By John E. Miller
Over the last few years real estate investor confidence has been harder to find than a needle in a haystack. Today, however, things look differently as investor confidence is on the upswing—which is positive news for everyone involved in real estate.
Investors After the Real Estate Market Crash
Let’s face it—in comparison to the life of real estate investors before the crash, it has been very hard to make a living with real estate investing over the last few years. Successful investors decided to purchase foreclosures and other distressed properties and turn these homes into rental properties in areas with a high demand. Although these investors had to expand their job description to include “landlord,” this minor adjustment enabled these investors to immediately start seeing a return on their investment.
Before the crash, most investors engaged in house flipping—or purchasing a property below market value, sprucing it up, and selling the home relatively quickly for a profit. With falling home prices, the rising foreclosure rate, and tighter lender standards, it is these types of investors who suffered the most from the crash.
Restoration of Confidence
After several years of real estate market skepticism and a complete change for investors (moving away from house flipping and toward purchasing homes for rental purposes), these investors are finally gaining much-needed confidence in the real estate market. In fact, house flipping is no longer a thing of the past, with many investors snatching up foreclosures while prices are still low.
A recent survey shows that around 65% of real estate market investors have plans for purchasing investment properties over the next year.
What, exactly, has led to this renewed confidence?
Home prices have been on the upswing for the past 5 months, showing positive signs that the real estate market is truly recovering. Of the 20 cities surveyed by the S&P index, Phoenix saw huge rises in home prices over the last year as did Florida. The reason for these price increases? Investor demand. Even the areas without a huge international investor base, such as San Francisco, saw a rise in home prices of 5.3% over the last year.
As home prices start to rise investors become more confident in the real estate market, which leads to a strong real estate market and therefore higher home prices. It is a cycle that is actually very beneficial for the local real estate markets in these cities.
Along with home prices, many of those who have lost their homes to foreclosure are actually back on the market looking for their next home—yes, that’s right, foreclosure victims are buying homes.
In conclusion, home prices are rising and real estate market recovery is underway, which is restoring investor confidence. As investors start to purchase more properties, local real estate markets will continue to strengthen and progress toward recovery will quicken.
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Investor Confidence Rises with Real Estate Market Progress