What happens if the title of this post comes true? Is it far-fetched to entertain such a thing? I wonder. Right now home prices are high and in demand and have been some time. A Real Estate cycle is at work. In addition, rents have reached an all-time high too. Both are holding steadily and with low interest rates they both may climb even higher & hold on the affordability scales
REAL ESTATE CYCLES
Fascinating the Real Estate cycle remains almost like the stock market only easier to read and predict within certain parameters. In the housing market, what goes up must come down is the rule and the buy low and sell high holds well but what if a chain of events mostly man-made created a custom cycle?
To buy now is still making the rounds loud and clear and sellers who are seeing so much equity are driving it when they decide to cash out. Premium property also known as "location" is always in demand however this market to own may continue to drive the low-end and in less favorable areas into activity for the better
Everyone needs a place to stay so renting isn't going anywhere. As with prime Real Estate good rentals are in demand commanding high rents. Renters either rent to save money to own, to relocate or to keep a job or to keep a temporary arrangement going. If rents are high, they may just stay put longer. Good for both?
CALIFORNIA IS AN EXPENSIVE PLACE TO LIVE
There are factors that drive the cost to live this we know. However various cities in the golden state are fast-finding out that their pension promises are growing faster than their incomes are. The result will be increases in taxes (retail & property), utilities, cost of public services, transportation, & general upkeep. Without increases the city has to decrease the above services. All cities answer to this.
LOOK AT THIS
Both the stock market and Real Estate are doing well. Ask yourself when is the last time you saw this? Usually when one is not doing so well everyone treks over to the other. Today, people are invested in both. A window for wealth is opening up and it is wise for those who were waiting to wait no more!
A HOUSING SCENARIO TO PONDER
California may reach a point where it is not possible to move there because getting a good job that pays to do so will only go to feed the cost of living and basically to survive. That makes people who have been here for any length of time who purchased and reduced their debts able to stay here. Getting in was easy if done way before it was hard to do so. Many areas are only affordable to high income earners at this time
Decades ago when I was raising children having a good neighborhood, schools and shopping plus a good job was doable, obtainable and available. In the two homes I once own and purchased: One for $60k and the other for $295k, both remain valued at close to 1.5 million today. The time to get into these areas and stay there so as to benefit has passed. Only mega-earners can afford to live there today
HAVE and HAVE-NOT
You can find work today better than it has ever been but couple of things come to bear: First, it may be entry level or low wages but still a job and second, it is expensive to rent let alone buy. So how can this sustain? Hawaii has this problem. They have low-paying jobs but high rents. People either share quarters or live on the beach or in tents somewhere. You can survive but not get ahead?
REAL ESTATE as MUSICAL CHAIRS
I always looked at Real Estate using the game MUSICAL CHAIRS where you have ten chairs and 12 people who are asked to circle the chairs and when the music stops grab a seat! Then, those without seats are gone but they also remove another chair. This goes on until so many are seated and the rest are gone
WHERE WILL YOU BE WHEN THE MUSIC STOPS?
Every investor, homeowner, renter and those that work for a living have to answer to this game of musical chairs i.e. where will you be when it all comes to a stop, shifts or lingers? One defense against it is to squirrel away money in the event this happens. Being debt free is another wise move. Both remain difficult
REMEMBER THIS RULE
When you least expect it change comes. Health, wealth or loss, opportunity, power, fame, & just about anything are in a state of movement so as to not be discernible until they stop or erupt. Will the change be for the better or the worse? Regardless one should take the helm and influence the outcome their way. Living on the edge is rewarding for its stimulus returns but unforgiving if the edge drops-out