Reventure Videos: Real Estate

Inflation SURGING in 2021. Buy Real Estate?

The price of goods (especially used cars, gas, and meat) across America has spiked over the last three months as a combination of economic re-opening, supply shortages, and low interest rates has pushed up inflation. The Bureau of Labor Statistics-tracked CPI is now measuring the highest YoY % increases in decades.

The Federal Reserve Quantitative Easing program gets a lot of blame for this inflation. QE is essentially a “Money Printing” strategy where the Fed gives banks cash in exchange for treasuries and mortgage backed securities. Analysis of bank balance sheets shows that their cash reserves have spiked as result. But interestingly banks aren’t making as many new loans as they used to. The growth rate in loan credit from US commercial banks has slowed to only 4% per year in the last decade compared to well over 8% from 1970s-2000s. If banks aren’t making loans at the same rate, and the Fed printed money is just staying in bank vaults, that’s not inflationary.

Is Inflation here to stay? And if so, what does that mean for your Real Estate Investment Strategy?

Austin Crash Imminent? +Big Bubbles in 5 Cities

Home Prices in America have reached record levels in 2021. Home buyers and real estate investors are now priced out of the market and wondering when the Bubble will crash. The first Housing Crash City likely be Austin, where home prices have shot up by 30% in the last year. Other cities likely to be hit hard include: Salt Lake, Seattle, Boise, San Jose, and San Francisco (Silicon Valley).

One of the best metrics for evaluating whether your city is in a Housing Bubble is “Price to Rent Ratio”. This metric, which can be calculated based on data from Zillow, takes the typical home price in a market and divides it by the typical Annual Rent. The higher that home prices go above rents in a real estate city, the more likely it is to crash.

These are the markets where the 2021 Housing Crash will likely start. They could face home price declines as high as 30-35% over the next several years.

2021 Crash in Your City? 3 Metrics to Watch

Home prices are at sky-high levels relative to wages, and many home buyers and real estate investors feel priced out of the market. A potential crash could wipe 20-25% off home prices across the country.

But the impending crash likely won’t all cities in the same way. Some areas of the country could get hit hard, facing up to 40% price declines. But others are likely much more secure and could continue to see appreciation, even during a broader US Housing Market Crash.

Home buyers, renters, and real estate investors who want to find out the risk factors for a Housing Crash in their city should track the following 3 metrics for insight into the future of their local housing market.

Banks on STRIKE from Housing Market

Mortgage lending standards – tracked by the Mortgage Bankers Association – are now at their strictest level since 2013. That means that if you’re a home buyer you need to have great credit score, good income, and no issues in your past in order to be approved for a mortgage. What’s interesting is that banks are strict at a time when everyone else across the Housing Market seems to be bullish.

Why are banks strict? The first reason likely has to do with the Foreclosure Moratorium and the 1.7 million seriously delinquent loans sitting on bank balance sheets. From a bank’s perspective there is a Housing Crash occurring, because the delinquencies on their books are at Housing Crash levels.

With so many delinquent loans and future foreclosures on the books, banks are understandably becoming more conservative about making new loans. And until banks are able to get these loans off their books, they are unlikely to become more aggressive in originating new mortgages.

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