Epic Real Estate Investing - Why You Will REGRET Buying a House in 2024's Housing Market | 1309

Episode Date: July 4, 2024

In this insightful episode, we embark on a comprehensive exploration of the current U.S. housing market landscape. We start by dissecting the unprecedented surge in home prices, unpacking the factors driving this rapid escalation. From supply chain disruptions to changing consumer preferences and low mortgage rates, each element plays a pivotal role in shaping the market dynamics. We then pivot to the challenges faced by new homebuyers amidst this price surge. With affordability becoming a significant concern, we examine the strategies and financial maneuvers employed by large investment firms that have increasingly entered the housing sector. How are these institutional players impacting market accessibility and pricing trends? For small investors and first-time buyers, the episode offers a critical examination of the risks and opportunities involved. From navigating competitive bidding wars to leveraging evolving market fundamentals, listeners will gain practical insights into making informed decisions in today's volatile housing environment. Finally, we address the fundamental demand-supply imbalance that continues to define the housing market. As demand outpaces available inventory, what does this mean for future investment opportunities and housing policy considerations? Join us as we navigate through the complexities and uncover the insights that could shape your approach to real estate investment and homeownership. P.S. Whenever you're ready to go deeper and further with your real estate investing, looking into my partner program to help you get your first deal might be the move... take the first step here for free 👉 https://epicearnwhileyoulearn.com/ Sponsor: Baselane - Banking Built for Real Estate Investors Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey, strap in. It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies, and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-aise.com. Let's go, let's go, let's go, let's go, let's go, let's go.

Let's go. The housing market is warping the economy. to the likes we've never seen. Home prices jumped 1.2% in April from March. Recent statistics reveal a staggering 50% surge in home prices since 2019, eerily similar to the heights of the 2000s housing bubble. Cheath mortgages are forcing millions of US homeowners

just to stay put, and that is becoming a problem well beyond the housing market. For new homebuyers, it's a crisis, as this rapid escalation has left many prospective buyers gripped with anxiety, fearing they might be stepping into a financial trap. For owners, it's a windfall, as rising housing prices have pretty much every typical family homeowner watching their wealth surge in recent years, grateful that they bought when they did. But for everyone else, it's a warning. Homes are as

overvalued as they were near the peak of the 2000s bubble, according to a variety of metrics, including a Federal Reserve model. The Fed isn't alone in this opinion, though. John Burns' research and consulting concludes that based on supply, demand, and afford affordability, every part of the country is overvalued relative to its history, from 24% in Northern California to 37% in Southern Florida. The stakes have never been higher as the stage is set for stagnant or even negative returns. According to a recent report by Fitch ratings, this overvaluation trend, it's occurring in about 90% of U.S. metropolitan areas. The high mortgage rates and ongoing housing shortage exacerbate the situation, continuing to put real estate prices even higher at what

nearly every expert says is an unsustainable rate. Rising interest rates and an alarming gap between soaring home prices and rental values. That only adds to the unease. Burns' research calculates that 74% of metropolitan markets are high risk for investors right now. From a landlord's perspective, this is not a good time to be buying homes because the rental yields are very low, Burns said. But although yields are low, is the long-term bet on housing a losing one right now? Listen to this. While publicly traded real estate investment trusts have slowed down their single-family home acquisitions, they haven't stopped. And Blackstone and Jeff Bezos are still aggressively pursuing them. And then you've got large companies like Lenar and Toll Brothers who have started focusing on building

entire neighborhoods of single-family homes specifically for renting. Not for selling. This trend is supported by large investment firms seeking to capitalize on the demand for rental property. Private equity firm KKR has completed its largest ever purchase of apartment buildings, the latest in a string of big ticket deals, signaling that some of the most prominent investment firms are betting on a broad rebound for multifamily housing. So here's what we know. We've got an explosion in the population while experiencing a massive deficit in housing.

And maybe current numbers aren't the best. best they've ever been for the small investor, but big money is still full steam ahead on housing. Of which could cause you to wonder, will the numbers for the small investor or first-time home buyer ever be as good as they were again? Are savvy investors waiting on the sidelines for circumstances or market conditions that are a thing of the past? Could we be witnessing Wall Street money, closing the windows of opportunity for small investors and first-time homebuyers forever? You see, With experts divided on the likelihood of a market correction, it's easy to feel this tug of war that's happening between the paralyzing fear of financial loss and the fear of missing out.

