As inflation and interest rates threaten to rise and people talk about housing bubbles, I would like to know how the astute investors among us are repositioning or at least thinking about strategies.
Not sure how astute this is, but I think now's the perfect time to purchase rental property. Rates will soon go up, home purchases will fall, and the number of renters and L/O buyers will increase.
So, rentals and L/O's will grow in popularity, while the popularity of flips and rehabs will decrease.
We can agree up to a point; the rental market has been suffering and large apartment complexes have severly suffered here in the Chicago market. Our position is to acquire nice homes in quality neighborhoods for rent-to-own. We like long term financing to the buyer of our equity position. Small monthly payments received over multiple properties where we are NOT on title is attractive to us.
In our opinion, investors must gear themselves with better due diligence efforts to support the option to deliver FLEXIBILITY and CREATIVE financing when the lenders say "NO!"
[addsig]
Home values have been growing even faster than builders are pouring new footings. In some parts of the nation, such as California, New York City, Boston, and Washington, houses are up as much as 25 percent over the past year. Last week, the National Association of Realtors reported that nationally, prices of existing homes in May were up 10 percent over than May 2003.
The sharp rise has made some question whether the sector is "the next bubble." But in a study released last week, the Federal Reserve Bank of New York says it doesn't look like a bubble about to burst. Although some markets may be overbought, that's not the case on a national basis, say senior economist Jonathan McCarthy and vice president Richard Peach.
"We're not suggesting there are not pockets of exclusive areas where prices are up dramatically and they can come down dramatically," says Mr. Peach in an interview. "The main point we want to make is that the measures that people use to support the view that there is a bubble are flawed."
Flaws in housing 'bubble' theory
For example, Peach says the large drop in nominal interest rates in the past few years has meant that home buyers can afford larger mortgages. In 1990, the average nominal interest rate of a 30-year fixed-rate loan was more than 10 percent; today, it is closer to 6 percent. "Combined with a 50 percent increase in median family income, there's been a 130 percent increase in the mortgage a family can qualify for," he says. "Over the same period, home prices are up 72 percent - so it's a wonder [that] home prices have not risen [even] more under the circumstances."
Peach also disputes the view that an increasing number of home buyers using adjustable-rate mortgages during a time of rising interest rates constitutes a threat to the economy. "We have seen this before in the beginning of 1987 when there was a fairly big run-up in rates in a short period of time, and the world did not come to an end."
Not sure how astute this is, but I think now's the perfect time to purchase rental property. Rates will soon go up, home purchases will fall, and the number of renters and L/O buyers will increase.
So, rentals and L/O's will grow in popularity, while the popularity of flips and rehabs will decrease.
We can agree up to a point; the rental market has been suffering and large apartment complexes have severly suffered here in the Chicago market. Our position is to acquire nice homes in quality neighborhoods for rent-to-own. We like long term financing to the buyer of our equity position. Small monthly payments received over multiple properties where we are NOT on title is attractive to us.
In our opinion, investors must gear themselves with better due diligence efforts to support the option to deliver FLEXIBILITY and CREATIVE financing when the lenders say "NO!"
[addsig]
As the market changes, we too as investors must adjust and come up with new solutions.
Home values have been growing even faster than builders are pouring new footings. In some parts of the nation, such as California, New York City, Boston, and Washington, houses are up as much as 25 percent over the past year. Last week, the National Association of Realtors reported that nationally, prices of existing homes in May were up 10 percent over than May 2003.
The sharp rise has made some question whether the sector is "the next bubble." But in a study released last week, the Federal Reserve Bank of New York says it doesn't look like a bubble about to burst. Although some markets may be overbought, that's not the case on a national basis, say senior economist Jonathan McCarthy and vice president Richard Peach.
"We're not suggesting there are not pockets of exclusive areas where prices are up dramatically and they can come down dramatically," says Mr. Peach in an interview. "The main point we want to make is that the measures that people use to support the view that there is a bubble are flawed."
Flaws in housing 'bubble' theory
For example, Peach says the large drop in nominal interest rates in the past few years has meant that home buyers can afford larger mortgages. In 1990, the average nominal interest rate of a 30-year fixed-rate loan was more than 10 percent; today, it is closer to 6 percent. "Combined with a 50 percent increase in median family income, there's been a 130 percent increase in the mortgage a family can qualify for," he says. "Over the same period, home prices are up 72 percent - so it's a wonder [that] home prices have not risen [even] more under the circumstances."
Peach also disputes the view that an increasing number of home buyers using adjustable-rate mortgages during a time of rising interest rates constitutes a threat to the economy. "We have seen this before in the beginning of 1987 when there was a fairly big run-up in rates in a short period of time, and the world did not come to an end."
This is just my approach:
If I do what i always did, I'll get what i always got.
To me a deal is a deal no matter what.
Lori
[addsig]
We have rentals.
We sell rehabs, lease ops & subject tos.
Thanks :-D ,
OTW