I just attended the Northern Virginia Association of Realtors Economic Summit and heard some good news which, although might not be immediate, could positively effect real estate in a few short years. Yes, even though the economy currently seems to be stalling and consumer confidence is in the tank, real estate is a great investment NOW. Here are some reasons why.

The inventory of newly constructed homes is at a 40 year low in part because of the difficulty of Builders to obtain construction loans. Rents are also going up and people are doubling up – particularly with multi generational families.  Moreover, the Echo Generation the largest group of young people since the 1960s is coming of age. Born between 1982 and 1995, there are nearly 80 million of them and they will want housing.

Although it might not always seem like it, our economy and the housing market is getting better. Jobs are being created but the number of jobs created is sluggish. The stock market has recovered since 2008 so consumers have more cash to buy.  And, once again with rising rents and record low interest rates, you don’t have to be a genius to know that now is the time to buy. Distressed properties are in demand especially for their deep discounts. And, international buyers particularly those working on U.S. soil are cashing in on the weak dollar by purchasing homes.

So who’s buying real estate now? The answer is The Wealthy. All cash transactions make up 35% of the deals. People are buying investment homes as a hedge against inflation which is already going up a bit and a hedge against a future housing shortage. Moreover, with interest rates in banks near O, buying real estate is putting money to good use. In fact, it might be a better investment then gold. Some investors are also getting mortgages. With record low interest rates it’s not only the price of the house but the cost of buying a house which is so attractive. If interest rates rise, which they are bound to do; their monthly payments would go up significantly if they bought at a later date.

While Mortgage Lenders as well as Consumers must own up to their past mistakes, too much regulation today is choking the mortgage market and could hurt the housing market.  Sure, Lenders must restore trust but lowering loan limits and choking off mortgages with less then 20% down would hurt the housing market, hurt the job market, and would keep credit worthy people from owning a home. Tighter standards by all means are required but when do they become too tight?

Everyone at the summit noted how fortunate we are to live in Northern Virginia with its robust job market. No one thought that the real estate market would be HOT HOT HOT in the immediate future but they did think that signicant gains could be made in a few years.

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