The feedback I get from investors across the country is that we are in a seller’s market. Prices are up. Inventory is low. Properties in the hottest markets are selling over asking price with multiple offers. Investors are paying “more than they want to” just to get a deal done. The ratio between rents and purchase price is favoring sellers and squeezing investor buyers out of the market. Another way to describe this trend is that CAP rates are decreasing, or “compressing”.
We are approaching a delicate part of the market cycle where the flood of inexperienced investors is driving prices up to places where experienced investors shake their head and wonder, “How is the winning bidder ever going to make a profit?”
RealtyTrac released a report identifying county-level housing markets with early warning signs of a possible home price bubble — where prices over-inflate and eventually decline. The report also identified markets with little risk for a home price bubble.
Entering the real estate market is a bold move, especially for those without previous experience in managing or operating rental properties. Mistakes are common and profit is not guaranteed. However, location plays a vital role in first-attempt success rates. Before deciding on a potential investment location, consider trends in both property purchase prices and current rental market strength.
Demographically, a lot has been written about how Millennials and Baby Boomers will impact real estate. But how will 11 million undocumented immigrants impact residential real estate if they are given residency?
Zillow’s second quarter Real Estate Market Report shows national home values rose 6.3% on a year-over-year basis from June 2013 to $174,200. The last time national home values were at this level was back in March 2005. (Housing prices peaked in 2006.)
