Housing Prices Cool Off While Rental Rates Heat Up Every market shift brings new opportunities
By David P. Greenberger
Harvard's Joint Center for Housing Studies has just released a report outlining the fact that climbing interest rates and cooling speculative demand is putting pressure on the housing boom while at the same time hiking rental demand in all sectors of the U.S. That’s good news for anyone who acquired rental properties at the right time, and a possible window of opportunity for investors still motivated to sell or exchange property before prices decline any further.
According to the National Association of Realtors, there are 191,400 fewer apartments in the country primarily as a result of condo conversions. With all the condos on the market, many longtime renters stopped renting because they were able to take advantage of historically low interest rates and purchased the condominiums as their first homes. The NAR now predicts that renters will be paying about 5 percent more in rent than they did last year. If true, that would be the highest increase since 2000.
Homeowners and smaller investors with some flexibility in their living arrangements might want to consider renting out their existing properties while either waiting things out or looking to exchange.
With a trend toward almost 30 percent of the homes in the country being bought by investors and prices beginning to soften in the general housing market, the scene is set for a record number of 1031 exchange transactions. Investors wanting to cash in before the market slips too far and wanting to hold onto as much profit as possible are exchanging rather than cashing in and paying the taxes. At the same time, homeowners with great appreciation, as well as empty nesters, will look to hold on to more of their most valuable asset by turning their homes into exchangeable properties.
While things cool down in the so-called bubble markets, there are still good values in other regions and savvy investors will always find them.
The Outlook is Good
Eric Belsky, executive director of the Harvard Joint Center for Housing Studies, says
"Strong household growth, combined with record incomes and wealth, will lift housing investments to new highs next decade. Each generation is achieving higher homeownership rates, incomes, and wealth than the one ahead of it, with the leading edge of the echo baby boom now in their 20s and the baby bust now in their 30s starting off on especially high paths.”
Why not take your most valuable asset, trade it into both an income stream by way of a commercial investment and a new scaled down home to retire to in time? The bottom line: the investor and/or homeowner both want the same thing - more money in their pockets. And that’s why they’re turning to exchanges to keep that dream alive. |
