When Will Housing Prices Stop Rising?

When Will Housing Prices Stop Rising?

 

Many buyers are sitting on the fence waiting for home prices to drop like they did from 2007 until 2011. They point to pundits preaching imminent recession.  The economists disagree.  Not only do they not see a drop in prices they expect prices to rise significantly over the next 4 years.  There are several reasons to believe this in Northwest Atlanta.

1. Population Growth. In 2022 Atlanta is expected to have just over 6,000,000 residents.   In 2050 its predicted Atlanta will have 8,600,000 people.  Cherokee County will grow from 220,000 to 380,000 and Cobb County from 710,000 to over a million people.  Huge growth is fueling demand.

2. As inflation increases investors look for the solid returns real estate brings. The chart below shows that home price appreciation is a tremendous hedge against inflation.

3. Historically low interest rates. Anything below 5% will be “low” historically. And with the current US Debt situation its unlikely the rates will rise above 5% for the for-seeable future.

4. Low Supply. In the counties we service we currently have less than a one-month supply of homes for sale. We have been selling over 420 homes each month for the past six months in Cherokee County and have 325 for sale.  Cobb County has been selling about 850 homes a month and has 658 available.

This means that if no new homes come on the market every home for sale will get an accepted offer in about 3 weeks.

A normal real estate market has between a 4 and 6 months’ supply of homes on the market.  Investor Owners bought 17% of All Atlanta Homes sold last summer – the are betting prices and demand will stay high.  We believe that to be true too.

We can expect to see prices continue to rise at a more moderate pace for the next 4 years.  The only caveat would be if interest rates get above 5%.  Until that time demand will continue to greatly exceed supply.

What does this mean for you?  It means there is still opportunity to buy a great home or investment at a price that will allow for wealth building.

Why you might consider selling your current rental and buying more

Help your children buy now instead of waiting to inherit when you die. Many families find them torn apart over arguing over the estate.  We’ve recommended for years that you take your current investment portfolio and help your children either buy a personal residence or to buy an investment property in their and you name.

We had a client in her late 60’s who owned $1,000,000 worth of investment property free and clear and had 3 children.  Her children were in various financial stages of their life but only one owned a home. Her concern was that when she dies there would be acrimony over the estate. She sold her current investments and helped her two children buy a personal residence, paying long term capital gains taxes and that’s it.  About 15% currently.  And proceeded to  conduct a 1031 Exchange into investment property with 100% tax deferral for the 3rd.  The two residence buyers each bought a $500,000 home – putting $283,000 into the transaction and they borrowed $217,000 (15 year mortgage at 3.25% would be a principal and interest payment of under $1530!) In 15 years the homes are free and clear and might have appreciated and your kids had a home to live in for those 15 years. The third child bought two investments for about $600,000 putting 50% down. With a 5% appreciation rate for the 4 homes would be worth over $3.25 Million in 15 years.  There’s lots of variations to this theme – and some real advantages in addition with reduced maintenance and increased leverage –  check in with us for a no-obligation discussion specifically around your situation.

 

Real Estate Stats and Thoughts

Our primary areas of service are below, and it continues to be an unusually strong sellers’ market. Average appreciation is now at 20 % year over year, but the rate of appreciation is continuing to slow from the highs of 26% year over year .

 

Our primary areas of service are below, and it continues to be an unusually strong sellers’ market. Average appreciation is now at 20 % year over year, but the rate of appreciation is continuing to slow from the highs of 26% year over year .

Highlighted City: Cartersville

Some of you may have noticed in our statistical chart that we have added Cartersville to the List of Serviced Areas.  For over 2 years we’ve been recommending it as “the next hot spot” and it has proven to be fantastic. Just North of Atlanta and in the foothills of the Appalachians with direct access to I75 its beautiful and convenient.  There are several new home developments out there.  As the seat of Bartow County  they have 9+ Major Employers and 207 industries (minimizing recession risks) and a terrific track record of appreciation.  Buyers who took our recommendation and paid $215,000ish for new townhomes last winter are now seeing rents rise to $1500+ a month and prices for identical new units at $270,000ish.

https://locationofchoice.com/index.php/regional_data/major_employers

http://www.city-data.com/city/Cartersville-Georgia.html#b

https://www.cityofcartersville.org/29/About-Cartersville

https://visitcartersvillega.org/lakepoint-sports/

Property Management Question of the Month

How can I avoid evicting my tenants?

