Real Estate News

Forward thinking real estate investors are now taking advantage of the best residential real estate buys in more than a decade. Based on today’s low homes prices and interest rates it is now possible to buy single family homes and rent them out on a positive cash flow basis.
Consider this: due to the large number of short sales and foreclosure sales occurring now, a growing number of new renters enter the market every month. These are former homeowners who will be locked out of home ownership for at least the next five years due to their damaged credit. Many of these households will become comfortable with renting as a permanent arrangement over time and not re-enter the market as buyers.
Most are used to living in single family homes with yards, basements and garages. They will not migrate to apartments. Furthermore, the current credit crisis will have a significant influence on curbing the federal public policy that overly encouraged home ownership over the past twenty years. The bottom line is that there will be much more demand for single family rental properties in the future.
Smart investors now see this as a very real opportunity to diversify their portfolios. Real estate once again provides an attractive alternative to other financial investments.
To address the needs of both investors and renters, WMR offers both property management services and a Rental Lifestyle program. By matching renters with investors and the right properties, WMR creates a valuable long term relationship with both.

Last week the Birmingham Bloomfield Chamber of commerce hosted their annual Real Estate Forecast luncheon. The format was based on questions from the moderator and answers from each of the three panelists. The panel consisted of three local real estate experts.

One of the most interesting questions asked was, “Is anything selling in this market and, if so, what kinds of homes are selling and what kinds are not?”

The simple answer given was that well staged homes that are correctly priced are selling and anything overpriced or not properly presented will simply languish on the market. The discussion went on to further explain the current market.

The bulk of activity in the current market is in the price range below $400,000 with a large amount of activity between $100,000 and $300,000. This segment of the market is characterized by first time buyers and investor driven distressed sales. Keep in mind that this price range now represents properties that formerly sold for up to $600,000.

There is also some activity in the luxury market. While the number of sales of luxury homes is far less than in the lower price ranges, well heeled buyers are also taking advantage of value-priced high-end homes.

There is an obvious void in activity between $400,000 and $1,000,000. This price range is too high for most first time buyers and investors typically find a higher rate of return in lower priced properties. As sales continue to increase in the price range just below this, we may well see activity in this market segment begin to pick up as potential buyers for homes above $400,000 begin to sell their existing homes.

Regardless of price range, the best advice to any seller is to make your property as physically presentable as possible and engage the expertise of a Realtor to price and market it correctly.

Last week I reported that U of M economists have forecasted a return to stability in our core real estate market next year (see REWeekly 5/4/09). That is cause for celebration as we have all been looking for the bottom of this free falling market for over four years. Once stability has been achieved, much of the fear will be dissipated and consumer confidence will begin to rebuild.

This is all good news, but don’t be lulled into thinking that there will be a return to “business as usual” anytime soon. Even as the market rebounds in 2011 and beyond, it won’t look like the market we had in 2000. The way real estate is transacted will look entirely different than it did before.

We are already seeing a different lending model emerge. But moreover, the behavior of real estate consumers will be different. First time buyers will be a far larger component of the homebuyer demographic than before. This will be true for two reasons.

First, much of the current home-owning population going through foreclosures and short sales now will be locked out of buying another home for five years. These are primarily mature homeowners and families who will become part of a huge new rental lifestyle market. Second, there are 80+ million Y-Generation buyers, the oldest of which are now 32 years old, who are entering their prime consumption years.

These consumers will behave very differently from the more mature consumer we have been dealing with for the past 20 years. They have different expectations about everything. They are seeking a different lifestyle than that of their parents. More details about that in future editions of the REWeekly. For now, however, the message is that real estate practitioners at all levels will need to adopt new ways of thinking and behaving in order to do business with the new consumer.

“Single family home prices are expected to bottom out late in 2009 and then stabilize during 2010.”

That is the conclusion of George Fulton and Donald Grimes, the renowned economists from the University of Michigan. In their 24th annual Oakland County Economic Outlook presentation given on April 30, 2009, they forecasted another difficult year for unemployment with a turnaround expected beginning in 2010. They predict net job growth to be positive in 2011.

Unemployment rates for the County should peak in 2010 at 12.0% and fall below 12% in 2011.

Inventories of homes for sale have already been on the decline for several quarters. While there are still plenty of choices available to buyers, much of what is on the market falls into the distressed category. Field reports indicate that turnkey homes in good condition are already a tough find in some market segments.

Buyers desiring a traditional transaction on a move-in condition home should think seriously about making an acquisition this year, before that market segment tightens further.