With the election finally behind us, many people are asking what the impact of Barack Obama being elected will have on the Real Estate market. I have mixed feelings about this but will try to stay as objective as possible for the sake of not choosing sides.
First of all, let's look at the tax plan. We have been told that "95% of American Taxpayers will get a tax break" according to Obama's talking heads, and others in his inner circle. However we cannot blindly expect that is the true amount of people that will be getting a refund. Not only that but that 95% is including the roughly 30% of people in the US that DO NOT even pay income tax, and would be given approx a $500 credit. (Talk about redistribution!) The CATO institute did a great workup on the plan and decided that about 81% of us would receive a tax reduction, and only about 10% would receive a tax increase in their liability. Here is the link for those of you who care to read further on about it.
http://www.cato.org/pub_display.php?pub_id=9769
With that said, former President Clinton DID raise taxes, and see a success in the markets. Obama's plan will actually discourage investment in Wall Street, and will most likely push many investors into unconventional avenues, or long term safe bets, as their profits would be heavily hit under the new President Elects proposals. However, this could be a benefit for the Real Estate Market. If the Capital gains tax stays flat, or drops, and with the current market having many homes available with rates low, we could see an increase in Real Estate investing. I think this will especially hold true for the long term investors. Real estate is historically one of the best investments one can make, and many savvy investors are already switching their money into property. I cannot speak for the nation, but in Tucson, we have seen small single family homes under $150,000 just dissappear literally overnight. It is a good sign when investors return to the market, and those that are in it for a 2+ year committment will really see dividends.
My advice has been this. Rates are low, prices are leveling, and the repossessions and short sales are being removed from the market. Grab one (or twenty) while you still can, it's going to be an interesting ride. In the long run however, Real Estate consistently outperforms Wall Street, and you're lucky if you can get 4% in a savings account. Why not put your money into something you can touch, a tangible entity, that is certain to go UP in value over time. Not to mention, if the promises are to be believed we may see many investors fleeing the high taxes on stock profits. This will drive the market back into an upswing and with banks being more picky who they lend to, you will always have renters!
One of the major concerns that is also being thrown around is "Can I borrow money?" The answer to that question is a resounding YES! There are still plenty of banks out there that are giving GOOD loans out. Not to mention that there are still FHA loans, and depending on your county/city, there are even grants from those entities sometimes for over $10,000! The reality of lending/borrowing is that we are past the days when 580 credit scores would put you into a home, you will now need at least a 620 score, and usually 1-2 yrs of employment history. Fannie and Freddie went under because of these sub-prime mortgages. I will address that in my next blog...
I hope this has been informational and welcome any questions or comments!
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