There has not been a time in recent years when there is so much opporunity in real estate investing . The prices for properties are at lows we have not seen for more than a decade. In the next 3 to 5 years we can anticipate a great return will be made on both residential and commercial property that is acquired during the next few years
Weathering recessions and even depressions, real estate has rebounded and each time the values of properties continued to reach new highs. This does not mean that we adopt a “bubble” approach to our investing strategy. What we need to do is stay on track with our attention on the underlying demand for housing.
At the present time, construction permits are way down simply because of the available housing inventory. However, during the past year, the housing inventory has been tightening and in some areas of the country, construction developers are now again buying land at low prices in anticipation of a rebounding market. Even rehab hard money is on the upswing as investors acquire REO properties, freshen up them and sell them for profit or rent them out for long term appreciation and rental income . This is not tough to understand because, when we consider the fact that the available housing inventory now stands at about 11 months meaning that it would be altogether low within that timeframe if there were no new construction. Once the housing inventory reaches approximate 6 to 7 months, the market has changed from a buyers market to a sellers market. Once the housing inventory is less than 6 months, it is considered a very tight market and the pricing of homes starts to increase dramatically.
What fuels the demand for housing ? Let’s consider the fundamental principle. New homebuyers first come to mind, because the new homebuyer will be people who are starting a family and prefer not to live in apartments. Therefore, we anticipate strong response from first time homebuyers in the next 12 months while prices remain low. Next, immigrants are getting housing at unprecedented rates and foreign investors have begun buying up housing, including bulk REO purchases in some of the most prestigous areas of the country .
For the real estate investor, more new lending opportunities and programs will develop as the market conditions rebound. Banks who have avoided investors will come back into the mix and again extend programs for investors to finance and refinance property. Until then, the investors are using primarily private hard money lenders to help them acquire property. So, once the market has strengthened sufficiently , the investor will be able to utilize hard money to acquire property and again use traditional bank financing to refinance cash out and to facilitate long term strategies of acquiring property for short term holds, from strategies including short sales, and to realize long term appreciation, tax advantages including depreciation, and a more versatile investing strategy. All of this is good for the economy because it stimulates the demand for housing including new construction and the unveiling of jobs in the construction, finance, and related industries. Housing is the keystone of the economy and for a full recuperation to occur, the banks and financial institutions will have to get squarely behind financing housing and devising loans for homebuyers who are starting out or trading up .
