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Here’s what’s going on right now: mortgage rates have continued hitting historic low after historic low, and that bodes REALLY, REALLY well for real estate. But even though record low rates means there has NEVER been a better time to buy real estate and get a mortgage, fewer sellers want to list their homes for sale, and that’s creating a housing SHORTAGE.
Marketwatch included a graph showing the trailing 12 month returns of real estate versus the stock market – and the great financial crisis of 2008 was the ONLY time where real estate experienced a 12-month trailing loss of more than 2%. That means, that – over the long term – real estate as an investment is going to be fairly stable and uneventful, despite what happens with our overall economy.
Real estate is also proving to be a good hedge against inflation, and that could also be driving higher than normal demand with rates as low as they are.
Even for myself, I’m a firm believer in getting a low interest, fixed rate mortgages on cash flowing rental properties as a hedge against inflation – and then, just take 30 years to pay them off in full while the home goes up in value. I think that’s a sound investment strategy when you do this correctly…but the problem, at this point…is that home prices are skyrocketing, and there’s NOTHING to buy.
As a real estate investor, it’s paramount that you get a good deal on a property with some upside so that you can fix it up and make repairs…but, everything I’m seeing is selling a premium because there aren’t many other choices on the market, and prices are increasing faster than I expected because other people are willing to pay whatever it takes just to get the home.
There’s nothing wrong with doing that if your intention is to buy something for yourself…BUT, from an investment standpoint, it makes it VERY difficult to come out profitable.
Despite all of that, though…the future of what’s going to happen with housing prices is hard to determine. Right now, yes – prices have been going up – a lot, whereas – seasonally, they would be going down. Sellers area also getting closer to their asking price, on average, than usual – but, how long can this hold up for?
Well, the tech company Haus predicts that real estate will see about a 1% decline into 2021…but then predict, after that, growth could continue as high as 4-5% once our economy begins recovering.
CoreLogic, one of the largest data analytics companies, found that – even though prices have risen 4.8% year over year…they expect that, over the next year, will see a drop of 6.6% in real estate prices…
I have a feeling, as long as consumer spending is low and our economy is shut down – interest rates will stay low, and demand for real estate will stay high. But, if that changes, after about 6-12 months or so, I would expect rates to slowly go back up – and that might begin to change the pace of real estate, especially if more sellers begin to list their homes for sale.
I’m still actively looking to buy something else for myself…BUT, I want to make sure whatever I buy is somewhat of a good deal, and I’m not going to overpay just for the sake of buying something.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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