REI Wealth Magazine Featuring Paul Finck | Page 114
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Projected starts for 2010 are better, but just 700,000
units.”
Decreased construction means that more homeowners
and business owners are staying where they are in terms of
their location. Homeowners and business owners who
would like to relocate to a new home or office space
simply don’t have any options from which to choose. This
means that people are more likely to pursue the option of
remodeling or adding on space rather than going out into
the real estate market and looking for a new residential or
commercial property.
s a professional real estate investor,
keeping a pulse on the changes in
the market can be the difference
between having a profitable year
and seeing losses in your business.
Seeing these trends and knowing
how to react to them can be one of
the most critical skills for any
individual working in the property
business.
One of the most pronounced
trends in the market recently
has been the tightening of real
estate inventory and,
consequently, a shortage of
leads. This trend has paralyzed
many real estate professionals
and prevented them from
finding and making the deals
that will take their business to
the next level. The contributing
factors to this problem come
from many areas. Knowing a
bit about the factors that are
causing the issue will help you
to navigate the current changes
in the market.
Contributing Factors to Real Estate Shortage
There are a myriad of factors that may be affecting
your real estate business and your ability to find good
properties – both on the residential and the commercial
side – that will lead to profits and excellent options for
your portfolio. Alan Heavens of the Philadelphia
Inquirer reported, “Research from the National
Association of Realtors shows the U.S. needs to build 1.3
million to 1.7 million housing units annually to keep pace
with yearly household formations averaging 1 million to
1.4 million, in addition to replacing the 300,000 obsolete
dwellings that are razed each year. Statistics released two
weeks ago by Freddie Mac, however, show that only
910,000 units were started in 2008 and 550,000 in 2009.
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Heavens said that it can be challenging to try to
predict how much space will be needed in any given
year, “Predicting how much housing is needed
involves a complex calculus that weighs hard
statistics (newhome starts, sales of previously owned
homes) against a certain amount of demographic tea
leaf reading (householdformation forecasts). Thus,
there isn't complete consensus on what will be
enough. ‘At current levels of housing construction
and demand, the nation has just about two years'
worth of excess vacant homes for sale and rent,’ said
Moody's Economy.com chief economist Mark Zandi.”
Without additional construction, many homeowners
and those looking for commercial space may find
themselves frustrated.