How to handle a Real Estate Collapse

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I was thinking to myself . . . what do I need to do to prepare for any sort of real estate bubble collapse? While it is a simple question, I think the ramifications are huge. It is more then likely that interest rates will be much higher then they are today. All those people with ARMs will be crying to their banks in an attempt to avoid foreclosure. People will stop taking equity out of their homes to finance spending. The economy as a whole will start to falter. Will we get propped up by foreign investors?? Will the chinese take pride in their newfound ownership of American property?

I fear this. What will cause it?? No one really knows. There are certainly positives:

Those of us who remember the premise of a 30 year mortgage – slow and steady, but quite safe, will have no worries. The average American might be able to buy a studio condo in LA/NY again – I’m not going to stretch it and say house or, mind you, a 1 bedroom. The stock market will probably begin to push upwards! With the real estate market in trouble, the stock market will again begin to look like a place for opportunity.

I guess there are many ways things can go, but be warned. Time to start diversifying your portfolio a bit. Look at cash, stocks, bonds. Real estate is a great investment, but should never be your only one.

Just a thought……….

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.