Why Now is the Worst Time to Own Real Estate

I recently challenged all subscribers to carefully reconsider their position on real estate, keeping in mind the global economic state as we approach the planned World War 3.  While primarily intended for US residents, the principles apply to home owners in any Western nation.  The reason?  When the US economy collapses, all other economies will follow.

Thank you to the almost 40 respondents who took me up on the challenge by sending details of recent, or imminent sales of real estate - you have restored my faith in humanity!  Here are 40 individuals (out of 11,000!) who have seen the writing on the wall and have actually DONE something about it.  This is one bet I'm delighted to lose!

This article elaborates on the reasons for selling your property as quickly as possible, for those who may still be undecided, or are completely unaware of the risks in holding onto property in a falling market.

Let me start by saying I am not an investment advisor, nor a property broker, nor a legal expert.  I don't live in the US, so I am not fully conversant with the ins and outs of property ownership and disposal in the US.  Obviously you need to seek your own professional advice before taking any action.  There is a lot of reading here, but this is not all the information available.  I would encourage you to use this as a starting point for your own research.  This is a serious matter.

I also realize that selling your home is an emotional decision.  It is not an easy decision, and will require much thought, research and perhaps negotiation with a significant other in your life.

This series of answers in response to questions raised provides my reasoning for disposing of real estate, as well as links for further reading.  You should also be aware that this is NOT an unbiased article: I am unashamedly trying desperately to convince you to do whatever it takes to achieve liquidity.  The links presented do not present a balanced view.  There are many websites who are still recommending investment in real estate.  Just remember that their motivation for promoting investment is commission whenever a property is sold.  Their advice is also NOT unbiased.

Question:  Why should I sell my home if the mortgage is fully paid off?  I live completely debt free and selling my property will mean I have to rent another.  How is that a better financial position than owning my home?

Answer:  This is by far the most frequently asked question in response to the issue of home ownership.  It is an excellent question, but the answer may surprise you.  I'm not going to make any friends saying this, but someone has to say it:

As a debt-free home owner, you stand to lose the MOST when the wheels start falling off.  Others who have high mortgages will lose their homes through repossession, but at least they will not have invested much.  The best way you could reward your economic discipline is to cash in and enjoy the results of your self control before your home is taken away from you.

Why could your home be taken away?

Reason 1: Even though you may have fully paid for your home, you do not enjoy full ownership, and it may be taken from you at any moment.  This was proved in a US Supreme Court ruling in June 2005.  In non-legal terms, the City of New London, Connecticut won a case which permitted them to forcibly remove land from an owner, Susette Kelo, so that a city development could continue.  The process is called 'eminent domain' and the ruling set a precedent for other home owners.  In essence, the decision allows city governments to take land from one private owner and give it to another if the government will generate greater tax revenue or other economic benefits when the land is developed by the new owner.  The case was a complex one, and we will not analyze the specifics here, but encourage you to do so using the links below:

Supreme Court Opinion: Kelo vs. New London

Statement of Ralph Nader on Supreme Court Eminent Domain Ruling

In a bizarre turning of the tables, the Eminent Domain Clause is now being used against one of the judges who voted against Kelo.  See freestarmedia.

California Eminent Domain Handbook

Strengthening the Ownership of Private Property Act of 2005

Eminent Domain & the New Orleans Land Grab

Reason 2:   If your government doesn't take your property, an act of God could.  Just ask the people of New Orleans.  Insurance companies don't pay out in the case of an act of God.

Reason 3:  Flexibility and a wider range of options.  Only you will be able to decide for yourself how real the threat of Martial Law is, and the question you need to answer is whether you would rather have a roof over your head while bullets are flying around outside, or the freedom to simply walk away with cash (or rather gold) in hand to choose a safer area to live in.  That decision needs to be made now.  You cannot make a rational decision after Martial Law is declared, or after the bottom drops out of the market.  What would have happened to Noah and his entourage if he had waited for raindrops to start falling before commencing building of his ark?

Reason 4:  Past performance of the investment value of your property is no guarantee of future performance.  This should be obvious, but the reason is more sinister than most are aware of.

The Federal Reserve Banking System is a privately owned international banking cartel of wealth beyond comparison, which collects billions of dollars in interest annually and distributes the profits to its shareholders.  The Fed manipulates inflationary and deflationary cycles to their (business) advantage.  Depressions are used to confiscate possessions from those who cannot maintain payments.  These same items are then resold during inflationary cycles. 

In short, modern money, and specifically credit, is a game, and you are trying to partake without knowing the rules, or even who the real opposition is.  You cannot win when odds are so severely stacked against you, unless luck plays a hand.  Luck has favored millions of home owners to date, but it's time to cash in your chips.

Alan Greenspan's resignation is, to me, an indication that he does not want his reputation tarnished now that the next deflationary cycle is planned.  He knows what's coming and wants no part of it.  Neither should you.

The Fed is Privately Owned

The Fed's Origins, History & Current Strategy

The Greatest Theft in the World

A History of the Federal Reserve by Allan H Meltzer

The Manipulation of US Debt

Strategic Wealth: How the Money System Works

Note that some modules are missing from the link above.  You will have to use these links:

Module 8

Module 9

Section II

Section III

Section IV

Section V

Question:  What if I sell my home and nothing happens economically or militarily?  I will have no home and will have used my capital to pay rent.

Answer:  What if you retain ownership of your $400,000 home and then cannot even sell it for $20,000 in 12 months time?

Seriously though, I realize there is a risk in selling your home.  I personally believe the risk is higher in NOT selling, but only you know your own circumstances.  Only you can make that decision.  I have done my duty by at least getting you to think about this.

Question:  If I sell, what should I do with the funds?

Answer:  Again, only you know what your personal circumstances are, so you will understand why I don't offer too much specific advice.  The whole purpose of the exercise is to get your hands on the value of your real estate.  So whatever you do, don't leave it all in your bank account.  If it were me, this is how I would invest the excess cash:

• Keep 20% in cash in hand, preferably spread across a number of currencies. (Can be stored in a vault, but preferably not with a bank - you may not have access to it when martial law is declared).
• Use 20% to purchase non-numismatic (i.e. no collectors value - just the value of the metal) gold and/or silver coins (not shares).  Be aware that gold ownership may soon be declared illegal.  The solution is naturally not to let anyone know about your gold horde.
• Take another 20% and purchase food and other supplies that you will need to survive for a period of 6 months or more.
• With the remainder, rent a home in a rural community at least 100 miles from a major city, ideally with a large basement or underground shelter.

Remember that we're entering a very different phase of economic history and the old investment rules simply no longer apply.  Today's circumstances call for creative thinking.

May all your decisions be wise and calculated.