The surprising thing to me is that people have such short memories.  God gave us a brain and the ability to remember, so why not use it?  The real estate market in the US (or at least most of the US) was stagnant from the mid 80’s to the late 90’s with typical appreciation of 3-5% annually, maybe less.  It was common knowledge that to  break even you had to stay in your house for at least 5 years after buying it, otherwise you’d take a bath.

When the stock market went kaput in the year 2000 and the tech stocks plummeted in the year 2000, everyone dumped what little money they had left into real estate, thus dramatically increasing demand for real estate and coupled with low interest rates, created unprecedented ability to buy.  Naturally, prices started to rise and just like every other bubble,  everybody jumped on the bandwagon because nobody wanted to miss out on quick and easy money.

So, from the year 2000 through 2005 prices escalated very quickly (in real estate terms) and certain demand markets like California, Florida, Nevada and Arizona of course, went through the roof.

In 2005 fear started creeping into buyers since everybody already knew prices were too high (in the year 2005 mind you) and in 2006 demand started to slow down and the rest is history.

The point is prices were already way too high in 2005.  To read now, in 2008, how ‘tragic’ it is for housing prices to fall to levels that were already unsustainably high in 2005, doesn’t strike me as a tragedy.

I remember reading in the Fort Lauderdale Sun-Sentinel (in 2005) that the median wage of income earners in Broward County was approximately $46,000 a year and the median house price (in 2005) was approximately $325,000.  Now I ask you… how is somebody making $46,000 a year going to buy a $325,000 house?  They aren’t.

I can deeply and sincerely sympathize with people who bought their house at high prices and now their house is worth less than their mortgage.  It’s a terrible position to be in.  However, the same thing happened in the early 80’s when housing prices suddenly took off (although not nearly to the extent they did in the early 2000’s) and also at that time interest rates rose dramatically and people were scrambling to lock in their mortgages at 12%, 15% and even 17%.   But the point is that many, many people ended up owning a house where the mortgage was way more than the house was worth.  The suggestion of such a thing now-a-days is met with a look of horror and shock as if you were telling them a lie. They seem to think this is the first time it’s happened.

Nobody remembers.

But the answer is ALWAYS the same.  When you buy a property, buy it only if you can afford to hold on for the long term.  In the end, property is just about the surest way to build long term wealth.  It hasn’t changed.  Historically, it’s always been a long-term asset.

Are you worried about how horrible the crisis is in California, Arizona, Florida and Nevada?  Well, listen up…

One time I was on a plane and sat next to a realtor from Laguna Beach.  We were talking about prices in Orange County and she said that for the last 100 years  Orange County real estate has gone up, then dropped somewhat, then gone up again, then dropped, etc… The drop in price after the rise was NEVER as low as the previous low.  She then mentioned that people will ALWAYS want to live in Southern California.  Nice weather, beautiful scenery, healthy economy etc. etc…  Guess what?  She was right.  I would like to expand her comments to Arizona, Florida and Las Vegas too.  People will always want to live there.  Right now times are tough, but hang on to your house and someday, when you least expect it, the market will take off again, demand will increase and there will be a short supply.

1.  Always fill up in the morning.  Always.  Everyone can do this.  The reason is that gas expands with heat and you will actually get less gas for the same cost if you pump in the afternoon.   The gas in the underground tank heats up during the sunlight hours and cools down at night.
2. Pump your gas at a moderately slow level.  This reduces the amount of gas that gets returned to the underground tank in the form of vapor.  The faster you pump, the more gas gets returned as vapor.    
3. This may seem silly, but get gas as often as possible.  Since gas goes up almost daily, you will be ‘dollar cost averaging’ your purchases at the pump.  Lets compare getting gas whenever your tank is only a quarter empty with waiting until your tank is completely empty.  If your tank holds 12 gallons and you wait till its a quarter empty, you get three gallons.

Here are our assumptions: Tank size = 12 gallons.  Gas goes up $.05 every day.   Both drivers originally fill up when gas is $4.00 , but driver #1 refills at 3/4 of a tank and driver #2 fills up when completely empty.  

• Driver 1  buys 12 gallons on Day 1 - $4.00/gal x 12 gallons = $48.00
• Driver 1 buys 3 gallons on day 3 - $4.15/gal x 3 gallons = $12.45
• Driver 1 buys 3 gallons on day 5 - $4.30/gal x 3 gallons = $12.90
• Driver 1 buys 3 gallons on day 7 - $4.45 /gal x 3 gallons = $13.35
• Driver 1 buys 3 gallons on day 9 - $4.60/gal x 3 gallons = $13.80 
• So, Driver 1 has paid a total of $100.05  

• Driver 2 fills up on day 1 - $4.00/gal x 12 gallons = $48.00
• Driver 2 fills up on day 9 - $4.60/gal x 12 gallons = $55.20  
• Driver 2 has paid a total of $103.20  Just because driver 2 waited, he has had to pay $3.15 more than did driver 1.

