The Pulse Of The Real Estate Market

What is happening on the market now?

There are many experts in the industry that watch the market daily, observe the economy trends, interview millionaires and professionals on various topics. Me and Gualter we follow the updates daily, watching the Rich Dad Poor Dad Radio Show with Robert Kiosaki, Rod Khlief podcast, Interviews with Harry Dent, Jim Richards, George Gammon, Ken Mcelroy updates, Peter Chief. The experts’ points of views may vary, we are here to share an overview and let you form your own opinion and how are you going to hedge and pivot and get ready for the upcoming changes.

Where are we now?

We got a new president, which by the way it will provide entrepreneurs lots of opportunities including real estate investors and business owners. We as investors learned how to adapt very well and get a head of the curve.

We are certainly in a bubble, will it explode now or later - we can only speculate.

And we want to be prepared for BOTH: Continues inflation and upcoming deflation.

Who have heard of a Barbell Theory (hands up?) Jim Rickards, former CIA consultant, the author of the book “Aftermath” has been talking about it for a while.
In inflationary market we know what to do: Buy Gold and Buy Real estate and hard assets – these are inflationary hedges.

In deflationary market we want to get cash, 10 year treasury notes because bonds do better in deflationary markets (rates come down, bond prices go up). Cash, Stocks and Notes are the hedge against deflation.
One side you have Hard Assets, on the other side of a barbell you have treasury notes and Cash is the connector. If you are the guy with Cash you can pivot and have choices. The point here is that it looks like deflation is coming after QE, stimulus will run out but we do not know if we get more stimulus, most likely we will, just be prepared for both: 30% Cash, 30% paper asset, business, and 30% Hard assets.

Are you with me so far? The economy seems to be artificial, how Covid effected.
Let’s just take a look at our local market here, Boston Ma and Fall River Ma:
We have LOW inventory for 2 Fam and 3 Fam and high inventory for 5-6 Families. Investors are selling at the pick of the market. Therefore, we have more inventory ever, the prices still going up. It is not Natural supply and demand. Artificial. The inventory for large residential multis is up, and the market is still on the rise. We see slightly higher days on the market.

Mortgage delinquencies are a massive indicator of the challenges ahead. The Cares Act rolled out forbearance programs which many people participated in. So as a real estate investor, you can do a deep dive into those numbers. These delinquencies are going to add massively to the housing inventory, which is extremely low and begin to have downward pressure on prices. Watch mortgage delinquencies. Mortgage delinquencies are already happening on commercial buildings, retail buildings, malls, office space, multifamily, and residential already. Without getting income no one can serve the operating expenses and debt. Watch your default by market. Be prepared to start buying from banks as they discount the properties in that they foreclose on. So these mortgage defaults are coming.

Prices will go down as inventory goes up. Dig into the numbers for your state, city and submarket, watching delinquencies and its impact on markets.

Evictions will have real impact. The Aspen Institute, is an estimating that 30 to 40 million people in America are at risk of eviction due to the Covid crisis.

Evictions are a real thing. Currently there continue to be moratorium on evictions but these will begin to ramp up as we move into 2021

U.S. was already facing an affordable housing crisis prior to the Covid health crisis. Given this situation, people are going to be evicted and lose their homes, which is incredibly unfortunate. However as in 2008, this will put pressure on multifamily units and some rental housing. So over the mid and long term this will drive up multifamily values, while having downward pressure on single family prices, very similar to the period after the 2008 financial crisis where 10 million people got displaced from the fallout.

Unemployment and migration.

What is the real rate of unemployment and are we really in a recovery mode?

Where people are going to due to unemployment, where are they moving to? High unemployment, high forbearance – this investment is going south. Or it could be the opposite.
In his latest video, Ken Mcerloy is going deep, and you can watch this, but I will highlight the main points.
Ken shows the breakdown of unemployment based on 6 measurements that government uses and it is all in BLS.gov From U1 to U 6. What is government is showing us is U3 – official unemployment rate. 7.9% which is 12.6 M

U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers. 20.4M almost 8 m pp more varies state by state. The highest Cali 15.1%, Hawaii 15.8% , Nevada 17% and NY – 14.3%
Big cities always get hit first.
Does this make sense?

Pay attention to migration patterns. When people move that is trackable primarily by moving companies and driver’s license applications. A good resource for this is the North American Moving Lines website, but there are others you can research. Are they going from New York to Phoenix? That's trackable. That's a data point. Pay attention to these migration patterns. Cause it's going to help you to make sure you can differentiate between the cities and the submarkets that are going down and the ones that are going up, potentially causing small bubbles and minor depressions in various places.

What do we Do?

Robert Kiosalki says: “If you are not paying attention , you are going to be wiped out”
Pay attention to demography. Harry dent says Demography is density.
With new president, we want to pay attention to energy stocks, there will be more stimulus, and interest rates are being low and fed says it will stay low till the next 5 years.
Harry Dent and Rod Khleif:
For Multifamily investors. Rents hold up. All Properties will go down in value to some degree in a real estate cycle. Medical and residential will go down the least.
When we are about to get to the downturn, there are two things Harry Dent actually is suggesting to do:

1. Sell your over inflated properties to get cash! Stocks, businesses- anything you can to create cash. Sell Properties that has the least debt, not the most. You may want to sell it at the high and then reby something similar 2-3 years from now.
2. Cash Flow. Keep properties that cash flow now. They will be cash flowing later.
   The combination of Cash flow and Cash makes you the king when stuff hit the fan and you will have choices.
   Opportunities in nursing homes, etc. boomers selling off mansions and getting into the rental market.

In Summary and Recourses:

Mortgage Delinquencies and Evictions

• Mortgage delinquencies are a massive indicator of the challenges ahead
• Evictions will have real impact
• U.S. was already facing an affordable housing crisis prior to the Covid health crisis.
• Websites Recommended by Ken McElroy:
• Black Knight - blackknightinc.com – Great for delinquencies reports
• Mortgage Banker Associations - mba.org - provides forecasts and commentary on the market.
• Urban Land Institute - uli.org - Think Tank working on land use for cities and communities
• Aspen Institute - aspeninstitute.org - The Covid Eviction Crisis
• National Apartment Association - naahq.org - U.S. based group supporting multifamily property
• National Multi Housing Council - nmhc.org - Industry group advocating for apartment owners
• Small Property Owners Association - spoa.com - Group in support of smaller family owned rental property

Unemployment Rates and Migration Patterns

• BLS.Gov – unemployment by State
• Official unemployment is 7.9% or
• 12.6 M people.
• Real Unemployment which total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.
• Is 20.4M people
• Migration: northamerican.com/migration-map

Posted Using LeoFinance ^Beta