Rent's are on the way up, as many find themselves unable to purchase a home because of credit issues, bankruptcy, or losing a home to foreclosure. If you are considering purchasing investment property please call Paul Walker, with Realty Executives of Metro East, IL. Everyone that can diversify their portfolio should consider owning rental property in their portfolio. Property is tangible, whereas, stocks, mutual funds, and bonds are intangible paper products. I would also recommend for most people to find and use a good property manager, just like a stock broker. You can never make money in real estate, unless you first buy some property.
Demographic and economic forces, together with some perversities of government policy, are combining to push the share of ownership back to where it was in the early 1990s. Already, in the wake of the housing bust that brought on the Great Recession, the share of U.S. households owning homes has slid steadily-from 69% at its peak in 2004 to 67.2% in this year's first quarter. And the rate is likely to fall to its 1993-94 level of 64% by 2015. The flip side of this trend is a rising rental rate, which probably will hit 36% by 2015, versus 32.8% in 2004. Every percentage-point increase represents nearly 1.3 million households, and the average household includes more than two people-so roughly 10 million extra folks could be moving into rentals over the next five years. Why? From now through 2015, the long slog that will unfortunately characterize the economic expansion will bring slow growth in jobs and wages.
That pace of improvement should be just strong enough to permit new households to form, but not robust enough for the members of those households to afford to own homes. In addition, lax lending standards, fraud and predatory lending practices- key factors in the unrealistic bubble in home ownership in the mid-2000s and the subsequent debacle-appear to have become rarer, at least temporarily. Demographics also will deal home sellers and builders a clear blow. Not surprisingly, the home-ownership rate tends to rise with age. For example, while the overall U.S. rate is 67.2%, the rate for households headed by someone under 35 is just 38.9%. Thus, whenever the age distribution of households tilts in favor of younger adults, the overall home-ownership rate declines.
That happened in the early 1980s, when young (and numerous) baby boomers began to form households. And, says demographer Peter Francese, former president of American Demographics magazine, a similar tilt is likely over the next half-decade. Francese projects substantial growth in households formed by people under 35, who mainly rent rather than own. Worsening the shift will be a decline in the number of households led by people 35 to 49 years old-the very ages when there is normally a huge jump in ownership. Francese does expect a rise in households led by people 50 and older, but the boost to ownership from this won't be great. Home-ownership rates tend to level off when Americans reach their late 40s and early 50s.
GDP slowing more than expected
The Commerce Department says gross domestic product, the broadest measure of the nation's economic activity, rose at a 2.4% annual rate during the three months ended June 30. Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 2.5% rate in the second quarter. The government had previously estimated a 2.7% growth rate for the first three months of this year. Growth during the second quarter was also supported by new home construction, which surged at a 27.9% rate after being a drag on growth in the first quarter, reflecting a spurt in building activity spurred by a popular homebuyer tax credit that has since expired. The rate of increase was the biggest since the third quarter of 1983. Residential investment had contracted at a 12.3% rate in the first quarter. Growth in the last quarter was held back by 28.8% surge in imports, which eclipsed a 10.3% rise in exports.
That created a trade deficit, which lopped off 2.78 percentage points from growth, the largest subtraction since the third quarter of 1982. The report showed consumer spending was not as robust as had been previously thought. Growth in consumer spending was at a 1.6% rate in the second quarter after increasing at a revised 1.9% in the first quarter. Consumer spending, which normally accounts for 70% of U.S. economic activity, had previously been estimated to have grown at a 3.0% rate in the first quarter. Spending added 1.15%age points to GDP last quarter. The sluggish economy, 9.5% unemployment rate, and his constant attacks on business, banks, and Bush are eroding President Barack Obama's popularity and dimming Democrats' prospects in November's mid-term elections. A Reuters-Ipsos poll this week showed only a 34% approval of Obama's handling of the economy and jobs compared to 46% who deemed it unsatisfactory.
DSNews.com - Home Prices to Drop Another 4.9%
Despite recent increases in a number of the industry's home price measurements, and even an uptick in the company's own index of residential property prices, Fiserv Inc. says the gains will be short-lived. The Wisconsin-based information technology firm is forecasting home prices to fall by nearly 5% more over the next 12 months. According to the Fiserv Case-Shiller Indexes, which covers trend data in 384 U.S. markets, single-family home prices in the United States rose 2% in the first quarter of 2010 compared to a year earlier, Fiserv reported Thursday. It was the first year-over-year gain recorded by the company since 2006, but Fiserv says the national numbers mask the broad declines seen in most markets. Home prices were actually lower in 303 of the 384 metro areas included in the Q1 study.
Fiserv expects home prices nationally to fall by another 4.9% in the year ahead, as unemployment remains high, mortgage rates rise, and markets such as Florida, Arizona, and Nevada add even more distressed properties to their inventories. "The stabilization of residential real estate markets will take many years as buyers and sellers try to find price levels that clear large inventories of vacant homes from the market," said David Stiff, Fiserv's chief economist. "Consequently, we expect to see prices bounce up and down around their lows for the next two to three years, especially in markets that experienced the largest home prices bubbles," Stiff continued. "This will result in alternating bouts of optimism and pessimism regarding the housing market recovery... [and] will make it difficult to know exactly when the housing market has reached its bottom."
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