That is the question that most prognosticators are asking when looking at the rebound in the real estate market. Real estate as a sector fell so far and so fast and actually spurred the financial crisis just a few years ago, so it is logical to question whether the good news we have received in the past year is the “real deal.” Those who are looking at the rebound skeptically point out that investors have fueled the most recent real estate rebound by scooping up just about every lower priced home on the market. When prices are higher and they cease to become a bargain, investors are likely to back off. In our mind, the reason that investors have gone after real estate so voraciously is exactly the reason our real estate rebound may continue. Home prices in many areas of the country were lower than replacement costs while the cost of owning has been lower than the price of renting. These are numbers which are hard for investors to ignore.
While it is true that many investors might pull out as homes cease to be a rock-bottom bargain, they are far from not being a bargain for prospective homeowners. Those who dream of owning a home now realize that the opportunity to own at today’s low prices and rates may not last forever and they are filling the void left by investors quite nicely. As pointed out in news reports, investors are fixing up homes and selling to first time buyers. Will this continue? The key factor will be the ability of the economy to continue to generate jobs. We know as people purchase homes this will create more jobs and create the “virtuous” cycle we all have been waiting for. After the disappointing March jobs report, many were concerned that the economy was not creating the jobs necessary to fuel our recovery. Last week, we found that this was not the case. Not only was there a solid 168,000 jobs created in April and a drop in the unemployment rate to 7.5%, but the previous two months job creation reports were revised upwards by over 100,000 jobs. This growth occurred despite a loss of jobs in the government sector.
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