In December of 2010, the median mortgage payment as a percentage of median household income was at the lowest it has been since these statistics have been being tracked in 1971. Mortgage payments averaged only 14.9% of median household income as compared to 25.1% in 2006. What this means is the average buyer can purchase more home for the money now than at any time in the past 40 years.
The combination of low interest rates coupled with low prices are the contributing factors. Never, at least in the past 40 years, has the combination of price and interest rate been so low. Normally with rates this low homes would see an appreciation in value due to the increased buying power the buyer has with such low rates. That increased buying power under normal circumstances would increase demand, therefore putting upward pressure on prices. Remember economics 101, higher demand stimulates higher pricing until supply catches up to demand. Well, in this economy, supply is generally way ahead of demand, keeping prices down. Although inflation, which we are also experiencing in this economy, would normally push interest rates up, they are presently being artificially held down by the fed because of the slow growth the economy has shown, especially in recent months. The result, an unprecedented opportunity for the real estate buyer able to capitalize on this historic moment in time.
For more more helpful information concerning market trends, homes for sale, mortgage information, community information and much more, visit my website at www.mybestbuy.org.
Wednesday, August 10, 2011
Tuesday, August 9, 2011
Is there any good news in Real Estate
With all that is going on in the world and in the markets today, my Dad called me yesterday to ask if anything is selling, is there any good news? He has property in Michigan and Florida and needless to say, the present market where he is isn't pretty. However, there is good news. Interest rates are still at record lows, running between 4.5% and 5%. Inventories are still good and there are plenty of good deals out there for the person that is looking to move up or to invest. Downsizing is not a great idea in this market unless you absolutely have to. If that's the case, contact me asap. I have some suggestions that may help.
From an investment standpoint, with all the people that have had the misfortune to lose their homes in recent years moving in to the rental market plus financing tightening up some, there is a shortage of rental property and rental rates are high. I was with an investor over the weekend looking at some homes that he would have under 50K invested in even after repairs and he expected to get $700 to $800 per month in rent. They presently have 21 properties and they are ALL rented. Think about those numbers. Less than 50K invested and getting an average of $750 per month. That's $9,000 per year income. And that doesn't even include the tax advantages with depreciation, etc. How many of us have gotten 9K in income from a 50K investment in one year any time in the past 10 years. I'll go out on a limb and say not many. How many of us have lost 9K in the past few weeks on a 50K investment in the stock market or a 401K. Let's not think about that. It's too depressing.
The point is, there are some great opportunities in real estate out there, especially if you have cash to invest. If not, I have investor contacts with money to invest. If you're interested and in the Indianapolis area, contact me and we'll set up a time to get together and discuss your particular situation over lunch. I'll even buy. See, you're already making money!
By the way, get market updates and trends as well as find homes for sale along with a ton of other valuable information on my website at http://www.mybestbuy.org/.
Enjoy the rest of the summer. There's not much left.
Saturday, August 6, 2011
Possible Effects on Real Estate from Standard and Poors Downgrade
This will probably put some downward pressure on the dollar and therefore could negatively effect mortgage rates. Right now they're at historic lows, running between 4.25% and 4.5%. We'll keep an eye on what happens in coming days but if you're a real estate investor, especially in rental properties, the time could not be better to jump in. Prices are low, there are still great numbers of bank owned or short sale properties on the market and rental rates are high.
I have contacts with lenders that have money to invest so if you're an investor looking for funds, contact me at belliott@c21scheetz.com.
I have contacts with lenders that have money to invest so if you're an investor looking for funds, contact me at belliott@c21scheetz.com.
Friday, August 5, 2011
Real Estate trends for the last half of 2011 and beyond
RISMEDIA, Friday, August 05, 2011— Jason Hartman, creator of the Complete Solution for Real Estate Investors™, discusses current trends in real estate and economist forecast in his "The Investment Real Estate Forecast" report. With the first half of 2011 in the rear view, Hartman's forecast explains in detail that current government policy is tilted in exactly the opposite direction of factors needed—as monetary expansion and skyrocketing debt continue to finance spending initiatives having little to no impact on the fundamental tenants of innovation and productivity driving long-term economic growth.
For the remainder of 2011 and beyond, the prospect of future inflation and higher interest rates does not bode well for most forms of business or investment. However, there is a bright sliver of opportunity for investment vehicles capitalizing on fixed-rate debt to leverage income producing tangible assets that will have their nominal value increased and their debt debased by inflation.
"The most obvious remedy for this problem is income producing real estate," says Hartman. "Since most income producing properties are financed with fixed-rate mortgages, they will provide an excellent hedge against inflation for investors."
"Rental income will be directly impacted by the expected increases in interest rates as more people are pushed out of the homeownership pool into the renter pool," adds Hartman. "This will have the net effect of strengthening market rents."
Trends in Real Estate
Heading into 2011, one of the most impactful news items was the announcement by Bank of America suspending foreclosure activity and the decision by government agencies to increase scrutiny on the foreclosure process. Halfway through 2011, nobody completely knows how long this increased scrutiny will last, how intense it will be or the long-term impact on market activity.
