way over trend, it can also go way under trend. And that’s what I think we’re going to see.
“The guys who are buying real estate now, they’re going to be a little shocked and disappointed when the see that prices just keep going down.
“I know this is one of your themes too. Prices in Japan didn’t go back to trend. They went down and just kept going down. They ended up 80% below the peak. And they actually bent the trend-line down. Maybe it will go back to the trend. But I don’t think so. The population of Japan is going down. And they don’t get married. And they don’t have children. So they don’t need starter houses…or family houses…or any kind of houses. Just apartments for old people. That’s not a way to get higher real estate prices.
“The US is not in that position. Not exactly. But a lot of the demand at the starter house level was coming from Hispanic immigrants. And the numbers show that the Hispanics aren’t coming the way they used to. In fact, they’re now going the other way…they’re going home.
“Not only that, but we’re seeing more grown children move back in with parents…and more parents moving in with children. This will mean less demand for separate housing units.
“So, we’ll probably first have some over-shoot to the low side of the long-term trend-line, which will take prices down another 20% to 40%. And then, we might have a permanent bend in the trend-line, as the number of new households actually begins to go down.
“You think the middle class is having trouble now…just wait until their main asset is down 80%.
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