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Savvy investors put money into today’s real estate market

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Posted: Friday, May 31, 2013 6:39 am

In 2011 one in every four homebuyers was an investor. What kind of person has cash sitting around to pour into a real estate deal? Investors.

But what kind of individual are they financially? Wealthy, right? They are high net worth individuals. High net worth individuals can usually project what’s going on before everyone else does. That’s why they became high net worth individuals in the first place.

Hedge funds are also heavily purchasing single family homes. When you see this type of cash (1 out of 4 buyers) pouring into the real estate market you need to understand there’s a dynamic happening that happens very rarely.

We all know what happened with the run up to the bubble. It was an artificial market. It was so easy to buy property it wasn’t even funny.

This is differentiated by today’s market. The last time it was less expensive to buy a home instead of rent was 1974. We are currently experiencing a more affordable housing market than any other time in recorded real estate history. To an investor that’s cash flow. To a home owner that’s cash savings.

I’ve also noticed a sense of urgency with the inventory shortage, and in my opinion rightfully so. The average number of homes built annually from 1968-2008 was 1,531,000 according to Joint Center for Housing Studies of Harvard University. Even during the turbulent times of 16 percent interest rates, the Cuban Missile Crisis, the Cold War, and the dot-com collapse there were 1.5 million homes built. Public fear was high during these times as individuals were building bomb shelters, but still 1.5 million homes were built. However, in the past 4 years everything has changed. In 2013 it’s predicted that only 542,000 homes will be built.

Home ownership has dropped 2.9 percent since the peak 2004. Only 2.9 percent! From 69 percent to 66.1 percent due to foreclosures. It’s not as dramatic as everybody thinks.

That’s a major movement and a big number but it’s not a double digit percentage drop — it’s only 2.9 percent

A Fannie Mae survey states that 86 percent of 18- to 34-year-olds are considering purchasing a house. Let that number sink in ... 86 percent. The vast majority are considering purchasing a house. They are going from mom and dad’s house out into a rental, but they want to buy a house.

This clearly outlines a market of constraint and a peak of interest.

So much interest that it seems we are almost guaranteed to expect a consistent rise in home prices. Not another bubble, but clearly rising prices, which benefits everyone. I’m looking forward to the vigorous market ahead! What an exciting time to be in real estate.

Sheri Aguilar is the president of the Lodi Association of Realtors and can be reached at