There is a saying that goes “You have to jump on the escalator sometime” and for an experienced, accredited real estate investor it may never be as true as it is right now.
But what about the rest of us?!
Homes for sale in the United States are out of reach for most Americans. Housing markets have jettisoned to epic heights while American pocketbooks have either been emptied by the pandemic or have stayed the same. So why the imbalance, and how do we respond? Let’s take a look.
The housing market forecast for 2021 is looking hot!
Add in the shift of millennials increased interest in a more predictable asset class like real estate over the stock market, and you’ve got a perfect storm for high housing prices.
Let’s see some data.
Strong real estate demand for sellers
The image below from the Realtors Confidence Index Survey shows that all but two states, Vermont and Iowa, have high or super-high increases in BUYER traffic, also known as the pace of sales. In those states, the traffic is just stable and not accelerated but is not decreasing.
So overall, a great time to get into real estate, right? Well, yes, but there’s a problem. Below is the same graph but this time for seller traffic.
Low inventory supply for buyers
You can see that the inverse is true here. Despite increased demand, most states are selling at the same rate. Only three of the eight states yellow states have a similar increase in traffic.
Otherwise, every other state is behind. The supply of homes cannot keep up with the demand.
This reluctance to sell creates a low inventory and houses are selling in record time! Single-family homes, on average, are on the market for less than a month because demand is so high.
The competition is so hot that buyers are forced to make a decision on one of the biggest purchases of their lives in less than a few weeks. In many cases, like in my Bay Area town, houses go on the market on Thursday and a buyer is chosen by Tuesday! Buyers are making snap judgments in many cases without all of the proper due process, a prickly position for sure.
So what is this competition doing to housing prices? And how much are buyers stretching to get into real estate? Well, the short answer is too much!
Home affordability in the U.S.
howmuch.net reports that there are only three states (Virginia, Maryland, and Delaware) that more people than not can afford to purchase a house. The map below compared the median home price and the households who can afford the median home price.
So what does this all mean?
The value of homeowners’ most important asset is growing in value. That’s a good thing for owners! It’s great for homeowners, landlords, and also real estate investors who have already purchased property. Their wealth has increased. The next logical question is:
How can owners take advantage of their recent increase in their property value?
Well, if they want to use this newfound wealth, what are their options? There are a few:
Take out a home loan or HELOC, but that seems counter-intuitive. If you have more wealth tucked away in your property, why would you get a loan? And, are you going to pay a bank just to access the value in your home? That doesn’t seem fair.
You could sell your home and buy another but as we can see from above it is NOT a buyers’ market and, selling your house to overbid on another house also won’t leave you with any cash so that doesn’t make sense either.
You could also use services like Invown to stay in your home and unlock the value (the equity) in your property.
There are innovative real estate services like Invown that can be used to unlock your property value to pay off debt, upgrade your kitchen, put your kids through school, pay off debt or invest in other real estate markets.
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