Invest in Ann Arbor Area Real Estate?
Does It Still Make Sense to Invest in Ann Arbor Area Real Estate in 2022?
“Real estate offers huge financial advantages to those who will learn the system.”
Why this Question Is So Important Right Now.
We are facing 40 year highs in inflation—over 8% .
Real wages are down almost 3% as a result of the lost purchasing power to inflation.
It seems like every economic indicator is negative and and every asset class losing value from stocks, to bonds, to crypto to gold.
Where Else Are You Going to Invest Besides Real Estate?
If our goal is to maximize our return on investment, then we have to look at the performance of the alternatives to real estate.
1. Wage Growth- According to the U.S. Bureau of Labor Statistics from Sept. 13th 2022, real average hourly earnings have decreased 2.8%, seasonally adjusted, from August 2021 to August 2022.
2. Stock Market- According to MarketWatch, year-to-date total returns for the S&P Index is down 17.2%.
3. Bitcoin- The king of cryptocurrency is down 57.7% year-to-date according to MarketWatch.
4. Gold- The safe haven asset is down 6.82% year-to-date according to MarketWatch.
5. Small Business- Only 40% of small businesses are profitable according to an article entitled "41 Small Business Statistics: Everyone Should Know” from April 2022.
Clearly, most people and assets are losing money and when you factor the loss of buying power from inflation on top of that the losses are significant.
Now is the time to make smart financial decisions and benefit from these market conditions.
Why Ann Arbor Area Real Estate in 2022 and beyond?
There are many reasons Ann Arbor area real estate will perform better than most assets in 2022 and beyond.
Lack of Inventory- The number of new houses coming on the market has been going down in recent years. In fact, inventory in the Ann Arbor area is down 35% compared to last year.
Source-Ann Arbor Area Board of Realtors
Additionally, people with low interest rates mortgages will be reluctant to sell in this high interest rate environment.
Finally, Freddie Mac recently stated that there was a shortage of 3.8 million housing units that would need to be built and that takes time.
Population Growth- According to an MLive article from Aug 2021, Washtenaw county saw an 8% increase in population as of 2020 since the last census was completed 10 years before that and is one of the fastest growing counties in the state.
Diverse/Recession Resistant Economy- The Ann Arbor area is fortunate to have a diverse economy that is resistant to an economic slowdown.
Although there were dips in the Gross Domestic Product for Washtenaw County during recessionary times, the dips were short lived and less severe than other other areas of the state and country.
Rents- Rents have been going up 14% nationally according to Redfin as of July 2022.
This will help you stay ahead of inflation and protect your cash-flow and purchasing power.
According to Apartment List, Ann Arbor rent growth is up 10.6% year-over-year compared to 10.0% nationally and 7.5% for Michigan according to their data—still faster than inflation. Some places in the Ann Arbor area have seen rents increase greater than 14% year-over-year.
Appreciation- The lack of inventory, inflation and demand for housing is pushing up the value of properties in the Ann Arbor area.
Source-Ann Arbor Area Board of Realtors
Median sales price for all Ann Arbor area properties is up 18.3% year-over-year.
This is double the rate of inflation and is in addition to rent increases greater than inflation.
Mortgage Interest Rates- Interest rates on investment properties can be as high as 7% as of the time of writing.
However, this is still lower than the rate of inflation and mortgage rates historically.
If the rate of inflation is greater than the mortgage interest rate, it helps you pay the mortgage back with dollars that are “worth less”—essentially helping you pay the debt back at a discount.
Taxes- Real estate is still a tax advantaged asset with the ability to treat your rental income as passive income and offset that income with depreciation and normal business expenses.
Basically the government wants you to provide housing and rewards that behavior in the tax code.
Why not use the tax code to your advantage and own Ann Arbor area real estate?
“Now is the time to make smart financial decisions and benefit from these market conditions.”
What are The Opportunity Costs For Waiting To Invest In Ann Arbor Real Estate?
There are always opportunity costs for not making a decision or forgoing one decision over another.
1. Housing prices my very well continue to increase due to inflation, lack of inventory and demand.
2. Interest rates may very well continue to increase.
3. Your money you have to invest will lose purchasing power with inflation.
The real question to ask yourself is where can you put your money right now besides real estate that will give you so many benefits and favorable returns with minimal downside risk.
How Can a Real Estate Professional Help You Invest?
Working with a real estate professional that understands investing in real estate and invests in real estate themselves can accelerate your success and minimize mistakes and losses.
Investing is a team sport and a real estate professional can introduce you to properties and markets that offer good returns, experienced property managers that will add value to your property and save you from having to deal with frequent tenant issues, funding sources and lending professionals, and experienced tax and legal experts in real estate as well.
We, at Arbor Advising, are dedicated to your financial success and being your trusted advisors to help you achieve your unique goals with real estate.
We help individuals, families and entities buy, sell and invest in Michigan real estate.
Why Your Investment Decisions Matter Even More Right Now?
Nearly every economic indicator is negative.
Inflation is at 40 year highs.
Real wages are down.
Most assets are losing money.
It is critical to your long term financial wellbeing that you make wise investment decisions now more than ever.
Real estate is one of the few asset classes that has performed well recently and Ann Arbor area real estate in particular.
From low inventory, to appreciation, to rent increases, to historically reasonable interest rates and the many tax benefits, now is an excellent time to invest.
To your success!
Arbor Advising has a passion for helping people buy, sell and invest in real estate. We believe real estate is the best way to create passive income, grow your wealth and provide inflation adjusted returns in retirement with fantastic tax benefits.
Want to learn more? Contact us.
Disclaimer:
Always speak to your CPA, investment advisor and attorney before making any investment decisions. Past performance does not guarantee future returns. Arbor Advising seeks to educate and does not endorse any specific product, service or investment.
