Real estate is a non-fungible physical tangible scarce asset.
The beauty about real estate is that although it requires a substantial amount of capital and time upfront, down the line, it is made for those who are more risk-averse (not risk-takers) and generates an unexpected inflationary-proof return if you’re patient enough.
What’s ironic is that the best skill to possess to see your investments in the private or public markets compound is to wait it out. The ebbs and flows will exist and are guaranteed but over time from a distance, it’ll all look like a steady mountain to climb.
Unlike buying shares of equities where each sliver of the pie is the same, each property is different and unique in its own way. No matter how hard you try to replicate your childhood home, it just won’t be the same! Real estate is not only personalized to one’s individual tastes but also used and breathed in a way that feels most comfortable to them.
It’s a physically comfortable asset since you can design it to your liking. It doesn’t have to fit any mold and instead is a representation and expression of you. Thank goodness, we don’t have to fit every standard at home at least! No matter if you’re renting or owning, your crib can reveal your personality and way of life in some shape or form, free of judgment I promise.
My guilty pleasure has always been Zillow browsing/scrolling/fantasizing. I leaped on this trend years before it became popular during the dark days of lockdown to pass the time and in the meantime, became more familiar with the markets You can browse all the real estate guides and portfolios you want but until you go out into the real world and tour some properties, you won’t know the true home buying sentiment. As a true real estate hawk, I’m always on the lookout for the best deal in and outside of my tri-state area and believe the most strategic real estate landowners, tenants, and strong investors always pay attention to the housing market across the U.S. throughout the year because you just never know when a deal will be available for grabs!
Real estate shopping isn’t a one-and-done practice you engage in once you’re desperate to move. Although deals aren’t taken off the market in less than 2 hrs as witnessed in late 2020–2021 and inventory has finally cooled in 2022 due to sky-high 15, 30 yr fixed rate mortgages rates not seen since the Great Financial Crisis, there are a lot of attractive deals out there nowadays that aren’t publicly listed or obvious for a reason! To find a golden goose opportunity in any market, you must search deep into the woods! Never expect anything worthwhile to be served right in front of you.
If you’re a cash-cushioned buyer looking to snag a deal without filling out a mortgage loan application, you are seen as the most attractive and easiest buyer, especially to sellers at this time of the year when the housing market isn’t traditionally as fierce as in the summer and spring months. If you see a listing that is begging to be sold and reduced in price each week in the fall months, something is off. The sellers must be so desperate to leave and this is your time to snag a one-of-a-kind asset!
As a true investor, you must live and breathe the markets, or else you may be sabotaged into renting all your life! There’s always a bull market and private listing somewhere. It’s whether or not you’re willing to put in the work behind the scenes to hold the keys to the castle!
Check-Out
As you may know by now, real estate is by far my favorite asset class.
Not only is it easier to actually time the real estate market and have negotiating power compared to public equities where your favorite FAAMG may lose 40% of its value overnight with no control over price movements, but real estate is also an inflationary proof asset class that provides two sources of returns; one through rising rents as a source of passive income and another through price appreciation by simply living in it!
The benefits are truly endless since it is a scarce asset that provides priceless utility after all.
Clearly, buying any worthwhile investment for the long haul doesn’t appreciate right away, especially a vacation property/weekend getaway home which most homeowners rarely justify the price and maintenance for, however, if you stay long enough to potentially rent it out down the line, your properties can become your main sources of income!
By simply living in your home, you are benefiting from the purchase you made, even if you don’t have considerable equity in it since that purchase hopefully made your life easier in some way. After all, we don’t just buy properties for the sake of it or for them to take up more space or have neighbors! There’s a motivation to create capital while benefiting from it at the same time. That’s a real and rare deal you don’t find every day.
Inside Out
Something interesting I recently discovered about how real estate agents showcase their properties and what goes into the genius marketing of top developers and agents starts with the story they share about their client’s home.
Of course, first impressions matter the most and if you don’t ‘vibe’ from the start with a home you’re touring, no matter how compelling your agent’s story may be, you won’t resist.
However if the art of perfecting the pitch and the juicy business of sales has taught us anything, it’s not always about what you say or do, but rather how you make someone feel, especially in the world of sales.
During the darkest days of the pandemic, open houses were put on hold and considered a challenge for many first-time potential homebuyers and newly licensed agents alike. Virtual showrooms just didn’t cut it when a couple million are on the line.
As a result, agents needed to get creative in making a real estate showing spacious, comfortable, safe, and fun at the same time. Since 98% of Americans don’t own second homes and sellers who were looking to put their homes on the market were trapped during lockdown, hosting open houses while current residents were living life inside was actually a strange popular trend that came about during these unprecedented times.
Now, this isn’t something I’m a huge fan of for obvious reasons yet desperate times call for desperate measures, and this new approach for open houses surprisingly had a big influence on the way people purchased their homes in 2020–2021.
In fact, as a curious real estate owner, investor, and fanatic myself, with my PPE gear on, I got to tour one myself in late 2020 while the family was living in it in real-time! I knew seeing the current owners in action in their home won’t happen every day, especially when a scheduled viewing is in progress so I went for it! I felt as if I was a part of a reality show and the family completely didn’t mind!
The reason I bring up this exciting strange moment in open-house history that ended up completely sprucing up a typical real estate showing near me was that I got to witness first-hand how Americans live and specifically how much more we’ve spent and wasted over the years as consumers.
Gone to Waste
Over the past few decades, particularly in America where the mantra, “bigger the better” has swept the nation, Americans’ wallets have ironically not only gotten thicker, which is of course great news in terms of one’s portfolio and net worth, but on the flip side, consumers have not only become more obese, but more are collecting, hoarding, and spending all for less before rampant 41-yr-high inflation only exacerbated this spending spree.
