Myth #1 - Being in a seller’s market is a bad thing
Are we in a buyer’s market or a seller’s market right now? Well, having a six month’s supply is the threshold to be considered a buyer’s market. And really, by all metrics we are in a seller’s market because we’re at one month supply of inventory.
However, I want you to think about this a little bit differently. Because if you think of a seller’s market as a negative thing, then we’ve been in a ‘negative’ situation to buy a home since 2013.
All of my friends who have purchased homes in the last five to seven years are smiling because they have grown so much in equity in their purchases.
Think about this, what if this rate and what if this environment continues to move forward with a low rate environment with low inventory. In a couple of years from now, are you going to be disappointed that you purchased a home today? Probably not.
You look at sellers that sold their home a couple of years ago, they left some money on the table. So we may be in a seller’s market, but that is not a bad thing.
Go out there, find a home that works for you, and you’re going to look back in a couple of years and be very glad that you made a move this year.
Myth #2 - We should wait for the housing bubble to pop
When is the housing bubble going to pop? Well, we are currently in the opposite of a bubble.
A bubble is having a ten to twelve months’ supply of inventory. That’s what we had back in 2007, 2008. Rising prices, rising inventory.
Right now we’re at about one month’s supply of inventory.
What does it take to get up to ten to twelve months’ supply? It takes years and it takes a lot of builders that we don’t have.
So, when is the bubble going to burst? Well, first of all, we need a bubble. And I don’t even see a way that we get to that bubble so go out there, feel encouraged. We’re in a rising market that’s going to keep going up for quite a while.
Myth #3 - The real estate market is going to crash due to decreasing population
So there’s a lot of fear-mongering going on right now in this country about the population slowing down.
We’ve seen the slowest population growth in the last 100 years, actually since the Spanish Flu. So people are saying “Hey, the real estate market is going to crash because the population is slowing down.”
Well, that is mostly because of COVID and because we have limited the amount of migration into the country. However, that is not the full story. There are parts of the country that are actually growing very fast right now.
So don’t focus on the big picture; focus on the markets that are growing super fast. What markets are those?
Well, by population, the number 1 market is Texas, followed by number 2, Florida, followed by number 3, Arizona. There are also some areas such as the Carolinas, Tennessee, Utah and Idaho that are also doing very well.
Focus on those markets, they’re growing very fast, and I think you’ll do very well.
Myth #4 - Cash flow > Appreciation
“Cash flow is king.” Wrong. Why does everyone always focus on cash flow? Cash flow is important, but it’s not the only way you make money in real estate.
I think it’s important to have positive cash flow, but then start focusing on things like appreciation. You actually will make way more money in an increasing market like we’re in right now through appreciation.
Especially if you’re buying in an area where the population is increasing. Then think of other things like your tax savings through depreciation, through interest expense.
And then the last is mortgage pay down. Tenants are paying down the mortgage for you. There’s a lot of ways to make money in real estate, especially using the power of leverage.
So don’t focus only on cash flow.