Hartman predicts prices will be temporarily strengthened as the inventory of foreclosures is artificially constrained. Currently, people are being held out of the rental pool while living in their house (without paying a mortgage) as the foreclosure process proceeds at a snail's pace. The impetus behind this is quite clear since the politicians in charge of government policy are attempting to curry favor with their constituents by helping them stay in houses they cannot afford.
Over time, this decision will continue playing out and the market will regress back to equilibrium. In many markets, this will take the form of short-term price stabilization or increase, followed by softening of market prices as foreclosure inventory that had been held off the market comes back on. In conjunction with this, people will be moving out of the "owner" population and into the renter pool. Rents will only strengthen as the population of renters increases faster than the supply of rental properties. This will remain true even if investors purchase some of the foreclosed properties because the displaced owners become renters.
In some markets with low land values, the wave of foreclosures is pushing market prices far below the cost of construction. Fundamentally, this means that buyers will have "built-in" equity since the low prices have ground new construction to a halt and future demand increases will push market prices up toward replacement cost before new construction begins.
This Regression to Replacement Cost™ is expected to be an upward force on future market values in some areas—notably Atlanta, Dallas, Indianapolis and Phoenix. Conversely, in markets such as California and New York with high land costs, there is considerable room for price compression since the values exceed replacement cost by a very large margin. It is not likely that land value in these markets will compress to zero, but whenever land value makes up a high percentage of total market value, there is more downside risk exposure.
In the end, the only situation that can create a fundamental market recovery in real estate is an increased number of people paying their bills. With national unemployment at 9.2% at the end of June according to the Bureau of Labor Statistics, there is considerable slack in the labor markets that stands in the way of a fundamental recovery. It is likely that real estate will lag the overall market recovery, as there need to be more people who are employed and paying their bills before a sustainable increase in the number of people purchasing homes appears. For astute investors, there are tremendous opportunities available to purchase properties in healthy economic areas for prices far below the cost of construction.
For the remainder of 2011 and beyond, the prospect of future inflation and higher interest rates does not bode well for most forms of business or investment. However, there is a bright sliver of opportunity for investment vehicles capitalizing on fixed-rate debt to leverage income producing tangible assets that will have their nominal value increased and their debt debased by inflation.
"The most obvious remedy for this problem is income producing real estate," says Hartman. "Since most income producing properties are financed with fixed-rate mortgages, they will provide an excellent hedge against inflation for investors."
"Rental income will be directly impacted by the expected increases in interest rates as more people are pushed out of the homeownership pool into the renter pool," adds Hartman. "This will have the net effect of strengthening market rents."
Trends in Real Estate
Heading into 2011, one of the most impactful news items was the announcement by Bank of America suspending foreclosure activity and the decision by government agencies to increase scrutiny on the foreclosure process. Halfway through 2011, nobody completely knows how long this increased scrutiny will last, how intense it will be or the long-term impact on market activity.
Hartman predicts prices will be temporarily strengthened as the inventory of foreclosures is artificially constrained. Currently, people are being held out of the rental pool while living in their house (without paying a mortgage) as the foreclosure process proceeds at a snail's pace. The impetus behind this is quite clear since the politicians in charge of government policy are attempting to curry favor with their constituents by helping them stay in houses they cannot afford.
Over time, this decision will continue playing out and the market will regress back to equilibrium. In many markets, this will take the form of short-term price stabilization or increase, followed by softening of market prices as foreclosure inventory that had been held off the market comes back on. In conjunction with this, people will be moving out of the "owner" population and into the renter pool. Rents will only strengthen as the population of renters increases faster than the supply of rental properties. This will remain true even if investors purchase some of the foreclosed properties because the displaced owners become renters.
In some markets with low land values, the wave of foreclosures is pushing market prices far below the cost of construction. Fundamentally, this means that buyers will have "built-in" equity since the low prices have ground new construction to a halt and future demand increases will push market prices up toward replacement cost before new construction begins.
This Regression to Replacement Cost™ is expected to be an upward force on future market values in some areas—notably Atlanta, Dallas, Indianapolis and Phoenix. Conversely, in markets such as California and New York with high land costs, there is considerable room for price compression since the values exceed replacement cost by a very large margin. It is not likely that land value in these markets will compress to zero, but whenever land value makes up a high percentage of total market value, there is more downside risk exposure.
In the end, the only situation that can create a fundamental market recovery in real estate is an increased number of people paying their bills. With national unemployment at 9.2% at the end of June according to the Bureau of Labor Statistics, there is considerable slack in the labor markets that stands in the way of a fundamental recovery. It is likely that real estate will lag the overall market recovery, as there need to be more people who are employed and paying their bills before a sustainable increase in the number of people purchasing homes appears. For astute investors, there are tremendous opportunities available to purchase properties in healthy economic areas for prices far below the cost of construction.
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