This inflated trend is most evident in real estate. As a New Yorker, anything over 1800 sq ft is considered livable yet even my analysis of how properties have grown in size is too grand to comprehend. No pun intended!
Whether your dream home is based on the unrealistic acres of property the Kardashians sit on or the mega-mansions our former President could never truly afford, our perspectives on how much we need have been lopsided. Worst of all, we’re spending more for less!
Take a look at this floorplan below of a standard American home. Despite millions of Americans having purchased larger properties out in the suburbs with backyards, a basement, pet station, and gym in the past few years, fast forward to today since the peak of the housing market in the heartland, sunbelt states, and major suburbs across America, there are too many Millennial buyers, in particular, to count that are now regretting their home splurging purchases!
This is a true example of a rushed FOMO decision that shouldn’t have been made. Since a home is the majority of Americans’ most expensive purchase of their lives ahead of college tuition, this is frightening to hear. A good deal doesn’t mean you need it since, at the end of the day, finance is all relative.
National home prices have neared $440k due to various factors originating from construction costs to supply chain constraints, inventory delays, location, crime rates, schools, etc. however we must not forget it has a lot to do with our OVERCONSUMPTION and assumptions that we need to own more space to feel better about ourselves.
Spoiler alert: less tends to mean more, especially with a home due to ongoing costs, property taxes, maintenance, cleaning, utilities, and of course, you feel cozier in a cabin, not a castle.
Adventure of a Lifetime
When I went on the live tour during the pandemic in the suburbs outside of NYC in the fall of 2020, I saw first-hand the abundance of overconsumption as illustrated in the home’s floor plan!
The current residents who were looking to sell this property at the top of the market during peak covid time asked over 40% of what the comps in the neighborhood were going for however they still decided to have in-person viewings while they were home.
Although asking over 40% of what most homes in the neighborhood went for wasn’t too unusual at the time and they clearly didn’t have anywhere else to go for the 2 open houses (20 mins) scheduled that week, they seemed desperate to leave. The family consisted of 4 young kids with 1 dog. The home had 3 bedrooms and 2 baths! The 6 of them total were definitely cramped but the house didn’t show it since most of it was empty anyways!
The living room and dining room were barely used as no family members stayed there at the time and when we went to tour the bedrooms, both kids’ rooms were closed since they were playing video games while the rest of the house was empty and cold.
The parents were in the kitchen while the other kid was playing with the dog in the living room and on the stairs. Throughout the tour, almost 60% of the home wasn’t used however they were looking to move into a presumedly larger home! W
ho knows if their home buying criteria was based on size or location, however with an abundance of space and nowhere to head out during the open house on a Saturday, not Monday, I have a feeling this family was enticed by the home-buying spree and rock-bottom mortgage rates during the pandemic.
If I had to take a wild guess from what I’ve heard, seen, and experienced myself these past few years of real estate browsing, most likely ~70–80% of homebuyers during the peak covid waves purchased a home because they were either bored, stuck at home, yearned for more space, and or wanted to jump on a deal because ‘everyone’ else did.
Fast forward a week later after this unique open-house experience, I noticed the home got sold for $160k above asking in an all-cash deal no escrow! I have a feeling the other couple who toured the home with me must have enjoyed the family live in action in their home. They very well could be the current homeowners.
Live-tours with the existing homeowner adds a unique spin to the tour that I hope agents and brokers encourage more of as we are now safely out of lockdown in the U.S. It definitely saves money for the current homeowners as well! Needing to pack up the car with a family of 6 and a dog is a move in itself!
I’m curious to know where the sellers ventured off to since they seemed like they were playing a strategic part in wanting to sell their home ASAP by living there as the tour was going on! You certainly don’t see that every day and a lot of the time, it doesn’t even help since many buyers don’t want to associate their potential new dream home knowing who lived there previously.
Anyways, good for the family who was able to sell it above asking for that much! That probably wouldn’t fly today especially since the home was over $2.7m and luxury deals are stagnating, especially in Flordia after the disastrous historical hurricane. Another reason why home insurance is a must! Planning for the worst, and hoping for the best is in your best interest!
If the family took out an ARM (adjustable rate mortgage) that expired within a couple months/years, then they’re going to expect to pay a historically high mortgage rate once it resets. I’m presuming they’ll have more unused space to clean and have to pay higher property taxes as a result as well. There’s no such thing as free lunch so be careful about following consumer trends and becoming lured into attractive deals that may not pay off right away.
Since they didn’t utilize a majority of the space in their old home according to the live-tour and grand floorplan, I can only imagine how much more room they sabotaged themselves into buying especially since they have young kids and a dog! The case for never enough room was probably the reason!
There’s also a high possibility their new purchase was their forever home and in that case, they probably took out a 15/30yr fixed mortgage and will notice the appreciation and utility benefits in the next 5–10 years, however, more space doesn’t entail an easier life in the short term.
Unfortunately given most homebuyers during the pandemic stuck with larger and bigger not smaller and cozier, and were forced to pay at a premium given the extra bidding speculative wars, today, they’re probably dealing with too much clutter, overconsumption, and massive irreplaceable regret. Luckily it’s real estate and someone will want what you have eventually and hopefully not find themselves in the same home-buying delusional FOMO dilemma.
Having too much of anything can be annoying or in some cases, destructive, especially when it comes to the consumption of food to real estate! Everything adds up in the end.
Be mindful of what you say you need. If there isn’t something you’re looking for, keep digging and Zillow scrolling. Home buying is a life process, not a quick decision that should be rushed. If you don’t plan on staying in your property for more than 5 years, it’s probably better to rent but please consider other variables as well!
Not utilizing something or throwing it out is the worst. Get your money’s worth by seeking what you need when you need it not when there’s dovish monetary policy or overconsumption overload trends.