I received so many phones calls on my last article “The Projected Rents Theory” from both apartment owners and brokers alike concurring with the facts of the article and acknowledging the accuracy of the market at this time. It was nice to get the feedback. Ironically, or not so ironically, I’m still getting lots of property set-ups on apartment buildings for sale using the projected rents marketing concept and I’m tempted to reply back with a copy of that last article. Obviously the reality has just not caught on yet!

Surprise, surprise, interest rates are starting to creep up and that’s creating the obvious response that prices will be dropping, but prices are not dropping if the property was priced right to begin with. The properties that were overpriced are creeping down and will still sell at a great return providing that the seller is realistic. Fixed rates rose to approximately 6.14% up from 5.94% for a 30 year mortgage and to 5.44% up from 5.27% for a 15-year mortgage with adjustable starting rates averaging around 3.68% (these rates may change again after the date of this writing.)

We have just completed one of the best quarters for common stocks in the past five years. There are still very big concerns facing the stock market and our world economy: looming threats of terrorism, corporate malfeasance and lagging economics throughout Europe and Asia. California, with its highlighted possible recall for Governor and the State budget crisis, brings further caution for an increase in taxes, which to some extent offsets the benefits provided by the Federal tax cuts.

Unemployment is still way too high with more and more industries becoming part of the trickle down effect. The housing market still remains very strong along with all the related trades and services connected to this industry; however, the hovering thought process throughout in lieu of this boom is “get it while you can.”

The rental market directly tied to the housing market remains to be a “tenant market” with lots of vacancies (particularly 2 bedroom units), amenities and choices for the tenant who can afford market rates but isn’t a buyer at this time.

The inventory of apartment buildings is still pretty scarce with many more buyers than sellers. However, buyers are backing off a little to see what the effect of rising interest rates will have on sales prices, and because of concern over the high vacancy factor and if the rise in unemployment will contribute further to it.

There’s a lot more caution as to how long this cycle of uncertainty will continue to sustain itself and how it plays out in the value of the prices being paid today.