Hey everyone. Paul here, REO auction Academy, just looking at this new article came out today. 2020 home sales hit the highest level since 2006.
And if you remember 2006, that led up to the crisis of 2008 and I was busy doing a lot of fix and flip store in this time period here in 2006 and getting record numbers. And we're kind of seeing some of the same things. Now that's far, far, far different, and I'll go over some of the similarities and differences.
What led up to that is all the easy loans, they call them the liar loans. Where if you were alive, you did not need to have to prove you had a job. You had strippers getting houses. It was totally insane, and totally different thing, which led up to the financial crisis.
What we have now is that we're being pushed in this direction because of COVID. That really push people to move. That is why you're seeing a 22.2% increased year over year in existing home sales. What COVID did, everybody decided I'm moving. For people who are thinking about moving, COVID pushed people that direction. For people that weren't thinking about moving, they wanted to get out of the city. They wanted to get out of the major metropolitan areas. And it wasn't just the COVID shutdowns in the cities, it was also due to the rioting and other disruptive things that were going on in the city.
You have a big transient push out of the cities and into the suburbs and into more rural areas is what we're seeing here. I think that's going to continue for a little while and that's the way the trend is going right now.
I do think this year we will start to see an uptake housing inventory. I think we'll start to see that probably in all likelihood towards the second half of the year. Maybe towards September, October, November, December timeframe. Late Q3 or Q4 is when we'll start to see housing inventory increase.
Biden spoke about putting a moratorium until end of September. That's only on federally backed loans, government backed mortgages, Fannie, Freddie, and HUD. It's not going to be on your conventional mortgages so the non-government back loans could still go into foreclosure. But it will still reduce housing inventory.
What else is pushing existing home sales higher?
Record low interest rates. As you can see here, they're projected to stay 3% or below for the foreseeable future. The federal reserve is just buying up these ten-year T-bills to keep the record rates low artificially. I was talking to some people who think the interest rates are going to increase, but the Fed will attempt to keep interest rate low.
The Fed may not be able to keep interest rate fully down, but I believe the Fed is going to do everything in their power to keep interest rates low.
Where are people migrating?
Currently, Tennessee's number one, Texas is number two. Nevada is up there, as is Florida. Basically where people are migrating to is to low or no income tax states and warmer climates. Also, to red states. Red states have lower taxes. You're seeing a lot of that currently happening. I think the blue states are going to have a major drop in population over the next year. Looking at home prices from their lows right after the 2008 financial crisis. In June of 2012, $198,768. That when you start seeing the increase from the low of $195,000. The low was March of 2012 and then home prices started to increase from there. Fast forward to June 2020. the median home price went from $198,768 in June of 2012 to $278,621 in June of 2020. And of course, home prices have increased since June 2020. It is probably closer to $286,000 currently. That means you had a $79,853 increased over an eight-year period, roughly just under $10,000 per year.
People gained in home equity which was a 40% increase, which is a staggering increase. We really been helped by everybody moving from the big cities to suburbs and rural areas and record low interest rates.
We have matched or just slightly exceeded, the all-time medium home price highs. I think that's going to continue into this year, but how far into this year? I don't know, but I'll tell you what my plan is. My plan is to sell off my dog rental properties and keep my good rental properties. I have rental properties that I've purchased for $80,000. It is a short-term rental (Airbnb) and I put about $10,000 of renovations into it. I am $90,000 into the property. I then got a mortgage for roughly $80,000. This property rents for $3,000 a month on average as a short-term rental (Airbnb). Minus property expenses and mortgage, I am netting somewhere around $1,100 a month.
It's a real good cash flow rental property for me. So I'm will keep this property. Plus the value right now is probably around $175,000.
These types of properties that I have where I have no more of my money into them, they are just producing cashflow, I'm will keep these rental properties. Other rental properties that are either more difficult or have issues with them, I'm going to sell those properties.
If you're thinking about your poor performing rental properties right now, you should probably sell them right now. Get these poor performing rental properties on a market ASAP before home prices reach their peak. I do believe we are at or near our peak.
I don't know how much longer the rising of medium home prices will continue. I know the government will keep printing money into oblivion. We'll see what happens, if that continues to inflate home prices a little bit further. If you're on the fence, definitely sell the poor performing rental properties.
