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Interest Rates Are Shifting & Rents Are Rising

Interest Rates Are Shifting & Rents Are Rising

Are you feeling the market shift?

The time is coming.. one year ago, Powell tried to stabilize the markets by saying the Fed is not even thinking about thinking about raising rates.  The time has come to start talking about talking about it.  Come August’s Jackson Hole meeting they will actually talk about it.  Some already are.  Jim Bullard, FOMC member, said yesterday, he wants to see rates go up in 2022.  This talking about talking about is the beginning of rates shifting.  As interest rates are shifting, rents are rising and the Fed starts tapering, we just need to stay in front of the communication with our buyers and sellers as rising rates will impact both demand and supply.

“You can think of this meeting that we had (this week) as the ‘talking about talking about’ meeting.” – Jerome Powell

Congratulate Your Buyers!

Last week I shared a look into the equity cushion this market is creating.  CoreLogic released their Homeowner Equity Report showing homeowners who have a mortgage realized an increase in their equity of 19.6% on average year over year for a total gain of $1,900,000,000,000. This combines both appreciation gain and principle reduction. 

1.9T Homeowner Equity report

With 62% of all homes having a mortgage, the $1.9 trillion equates to $33,400 gain per mortgaged household. In the state of Colorado, our average gain was higher!  $47,000 per mortgage household.. WOW!  When homes around us are selling for $50,000, $100,000 or $1,000,000 over asking; $47,000 might not sound like a lot. But it is. So, let’s put it into perspective.

Vanguard released their 2021 report.. How America Saves. It is scary how little American’s have saved.  The Median American has $33,472 in their retirement account. This is not the average.. that is higher.. as outliers like Jeff Bezos and the Walton Family will pull up averages. So let’s focus on the median. Again, the median American has $33,472 saved for retirement. If you are female that number drops to $29,095.  

The average homeowner had an equity gain of $33,400 last year. The average Coloradoan had $47,000. All of a sudden $47,000 looks like a lot.. doesn’t it?  And it’s worth celebrating… both with your clients and your prospects.  There was a CNN article this morning on “How to Propel 2 Million Blacks to the Middle Class” talking about job gaps.  Our industry has the ability to have incredible impact on racial and sexual discrimination and opportunity.  Home equity can change the trajectory of your clients lives. 

Now I know.. next year might not be as high.  Maybe it’s not 19.6% as the market starts to shift slightly.  Maybe it’s 18, 16 or 15%.. this market will continue to be strong for decades due to birthrates.  It will be hot for years as 29 year-olds turn 33.  Equity gain is not transitory and appreciation always goes up over the long run.  

 Take a minute to write up a congratulations to those clients you sold a home to in the last five years.  They not only have more wealth then the median American.. but I’m guessing they have more equity wealth than the Average as well.  Ask them.. are they taking advantage of that?  I bet you have some ideas of how they could 😉 

How America saves 2021

“It Is Cheaper To Rent”

You will start hearing that more as rates start to trend up and appreciation continues.  You will also hear about how unaffordable homes are.  Rental rates did stall during COVID.. landlords needed tenants to stay in their homes.  But now that more people are vaccinated and moratoriums are being lifted, rents are going up.  

 Invitation Homes appeared on CNBC Friday morning giving their plan to buy $1 Billion more in single family rentals by the end of 2021.  They are not doing that hoping only for appreciation. They are doing that because they know.. inventory will be tight for years forcing rental rates up. Lawrence Yun was quoted as saying “America is facing a massive housing shortage due to multiple years of underproduction in relation to population growth.  Expect both rents and home prices to outpace overall consumer price inflation in the upcoming years.”  

It might be cheaper to rent today, but that thinking won’t give you financial stability nor opportunity.  That thinking is transitory especially when we saw rents go up 2.3% in May alone and 6.6% year over year in Denver.  

zillow rents are rising graph


[author] [author_image timthumb=’on’][/author_image] [author_info]Nicole Rueth has been passionately advising clients on their wealth building and home financing strategies for over 17 years. Her path has been non-conventional and it is a benefit to her clients.  www.TheRuethTeam.Com.[/author_info] [/author]
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