Low RATES creating accidental real estate investors?
The average mortgage rate across the US is 3.8% and there are many reasons why that is great. There are also reasons why this is becoming a BIG problem for the current housing market. The obvious reason is that rates are double now, values are up 36% on the average PRE-PANDIMIC, there is no inventory to buy and there is little to no motivation to move/sell.
There is also something that is starting to happen and seems that we will only see more and more of it. People are starting to move for all the typical reasons; job, bigger house, new area, and the list goes on. The issue is that they are locked in at a nice low rate, low payment and now the house they could sell looks better as an investment property that can return some nice cash flow. Rents have shot up over 20% on average across the whole country with inflation, lack of inventory to buy and demand for rental units.
Sellers are more inclined to keep their existing property, rent it out and buy a new one. Yes, they have equity locked up in their house, but they also have a fixed rate, fixed payment, and cash flow. Sounds like a little nest egg or retirement that was created in the last 3 years. This will NOT be an option for everyone, but many will take advantage of this. I have talked to many clients that will be keeping their current house and purchasing a new one. The extra cash flow helps offset the payment on the new house, they feel very good about being real estate investors and having an asset to fall back on if needed. Cash flow is cash flow.
Anyone else seeing this with clients?