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Real Estate Trading

It’s 2016, So How’s Your Return on Investments?

Why the Housing Market was a Great Investment for 2015?

Just ask most investors what they think about the future of the housing market and they will most likely cringe out of habit, and the reality is that the housing market was in full recovery all of 2015. Before we consider why the market is looking good, let’s remind ourselves how our housing market ended up with such a bum rap. After the savings and loan crisis of the 1980s and 1990s when the Federal Reserve helped create an environment for the Savings and Loans in 1979 by doubling the interest rate in an effort to reduce high inflation: S&Ls had made long-term loans at fixed interest using short-term money. Many S&Ls became “reactive” by inventing risky accounting strategies that made their businesses look highly profitable when, in fact, they were showing losses. As the twenty-first century came along, many people pounced on land as if it were going out of style. People snatched up vast amounts of real estate thinking you can never have too much of a good thing, right?

Wrong!

In 2008, we all watched the housing bubble pop. We all looked on as years of badly thought-out policies, badly constructed affordable housing acts, and an uninformed consumer base reached a bursting point and blew up in the faces of millions of Americans. The great housing market can always give and take away, with the great housing market of the late 20th century and its crash in 2008.

If there’s anything we should remember, it’s that history always seems to repeat itself. From 1970-1990, the average cost of a home in America quadrupled. To most Americans, the housing market was a great thing that just seemed to keep getting better. Yet, everything has peaks and falls, valleys and cliffs.

As of right now, the Federal Reserve is keeping short-term rates near zero percent. That alone is great news for potential investors, though the fact that the Federal Reserve is buying longer-term bonds and mortgage securities in the secondary market. This powerful tonic of reparative measures is keeping rates artificially low across the board. In addition to this, banks are loosening their lending standards for mortgages again, and while no-money-down deals have gone extinct, borrowers with decent credit are getting financed more easily.

Think these low rates are great news?

How about the fact that houses are an average 10 to 20% below their peak and in many cities it’s still less expensive to buy than to rent. Add to this, that mortgage rates are still hovering near all-time lows, and many homebuilders have reported that quarterly sales are up by 25 percent or more. Banks are selling fewer foreclosures than they used to, and cash investors are scooping up many homes, and converting them into high paying rentals. The existing home prices around the country rose around ten percent last year, and once the buying season gets back into full swing, those prices should rise even further. And while the stock market seems to be leading the pack in this economy’s slow recovery, new construction costs and demand have been steadily increasing, and with continued historically low-interest rates, real estate is showing strong and continued capital appreciation.

The housing market is ripe for investment right now, making it a great time to buy investment property. Contact us for further information Investment Club 360.

Source: https://www.linkedin.com/pulse/its-2016-so-hows-your-return-investments-norman-w-dixon