Currently, eviction lawsuits in Cherokee Cobb and Fulton counties are taking a lot more time to move through the system due to the recent moratorium on evictions sunsetting.

Unless your tenant is a danger to the health and safety of others, you may want to consider the following 8 eviction alternatives.

 

1. Work with them on their issue(s)

You are the boss. However, it’s a prudent idea to try to maintain a good relationship with your tenants. If you can find out why your tenant is having issues that are causing you to lean toward eviction, you might be able to help solve the problem.

 

For instance, say your tenant lives in a unit built inside of a garage, and the inside of the garage is shared space. Now, say you want your tenant to use the side door that goes directly into their home and not the front door that leads to the garage first.

If your tenant uses the wrong door to enter their home, there might be a reason. Their designated door might not have even ground or lighting. Your tenant might have a disability you don’t know about that requires them to walk on even ground. Not all tenants know they can or should ask for a reasonable accommodation.

Whatever the issue is, ask your tenant to share their concerns and see if you can work things out.

 

2. Be a little more flexible

Are you looking to evict because your tenant is breaking the rules? Reconsider your rules and see if you can be a little more flexible. Your tenant might be breaking rules that aren’t a big deal.

 

For example, if your lease allows your tenant to have one pet, but they have a second pet, consider letting them slide. It’s not worth evicting someone over having a second pet.

 

3. Offer to let them out of the lease.

When your tenant can’t pay the rent, offer to let them move out. That might be all they need to avoid you paying for an eviction. Be sure to get the terms in writing.

4. Renegotiate the monthly rent

Evictions cost money and can drag out in court for months. If you want to evict a tenant who can’t pay the rent, offer to renegotiate the rent. Drop the rent by $50 or $100 per month, or more if you can afford the cut.

 

This option won’t work for every situation, but if your tenant is otherwise great, you can avoid all kinds of legal fees and wasted time by dropping the rent. If you drop the rent by $100 per month, you’ll generate $1200 less per year. However, you might lose double or triple that amount with an eviction, lost rent, and potential damages an unhappy tenant may cause.

 

5. Ask how you can help

It never hurts to ask your tenant how you can help. This won’t work with every tenant, but some tenants are reactive or combative because they’re struggling with something.

 

You might be able to avoid eviction if you can help your tenant get through a rough patch in their life. However, don’t let your tenant take advantage of you. We recently had a tenant lose their job, fell behind on rent, but was able to catch up over the next six months.

 

6. Seek Mediation 

As long as your tenant’s issue isn’t non-payment of rent, mediation can help. If you’re in conflict with your tenant, a mediator can alleviate tensions and help you work out a solution.

 

If your tenant is experiencing financial hardship, a mediator can assist in creating a repayment plan for back rent. However, any agreements formed with a mediator aren’t legally binding unless you make those changes part of a lease amendment.

 

7. Offer them “cash for keys”

Sometimes you can get tenants to leave on their own by offering them a cash incentive (cash for keys) to move out by a specific date you both agree on. Eviction is costly, and offering a tenant cash to move out will save you time and money.

 

When a tenant accepts your cash offer to move out, draw up an official notice and serve that notice to your tenant as you would any other lease amendment. Post the notice to their front door and mail them a copy via certified mail.

Once your tenant receives the official notice, you can plan a date for your move-out inspection. From there, you’ll treat the situation as you would any other normal move-out.

 

8. Don’t renew the lease

If you want to evict a tenant, you might be able to get them to move by not renewing their lease. If their rent increases once they go month-to-month, that might be enough to make them leave.

Trivia Contest – hit reply with your answer to be entered in a contest to win a $100 Visa Gift Card.

 

Q: How many states border Georgia?

A:  2.

B.  3.

C.  4.

D.  5.