Interest Rates, Real Estate Auction Companies, Inventory, Inflation, Pricing Predictions
What we think you will see and how we recommend you act on it!
As my real estate mentor always did tell me, “My opinion and a dollar will buy you a cup of coffee.” But for all those who care to listen, here is the way that I see the real estate market as a whole going in 2013, and some strategies that in my humble opinion could benefit our users.
To start, I will give some background to my opinions and what I have done so far to capitalize on the market. At the end of the year in 2011 and the beginning of this year 2012 I told all of my friends, clients and all those who would listen that I strongly believed that the bottom of the market had come and gone and that we would look back at 2012 and ask how much did we capitalize on it. If you look at the stats and all of the trends, that has proven to be true. The market nationally has started a slow rebound, and as predicted, the areas hit hardest by the crash such as Las Vegas, NV, and here in California have rebounded the strongest. With hopes that this would happen, I started investing very heavily in Las Vegas in July 2011 and since that point the market as a whole there is up 37%! My thought process has remained the same for the market as a whole in 2013 as there are still exceptional buys out there on a national level and in some of these key regions like CA and Las Vegas, and while they may not be the 15% cap rate rental properties that we saw every day for a while, the ROIs are still dramatically better than what you would get in the bank and once again I strongly believe you will see continued upswing in the market in 2013 and beyond. There are two possibilities for the market that I see that both result in pricing rising:
Possibility #1: The economy crashes hard once again and the fiscal cliff destroys the markets:
This, believe it or not, could result in house prices going dramatically higher, as if this happened it is likely that we would see some form of rapid-inflation which although a slow process would ultimately hit the housing market. This means house prices would go up not so much because the house is worth more, but rather because the dollar is worth less. This means that condo you bought for $90K could and will likely someday be worth $1 million just like how a house you bought for $2,600 in 1944 would be worth dramatically more today. Inflation always happens and it always at some point hits the real estate market. It is simply a question of how long that will take. If the economy crashed and we had another dip in the market briefly, it would create another exceptional buying opportunity before inflation kicks in and you can see that exceptional long term growth.
If this happened, the way to capitalize on it is by having as much leverage as possible. So instead of buying one rental property cash for $200,000, you would want to buy 10 rental properties with 10% down and maximize your leverage so you can pay off the loans with cheap dollars. It can be a bit in-depth so if you have questions about this email me through my user profile on ListedBy.com and we can go in to some extra stats and detail.
Possibility #2: The economy and the markets get a bit better
This obviously results in having the economy and the market in a better condition, which helps buyers to have the resources needed to purchase, which should continue a slow upswing in home prices and purchases as a whole as we grow. Also, note that many Americans with foreclosures that happened in 2008 will now have more than 5 yrs since that foreclosure, which for many is enough time to rebound their finances to be able to buy another home, which will also help the market.
As you can see, the stats and the details seem to point towards a strong market recovery regardless of the economy as a whole which is obviously great extra security for all of us who invest in real estate. I think that it is likely that you will see a combination of the two where the economy stays well and we see some rapid inflation also, which is why in 2013, I will be trying to buy as many units as I can the same way that I did in 2012 hopefully with the same result!