Will 2013 be great for real estate?

By Tulsa Property Management

After a number of difficult years for the real estate market, the market began to show signs of recovery in 2012. Many investors are hoping for the recent growth in the market to continue to accelerate and to make a 2013 a profitable year for the real estate market. While some growth is likely, there are a number of problems that continue to face the real estate market that investors should understand in order to make good investing decisions in 2013.

 

Fiscal Cliff

The fiscal cliff is a news story that bears watching for those interested in the real estate market. Whatever deal is struck in Washington will likely have an impact on the real estate market. Whether the deal includes raising taxes on higher income earners, the elimination or reduction of the home interest deduction or reducing federal government spending or financing in the housing market, any deal will likely impact the real estate market. Investors should stay informed of the changes resulting from any deal that the two sides make in regards to how it will impact real estate.

 

Other legislation

In addition to dealing with the fiscal cliff, Congress and the President have other issues to address that may have a significant impact on the real estate market. Expiring unemployment benefits, the expiration of the Mortgage Debt Forgiveness Act and pressure to raise capital gain rates could all cause problems for the real estate market. The extension of unemployment benefits or the Mortgage Debt Forgiveness Act will cost money that will either be added to the deficit or paid through new taxes. Low capital gain tax rates and exemptions make real estate a more advantageous investment than stocks and other investment vehicles. The only positive solution to these problems for the real estate market is for the economy to grow quickly and reduce the need for changes in 2013, but this seems unlikely.

 

Economic growth

While the fiscal cliff and legislative changes in Washington holds the potential to impact the real estate market in 2013, the market will always be primarily driven by demand. The most important factor for strong housing demand is high rates of employment and rising personal income. However, economists are predicting slow growth for the American economy in 2013, which will likely translate to slow growth for the housing market. However, with many people renting after losing homes in the mortgage crisis, there is a strong potential for these people to buy homes and fuel home sales in regions of the country with low unemployment and high income.

 

Rental real estate

As the economy continues to grow, albeit slowly, investors in the rental segment of the real estate market can expect rental rates and prices to remain strong. With the continual influx of new renters to the market (recent graduates, those who have sold or lost their homes, etc.) and slow economic growth keeping many current renters from being able to afford a home, demand for rental real estate should continue to be strong. The commercial real estate rental market should also continue doing well in 2013 for similar reasons. Landlords should be able to expect a nice return on their investment in 2013.

This article was contributed by Tulsa Property Management who specialize in Tulsa real estate and homes.