The Science of Flipping - Pending Market Crash...

Episode Date: November 29, 2021

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Yo, yo, what is up? What is up, everybody? Welcome to the Science of Living podcast. I'm your host, Justin Colby. And if you are listening to this on iTunes, welcome. Would love to get a five star review out of you. And if you are, well, I should say if you are listening to this on iTunes, welcome. Would love to get a five-star review out of you. And if you are, well, I should say if you're not yet over at YouTube, make sure you subscribe to me on YouTube, youtube.com forward slash Justin Colby. These podcast episodes are actually videos as well right there on YouTube. Make sure you subscribe and make sure you turn on your notifications so that you can engage with me, ask me questions, mention things, you name it.

YouTube is a great platform for that. So go to youtube.com forward slash Justin Colby, subscribe so you can engage with me. Now, this podcast actually has something to do about a conversation I had this weekend with a local broker here in Miami. And we were talking about home prices and how crazy home prices are here in Miami. As I just mentioned, I moved here. I just bought a million plus dollar home. I say that to say four or five years ago, this not a million dollar home right three years ago it's getting close um but prices are nuts here in miami prices are nuts in so many markets and so we are having this discussion about this pending foreclosure this pending foreclosure tsunami and all these people talking about how it is happening, it's going to happen. Well, I've actually did a little research, read a couple articles to try to support my point,

which was I don't actually believe this is going to happen anytime soon. I've mentioned it before on other podcasts and other YouTubes, but I actually found a couple articles supporting this very heavily for a couple reasons. One, this holiday season had a massive spike in loan applications and home purchases. Some of this is people's fear that the interest rate is going to go up here going into 2022. Now, I believe most people are buying for that reason. In fact, it was played into some of my reasons to buy, which was low interest rates, right? Why rent a property when I can get a good low interest rate? Now, I'll pause there because I would also make the argument my down payment was so heavy, I could be investing that down payment in things like rental properties or cryptocurrencies

or stocks, but I digress. It definitely played into my decision to buy. And so obviously through this holiday season, there was a lot of people applying for loans and buying homes so far this holiday season. So that was interesting to hear. People are in, I guess, a frantic, crazy headspace about these interest rates, which I can appreciate, right? You don't want a 6% interest if you don't need it. The other, which I found even more interesting was this idea of millennials being one of the larger group of home buyers now and

outpacing by numbers, the largest group versus baby boomers, right? So baby boomers used to be the largest group segment of people. Now it is millennials and millennials are now setting the pace for home buying. Some of this is because the jobs are paying so well. Some of it is this idea of the interest rates and then some of it is, you know, tech industry is doing so, so well right now. And parts of California, like the Silicon Valley are just exploding. And so individuals and millennials are able to afford a home. And so these couple articles that I read really kind of just help cement in my head that do I really believe that the home market's going to crash anytime soon? Do I believe that banks are actually going to probably even take people who essentially didn't pay for the

past two years and probably fold them into complete loan mods and back end? I do believe all of that. These two articles that I did a little research on really kind of just supported people's mindset right now. I think they realize cheap money is cheap money and get it while the getting's good. Excuse me. Get it while the getting's good. You know, the government's giving out a bunch of SBA loans, which isn't necessarily for this either. But again, cheap money kind of goes back to this idea of cheap money. And I think the millennials are going to be a major

point here regarding how many homes are buying, the price point that they're buying it. The markets are continuing to increase in appreciation and values. And I believe this is a big push from the millennials. Now, if you've been paying attention to me, listening to my podcast, watching my YouTubes, do I actually believe it's a good idea for a 20 something, uh, to be buying a home or maybe even a 30 something? I forget when the millennial cutoff is. My answer to that is no. And I know that probably surprises you if you haven't heard that from me yet, but my answer is no, I actually don't believe it to be a great investment, if you will, for a young 30-year-old to be buying a home. And the reason being is largely based around the

maintenance of that home and property taxes and actual cost of owning a home. Someone had just bought their second home as an adult first home, I bought went to foreclosure second home I'm currently living in I quite literally am spending an extra twenty thousand dollars On my roof not because I wanted to but because my insurance Needs me to repair some uh cracked uh Tiles on my roof and for me to maintain the insurance, which I really want and need, I have to get it inspected and have it signed off so I can maintain the insurance. So I don't even

