HOME PRICE APPRECIATION – Winners and Losers?

by Tim Herriage

HOME PRICE APPRECIATION – Winners and Losers?

by Tim Herriage

by Tim Herriage

Real Estate FinancingInvestors particularly agree that home price appreciation is a good thing especially if you are able to realize this through a sale or successful refinancing. Investors are already on inside owning property and on their way up the property ladder, but to maintain this upward momentum properties, Investors need sellers/buyers and lenders to facilitate first-time and move-up home purchases. Most investor exit plans need a qualified and willing buyer who can close on the deal but home price appreciation can make finding these people more difficult, especially with a conflict housing confidence among vital buying audiences.
CLIMBING THE PROPERTY LADDER
It is widely held belief that buying a first home is a step up onto the ladder toward a secure future. Not only is this belief core to the American Dream, this bottom rung of the property ladder is a seen as a vital starting point to individual wealth building by most modern economies. It is seen as a step toward maturity and adulthood. But what happens when the markets do not cooperate with plentiful affordable properties, adequate jobs with incomes that makes buying a house feasible, coupled with a mortgage lending environment that can help close the gap between savings and what is need for a home purchase?
CONSUMER CONFIDENCE CONFLICTED
Current home values are near or past their pre-crisis peak in about 25% of U.S. metros. These inevitably are the most popular and populous, making for competitive markets. This confirms market value recovery but at the same time as a gap is growing between renter and homeowner sentiment.
According to a Housing Confidence Index released by Zillow September 1st 2016, current homeowners and renters agree that home values are going to continue to appreciate but the confidence in home value appreciation held by current homeowners is very different from the confidence of renters.
Homeowners: Zillow found existing homeowners are becoming increasingly confident that now is a good time to sell, but more so than buying on a ratio of 70 percent sellers to 65 percent as buyers. The most confident homeowners were concentrated in Western and Southwestern cities.  If they are reluctant to sell as they do not see buying as that attractive, they cannot move-up, therefore allow a more affordable home come to market.
Renters: Only 38 percent of the renters believed it is good time to buy. In cities like San Francisco, New York, Seattle, San Jose, and Boston renters lacked confidence in their ability to afford a home.
DEEP DIVE DATA DILEMMA
Zillow Chief Economist Dr. Svenja Gudell says, “The overall health of the housing market looks great at first glance, but dig a bit deeper you’ll find inequality between renters and homeowners. Even though the confidence of the majority of homeowners and belief now is a good time to sell, they’re holding off because they expect home values to continue to appreciate and want to ride the wave. They also don’t want to turn around and become buyers in a competitive market.”
“On the flip side, renters aren’t nearly as confident as homeowners—they’re discouraged by the shrinking number of homes for sale and rapidly rising prices. As housing gets more and more expensive, these trends are not sustainable in the long-run, especially once mortgage rates start to rise.”
WHAT IS AN INVESTOR TO DO?
An investor does not have to do anything provided the property they own is cash flow positive.  If they are trying to sell a flip qualified buyers (retail homeowners or investors) are necessary to a sale as a successful exit strategy. It is essential the investor has a realistic plan and pricing strategy, as well as real estate brokers and lenders who can generate buyer interest and in the case of buyers, particularly other investors, an ability to help get them funded.
HAVE YOU LISTENED TO A SECOND OPINION?
2020 REI Companies includes a Consulting division that evaluates the current state of the investment, the investors goals and what options make sense, whether maintaining a steady state, refinance, exit or exit and a re-investment.  2020 REI Companies include an investor-focused brokerage like many around the country that can help investors sell properties. Investable Realty can help you sell retail or to the many investors they serve that will buy properties with the potential to be cash flowing rentals. Investable Realty is associated with another 2020 REI company, 3L Finance who specializes in investor funding. For Investable Realty go here. For 3L Finance go here.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Top