Real estate across the nation is experiencing a significant surge in market value. So much so, that prices are reaching momentous heights with no indication of slowing down. Rents are at an all time peak, while construction is expanding rapidly as some investors are finding it’s more expensive to acquire existing buildings, than to build new developments. However, this isn’t just affecting the US, the economy is experiencing an upsurge across numerous global markets.
If you’re experiencing déjà vu, chances are, you’re remembering the US real estate bubble between 2006 and 2009. Market values were at an all time high and mortgages were acquired on minimal standards, which consequently caused the bubble to burst. Buyers were spending much more than they could truly afford, while lenders were basically giving away mortgages to unqualified applicants. It was a damaging scenario that affected the nation and economy.
A soaring real estate market isn’t necessarily a bad reality, however. Interest rates are relatively low, but banks have learned a valuable lesson from history and are not lending like they once used to. Mortgages, which are no longer easily obtained, are becoming more of an exclusive commodity, causing the market to shift to a cash-only option and more often than not – a bidding war. It’s a hard truth to face for many prospective buyers, who cannot compete with the affluent, cash-heavy investors.
For international investors, cities such as New York, Boston, Chicago and San Francisco are prime real estate markets – offering a safe haven with phenomenal returns. Considering the upward market trends and demand, New York real estate continues to be the most desired asset. According to the nytimes.com, the average price of a Manhattan apartment is $1,697,000, which is up by 20% since last year.
As inventory becomes increasingly scarce and property value continues to rise, many are cautionary towards this rapidly growing real estate market. As for investors, increased market value and a growing global economy can pose a challenge when looking for the right investment option. A limited partnership with a real estate investment company like Jakob Pek Fund, allows accredited investors to invest capital in a real estate venture, while maintaining limited liability. Hence, making limited partnerships a smart, low risk, investment option for those looking to invest during this boom.