Wednesday, August 1, 2012

The Next Big Opportunity in Real Estate?

According to recent national research 70% of all existing homes in the U.S. were built prior to 1990. Research also shows the median age of a U.S.  Home In 1992 was 25 years old…in 2002 it was 30 years and in 2011 it was 35 years old. 
What do these stats show us?
If 70% of all U.S. homes are 22 years or older… what does this say regarding the condition of the majority of homes? According to the National Assoc. of Remodelers in 2009 22% of all home purchasers who bought a home 15 years or older planned to do $10,000 or more of improvements within 6 months of closing…(I am sure with the influx of REO and short sale properties that figure must be higher in 2012).

For the 10 years prior to 2008, U.S. Homebuilders were churning out between 1.3 and 1.5 million new home units per year…Since 2008 the average built number has dropped significantly to <600,000. The last time this few new home units were produced was in 1932 ….when the U.S. population was 124 million. The 2011 census now shows the U.S. population at 314+ million (over double what it was in 1932). This leads us to the old adage of supply verses demand.

Supply and Demand:
The U.S. population is growing and living longer…Plus there are approximately 80 million Echo Boomers between the ages of 18 and 32 years old who are already, or are thinking about, entering the real estate market as buyers. Couple this demand with a lowest supply of new inventory in 80 years and I think you can see where I am headed.
I feel the demand for existing homes will be higher over the next 5-8 years than it was during the “boom” years. With the median age of 35 years… a large portion of these existing homes sales will need updating, remodeling, or rehabbing. Here is where the “Next Big Opportunity” lies.

Cash is Tight but Financing is Cheap:
Many home sellers… turned home buyers… have lost a good portion of their equity and are “cash poor”. This makes REO and Short Sale listings in high demand to these cash strapped buyers…many times allowing them to buy into built in equity. The national average discount for REO sold homes was 34% below non-distressed like kind sales and short sales were discounted 24%. In the past 18 months the percentage of distressed homes sold to buyers who plan to occupy them has increased significantly…where previously the majority of REO buyers were savvy investors who usually know the market and the cost and hard work of rehabbing.

It is important to know what programs are available to buyers who want to buy homes in need of repair…We as REALTORS have to help our clients see a vision…see past what the home is now to what the home “could be” after the rehab work is complete. So…It will become even more important to build solid relationships with trusted contractors who have experience in remodeling and rehab and to educate yourself on loans like the FHA 203k (FHA 203k Loans)  or Fannie Mae HomePath  ( http://www.homepath.com/ )  which allows buyers to finance all, or a portion of, the repairs or improvements on their existing home purchase.  For questions regarding financing call Dan Flynn at 919-785-4238

New opportunities do exist in our marketplace; you just might have to look a little… (and work a little) harder to find them. If my gut feeling is right…this information shows a new need your clients will be facing…step up to the plate and become their “go to” professional for all things real estate related. Grab the opportunity to be ahead of the curve and secure business you may have otherwise missed!

Eddie Brown
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