Get Ready-Another Housing Boom Is Underway

Huge, pent-up demand developing for housing. Investors will soon be getting back in the market. When investors can purchase with 5 to 10 percent down and purchase more than four to 10 properties, they will begin to buy again in large numbers as long as the interest rates stay down and cash flows are possible.

Get ready for a huge demand for housing, and huge appreciation, says Dr. Marshall Reddick, CEO of the Marshall Reddick Real Estate Network. There is a huge oversupply of homes now-but where are they? With so many foreclosures from last year and now this year, why is it there are 10 to 20 offers on every foreclosure? It’s because the banks wised up and are slowly releasing foreclosures onto the market. By doing this they stopped the declining prices in at least half the cities and we are even seeing some appreciation from a year ago.

Right now, we have an oversupply of homes because of all the foreclosures. Many previous homeowners are forced to move in with relatives and with so many losing their jobs, many of them are forced to do the same. However, hopefully 2012 will be the pivotal year when foreclosures dry up, after which the number of homes will become increasingly undersupplied.

Currently, builders are building at the lowest level in decades. When new homes are overpriced, they can’t get appraisals and banks are unwilling to provide construction loans.

Demand will soon outstrip supply. Forbes magazine says the supply of new homes is at one-third of what we need just to keep up with population growth. The National Association of Realtors says we need to build 1.3 million to 1.7 million new homes annually to keep pace with yearly household formation of 1.0 to 1.4 million, in addition to replacing 300,000 obsolete dwellings each year. Only 550,000 homes were built in 2009 and are projected for 2010. This is less than half of what we need to meet future demand as things return to normal and we have a three- to four-percent unemployment rate.

Investors are chomping at the bit to start buying again. Although many first-time homebuyers have taken advantage of the tax credit, other potential first-time homebuyers and move-up buyers who would like to purchase have succumbed to media messages that prices still could fall some more. Other homeowners are still uncertain about the economy and afraid that they may lose their job. Nearly everyone has a relative or knows someone close to them who has lost his or her job. Unemployment claims are now decreasing in most cities, which should help.

Summary: For the past two years, builders have been building to meet only about one-third the potential demand. Many small and medium-sized builders have been forced out of business.

Marshall Reddick, PhD, is the former head of the Real Estate Continuing Education program at California State University, Los Angeles. He is founder of the largest real estate network in the country, which features 12 monthly real estate clubs throughout California and one in Oregon. The network also offers free mentoring.

Want to find out more about Real Estate Seminars, then visit Marshall Reddick’s site on how to choose the best Piece of Real Estate for your needs.