Lawrence Yun, Chief Economist of the National Association of Realtors, commented that in the decade prior to 2008, Americans only saved $250 billion, which is 2-3% of disposable income. We were doing a lot of spending back then. But in the time since, we are saving $600 billion, that is more than twice the savings prior to the bust. People have gotten more conservative in these troubled times.
Just where is the savings coming from? For one, people aren’t buying cars or homes like they used to. And two, real estate. It’s seems reasonable to think that the high priced goods would be put on the back burner until the confidence levels come back. We certainly have seen a drop in home sales since the boom era ended, that’s for sure. People are being more cautious these days about big purchases. But these people have to live somewhere, and that is why the rental market is so hot right now. Rents are increasing faster than than home values are dropping. That tells me that something has to give. Renters are going to realize that the rents are too high and, once again, will see that there is true value in ownership. Once that shift happens, sales will increase along with home values, and rentals will not be the “in thing” anymore and rent rates will decrease. It is a cycle, and knowing what I know about how high the rent rates are, I know the shift is coming soon!
So, where do you want to be positioned when the shift comes? I have been putting my money where my mouth is and have increased my inventory of investment properties. I have seen, first hand, the increase in demand for these rentals and the corresponding increased rental rates. I was able to buy most of these homes at incredibly discounted prices. Because of this, I am positioned quite well. I am aware that housing is not what it was back in the day of sub-prime lending. That was a time of the fix-and-flip. No, those days are gone, but the the housing market will be back. Not at the level it was at in the late 1990’s and early 2000’s, but they will be back. Real estate is a long term hold. Having the opportunity to buy low is key to the success of any investment. As anyone in the game knows, it is not how much you sell something for, it is how much you were able to buy it for that matters. You make your money on the purchase, not the sale. So I say get out there and take advantage of the low prices and the super-low interest rates, I sure am!