First, there were memories of the pervasive price drops that followed the global financial meltdown. Not exactly what a prudent investor was looking for—even given the real estate’s traditionally invincible long-term record. Then there were fears that the economy’s slow reverse out of the Great Recession (a term that was in itself enough to freeze many a checkbook!) would hamper apartment and single family unit rental increases. A landlord could get squeezed by inflation…if there were any inflation…who could know for sure?
But as 2013 began, some positives that were at last beginning to provide a degree of optimism. Last year’s North Georgia mountain real estate investment decision was looking a little less risky when the historically low mortgage loan rates were taken into account. They penciled out to what looked like a potentially rosy cash flow outlook. And even the more hesitant investors had been noticing for a while how institutions had been pouring their own cash into residential real estate—you had to wonder why so many of the larger investment concerns suddenly seemed to want to become local landlords…
Now we can look back at 2013 and realize what a fantastic year it was for a real estate investment in North Georgia. First, there was the rise in real estate prices, which was nationwide. According to the S&P Case-Shiller Index, U.S. real estate prices increased 11.3%—the highest rate of increase in many years. By the end of the year, website Zillow was predicting that the rise would continue through 2014 at a steady (and less superheated) rate. That tempering was attributed to the gradual rise in still-low mortgage interest rates—and to the inevitable fact that the most extreme bargain properties had been snapped up.
The latest news on multi-family dwellings shows that fears of inflation outpacing landlords’ ability to increase rents were exaggerated (to say the least). National research firm Reis has just reported that for the 12-month period ending in June, rents rose 3.4%—the 18th consecutive quarter of rent increases! “You have definitely seen the recovery now spread to all of the major markets around the country,” according to Reis economist Ryan Severino. Single-family home rentals are on the rise also. According to Zillow’s latest Year-over-Year Rent Index, “increase renter demand is driving rental appreciation” even though rent affordability continues to be low in terms of percentage of incomes.
What does this mean for today’s investor deciding whether to enter the North Georgia real estate market? That’s always a choice individuals make for themselves—although, as a not-entirely neutral observer I tend to side with landlords throughout the ages whose reliable backstop has always been the real estate “they aren’t making any more of.” One thing is for certain: checking out the values to be found in this Fall’s local real estate offerings is the only sure way to gauge the opportunities that are out there. In other words, give me a call – Chad Lariscy with The Mountain Life Team – 706-633-8186.
It’s only prudent!