The housing market it’s going crazier than it has been since 2006. What does it mean for you? Houses are flying off the market in less than a day. While it’s nice for the seller, it’s very heartbreaking for the buyers because they’re saving up throughout their whole life.
Some of them managed to save up a lot of money during 2020 with the dreams, with the hope that they could get access to their dream home, and now they’re getting outbid by other people offering above the asking price.
Sadly, you do get outbid. One way or the other, you will think that the scenario will make the realtor’s life easier, but sadly it is not.
Millennials are entering their early 30s
That means that more and more younger generations are heading to that stage in their early 30s, which is typically when they’re ready to buy a home. We’re getting all this new generation already saving up their money, entering the market, and they’re getting out all the time, which can be very heartbreaking for them, and one way or the other, it destroys their dream of becoming a first-time homebuyer.
It’s great for those people who have the cash readily available, but now we’re seeing this scenario and where there’s not enough houses in the market. Then typically the ones that get outbid all the time are the people who are entering the housing market for the first time. First-time homebuyers who are getting squished out of the competition, just because of the fact that since they’re first-time homebuyers, they typically don’t have all the down payment available.
They have the option of using down payment assistance programs, like any type of FHA loan or any type of government-backed mortgages.
The fact that construction actually slowed down over the past 10 years, it’s having big repercussions nowadays and the situation that we’re facing right now with the housing market. Then in addition to that, you have existing homeowners who are refusing to leave their homes.
They’re refusing to sell because they’re already aware of the current situation. In addition to that, we are dealing with the lack of supply from existing houses in the market, just because current homeowners are so afraid to sell because they don’t want to be left off on the street. Once the home builders are increasing their volume of constructions and supplies in the market, these prices in the housing market might start to slow down.
When and how soon will the prices slow down?
The housing market is crazy. That does not mean there’s no opportunities out there. You just have to embrace it and prepare yourself and just be aware of what’s going on.
That way, you can either prepare yourself to be ready to jump in when the timing is right or just simply adjust and see what it is that you can offer to the current demand, to the current buyers that other people or other investors are not already offering.
In fact, housing prices or home price growth has accelerated to a new 15-year high. We’re talking about over the past 15 years. Today, in 2021, we are already seeing the highest prices possible available in the market and it doesn’t seem to slow down. People continue to engage in bidding words because of the short supply of housing available in the market.
We are already hitting a record low of supplies, but then at the same time, we’re hitting a record high in prices. The US housing market is nearly 4 million homes short of buyer demand. We’re talking about 4 million houses short, meaning people are waiting for new homes to hit the market and the market it’s behind by 4 million homes. That means you are either going to have to wait for a long time or you’re just simply going to have to outbid everybody assuming you have that capability.
What’s the worst-case scenario that can happen if you get to be outbid, or maybe you hit your senses and you refuse to overpay for a house that might not be worth it?
- You can move back with your parents
- You can just simply go back and rent
It’s not the end of the world as long as you have a roof over your head. These are just different ways to view the scenario to help you realize that even though the market is crazy things are not as bad because at least there’s still supplies of homes available.
When you’re a first-time homebuyer, you’re scrambling to save all you’ve got, some people might have even gotten a gift from their parents just to get everything possible and package your paperwork in a way that is presentable to the bank to finally get that pre-approval letter.
You hit the market and all of a sudden you get outbid by situations. A buyer could appear out of nowhere with an all-cash deal and then you get outbid. It’s heartbreaking. Buying a home is already very cumbersome in itself. Imagine getting yourself outbid and getting a reality splash into your face making you feel that.
All you gotta do is just be patient. Just continue looking, and eventually you will find a house that could meet your needs. Don’t let emotions take over your decision-making process.
Typically, housing demand declines and supply increases during a recession, but the effect of the COVID pandemic is unusual. It has spurred housing demand because higher-income households who were able to work from home now want more space.
Everybody’s working from home. If you come to think about it, that means courthouses and everyone else is also working from home. If you are a builder and you’re trying to get a permit, you might not get your permit within the usual week, two, sometimes even three weeks depending on where you are doing business.
Now you’re going to have to wait a long time before you can even get approved and get the permission that will allow you to start construction.
Some good news – Housing during pandemic
We do have some news when it comes to the housing market. The pandemic has changed where Americans live. People from big cities have been migrating out meaning leaving the big cities into the more suburban areas and that has created opportunities for areas where under regular circumstances, they would have never had the opportunity to grow.
