As I write this (mid 2009) home prices appear to be falling still and, of course, recent experience shows us that they do not always rise from year to year. But not even the most pessimistic analysts think they can keep dropping for too many years. So were are real estate values headed this year and next?
That is a difficult question. For those who paid attention during the “bubble years” it was easy to see that a fall was coming. In fact, in a book I wrote in 2006, I mentioned, “By the time you read this prices of homes are likely going down.” But notice that I said “likely.” It is one thing to see that something is over-valued or that prices are rising at unsustainable rates, but predicting the precise timing of corrections is next to impossible.
That’s true now as well. What we can look at for a clue, though, is the factors that affect the prices. Then, as these change we will be able to see the bottom – and the appreciation that follows – coming.
One of the key factors is the rate of foreclosures. So far it just keeps climbing. And when banks take back those houses, they can’t sit on them. They need to sell quickly due to regulations regarding their capital requirements. That means they sell cheap, which helps drive down prices in general. So watch for the rate of foreclosures to decline before prices can stabilize or rise.
Another factor is the supply of houses out there. I was recently reading that at the height of the housing boom a large proportion of the homes bought were bought as speculative investments and second homes. People are more likely to be selling second homes than buying them now that the economy is worse. In other words, there may be too many homes available still, which holds down prices. New housing starts are down, so if the population grows the excess supply will start to be used up.
Population growth is another important factor. Few people realize how much demand for housing was affected by immigrants, legal or illegal. Many illegal immigrants were able to get home mortgages, which has become harder. Even as renters they created demand for houses, of course. Now, with the worsening economy, many who are here illegally are returning to their home countries, and fewer are trying to come here. That may negatively impact demand for a while. A return to higher levels of immigration may help stabilize real estate values.
Unemployment is another factor. As long as the rate keeps growing it is going to mean fewer people able to buy a home. When you see employment levels rise, there might be more hope for real estate values to rise with them due to increasing demand.
Interest rates are a big factor, and a “wild card” in the whole equation. If they were to go from the current 5% to 9%, for example, tens of millions of people who now qualify for an average mortgage loan would no longer qualify. That would have to have a dampening effect on any real estate recovery. It is not clear how high rates will rise in the near future, but the massive government borrowing going on will have to push them higher.
Keep an eye on the factors outlined here. As they change in the right direction real estate values should start to stabilize, and then – hopefully soon – start to rise again. Meanwhile, look at the current slump as a big sale, with prices up to 40% in places.
Most homeowners are over paying their property taxes. If you can get your property value reassessed you can lower your property taxes. This can be done free. And you can do it yourself, and there are some companies that I profile who provide a service to lower your property taxes for you. Some charge a small fee or a percentage of your savings. Unfortunately your local government does not adjust your property taxes downward when property values decline. So it is up to you to do something about your high property taxes. Another important point is this, The Fed has lowered rates several times now, so the financial and real estate markets will begin to rebound. This might be the only sweet spot in a declining real estate market. After the economy recovers, you may still may be entitled to a lower property tax. Right now is the best time to maximize your tax savings. Three ways you can lower your property tax assessed value. 1. Is to do it yourself. 2. Is to hire a service to do it for you. 3. Buy a book and then do it yourself. If you bought your home in the last 4 years there is a great chance you can lower your property taxes by a couple thousand dollars per year. This window of opportunity is going to close when the real estate market rebounds. Visit videomailrealestate.com Video Rating: 0 / 5
www.TheRealWealthCompany.com What does it really take to get started in commercial real estate investing? The gurus won’t tell you unless you spend 00′s of dollars on real estate investing courses. My partner, Rob Powell and I started The Real Wealth Company to help you understand how to be successful investing in commercial real estate. We want to share the truth about what it takes. We’ve done it ourselves, and had some great real estate mentors and partners along the way. We own over million worth of commercial real estate including apartment buildings, mobile home parks, raw land, strip shopping centers and office buildings. We are young and started from the ground up, in fact, we met at a commercial real estate investing seminar as real estate investor wanna-be’s. Then we were so successful, we started coaching for a nationally known mentoring program. We got frustrated when we saw how many real estate investors wanted to get started but were struggling to have the success they wanted. We felt that a lot of real estate investing gurus put a lot more time and money into marketing their course than giving their prospects (thats you and me!) a real perspective on what it takes to be successful. So, that’s what this video is all about. It’s part 1 of a 5-part series on how to get started in commercial real estate investing. If you watch all five, you’ll know what we’re doing to get deals, and whether that sounds like something you can do, too. After you watch … Video Rating: 5 / 5
At the moment (late 2009), it seems that real estate values may have stopped falling finally. Are they headed back up now, or are we in for a period of stable prices that barely move for years? Or are they going to start dropping again? I suspect we are in a slow recovery, but let’s look at some of the things that determine prices. Watch these factors and you can make your own predictions.
