Here’s how to not only protect yourself but also take advantage of the housing bubble.
Just when you think housing prices couldn’t get any higher, they have. In January 2022, home prices skyrocketed again as home inventories reached record lows. The bottom line is this: When there isn’t enough housing, the price increases drastically. What you’re left with is what we call the housing bubble.
Supply, Demand, and You
This is a simple supply-and-demand problem. Right now, there’s an overload of demand and, unfortunately, not enough supply. Huge driving factors are fewer builders, an increase in construction material costs, and more people moving to cities faster than ever, making home prices almost unaffordable for most people in America.
The median price of a home has topped $350,000 nationally. What’s so important about that number? If you look at the cost of buying a home, you’ll find an amount that’s unaffordable for most. For starters, to be able to buy a home at this price, you’ll need roughly $70k for a down payment, which eliminates most of the U.S. population from purchasing a home.
To buy a home, you need a factor called “the ability curve,” meaning someone can buy the property if they have the cash to do so. The spike in home prices is scary for most people because, unfortunately, they just don’t have the money for a down payment. You’d think that because wages are going up, people could afford more, but our current economy says otherwise.
Escaping the Housing Bubble
One way to escape the “housing bubble” is to invest in multifamily apartments in places where there are plenty of jobs and tenants pay their rent, which in turn pays the mortgage. This eliminates the issue of “what the property costs” because it is more about the cash flow of the property. And, if housing prices are going up, rents are also going up. As inflation and wages increase and supply runs low, prices do increase, but so do rents.
When you invest in real estate, it pays you every month. You will always have consistent cash flow. When you have consistent cash flow, you can purchase more property, and you won’t be stuck in the housing bubble. Once you have invested in real estate, you’ll never have to worry about your financial situation and contemplate buying a home, because you’ll have the cash.
These are the five factors that dictate the housing market: supply, demand, jobs, migration, and ability. If you take a look at them, you’ll discover something that might shock you: We do not have a housing bubble in this country.
In most parts of the U.S., you can find places where prices will continue to increase. We simply don’t have supply here. We have a shortage of homes in America, and we have an extremely high demand for housing in some places. So, here’s what you need to do: Figure out where you want to live and move your family.
Multifamily homes used to dominate Illinois, but now that state is losing traction. Many cities and states are going to be losers going forward. Utah, Idaho, Texas, North Dakota, Nevada, Colorado, Washington, Florida, Arizona, and South Carolina, on the other hand, have all benefited from population growth.
When people move to a new place, the first thing they do is rent for about two years. Then they decide whether they want to buy a home in that location. Most people will try to talk you out of buying a home, saying it’s too expensive. Here’s the thing: Cash flow is the Holy Grail, and it’s what will protect you from suffering in a housing market that’s bottlenecking. Make sure you have a place you can rent out and get positive cash flow.
The last thing you want to do is put all your eggs in one basket. Make sure you have multiple streams of income. You don’t want to rely on one job or one source of income. Make sure you have multiple sources of income so you can have more stability in your life.
Remember, the housing market will always be changing. Make sure you have the ability to adapt and change with the times—doing so will keep you ahead of the curve. The market is changing, so it’s more important than ever to make sure you’re protected. Buy a property and start enjoying positive cash flow.
Grant Cardone owns and operates seven privately held companies., and a private equity real estate firm, Cardone Capital, with a multifamily portfolio of assets worth over $3.6 billion.
Cardone is one of the Top Crowdfunders in the world, raising more than $740 million in equity via social media. He is featured on Season 2 of Discovery Channel’s Undercover Billionaire, where he takes on the challenge of building a million-dollar business in 90 days.
Cardone is also a New York Times bestselling author of 11 business books, including The 10X Rule, which led him to establish the 10X Global Movement and the 10X Growth Conference, now the largest business and entrepreneur conference in the world. The online business and sales educational platforms he created serve more than 350,000 individuals and Forbes 100 clients throughout the world. Voted the top Marketing Influencer to watch by Forbes, Cardone uses his 15 million plus following to give back via his Grant Cardone Foundation, a non-profit organization dedicated to mentoring underprivileged and troubled youth in financial literacy.