5 Reasons For Optimism in Real Estate

If you're an investor that has been beaten down by negative media articles, let's look at where we are and put things in perspective:

5. Investors, hedge funds, REITs from around the world - Europe, Asia, India, the Middle East = are actively and quietly investing in U.S. real estate. One of the wealthiest investors in the Middle East stated on CNBC yesterday that he sees opportunity to acquire U.S. housing assets over the next few months. Hedge funds have contacted us recently out of Asia to initiate discussions on pricing for large portfolios of assets

The significant depreciation of the dollar has made U.S. housing assets ridiculously cheap compared to expensive European real estate. Foreigners are investing in California, New York, Florida, Arizona and other markets that have fallen but show strong long term demographics

4. Canadians and U.S. expatriates are active U.S. buyers. Canadians need a respite from the harsh winter and Florida, Arizona, Carolina are just the places to offer it. Canadians are relatively wealthier with the depreciation of the dollar and Canadian real estate has held up extremely well leading many Canadians to consider a second home investment in the southern U.S.

3. Interest Rates - We may have a 30 Year mortgage at 5.25% by April. The economy is weakening monthly. The subprime mess continues to worsen. At least 2 additional Fed rate cuts could be coming. An opportunity to lock in attractive rates and reduce monthly expenses is certainly thankful news for many investors.

Here's why this is important. Our anecdotal conversations with renters indicate that most people are renting today with a plan to buy once prices come down, rates come down, blah blah blah. A decline in rates is reducing the benefits of renting versus buying and buyers that skip this opportunity may not be able to get as much home for their money once the market bounces back.

2. Inventories are stabilizing. New construction starts have plummeted, another piece of good news. I track local inventories in South Florida, where I happen to reside. Over the past couple months, we've started to make inroads into the rental inventory. Rental inventory in Palm Beach county declined from month to month for the first time in a long time. Could that be a start of a inventory reduction trend. Okay, even if you don't buy that, rental inventory has stayed relatively flat for the past 6 months. Ditto Fort Lauderdale, Miami Beach. Miami continues to worsen.

Here's why rental inventory is more important that sales inventory. It is rental inventory that needs to decline before rental rates can stabilize and start rising, which will at some point make purchasing a better decision than renting.

1. And the number 1 reason to be thankful .... If you are a real estate investor or homeowner, congratulations! Real estate is the best long term wealth building asset available today, despite what the fear mongering media would have you believe. The media has made people fearful of real estate ownership. Ask someone that has owned a home for 20 years if they're glad they purchase. What do you think your home or investment will be worth in 2015. You have made an attempt to build financial freedom. All that is required is patience. Remember that even 3% appreciation in real estate is equivalent to 30% appreciation on your money at 10% down.

And worry not. Even if this deal doesn't turn out right. Because what you possess is the ability to make decisions, think ahead for yourself and take a risk in making an investment. You're focused on your future financial freedom and I'll put my money on someone looking to improve their lot in life any day of the week over someone that accepts their situation and is unwilling to do so.

Focus on ways to maximize the cash flow of your investment. Unlike stocks, housing is a tangible asset. People need housing and the population continues to grow each year. People are living longer. New construction starts have all but disappeared but the population is still growing. Because the correction has been so severe, the snap back will also be quite sharp. Happy Holidays!