U.S. Real Estate Predictions for 2017

It is with great sadness and generosity that my annual rollout of US. Real Estate predictions can proceed forward. This year will have more of a political bent given that 2016 was all about the politicos and the mental consternation it brought to the American psyche. Most often, real estate predictions are about hard numbers, sales expectations, housing starts, etc., etc., etc. Pretty dry stuff if you’re a normal human being, but if you’re a policy wonk or a real estate broker, it’s a nirvana jubilee. This year I shall call my prescient forecast “Sidney’s Pix Six”.

Millennials (Send in the Millennials)
According to Zillow magazine, “More millennials will become homeowners, driving up the homeownership rate. Millennials are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics of the United States.” Unless you’re a devout racist, this is probably a good omen. Similar to the saying: Happy wife… happy life. An active housing economy saying is as follows: Happy labor market… happy America.

In addition, the 2017 National Housing Forecast is in lock step with Zillow, with its position that millennials and baby boomers are fully expected to constitute the majority of housing market participants in the coming year. The National Housing Forecast also noted “… that millennials will represent the largest share of buyers at 33 percent, a market ratio that has actually been lowered due, largely in part, to the impending interest rate hike”. In terms of the Mid-West, researchers believe they will lead the pack in aggregate purchases. “This year, average millennial market share in these markets is 42 percent, far higher than the U.S. average of 38 percent.”, said the report.

New home growth connected to Obama job creation
Will new housing starts have been better under Obama or the President-elect. There is varying opinion on that speculation, but here are what some for the pros say. “Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump”, says Dr. Svenja Gudell, the chief economist at Zillow. Furthermore, “A shortage of construction workers as a result may force builders to pay higher wages, costs which are likely to get passed on to buyers in the form of higher new home prices.”

Home Appreciation (The froth on the Top)
Even non-policy wonks like to sip the froth on the top. In real estate terminology, real estate home appreciation is the Eighth Wonder of the world. And according to Zillow, once again they’ve conveyed that sediment in numeric value. However, just like stats inherently lie, there’s good news and bad news. The good news is that there’s appreciation (remember, several years ago there’s wasn’t), the bad news is that it will be lower than 2016.

“Home values will grow 3.6 percent in 2017, according to more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey. National home values had risen 4.8 percent so far in 2016.

The good news on this disappointing forecast, is that the slow pace in price growth will be great for home buyers, since a slower market means slightly lower prices. However, some real estate experts refer to this as Phase-two of the post-Recession market. Phase-one having been the boomer-rang of price acceleration after the market had hit dirt bottom. The other 800-pound gorilla expert in the room is Reator.com, which anticipates a 3.9 appreciation rate, compared to Zillow’s 3.6.

Foreign buyers will play a smaller role (No Visa, No Dinero)
Lately, there’s been quite a bit of heightened drama with Number 45, even before he’s signed the lease at 1600 Pennsylvania Avenue. Arguing with world leaders seems to be the new norm, given the tit-for-tat with China, England and others. This raises the question of foreign buyers. The word on the street is that foreign buyers will be a bit more circumspect, since they will now have to consider their own visa and permanent Alien status given the President-elects stance on immigration policies and visa reform. Translated: Hesitant foreign buyers will mean less buying on the home luxury market, a longtime favorite cash bucket for foreign nationals to invest their money in the states.

While Orange is the New Black, Small is the New Big (or vice versa)
Based on facts, not speculation, the median square footage for new homes in 2016 fell downward. That’s a canary in the coal mine event. Meaning it’s not good. The Texas A&M’s Real Estate Center notes there are serval reasons for this present and future shrinkage, which can be attributable to several factors: higher demand for homes close to city centers, the Tiny Home movement (thanks HGTV), and the Come to Jesus Moment of home builders who now realize that poor home buyers can only afford so much square footage. The solution, build smaller homes. Problem solved.

Loan Democracy is Loan Democratization
I have advocated residential mortgage loans that are more user friendly. And that’s just not me, it’s think tank policy wonks as well, since some are pro-business advocates. Translated: Increase the FICO score requirement, but allow buyers and market players (aka small investors), into the game with less money down. According to the Mortgage Credit Availability Index, it’s easier to get a mortgage now than at any time in the past eight years.

