Payam H. Raouf
What else is possible?
Not much these days except sitting, hoping, watching the market and seeing your buying power go to hell!
Last I spoke with an agent in Las Vegas, there were less than 1000 single family homes for sale, here in Phoenix Metro less than 4000 and in Houston TX and Charlotte, NC, a similar story.
You market a $300,000 house, it sells for $325000, and by the time it closes in 30 days, you’d be lucky to find one like it for less than $350,000.
Everyone is sitting put.
Institutional investors are buying whatever pops up at any price, one in particular I researched, bought 1600 plus homes, paid cash at asking price or above since the pandemic began in March 2020 until the end of the year driving the prices up through the roof.
Renters are sitting put literally taken hostage by the situation. They pay whatever it takes to renew their leases. No one is moving out except the ones that are getting lucky enough to buying a pocket listing or the rug is being pulled off from underneath their feet by the landlord selling.
You get the picture?
Nowadays cash is a liability and mortgage is an asset. So, get used to it. No one is asking what the cash-on-cash return is, everyone wants to dump their cash into something, what else better than into Real Estate?
If this trend continues which it seems it is going to for the next 3 years, the house you put on the market for the $300,000 now may be $600,000 by then. That’s at least what everyone I ask to sell their house tells me.
Some think there will be a hiccup somewhere ahead but when, who knows, and if so, demand is so high right now that it doesn’t really matter? No one has a crystal ball. We are at the mercy of the global market specially China.
Here we go. Have you heard of 40, 45 even 50-year mortgages? Now you did and remember where you did, right here. As an idea take for example:
Borrow $300,000 at 5% for 30 years you pay $1600 P&I
Borrow $500,000 at 2.5% for 40 years you pay $1600 P&I
Borrow $600,000 at 1.75% for 40 years you pay $1600 P&I
$15 an hour is not going to cut it. We cannot buy, China cannot grow, as long as they keep buying our papers (inflated notes), fed is going to print more money and keep the rates low.
Have you looked at the cost of labor and material lately? A 4x8-foot sheet of construction-grade plywood used to cost $10 a sheet. Have you been to Home Depot lately? How about $45. Labor cost, do not even go there, try to call a plumber or a handyman. Good luck finding one.
At least this is what I see in the trenches for now. Each market holds its own. Here in Arizona, we went from being a red to a blue state in this election that’s why all those from California, Washington, New York and Chicago are moving here. To them our prices are low comparing to where they come from driving rent and home prices up.
Jobs here are plenty. Big boxes, distribution centers, factories are opening up everywhere. Big industry from Microsoft to Amazon are here to stay. For the last four years, Chief Executive Magazine has ranked Arizona in the top ten best states for business.
I am not hyping it. I have been guilty of sitting on the side line myself to see how this election went but It’s time to start actively looking for a deal that makes sense. Not chasing the price but location, future potential and, if lucky, make $10 on your $5 scratcher after losing 2 or 3 times in a row.
And if you come up with a new invention 2 o’clock in the morning wondering what to do with your money, google it before you rush to buy the domain. Chances are it already exist.
We know property management and investment market down here in Phoenix Metro. When you are ready to park your investment with us and let us handle all aspects of your rental management, give us a call. We have a proven track record, bar none. Here is the number. 888-777-6664. We are ready when you are.