A lot of real estate investors are worried about a crash due to the extreme market rises we have seen in both rents and in appreciation.
I am not sure if I am an outcast on this subject but let me give you my advice on the subject.
Just for a little credibility I graduated from Penn State with a finance degree and was an accredited financial management analyst at Ernst and Young, focusing on profitability for the Audit East practice. We analyzed outside movements in the economy as part of our planning process. An example of this was analyzing how covid would affect the Ernst and Young Audit practice during the 2021 planning process (this happens a year before, so we were planning for 2021 during 2020 when covid outbreak was top news).
Anyway, i eventually grew a large enough portfolio and became a full time real estate investor, thus bringing some of that expertise to this world.
Hang on with me on this next paragraph, it has meaning and will help me explain my point.
My mother was born and raised in Argentina. A once pretty well-off country. But corruption and inflation has destroyed the economy and the trust amongst the government. In Argentina most people are either extremely rich and well off, and the rest are not so fortunate. My family there is very wealthy, they have butlers, a lot of real estate, and a lot of assets. They are threatened a lot and when I visited as a 10 year old my cousin was actually kidnapped for ransom!
Well, how did they get to that point. They did not do anything spectacular or amazing. They were simply business owners. My grandfather and grandmother owned a bra factory and my cousins made their own shoes and had a shoe store. They saved and bought a home, they bought cars, they owned machines and store fronts. They worked hard and bought things. They did not lease, they did not rent, they saved and bought assets.
Life was good, but then inflation started rising rapidly. The government handed out money, they printed money, and the government was digging their hands in tax money (sound
familiar?) Inflation created a great divide that has never seemed to stop.
You see inflation makes the price of assets go up. But if you do not own assets and simply save all your money in a bank account (which is what most people do) your money becomes worthless and you have no assets that will rise with inflation.
Well, the rich became extremely rich and the middle class (the ones who put their money towards assets) became rich. It caused the great divide. And its not so much between poor and rich but between ownership and non-ownership.
We are seeing something very similar going on in the US today. Inflation does not seem to be stopping and that is a big reason why prices keep going up and up. Demand is also extremely high right now because of the great migration. People are moving at never before seen rates and that is also attributing to rising prices. But the price of materials is going up with inflation. This is causing home builders from hesitating on their builds, with wood, gas, steel, and almost all materials being sold at record highs. This also attributes to the supply and demand problem causing prices to move up.
You see, as inflation keeps going up assets will always go up. There are no signs of any of this slowing down and that is why we may be headed for uncharted waters in the United States.
The people who do not own assets will be left with worthless savings accounts and those who have ownership will see their assets rise and rise and rise, but your fixed loan will stay the same. This causes massive wealth.
The current administration fights for equality and bringing the poor up to the middle class. But the side effects of their actions is and will cause the exact opposite. Over the next decade (if these factors do not change) could mean a huge shift in our economy. I like to call it the great divide. We will see Indvidual's with lots of ownership and assets become rich. Those who do not own anything will be left with worthless savings accounts.
This relates to bigger pockets because homes will be the asset to drive individuals into great wealth. Not the only driver but a major one.