I mean, will you be caught off guard by an imminent market plunge in 2024 and experience a moment of regret for buying a house this year? Or live the rest of your life filled with regret? Having not seized this year, one of the last opportunities you may ever have. I don't have a crystal ball to advise you with great certainty one way or the other. I certainly lean one way more than the other, but many factors and variables far outside of my control could cause me to be wrong. And if I were, it would impact me, minimally and temporarily. But depending on your financial situation, this could be a huge decision that if you get it

wrong could cause significant financial hardship. Or if you get it right, could make you look like a genius. laughing all the way to the bank. Or maybe you are like me a little bit. And it's not a life or death decision for you either way. Regardless of your financial position, there are three things here to consider moving forward as a real estate investor to make the best decision for you,

because that's what I want. I want you to make that decision for yourself. So here are the facts. First thing, the historical resilience of real estate. It has long been recognized as a solid long-term investment. We all know that. Despite periodic market corrections, property values tend to appreciate over time. In fact, there's never been a time where they didn't.

For instance, after the 2008 financial crisis, which saw housing prices plummet, the market eventually recovered and reached new highs. According to the Federal Reserve, the median home price in the U.S. increased from $180,000 in 2009 to over $400,000 in 2023 to $412,000 today. This resilience shows that, while short-term fluctuations are inevitable, the long-term trend remains upward. Moreover, the National Association of Realtors highlights that the average annual return on investment for real estate over the past 50 years has been around 8 to 12%.

This consistent growth outpaces inflation and provides a reliable wealth-building avenue. Real estate, it also offers unique advantages such as rental income, tax benefits, and the ability to leverage other people's money, OPM, to amplify returns, not to mention that that debt is self-liquidating. Here, take New York City, for example. Despite facing severe downturns after 9-11 and during the 2008 crisis, property values have surged over the long term. Even those who purchased at the peaks of the market saw appreciation,

underscoring the importance of a long-term perspective. Ignoring these historical trends and focusing solely on current market overvaluations can lead to missed opportunities. Real estate's tangible nature, combined with its ability to generate, passive income and hedge against inflation, makes it a compelling investment, even when market conditions seem daunting like right now. Real estate, it's undefeated. Number two, improved market fundamentals. Today's housing market is fundamentally stronger than during the 2008 crisis, thanks to stricter lending standards and increased federal oversight. Post-2008 regulations,

such as the Dodd-Frank Act, have tightened mortgage underwriting standards, ensuring that only qualified buyers receive loans. The Consumer Financial Protection Bureau enforces these standards, reducing the risk of widespread defaults. Additionally, over 90% of mortgage-backed securities are now federally backed, providing a safety net that was absent during the last housing bubble. According to the Urban Institute, these measures significantly reduce the risk of a market collapse due to a default contagion.

A housing finance scholar, Lori Goodman, notes that today's higher credit scores and stringent income verification further stabilize the market. Consider the case of the San Francisco Bay Area. Despite being one of the most expensive markets in the whole country, stringent lending practices have maintained relatively low foreclosure rates, even during economic downturns. This stability contrasts sharply with the widespread foreclosure seen in 2008. You see, by understanding these improved market fundamentals, potential buyers can feel more secure in their investments. Ignoring these factors could lead to unnecessary anxiety and missed investment opportunities in a more robust and resilient market.

Number three, demand outweighs supply. The current housing market, it's characterized by a significant demand supply imbalance. According to the National Association of Home Builders, the U.S. faces a housing shortage of over five and a half million units. This shortage is driven by both a huge pullback in building after the 2008 crash met with a reluctance to resume, and demographic trends, such as millennials reaching peak home buying years and increased immigration. This low supply and high demand, it supports sustained priced growth. It's breathing in an environment for it to continue to rise. For example, in cities like Austin, Texas,

the influx of tech workers and companies has driven demand, leading to a housing boom there. Despite high prices, demand continues to outstrip supply, maintaining upward pressure on prices. not down. Furthermore, the U.S. Census Bureau reports that household formation rates are increasing with more millennials and Gen Zers entering the house market. This trend, it's expected to continue further supporting home prices, unless they just start deciding that they want to live under the stars with no roof. Ignoring this demand supply dynamic, that can lead to a skewed perception of market risks. While overvaluation concerns are valid, the persistent demand ensures that prices are unlikely to plummet. Understanding these trends helps potential buyers make informed decisions,

