From the latest issue of business week magazine, Robert Shiller has these several points:

1) Housing price is going through a peaking process, … will have 10% to 30# decline over the next five years.

2) Developers are disguising the price decline by throwing in SUV or granite countertops to hide the actual price drop.

3) He could not find correlation between interest rate and housing boom. High interest rate in the late 70s did not prevent a housing boom.

4) Still strength in the market: NAHB is reporting a higher traffic for prospective buyers. Short term revival is possible because human psychology may make it a self-fulfilling prophesy.

Thinking about how to maximize leverage and reduce risk, I think Lease-Option would be a better strategy than buying in traditional way:

1) Find pre-foreclosure owners to negotiate a Option price that would make them happy when the option is exercised 2 years later. But this price is still about 20-30% below current market. In other word, high enough to get the owner out of default, low enough so that you may get a profit later.

Did you read the story of Mr. Rock in Salt Lake City, Utah? That is a LPSG area similar to Memphis. Yet, he managed to build 8 figure wealth in that city. The truism is that you can make money anywhere as long as you have the determination. In LPSG area, a 3-4% growth rate may be enough to make money for you if you start to accumulate lots of rental houses. You do have advantages that people in High price High growth area can’t afford to have: chance of breaking even on your rental properties. LPSG area is not low on rental income, that is a huge advantage to have.

I’ve been to Dallas many times, for company businesses.
Housing is definitely cheaper than east coast, and even looks like nothing if compared to west coast. Using east coast’s money, I can buy 3 houses for the price of 1. If I use west coast’s money, I can buy 5 houses with the price of 1. It’s that economic. It’s pretty easy to live in Dallas, lots of strip malls, big mall and smaller malls. There are at least 3-4 Chinese super markets in places like Richardson. They are as big as Safeway. As Asian, I think life is pretty convenient although not as Asian centric as in Fremont, CA. Salary is not bad, about 85-90% of Bay area’s level. For IT workers, they pay as high as either coast. Dallas is a great place to save money. The environment is newer than most east coast regions, even newer than California. Places like Plano/Richardson gives you typical newer American suburban life.

Good established districts tend to hold its value. They will drop one day when the total market collapses, but they will remain the LAST area to drop. Less than good districts tend to drop early and rise late. However, here is the detail: when you want to invest for optimal growth, you may want to invest in less than best areas because they tend to yield the highest return during a boom cycle. The rise delta tends to be wider for secondary areas around the best areas. If you identify an “up-and-coming” area a few miles away from the best area, your investment return tends to be higher.