Is Public Perception Changing?

The stock market is at four year record levels, manufacturing is coming back and we are seeing a lot of positive press on real estate.  Real Estate has caught negative press for over 5 years now, it seems hard to believe that we are that far along but 2007, 2008, 2009, 2010, and 2011 have all passed.

Warren Buffet recently said, “If I had a way of buying a couple hundred thousand single-family homes I would load up on them.”  Every day we learn of a new hedge fund that has plans to buy 100 million plus in single family housing.  From a guy on the ground floor, like me, I have really noticed there really isn’t much inventory out there and everything that does make sense is being chased by tons of bidders.

All this news doesn’t mean the banks aren’t sitting on a ton defaulted loans, but we’ve been talking about that since 2008.  I guess the real question is, how in control of the inventory are the banks/government?  Have they limited the supply to heavily?  Will they over correct and bring on too much inventory?

I have heard the average landlords last two years, I wonder how many people that seize the opportunity the news is talking about can handle being a landlord? I have more questions then answers, on the next couple of years, but I can say I am glad we started loading up on rentals in 2009.

Do you think 2012 will be the year that real estate starts going up again?  Give me your opinion in the comments!

 

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3 Responses to “ Is Public Perception Changing? ”

  1. I’ve seen this trend as well. I think there are a few things that will determine the future prices:

    1. Inventory – How quickly the banks release the “shadow inventory”? Overall I think we’ll see less REOs moving forward and more short sales, especially if banks continue to streamline the process.

    2. Government Intervention – This is the “wild card” in the stack. If they push fannie and freddie to lower their standards (i.e.,10% down, lower credit score) or allow investors acquire more than 10 loans. This could set allow more buyers in the pool and soak up excess demand.

    3. Appreciation – I am not sure we’ll see “real” appreciation over the next few years. I think most of the increase in values (if any) will be a result of prices reverting to the cost to rebuild. Right now, much of the inventory is still well below the cost to rebuild or what I call “phantom equity”.

    Another reason I don’t think prices will “shoot up” is that the Echo-boomers (baby boomer’s children) are on average less strong financially than their parents were. Many of these future buyers are loaded with college debt, living with their parents, waiting longer to get married and are choosing to rent.

    I think this is a great long-term trend for landlords, but i’m not sure this will shoot up home prices in the mid-upper tier markets.

    Not sure if this is the type of commentary you are looking for, but I thought I would share my 2 cents.

  2. Chuck says:

    Steve,

    I am noticing some of the same trends here in Texas. Inventory is still out there, but more people bidding on it even through this winter.

    I saw the Buffett clip as well and RE investing has really been in the news alot lately. I think this will lead to lots of new investors trying their hands at landlording. The demand is certainly there for rentals now..but things change. I do fear over-saturation of rentals.

    One trend i am noticing is the number of adults that have moved back in with their parents or other family. Once the economy and employment starts rolling this trend will start unraveling. I predict the inventory will move a lot quicker than some are predicting.

  3. Bilgefisher says:

    In Denver we are at 20 year lows for inventory. Were down over 50% year or year inventory. As far back as May last year investors were in bidding wars. We are now seeing retail bidding wars. Lower end neighborhoods have seen a slight increase in values. I believe that its due to lack of foreclosures that artificially suppressed the those hard hit areas.

    Denver has traditionally been about 1-2 years ahead of the nation in this downturn. I will be interested to see how everything else plays out nationally.

    One odd trend Ive seen in three weeks is my wholesaler list. They have been spitting out properties pretty regularly. I’m not sure if its an anomaly yet or not.

    Jason

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