Home prices continue to rise fast. Another home in a "average" neighborhood here in Prosper just sold over $700k with a pool. It's almost impossible to predict how high the bidding war is going to go. If the home is priced at where market was 90 days ago it'll probably sell 10% over that, at least.
Is this just down to low inventory and high demand along with the low rates or is something more sinister at hand... inflation? Based on what we know, the Fed has been printing money rapidly since the Covid outbreak. And when I say, "printing" that is more of a euphemism since most people don't use physical money anymore. It's mostly digital transactions these days. What is actually happening is something quite simple, and yet quite evil. They are making money out of thin air. Literally. Say the Congress wants $1,000,000,000. The Fed merely credit's Congress's account with $1,000,000,000. That money didn't exist 5 minutes prior. And it really didn't exist once it's in the Congress's account. But then they spend it or give checks out and that gets spent and the economy moves. It looks like a free lunch, but what's happening is that our money that we have is quickly being diluted as more money is just made up out of thin air like this over and over again. The Fed is buying Mortgage Backed Security Bonds with more of this made up money that allows them to keep Bond prices up and interest rates low. Now this has been happening for many decades but the pace of "printing" this money has accelerated to bizarro level's.
We are now seeing the results of this money supply dilution and severe inflation is the result, it's happening with lumber, gas prices, home prices, etc... In an inflationary environment, stocks are a poor place to be, commodities are the best thing to be in and Real Estate is one of those commodities to be invested in. So as a former Stockbroker for Dean Witter, now known as Morgan Stanley, I can tell you that I see a Stock Market crash coming. No one can predict the future but I can read the tea leaves and it's not looking good. The amount of stock being bought on borrowed money, whether it's people pulling money out of their homes at 2.5% and investing in the stock market or people using the traditional Margin accounts at brokerages, the amount of money invested from these types of investors is at historic highs. And when I say historic, I mean it, it's double or triple the previous record just based on the Margin account information. Once a large number of Margin accounts start getting Margin Calls during a market dip, at some point they will cascade and you'll see Margin Call after Margin Call. It will be a bloodbath like nothing we've ever seen. So my recommendation is get out of stocks and bonds frankly as they are also being supported by the fed's buying. Buy Commodities or get into Real Estate to protect your capital. But nothing is completely safe. There will probably be quick bubbles in both markets with associated crashes. But I still think those are better for the time being than stocks and bonds.
Call me or email me to talk further.
Bryan Karlan
Broker Associate, Keller Williams
Mortgage Loan Originator, Caprock Home Loans
