One of the best pieces of news about the housing market to come along has been the many indicators that the strong demand we’ve seen for housing over the last few months is showing no signs of slowing. Many of the primary indicators of a slowing housing market have slowed or stopped completely and good news seems to come every day. From increased mobility, lower unemployment, and more disposable cash for people, there are several indications that the strong demand for housing will continue for the foreseeable future.
An Improving Economy
Last month the national unemployment rate held steady at 7.6 percent. While this number sounds scary at first, the Bureau for Labor Statistics (BLS) say that while the economy is improving, a big reason for unemployment holding steady is the amount of people who are reentering the workforce. The BLS tracks only those people who are actively looking for work. After several months of unemployment, many people give up looking for work and therefore, fall off the stats being tracked. As the economy continues to improve, more people begin looking for work again, forcing the number to stay steady, even though we’ve seen unprecedented job growth over the last few months.
“Boomerangers” Striking Back Out on Their Own
One of the biggest victims of the recession over the last few years were the children of Baby Boomers who were forced to move back home after losing their jobs/homes during the housing crash. This trend has begun to reverse and many children of the boomers (nicknamed “Boomerangers”) have struck out on their own once again. This has the added benefit of raising the need for rental properties and higher rental rates for real estate investors specializing in rental investments. Rental rates continue to rise by an average of 3% to 4% year over year.
Low Interest Rates Continuing for the Foreseeable Future
In their meeting last month, the FED indicated that they still see no reason to raise interest rates while the economy is still on life support. This means they will continue buying treasury bills to help keep money cheap and available to consumers and the banks who lend it.
Landlords May Have Less Leverage
While many people are looking for a place to live, there are still pockets of high inventory available out there for renters to choose from. Yet in the northern Atlanta area, quality rental homes are renting quickly and inventory is at an all time low. Compared with southern Atlanta, inventory is still fairly high.
Nationally, where the economy is still comparably soft – places like Detroit, Tucson, and Johnstown, these markets are still having trouble filling the houses they do have. In addition, areas where construction continued even during the recession, there is a glut of inventory, therefore making it difficult for many landlords to have the same sort of leverage that they once had.
More Foreign Investment in the US
Foreign capital is also returning the US. As the world economy continues to improve, they will still depend greatly on investments in the US since our market is stable and predictable (recessions aside). Other countries in the world continue to struggle through their own recessions and markets in the US are proving to be more reliable making them a juicy target for investors. With the Dow Jones seemingly breaking records every day, expect to see more foreign investment money coming. While direct foreign investment fell by nearly 26% last year, experts expect to see that money return to the US within the next few months.
With over four million homes lost to foreclosure between 2007 and 2011, many people will need to remain renters until they are able to rebuild their credit. Use this time to invest wisely in properties that will provide you with a steady income for years to come.