Keeping perspective; Despite the alt-media gloom, U.S. residential housing market still offers opportunity

Keeping a long-term perspective on residential real estate
The alt-financial non sequitur: Rents, healthcare, and education costs may not be in a bubble, but why are housing prices unsustainable?

While the alt-media “experts” have maligned residential real estate for the past decade or so, and claim it’s in a bubble, I still see opportunity.

Indeed, my readers and listeners know how I have been bullish on the affordable housing segment in the Western nations for a long time. Of course, my analysis has run counter to the alt-media claims for years, and for those who have heeded my warnings of ever higher prices as long as QE is in effect, they have profited well.

Rents rising; Despite a slowdown in the rate of growth from covid, rents continue to rise. Cherry picking data from city centers (e.g. Zerohedge editors) doesn’t change the trend. I never recommended city centers anyway.

Why will the costs of tuition, health care, food, taxes, and rent continue to climb higher, but house prices (especially in the affordable segments) are unsustainable? This is just another ignorant non-sequitur conclusion of the alt-media experts who have been on the wrong side of nearly every trade since 2008.

Why stand in front of this freight train? Income-generating assets have outperformed as this money has trickled up to the top 10%. If this money tricked down to the bottom 90%, inflation growth would be much higher

I came across the latest World Affairs Brief from Joel Skousen (I don’t know why I renew anymore), who has reminded the reader that for the past decade or so, he has told his subscribers to stay away from residential real estate. His latest excuse supporting his opinion refers to the covid evictions moratorium from rent non-payment, and on the surface, this may make sense. But the law is fairly straightforward; a tenant must be able to prove that he or she is unable to pay rent. If their circumstances haven’t substantially changed, meaning they are still employed, they cannot take advantage of the moratorium. Moreover, there are few restrictions on landlords from filing evictions proceedings and damaging a tenant’s credit report.

Low/mid range-priced residential real estate has outperformed all other types of since 2008

Because I am very objective with my tenant screening process and know what I am doing, I have not had any problems with any of my tenants. While some property managers feel compelled to charge the highest rent possible, I prefer to charge slightly below-market rents. For instance, I have found that my costs and work time drop dramatically if I receive 90% of full market rent. I know this may sound anathema to many investors, but I actually tend to achieve higher profits over time. Moreover, I tend not to increase rents much to those who reside at my properties. Over the years, the maintenance calls get less and less.

Joel Skousen has recommended that we stick to holding rural commercial real estate that has a high probability of getting rented by government offices. But I cannot think of a worse form of real estate holdings, as these properties are highly illiquid, and often suffer from lengthy periods of  vacancy if the intended tenant does not materialize.

I have a better choice for those looking to purchase rural real estate: stick with unimproved farm and ranch land.

Conclusion; Covid has strengthened my real estate thesis

Despite the talk of catastrophe in the alt-media, I have to conclude that the covid pandemic actually has rendered affordable housing more attractive than before. Why? More people need places to work remotely, while the open borders campaign has allowed the eligible rental pool to balloon in size.

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4 thoughts on “Keeping perspective; Despite the alt-media gloom, U.S. residential housing market still offers opportunity

  1. its true for all sectors, i work in health sector, pretty high end cosmetics surgery, liposuction and its deemed to work only when people have spare money, believe it or not, when we shut down around April and Opened by July, the company profits have trippled Y0Y by this month december, its unbelievable what hidden forces are at play.

    The society is not at all what Alt-media or experts view it and i was wroung as well…its something else that keeps the society going

  2. Hi Chris,
    You’ve been spot on with your RE discussion and analysis. All regional markets are somewhat unique and I found success in urban areas. My rentals are all in highly desirable (popular) neighborhoods but I tend to go after the class B/C assets in sub markets where all new product is labeled “luxury” with very high rents. I found that people continue to live in these areas and find that “deal”, which is me. I also charge slightly below market rents which really helps with turnover.

    Question for you… I’ve been looking at the suburban markets here (Chicago area) and about 80% of listings are contingent or pending. Seems institutional where a fund is sucking up everything that fits a certain box. Have you heard anything on that front?

    1. Yes, I have heard of this. While most look at what Blackstone and other public REITs are doing, the $10-20 mm private equity pools are buying up these properties that the REITs can’t touch. Where else can one get as high as a 10% yield? No where else. I would guess that there are private pooled equity funds and smaller LLCs that are buying up these things. Believe me, there are people who listen to what I have been saying and taking action. Not saying these people listen to me per se, but I know it is going on. They see the same things I see. I buy in LLCs.

      As for IL, I am concerned about property taxes and had the same concerns in NY, which is why I left there to buy elsewhere. If taxes are reasonable vs. cash flow, it still makes sense.

  3. Thanks for helping to clear out the silliness of the alt-financial world. The advice out there has been worse than bad.

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