When is the Right Time to Invest in Real Estate?


It’s natural to base expectations for the future on past experiences, and no matter how conservatively you approach your portfolio, it’s understandable if you’re cautious about real estate. It’s not liquid, requires a substantial down payment, and investors took a beating in the recent Great Recession.

However, it’s important to remember that historically real estate has outperformed or stood its own against other asset classes. It’s one of the few that gives investors a cash flow that can be as passive or active as they want. Nearly all the expenses are tax deductible, and gains could be exempt from taxes when it’s sold, advantages few other investments offer.

Thanks to online resources from professional and government agencies, it’s easier than ever to know when to make a move in any particular housing market. The indicators to use for real estate research are the same that the National Board of Realtors (NAR) uses that include federal, state and local private and public agencies.

When is the Right Time to Invest in Real Estate

National Trends

NAR has developed a statistical tool called the “Bubble Index” that takes into account a bundle of factors like appreciation, foreclosure and flipping rates. They also look at the mortgage transaction ratio (the number of mortgages issued versus cash transactions), and the price to income and price to rent ratios. They measure demand by looking at household growth in relation to the number of housing starts, as well as job formation.

The NAR reports that their index shows that the overall, the U.S. housing market is well below the indicators present before the bubble of the mid 2000s. It’s ticking up for some cities, primarily in western states. Florida’s home prices have risen since the housing crash, but have not yet reached their pre-crash levels.

Local Trends

Home prices are on the way up. Over the last 12-month period, home prices the metro Jacksonville area have risen a whopping seven percent, putting the area on the list of healthiest housing markets in the U.S. The growth in housing prices is a function of steady demand created by steady job growth. The U.S. Navy is the area’s largest employer, and the region has a strong presence in the manufacturing sectors.

Interest rates are low. Although long term rates have inched up slightly in 2017, they’re still historically low for mortgages. There is little evidence the Federal Reserve will raise these rates in the foreseeable future.

Lender requirements are still stringent. Gone are the days of easy mortgage money, especially for investment homes. Banks now require 20 percent down for rental properties, which has reduced the number of speculators and flippers in the market. Although lender requirements are strict, borrowers have access to a wider array of down payment resources than ever to overcome this barrier to entry.

Putting It Altogether

When you’re ready to make a move into the market, do your research to find out the right time to invest in real estate. Look for reports about:

Realtor.com is a good place to start for the Bubble Index, housing prices, and sales data. The Bureau of Labor Statistics (bls.gov) has job data going back 10 years and is easy to use. The U.S. Census Bureau (census.gov) has population estimates along with other historical information about Jacksonville’s demographics.

Local newspapers often publish reports about the economy. Your best, and simplest, resource will be a real estate agency that specializes in investment properties. Besides managing properties, they also work actively with acquisitions, and will have in depth information about the condition of the market and its underpinnings.

JWB has more than 10 years experience managing turnkey rental property investments. We have a consistent approach that delivers steady cash flow from our clients investment properties. Curious what your cash flow could be from one of our rental properties? Try our cash flow calculator or contact us to learn more.

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