US Housing: Under Contract

Investors and Colleagues,

As spring arrives and the end of the school season is in sight, the housing market is starting to come out of hibernation.

Spring is traditionally an active time for residential housing. Families with children prefer to move during summer break. That way they don’t have to disrupt the school year. But of course this often means signing contracts a month or two in advance. That is exactly what we are seeing this year.

Consider the news this week from the Associated Press:

“More Americans signed contracts to buy homes in March, but sales were uneven across the country…”

The National Association of Realtors reported 5.1% growth in sales agreements last month – and the number of signed contracts has risen 24% from the low point last June. At this point, the numbers are signaling a clear recovery in the US housing market.

But along with the good news comes some qualifying fine print. You see, the recovery isn’t an “even” recovery affecting all areas of the market. There are significant differences when you break out the numbers by price, location, income demographics and so forth.

As I’ve mentioned before, the residential real estate market is a completely different environment than we had just three years ago. From the late nineties, through about 2006, it really didn’t matter what kind of real estate you bought …

  • Acreage outside metro cities? Prices went up.
  • Urban condominiums? Prices went up.
  • Single family homes in small-town USA? You guessed it, Prices went up.

Even investments in run-down neighborhoods with crime problems often paid off. With a call to a politician and a little luck, community transformation projects made even the most dilapidated properties a successful investment.

Today’s Market is Fragmented and Requires Expertise

In 2011, the real estate investment market requires a lot more experience. While the overall environment is certainly improving, the market is more fragmented than ever before. To a large extent this reflects the fact that our economic recovery is extremely fragmented.

If you look at unemployment rates, they are currently much higher for lower wage earners than they are for higher-paying employees. If you have little experience or a low level of education, employment challenges are much more difficult to overcome.

Inflation is another issue that hits lower income tiers harder. Food and energy costs make up a much larger portion of income for lower-tier earners. So when you see gas prices crossing over $4.00 per gallon and grocery bills increasing, know that this is hitting certain families much harder than others.

Translating this to the housing market, we are seeing uneven recovery because some portions of our economy are faring much better than others. Today’s opportunity is skewed much more strongly to the markets for affluent homeowners – and those who are able to find new employment opportunities.

In the Atlanta market, there are key real estate areas that will benefit from these dynamics. There are also some areas that may look attractive right now, but are actually very dangerous investments.

I call these danger areas “value traps.” On the surface, an investment might look like a tremendous value. But because of the difficulty in some portions of the economy, these investments may take an extremely long time to pay off. The problem with this is that your capital gets locked into a stagnant investment, and you miss the opportunity for much better returns on stronger investments.

Experience Drives Success
Many years ago, I made Atlanta my home and began developing my professional expertise right here. While many companies boast of their national presence and extremely broad asset base, Ashford Capital has chosen to take a different route.

Our experience is in the Atlanta market and there are few (if any) who can offer the type of expertise that we have built. When it comes to profiting from today’s real estate opportunities, Ashford Capital offers specific niche investments that have been hand-selected for your success.

Would you take a moment out of your day to discuss these opportunities with me? I would love to see how we can work together to meet (and exceed) your investment goals. Please call me today and we can begin the process.

Wishing you every success,