Big cities lost residents, as younger households left for the suburbs and older people accelerated their retirement, while few newcomers came to take their places. We’re starting to see a shift, so we’re getting a lot of middle-class families to upper-middle-class families moving out to the city since they have the opportunity to work from home, and therefore, that creates a demand for a bigger place for them to reside in.
It’s not the same thing to live in a two-bedroom apartment with your husband or wife in the living room and then you are in the bedroom and then your kids are also taking Zoom classes. It becomes a recipe for chaos. More and more people are having demands for bigger spaces with playgrounds and outdoor areas because, of course, you want your kids to play and take some fresh air.
It’s not good to be locked up in the house 24/7. Now there’s more and more demand for areas with outdoor spaces or at least having some type of proximity to public parks or any recreational areas that are outdoors. Usually, when you’re in big cities, the options become very limited. Then as you start going out to the suburban areas, you’re getting more space, your money gets you more real estate, meaning it gets you more space.
This dynamic is actually creating a very interesting scenario because now the suburban areas are getting the opportunity to grow to attract talent, to attract businesses who are willing to create restaurants, coffee shops, and additional movie theatres. What does that create in the long run? Taxes.
Businesses have to pay taxes, the residents have to pay taxes, and now you’re creating revenue for these areas that otherwise they wouldn’t have had the opportunity if it wasn’t because of the pandemic.
Then in the city, we’re seeing an outflow of all that revenue because the residents are leaving so that means less taxes are being collected. Since businesses are leaving for all these suburban areas, even bigger companies are considering the option of creating a small office space for those who would like to have the option of going into the office.
Some people prefer the office space because they prefer to engage with their coworkers. Maybe they find it more productive to sit in a meeting room with all of the team and brainstorm ideas, and why not? Maybe people need that time apart from their family because they find that working with their family right next to them could become a little bit distracting.
Where to invest?
The suburbs of larger metropolitan areas captured much of the outflow. The new suburban household from migration rose 43% in 2020 from the prior year, helping swell the counties surrounding Dallas, Indianapolis, Nashville, Tennessee, and Charlotte, North Carolina, amongst others. Smaller metro areas, including Salisbury, Colorado Spring, and Allentown, Pennsylvania, and Boise, Idaho, also experienced a sharp net increase in newcomers.
What used to be the non-school popular areas are not becoming the new thing. The new up-and-coming neighborhood, where people are looking to migrate and where there’s more migration, there’s more opportunities, there’s more demand so that means it will start attracting more and more companies, more small businesses to help revitalize or just build the new area from the ground up.
Lakeside, Idaho city is America’s hottest housing market, according to the New Wall Street Journal. The next is Austin, Texas; Springfield, Ohio; Billings, Montana; Spokane, Washington.
- Big companies are moving to new locations
Apple, for example, has announced a new $1 billion North Carolina campus and $80 billion additional US spending. The plan will create close to 3,000 new jobs. If you’re looking for a new area to invest in, try to look more into the plan that Apple has to create new jobs. What happens when new jobs are created? That means more opportunities for you to provide housing, whether it’s for rental or whether it’s fix and flipping for home buyers.
Housing market in the US: Foreclosures in 2021
The Fed has proposed prohibiting US foreclosures until 2022. What does that mean for you? It means that if you are dealing with a troubled tenant who was refusing to pay rent, you’re going to have a hard time keeping up with a mortgage payment, unless you have a lot of cash reserves available in your bank account to continue to meet those mortgage payments, or you’re going to have to call the bank and sort of renegotiate any type of forbearance payments that you might have.
It’s not ideal because once again, even though you’re not making those mortgage payments right now, you are an essence accumulating more and more interest in the long run.
That means you’re going to wind up paying for a mortgage of a much higher cost than you originally signed up for. This is in essence the situation.
- What does it mean for you as a homeowner?
It means that if you are in the market trying to get a hold of a new housing, it just simply means that the supply might not be there yet because current owners cannot even put their properties out in the market because of the situation going on. They cannot evict the tenant. If you cannot evict the tenant, that means you cannot sell the property, or it could go the other way around. You can accelerate the foreclosure process.
Eventually, even the banks are going to get tired of extending these measures. They need money as well. They need to create money. You can only go so far with the extension. Just hold on tight, keep monitoring the market to see what happens. If they continue to extend these moratoriums, there’s going to be a point in time where the banks are going to say enough is enough. Even the investor is going to say the same.
