4 Funds Building A Position In Housing Recovery In 2019

A series of dismal reports about America’s housing industry have been released recently. This has led to speculation that the space is headed for yet another bubble. However, business-friendly policies and increased demand fueled by higher wages and a robust job market are likely to boost the sector.

Moreover, the hiring boom in construction sheds light on the fact that such impediments would not last long. Under such circumstances, investing in real estate mutual funds seems prudent.

Opportunity Zones to Provide a Major Boost to U.S. Housing in 2019

Opportunity Zones, which were created as a part of the 2017 Tax Cuts and Job Act, would go a long way in boosting the real estate market this year. As part of the arrangement, every U.S. governor earmarked 25% of the low to moderate-income areas in their respective states. Such areas would then be converted to places where instead of paying capital gains taxes to the IRS, the amount would be deferred, reduced or eliminated as a whole.

Notably, it is the most beneficial program for economic development in the United States in the past 10 years. Further, taxpayers would be required to defer their capital gains for seven years prior to 2026, in order to reap the benefits of such an arrangement.

Fears of a 2008 Type Bubble is Just Speculation

During the last economic crisis about 10 years ago, markets were overheated by a glut of new houses. Further, subprime mortgage financing weighed heavily on the markets, resulting in a bump in speculative inventory. Taking a closer look at the current scenario, the housing industry is actually reeling under the pressure of extreme paucity of skilled labor amid rising prices of materials.

Rising wages and a higher number of job openings have resulted in increased demand for land ownership in the metropolitan areas of the country. These areas have witnessed a surge in housing demand, north of 3% on average annual basis.

Further, growth in population has also resulted in increased migration toward the metros. This trend is prevalent among millennials and baby boomers, who are earning well and moving to bigger cities in pursuit of better lives. Such a trend has kept housing demand steady in these areas.

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