The housing market continues to show positive growth towards pre-crisis levels with strong sales. But the lack of inventory is pushing home prices higher and causing many homebuyers to consider moving to secondary markets with lower prices. Many investors believe that housing recovery is nearing the end of the cycle, but that might not be the case, according to a recent Morgan Stanley report.
Housing is still recovering
Morgan Stanley’s North America Insight Report states that housing recovery is not late in the recovery cycle, but in the middle. This analysis was based off findings that 44 of the top 75 markets had not seen home prices recover to their pre-crisis levels. These top markets contain 60% of the United States population. With the majority of markets displaying positive growth, real estate investment opportunities are still possible. There is not enough new construction to facilitate all new homebuyers, but fix and flip properties are one way to lower the strain on housing inventory.
Rising rates may be “less problematic”
In its research, rising interest rates in this cycle were gentler “in terms of absolute rate levels and the speed at which they were moving higher.” Even in aggressive cycles, Morgan Stanley noted that it took an average of eight quarters to have an effect on housing prices.
Morgan Stanley also noted that the impact of rising rates on home prices could take even longer because of growing home demand, low inventory of homes for sale, favorable mortgage affordability, and a household debt to disposable income ratio that is “down 30% since the financial crisis.”
There’s still time to invest
Morgan Stanley’s research hints that there is still time to invest in real estate. Whether that investment is flipping houses or utilizing an investment platform; the potential for a return on investment is still there. But like all opportunities, you cannot wait to start investing. It is unclear how long markets will remain below pre-crisis, but it might be too late to capitalize on this opportunity if investors hesitate too long.
Source: Morgan Stanley Research North America Insight
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