In this Part 8, I wrap up all of the ideas we discuss in the first 7 parts and what our strategy will be going forward.
The first thing I have to say is that you have to wrap your head around the facts that prices will drop at some point in the not too distant future. I don’t care if prices are increasing right now (in the summer of 2020). Eventually demand is going to fall and supply is going to rise. That is going to lead to decreasing prices.
The other thing you need to understand is the inventory issues, price drops, rent drops, etc. are going to be different in different sub-markets. The national averages will show price drops and increasing supplies. But some markets will decrease more than others. And some markets might not decrease at all if they have a large inflow of people moving there.
Be careful of the big cities and cities that have dense populations. This pandemic has made a high percentage of people want to not live so close to each other any longer. People want to leave the big cities and they want to move out of dense areas to the suburbs.
You need to pay attention to supply and inventory and foreclosures on a market-by-market basis. There will be very good deals available and those that pay attention will get them. Some clues will be to watch new listings and sales. Are prices moving up or down?
Make sure you stay connected to the large companies that monitor the real estate industry like Zillow and Realtor.com. The listings and data on their sites are a very good survey of what is happening in the markets and whether inventory is going up or down and whether prices are going up or down.
Finally, pay attention to population migration patterns and where are people moving and going. You can watch data on websites like the US Census Bureau which information on metro-to-metro migration flows. You can also look at state data on drivers licenses turned in. You can look at UHaul and North American van lines websites which show where trucks are going. Watch the inflows and the outflows.
These are all sources of clues as to where markets will be good and which markets will be bad for investing.
I hope this series of blog posts was enlightening and helpful.