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5 Reasons For Optimism in Real Estate

If you're an investor that has been beaten down by negative media articles, let's look at where we are and put things in perspective:

5. The Europeans are coming. The Asians are coming. The Middle Easterns are coming. One of the wealthiest investors in the Middle East was on CNBC yesterday and stated unequivocally that he sees tremendous opportunity to acquire U.S. housing assets over the next 3 to 12 months. We are currently in conversations with a hedge fund out of Asia that is interested in purchasing $500 million in U.S. real estate assets.

Foreigners are putting investment dollars to work in California, New York, Florida, Arizona and other markets that have fallen but are expected to recover strongly. The weak dollar combined with the correction in real estate prices has made U.S. housing assets ridiculously cheap compared to expensive European real estate.

4. Canadians and U.S. expatriates are active U.S. buyers. Canadians need a respite from the harsh winter and Florida, Arizona, Carolina are just the places to offer it. Canadians are relatively wealthier with the depreciation of the dollar and Canadian real estate has held up extremely well leading many Canadians to consider a second home investment in the southern U.S.

3. Interest Rates - Could the 30 Year be at 5.25% by April? The economy and consumer confidence are declining monthly. The subprime mess continues to unfold. At least 2 additional Fed rate cuts are in the offing. An opportunity to lock in attractive rates and reduce monthly expenses would be welcome to many investors.

Why is this important? Because are anecdotal conversations with renters indicate that the consensus whether it be Miami, Orange County or New Jersey is that people that are renting actually plan to buy once prices come down, rates come down, blah blah blah. Declining interest rates significantly bridge the gap that currently exists between buyers and sellers.

2. Inventories are stabilizing. Rental inventory in parts of Florida where I reside declined from month to month for the first time in many months. New construction starts have plummeted, another piece of good news. Each of these factors are critical in setting up the stage for a recovery in housing. As the sub prime mess unfolds it is going to get tougher for buyers to get financing. Expect the numbers of renters to explode over the coming months and rental rates to rise.

Here's why rental inventory is more important that sales inventory. It is rental inventory that needs to decline before rental rates can stabilize and start rising, which will at some point make purchasing a better decision than renting.

1. And the number 1 reason to be thankful .... If you are a real estate investor or homeowner, congratulations! The media has made real estate ownership seem like it is to be avoided like the plague. You did something to improve your lot in life. You made an attempt to build financial freedom. Which is more than can be said for most people. And remember that 3% appreciation in real estate is equivalent to 30% appreciation on your money. It is still the best long term wealth building asset available today.

And worry not. Even if this deal doesn't turn out right. Because what you possess is the ability to make decisions, think ahead for yourself and take a risk in making an investment. You're focused on your future financial freedom and I'll put my money on someone looking to improve their lot in life any day of the week over someone that accepts their situation and is unwilling to do so.

Focus on ways to maximize the cash flow of your investment. Unlike stocks, housing is a tangible asset. People need housing and the population continues to grow each year. People are living longer. New construction starts have all but disappeared but the population is still growing. Because the correction has been so severe, the snap back will also be quite sharp. Happy Holidays!