Is This the Right Time to Buy? BY ROGER AND ANJALI ARORA Is this the right time to buy real estate? It depends! In order to make any investment, whether in your primary residence or commercial real estate, or even stocks and bonds, one must look at macro-economic factors such as unemployment, income levels, inflation, investments, etc., that may affect your investment. On a micro level, it depends on your individual financial situation, your current job, what part of the country you live in, and whether you are able to withstand another housing shock should one occur again. If you live in Houston or certain parts of Texas (Austin, Dallas, San Antonio), you have probably seen home sales increase, inventory decrease, and prices rise in the past year or so. Texas has bucked the trend nationwide, and is seeing Texas sized increases in home prices. In Houston alone, home sales were up 16% in 2012 as compared to 2011, and unsold home inventories dipped to the lowest level in a decade, resulting in record price increases. The reason behind that is that Texas economy in general, and Houston specifically, is on a rebound thanks largely to the number of jobs being created in the energy sector due to the fracking technology. Houston is probably experiencing the best real estate market in the country today. New homes and large multi-family units are being built, homes are selling, commercial space is
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being leased up, and rents are escalating. But will this boom in Houston last forever? We don’t think so. What goes up must eventually come down. There are many external factors that could come into play to reverse the existing trend. With the energy sector heating up, there are possibilities of mergers and acquisitions amongst some of the big players. If that happens, it’s common to see layoffs and consolidation of large office spaces. When people get laid off, it affects every segment of the real estate market, be it single family, multi family, or commercial. How about new proposed regulations that will result in slow down of fracking, especially in Texas and North Dakota? If and when that happens, it would surely cause some massive layoffs in the energy sector, however, the likelihood of that happening in Texas is far less compared to a state such as California. Further, there are talks in Washington about eliminating the tax deduction on home mortgage interest. This is a sword that will adversely affect all residential real estate markets across the country, not only in Houston. Then there is talk about inflation, and inflation is definitely coming to our doorsteps sooner or later, due to the massive amounts of money the Federal Reserve Bank (FRB) has been printing. Currently, the FRB is maintaining its ZIRP, or zero inter-