Inflation still hasn’t stopped. Regardless of the official numbers being reported or restated, real inflation in the street seems like a runaway train that has to hit a wall and crash eventually.

Hiking interest rates was supposedly the way to kill off inflation. Of course, it only fueled it instead.

Interest rate increases alone haven’t been enough to achieve goals, so, we now have other things, like higher taxes, more taxes, and minimum wage hikes of as much as $33 being floated in some places.

Something Has To Break

History, and the state of many other countries tell us that inflation can go a whole lot higher. Fixed rate, long term loans can disappear altogether. Mortgage interest rates have and can go above 20%.

Things can be made so expensive that just being able to afford food and toilet paper is hard.

When you can’t walk out of the ‘dollar store’ without spending $60-70 for a few snacks or a day and a half of food, nor run into the gas station without spending that much, it’s going to be a problem. Even with a $15 an hour minimum wage, that’s a day’s worth of work. Not counting housing, insurance, or utilities. All of which are going up too.

Then, not only are interest rates going up, but so are overall loan and borrowing costs. For those that can afford homes, now even putting in a few plants is a luxury expense many won’t be able to afford.

What exactly will break, when, how, and how badly will have to be seen, but it doesn’t appear to be sustainable. At least not while maintaining the lifestyles Americans have become accustomed to over the past couple of generations.

$190B In Real Estate Debt Being Sold At Discounts

According to Bloomberg, there is $190B in real estate debt being sold off at discounts around the world.

There are likely a variety of reasons for this. Chiefly being highly motivated sellers. While physical property values may not have changed, financial positions have.

Some are liquidating because they failed to plan and prepare for moments like these and are losing money. Others can’t get any more credit to stay afloat. Some just want more cash on hand. Or the banks that have failed have seen their assets literally bought for pennies. Which can now be cashed in on.

Interestingly, most real estate pros you’ll speak to will say that housing prices are still strong. In some pockets of the country there is more demand than ever. Open houses are busy, and are attracting multiple bids. There are cash buyers who still feel rich, coming from more expensive destinations, to new ones with lower taxes, and less crime.

So, there is currently this sweet spot, with inflation tragically bankrupting many businesses and families. Which means discounts on real estate. While strong demand means there are still great profit margins on wholesaling houses swiftly.

Those that take advantage of this, will find it is what keeps them and their own finances ahead of inflation.

 

Watch out for these four real estate and mortgage trends that are evolving now…

The US real estate and mortgage market is changing fast. Many diverse trends and conflicting headlines are showing up. Some of these are local market differences. Like new foreclosure spikes by double digits and declining property prices and rents. Others may have more macro impacts, with bigger opportunities and consequences. If you are out there wholesaling houses now, make sure you know what’s going on.

Mortgage Interest Rates

Bank Rate reports that mortgage interest rates have come down in August 2018. Average 30 year fixed mortgages are only 4.37% and 15 year fixed loan rates are averaging 3.78%. That’s great news no matter what you are financing or refinancing.

Housing Beginning to Drag Down the Economy

Market Watch reports that housing is now finally beginning to pull down the national economy. The chief economist for Fannie Mae says that lackluster building activity, slow sales activity and and brokers commissions are all beginning to become a lag on the whole economy. Other analysts report that only around half the number of people are moving for jobs in 2018, and many home buyers have simply given up. Less building, fewer listings sold, and lower Realtor earnings can all start showing up in unemployment figures, GDP reports, and the balance sheets of local businesses.

While we never want to see other suffers, the sooner agents and sellers who have been overpricing listings catch onto this, the sooner wholesalers should be able to scoop more deals at better prices. If you’ve been longing for the glory days of 2008 and cheaper houses to come around, we could see more distressed sales and motivated sellers ready to take action soon. Providing you are wholesaling and are negotiating at good prices, this is all good news.

Alternative Lending

Investment capital is still plentiful for now. This is the time to use it. Non bank lenders have seen their market share rise over the past 4 years, and made over $60B in loans last year. In addition to transactional funding there are credit unions, crowdfunding portals, conduits, home equity loan lenders and private lenders will to provide capital. Real estate investors can use these sources to fund marketing, make down payments, do rehabs and grow their businesses. Don’t expect this to last forever. So, do take advantage of all the leverage you can get while it lasts.