have an option. I bought this home and immediately have to go in and spend $20,000 on maintenance. This isn't a remodel. This is not something I wanted to do. It's quite literally so I can keep insurance on this home. And if you know anything about Florida, really important to have good insurance here because there's things called hurricanes. So I don't actually believe this is a good idea for millennials to be buying homes. I think they could be utilizing their money in much better ways. I think most people don't realize the cost. I think most people like the idea. They, you know, again, champion this idea of low interest rates, which I can understand. But if they're not settled down, if they're not starting a family, if they're not really located and ready to kind of lock it down, so to speak, I just don't believe it's a good idea

for them to do that because the cost, again, what could I be doing with this $20,000, I just don't believe it's a good idea for them to do that because the cost, again, what could I be doing with this $20,000 that I just have to repair my roof? $20,000, by the way, to repair a roof. And then on top of that, nothing happens quickly. So is it the right time for a millennial or anybody really to be buying a home? I would say if you can maintain patience, I would hold off. I do believe there will be a market correction. So as I kind of close this circle on this episode, I do believe there's going to be a market correction. I do believe prices will adjust. Do I believe there is going to literally be a foreclosure tsunami? I don't believe that's going to be the case. I hope not. I don't want our economy to

go through that. Right. I mean, I think there's enough going on in our economy that I don't think we need a, uh, real estate crash again. Right. So I think, um, I think there's a lot of hedge funds buying a lot of money right now, or buying a lot of houses right now. They're using their monies to buy. There's a lot of investors using their monies to buy and you know these Millennials are really moving the needle if you will right so I hope you know you can kind of gauge your own interest of whether you want to be buying a home as an investor obviously I'm gonna you know utilize my money to make money I like when my money works for me. But then again, as a husband and a father, I realized my wife really wanted to have her

home to raise our child in and essentially rents. Another great article I read, which won't be a part of this per se, but it was a great article about how rents are actually going to continue to increase. And the article went in about, you know, partially landlords need to adjust for taking the major hit from COVID, you know, for the people that, you know, weren't paying, right. Or giving COVID prices and discounting months and, you know, allowing people to not pay rent for three, four, five, six, seven, eight months, um, or discounting prices just to help people out. And so part of that is they're trying to recoup some of that cost. The other part is, you know, supply and demand. People can't afford to buy homes essentially,

except for these millennials that we just talked about. And so what everyone needs a place to live, right? And so this article was really interesting because it essentially said there's no, um, end in sight with increased rents again to, you know, go into my own experience. I, myself, uh, when thinking about moving to Miami before we did, we debated running and rents were obscene for a house that I wanted to rent. I mean, I was anywhere from six to $9,000. And when I say this was, it's not like the home was sitting on the beach, right? These were nice homes, homes that I would want to live in, but nothing that you would like be like, Oh, you must

have been on the beach type of idea. No, they were just nice homes in Miami. Um, and so when you look at that and you quite literally look at the fact that you have no write off with that, uh, you look at the amount of money I'm going to be spending paying someone else's mortgage. I made the decision, uh, to go ahead and buy, right? Uh, because ultimately those rents are so high and that's, that's difficult. We're in a very tricky spot right now in real estate, right? You can't afford the house, can't afford the house, can't afford the rents. It's going to get tricky. Um, but you know, all in all, I don't see anything happening. No big crash,

no big foreclosure scenario is going to happen. I see people that can afford it. They're going to take advantage of the low interest rates. I see these millennials going to continue to buy because it's the dream to buy and become an adult. Um, but I don't know if that's a great idea. I'd love to hear your comments by the way. So again, uh, love to see you on my YouTube channel. Go subscribe to my channel and give me some comments. Give me some of your feedback. Give me your opinion. Would love to engage with you right over there on youtube.com forward slash Justin Colby subscribe and would love to hear your feedback on this. Otherwise I hope you guys are having a great holiday weekend

It is the weekend as I record this episode. We just had thanksgiving and I hope you guys are relaxing and we will talk on the next episode. Peace You