BUY, SELL OR HOLD?

[Joseph Scorese]

BUY, SELL OR HOLD?

It seems that at last, the US real estate markets have recovered from the downturn of 2005-2010. Now that we have returned to a sense of normalcy and recovery, it is a great time to be a real estate investor.

Despite a slow start this year, the 2015 real estate markets have been gaining momentum for the last 18 months (National Association of Realtors). The experts seem to agree. According to Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh, “[we] should see the housing market continue to improve through 2015.”

In a turnaround from the conditions of just a few years ago, the supply of homes on the market has decreased, causing upward pressure on pricing. Considering the rate of sale in March 2014, it would take 4.6 months to clear inventory on the market, down from even the month before (Reuters).

“It looks like the combination of limited available inventory and a decline in the share of distressed sales in the market continue to put upward pressure on prices” says Daniel Silver, an economist at JP Morgan in New York.

According to the National Association of Realtors, property values rose 11.5% over the last few years, resulting in an average sale price of $197,000. Interestingly, they also write that some of the supply issues are the result of a continued depression in new housing starts, as constructions costs have gone up more than housing prices. The result of this is positive for rehabbers and wholesalers who specialized in existing, but distressed housing.

The consensus from most experts is that interest rates will start rising after years of record low rates. The Federal Reserve has publicly indicated that it will increase the federal funds rate next year, which will have an effect of mortgage rates. According to Realtor.com Chief Economist Jonathan Smoke, “mortgage rates will increase ahead of the Fed’s move . . . Our forecast for housing assumes the 30 year fixed rate will reach 5% by the end of 2015.”

What does this mean for those in the rehab business? . . . Now is the time to buy — but buy right! Find the diamonds in the rough and buy low in order to sell high. Take advantage of low interest rates now before they start moving up. This applies to both flippers and those who buy for rental — prices will continue to rise and borrowed money will become more expensive, so buy now, while you can!