The first thing we should consider in determining how markets will be changing this year is to figure out what the significant factors are. Below is a list of the biggest factors to keep track of in 2013. This is by no means a comprehensive list of all factors, but merely the ones which will have the most impact on real estate values and occupancy levels. In no particular order they are:
Bernanke - Chairman of the Federal Reserve Board of Governors Federal Reserve Rates Real Unemployment Value of the Dollar Obama and Friends Banking Regulations
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An in depth explanation of each of these items would require several large publications so instead I am going to focus on explaining what role each of these factors plays in the real estate markets and how you can keep tabs on them.
The first two items on our list are the Federal Reserve Chairman, Mr. Bernanke, and the Federal Reserve. Most recently Big Ben has promised to keep the Fed rates at close to 0 percent through 2014. This is the starting point for most banks in pricing the rates they offer to investors. Lower interest rates facilitate higher real estate prices. This is especially true for commercial real estate such as apartments and office property. A lower rate means higher cash flows. Cash flow is what drives commercial property values. Investors want return and for real estate investments there are two ways to get it: cash flow and value appreciation.
Next up is unemployment. If you own an apartment complex, you want your tenants to have jobs so they can pay rent. Considering that the factors of unemployment such as taxes, licenses, and education do not appear to be changing anytime soon I suspect unemployment will remain steady through this next year.
The value of the dollar has been steadily declining for many years though it has been taking a bumpy ride along the way. This trend does not appear to be changing anytime soon. As the dollar continues to decline, investors will keep looking to own real assets such as real estate. Real assets will look even more enticing at the end of 2013 than at the beginning.
Every investor's favorite topic for dinner discussions this year: politicians and friends. The political landscape looks clear. Nothing is more enticing for a politician than acquiring votes and campaign contributions from property owners who tend to have more to offer than the average Joe. Don't expect these folks to do anything that would compromise property values anytime soon.
Lastly we have banking regulations. Fortunately for investors looking to get apartment loans this year, the big GSE's have not slowed down one bit in releasing cheap money for buying multifamily property. They offer long term fixed periods at historically low rates and that doesn't look like it is going to change anytime soon. Bernanke has promised to purchase their mortgages at a steady rate for at least the next year.
This is just an overview of what is to come in 2013. Though the economy may look scary at times, real estate investors looking for apartment loans this year have a lot to look forward to. Steady or rising commercial property values, extremely low rates, and no major changes in qualifying factors.
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