If you are on the wrong side of events, it may be very difficult to see the silver lining in a dark cloud. The most recent economic downturn has been very difficult for some home owners who are living beyond their means and the likely end result has been their losing their house. This failure in the system as a result of easy money and lax lending standards has created a real estate contagion and the cycle – at the moment – is self propagating. As more home owners lose their property, that property goes to the market at lowered prices, which in turn pushes the whole market lower, which then puts more home owners in danger of losing their homes because of loss of home equity lines or other factors.

This unfortunate cycle is not unlike a forest fire. Without going into all the complex dynamics of a wild fire (which is a fascinating subject) – sometimes the best option is to let the fire burn itself out. The fire consumes all combustibles, eventually runs out of fuel and dies. The housing market now has a backlog in houses for sale not seen in several decades (well, maybe since the early 90’s, but I think it is even worse now). This inventory needs to be burned off and until that backlog is gone, the market prices will continue to fall. As a home owner, it is an unenviable position to be in watching a wild fire fast approaching your home and this real estate plague is no different – there may be nothing that can be done without burning until the fire dies for lack of fuel.

Silver lining? Oh, right – back to that. Using the forest as an example again – fires are a natural part of life in the woods. The natural burning as a result of lightning helps to clear the undergrowth and allows for new fertile ground to be available for oak trees overwhelmed by weeds and minor foliage. If you watch CNBC and hear Larry Kudlow talk about the present situation, he clearly defines the housing market in this manner: The housing market is now more affordable. That is an interesting way of looking at the markets – not just a crash in prices, but more affordability for those willing to invest now. The glass is half-full. And to extend the argument even further, not only are the market prices more affordable – foreclosed properties are absolutely bargain basement deals.

So, an average newly wed couple can better afford a home now than they would have been able to five years ago – for them this is an opportunity. For the active investor, or even the aggressive prospective new home owner, foreclosure sales are an opportunity plus situation. Buy when there is blood in the streets – and I think we have seen some blood in the streets. And if it was easy, then everyone would be doing it – right? The infomercials running late at night that highlight the ease with which anyone can go out and find and purchase foreclosed properties are generally hubris. Intelligent decisions are based on accurate, reliable, timely and actionable information. In the sea of gurus selling programs, a potential investor needs to think for oneself – but with appropriate intelligence to find foreclosed properties that can be acted on.

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