Real Estate Triple Squeeze (Patreon)

The Triple Squeeze: Making Homeownership More Expensive

• Higher Mortgage Rates

  • New buyers face 6-7% rates

  • Most current owners 75%+ locked in under 5% so not much being sold as oppty cost is too hi to leave and refi - I know homeowners that are forced to sell and become renters again in their 50's because they DID NOT LOCK IN LOW RATES - this whole community did lock in low ratesin 2021/2022 - I called it free money - Lowest Rate: 2.65% ten year interest only fixed

  • Makes monthly payments much higher for new buyers - everyone priced out except for cash buyers

• Rising Property Taxes

  • Home values have increased significantly - due to inflation

  • Local governments are adjusting property taxes accordingly - a second whammy

  • Results in higher tax bills for homeowners - making property even more unaffordable

• Skyrocketing Insurance Costs

  • Climate change is increasing natural disaster risks

  • Insurance companies are jacking premiums, especially in high-risk areas or even leaving markets - CA, FL, etc

INVESTING TIP:

If you are a cash buyer and do not need insurance - you can score great deals right now in hi risk areas...

WHAT WOULD IT TAKE TO FIX

To return to pre covid affordability would require 3 things

• A 60% increase in incomes - not gonna happen

• A 38% drop in home prices - not gonna happen

• Mortgage rates falling to about 2.23% - not gonna happen but I do see 3.5% to 4% again in a couple of years.

h/t Sanjay for the image.