If you’ve read any headlines, you’ve seen the housing market boom. I’ve talked about the prices that keep going up, but is this a bubble? When is it going to burst? People aren’t going to afford these homes, but is real estate really that expensive? Even though we have seen these prices skyrocket across the country in the last year, year and a half.
Well, I’d argue that there’s been a whole bunch of dollars pumped into the system. I’d also say that, with an inflated stock market, where else will you put your money. We’ve seen companies like BlackRock buying up to $6 or $7 billion in single-family homes because they know that rents continue to appreciate and that they can guarantee a rate of return for their fund.
As of March this year, the New York Times reported that Wall Street owns over $60 billion in single-family homes. Zillow is buying, Open Doors is buying, and Redfin is buying. Everybody is buying real estate, even when the market is at its peak.
So what do companies like Wall Street know that everybody writing the headlines just can’t seem to figure out? Why is real estate continuing to appreciate, and is it that expensive?
On a recent podcast with Robert Kiyosaki from the Rich Dad Channel, he breaks down the prices of commodities compared to real estate. Check it out.
In the video, it’s fascinating to see how the guest speaker, Jason Hartman, compares oil to gold, which many people have as an asset class. Many people choose to invest in the oil that you have as an asset class.
When you compare “where am I going to put my money” to “what asset am I going to put as an investor, my money into,” you begin to wonder and ask questions. Is this why you see BlackRock, buying up to $7 billion worth of single-family homes? Wall Street already owns more single-family homes today in a high point of the market. Wouldn’t they be selling right now if they didn’t think these homes would continue to appreciate? If they thought dollars or barrels of oil were worth more than homes, they’d be buying oil. If they thought gold was worth more than homes, they’d be buying gold, but they’re buying single-family homes.
Talk to your local builder. Ask them, “if I were to build a new house and I own the land, what would it cost to build the average size home in my community today?” I promise you’re going to be blown away at what it would cost for the material and the labor. Single-family homes are always going to have a place in our economy. You need shelter, air, and food. You need these essential things, to live. BlackRock knows that, and Wall Street knows that. Guest speaker Jason Hartman, he knows that.
When you compare it to where else you could put your money, it looks like real estate isn’t that expensive. It’s probably, very accurately priced right now, and I believe over the long term, like always, real estate has a long way to go and appreciate.