What's going to happen to real estate? Friends, family, acquaintances, it seems everyone wants me to tell them what's next. And considering the position I am in, watching transactions occur on a daily basis all across the country, closing more deals than any other real estate education organization in America, it would seem that I have a terrific vantage point in which to understand what to expect from real estate better than most.
If you asked me today, "what's going to happen to real estate?", here's how I would answer:
Real estate should be viewed from both a macro and micro standpoint. A macro standpoint is the overall market on a nationwide basis, like you see on the national evening news. A micro standpoint is viewing real estate on a local, zip code or even neighborhood level. I'll begin on the macro level.
Macro Real Estate Economics
For this subject, I yield to the world renowned expert, Yale economist, Robert J. Shiller:
As you see from this 100+ year study of housing prices, after large booms or busts, there tends to be very long stretches of volatile markets where the prices go up and down in a zig-zag fashion. We already saw this nature occur right after the bubble of 2006 burst. Prices plummeted, then rebounded a tad, then came back down again.
So what's going to happen to real estate? Look at the graph above to see what is most likely to happen based on history; a prolonged volatile market of zig-zagging ups and downs.
If that left you hanging as to how you can turn this knowledge into financial abundance for yourself, hang on, there's more!
Micro Real Estate Economics
On a local, zip code or even neighborhood level, the real estate landscape maybe very, very different. A company may have just built a gigantic plant near by and 3,000 new jobs may be added within the coming months. A very prestigious neighborhood known for incredible schools, wonderful amenities and superb access to downtown may sell quickly regardless of what's happening on a nationwide basis. Or, populations and jobs may be on a mass exodus out of a certain area due to poor government policy making and vacant houses are piling up in droves. On a local level, real estate can have a much different outlook.
Since most of us reading this post are not large institutional investors looking to profit from the ups and downs of real estate on a macro level, we are going to make our money on the pockets of opportunity that present themselves on a micro level. But, macro and micro real estate markets are not mutually exclusive. In fact, the issues that are plaguing the nationwide real estate health (macro level) can actually further enhance the opportunities you can find on a local basis (micro level). Here's what I mean:
Example # 1 - Interest rates are at all times lows. Home prices are at their lowest point in over a decade. When you combine these two, on a local level, whereas before, you may have been unable to acquire a single family home and cash flow positive, now, with these two factors, you may be able to cash flow very well. In many metropolitan areas across the country, opportunities abound to purchase homes for $60,000 that rent for nearly a $1,000/mo. With interest rates at incredibly low rates, that's a cash flowing dream come true! And whether the market goes up or down over time, if you are bringing in $400 per month, month in month out, who cares what's happening to prices. You're raking in the dough from the tenants and they are paying off your mortgage and best of all, the income is incredibly tax advantaged!
Example # 2 - There may be neighborhoods within a given area that sell better than others due to factors completely unrelated to the general market conditions. But, there may be property owners within that area that have watched the news, read the articles and been inundated with such negativity that they may decide to sell their property for a price that allows you to resell quickly for a small profit. Therefore, wholesaling may be a great little niche within certain areas of town because of the negativity surrounding the national view of home prices.
The list of examples could go on and on. The secret is to focus on a micro level, using the macro level to your advantage and to focus on the little niches that create excellent opportunities. But like all great opportunities, they don't last long so you must seize the moment. Right now, our students are making more money than ever before. They are weaving and bobbing, finding the little "honey holes", getting in and making money and then moving onto the next opportunity.
In the next week alone, literally hundreds of thousands of dollars in cash profits are being produced from our students.
So you ask, "what's going to happen to real estate?", the past is history, the future is a mystery, but as for me and my team, we'll be making money.
Very well written article. Easy to read and understand the numbers and reasoning. The question is how do you find these gems of houses in appealing areas to buy with a low down payment and then rent quickly so you can start the cash flow process. This is what I am looking for.
That’s precisely what we teach our students to do. Look into working with us at the apprentice link above.