If you’ve opened a newspaper or turned on a television in the last year, you know that the housing market is in serious trouble. A week ago, it was announced that home prices had fallen by 15.3%, year-over-year. This marked the first time in history that all 20 metropolitan markets measured by the government posted annual declines. Not surprisingly, mortgage applications are at a 6.5-year low.

What came first, the chicken or the egg? The housing bust or the general economic slump? It’s hard to say, but there’s no doubt the two are related. On the heals of that negative housing data, it was announced that the Consumer Confidence Index had fallen to a 16-year low. A few days later, it was at a 28-year low. The dollar is very weak against foreign currencies and gold (and oil!), and the stock market is in a tailspin despite the Federal Reserve’s “weak dollar” polices intended to boost it.

Now for the counterintuitive economist’s view: It’s a great time to invest in real estate.

Why? Well for one, it’s unquestionably a buyer’s market. This means that there’s a large variety of homes for sale in every price range, from fixer-uppers to luxury homes, and many sellers are desperate. These people need to sell because of a divorce, death in the family, job transfer, or financial hardship. They must sell their homes before financial ruin sets in and the bank comes knocking. This is where capitalists capitalize.

Taking advantage of this situation doesn’t make you a bad guy. Quite the opposite: People willing to help desperate sellers are angels, not demons. Meet a hardship-case seller at a mutually agreed-upon price and you might be saving them from any number of degradations. This is yet another case where working in one’s own rational self-interests is not only the personally profitable thing to do, it’s the humane and societally beneficial thing to do, too.

But I haven’t even gotten to the best part: Desperate sellers are more likely to work with you directly, cutting out the middle-man banker and his burdensome regulations.

The best form of “seller financing” is when you simply take over the loan. For example, your seller owes $100k on a $160k mortgage with payments of $650 a month. You step in and assume the payments, and when it’s all said and done, the house is yours. Typically, you’ll get the title in your name, and the seller will be happy to get out of Dodge. And while this may violate an aspect of the seller’s mortgage contract, it is not against the law (an important distinction), and the bank can choose to enforce the clause or not — and there’s no reason for them to do so as long as you make your payments on time. Trust me, in this market, that’s all the bank will care about.

But what if the economy doesn’t rebound right away? All the better! In fact, I’m planning on that. As the Federal Reserve tries to inflate our way out of this recession-soon-to-be-depression, the value of the dollar will continue to plummet. Dollar-based financial assets will sink in real value, but real estate will increase in nominal value (due to inflation) and stay relatively stable in terms of real value. Given this scenario, let’s say the value of the dollar is cut in half. That would mean that the $100k you owe on a mortgage would become more like $50k. If the dollar loses 90% of its value, then that $100k is more like $10k. You get the idea.

When the dollar goes to zero, as I predict it will, the one thing you do not want to be holding is paper assets. Hard assets – precious metals and real estate – are where you want to be. So if you’re able to get a good, seller-financed deal on an investment property with a fixed-rate mortgage, take it.

Related posts:

1. The Household Initiative Plan to Rescue Real Estate
2. Commercial Real Estate: Recovery Signs?
3. Another $1B for Commercial Real Estate
4. The Coming Real Estate Recovery — By The Numbers
5. Dispatches from the Front Lines of the Real Estate Wars – Part 2