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Boom or Bust
For those looking to invest in the real estate market?keep your eyes on the headlines. According to the Federal Deposit Insurance Corp. (FDIC), the number of areas across the U.S. with real estate booms shot to 55, increasing by nearly two-thirds last year. The FDIC warns, "these booms may be followed by busts". "Boom" areas are defined as having inflation-adjusted prices at the end of 2004 that were up 30% or more in three years. Of the 362 major metropolitan cities included in this study, over 15% were boom areas. This data, analyzed by the Office of Federal Housing Enterprise Oversight, more than doubles the peak of the 1980's booms and is the highest ratio of boom markets in 30 years. As for "boom or bust", busts are rare. Only 17% of U.S. housing booms from 1978-1998 ended in busts, which are defined as a 15% or more drop in home prices over a five-year period. What is making the market soar? Aside from inflation, the mortgage industry has to be considered first. Adjustable rate and interest only mortgages are growing in numbers and subprime loans now account for 10% of all mortgage loans. With interest rates lower than they've been in years, borrowers can afford to finance an amount greater than the standard 80% loan to value. The percentage of loans exceeding 80% of the purchase price has grown to over 30%. If a borrower has an adjustable rate mortgage and the interest rates rise, their payments increase. If the market values drop, or bust and they have 90% or 95% loan to value, they owe more on the home than it is worth. But these are all "What ifs??". In the markets with the highest number of "boom" cities, California with 21 cities has a high increase rate of 58% and Florida with 11 cities has a high increase rate of 54%. These two states alone account for 60% of the boom areas! With these numbers, would you purchase an investment property in Florida or California and flip it in three years for a possible return upwards of 50%? Of course. A relatively sound investment. How much longer can the market withstand these price increases before it busts? Even history shows a period of time when the market stalls so that inflation can catch up. If you want to invest in real estate, carefully examine the history of the market you are purchasing in! If it has been booming like Florida and California, be careful how long you hold on to the property. If you notice the market is starting to drop, sell. Hold on too long, it may bust! Jason M. Rigler
MORE RESOURCES: Florida real estate sellers slashing home prices as inventory surges to uncomfortable levels New York Post How real estate commission changes could affect buyers and sellers The Washington Post Here’s the latest on commercial real estate sales in Baton Rouge Greater Baton Rouge Business Report The Folly of China's Real-Estate Boom Was Easy to See, but No One Wanted to Stop It The Wall Street Journal Real estate experts share a message for home buyers as they predict rising home prices through 2025 Fox Business Chris Hemsworth's Homes: Inside the Marvel Star's Real Estate Portfolio Architectural Digest Blackstone makes more real estate moves InvestmentNews Berkshire Hathaway's real estate firm to pay $250 million to settle real estate commission lawsuits The Associated Press Navigating Real Estate Law with The Mullin Blankfeld Group KLAS - 8 News Now Former HGTV star gets jail time for real estate fraud WGN TV Chicago Routt County real estate sales at $26.2M from April 19-24 Steamboat Pilot & Today Blackstone's Beleaguered Real-Estate Fund Stems Exodus The Wall Street Journal EG Real Estate: A Block of Historic Downtown Hits the Market – East Greenwich News East Greenwich News Warren Buffett's real estate firm pays $250M to settle antitrust suit over commissions New York Post Warren Buffett's Real-Estate Firm Settles Antitrust Matter for $250 Million The Wall Street Journal Can Robert Kiyosaki's Real Estate Investing Make You Rich in 2024? Norada Real Estate Investments The Pipeline: Commercial real estate roundup for 4.26.24 RichmondBizSense An ongoing issue for the Rockford-area's top-ranked real estate market: Not enough homes on the market Rock River Current Judge Approves $418 Million Settlement That Will Change Real Estate Commissions - The New York Times Real estate, business leaders help honor Milwaukee-area real estate projects: Slideshow - Milwaukee Business Journal The Business Journals Reversing the Real-Estate Doom Loop Is Possible. Just Look at Detroit. The Wall Street Journal This is America's Hottest Luxury Housing Market of 2024 Norada Real Estate Investments East Austin real estate booming after Tesla The Business Journals 10 Cheapest Florida Beach Vacations for 2024: Affordable Beaches Norada Real Estate Investments This ornate Queens home with $1M of mahogany additions asks $5.77M -- one of the priciest in the borough New York Post A+ Real Estate: See How Much It Costs To Buy a Home in the Nation's Top 10 School Districts Realtor.com News New Jersey DOI mulls $250m commitment to Bain real estate fund IPE Real Assets Berkshire Hathaway's real estate firm to pay $250 million to settle real estate commission lawsuits The Atlanta Journal Constitution Berkshire Hathaway's real estate firm to pay $250 million to settle real estate commission lawsuits Beloit Daily News Solano Real Estate Scene: Back road to downtown Suisun City Fairfield Daily Republic From First-Class to Super Prime: A Luxury Real Estate Success Story News Channel Nebraska Some Exciting North TX Real Estate Projects in 2024 The Dallas Express Solano Real Estate Transactions: April 26, 2024 | Solano Business | dailyrepublic.com Fairfield Daily Republic Rockford Is Now America's Top Housing Market After an Improbable Turnaround The Wall Street Journal Mike Wyatt's legacy: Longtime Dallas real estate broker remembered - Dallas Business Journal The Business Journals Real estate transfers: 3 Stark County homes sell for $500000 or more Canton Repository reAlpha Tech Corp. Launches Claire, Real Estate's First AI-powered, Zero-Commission Smart Buyer's Agent Business Wire real estate market and insurance Sacramento Appraisal Blog $2.2 million Key Biscayne townhome highlights this week's Real estate deals for Key Biscayne and Brickell Islander News.com Berkshire Hathaway's real estate firm to pay $250 million to settle real estate commission lawsuits Bowling Green Daily News Real Estate Investment in Belize - Luxury Beach Front Opportunities | Covington-Maple Valley Reporter Covington-Maple Valley Reporter San Francisco Buyers Bring Its Luxury Housing Market Back to Life The Wall Street Journal $5 billion real estate firm St. John Properties opens office in Plano The Dallas Morning News Coima selected for €500m Intesa Sanpaolo real estate mandate IPE Real Assets Cincinnati zoning changes: Homeowners rip into city - Cincinnati Business Courier The Business Journals Homebuyers and sellers might spend less following major real-estate settlement - Evanston RoundTable Homebuyers and sellers might spend less following major real-estate settlement Evanston RoundTable Recent commercial real estate transactions - 4/24/24 BizTimes Milwaukee Berkshire Hathaway's real estate firm to pay $250 million to settle real estate commission lawsuits MSN Is The Housing Market Going To Crash? Bankrate.com Real-estate agent's ritzy Hamptons home used in fake Airbnb scam Business Insider Agencies' headquarters in DC remained 'nearly empty' in 2023, real-estate board finds Federal News Network Real Estate Quarterly: Auctions On the Rise Los Angeles Business Journal Former Laconia State School property back on the market Conway Daily Sun Homes for Sale in New York and Connecticut The New York Times Big Tech Is Downsizing Workspace in Another Blow to Office Real Estate The Wall Street Journal Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout The Wall Street Journal Homes for Sale in Manhattan and Queens The New York Times The Top 3 Real Estate Stocks to Buy in April 2024 InvestorPlace |
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