recognizing the ongoing opportunities in the housing market despite high current valuations. I don't need to tell you that the housing market, it's a battlefield, and the stakes they've never been higher. But amid the chaos, there lies an unprecedented opportunity. You see, this might be the worst time to buy a house, according to some metrics, but it could also be the last time. It could be the best chance to secure a foothold in a market increasingly dominated by big money. Because it's obvious, big investors, they're all in. I mean, I'd say they're hiding in plain sight, but they're not even hiding. They're like flaunting it in front of your face. People just have their heads stuck in the sand, convinced that a market crash is imminent for no reason other than knowing,

hey, it always crashes, right? Here's the deal. For a housing market to crash, you must have an excess of houses for sale. We don't. far from it. And despite some pullbacks out there, major players, though, like Blackstone and Jeff Bezos, they're doubling down on real estate. Blackstone's re-entry into the single-family home market with acquisitions like Home Partners of America and Tri-Con Residential. That demonstrates their confidence in the long-term profitability of housing. With over 61,000 homes in their portfolio, Blackstone's investments signal a bullish outlook on the housing market's future. Similarly, companies like Lenar and Toll Brothers, they're focusing on building

entire neighborhoods of single-family homes specifically for rent. They're not building them to sell. They're building them to keep. And private equity firm, KKR's massive purchase of apartment buildings further illustrates that big money sees real estate as a solid investment, even amid current uncertainties. The window of opportunity for small investors and first-time homebuyers, it's closing rapidly as big investors continue to snap up properties. The availability of affordable homes, it's dwindling. Waiting on the sidelines could mean missing out on the last affordable opportunities to enter the housing market. The National Association of Realtors reports that institutional investors accounted for 22% of all single-family home purchases in 2022,

a trend that shows some signs of slowing down, but zero signs of stopping. Imagine standing out crossroads, with one path leading to financial independence and the other to a lifetime of regret. You see, the fear of missing out. It's real and justified. Big money is not hesitating, and neither should you. The longer you wait, the more difficult it will become to compete against these well-funded giants. What could the housing market look like in five or ten years if current trends continue? I mean, imagine property values soaring as demand outpace a supply. Those who invest early, will see significant appreciation reaping the rewards of their foresight. On the other hand, those who hesitated will face even higher barriers to entry, with home prices potentially becoming

unattainable for the average buyer. It's kind of feeling like that already, right? I mean, imagine that time in the not-so-distant future when the elite of our society is defined by one simple metric. Homeowner. It's not an unreasonable idea based on how things are going. The consequence of an action could be devastating. Consider the story of an old investor who hesitated to make a list of all the countless deal he'd missed. But nanzas that were in his grip,

he watched them through his fingers slip. The windfalls which he should have bought were lost because he overthought. He thought of this, he thought of that, he could have sworn he smelled a rat. And while he thought things over twice, another investor grabbed them at the price. It seems he always hesitated,

then made up his mind when it was much too late. A very cautious man he was, and that is why he never bought. When Tucson was cheap desert land, he could have had a heap of sand. When Phoenix was the place to buy, he thought the climate was much too dry. Invest in Dallas, that's the spot,

but his sixth sense warned him he should not. The golden chances he had then were lost and would not come again. Today, he cannot be enticed. For in 1977, everything is so overpriced. The deals of yesteryear are dead. The market's soft and soes his head. At times, a teardrop drowns his eye for the deals he had but did not buy. And now life's saddest words he penned, if only he'd invested then.

That's a poem by Don Weil, a reluctant investor's lament. And I bring that up because the housing market is at a critical juncture. The decisions you make now could determine your, financial future for decades to come. While the current market may seem daunting, the long-term benefits of investing in real estate are undeniable. Don't let the fear of financial loss paralyze you. Instead, embrace the opportunity to secure your financial future and reap significant rewards. This could be your last chance to enter the market before big money forever closes the windows of opportunity. The stakes, they've never been higher. Will you seize the moment or will you live a life of

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to make informed decisions about their investment. Head over to baselane.com slash Matt and sign up today for a free chance to win a $500 dollar Amazon gift card. Sign up for free, no monthly fees. That's baselaine.com slash Matt. Baselan.com slash Matt. That's B-A-S-E-L-A-N-E. com slash M-A-T-T.

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God loves you, and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know, home, boy, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.