It’s no secret that the industry seems like it’s imploding. The Federal Reserve’s interest rate increases are creating havoc. Including “owners’ equivalent rent” in a lagging CPI Index is non-sensical. No one pays themselves rent when they’re already typically paying a mortgage payment. My guess is they will keep raising rates until the entire economy is paused because most won’t be able to afford the essentials, also known as food, shelter & clothing (add gasoline & utilities, too!)
Interest Rates, Inventory & Random Thoughts
The Federal Reserve is behind the curve and off the rails. I don’t believe they can control inflation at this point. It’s not in their charter. They have no control over fiscal policy and federal spending.
That said, if interest rates are rising and you think you should wait to buy property, you may be a victim of faulty reasoning. Inflation is running hotter than 5%. Your arbitrage opportunity is that difference between current interest rates and future inflation. You are at a sweet spot right now, where you can get in and reap the benefits as inflation trends higher, which it will. Your ability to get a fixed rate loan will lock in advantages for you. I can strategize with you on methods for reducing your transaction costs.
If you’re selling, always look at your net proceeds from selling when comparing brokerages, offers, etc. Don’t leave your money on the table.
Owning property now is more about the type of lifestyle you want to live and where. Being aware of the net present value (NPV) of a financial move is imperative to keeping your wealth growing and intact.
More wealth will be created in the next couple of years before we get to a more dangerous phase in the real estate market. There may be more multi-family and single family built to rent neighborhoods in progress right now, but your best move in most cities and towns is to own or move up. If you’re not an owner you will need to make more risky and speculative moves placing your funds in a stock market that will be more volatile going forward.
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While I am upgrading this site please visit me on Facebook where I post the most recent news concerning real estate investment.
Coming improvements include the ability to fill in online forms to order financial reports for your real estate investing. Over the course of my career I have invested in sophisticated software for property analysis and production of many types of reports to assist you in making your best decisions. The one thing software cannot do is use its best judgment regarding assumptions necessary to accurately determine outcomes based on your circumstances.
More Construction & A Possible Increase in Interest Rates
U.S. Bureau of Labor Statistics notes that February 2017 saw strong job creation, including those in the construction trades.
“Here are where some of the major gains in jobs occurred in February:
Construction: Increased 58,000
Professional and business services: Increased 37,000
Private educational services: Increased 29,000
Manufacturing: Increased 28,000
Health care: Increased 27,000
Mining: Increased 8,000
On the other hand, some industries saw a loss in jobs during February, such as retail trade, which lost 26,000 jobs, general merchandise stores with a loss of 19,000 jobs, sporting goods, hobby, book and music stores with a loss of 9,000 jobs and electronics and appliances stores with a loss of 8,000 jobs.”
Source: HousingWire, U.S.Bureau of Labor Statistics, ADP
