Home prices in many locations across the U.S. have seen a marked price increase as the housing market recovers from the crash of 2008. Soon after the market crash investors swooped in able to pay cash for foreclosed homes, many institutional investors entered the rental market in a big way to take advantage of undervalued homes and the growing rental market. Many of these investors are now cashing in on their investments in a now much more stable housing market.
This buying frenzy created an environment that made it difficult for traditional home buyers to literally and figuratively get their foot in the door. In many markets including here in southern Oregon the draw for real estate investing has decreased dramatically because the opportunity to buy low and sell high has dwindled. Over the last couple years we’ve seen growth of home prices at roughly six percent per year it’s predicted to slow to about half of that in 2015. This decrease in appreciation along with the limited opportunities to buy low and sell high will absolutely reduce the number of investors.
This shift in the balance will make it more of a buyers market and we’re likely to see buyers becoming more discerning without the worry of having the house being “bought out from under them”. The days of all cash offers, bidding wars, buying without contingencies, etc are a thing of the past for many parts of the U.S. However, there are still some investors outside the U.S. that find real estate investing as appealing because of uncertainty and volatility in the economy of their country of origin. The foreign investors tend to purchase the higher end homes which still leaves many moderate- lower end priced homes on the market.
The market is finally opening back up for the average citizen with a good job and a down payment. Mortgage rates are not likely to stay at the extraordinarily low rates we are currently experiencing but it certainly will help more people to be able to afford and qualify for a home loan while it lasts. In addition, those pesky short sales and foreclosures become history on credit reports and make qualifying a little easier. As the dust settled from the real estate market collapse and homes regained value baby boomers will finally be able to put their homes on the market, downsize and move closer to the grand kids. Many millennials are getting to the age where they are ready to start a family and we may see an insurgence of home buyers there as well.
The ideal window for many of us real estate investors to purchase real estate has come and gone but there is still money to be made and it’s definitely worth watching for that deal of a lifetime. When the real estate market does crash again I hope to be even better prepared to seize the opportunity to purchase rental properties and perhaps even flip a few homes. What do you think, is it time to step back and wait or do you think it’s worth investing out of state in areas where housing may still be undervalued?