Have you noticed that real estate prices year-over-year have increased, regardless of our most serious Covid-19 pandemic calamity for almost the last six months? You would have thought that prices would have gone down, right? And the demand would have decreased.
Well, we did have a cooling-off period from March 22 to June 9 when Realtors (and the public) legally could not go out but could do virtual tours and videos to connect with purchasers while some actually bought w/o physically entering the premises. Most important, prices did not decrease, but sales year-over-year were less. The reason being lack of and historically low inventory. But buyers benefited with the lowest mortgage rates in 50 years. So if you are a very serious buyer, (with good to excellent income and very good to amazing credit scores) why wouldn’t you want to jump in and grab your starter, intermediate or “dream home” while the environment is so pro-buyer and seller and not lose this once in a lifetime opportunity?
A certain percentage of buyers are qualified and certain percentages are not! This is what I call a perfect storm for those who can. So if you are not a buyer, then unfortunately you become a tenant, increasing your landlord’s wealth over time as well as providing all the tax benefits. When owning and living in your “American Dream” home, there is never a guarantee when you are ready to sell that you will earn a profit, after subtracting your mortgage payments and all the costs affiliated with ownership. So I say, don’t consider it an investment unless you are earning a penny more than it costs you each and every month.
You initially purchase to bring up your family and grow roots in the community and maybe you will recoup all your money in the end as many have done as well as earning a profit. Investors on the other hand are taking calculated risks, so the spoils and benefits go to them because there is never a guarantee that they will earn a profit, but those who hold for the long term usually do. As history shows, investing in real estate has provided a safe haven for your money and returns have been quite excellent over the last 50 years. Yes, there are those who have lost money for many reasons and that is why one must have the knowledge and plan before investing, and as they say one must also cross your “T’s” and dot your “I’s.”
Of course, right now things are looking up for those cashing in as well as those who are buying because the costs are much lower than in 2019. But when things are this good for the qualified percentage of those able and capable families and individuals, but not necessarily great for the vast majority, I start to ponder and think about what could happen next to change the dynamics and the parameters of how real estate is being conducted.
Could we be at the top as we enter the second half of 2020? Will demand still be strong around most of the U.S.? Interest rates most likely will still be low. However, this past week the Labor Department reported that unemployment claims went back over one million, but the previous week they hovered around 965,000? Who will lose their job or business next week? How many restaurants, hotels, and maybe even airlines will lay more employees off or even close up for good?
Those who own their homes or investment properties hope that real estate will continue as we will be going into the 11th year of increases, which is an historic record, but the economy must keep improving for this to continue. Without a stimulus package that has stalled for many weeks, will this cause more foreclosures and short sales going forward? I am quite positive there are many who are sitting on the side, hoping prices go lower, even collapse, so they too can enjoy the long term benefits of homeownership and potential investment.
But if we cannot control the current Covid-19 situation here in the U.S. and around the globe, even a vaccine will not immediately solve the problem. There is supposedly a new Covid mutation that has been detected in China and other eastern countries, so can things continue happily ever after, or will we pivot into a negative situation? What I have experienced and learned in my own life is when things are too good, and one may not see the forest for the trees and you think nothing can go wrong, that is when you need to have a strategy to consider putting yourself in a defensive situation as a hedge against things going south. It’s called diversification.
I sort of alluded to this in my last two columns (if you haven’t read them, go back today and do so!) about the use of Bitcoin and cryptocurrencies in the sale and purchase of real estate. Although the digital currency is only 11 years old, some have been using it more and more frequently as a safer haven than the dollar when using it in a sale or purchase. I am not an accredited financial planner or investment counselor, so I cannot and do not offer financial advice. However, if you might use the digital currency, you need to obtain the advice of a certified financial planner. One must do their research to gain the necessary knowledge and do your due diligence to ascertain the best route for you to pursue when selling, buying, or investing in real estate.
Digital currency is still new and not clearly understood by the public as an alternative to our currency. So it’s a great time to sell, invest and purchase and Bitcoin (BTH) as well as other digital currencies, (Ethereum (ETH), Ripple (XRP) and Litecoin (LTC) will be playing an increasing role in future real estate transactions, as well as other types of commodities and the stock market. They could be an excellent hedge against inflation that just may be coming down the pike as Washington continues to print more and more currency.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). Just email or snail mail (regular mail) him with your ideas and suggestions on future columns with your name, email, and cell number and he will call or email you back. For a consultation, he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com to answer any of your questions or concerns.