Mentorlynx: First-Time Investors Enjoying Buyer’s Market in Real Estate

The real estate market is currently a buyer’s market. Real estate investors are capitalizing on the current housing crisis. Housing inventory is up, mortgage rates are down, and existing home prices are projected to increase in the following years. Investors are turning to real estate to diversify their portfolio; especially investors who lost their retirement savings and suffered losses from the troubled stock market.

The housing inventory has steadily increased. According to the U.S. Census Bureau, the number of all housing units in the U.S. was 127,808 in 2007, 129,019 in 2008, and 130,159 in 2009. The number of vacancies was 17,635 in 2007, 18,545 in 2008, and 18,815 in 2009. As the housing inventory and vacant units have increased, the overall housing has increased as well.

As the housing inventory has increased, the Federal Reserve has reduced mortgage rates to encourage purchases. According to the Federal Reserve, a 30-year fixed mortgage rate was 6.34 in 2007, 6.04 in 2008, and 5.04 in 2009. The 30-year fixed mortgage rate was estimated to be 4.56 in July, 2010, according to Freddie Mac.

Existing home prices are projected to increase in the coming years. According to the National Association of Realtors’ (NAR) “U.S. Economic Outlook: August 2010,” the existing home prices was down in 2009 by 12.9% from 2008. However, NAR statistics show existing home prices increasing by 0.1%, 1.5% and 2.8% in 2010, 2011 and 2012 respectively.

The unemployment rate is also a factor in today’s buyers’ market for real estate investors. The unemployment rate has steadily increased as the recession began in late 2007. According to the Bureau of Labor Statistics, the 2008 unemployment rate was 4.6%, 2009 was 9.3% and the unemployment rate as of June, 2010 was 9.7%. From 2007 to June, 2010, the unemployment rate increased 110%. According to NAR data, unemployment rates are expected to drop from 9.8% to 9.3% in 2012. As more unemployed workers return to work, the demand for housing will increase. This will be a positive trend for real estate investors.