By Shayla M. Sharp
Which way--up or down? You might be asking yourself this very question and you would be wise to do so. Each year, the real estate market can and does change, sometimes in subtle ways and sometimes in dramatic ups or downs. How can you know what the next year will hold?
While real estate, land and financial experts can never know exactly how things will be in your particular area, they can look at multiple factors and predict what the next years trends are most likely to be. This, along with speaking to a trusted local Realtor, can give you some guidance in your realty decisions. Let's take a closer look at what some experts expect in 2010.
“Our report participants find that a sense of nervous euphoria is growing among liquid investors who can make all-cash purchases,” said ULI (Urban Land Institute) Senior Resident Fellow for Real Estate Finance Stephen Blank. “Those that are patient, daring and selective could score generational bargains on premium properties from both distressed sellers and banks that are clearing out unwanted bad loan and real estate owned portfolios. However, once the property market recovery begins and gains traction--likely before 2012--any rebound could be restrained by a lackluster economy and rising interest rates.” (Emerging Trends in Real Estate 2010 )
Sounds a bit doom and gloom? Maybe, if you are trying to sell. But, if you are looking to buy, things are different. Upon closer inspection of the above statement, you may find the guidance you need to get the best results for your personal situtation.
For sellers, hearing a statement like this may be a bit discouraging. With an excess of marketable housing and other real estate, you may not get top dollar for your property. However, this does not mean there isn't a profit to be made or that property won't sell. House values have still had an increase--that increase, however, is seen in properties which were originally purchased by the current owners many years ago. Much lower prices in the 1970's and 1980's means that houses sold today can still turn a sizable profit from the original purchase price. This is great news for those moving into the retirement age. While you might not get the high prices of just a few years ago, you will still get a return on your investment. For those who recently purchased, Mr. Blank's statement let's you know that while the market may be at a low now, recovery is projected for the future. Now might not be the best time for you to sell, but keep your property maintained and updated as there will be a turn around in the real estate market. Now might be the time to focus on making needed improvements and paying down the debt owed on the property. Check with your local Realtor to find out how your immediate area is doing. You may be surprised to find that you can make a perfectly acceptable profit even in today's market.
A buyer reading Stephen Blank's statement might feel several things. Perhaps a bit of wariness or maybe a little nervous excitement? There is no doubt that 2009 has been a buyer's market and it appears that 2010 will follow this particular trend. Interest rates are low and there are plenty of properties on the market to choose from. However, a wise investor or home buyer will not rush out simply snapping up any available properties. Just like the game of Monopoly, you do not need to purchase every property you come across, but if thought out carefully and strategized you just might find yourself the winner. If you are looking to invest, and your budget allows you to do so with financial safety, today's market is ideal and so will be the 2010 market. A local Realtor can be your best guide to an area's market. Your Realtor can tell you which housing areas are most popular (and thereby have the best future resale value), point you in the direction of properties that are priced low for their potential value (allowing for greater potential profits), or help you avoid properties that seem nice but are simply money pits.
“For 2010, our report finds that investors will need to time the cycle and only cash-buyers will benefit from the emerging opportunities,” said Tim Conlon, U.S. real estate sector leader, PricewaterhouseCoopers. “Investors will need to be patient and transaction trigger points will be improving job numbers, visibility into asset pricing and stepped up tenant deals. Equity investors will need to focus on quality assets and expect to hold for at least a five to seven year period during the recovery, allowing fundamentals to slowly improve.” (Emerging Trends in Real Estate 2010)
Investors would be wise to heed Tim's advice to be patient and look for good market indicators. Whether you are looking to buy a home for yourself or one for investment purposes, you will need to be patient with the market recovery and recognize that investments now will not turn a sizable profit for several years. Carefully review your personal finances prior to purchasing--an investment isn't an investment if it costs you everything! Emerging Trends reports the best investor bets for 2010 include:
- Deal with cash – Cash is the only way to operate and only the most liquid can take advantage of the emerging opportunities.
- Patience will be rewarded - Economic uncertainty will hamper the recovery and absence of ready refinancing in comatose debt markets adds more risks.
- Focus on quality and be selective – Seek irreplaceable Class A properties with debt maturity.
- Stick to global pathways where recovery will happen more quickly.
- Buy cash flow and real yield – Anticipate creating value by filling vacancy and increasing rents over time.
- Provide financing as three to five year loans can deliver low teen returns.
- Implement asset management triage – Focus capital and resources on retaining and attracting tenants in properties with better long-term value.
Read the details in the 80-page book from the Urban Land Instutitue called Emerging Trends in Real Estate 2010 and talk with your local Realtor. You may just find that 2010 is a year to look forward to.
Article first published at NWAbode.com in November 2009.
Shayla M. Sharp, owner of White Dragon Studios and freelance writer, enjoys design in all its aspects whether she's designing jewelry or trying to get two-year olds to hold stilll for a portrait. She lives in Oregon with her best pal Stars, a border collie mix, where she plants vegetables and flowers for him to run over.