(From the desk of Troy Eckard)
I believe the rising interest rates have only begun and I expect this pattern to continue in the next five to ten years. Reality is, there is only one effective way to pay off our national debt; with inflation driven dollars. The entire planet has been living on borrowed times and artificially inflated economies. The day of reckoning is around the corner. Now is the time to think ahead and start to plan your next five years!
The continuous rise of U.S. home values is not only in existing homes, but the construction of new homes. Rising interest rates means more expensive mortgages, higher monthly payments and less affordable living! This will lead to a downward push in the economy. Buyers will take lower value homes, and sellers will receive less value for their homes in return.
This is called a reality check! It started roughly six months ago, and its full effect will not be seen until the first half of 2018. It will take a while to come off the price increases “funny-punch” the homeowners have been drinking.
I predict there will be a large amount of pressure on potential homebuyers who look to secure a new home, or desire to upsize in the next three to four years. Cheap money has been the main emphasis in all the home buying activity of the last eight years. This behavior is creating a clear path to being a thing of the past. The spread between the affordability of homes, the cost of homes and ability to secure a mortgage will get tougher and tougher for many! At the end of the day, buyers will buy homes but maybe smaller or less expensive homes.
The erosion of demand in home buying will feed a new sector that is ill prepared to handle this shift, which is medium to low-end residential home rentals. Why? Homes have been bought not rented.
Many investors bought homes when the mortgage industry collapsed and rode out the price rise and either have already sold off their portfolios for a tidy profit or have the houses retrained in a rental pool. These investors are not coming down on their rents but will be very aggressive in their rents simply because they can!
So, in my opinion this means that acquiring rental homes now and building a portfolio of rental homes is paramount. This will position one’s self for a 5-10 year switch between home purchases and home rentals for the bottom and medium tier consumer.
The Mortgage Report released a new article about what is to come. Market analysis is always subjective and my opinion is based upon my own research and own analysis.
Disclaimer: I’ve put together a company focused on buying single-family residences to be placed into the market as rental homes. We have a very specific plan to buy these homes in large quantities to dilute overhead and provide significance in diversity of the portfolio. This is the first of what we see as a series of undertakings in our focus on INCOME, INCOME, AND MORE INCOME!
Many investors who are active and exposed to public stocks may wish follow the real estate market. There is a major link to the housing industry and how it will effect companies like Home Depot, Lowes, various homebuilders, appliance manufacturers, lumber companies and other related industries that feed the housing market.
If you like to read about alternative investments, oil and gas, real estate, and find out more about hidden markets, make sure to subscribe to our monthly newsletter.