Supply
The state of housing supply, like many other factors, is not the same in all parts of the country. Some areas have enough empty homes to meet demand for a long time to come. In other areas the building boom never came, and so the supply is more in line with demand.
In general there is an over-supply in the country still. Watch as that is eaten up and at some point prices may spike upwards, since it will take some time for builders to realize it is safe to build a few homes as speculations again. If you can’t find the statistics you need easily for your area, you can call the local board of realtors and ask how many homes are sold each month. Then divide that into the number of MLS listing to see if the supply is below six months yet (this is a more normal supply).
The foreclosure rate will also affect the supply going forward. We may still have an increasing rate of foreclosures due to loans that are due to adjust their interest rates. That will put more homes on the market, and because banks need to sell fast they will sell cheap, potentially lowering the prices of all real estate. When foreclosures start declining prices may rebound.
Demand
One of the things that has affected demand for real estate is the first time home buyers tax credit. It has been an ,000 motivation to buy, but it will likely have expired by the time you read this. That means we might see less demand going forward.
Interest rates have also been near historic lows, which always helps demand. If they rise much there will be millions of potential buyers who will qualify for tens of thousands of dollars less on a mortgage loan. That might push demand down, especially for homes that are above average in price.
Immigration, both legal and otherwise, creates demand for housing. During the boom years even illegal immigrants were able to get home loans, and those that rented single family homes contributed to demand for those through the investment purchases of their landlords. Immigration has slowed, and due to the recession many illegal immigrants have even returned to their home countries. If you see immigration levels returning to normal that will be a good sign for real estate values.
Unemployment is still rising as I write this, and that dampens demand, as well as increasing supply due to foreclosures. When total employment in the country starts rising again that will be a good sign for home prices. Watch your local unemployment figures as well, since they may change before the rest of the nation (or afterwards, for that matter).
Inflation
In addition to raw supply and demand issues, there is the matter of inflation. Although it is not yet showing in prices of real estate or even most other goods, that will change. The government is creating money at a historic rate, and as soon as the recession is clearly over and employment starts to rise, we can expect that to push the prices of almost everything up.
Watch the things outlined here to predict real estate values going forward. In the mean time, consider the current slump to be a huge sale for homes and other properties.
From owning rental properties, to fixing up properties in disrepair, to foreclosure investing, real estate is a bright light in the current gloom of the overall economy. Sure, people are out there losing homes and we wouldn’t wish that upon anyone. That said, these situations create opportunities for investors and also a chance to help someone who needs a solution to their problems.
With respect to foreclosure investing, where do most people turn when they seek opportunities? They might take a look at foreclosure listings that come from either realtors or other private sources. They can then use these sources of leads to market to preforeclosures; one of the most common forms of foreclosure investing that includes short sales.
Another option with foreclosure investing is the world of bank owned real estate. When a property is lost via foreclosure it goes back to the bank and then becomes one of the now thousands of bank owned foreclosures (or REO properties) on the market today. Once on the market, you can work with a realtor who specializes in bank owned properties and start making offers almost immediately. Who said that foreclosure investing had to be tough to get into?
The key is to surround yourself with a professional team who can collectively support your efforts in foreclosure investing. With the abundance of preforeclosures and bank owned foreclosures out there, more and more professionals like realtors and attorneys are working with investors who specialize in foreclosure investing. In addition to guidance, these professionals can also provide you with foreclosure listings for your business.
Despite the opportunities that exist with foreclosure investing, I think foreclosure investing also can be risky for the investor because, without the proper foreclosure training, you run the risk of not really knowing what you are doing. Profits can be lost and so too can opportunities that exist with foreclosure investing when you lack the proper foreclosure investing training.
In today’s economy and market, foreclosure investing is as much as part of the real estate business as anything else. Make sure you have the tools you need ready to go for foreclosure investing because the deals are out there. I also suggest that you commit yourself to real estate training, and your pursuit of foreclosure investing will be more productive and more rewarding. I wish you the very best in success in all of your foreclosure investing pursuits and in business as a whole.
D.C. Fawcett learned the real estate business from the ground up and now operates a world class investing business out of the Tampa, FL market. His training programs specialize in showing real estate investors how to achieve success in the real estate foreclosure market and have gained broad appeal around the country. You can learn more about D.C. Fawcett’s training philosophy and his programs by visiting www.dcfawcett.com.
