How the Employment Environment Affects Real Estate

Investors and Colleagues,

Late last week the Bureau of Labor Statistics (BLS) released the monthly payroll report for April. For the month, the US economy added roughly 244,000 new jobs which materially beat expectations.

On top of the April data, the BLS also revised previous month’s statistics higher – indicating a total increase of about 290,000.

While the raw numbers were good, the details were even better. The number of government jobs have actually been declining over the past month – so that means private payrolls have been increasing by an even stronger rate to offset government job losses.

Bottom line? The employment picture is steadily improving – and consumers are becoming more optimistic.

Consumers, Employment, and Real Estate …
The environment is improving each month. Nearly every economist now admits that the US economy is growing. While the terms describing the recovery often include “modest” or “moderate,” the pace of recovery is actually quite healthy.

I would much rather see a steady, sustainable recovery that can last for years, than the type of economic growth that creates risk, asset bubbles and eventually pain. Today’s economic expansion is the kind of environment that can encourage individuals to once again put their hard-earned capital back into play.

With the employment picture looking healthy, we should see a transformation in the residential real estate market. These two economic areas (employment and housing) go hand in hand.

Workers who land a new job are much more likely to purchase a home. And as demand for housing picks up, the residential real estate market will see inventories decline and asset values increase.

We’ve already talked about how important it is to be invested in the right areas of real estate. With this “moderate” recovery, not every real estate investment will benefit. But the prime locations with attractive housing, and a strong surrounding employment picture will yield tremendous investment returns.

Consumers Recover While Banks Tread Water
Here’s where it gets really exciting. Even though the employment picture is turning around and the broad economy is growing steadily, the financial industry is still under a lot of pressure.

Mega-banks who issued loans to everyone with a pulse (and sometimes not even requiring that) are still sitting on huge losses. The FDIC has stepped in and bailed out some of these institutions and the government has funneled taxpayer money to propping up the financial sector.

But significant risk is still being carried by these banks – and they have to sell foreclosed properties just to keep their capital ratios intact. Even the government sponsored Fannie Mae is still in trouble. On Friday, the company asked Washington for an additional $8.5 billion dollars in federal aid to help it deal with first quarter loan losses.

Do you see the opportunity here?

  • Banks and government financial institutions are desperate to get rid of assets and stem their losses.
  • Simultaneously, consumers are getting jobs and hundreds of thousands of workers are now becoming eligible to buy houses.

This situation has profit written all over it. At Ashford Capital, we are working with the banks and the FDIC to buy the most attractive properties at fire-sale prices. We then work with our network of builder and development contacts to sell these properties for a substantial gain.

Typically, our holding period ranges from several months to a couple of years. Our investment programs are designed so that our clients receive a fixed preferred rate of return, and then also participate in the profits of the entire transaction.

We work with individual investors, putting traditional or even IRA capital to work. We work with institutional investors helping to design opportunities for their clients. And we want to work with YOU to help you succeed in the real estate investment area.

Would you give me a call this week? I would love to give you some specific information about the properties we are currently holding or in negotiations to purchase. Whether we agree on an investment program that fits your needs, or you simply receive valuable information on the Atlanta real estate market, it would be my pleasure to chat with you.

Wishing you every success,