Friday Update November 18, 2022
I missed last week because we went off roading and camping instead of caring about the real estate market. The cool thing about having a long term outlook on real estate is that you do not have to care about it daily for it to be a good investment.
I wrote this insanely long and very ranty update for you and then I deleted the whole thing. In it I clowned other agents for being short sighted and desperate. But like what else is new?
So this week we have 1,553 single family existing homes for you to look at. We have interest rates that are significantly better than they were just a week or two ago. And rates are also significantly higher than a year ago. It is exactly what it is though, isn't it?
The midterms are over, we have a divided congress and the market generally loves that. The market loves a divided congress because it truly can't get shit done, therefore it can't get in the way of the business interests that own this country.
Our sales volume year over year is less than half. Last year month to date we had almost 1,000 units close out at a median of $451,500. This year its less than 500 units at a median of $450,000.
A lot of recent home buyers are now under water and I think the trend will likely continue downward for the short term. And I'm sure with that a lot of unprepared and financially strapped folks that should not have stretched to buy a house are going to be in for some pain.
Real estate is a long term investment. That has been true and will continue to be true. Real estate is the only investment you can make that literally allows you to own a piece of the earth we all live on. That does not necessarily make it a good short term investment. You know what we call short term investments? We call them scalping if you're a day trader or we call it gambling if you're honest.
Long term real estate investments allow you to milk tax benefits, collect rental income, create leverage that in my opinion you should be super careful with, and most importantly allow you to hold onto a piece of this world. Real estate investing allows you to create legacy wealth that can elevate your family's future generations.
There is a saying about finance that the market is able to remain irrational for much longer than most people are able to remain solvent. We talk about good markets, bad markets, and people make judgement calls about when to buy and sell things.
The reality of it is markets are just a mechanism for exchange. They're not good or bad, they're just there. Like the last 2 and a half years have been the best time to sell a house in many years. And so buyers flocked with escalation clauses and appraisal gaps. This is of course due to the crazy low interest rates that we had.
Now we flip close to a 180, houses are much easier to buy and can be had not only without premium but often with a steep discount. And so buyers don't want them and sales activity is down.
That is as stupid as it sounds and is just proof that the market is as irrational as it's participants.
Today we have the lowest sales volume of homes nationwide since 2011. We have prices creeeping lower nationally. We are most likely on the verge of a severe recession if you look at financial indicators like the yield curve.
It's reminiscent of 2011 for sure in a lot of ways. But if you look back at home values in 2011 and compare them to today you'd realize that buying in 2011 was pretty fucking awesome. And I'm pretty sure with a long enough time horizon for your investment buying in 2022/2023 won't suck either.
It's all about perspective gang. We're coming to the end of one business cycle and getting ready to kick off the next. Selling between the two probably won't be fun and buying between the two seems scary. But fortunes are made on the purchase, not on the sale.
Try to kick the mindset of how much something is a month. Try to build wealth. Real estate is one great way to do that with the right attitude and positioning.