The Future of Real Estate: In Case the World Does Not End on 12.21.12

by on Real Estate Investing

December 21, 2012

There seems to always be someone claiming that the world is going to end on a certain day. Throughout history, these claims have been made and yet the world is still very much here (as you probably know). In fact, some people believe that the Mayans predicted that world will end on December 21, 2012. Along with the hit television show Doomsday Preppers, there are even Doomsday houses – homes that area ideal for the end of times.

Just in case the world does not end – knock on wood – let’s take a look at the future of the real estate market.

Fiscal Cliff and Real Estate

Although we are all sick of hearing about the fiscal cliff and the possibility that Congress will fail to come up with a compromise that is best for the American people, real estate market investors are definitely hoping for a compromise before the end of the year.

What, exactly, does the fiscal cliff have to do with real estate market investing? Everything.

The real estate market has just now started to make significant progress toward recovery. Although the recovery will take a while, the recent progress is undeniable and it is safe to assume that steady progress will continued to be made throughout 2013. However, if the fiscal cliff issues are not resolved by December 31, the future of the real estate market could be directly affected.

Unless changed, the tax rate on capital gains is set to return to the same rates that were present before the Bush tax cuts. Specifically, the tax rate for those in the upper brackets will go from 15% to 20% and the tax rate for those in the lower income bracket will increase from 0% to 10%. Furthermore, the 50% depreciation bonus for those purchasing depreciable properties is also set to expire.

Furthermore, consumers will end ups paying more taxes, which means less money to spend or invest in real estate. With a rocky United States economy and a still-high unemployment rate, the middle class will be affected the most.

At the end of the day, fiscal cliff issues have to be resolved or we could very well see the real estate market become stagnant instead of making steady progress toward recovery.

Commercial Real Estate Market

Most real estate news has been centered on the residential real estate market, but what is the outlook for the commercial real estate market? Although the commercial real estate market has not recovered as much as the residential real estate market, recovery is definitely underway. Throughout 2013 you can expect to see the commercial real estate market strengthen as consumer confidence rises and the economy and overall real estate market continues to make steady progress toward recovery.

At the end of the day, we can expect both the residential and commercial real estate markets to make steady progress throughout 2013, especially if Congress can reach an agreement that keeps the tax rate for the middle class low, including not raising the capital gains tax rate. Assuming the world does not end, the real estate market will continue to move forward.