The Real Estate Market

The year 2030 doesn’t sound very long ago, does it? It may seem that a decade has passed since the global economic crisis of 2008 and that real estate markets around the world were floundering at under water. Fortunately, that isn’t the case today since the worst is officially over and the recovery is in full swing. According to economist’ agree, the industry is on track to reach a bottom by 2014. If you are currently involved in the real estate industry or are looking to get into it, here are some of the factors that will influence how things perform in the years to come.

The Main Threats

The main threats to the economic recovery still come from fiscal tightening and deflation. In particular, the U.S. has been hit by two of these threats in 2011, with low rates pushing consumers into un necessitatedretirement, while also causing consumption levels to drop. The housing market in particular has been plagued by this since early 2011, though the crisis has been alleviated somewhat as foreign investors have begun to buy up American real estate.

Non-English speaking markets are also in many ways directly impacted by economic turmoil within the U.S. market. These are mainly Central and South American countries that have growing economies and high unemployment rates. Rapid growth in many of these countries will drive their demand for American real estate. Furthermore, some of these countries are plagued by violent political conflicts, which are also driving their demand for foreign real estate.

Cheaper Materials

Should you be worried about the future of any market, one good thing comes from this regardless of the country in question. That being said, U.S. real estate markets such as Phoenix, Arizona are in fact very well positioned compared to their Mexican counterparts. That is due in part to the cheaper cost of construction materials in the U.S. The island nation of Mexico has seen double-digit growth through most of 2011, but has now started to experience weakness as its tax breaks for foreign investment start to expire.

Supply and Demand

Today, the markets of Arizona and Nevada are stilltorating at a stable and sustainable pace. Both areas this year have also seen unprecedented demand for materials for new construction projects, with a considerable amount of housing construction material going to these markets. For example, Arizona residential construction supplies rose to 109% from the 2009 low. Las Vegas saw a 28% spike, while homes for sale in Phoenix saw a 15% gain. One reason these areas’ housing supply rose so quickly is due to the surge of foreclosure and pre-foreclosure bank owned homes.

The Bottom Line

The bottom line is that all markets are subject to both supply and demand considerations. Interest rates, the amount of construction materials, and unemployment rates in particular, all impact the length of time it will take for an industry to grow and/or recoup its losses. However, while real estate has been growing for quite some time, we are now seeing acceleration as the effects do not seem to be slowing down. This is why now is the time to invest in those markets despite the risks.

For investors, Arizona and Nevada real estate would seem to be an excellent choice. Prices in Arizona are now 25% lower than they were last year while Nevada saw a 34% drop in house prices. Additionally, Arizona homeowners are seeing yearly appreciation rates of over 20% and more.

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