Real Estate investing for cash flow and capitol growth will be very bullish during the first half of 2013. More investors will capitalize on real estate as they understand it to be one of the best investment vehicles available today. At least half of those people who invest in real estate will be investing with strong emphasis on the first half of the year. As inventories run scarce, property values climb. With this in mind, seasoned real estate investors are looking to grab the available properties quickly so they can capitalize on the capital growth of the property.
With threats of inflation coming, it looks like we may be safe for 2013, however 2014 and into 2015 is a concern. To hedge their money against inflation, investors will look to grab low cost property and idealistically low cost financing. Rising rents, the printing of money, federal spending which outpaces revenue, as well as a rising national debt are all factors which raise those inflationary pressures.
As many as a million new households will be formed and real estate investing will benefit from this. Millions of new households are projected to be added into the housing market for this new year. There are many young couples and many children now exiting college years and entering the workforce. Living with family members was a great way to save money but now as the economy and consumer confidence continues to improve, it is their desire to move into their own homes. For many of these entering into the housing market, a rental will be their first choice while they acclimate to some new expenses.
Rising Rental Rates
With this increased demand for housing, supply and demand laws suggests rents will also be strong and on the rise. The free flow of money by lenders will be the thing to watch, as freeing up lending standards will prompt tenants with expiring leases to dip their toes back into home ownership.
Vacant homes and foreclosure sales are heading down. The big scare of the so called shadow inventory failed to ever really appear. Now there is a shortage of inventory. Most banks find it much cheaper to short sale a house than to go through costly foreclosures.
Housing affordability is at best ever pricing. At least for the first half of 2013, the housing affordability is better than most have ever seen or can expect to ever see again in their life. The over correction of the real estate market, dropping prices far below the normal (in many areas), along with the historically low mortgage rates makes housing more affordable than anyone could ever have suggested. Thus, real estate investing can take advantage of this and increase the cash flow and capitol growth of their business.
Commercial Real Estate
Commercial real estate off to a sluggish start. While the uncertainty of the fiscal cliff continues to loom over America, many businesses are falling behind on implementing strong objectives moving into the 2013 calendar. Most businesses have their strategies in place to implement day one. This delayed response while they take a wait and see measure will cause a slow start to the year.
Wall Street Real Estate Investing
The Mom and Pop real estate investor faces huge corporate competition. Just like the little hardware store down the street that gets squeezed out by the big home improvement stores, so is the little individual investor getting squeezed out by Wall Street. Hedge fund managers continue to buy up properties (with billions of dollars in cash). The small investor looking to leverage a great investment for optimum returns are no longer attractive to banks and housing liquidators of real estate. They find it easier to sell in massive quantities for quick cash than to work with individual investors.
Single family homes are a growing asset class entering Wall Street. With low acquisition costs and high rents, the returns of rental income are being packaged up and sold as an asset class on Wall Street. As long as the returns are strong, the single family homes will be a commodity Wall Street will not want to avoid.
Multifamily apartments will be the strongest growth for builders. Millions of households will be formed and the apartment (which tends to have lower cost rents) will be in higher demand. In recent years, inventory of the apartment buildings were stripped away as many apartments’ buildings were converted into condos. This will be a huge opportunity for builders to build more of them and for the investor lucky enough to acquire some attractively priced ones will benefit with big cash flow.
The housing sector will dominate the recovery of the economy. Builders confidence is at the highest level since 2004 and this will cause a lot of building, which will bring with it jobs and more sales of goods and services to accommodate all the building.
Borrowers turn to small local community banks for their home loans. Recently, a majority of home loans have been acquired through the big name lenders in the industry. Continued strict requirements of these big lenders have made it way too challenging to acquire a loan. Buyers are finding that the local community banks are much easier to deal with, and actually these community banks are rapidly growing their output of loans while the big lenders are reducing their loan output. Check to see who is lending.
Changing Condo Requirements
FHA loosens rules on condo purchases. Investors used to have big limitations in buying and selling their condos as investment properties. Many investors paid cash for condos, only to learn that in order to sell the condo they needed a cash buyer or one who could at least finance with a 20% down payment loan (conventional loan) because of FHA restrictions. This restriction, which used to cap investor owned properties at 10% of the total number of units within the complex, has changed to allow up to 50% renter occupied units. This allows more investors within a community. (Please note you still want to make sure bylaws of the units allow the same thing, but the financing aspect of it has become much friendlier).