Plenty of factors figure into the state of the U.S. economy. When the economy crashed a few years ago, the housing market was largely blamed. Very slowly, we’ve been climbing out of this economic hole. The general public opinion of the recovering economy, however, is still mixed and hasn’t changed much from 2009. In a study by the Pew Research Center in February of this year, a reported 61% of Americans were hearing a mixture of good and bad news surrounding the U.S. economy and its recovery, 33% heard mostly bad news, and only 5% heard mostly good news.
If you spend any time watching your local news, national news or cable news shows, you are inundated with negative stories every day concerning the economy. There is very little news on the wire that evokes high optimism or the positive stories that highlight the parts of the economy or cities where there is actual growth.
That said, every economy is local and each city is recovering differently. There is reason for optimism and there is a certain level of understandable caution that most people seem to have in regards to the recovery of the economy.
What About Real Estate?
The good news is that there’s, well…good news! More findings from Pew Research indicate that 25% of those surveyed are hearing good things about real estate values. Real estate was the only sector of the economy to have predominantly good news going on. That bodes well, as that shift to good news over bad only began in 2012.
Real estate investors helped the housing market get where it is now by buying properties in the thick of the housing crisis. In 2011, investors were able to take advantage of discounted home prices and drive them up by over 31%. It helped prices recover and offered alternatives to former homeowners who lost their properties to foreclosure. Those are still important functions of real estate investment. Many parts of the economy still rely on real estate and construction to operate, but many feel that for the foreseeable future, homeownership will remain at or below historical levels of 64% - 66%.
We’re seeing, however, that home prices are growing at a lesser rate than they have been in the last few years. That means the market is beginning to stabilize. For real estate investors, that could mean you’ll be seeing less of your peers in the future. With high home prices, it’s harder for investors looking to buy in the current market to have positive cash flows with current rental rates — even when renting, in many cities, has become more expensive than buying. Take all economic predictions with a grain of salt, however.
We don’t expect a mass exodus of investors. As long as roughly 35% of the population wants or needs to rent housing, there will be a demand. The rental scene is still attractive to many Americans, particularly millennials and those who felt the pains of foreclosures in the past few years. No one’s going to stop renting any time soon.
How do you feel about the overall state of the economy? Share with us in the comments.