Those are my plans. Hopefully you got a lot out of this article. If you want more check out https://youtu.be/tCJO2zd2OgQ
And if you remember 2006, that led up to the crisis of 2008 and I was busy doing a lot of fix and flip store in this time period here in 2006 and getting record numbers. And we're kind of seeing some of the same things. Now that's far, far, far different, and I'll go over some of the similarities and differences.
What led up to that is all the easy loans, they call them the liar loans. Where if you were alive, you did not need to have to prove you had a job. You had strippers getting houses. It was totally insane, and totally different thing, which led up to the financial crisis.
What we have now is that we're being pushed in this direction because of COVID. That really push people to move. That is why you're seeing a 22.2% increased year over year in existing home sales. What COVID did, everybody decided I'm moving. For people who are thinking about moving, COVID pushed people that direction. For people that weren't thinking about moving, they wanted to get out of the city. They wanted to get out of the major metropolitan areas. And it wasn't just the COVID shutdowns in the cities, it was also due to the rioting and other disruptive things that were going on in the city.
You have a big transient push out of the cities and into the suburbs and into more rural areas is what we're seeing here. I think that's going to continue for a little while and that's the way the trend is going right now.
I do think this year we will start to see an uptake housing inventory. I think we'll start to see that probably in all likelihood towards the second half of the year. Maybe towards September, October, November, December timeframe. Late Q3 or Q4 is when we'll start to see housing inventory increase.
Biden spoke about putting a moratorium until end of September. That's only on federally backed loans, government backed mortgages, Fannie, Freddie, and HUD. It's not going to be on your conventional mortgages so the non-government back loans could still go into foreclosure. But it will still reduce housing inventory.
What else is pushing existing home sales higher?
Record low interest rates. As you can see here, they're projected to stay 3% or below for the foreseeable future. The federal reserve is just buying up these ten-year T-bills to keep the record rates low artificially. I was talking to some people who think the interest rates are going to increase, but the Fed will attempt to keep interest rate low.
The Fed may not be able to keep interest rate fully down, but I believe the Fed is going to do everything in their power to keep interest rates low.
Where are people migrating?
Currently, Tennessee's number one, Texas is number two. Nevada is up there, as is Florida. Basically where people are migrating to is to low or no income tax states and warmer climates. Also, to red states. Red states have lower taxes. You're seeing a lot of that currently happening. I think the blue states are going to have a major drop in population over the next year. Looking at home prices from their lows right after the 2008 financial crisis. In June of 2012, $198,768. That when you start seeing the increase from the low of $195,000. The low was March of 2012 and then home prices started to increase from there. Fast forward to June 2020. the median home price went from $198,768 in June of 2012 to $278,621 in June of 2020. And of course, home prices have increased since June 2020. It is probably closer to $286,000 currently. That means you had a $79,853 increased over an eight-year period, roughly just under $10,000 per year.
People gained in home equity which was a 40% increase, which is a staggering increase. We really been helped by everybody moving from the big cities to suburbs and rural areas and record low interest rates.
We have matched or just slightly exceeded, the all-time medium home price highs. I think that's going to continue into this year, but how far into this year? I don't know, but I'll tell you what my plan is. My plan is to sell off my dog rental properties and keep my good rental properties. I have rental properties that I've purchased for $80,000. It is a short-term rental (Airbnb) and I put about $10,000 of renovations into it. I am $90,000 into the property. I then got a mortgage for roughly $80,000. This property rents for $3,000 a month on average as a short-term rental (Airbnb). Minus property expenses and mortgage, I am netting somewhere around $1,100 a month.
It's a real good cash flow rental property for me. So I'm will keep this property. Plus the value right now is probably around $175,000.
These types of properties that I have where I have no more of my money into them, they are just producing cashflow, I'm will keep these rental properties. Other rental properties that are either more difficult or have issues with them, I'm going to sell those properties.
If you're thinking about your poor performing rental properties right now, you should probably sell them right now. Get these poor performing rental properties on a market ASAP before home prices reach their peak. I do believe we are at or near our peak.
I don't know how much longer the rising of medium home prices will continue. I know the government will keep printing money into oblivion. We'll see what happens, if that continues to inflate home prices a little bit further. If you're on the fence, definitely sell the poor performing rental properties.
Those are my plans. Hopefully you got a lot out of this article. If you want more check out https://youtu.be/tCJO2zd2OgQ
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