Note to reader: We need to prepare for what is coming. It is clear to me that the fiscal and monetary authorities wish to destroy the current system to allow their desired objectives to emerge. Those who prudently own income-generating assets and SFRs should hold up better than those who do not.
While housing provides less opportunity than 12 months ago, the numbers still can make sense
While the MSM and alt-finance media continue to proclaim, as they have for the past decade, that residential real estate is a sucker’s bet, I take the contra – with a caveat.
While I admit that single-family rental prices based on cap rates and IRRs no longer provide buyers with the great deals from before 2022, I still recommend newcomers to look for deals and buy that first rental property. This is especially true for those wishing to escape the multicultural areas and to prepare for what is already taking place.
While home prices are adjusting downward in the Western third of the U.S., prices are still generally climbing in the eastern third. For instance, in the area I have been looking, which is about 80-90 miles west of here, house prices are up about 40-50% since 2018, and are still rising. Granted, the market is smaller, but the competition is fierce, since there is little inventory.
The covid pandemic and burgeoning recalcitrant government policies have also helped to redraw many of the traditional housing market dynamics. For example, year-over-year population growth in Fairfax County, VA has declined by a few thousand people, and while this may not mean much to a County with 1.1 million residents, it demonstrates that the county is no longer viewed as it once was. Thus, property prices in Fairfax County have fallen a few percent from last year’s highs. Many of the people who live in Fairfax County Virginia or Prince George’s and Montgomery Counties in Maryland have not been pleased with the responses of their governments to covid, nor the other objectives. As a result, the housing markets west of NoVA and DC continue to boom.
Let’s take a bird’s eye view of the American housing market. Based on the usual measures like price-to-household income ratios, US home prices are still affordable. Look at the table below; U.S. housing is much cheaper than anywhere else in the developed world.
We still have time to prepare. Look to get your ducks in a row by 2025-2026. For those willing to relocate and to seriously look to prepare and separate from the crowd, take a look at the table below. There are a number of cities that offer affordable housing prices and are outside the blue-area tyranny. While some of these cities may not provide an attractive lifestyle to some, their suburbs are still growing. We don’t want to live in the city centers anyway. We want to live at least a few exits beyond.
15 thoughts on “Putting it into perspective; U.S. residential real estate is still relatively affordable”
PMI data better than expected. Manufacturing in positive territory.
Manufacturing PMI (Apr)
Act: 50.4 Cons: 49.0 Prev: 49.2
S&P Global Composite PMI (Apr)
Act: 53.5 Cons: 52.8 Prev: 52.3
Services PMI (Apr)
Act: 53.7 Cons: 51.5 Prev: 52.6
Have you considered getting a new construction tract home as a rental in one of those low income multiple areas? This one doesn’t seem expensive to me https://www.realtor.com/realestateandhomes-detail/Aspen_Cameron-Ridge-2-Story_1007-Cameron-Ridge-Drive_Columbia_SC_29209_P417000762434 and looks like the same business model that arrived is using.
Absolutely! The one you show is the perfect size for people of mediocre means and the perfect size/price for a rental property. That is cheap! SC is growing. Love that state for opportunities and low costs of living. The one thing you’ll notice in some of the secondary and tertiary markets are the sizes of the properties; many of them are very small by typical standards. Many of the houses in rural Virginia can be less than 1,000 square feet in total. They were very inexpensive when they were new and were targeted to the native population of the area.
In my desired area I looked at new construction, too. They were just slightly higher than my targeted budget, but the numbers were close for me. About $60 to $70,000 more than I wanted to pay, and the lots were pretty small. If I wanted to buy a new construction in the area I was looking I would have had to take out a small loan and I wasn’t up for that. I took a small Cash out loan about a month ago to facilitate two 1031 exchanges and I will close on the first one of them next week in an all cash deal.
Yeah; I’m kinda in that boat. I was looking at new construction near where I live now because all the existing homes are just as expensive and most are in lousy shape and not updated plus a-lot of competition and cheapest new construction is about 313k for 3bed 2.5 bath but I would need to take out some financing but then based on your multiple list I thought to look at some other out of state areas which I’m somewhat familiar with and that SC at 220k seems quite appealing and I think if I liquidate a few other things I could buy that without any financing. Guess I need to contemplate more and see what makes sense. I’m about to close on a heloc against my current house tomorrow to have an extra line of credit if needed.
If you have questions shoot an email or comment for a response. I recommend SC over FL if someone likes that weather at a steep discount.
The hidden costs of FL home ownership can be substantial depending on where one lives in the state. I know someone who pays about 2k a year in tolls living near Orlando.
Personally, I prefer living in upstate SC, but for rentals at the price you showed, how can you really go wrong?
Fed’s Mester Says FOMC to Assess Loan Tightening at May Meeting
2 hours ago
(Bloomberg) — Federal Reserve Bank of Cleveland President Loretta Mester said policymakers will gauge the impact of banks tightening their lending standards when they meet next month to discuss the peak rate.
“Even before the stresses in the banking industry in March, banks were already beginning to tighten their credit standards,” Mester said Thursday in an interview with Yahoo! Finance.
“The question now going forward is” Will stresses in the banking industry, those stresses in March, lead banks to move faster to tighten their credit standards,” she said.
Mester repeated she thinks the Fed’s benchmark rate will likely have to go higher than 5% in order to achieve the central bank’s 2% inflation goal.
