Housing Double Dip Confirmed

A double dip in the housing market is not surprising as we have been living off the ripple affect of the government's first time home buyers program for several months. Home prices continue their downward spiral with little relief in sight. Down over 5% from from last year we are now at levels lower than 2002.

In the AZ market we were down 8.4% over the past year alone. Although not ideal, these economic factors have offered a once in a generation opportunity for investors to build cash flow portfolios. A take down strategy of buying over time allows investors to average across the bottom. With heavy shadow inventory and current supply, basic economic principals remain true that supply exceeds demand creating downward pressure on home prices.

This being said, we are seeing increases in rental rates across the Phoenix metro area. Although we continue to see above average supply of inventory, we thankfully have strong rental demand due to a generational shift from home ownership into rental product compounded by senior debt instruments that are difficult to obtain. All contributing factors to increased rental rates. This has been a critical driver in economic stability in AZ as traditionally we have been dependent upon new home construction for economic recovery.

All this being said, it is our belief that this continues to be a once in a generation opportunity to amass cheap housing for long term rental purposes with increased demand and rental rates. These factors combined with lower property taxes over the next few years will only add to the already desirable double digit unleveraged cash on cash returns being experienced which offer further protection against inflation in a very unstable investment environment.