Here's What Happens Next in Real Estate...

Are home prices too high? Is the housing market going to crash in 2021? Well, stay tuned and let's figure it out. So today we're going to get into what has happened so far in 2020, what we can look forward to in 2021, and how to find opportunities in all of this. So about eight months ago, I put out a video that talked about, you know, the facts that were facing the housing market, different factors, and what I believe was gonna happen. Now, this was right when Covid and coronavirus lockdowns were hitting all the markets. Everything was pretty bleak at that time. And I just wanted to look at the facts and take my emotions out of it to see if I could come up with a accurate prediction. Turned out pretty much everything we went through in that first video actually played out. In fact, it was even more bullish than what I thought it would be. I am the smartest man alive. So really quick, here's why that prediction turned out to be correct. So if you recall, government action was very swift at the beginning of the recession. Money was coming very fast to small businesses. And then also interest rates were suppressed by the Federal Reserve. So the Federal Reserve is artificially keeping long term mortgage rates very, very low. They're at record lows. And this decreased borrowing costs and increased purchasing power. Also, there was a lot of cash on the sidelines that came into the market as soon as things started to gain steam. So you saw the stock market recover and you also saw the real estate market kind of shoot up, almost like a V shaped recovery. The other main factor that really supported the housing market was during the lockdown period, the importance of your home skyrocketed. What do I mean by this? Well, when you're locked in your house, pretty much nothing else to do, no travel, no work, no leisure activities, no recreational activities, pretty much everything gets moved into your house. Now this becomes the place where you work, where you work out, where you, where your kids even go to school, all these things. So now you're looking at your home and you're saying, well, you know, now I want to have a home with an office, I want to have a bigger yard for the kids, I want to have a bigger home or I want to live in a better community that's got these amenities and all these different things. So people started to really consider where they live being the most important thing on their list of priorities. So let's look at what's going to happen in 2021. What's the outlook for the future? Right. Most analysts are predicting between 2 and 7% of appreciation for the coming year, depending on what market you're in. Now, there's a few exceptions where prices may remain flat or even depreciate, but for the majority of the markets that we're in, we're looking at appreciation. Now, my personal outlook when I review all the facts is that home prices are going to see the top end of that appreciation range. If you're in one of the high growth markets, what do I mean by that? Well, there's five states that are experiencing extreme population growth and job growth and those are Idaho, Nevada, Utah, Texas and Arizona. So in those markets where we are looking at all the data, the number of people moving into those cities is increasing significantly and also the job growth in those cities is going up. So there's not enough homes in those markets to address the amount of people coming into those markets. And that's really putting a floor underneath prices and causing prices to shoot up. The next thing we're going to look at is supply. So supply right now is at a 40 year low. That means the inventory, the number of homes for sale, especially in those hot markets, has never been lower. What's happening is people are staying in their home, they're improving their home, they're staying put, right? Or they're reshuffling, maybe moving from one to another, but there's just not enough new inventory. Now home builders are trying to play catch up, right? They're building at a rapid pace, putting out as many new homes on the market as possible, but they didn't anticipate this level of demand. So they're just trying to play catch up. It's going to be at least a couple of years before they can have enough inventory to be considered fully supplied or oversupplied. As of right now, we're still in a very undersupplied category. The current markets that we're looking at are between one and two months of inventory, which still represents a very strong seller's market. The next thing we're going to look at is interest rates. So interest rates right now are at all time historic lows. What that's done is increased the buyer's purchasing power. So buyers today are looking at, in certain cases, an increase of $100,000 or more in purchasing power for the same monthly payment that they were looking at a year ago. That's huge when you're looking at buying a home. So now when you're looking at paying an extra 20k for a property, it's not going to cost you much more as far as monthly payment goes. So you're willing to. So you're willing to use debt to make up that difference. The Federal Reserve has said that they're going to keep short term rates low and artificially keep long term rates low as well through 2021. So for the next year or so, we haven't seen any hint that they're going to start increasing rates. Now if they do release any information, you should see rates start to rise pretty quickly. But I don't expect them to just skyrocket. We'll see maybe a percent increase once they start hinting that they're going to start pulling back on their quantitative easing. So now let's look at a few negative things that may trip us up here. Right. So one of the things that the bears pointed to, the bears, the bears that was going to cause housing prices to fall was the amount of people that were in default or in forbearance. So what happened was in the beginning of the crisis, many people requested that they could have a temporary forbearance, meaning they can't bank their mortgage payment because they've received a decrease in income or they've stopped earning their income due to Covid. What happened was a lot of those people just requested it just in case, but then their income came back, so now they're back to making their payments. For the few people, the small category that is still in forbearance or in default of those people, 80% of them have 20% or more equity. So what that means is if you're facing a default on your loan and you know your home may go into foreclosure, you could just simply list the house and sell it because you're not going to walk away from tens of thousands, maybe even hundreds of thousands of dollars of equity. So the initial fears about the forbearance loans going into foreclosure and then tanking the housing market are completely unfounded. The next thing you want to look at or keep an eye on is unemployment. As of right now, unemployment rate nationally is at 7%. In our state here in Nevad, it's at 12%. But that hasn't impacted the housing market at all because those people that are adversely affected by the current recession or by the previous recession are those who are not really in the market to buy a home anyways. Right. So these were a lot of people in the small business industry, in hospitality, travel, and those weren't a huge segment of home buyers. And what's happened is, even though Some industries are struggling and it's very, you know, sad what's happened to a lot of these industries. There are other industries which have exploded in growth. So we have a tale of two economies and the economy that's growing exponentially far outweighs the small amount of people who are facing struggles or dealing with unemployment, those types of issues. Many people are pivoting to the growth industries, in fact, and that's what's reducing the unemployment rate. The last thing to keep an eye on is politics. A lot of people are worried about politics these days. But real quick, you know, with a divided House and Senate, you're gonna not, you're not going to see really crazy, you know, agendas pushed either on the right or the left. So I wouldn't really worry about politics at this point. Yes, whoever's the president could make some executive orders, but it's not gonna affect the market in a huge way. So the last thing I want to hit on was opportunities. How can we find opportunities in all of this? And there's three ways we can really do that. We can find deals even in the hot market. We can also use facts, not emotions to determine where the dollars are going to be best invested or where we should buy property. And then also we can find ways to create opportunities if we're in the industry. So real estate agents, mortgage lenders, there's definitely ways to create huge opportunities today. So I'm going to go over those things in a future video and really go down into the details of how we can really capture opportunities even in a crazy market like we are in today. So overall, guys, I'm still pretty bullish on the housing market for 2021, like I said, with the one caveat being in these high growth markets. So it's not a blanket statement for the entire United States. Every market's a little bit different. But for the markets I'm looking at with high growth, I'm definitely looking for the top end of that appreciation range. And you know, this may change as things go on. And we will update you throughout the year with new news as it comes out. So that's all I got for today. If you guys have questions or comments or if you don't agree with what I'm saying, let know me leave comments below and I will address it on the next video. Until then, see you guys later.