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Real Estate Market – What is Going to Happen?

by | Aug 15, 2020

We all know that the world has been turned upside down by the current pandemic that is making its way across the globe. World leaders, country governments and business owners are doing their best to keep things moving forward. Although there have been many different strategies in handling this virus, it still is a mystery and no one knows when it will end. What we do know is that the economies of the world are struggling. China, England, India and the United States are going through challenging times.  So what is going to happen in the future and what should we be doing to prepare ourselves? 

To get a better understanding of what is going to happen, you need to first know why real estate values go up or down in certain areas, certain cities, certain states and in countries all around the world. Not every area is equal in weather, crime, jobs and more…If you are a social person and want to be in the middle of things, Manhattan might be a city for you, but if your goal is to find a place that is quiet and private, Manhattan might not be the place for you. If you are looking for a manufacturing job in the auto industry I would highly advise you not to move to Silicon Valley and on the flipside of that if you want to be an actor on Broadway you may want to reconsider your pending move to Wyoming.

In addition, when it comes to real estate there is one thing that is always constant and that is the economic principle of supply and demand. It is the biggest factor that can affect the business life cycles in any industry. Local and global events can magnify and intensify the effect that these supply chain issues have on an industry and the economy as a whole. When supply is low and demand is high then you have a strong market for the sellers of properties. This is conversely true when you have a high supply and a low demand. Real estate investors and market trends are a big factor in whether or not property values go up or property values going down. Getting tuned in and conscious to what is going on in your area is the key to trying to predict the future in real estate.

This is what is going to happen to the housing market in the next 12-24 months and here are the 3 main factors that make a big difference in the future of real estate..

Inventory

If there is lower inventory that normally equates to higher prices. This is a fundamental fact. If there are not many houses for sale in an area and there are people who want to buy in that area, prices are usually priced a little higher? Why? If there are a lot of people looking to buy a home in a certain area, meaning there is a high demand, and they are all looking at the same limited amount of houses available, that being the supply, you can see how sellers can price their houses a little higher and even then the houses can be bid up by the potential buyers. 

Just take a look at what we have seen w hand sanitizer during the pandemic. First off, once people started taking this pandemic seriously it was very difficult to find any hand sanitizer for sale anywhere. We would go into the stores and there would be an empty spot where hand sanitizer was previously located. I remember seeing it on the shelf for .99 cents and then 2 weeks later stores were selling the same bottle for $5 dollars or more. Did the hand sanitizer change? No, but the demand for it changed dramatically and thus prices went up. Makes sense, right?

Next thing we want to take a look at is:

The price of money 

What do I mean when I say the price of money? I am talking about what it is going to cost you to borrow money. We are at a historic low when it comes to interest rates. These are unbelievable rates that I am sure our parents would have loved to have seen years ago when they bought their first home at a 16% interest rate back in the early 80’s. Now we are seeing mortgage interest rates of 2.5% to 3.0% to those who qualify of course. That means right now you can purchase or refinance properties at some of the lowest rates we have ever seen and will probably ever see again for a long time.

Governments around the world are trying to keep their economies moving forward and are trying to avoid any type of recession and they are pumping in billions of dollars into the economy and passing legislation to help their citizens be able to survive and thrive during that pandemic. A result of this interest rates are low and I believe they will stay low for the time being. Lower interest rates gives the real estate market a boost because people can borrow or refinance and save a lot of money on interest. It sets the market up for success and those who can qualify for the low rates are happy to purchase a new home.

However, any hike in interest rate might send signals to the economy of things to come and who knows what will happen. That could negatively affect the real estate market and cause housing prices to drop which could have the domino effect of more inventory, desperate sellers and a housing crash could follow.

Finally lets talk about…

 Income 

As we all know there are a lot of people who are struggling right now. Millions have lost their jobs around the world and millions are collecting unemployment. There is an incredible amount of uncertainty to what the future holds in regards to employment. Along with the millions of people that are struggling there are countless businesses that are not sure if they can continue to stay in business or are going to have to shut down. If businesses shut down and do not reopen, all of those employees are going to have to try to find new jobs. 

We have already seen big companies like JC Penney, Gold’s Gym, Neiman Marcus, Nordstrum and many more declare bankruptcy and although they are trying to restructure so they can stay in business, it is going to take a toll on the owners, the employees and so many more. Stores will have to be closed, jobs will have to be cut and pay will undoubtedly have to be lowered if they are to stay afloat. These are big worldwide companies that are having problems, so what about the millions of mom and pop businesses around the world that are struggling as well? Most of those don’t have the cashflow or the investors to keep thighs going. This is going to lead to stress and struggles just to stay afloat and the income instability of this will affect the real estate market.  

I recently read a Forbes article a couple of weeks ago and it had a tremendous amount of statistics that are relevant to income. I am only going to focus on 2 of them. There are over 30 million people receiving some kind of government unemployment or other financial assistance. 47% of American households experienced some type of pandemic related job loss and believe that their jobs are not going to come back. That is a big change from the 78% of people surveyed in April who believed that the jobs would come back.

In summary, I want you to realize that there is going to be some kind of correction in the real estate market. We know that. Anyone can figure that out. So what do we do now? What do we do next? Those are the reasons I wrote this article. I want you to be prepared. I want you to get ready. The time to get ready is not in two months or wait another 6 months. You need to be taking action Now to prepare yourself for what is going to happen in the real estate market so you can help people in whatever situations they find themselves in. 

Yes, You need to be prepared to help people, not to take advantage of people and their situation and a by-product of helping as many people as possible is we will all make money. Now won’t that be a great feeling knowing that you are making money and making a difference at the same time? You can do that and we can all make a difference, but You need to be prepared. 

To learn more, click on the link below and get registered for a FREE training I will be holding in the upcoming weeks where I will be sharing with you some specific strategies you can take right now to get started as a real estate investor. You can also learn how RockStar Unleashed can work with you on achieving your goals in real estate and beyond.