Rental property owners enjoy some unique advantages when it comes to profitability and return on investment. Between tax breaks, lower homeownership rates, lower inventories and higher rents, it’s been a pretty good 3 to 5 year period. There are still some foreclosure bargains out there, and it’s still possible to cash flow well with appreciation potential.
Let’s take a look at the data and conclusions of a couple of newly-released reports about the housing market and the current status many refer to as a “recovery.” They draw some of the same conclusions, but they’re not necessarily together on the current strength of this recovery.
The State of the Nation’s Housing from the Joint Center for Housing Studies of Harvard University
The overall conclusion of this report stated in one sentence is that “Homebuilding strengthened in 2013, but remains below historical averages. There’s no startling revelation there, but there is some informative data in the report:
• Housing starts in 2013 were up more than 18 percent from 2012, but were down to 925,000 units from the historical average of 1.46 million.
Just inked a sub2 deal with a distressed seller referred to me by father in law. Older gentleman is 2 months behind and decided to walk away. Has already moved out and moved on. Am getting him caught up on payments and taxes, total of 3200. He is signing it over, has no issue with leaving the financing in his name he only wants the bank to stop calling him and stop sending him mail. Craigslist ads have netted several interested C4D buyers, who I'll be showing it to next week. One of the interested party has 12k to put down. I told him I could work with that.....This is the smallest amount of money I have spent on a house. Net profit should come in at 22k.
Mortgage Rates Improve this Week
Mortgage rates dropped this week, preserving a range they’ve been in since May. Rates have remained in a range from 4.125% to 4.25%, and most of the day-to-day movement has been in closing cost adjustments.
Foreclosures up in May
Year-over-year, foreclosures have been falling in most areas. However, in May foreclosures were up compared to the April level. This is according to CoreLogic. Completed foreclosures numbered 47,000 in May, up by 2.8% over April, but down year-over-year by 9.4%.
Millennials to Make Housing Mark … maybe
It may seem a little late to be talking about the real estate industry outlook for this year, as we’re already more than half way through it. However, over at NuwireInvestor.com, there is an interesting article this week doing just that.
It begins by stating that things are certainly getting better, but also predicting that there will be no quick snap back to normal market conditions anytime soon. HSH.com, a mortgage and housing research company provides some data:
• Mid-year analysis shows 30-year fixed mortgage rates could move up to 5% to 5.25% before the year is over.
• That’s a significant factor, as the current rate is around 4.233%.
• With the Fed attempting to keep interest rates down, it is expected that entry level ARM rates will remain low.
Real estate is local, and every market is unique. However, certain trends are national in nature, and the law of supply and demand doesn’t change from market to market. Playing out in the Las Vegas, NV market right now is a situation with cash buyers leaving the market. It could be a learning tool for investors in other markets to mitigate risk and even possibly wait for better deals to appear with lower demand.