With the impending presidential election, the unprecedented uncertainty and change brought by Covid-19, and the constant state of turmoil and rapid change in the housing markets, many of us scratch our heads and wonder about what the future for the real estate market holds. Behold, as I present my irrefutable, ironclad predictions for the remainder of 2020, and all of 2021:
1. Someone will win the 2020 Presidential Election.
I know, pretty earth shattering, right? I may have my personal thoughts on the likelihood and/or advisability of a change of regimes, but politics, religion, and staying within the good graces of large numbers of people make poor bedfellows, so I'll keep those thoughts to myself. Around the time of the election, the stock and real estate markets at large will "hold their breath," and forgo a lot of immediate activity, seeking the information which the outcome of the election will provide. People never seem to do much around the holidays or election time, as if the acts of voting and hanging mistletoe preclude any non-mandatory activity. We will have a president, and life will go on.
2. The overwhelming majority of Americans will require real estate in which to eat, sleep, and be merry.
This may at first glance seem overly obvious, but in the face of change, doesn't the media at large tend to catastrophize the future based on non-realistic but highly pessimistic viewpoints? Folks, we are not in the business of producing and selling luxury automobiles, or speculating in oil futures and International Markets. We are dealing with a staple of human existence that will become no less necessary or in demand with the passage of time, even in these times of historically unprecedented change. The law of supply and demand must and does always prevail in the long term, and with increasing population (demand), pressure is put onto housing stock (supply) in the form of rising prices or rents, and demand for new construction.
3. Investors will continue to profit from real estate, but only if they are flexible enough to adapt their strategies to current market conditions.
In the 1980s, in an attempt to curb inflation, the Prime interest rate was raised to 16%. So, let's say that mortgages for those with good credit were 18%. If I plug $180,000 into my financial calculator at 18% amortized over 30 years, I get . . .wow. A Principal and interest payment of $2,712.75. Now I wasn't investing in real estate in the 1980's, but I'm willing to bet that rehabbing and flipping houses to people getting a mortgage to purchase was not a great strategy then. But, since so many people could not sell their houses, I bet there were a lot of people willing to sell their houses "subject-to" (back then they called it 'assuming' the loan) with their existing 10% or so mortgage, and a lot of people with great credit and large down payments were all too happy to purchase the same houses with owner financing at 14 or 15% interest. Are interest rates going that high again? I don't know, but inflation is sure going to be a factor that will need to be addressed in the coming years due to our recent dramatic increase in the money supply.
4. Those with the greatest amount of specialized knowledge will have an "unfair advantage" in the marketplace.
But isn't investing in real estate in times of change a "risky" proposition? Sure it is, but in real estate investing, as in all fields of entrepreneurial endeavor, risk decreases in direct proportion to the relevant facts and specialized knowledge you possess. In other words, those that are well familiar with a variety of methods for profiting from real estate will best be able to capitalize on emerging opportunities.
There they are, my four ironclad predictions. Hopefully you will find them helpful in the months to come.
Lou Gimbutis, owner of Property Solutions, LLC, www.SellQuickNC.com and www.SellMobileHomeNow.com, has been buying and selling houses full-time since 2004, first in Michigan, then after moving to NC in 2007.
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