Fed officials raised interest rates over the past year in effort to tame inflation running well above the central bank’s 2% target. Policymakers lifted borrowing costs by a quarter point last month, bringing the target on their benchmark rate to a range of 4.75% to 5%.
They are expected to move by the same amount again at their upcoming May 2-3 meeting.
Mester said so far the underlying economy has shown resilience to rate hikes. “Now we just need to make sure we get the job done on inflation,” the Cleveland Fed chief said.
©2023 Bloomberg L.P.
Headline number looks terrible, but the others don’t look so bad. The prices paid is definitely better than expected and so is the employment gauge.
The bond market definitely liked it and the 10-year Treasury futures perked up nicely upon release.
Philly Fed Manufacturing Index (Apr)
Act: -31.3 Cons: -19.2 Prev: -23.2
Philly Fed Business Conditions (Apr)
Act: -1.5 Cons: -11.9 Prev: -8.0
Philly Fed CAPEX Index (Apr)
Act: -5.40 Cons: 8.30 Prev: -3.80
Philly Fed Employment (Apr)
Act: -0.2 Cons: -2.6 Prev: -10.3
Philly Fed New Orders (Apr)
Act: -22.7 Cons: -21.2 Prev: -28.2
Philly Fed Prices Paid (Apr)
Act: 8.20 Cons: 28.00 Prev: 23.50
Canada Sells Its Largest US Dollar Bond Amid Inverted Yield Curve
(Bloomberg) — Canada sold $4 billion of bonds in its largest transaction in the US currency on record as inversion in the Treasury yield curve continues to largely deepen.
Debt arrangers for the top-rated country priced the five-year notes at a spread of 11 basis points over US Treasuries, compared to preliminary price discussions Tuesday of around 14 basis points, according to people familiar with the matter. It marks Canada’s biggest federal government transaction in dollars — up from $3.5 billion previously in 2022 — Bloomberg-compiled data show.
The inversion in the Treasury yield curve has steepened for much of the past five weeks as economic data implies another interest rate hike from the Federal Reserve, which next meets on May 3. The extra yield of two-year over the five-year is at around 52 basis points, the widest inversion in more than a month.
“Rates in the belly of the curve have declined recently, offering issuers a more attractive all-in yield than the front-end due to the curve inversion,” said Gennadiy Goldberg, a New York-based senior US rates strategist at TD Securities. “Highly rated issuers are using the relative stability in the Treasury market to raise funds after a very quiet March.”
Earlier this month, the francophone province of Quebec priced a similar maturity bond at a spread of 34.6 basis points, while Ontario Teachers’ Finance Trust sold a $1.5 billion deal Tuesday at 58.6 basis points.
The Ottawa-based government is committed to maintaining liquid foreign reserves at or above 3% of its nominal gross domestic product, according to a statement on Canada’s Department of Finance website Tuesday.
A press officer for Canada’s Department of Finance didn’t immediately respond to a request for comment.
©2023 Bloomberg L.P.
It is quite remarkable that there is an abundance of real estate available in North America. My own Gen Z entitled kids want to live where it’s hip and cool but can’t afford. If they could only get their heads around doing what makes sense and not what appears as cool. Worst case scenario for me would be to watch one of them rent in the city in perpetuity for a lifetime, waiting for the right time that will likely never come.
That’s what I did when I graduated university. 4 Years renting downtown Toronto. Result, $0 savings. So stupid. If I was smart would’ve lived at home in the suburbs, commuted, saved up and bought something in the suburbs and rented out to pay mortgage. Now I’m 29, no assets, and working on building my business because I finally understood what Chris has been teaching about needing income generating assets to get ahead in this inflationary environment… I’ve got an old friend living in NYC netting 7k/month. Spends every dime on rent, gym membership, travelling, and $25 bagels. No savings. Works in tech VC. It’s like watching a trail derailment in slow motion. I’m a slow learner but the heathen never learn.
For those interested in Canada, Winnipeg and Edmonton still have the best price-to-income ratios; however, I tend to lean more towards Winnipeg, as Edmonton is rapidly multi-culturalizing (although not the degree of Vancouver or Toronto). But tons of deals in both cities. Rural Alberta is a great bet and much cheaper than its immediate neighbours to the South Montana and Idaho. Tons of rednecks, trucks, hutterites, and oil. 😉
I agree but, man -Manitoba and Alberta are cold – very long winters.
Southern Alberta not so bad. Calgary area gets chinooks. Manitoba the colder of the two.
I received an industrial building in foreclosure Cleveland at the bottom of list at 1.4. (from a con artist who fleeced me) Weather is the worst I have experienced and most workers are cons who are not happy until they overcharge or ripoff customers. City government is corrupt and communist. Fans are fools, they ousted Bill Bellichick for firing Kosar. That is why nobody is willing to pay over 1.4 to live there.
I wouldn’t live in Cleveland nor near it for the reasons you state. The city used to be Ohio’s biggest, but I would pick Columbus over the other cities any day. I have driven through and done business in Columbus and was impressed.
Most of the cities that have low multiples have them for a reason. Upstate NY has some beautiful areas, but economic prospects are grim.
The list is just a guide that can help those who desire a change and not be burdened with selling their organs to afford a house. As poorly as I personally regard Fairfax County, it still offers some good home value based on P/I multiples vs. the economy and job market. Suburban MD also. My typical tenant is making over 100k. People make a lot of money around here, but home prices are reasonable.
I lived in Colorado Springs and thought home prices there were fairly reasonable as well. But with Cheyenne Mountain in the picture, Colorado Springs will most likely be hit in a war.
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