Real Estate Lessons from Chicken Little
That’s the message I got after reading about the huge jump in the interest rate for the 30-year mortgage. The rate increased 14 basis points over the past week. This is the largest spike since November 2013!
Also, the sky is falling.
Marshall McLuhan’s (http://en.wikipedia.org/wiki/Marshall_McLuhan) famous quote could not be more accurate: “If it bleeds, it leads!” If your only source of information came from the 24 hour news cycle, you would probably think the world was on the brink of collapse. This is the main reason I rarely read the newspaper or watch television.
Reporting selective information is deceiving and manipulative. Remember this before you quit Real Estate and run off to join a commune in the desert (though that does sound like an adventure), let’s take a look at the real facts.
Fact 1: For the past 8 years we’ve been living in an historic pariah with respect to interest rates. Money has been really cheap for a long, long time. In 2004 I bought my first house. The interest rate was 6.25 percent. At the time, that was a rate that my wife and I were very happy with. Today we’re crying about a 4.29 percentage rate.
Fact 2: The housing market is strong. Sales of existing homes are outpacing demand. New home construction continues to increase month after month. The last 2 rehab projects I put on the market both went under contract in less than a week. There is an unmet demand for good properties.
Fact 3: People who should get mortgages are getting loans. Before the crash, if you had a heartbeat and a library card you could get a mortgage. Today the process is not so easy. But if you have good income, good credit and plenty of documentation, there are plenty of places that will help you get a loan.
Reporters, bloggers and nightly news broadcasters have a job to do. They need to put out stories so they can sell ad space and generate revenue. Their job is not to flip houses, wholesale deals or rent out apartments. They are not the experts in my industry.
Like every profession, Real Estate investing constantly changes. These changes are not inherently bad or good. Our reaction to the change is much more important.
Right now is a great time to be a Real Estate investor. Do not be scared off by the Chick Littles in the news media chirping that the sky is falling. Instead, put on your Big Boy pants, step out the door and do some deals.