We’re at that time of the month again where we’re going to do a full-blown analysis of everything that has been going on in the last months, and how that can help you make a better and informed decision in your investments going forward. Housing prices are inflating everywhere and the US is not the exception.
We are going to analyze information taken from a group of articles to get the full picture of the situation. 1.9 trillion COVID-19 stimulus. This is not news. Everybody knows about this. The $1,400 check was issued to most people. They talk about how people were receiving the direct deposit of the $1,400 stimulus.
The legislation also provided $7.5 billion for vaccine distribution, $48 billion for testing and a contract tracing effort, $22 billion for rental assistance and $39 billion dollars for child care. $29 billion for the restaurant industry and more than $160 billion for schools and universities.
Housing prices are ridiculously expensive but it’s not just in the US. They are inflated around the world so this is not the only country and it has to do with the pandemic stimulus.
Aside from the pandemic stimulus, we also have ultra-low rates and changes in buyer behavior are fueling turbocharging the markets from Europe and Asia. There’s been a migration, so there are a lot of people migrating from the metropolitan cities, where there’s lack of space where everybody is basically on top of each other. They’re just simply migrating into areas where there’s more space, more bedrooms for their family members, call it husband, call it wife, call it children and at the same time more fresh air.
It created a ripple effect and where housing prices and the cities started to decrease because there was less demand of it and more people were actually moving out and that started creating a high demand and people who are willing to pay over the asking market price because they were in need of a property, so because of everything that was happening in COVID, construction slowed down. The construction materials also got expensive.
Real estate investors buy with numbers, but homeowners buy with emotions. This situation has created inflation. Inflation means that things are getting more expensive.
If you make $10 an hour and you are accustomed to a certain lifestyle with whatever you can afford with $10 an hour. Then all of a sudden you go out to restaurants, you go grocery shopping and the rent everything becomes a lot more expensive. Whatever amount of money you used to make per hour, it’s going to allow you to buy less of what you could normally afford. That means decreasing the quality of your existing lifestyle.
Today we are getting a ridiculous demand on housing. Even though the lending has tightened up, the rates are low so people are taking more risk, people don’t want to miss out on the cheap money and they want to take that money, either to buy more real estate or just simply reinvest it in their homes.
What happened in 2008?
In 2008, we didn’t have cheap money, what we did have was easy money. Basically, anybody could have become a real estate investor, all you had to do was just to walk up to a bank and say, “I make 1 million dollars a year.” The bank wasn’t verifying that, they didn’t ask for your tax returns or anything to verify or to confirm that you do in fact make the amount of money that you’re claiming that you’re making.
People without the experience became real estate investors, they didn’t have the expertise nor the discipline to manage money. Over time, people started buying houses, which was feeling the housing prices and everything just became more expensive and eventually the bubble burst.
That’s not something that only happens in the US, it happens worldwide. Anything that happens in the US has an impact worthwhile. We live in a globalized economy and there’s no such thing as a segregated country that only suffers separately, everyone is impacted depending on what they do with their money and depending on what they choose to invest their money at.
Taking Risks – Housing Prices
More people are taking risks. They are renovating their properties, they’re paying more money for their houses and not knowing that eventually the housing prices could stagnate, could stop growing in value and possibly have another 2008 repeating all over again.
Families are becoming poorer because their salaries have not increased, inflation is kicking, things are more expensive and let alone having accessibility to buy a home. They’re getting poorer and poorer, the houses are getting more expensive and that American dream will continue to be a far American dream that they could possibly ever reach.
For those who were monitoring the metropolitan market, you might have noticed that the housing prices go down roughly about, depending on the area, between 5% to 20%. If you happen to be waiting for the market prices to go down a little bit more, you might want to rethink that because as you see in this article, the families are coming back and they’re looking to buy larger spaces.
Migration between cities
Some smaller cities are attracting young professionals. They’re attracting people with degrees who are willing to buy homes, and are willing to rent there because they have the opportunity to work from home and that creates opportunities for small businesses as well. It creates opportunities for a new local library, for a local shop, for a local coffee shop for local restaurants, which means it’s created an opportunity for you as a real estate investor as well.
You get to have the opportunity to provide housing for those who are looking to rent, for those who are flippers. You have the opportunity to build homes and make those readily available for people who are looking to buy. Same thing for commercial spaces. People are looking to have a life in general outside of their houses.
They don’t want to just be locked down because they’re used to the metropolitan life, to the fast-paced life. Some people enjoy working from home and they want to continue to have that opportunity as that new way of living.
Working from home is great, there are a lot of people that enjoy that, but there are some other people who don’t really necessarily enjoy that. Some people love having that interaction with others, love chit-chatting and having conversations with their coworkers and they don’t necessarily want to be locked down at home.
For those who managed to tap into the opportunity to invest in office spaces now is the chance to basically provide that space and maximize your investment to the next level.
- Prices of the land
Land has experienced an increase mainly because of China. China is coming back strong after the pandemic, and it’s competing against US farmers. If you happen to own any farmland, this is your opportunity to take advantage of this situation, either selling that land or just simply renting it out to the farmers out there.
- Eviction process and the landlords
There are some landlords out there who are actually not willing to accept that rental assistance for many reasons. One of them is the fact that those assistant programs have too many strings attached.
It requires them to disclose their financial statements and things that they, under regular circumstances, are not willing to disclose.
- One thing about real estate investors is that we want to ensure our anonymity. Tapping into those funds means giving up our anonymity.
- Another issue is the fact that they might be dealing with troubled tenants. This is a pandemic, everybody loses in this situation. There is a tenant who truly needs the money, who doesn’t have the resources available to continue to pay the rent but then unfortunately, they wind up on the street, because at the end of the day, they couldn’t keep up with the lease, but there are others out there who are milking the system.
There are other tenants out there who just simply do not want to work. They know how to milk the system. They don’t want to pay the rent for the landlord. On top of that, they’re destroying the property. Those are the troubled tenants that real estate investors don’t want because they just simply want to get rid of them and if something that rental assistance means the inability to get rid of them, that is something that they definitely do not want to deal with.
The Biden administration has offered a lot of incentives to invest in electric vehicles, and that is one way for you to diversify your investment.
If you want to diversify away from Tesla, there is a company called Lucid. This is basically the luxury version of Tesla. It promised to deliver a higher battery life, better quality on cars, but Lucid is still not in the market. The way they are traded publicly is through a SPAC.
Tesla dominates the electric vehicle market. The reason why Tesla looks like this is because they’re only competing in the electric vehicle space. Meanwhile, Volkswagen, with their regular traditional cars that we’ve always been familiarized with, is a brand that is coming up with electric vehicles. Volkswagen and Mitsubishi and all these companies are one option for you to consider because the stock price is cheaper than Tesla.
Another kind of business like Bitcoin is also something that everybody wants to talk about. This is a good business if you know how to analyze the market of the cryptocurrencies and you have the patience to give it a couple of weeks or months to produce profits.
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