Flipping America 445, The Zoom Boom

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By Roger Blankenship. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

I've coined the phrase "Zoom Boom" to characterize some of the things I see in the near and mid-term future for real estate. No it’s not a baby boom. It’s a real estate boom and a bit of a bust in some sectors. It all has to do with the trend toward working from home. In a moment I’ll explain what I mean.

I'll provide the key market indicators we constantly monitor.

  • Are the “sky is falling” click bait specialists on YouTube declaring a looming real estate disaster right? (Spoiler alert: NO).
  • What are the market indicators every investor should be watching?

How do we know a good opportunity when we see one?

Later in the show Logan Mohtashami is joining us to discuss his take on the “Bubble Boys” of YouTube. Just wait - that’s not the worst thing he calls them!

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News: Topic: Housing Markets 2021

My conclusions:

  • Sales increases will be modest due to the continuing lack of inventory. I do not believe we will sell 6 million homes in 2021 (sorry Logan). I believe it will be more like 5 million - in other words, relatively flat.
  • Prices will continue to press upward faster than inflation across all markets. The coastal markets will regain their 2019 losses and will see a 3-4% rise. Other large metro areas like Atlanta, Dallas and Denver will see price increases in the metro suburban areas in the 7-10% range. This will offset a flattening of in-city prices. More on that in a moment. The national year over year increase I am forecasting for 2021 is 7%. This is due primarily to the same factors that have pushed it along for the past 2 years. Historically low interest rates, low inventory, insufficient new home starts.
  • Under a new federal administration, we will continue deferments on mortgages and restrictions on evictions. This will create previously unimaginable burdens on landlords. 2021 is NOT a good time to be a landlord with a mortgage.
  • Any price roll-backs in lumber - if and when canadian tariffs are eliminated will be offset by the promised increase in regulatory oversight and builders are facing the prospect of being forced to build low-income housing in current upscale areas.
  • With confirmation of the Democrats in control of all the branches of the federal government I can only assume they meant what they said when running. That means personal and corporate tax increases within the first few months. I believe this will create a slow-down in the economy as a whole and will contribute to the slowing of the real estate market in the second half of the year as foreshadowed by Todd Teta at Attom Data.
  • The real estate market will be UP in 2020, but i see it flattening by second quarter of 2021.
  • One of the biggest short-term impacts of the pandemic of 2020 is something I’m going to call the Zoom Boom. As workers have needed to work from home, many have discovered they don’t need to ever be in the office and plan on never returning. This has led to a growing flight to the suburbs, which will result in some upward price pressure there and downward prices in the cities. If you want to speculate on city office space or city condos, 2021 will be a good time to do it. Some of the Zoom Boom effects will be felt in faraway places as well - ski towns, beach towns - places that were formerly primarily vacation spots will find a new group of permanent residents in 2021. I believe this is a relatively short-lived change and within 2 years, 75% of those people will be back in the cities going to the office as before. In years past productivity studies of work from home people have consistently shown a drop off in performance and productivity. HOWEVER and this is a big change - today’s technology and the improvements in the ability to stream live meetings has opened up the possibility that these changes could be permanent. Even so, I think that people are wired to want to be around people - and yes that even includes co-workers. So I think the Zoom Boom is a two year thing.
  • What does all of this mean?
    • 2021 will be like every other year I’ve been in this business in 1 regard: If you buy a property cheaply enough, you can make money with it. Never pay retail. You never have to. Someone somewhere is in enough distress to sell at a deep discount. This is your number one risk mitigation strategy.
    • 21 will be a great year to flip and therefore a decent year for wholesaling. Location will almost not matter (but do make sure you are still 45 days or less average on-market time).
    • 21 will be a challenging year to be a landlord. The only reasonable residential rental investments will be commercial multi-family. Only 75% of tenants are now paying their rent on time, but in an apartment building that’s enough to stay afloat. I do not plan to buy or invest in single family rentals in 21. I DO plan to buy BOR houses - as many as I can.
    • The first 6-8 months of 21 are the time to make hay while the sun is still shining. 22 is going to look a little different.
    • 2021 is a good year to buy distressed or REO office space. But you need to have enough cash reserves to hold for 2-3 years before it becomes profitable.
    • When the corporate tax rates are officially raised, you will see another exodus of corporations and capital, including manufacturing jobs from the US. I am not planning to invest in this sector for the next two years at least.
    • End of 2021 and into 2022, you will see an increase in foreclosures and perhaps a spike in evictions. This will create opportunities then for people who have cash on hand. Pursue all great deals now - don’t be caught empty-handed a year from now.
Motivational Quote: “A Lawyer can help you go broke legally. An Accountant can help you go broke accurately. An architect can help you go broke beautifully. Only you can prevent you from going broke.” -John Smithgall.

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