The Real State of Real Estate
A great article from Amanda Hoover and Ashwin Rodrigues that is worth a read, and I simply want to take a few of their illustrations and talk the through a bit.
The Wealth Gap - we talk about the extensively in our class, but the majority of wealth in the low to high income is in real estate, namely the primary residence. However, as those with more disposable wealth buy second homes and rental properties their wealth grows rapidly as leverage is a key driver in wealth creation when values are going up! What is big corporate America buys houses too for investments?
TIP: The problem is missing the boat. If you don't own real estate it can run away from you, as the property values go up faster than you can save!
The bigger problem is that the big money institutions ARE buying more real estate and that is also driving house prices higher. You could argue that they are 'making renters' by pushing values up and widening the market of people that have no choice but to rent their houses.
This is further driving up the rent burden and making it more difficult to find creative ways to get people into houses so they don't get caught in the wealth gap.
This number has gone up since this article, but it's on the verge of coming down for the first time since 2011.
We need to find creative ways to get people who want to live in their own houses into those houses... that may require so major government intervention and I expect a Housing Bill of some sorts in the future that will be used to stimulate housing if rates get too high and push things down too far.