Friday, April 25, 2008

Closing the Loop and Breaking the Chain

The anecdotes keep piling up. Its seems many first time buyers are attempting to get back in the market now that homes are becoming reasonably affordable (under 300k). Unfortunately they are continually being beat out by investors.

It appears we have a game of musical chairs, investors buy foreclosed homes and rent them to folks who were foreclosed on. This is a closed loop, and does not set off the needed move up buyer chain reaction . I believe this is why homes over 500k are not selling very well.....there just aren't enough move up buyers out there!

As long as foreclosures dominate sales statistics, the chain will be broken. Homes have to be bought from real people, looking to move into another (larger) home for the chain to be repaired. One good to come of this: rent's don't go up, due to oversupply.

From what I understand, the government gives generous tax benefits to real estate investors, which makes rentals property an attractive investment even if rent doesn't cover all expenses.

1 comment:

Patient Renter said...

We are flush with rental properties though, so there is only so much room in the marketplace for all of these "investors" to rake in all of that easy money they're dreaming about.

The problem is that the cycle is not complete. The walking away phenomenon will go through more phases as these "investors" get slapped upside the face with even more depreciation in the years to come.