What Does The Percentage Of Home Ownership Have To Do With RE Investing?

Posted @ 10:39 pm - Filed under Buying Income Property, Capital Growth, Economy, Financing, Kansas City, Market Correction, Purposeful Planning, Real Estate Markets, Retirement Income, Texas

In the 39+ years I’ve been in the business, the percentage of Americans owning their homes has stayed more or less at the same level — around 64% or so. It’s fluctuated at times of course, but 64% has been the benchmark for quite awhile. The last decade it’s zoomed to 69% or so. ‘Cuz it was largely based upon pretend loans made to pretend borrowers it’s now in the messy process of reverting to the norm — which ain’t pretend.

Though it’s arithmetical to say 5% when 69% is reduced to 64%, it’s really a 7.25% reduction in those who own their home. No matter how you say it, that’s a lotta people. It’s my contention the vast majority will forever be renters. Add to that the dearth of residential income property around much of the country, especially some growth regions — and you have the formula for falling vacancy rates marching in lockstep with rising rents.

Works for me.

When this happens in many regions of Texas, Kansas City, the Carolinas etc., it has the affect of turbo charging an already positive real estate investment atmosphere. This year alone we’ve already experienced escalating rents in parts of Texas. In fact, this year alone rents have risen in a specific project by just under 3.5%. Not bad, eh?

Did I mention Kansas City? Ask my good buddy Chris Lengquist what he thinks of KC’s future. Leave yourself some time though — he loves talkin’ ’bout BBQ, Kansas basketball, and the Royals, a group claiming membership in the Major Leagues. ‘Course that leaves me wide open for a Padres cheap shot, but I digress.

What this portends for those willing to invest now is the opportunity to already be in the V.I.P. room when the big party begins — whenever the heck that is. It’s my contention we’re tapping the mud with our feet, on our way to the shore. That doesn’t mean by any stretch that we’re at the bottom. It might mean though, that we’re at least in the shallow water to keep the analogy alive. But I’m veering off topic here.

For the first time in memory, vacant units in Texas are renting out in the last quarter of the year — without any giveaways. Though circumstantial for sure, it is another toe tappin’ the mud for a second.

I’ll end with an observation.

In the last several months the powers that be in the U.S. and around the world have injected between $3 and $7 Trillion into financial institutions, the amount depending upon who’s talkin’. They’re not lending it out though. All the talkin’ heads, and their Aunt Fannie have been spouting all the reasons they can fathom for this. In my way of lookin’ at things, why is the secondary question. I think the real primary question is something else, but first a small preface.

They’re lenders, and lenders lend, or they have no reason to exist. Any lender who has money and chooses not to lend, generally has a pretty good reason. Usually that reason is directly or indirectly related to the relative safety of the market in general perceived by the lender. I know — duh.

These lenders are mostly not real estate lenders, but commercial types. They’ll lend when they believe they’re seeing, on their own terms, the stock/bond markets calm down, losing most of the volatility we’ve seen so much of recently. In real estate we’re already seeing portfolio lenders proactively tryin’ to push their deposits out the door in the form of income property loans. There’s no mistaking what that means — they’ve surveyed the landscape and now feel safe enough to venture out.

A great sign.

Now, the primary question for me is this:

Where are real estate investors gonna be when all that money starts a flowin’? If you’re already invested in some of the solid properties found in the growth regions, you’ll be one of those boats about to be floatin’ with the friendly high tide.

Just like in 1975-76, 1983-84, and 1995-97 — those that got in before the party started were the ones who benefited the most by far and away. In my opinion, that’s where we are now.

The V.I.P. room is there for the takin’. The best part? You can write yer own invitation.

You’re invited to the virtual BawldGuy V.I.P. room. Just get a hold of me and we’ll see what’s shakin’. You’ll enter the Purposeful Planning Room, which is reserved for those wishing to make a real difference in their retirement income. Have a good one.

This entry was posted on Tuesday, December 9th, 2008 at 10:39 pm and is filed under Buying Income Property, Capital Growth, Economy, Financing, Kansas City, Market Correction, Purposeful Planning, Real Estate Markets, Retirement Income, Texas. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.