Wall Street may be happy. After all profits are up and rising. However, for those of us in the real estate business exactly where are we. The good news is that rates are stuck in low gear and likely to stay there for the next 12 months. The economies resistance to revival remains stubbornly in place.
Demand for oil in the United States remains tepid driven by the weak economy and by a populace determined to waste no more. U.S. savings is running consistently at over 4% and consumers continue to cut their debt, write off their mortgages through foreclosure, and other debt via bankruptcy. The U.S. consumer is saving cash and reducing outstanding liabilities at an unprecedented level.
Corporations are piling up cash in profits. Yet, Hiring is stuck in near neutral. As of this most recent quarter, the U.S. Federal Reserve predicts that this will remain the case as does a majority of economists around the country.
Foreclosure activity is increasing and the inventory of houses on the market is at 8.5 months and likely to continue rising for months to come because of the increasing foreclosure rate. At the same time, since 2004 the number of renters has increased by 3.4 millions and in the past quarter multifamily and rental vacancy has ticked downward in the face of this mostly discouraging news.
Where does this the leave the real estate industry?
Keep in mind that behind all these statistics, the demographics point to sharply increased renting, steady population growth, and the transition of the Echo Boomer from dependents of their baby boom parents to heads of household. And, the credit effects of the downturn and emerging legislative environment will increase rental demand for years if not decades to come.
Investors and those interested in a rental real estate career are looking into an unprecedented opportunity as housing prices remain depressed and the developing economic environment builds toward a period of what should eventually become an especially strong period economic growth. This growth will be driven by the increasing savings driving investment and the stockpiled corporate profits going toward new business development and expansion. Employment stuck in neutral will likely begin a sharp improvement somewhere in late 2011 or 2012 as the pent up cash supply, the eventual recovery of consumer confidence, and the swelling global recovery begin to drive all factors forward. So, the short answer is buy now if you are an investor. Get into the industry as soon as possible if that is your goal. Seek to strengthen or stay with the industry if you are already in the business.