Just watch out for shady lending and deals in the gray area which could make you a target and scapegoat when things go south. Remember what happened to all the stated income borrowers last time around.

Watch Your Advertising Practices

Facebook just got it with a big suit from HUD. The government agency alleges that Facebook has effectively let real estate professionals and businesses discriminate by providing them with its targeting tools for advertising on the social network. While no one should ever discriminate, many may be accused of it, even though they didn’t realize they were doing anything wrong by trying to market to their ideal audiences. Don’t think for a second that with all the pressure Facebook is under today that it won’t sell out its users and advertisers and give them up to the feds. This may seem extreme, but your financial survival and freedom may rely on revisiting your Facebook ads, promoted posts and social feed and removing anything which shows preference for marketing to any groups of individuals and leaving anyone out.

The Brexit has brought mortgage interest rates down, and that’s great news for U.S. real estate.

While not everyone is happy with the fallout of the British decision to leave the European Union it could prove to be a great thing for many American real estate buyers, sellers, and investors.

The Brexit crushed the stock market, caused banks billions in losses, setup US and EU banks for over a trillion dollars in cash short fall, and even resulted in funds freezing customer withdrawals from London property investments. That may be sadly catastrophic for many, but there is hope for those that have been able to cash out of those other investments.

The Bank of England is pushing banks to make lending easier, including lowering interest rates. Bankrate.com reveals that U.S. mortgage rates have also fallen back to almost the record low we saw 4 years ago. As of July 14^th, 2016 that meant 30 year fixed home loan rates at just over 3%, and 15 year fixed mortgage rates in the 2% range.

Low interest rates could be awesome news for property owners that have been wanting to refinance, as well as buyers who thought they missed the boat. Sellers too could find this a powerful time to sell since low rates mean borrowers will be paying less monthly for higher priced homes.

The bad news is that there is even less hope of earning good returns on savings or other investments except for real estate. Long term property price sustainable could also be even more threatened due to the current and going artificial manipulation of markets. Banks aren’t making much and don’t have much of a cushion when they are lending at 2%. When interest rates go higher home mortgage payments could easily double, even if prices don’t go up. All together this may appear to some as being just a little too reminiscent of the setup of the early 2000s.

Fortunately there could be some highly profitable sweet spots out there for property investors. The first is noting that if Brits pull back from some market it could provide better buying opportunities for domestic investors. The ensuing demand for U.S. real estate from other foreign investors could then help beef up spreads on flips. Those that stick to wholesaling real estate can benefit by leveraging cheap money now, and avoiding being stuck when rates go up later or cracks appear in the markets.

 

Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.

Will a new stock market, tech industry crash help or hurt real estate wholesalers?

Inman News has been in a flap since the stock market started to tumble last week. Whether a mere blip or the beginning of a new apocalypse it’s worth asking how another major deflation in the stock market and tech industry will impact real estate.

It’s coming. Whether it is now or a couple years from now analysts having been proclaiming the stock market is at least 60% over valued for a while, and the tech world is ready for its own shake up. So what effects are we already seeing, and what will the outcome of a bubble bursting look like?

While super hero day traders following a wholesaling style strategy might be hit less hard than Warren Buffett’s buy and hold followers or VCs betting on a wide spread of startups, or big elephants like Zillow which don’t have any net profit to prop up their valuations, there will be some major shifts for all.

This compares to the bulk of housing market which Trulia claims is still vastly undervalued. Inman notes that the market has immediately reacted to recent fluctuations by driving down mortgage interest rates, and spurring a spike in refinance applications.

Many real estate professionals and companies might be glad for a tech slow down. A little slower pace of innovation and a sucker punch to Zillow will not only mean more money coming to real estate, but a chance to catch up, and improve on the basics versus worrying about keeping up with next year’s tech changes.

A turn down in tech and stocks invariably creates more interest and need to invest in real estate. This comes in various forms from up sizing houses, and increasing direct investment, and more money put into mortgage markets. It will also drive more selling off of houses and real estate in some areas where owners have lost big in the stock market and tech companies.

The great news is that wholesaling real estate still works in all of these conditions and markets and is fueled by them. It creates great opportunities to help those needing to sell fast, and serve the others scaling up their buying activity. Fortunately, with access to plentiful capital from Best Transaction Funding wholesalers are only really limited in maximizing these opportunities by their own goal setting.