March Newsletter


Market Update
It is plain to see, we find ourselves in complicated, stressful times both nationally and internationally.  I wanted to share a few thoughts from my front row seat in the real estate community here in Maryland.
The typical questions I get asked at a cocktail party lately are answered as follows:  Disclaimer: please remember that while I have a degree in Finance and Economics, I am not a professional economist or financial advisor, just your nerdy Realtor :)

How does the conflict in Ukraine affect the Maryland housing market:
For starters, supply and demand are the fundamental driving factors of the real estate market.  Supply is still at a recording setting low, and that hasn’t changed.   The war has created a great amount of uncertainty in the global markets, and that uncertainty pushes investors towards safety.  U.S. debt and mortgage backed securities remain a very stable choice, and billions have flowed into those over the last couple weeks.  This pushes mortgage rates back down, allowing buyers more buying power while also allowing home values to climb.  As the war continues and sanctions on Russia become felt globally,  inflationary pressure will have a greater impact on the housing market, and the Fed will need to raise rates to protect it.

Inflation, Inflation, Inflation… Is that a question or a statement?
The federal reserve will likely feel the need to curb inflation by raising interest rates faster than previously predicted as that is the main method used to keep inflation in check nationally.   This will push mortgage rates up, reduce buying power, and  eventually help to stabilize  rising home values.  Every decision has both positive and negative consequences.  It simply isn’t an easy topic to answer in just a sentence. Essentially, home values/prices will rise due to lack of supply and due to rising construction costs, fuel costs and so forth.

Basic note on inflation:  Inflation pushes your home’s value up over time, and you have a financial instrument called a mortgage which allows you to use someone else’s money at a low, fixed rate to purchase a home. Let’s say you borrowed $500k on a mortgage at a fixed 4% rate and inflation is soaring at 7% or more.  That means you have a net benefit of 3%+ on someone else’s money!  These are certainly unique times we live in.  Owning your home out right with no debt might feel warm and fuzzy, but you miss out on this shield against inflation.

Should I consider investing in real estate right now?  Seems risky right?
One of the very best inflationary protection measures we can all take is to secure a low, fixed rate mortgage and spread it over a long period of time.  Personally, I am buying up rental properties at a fast pace.  I purchased another $1.2 million worth of properties to rent in the last 60 days and secured them each to a 4%, 30 year fixed rate mortgage.  If investment real estate is not something you are considering within your portfolio, we need to talk.  The US equity market has had the second worst start in 123 years, worse than the 1920 Great Depression.  Your average financial advisor likely knows very little on the subject of real estate investment and is not incentivized to even utter a word about it.  Real estate investing has created 90% of the world's millionaires. Realty is one of the most reliable wealth-building structures, as well as  an essential element of a well-diversified portfolio.  I scratch my head when my clients say they have never read a single book on the subject.  What better time to learn?

Is now still a good time to sell my family’s home?
If you are considering selling your primary residence then you should still be doing so.  Prices are near all time highs and you can lock in the financial gain.  Until you lock it in, you only have unrealized gains which are hard to spend :)  It remains a strong sellers market.  We have strategies which allow you to make a move and not wind up homeless as you find your new home.  We do it everyday.

Should we consider buying a new home right now in these crazy times?
For buyers, interest rates remain exceptionally low, far below the historical averages, and you can lock in a long term asset. I hear that many folks are waiting a bit to let things return to “normal”.  The rising prices of homes are unlikely to change in the short term and there are zero guarantees “normal” will be around the corner. Inflation and supply/demand pressures are unlikely to be changing soon.

This might have rambled on longer than it should have but I am passionate on the subject and enjoy what I do.  Feel free to give me a ring directly to discuss your real estate situation further.  Your referrals are always appreciated, I will be sure to take care of them.  
Stay well.
Matt Rhine