The Bargain Basement Days Appear To Be Over

Resetting your property investment strategy

After several years of horrendous declines in the valuation of house prices in the U.S., the latest reports show a definite pattern of a slow but continued rise out of the housing slump.  So much so, that it appears the days of the great “bargain” prices for those looking to buy investment property are beginning to come to an end.

Statistics don’t lie

Even before the traditional Spring selling season is about to begin, statistics show that house prices are rising at their greatest pace in almost seven years.  Home prices rose 8.3 percent in December, and are now reported to have jumped 9.7 percent in January, compared to the prior year’s data, according to CoreLogic, which tracks house prices in the U.S.  While price valuations are still down a huge 26 percent from their lowest point in 2006, this recent trend upwards is good news for all those looking to buy investment property.

Continued price rises

Except for Delaware and Illinois, prices rose in all other states in January.   Western states garnered the lion’s share of price improvements, with Arizona, Nevada, Idaho and California leading the nation, with double-digit percent increases.  The nation-wide inventory of homes for sale has been slowly shrinking, and that coupled with increased pent-up demand has been fueling the price increases.  Property investors with existing holdings finally have some cheery news to celebrate.  Now, for the first time in years, price appreciation can be added to your expectation of returns on rental housing properties, besides the positive cash flows from operations.

Moving off the fence

Another fortuitous sign of the housing recovery is the fact that the number of signed contracts for sale of existing properties jumped in January from December to their highest level in over two years.  Again, this activity is occurring prior to the Spring real estate sales market – a very good sign indeed.  It would appear that all the fence-sitting buyers are now starting to realize that this is the time to move ahead and purchase before house prices rise even further.  Especially with interest rates for 30 year mortgages continuing to stay at extremely low rates – for the time being.  So if you’re looking for a great “deal” now as you look to buy investment property, your mindset should be changing.  Instead of a good bargain, be more concerned with obtaining a proper cash flow return on your investment.  The increase in property valuation will begin to come to fruition naturally after that.

 

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