The Effect of the Housing Market on Investment Real Estate

Posted by Chris Clothier on Sun, Dec 9, 2012

effect of housing market on investment real estateReal Estate Investing

NBC News reports that the housing market recovery is well on its way. Indeed, more people are buying houses, inventories of distressed properties are down, and prices are moving slowly upwards.

Interestingly, according to NBC, "Current homeowners accounted for 54 percent of October’s non-distressed market, up from 50 percent in June," while first-time home sales are actually declining. "Unfortunately, first-time home buyers are seeing just the opposite, largely left out of this surge in sales and prices. Their share of the market, usually up in the 40 percent range historically, fell to 34.7 percent in October."

Basically, as the economy strengthens and the unemployment rate drops, current homeowners can now afford to move into a bigger house, while the increasing home prices and increasing mortgage requirements can make home purchases difficult for those who want to become homeowners for the first time.  Memphis real estate, like many markets is suffering from the same yo-yo that the economy has put many housing markets through.  The lack of ability for first time home buyers to purchase properties and much of the available inventory in need of repair, many are finding themselves still not in position to purchase.  Add to that the negative effects of the past few years on the psyche of many former home owners who have decided it is better to not re-enter the housing market , and you have a scenario that continues to favor long-term rental investors.

This means that there is a very high demand for high quality rental homes, which those interested in earning passive income through investment real estate seem to be responding to. In the housing market, "Investors purchased one fifth of all homes that sold in October, up from 18 percent the previous month." This is a wise move for many investors, as both demand for rental properties and the amount of monthly rents continue to rise. Since many "would-be first time home buyers are either choosing or are forced to rent," investors who are in the right place at the right time can purchase investment real estate and find tenants in order to bring in passive income.

With the assistance of a rental management company, such investors can earn money each month without putting forth much, if any, active time and effort. An investment property company such as Memphis Invest can find quality investment properties.  With the combination of a high-quality property management company such as Premier Property Management, a management team can locate quality tenants, collect rent, keep a property in good repair, and send the investor the monthly rental payment.  With this type of out-of-area investment opportunity available for real estate investors, regardless of where the investor lives themselves, investors could continue to see a fantastic investment environment.

 

Want to learn more?

 


Photo Credit

Topics: real estate investing, Memphis real estate, housing market recovery