Big changes in housing are missed

Conventional wisdom and history are unlikely to be good predictors of future housing market directions, and many future homebuyers may be reading tea leaves that no longer exist.

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There are a range of financial shifts and changes that many overlook that could keep housing very tight for homebuyers, and these circumstances can keep housing boiling for years to come.

Here are some factors that could create a sea of ​​change in housing markets:

First, for more than a decade the United States has not built enough housing to meet demand. In areas like Orlando, we see 3-6 people renting a home for just one bedroom because the availability of affordable rental space is non-existent and home prices are out of reach for most low-income buyers.

Unless those in need of housing continue to live in communities or the government creates a genuine affordable housing policy, the housing demand equation will remain strong as the country is lagging far behind in terms of housing numbers. ‘units.

The stock market and the crypto world are extremely volatile, and it’s not uncommon for people like Warren Buffett to refer to both as casinos with rigged systems. Money in 2022 has poured in from these markets and it is looking for a safe haven with tangible assets and real returns.

Housing and real estate provide both, and even with the crash of 2008 real estate assets have returned to full value. Expect to see money flooding real estate as uncertainty grows in other markets.

Probably the biggest change is that domestic homebuilders aren’t just building homes for sale, they’re now building homes for rent. There has been an epiphany by builders that building a house for rent can attract more people to homes because there are no closing costs or down payment.

Moreover, with the shortage of good rental properties, the return on long-term rental properties is higher than that of building houses. There are currently national homebuilders building entire rental communities with investors willing to finance transactions. Even if the market lowers rental prices, most of these transactions will provide cash flow and return good profits to investors.

The private sector is also getting into property investment for short-term vacation rentals. More and more people want to rent houses for a week when they are on vacation and get away from confined and expensive hotels, and in most cases a week’s rent can pay the monthly bill for a rental of holidays.

There are individuals making a good living by owning tangible assets by building and temporarily renting vacation properties across the country.

The multi-family portion of the housing market was the fastest growing sector in March. Demand for apartment rentals is very high with skyrocketing rents. Expect an abundance of construction activity over the next few years as the need for apartments accelerates. Additionally, Wall Street money and hedge funds are aggressively looking for projects to invest in.

Unlike 2005 and 2006, when builders and amateur investors built homes for speculation for sale, these properties are built for long-term investments, and the other benefit, most of them are done with the money.

Demand for housing is not diminishing despite the tumult of the economy, and there may come a time when rental prices will drop, but most of these projects may require deep rent reductions to remain profitable. This is why there will be no real estate crisis.

Here’s the bad news for conventional home buyers. Housing investment by private sector builders, investors and vacation home builders will continue to keep material and labor and house prices high.

This surge in investment housing could put real constraints on what is being built and available to private sector homebuyers. Even with higher interest rates, chances are that prices and availability won’t improve as much as conventional wisdom and history suggest.

It’s not your daddy’s housing market and cash is still king – there’s a lot of money going into housing and real estate.

Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc., and he is also the host of the show “Around the House” which can be seen on AroundtheHouse.TV.

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