EP190: Changing Housing Market And What You Need to Do
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Here’s a crazy idea…
What if, in a year’s time, you look back on the housing market and think you’ve stepped into an alternative reality.
No, not the fun kind like the 🍏 Apple Vision Pro.
Instead of white picket fences and manicured gardens, your bleak reality is filled with mountains of home mortgage debt.
Hardly the American Dream, right?
We hate to break it to you, but the reality of the housing market today will crush some while enabling others to come out on top.
So in a housing market filled with change, which will it be for you?
In this episode, we’re going to get into our 6 long-term predictions and ultimately how to safeguard yourself against financial woes that some will experience with the current market trends and dynamics. ☀️
Plus, you’ll find out why adopting a similar approach to Disney’s Mulan, even in the face of her ancestors’ concerns, ultimately proved to be the right path for both her and the rest of us.
To do this, let’s turn back time…
You know that classic saying about homeownership is the ultimate American Dream that we mentioned earlier?
Well, it’s not as timeless as it sounds. It was actually created after World War II when smart politicians and their real estate pals launched campaigns like “Own Your Own Home.”
They made homeownership seem not just cool but super patriotic.
The funny thing is, back in 1946, lots of people actually liked the freedom of renting.
➡️ So, when someone tells you that owning a home is the ultimate American goal, just remember: it might be more about savvy marketing than tradition.
Current Trends and Dynamics
Mortgage rates are going up, but the housing market is in a tight spot, especially after bouncing back from the Great Recession.
So, what’s causing this?
Well, it’s mostly due to a big shortage of homes, even though the Fed is raising rates.
Unless you’re among the fortunate few who can buy a house without breaking a sweat, this shortage affects most Americans and, in turn, the economy.
Here’s the deal: The U.S. is short a whopping 3.8 million homes, according to Freddie Mac. Meanwhile, median home prices have shot up to $419,103, a 40% jump since January 2020.
The housing situation is particularly tough in specific areas.
🔉 According to Bank of America’s recent data, cities like San Antonio, Dallas, Houston in Texas, and Orlando in Florida are feeling the squeeze the most.
What sets them apart?
Well, they’re experiencing rapid population growth, a tight housing market, and a thriving job scene.
For example, in June 2023, both Dallas and Orlando saw their job growth surpass the national average.
But get this – these vibrant cities are dealing with a shrinking ratio of housing units to people.
To put it in perspective 👓, the U.S. had an average of 0.43% housing units per person in 2022, but Dallas was down to 0.39%, and San Antonio was at 0.40%.
This isn’t just a fun fact for trivia night—it’s actually pushing house prices through the roof.
In fact, Orlando has seen an incredible 58% increase in prices since 2019, and Dallas is close behind with a 49% rise.
Supply-Side Constraints
Another important factor affecting home prices is the limitations on the supply side.
Who’s mostly responsible for this?
It’s the people who bought homes just before or during the pandemic. 🧫
They were able to secure those fantastic fixed-rate loans below 3%, and now, they’re in no rush to move.
Why?
Well, because with the current sky-high interest rates, getting a new home loan would be a real financial challenge.
Who’s Still in the Game?
There are really three groups of people here. ⏬
✔️ The first group is like Goldilocks, snugly settled in their “just right” homes.
These are mainly the baby boomers who have pockets full of cash from selling their larger homes and are now looking for a cozier place since the kids have moved out.
Then there are the interstate movers and urban escapees, you might say.
Think of those from high-priced cities like New York and San Francisco, searching for more wallet-friendly places to live. But their search for affordability unintentionally drives up prices in their new communities. This ripple effect leaves many local residents staring at steep price tags, pushing them more toward renting instead of buying homes.
✔️ The second group diving into the housing market consists of some of the wealthiest families out there.
In the past, we used to hear stories of fortunes fading away by the time the second generation came along.
These days, there’s a rising trend of families finding ways to preserve their wealth for much longer periods.
Thanks to the ease of modern investing, experts believe that not only will these riches 💰⏰ last, but they could also lead to a new era of long-lasting generational wealth.
✔️ The third group that we believe will benefit the most from the new housing market reality is real estate investors.
There are clear reasons for this.
Investors are naturally drawn to areas experiencing a real estate boom because of the potential for higher returns.
However, there’s another factor that might not be as obvious: some potential homeowners are choosing to join the action by investing in rental properties personally or through models like REITs or syndications.
They might not have the means to afford the entire down payment for a home, but they still want to be part of and gain from the market’s growth..
Just like Mulan 🎥 wasn’t your typical strong or super-skilled warrior, what set her apart was her incredible talent for reading the battlefield and predicting what the enemy would do next.
She didn’t rely on brute force; instead, she outsmarted her opponents, using her sharp perception to gain the upper hand.
Similarly, in the always-changing housing market, it’s not always about having the most money, but it’s more about understanding the evolving situations and making well-timed, strategic moves, which brings us to long-term predictions for how you can seize golden opportunities in a transforming market.
Speaking of seizing the golden opportunity, let’s dive into the 6 long-term predictions that may help you smartly navigate the current real estate market.
NO. 1 The Changing Landscape of Homeownership
As the dream of owning a home individually becomes less attainable for many, it’s opening up opportunities for alternative investment paths.
Syndications – like 🏢 apartment syndication, our favorite jam, which involves pooling resources, not only provide a way to participate in real estate markets but can also yield above-average returns when entered into at the right moment.
NO. 2 Dual Market Dynamics
The growing gap between those who own homes and those who don’t isn’t just something to note; it’s actually a great investment opportunity.
Syndications, which bring together various investors, can bridge this divide and generate strong returns from properties that might be out of reach for individual investors.
NO. 3 Syndication Surge
As traditional homeownership becomes harder to attain for many, syndications are emerging as a valuable alternative.
Those who get in early on these collaborative investment models are likely to reap the most benefits, especially with the growing interest in them. 🤓🤓
NO.4 Harnessing Generational Wealth
As family fortunes extend well beyond the usual two generations, syndications that cater to these wealthy families can offer not only diversification but also the potential for premium returns by strategically deploying this capital.
NO. 5 Urban Hotspots
Cities on the brink of a housing boom 💥 aren’t just in the headlines; they’re prime investment destinations.
Syndications that enter these markets at the right moment can anticipate substantial growth, fueled by changes in demographics and economic vitality.
NO. 6 Redefining Rentals
With a predicted shift toward rentals, syndications that focus on long-term or inventive rental approaches can look forward to a spike in demand.
And as any smart investor will tell you, when demand rises and supply is limited, it usually translates into attractive returns.
In essence, for a smart investor keeping an eye on the ever-changing housing market, identifying these significant shifts and acting on them promptly can make the difference between getting average returns and scoring substantial investment gains.
Until next time keep thriving on your journey to success, Cashflow Multipliers!
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