First Time homebuyers struggling to break into the market

According to the New York Times, “Investors and corporations are buying up houses and turning them into rental properties. In Charlotte, N.C., that is adding to the hurdles facing would-be buyers navigating a brutal market.”

Large investors are making it difficult for first time home buyers to break into the market across the country.  With interest rates rising and large companies fronting huge sums of cash for single family homes and townhouses it has become increasingly difficult for people to transition from renting to owning their own place.

“Real estate investors bought a record 18.4 percent of the homes that were sold in the United States in the fourth quarter of 2021, up from 12.6 percent a year earlier, according to the realty company Redfin.”

It is unfortunate but this is becoming a dangerous trend in today’s real estate market. Large companies buy up all these properties and they choose to rent them all out giving them the ability to control rent prices and the housing market in that area.

Even though sellers are aware of the issue they often choose the money over helping out a single family. This is just one of the many reasons why rent and housing prices continue to rise and real estate investors make bigger and bigger profits.

The pandemic saw a spike in housing prices but it also provided very low mortgage rates this allowed lots of Americans the ability to refinance their current rates. Recently mortgage have been climbing back up and spiked making it harder for people to afford a home.

“The jump in rates has hurt housing activity this summer — dissuading homeowners from listing, keeping the inventory of homes for sale alarmingly low, and worsening purchasing conditions for buyers” says Yahoo Finance.

This rate increasing has severely slowed the housing market, people who own homes with low interest rates don’t want to move because then they would have to forfeit their low rate. New buyer are also struggling to break into the market.

According to Gabriella Cruz-Martinez, personal finance writer, “Just 45.6% of new and existing homes sold between January and the end of March were affordable to families earning an income of $96,300”

This means that the majority of housing sales are to large real estate investors who intend to rent. As the rates reach 7% this trend will only continue.

As a financial advisor it is important to inform clients so save and be mindful of these rates. A fluctuation of even a tenth of a percentage has massive implications over the course of a 30-year fixed mortgage. While being a homebuyer is not always an option for everyone it is often the largest financial decision a person will make in their lifetime.

“The bank recommended investors prepare for a stock market sell-off of as much as 20% within the next few months because of a potential recession” says Market Insider

Over the past couple months stocks have been rising, However, many financial forecasters believe this is a warning sign of an impending recession. Most experts predict this will happen soon which is alarming but what can a financial advisor suggest to do in a situation like this to his clients?

Goldman Sachs’ David Kostin gave five reasons why buying insurance for their stock portfolio is a good answer:

1. “Downside protection is attractively priced.”
2. Narrow market rally suggests drawdown risk is elevated.
3. Valuations are high in absolute and relative terms.
4. Equities already price an optimistic outlook.
5. Positioning is no longer a tailwind to equities.

At times like this when stocks are trading very bullish there will be drawbacks to follow. It is important to position your assets accordingly. With recent spikes in the S&P 500 now is a good chance to move off any high-risk trades and move into safer more viable options.

The future is uncertain but it is important to monitor trends and advise your clients the best way you know possible. Even though your suggestions will not always be homeruns and large gains it is equally important to help minimize losses.

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