In our latest episode, we take you to lively Las Vegas, where we’re at the National Association of Broadcasters Show.
Visiting this city brings back a lot of memories.
You see, we witnessed firsthand the glut of real estate in Las Vegas pre-recession and the freefalling prices that followed when the market crashed in 2008.
In this podcast, we’ll delve into Clues in the News to analyze what’s going on in today’s market. We’ll discuss how headlines today parallel the past … and why emerging market trends should make a difference to YOU.
In this fast-paced episode of The Real Estate Guys™ show (we have a lot of ground to cover!) you’ll hear from:
- Your super-sleuth host, Robert Helms
- His clue-cracking co-host, Russell Gray
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Rising home sales
We found clear evidence home sales are rising in many markets. An article in Business Insider, New home sales unexpectedly jump in March, states sales of new single-family homes went up by 5.8% in March, according to the Department of Commerce.
This is a departure from what economists had predicted … the big shots imagined that new home sales would fall by 4% this month.
Notice we’re talking about new homes … this is a subset of the entire housing market.
The article also pointed out the confidence rating of the National Association of Home Builders is at a nearly 11-year high. It hasn’t been on fire like this since around 2005.
The news clearly points to rising confidence in the market … which means more free-flowing money. Catching any similarities between today’s market and the past?
We want to remind you we don’t have a crystal ball (although if you can procure one for us, we’ll happily take it!). The best we can do to predict the future is use our knowledge about the past to gauge where we think things are heading in the present.
Today’s market reminds us of what happens when money starts to flow freely. Too much free flowing money means money is mal-invested and people get sloppy.
Investments that make sense at zero cost often don’t make sense at a higher interest rate. In a market that’s beginning to be flooded with money, real estate investors have to be careful about the ways they consume debt.
New homes aren’t the only market subset currently thriving. In this MarketWatch article we learned the average number of days a house is on the market is 34 days.
That’s a tight market with sturdy demand! And with high demand comes high prices … until there’s a change.
If you’re in the building business, high demand and low supply might seem great … until you’re one of the hundreds of contractors who decided to take advantage of that high demand, inadvertently creating a glut of products.
At first look, rising demand might look good if you’re on the selling or building side of things. That’s why it’s SO IMPORTANT to put all the info you get in the blender … and figure out what kind of soup you’ll really be getting.
The MarketWatch article stated the national median sales price for existing homes is up 6.8% … on average.
The word average is key. Prices were up by almost 10% in the Northeast … and down by 1.8% in the West. All real estate is local.
We thought it was interesting to pair what we know about rising home sales with our knowledge that home ownership is at a 100-year low. So WHO is buying all these houses?
Clearly, real estate investing is trending up. But what’s the big picture?
Skyrocketing home prices
There are a ton of indicators that the market might be heading for another crash. Rising home sales to investors and speculators is one.
Our friend Dr. Doug Duncan, former chief economist for Fannie Mae, told us during the Summit that this has been the longest recovery in U.S. history … and the weakest.
People who’ve been recovering from the crash of 2008 are finally dipping their toes in the market, thinking it’s normal. But if you’re a professional investor, you know most people end up buying high and selling low (to you, we hope!).
If you’ve been waiting for things to go on sale, the current market might be getting ready to serve up a lot of sunshine for you! If you’re prepared, a big pullback from the market could be one of the greatest possible gifts.
We noticed another interesting MarketWatch article. It says that U.S. home prices grew at fastest rate in nearly three years.
That’s more evidence we might be nearing the top of the market. But it’s not time to be scared. It’s time to be smart.
You have to be careful about how and where you’re investing. And you absolutely must have a Plan B.
If the market crashes, you may have to sit on your properties for ten years … and you have to be willing to do so.
Ask yourself: If interest rates go up, will my deals stay stable? If prices go down, will I be in a position to buy?
It’s very dangerous to put your fingers in your ears and ignore what’s happening in the news. After all, the Titanic sunk because nobody thought it could.
The big question is how YOU will respond to what you’re hearing. Take a look at the past … analyze the present … and prepare for the future.
Plunging sales, soaring inventory in one market
Our next article, Condo Flippers in Miami-Dade Left Twisting in the Wind, featured on Wolf Street, could have been published 10 years ago.
If you go to Miami, you’ll see new high rises going up across the city. Yet sales fell 10% year over year.
If you’re a regular subscriber to our events and podcasts, you might remember that we were doing Miami field trips at one time.
It wasn’t that we weren’t plugged in. We examined the data and asked for details. And we let ourselves be persuaded the rapid growth in the Miami market could continue … because it seemed great.
But sure enough, the unthinkable happened.
Although there were people who had a plan and are holding on now, Miami is not a market you want to be in right now. Based on current construction, there’s a 432-year supply of new high-rise condos.
Miami demonstrates what can happen when there’s a temporary spike in demand. Now, we’re not saying temporary spikes in demand are always bad. In fact, they can be a good thing!
But you HAVE to be prepared for the worst to happen.
Are robots taking over the world?
Our last article discusses a very different phenomenon. We were fascinated when we read an article in Nikkei Asian Review. They share robots can handle a high percentage of our work tasks.
What do robots have to do with you? Well, that’s EXACTLY the question we want you to be asking!
The study the article cites found that 75% of 77 sample tasks could be handled by machines. So think … how does this affect the fast-food worker? The factor employee? The Lyft driver?
And what if those people are your tenants?
As landlords, we have to think about how every change will affect us, good and bad.
There are so many factors that affect the real estate “ecosystem” … blowing winds, undercurrents, waves, and sudden storms.
It’s essential to keep a sharp lookout as you navigate your portfolio through both sunshine and swells. As the saying goes, “A smooth sea never made a skilled mariner.”
Successfully navigating through rough seas can only make you a better sailor. As veteran real estate investors, we’ve learned to be grateful for devastating events like 2008 … because they forced us to become sharper students. Now we see downturns as opportunities!
We urge you to watch what’s going on the market and evaluate how each new factor makes an impact on you. The best time to repair the roof is when the sun is shining. Now is the time to be proactive … before you have a leak in your dining room.
Like the Boy Scouts say, “Be prepared!”
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