There may be another option to save you and your home from foreclosure. Short sales allow you to avoid foreclosure and salvage your credit. Contact a knowledgeable RE/MAX agent to find out more. Video Rating: 4 / 5
Did you know? RE/MAX has top-producing real estate agents with the tools, training and experience to get the job done. Who do you want helping you buy or sell your home?
Real Estate Agent Training www.yourcoach.com In this short video, Tom Ferry challenges you to ask yourself what type of professional are you? One who brings life to the room or someone who is an energy sucking vampire? In order to be successful at whatever you do, you have to always be working on your likeability factor with people! How do you do that? Two things, among others: 1. Work on being more interested. #2 Become passionate and give back as you connect with people. Video Rating: 4 / 5
Newspapers thrive catchy headlines that can sum up the drama of the day. But it’s important to read with a critical eye, especially when you see a blanket statement at the top of the page like “National Home Sales Plummet.” The headline looks good, and it’s likely to turn heads, but how true is it? It may be true on average in recent years that fewer homes are being sold across the United States, and at lower prices. But many large markets across the nation are doing well, or improving. Unfortunately nothing gets in the way of a good headline like subtlety, and those inconvenient subtleties have forced the media to cast a shadow over some very bright real estate stories.
One of those bright stories is the Kansas City, Missouri real estate market. Home sales here have been espeically strong in recent years, and show no signs of slowing. The area’s strong economy is attracting new residents from across the nation, and home construction has risen to meet the demand for real estate. Kansas City’s central location on the U.S. map also makes it an ideal spot for corporate headquarters, with five Fortune 500 companies, and the privately owned Hallmark Cards, based here. Spread across more than 500 square miles, Kansas City offers a lot of room for expansion, and more than 150 attractive neighborhoods.
Kansas City is more than just an isolated success story – it’s good example of why the national real estate market appears more stalled than it really is. Home prices here didn’t skyrocket during the real estate boom of the early part of the decade, and were unaffected when the markets softened in other parts of the nation. Instead, local home prices have risen steadily through the boom and afterwards, making the area particularly attractive to investors.
While more expensive real estate markets such as Marin County California, and Montgomery County, Maryland, have slowed, many affordable markets, like Kansas City have thrived. The Kansas City example is mirrored on a larger scale in Detroit, Michigan, where home sales have risen nearly ten per cent annually in recent years. Other strong markets after the boom include Madison, Wisconsin, and Phoenix Arizona.
While it’s clear some real estate markets aren’t as strong as they were a few years ago, areas like Kansas City, and Detriot can show us how national average home values could fall while still being as strong as ever in many places. That’s something the newspaper headlines don’t always mention.
Despite a slight softening of rental demand for the Sydney real estate market, yields are still high and demand remains strong. Property investors are beginning to return to the Sydney housing market, lured by high yields and low interest rates.
The current reserve bank of Australia cash rate stands at 3%, a 60 year low. The rapid and dramatic slashing of interest rates earlier this year has been very favourable to property investors. Mortgage repayments have been reduced by up to half for some investors, helping to bump up the total yields on their investment properties. This favourable environment has been luring savvy investors back into the Sydney property market. For the first time in a long time there are opportunities for positively geared property in the Sydney real estate market.
Median Weekly Rents Sydney
Units
Houses
Unit Yields
House Yields
April 08
0
0
5.05%
4.15%
April 09
0
0
5.47%
4.49%
The current average weekly rent for Sydney houses stands at 0 per week (up from 0 a year ago) a rise of 15.4% year on year. The average weekly rent for units is currently 0 per week (up from 0 a year ago) a rise of 7.9% year on year. This gives an average gross yield for house and unit of 4.49% and 5.47% respectively.
Despite these strong figures, there are signs of a slowing of rental growth over the last quarter. This slowing has been driven by an increase in renters becoming property buyers given the rise in housing affordability, lowering of interest rates and increased first home owners grants. Landlords are also no longer in a situation were they request their tenant to cover any raised interest rate repayments, reducing the pressure to consistently raise rents. However, this slowing is predicted to only be temporary given the large undersupply of housing in Sydney and an overall pend up demand for accommodation.
The Sydney rental market is currently in a period of transition with several factors creating an unusual market situation. This is bound to stabilise soon, the major factor that will return the market to normality will be the reduction in the governments first homeowners grant due later this year. For now we are in an unusual situation were it is a great time to be a property investor given the current interest rate environment, and renters are also enjoying a reprieve in rental pressures.
Just Rent Sydney Real Estate Agency are a specialist property management agency based in Inner West Sydney. We offer an expert rental property service and have won real estate industry awards for our service.
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