This strategy may seem silly to you, but if you do this all the time, you will save a lot over the long run.  Combine this with only getting gas in the morning, and you save far more than you realize. Now, I know what you’re thinking.  ”Gas isn’t going up 5 cents every day, etc…”  It doesn’t matter.  The only way this strategy will hurt you is if prices are falling.  So, when prices start to fall (HA HA HA) you can then wait to fill up when your tank is empty.     

How do the rich make money?  This is how:

Buy when every body is selling and sell when everybody is buying. 

‘So’, you say.  ‘Tell me something I didn’t know!’ 

Yes, I admit it. Everybody knows this.  It’s intuitive, even if you never, ever heard anyone say ‘Buy Low, Sell High’.  That sort of advice is common sense. 

Still, if everybody knows it, and it sounds so easy, why doesn’t everyone act on this advice and become rich?

First of all, is it true?  Yes.  It is.  It is the basis for almost all wealth generation.  It applies to stocks, real estate, gold, jewelry, inventory, supplies, food, foreign currency, commodities: just about everything.

So, why don’t we do it?

Let’s take a look at today’s world right now in the United States.  Today, when I turn on the television, or read a magazine or newspaper, I read or watch stories on how absolutely terrible the real estate market is.  I hear everywhere about foreclosures, people being thrown out of their houses, real estate values plummeting,  banks writing off billions of dollars of dubious loans, recession, unemployment and general catastrophe all around me.  It sounds absolutely terrible and totally intimidating.  I think to myself ‘Wow, Now is a terrible time to buy because nobody wants real estate…’ Right? 

Wrong!!

 First of all, the media has always made every news story as horrific and fearful as possible without coming right out and lying about it.  If there is a hurricane, and you watch the news, you will think the world is coming to an end.  But guess what?  The hurricane passes, the trees that were blown over get cleaned up and in a few days, life is back to normal.  It wasn’t the end of the world.  So, if you are wise, you will temper everything the media says with the knowledge that they are trying to sell their product, which is fear.  Why?  Because the media’s product is fear, and fear sells.  My advice is to ignore them.  Listen to the news if you must, but only pay attention to the facts.

Secondly, it is human nature and good sense to take precautions.  If a storm is coming, you go inside and seek shelter.  If it’s cold outside you put on a jacket.  The way the media presents the horrific news to us, it is common sense to stop buying real estate until ‘the worst real estate situation since the great depression’ is over.  But, there you would be wrong.  Economically speaking, now is exactly the time when you want to buy real estate.  What you have to ask yourself are the following questions:

Will people ever again need or want a house?

How has real estate been as an investment over the last 100 years?

Is everybody selling now?

Are prices falling?

Let’s answer these questions.  Will people ever again need or want a house?  Yes.  Without a doubt.  People will always want and need a place to live and call home.  (This applies to unimproved land as well).  What are people going to do instead, live in caves?  I don’t think so.

Has real estate been a good investment over the last 100 years?  Yes.  If you were to chart the values of homes/land you would find in most markets that the price goes up, drops somewhat, then goes up again, then drops again, then goes up, then drops etc…  The interesting thing to note is that the drop is almost never as much as the previous low.

Is everybody selling now?  Yes.  Why is everybody selling?  They’re scared and have gotten themselves in a bad economic position.  You can’t blame them.  However, if every body is selling and nobody is buying then that means there is high supply and low demand.  That means the price will fall until demand picks up and there is an equilibrium.  Now is the time to buy since the prices are falling.

Are prices falling?  Yes.  Economically speaking, they have to fall since there is an oversupply and under-demand. 

What is the rule we talked about earlier?  Buy when everybody is selling and sell when everybody is buying.  If you do that consistently, you might just end up rich.

1. Washington Mutual - WAMU (As they like to call themselves) have a debit card called the WAMU Gold debit card that pays back $.03 each time you use it up to a total annual amount of $250.  www.wamu.com
2. CME Federal Credit Union in Columbus, OH has a cash back debit card that pays .25% back on all purchases that don’t require a pin number (you sign as if it were a credit card).  www.cmefcu.org
3. Umpqua Bank in the Willamette Valley of Oregon has their debit card enrolled in a program called Rainbow Rewards out of Denver that pays a variable percentage back, but only from participating stores, restaurants, etc…  From what I was reading, though, some of the percentages are quite high… up to 25% back.  www.umpquabank.com
4. PayPal has a debit card that you can link to one of your regular bank accounts, and as long as you use it like a credit card (i.e. you sign instead of using the pin),  you get 1% cash back on your purchases.  I think its a pretty good plan, but it doesn’t sound all that great for things like ATM withdrawls.  www.paypal.com
5. U.S. Bank - These guys have a debit card called the ‘Cash Bonus Visa Check Card’ which pays up to 25% back on purchases at 150 participating vendors.  I looked at the participating vendor list and it seems to have just about all the big name vendors, iTunes, Ace Hardware, American Eagle, Barnes & Noble, Best Buy, The Home Depot, etc…  Only transactions not using a pin number qualify.  I checked on their free checking accounts and they really do, indeed, appear to be free. www.usbank.com 

As always, do your homework before signing up with anything and make sure you know any and all fees associated with it.