Podcast Summary
Fed's rate cuts: The Fed is expected to cut interest rates this fall to create labor market slack and control inflation, based on the latest jobs report showing a recovering labor market.
The latest jobs report shows the US labor market returning to normal after the COVID-19 pandemic, with 206,000 jobs added in June. While unemployment ticked up slightly, the Fed is expected to see this as a sign of normalcy and eventually cut interest rates to create labor market slack and control inflation. The timing of the rate cuts is uncertain, but it's likely to happen this fall. The Fed's mandate is to maximize employment and ensure price stability, and they are currently focusing on the latter to cool down the economy. The labor market numbers will influence the timing and speed of the rate cuts.
Economic progress and challenges: The economy is improving with lower unemployment rates and decreasing inflation, but there's a risk of economic instability due to potential unemployment rate increases. The Fed is balancing inflation control and labor market strength.
The economy is showing signs of improvement, with unemployment rates moving closer to the desired 4% range, and inflation starting to come down. However, there are concerns about the potential for unemployment rates to rise further, which could create economic instability. The Federal Reserve is trying to balance the need to keep inflation in check with the desire for a strong labor market. It's important to note that a lower unemployment rate does not necessarily mean mortgage rates will decrease, as there are other factors at play. Overall, the economy is showing progress, but there are still uncertainties and challenges to navigate.
Real Estate Investment Strategies: Focus on smaller, tertiary markets for stable rents and consider private credit or real estate data tools for diversification opportunities.
While rents may be softening in some areas, particularly in larger cities with oversupply of higher-end multifamily units, this trend is expected to be temporary. Investors can mitigate risk by focusing on smaller, tertiary markets where there is less competition and new supply is less likely to impact rents significantly. Additionally, Fundrise's private credit strategy and PropStream's real estate data and lead automation tools offer alternative investment opportunities for those looking to diversify beyond traditional real estate markets. With Fundrise's average net interest of 10.8% on private credit deals and PropStream's access to over 155 million properties nationwide, these platforms provide investors with unique opportunities to capitalize on the current market conditions.
Housing market risks for landlords and investors: Increased housing supply can lead to decreased rent prices, presenting risks for landlords and investors. To mitigate this risk, underwriting deals with minimal rent growth for the next few years and focusing on retaining tenants in single-family homes is recommended.
The current housing market, particularly in urban areas, is experiencing a period of increased supply due to the need for more housing units. This increased supply is leading to decreased rent prices in some cities, which can be seen as positive for renters and those looking to invest in affordable housing. However, it also presents risks for landlords and investors, as rent growth may be slower than anticipated. To mitigate this risk, underwriting deals with minimal rent growth for the next few years is recommended. Additionally, focusing on retaining tenants in single-family homes can help mitigate the risk of falling rents. The need for affordable housing is also driving investors to explore new markets and areas that were previously overlooked, potentially leading to new investment opportunities.
Real Estate Trends in Affordable Areas: Identify areas where employers are moving and follow the resulting population growth to invest in affordable real estate areas, as affordability remains a significant driver of real estate trends
While the trend of people moving out of expensive downtown areas into more affordable suburbs is not new, it presents new opportunities for investors. Employers relocating to more affordable areas create new job markets and potentially new metro areas, making it essential for investors to identify these emerging trends and adapt their investment strategies accordingly. The key is to look for areas where employers are moving and follow the resulting population growth. Additionally, demographic trends, such as the aging population and the growing number of millennials forming families, further emphasize the importance of affordability and the need to invest in areas that cater to these demographics. In summary, affordability continues to be a significant driver of real estate trends, and investors who can identify and adapt to these trends will be well-positioned for success.
Reserves and Real Estate Investing: Having reserves is crucial for long-term real estate investing, particularly for buy and hold strategies, but starting out, having a partner or flipping properties might be a more viable option. BiggerPockets offers a tool to help investors find the best market based on expert recommendations and data.
Having reserves is crucial for long-term real estate investing, particularly for buy and hold strategies. However, when starting out, having a partner or flipping properties might be a more viable option due to the lack of reserves. Reserves, which amount to six to twelve months, are essential for covering unexpected expenses and maintaining cash flow. For those seeking to invest in real estate but unsure of the market, BiggerPockets offers a new tool that provides expert recommendations and data on appreciation, affordability, and other important factors to help investors find the best market for their goals. With a BiggerPockets Pro membership, investors can access this tool and receive $100 off their first year of Pro membership by using the promo code "findamarket" at checkout. Overall, the importance of having reserves and the benefits of using data and expert advice to find the right market cannot be overstated for successful real estate investing.