Banks may also be more willing to work with borrowers over the next few years as they look to make up for a decline in refinancing business when interest rates go up. “The pendulum has been swinging toward a loosening of the credit box a bit,” says Daren Blomquist, a senior vice president with Attom Data Solutions. “I don’t think we’ll see a reversal of that with the new administration. We’ll likely see an acceleration.
—The Fiscal Times, November 22, 2016

In a nutshell, these are the primary issues of why 2017 will be different in terms of real estate. The reasons are fairly basic and logical. The newly elected president, and his administration have three major policies that are game changers. Think the following: 1) Infrastructure spending, 2) Tax cuts, and 3) Changes to immigration policy. The cause and effect will directly effect new construction starts and mortgage rates.

So there you have it. One hates to be the bearer of bad (and good) news. May we have a propitious year and hope the real estate Gods are open minded to their favorite Son.

Setting Up Your Real Estate Investing Business – The Business Setup Checklist

Since I get over 1,000 real estate investors coming to my various real estate investor websites and registering with me each week, as you might expect, I get quite a few people asking me how to get started investing in real estate.

When my business was smaller and I was just running my own real estate investing business and our local real estate investor group meetings, I used to sit down and meet with investors that asked me this question individually. We’d go to lunch at my favorite burrito place and I’d ask them many questions.

I’d want to know about why they wanted to invest in real estate, what they expected to get from it, how they thought they’d be making money as a real estate investor, how much time and money they planned to invest in themselves and their real estate investing business, what their business and investing experiences had been so far, and so on and so forth. After a couple dozen of these meetings though, I noticed a pattern in what I suggested to each of them (and yes, it really took that many meetings for me to notice this pattern): I suggested that each one of them get started wholesaling real estate.

After I told them that they should wholesale real estate first, I’d then run down–very haphazardly–a list of the things they needed to do to get started in their real estate investing business. A few years have passed since those first meetings and the first time that I made a quick list of how to get set up investing in real estate. Over the years, I’ve had quite a few people get started in the business based on those meetings with me. So, in this article, I’d like to share with you my Business Setup Checklist for Real Estate Investors.

In the Business Setup Checklist, I am not going to have you spend tons of money at first to lease an office, purchase expensive computer equipment and otherwise commit to lots of expenses with no proven income from your business. Instead, I will share with you what I believe to be the most important things to do and to purchase to get started in your own real estate investing business.

First, I believe you need to take time to sit down and decide where you are going. Stephen Covey says, and I agree, that you should “Begin With The End In Mind.” It is much easier to accomplish a goal if you know what you are trying to accomplish. Please, do yourself a favor, and don’t skip this critically important step.

Second, setup, or at least figure out, the minimum telephone communication system you will be using. Many times, it will be using your cell phone (and changing the message from something unprofessional to something more business-like). Of course, there is a wide range of telephone services you can setup. Start very basic, spend very little and expand as revenue increases.

Next, I am a big believer in using 24 hour recorded information lines in my marketing and so I do recommend paying the money to get this set up. With these, you can spend less on marketing and then have people call in to get more information about buying, selling, renting or private money before talking directly to you. You’ll be tempted to bypass this step and use regular voice mail (remember I’ve helped lots of other people get started investing in real estate) and that would be a mistake.

The next step is the MOST IMPORTANT step of all: get your marketing and get it out. Nothing happens until you start talking to motivated sellers in this business, so you need to get them to call you (or start calling them). So, take some time to figure out your basic marketing. Depending on your budget, you may also consider getting a website and bandit signs at this point as well. If you are on a tight budget, use the free website route and skip the bandit signs until later.

Once you have your marketing and are starting to get it out, you should then be getting organized and ready for seller calls. Make your Seller Presentation and Credibility Pack. Setup your office files to track income and expenses, marketing files and property files. Also, make sure you have the files and forms you need stored in your car. You never know when you might need to write up a contract and better to have them with you in your car at all times, then to miss out on a deal.

And finally, set up your business entity. The reason I recommend this last is because most people will stall on this step and unless you have assets to protect, it is a mistake to get hung up on it to begin with. If you have significant assets to protect, you should meet with your personal attorney at the start of any new business to get personalized, professional advice relating to your unique situation.

So, those are the basic steps to setting up your real estate investing business.