“The Consumer Financial Protection Bureau, CFPB, proposed banning foreclosures until 2022 as many families risk losing their homes as the federal protections during the pandemic expire.” This is just a proposal. It does not mean it’s going to happen.
Some tenants take advantage of the moratorium, just so they don’t have to pay rent. That puts a strain on the landlord. Then maybe some of you are not feeling bad for the landlord, but there are repercussions to this because the landlord not only has to be responsible for paying the mortgage, the landlord is also paying for property taxes.
The landlord, depending on the state where they are having the rental portfolio, they also have to pay for business taxes. If there are no tax revenues, what does it mean for your town? That means you’re going to get crappy roads. That means that the library is not going to be functioning the way you want it to function, public parks are not going to be as taken care of as you would like it to be.
That means less playground for your children and for your family members. Everything has a ripple effect, and it’s just not that simple. Money has to circulate, and cities and small towns need to collect those taxes. Typically, the smaller the town, the more they rely on small business owners, and landlords are, in fact, small business owners.
Housing market: Apartment rents are rising again
There’s no need for discounts or concessions anymore. A lot of the landlords are having to provide concessions to the tenants because there’s a lot of competition. There was a lot of supply on rental housing available and not enough customers looking to rent.
A lot of these landlords were offering concessions a month free, or by signing the lease they would pay your cable for four years, or they would give you parking for free for the full year. Now thanks to the COVID vaccine, and then higher employment, people coming back to the cities looking to rent, now there’s no need to offer those concessions anymore.
When you add to the equation, the fact that people are getting outbid in their homes, not everybody is happy living with their parents, not every married couple wants to live with their parents. Eventually, they’re going to have to make the decision to move back to the city and live on their own.
That is creating more and more demand for rental housing. If you are a landlord out there and you have rental housing available, good news for you: Demand is coming back again, and you should be able to rent out your property sooner rather than later.
For those who are looking to get into the commercial news, we have industrial rents hitting record highs. That has been a trend that has been happening for quite some time. The industrial sector kicked off the year with surging demand outpacing supply for the first time.
A lot of this has to do with the boom of the digital business. We’re getting more and more brick-and-mortar stores closing down because of COVID or maybe reducing some of their foot volume. Then people have been forced to do more online shopping.
The fact that there’s an increase in demand for digital products or digital orders, means there’s going to be a need for more warehouses and more industrial areas to house all of those products so that they can house all of their merchandise and have it readily available to ship.
Whoever owns a rental property, it’s going to do great because the demands for rentals are coming back up. However, things seem to be the complete opposite in the office space. In fact, office landlords are now offering up to a year of free rent just in hopes to have these big companies come in and sign a long-term lease with them in exchange for some perks.
News about the stock market
Semiconductors are quite useful, not only in car makings, but also in pretty much every single electronic device that you need, whether it’s your phone or your TV. Because we live in an area where live entertainment has been capped, a lot of us have been falling back on more HBO or Netflix or Hulu’s, that means more and more demand for electronic devices.
What that has created is a shortage of supply starting out with cars, but it wouldn’t be surprising to see a shortage on TVs or computers just because of the lack of availability in semiconductors.
Tesla posts record net income of $438 million revenue, which means an increase by 74%. If you’re still considering buying the Tesla stock, now is your chance to do that. If you find Tesla to be expensive, you can always consider investing in fractional shares in Tesla as long as you’re getting your hands on it.
Microsoft has actually posted strong growth in gaming, which means that the software giant is near a $2 trillion valuation. If you’re looking for another recommendation, another stock to invest in, Microsoft is actually a very strong buy.
If you find this stuck in itself to be a lot more than you can afford, always consider doing fractional shares.
Google is also another great stock. Not Google itself, but Alphabet will be another stock that you might want to consider in your investing. For those who are interested, the sales records were due to YouTube helping power the search giant to profits because of the ad revenue that they did wind up getting.
For those who want to look into an area outside of technology, this is actually very interesting. Crocs sales are surging. Why? Because of the pandemic. More and more people are starting to wear them around the house. It’s comfortable and you don’t have to be worried about the shoe looking ugly. In fact, they came out with a couple of new designs who are a lot trendier and nicer to look at.
If you’re looking for a stock that is more accessible, Crocs are under $100. Crocs is definitely another company for you to check out and maybe add to your stock investment portfolio.
Make sure that you get everything from end to end, and also learn about everything that you need to know in order to make the best investing decision for you going forward.
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