Is Now a Good Time to Invest in Real Estate in the U.S.?
At a time when the demand for housing is growing and supply is short in the U.S., it may be an ideal time to invest in real estate. The market has made a big comeback since the bursting of the housing bubble in 2008, with a Harvard Executive Summary noting that in 2016, house prices rose by 5.6%, surpassing the high reached in 2006. “Achieving this milestone reduced the number of homeowners underwater on their mortgages to 3.2 million by year’s end, a remarkable drop from the 12.1 million peak in 2011. In inflation-adjusted terms, however, national home prices remained nearly 15 percent below their previous high.” In essence, the rebound in house prices vary greatly across different neighborhoods. Prices in low income areas are still considerably less than they were pre-recession, meaning that people living in these areas can be reticent to refinance or sell.
Differences in Regional Prices
According to the above-mentioned summary, houses in the East and West Coast have seen inflation-adjusted prices rise by over 40% since 2000, while cities in significant parts of the Midwest and South have seen a decline. As noted by Ozy.com’s Daniel Malloy, “there is no national housing market, and the picture is different in pricey San Francisco or Washington, D.C., than in Las Vegas (still reeling from the popped bubble) or Detroit (what bubble?).” Yet one general wave hitting the real estate market, is the scarcity of new constructions of lower costing homes, despite an increase in the number of new building permits being granted in some areas. Thus, families are choosing rentals in cities like Los Angeles rather than purchases, simply because there is a lack of affordable housing on the market.
How Tax Reform is Affecting Real Estate Investment
Selecting the right areas in which to buy is key to obtain an attractive ROI. For American buyers, there is no time like right now to take advantage of the boost provided by the Tax Cuts and Jobs Act. US News’ Rebecca Lake notes that although real estate investors had always been treated well by the tax code, the new law enhances this treatment, and landlords in particular will be making a mint. She notes that various real estate professionals are predicting the same success for investors because “people will always need housing,” and the shortage of available homes means that many potential buyers have to (at least temporarily) forego their slice of the American dream.
If you are considering buying a home for investment purposes, there are a plethora of additional benefits you can look forward to. These include regular cash flow from rentals, appreciation (overall real estate prices have reflected rates of inflation) and an increase in equity. Although you may have to shop around for areas where the demand for rent is high and availability for purchase is low, you can even consider leveraging so as to take full advantage of your investment.