With inflation at 8.6 percent, the highest in 40 years, people are looking for ways to cut corners on all their living expenses – especially soaring food and gas prices.
In May 2021, the average price of a dozen large eggs was $1.60. And just one year later, they cost $2.80 — an increase of 75 percent!
Ground beef is up 13 percent per pound. A gallon of whole milk costs one-fifth more. Overall, grocery prices were 12 percent higher last month than a year earlier, according to the Bureau of Labor Statistics. That was the largest year-over-year increase since 1979.
During this same time, the average driver was paying nearly $275 a month at the pump, up from $167 in June 2021, when a gallon of gas was $3.07, according to Kelley Blue Book’s calculations.
Rents are also escalating, with the median monthly rent at nearly $1,850 in May, according to Realtor.com, up 26 percent from 2019, before the pandemic. And national home prices are up 18 percent, according to BankRate. (See below.)
This current runaway inflation is affecting everyone, who depends on the delicate balance between take-home pay and the cost of goods and services – because they are anything but balanced, with no signs of leveling out anytime soon.
A Few Tips on Managing Inflation…
Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.
Managing Your Finances: With interest rates rising, now is a good time to pay down credit card balances and bolster emergency savings.
A New Playbook: As brands grapple with inflation, they are taking a new approach: being upfront about price increases, hoping that transparency will keep customers loyal.
Let’s Take a Closer Look at the Housing Market
So we have home prices rising, low housing inventory, and the worst inflation in 40 years (including mortgage rate hikes)… all of which creates an ‘out-of-balance’ national dilemma.
And this strange imbalance is translating to apprehension for homebuyers, who already had limited options at an affordable price – and have even less purchasing power with higher rates today.
In fact, a Fannie Mae index that measures home purchase sentiment recently hit its lowest reading in 10 years.
How are Home Sellers Feeling About Their Prospects?
Home sellers are pretty pessimistic about getting their asking price, during a time when inflation is eating up buying power. Depending on where you live, you could find fewer takers… or need to come down on price.
And don’t forget what happens on the other side of the transaction. When a homeowner sells their existing home, they’ll be competing for a limited number of available properties when/if they want to buy again — along with higher rates for a mortgage.
This situation is affectionately known as being, ‘between a rock and a hard place.’ The options for (and against) selling are equally difficult. And that’s why many homeowners are finding themselves in a huge predicament.
How wholesale real estate investors are helping homeowners all over the country…
Simply stated, wholesale real estate is a strategy that allows the wholesaler to purchase homes from people in desperate need to sell their home, quickly, for one reason or another.
At KeyGlee, we’re able to genuinely help these sellers because we offer them a fair price for their home, sign them to contract quickly, and find a suitable buyer from our extensive buyers list of qualified investors.
Seller pessimism is very real… and it’s providing wholesalers an opportunity to buy ‘instant equity’ in this squeamish seller market that thinks the market’s going down – even though values are still high right now.
This is a great time for FixNFlippers and real estate agents to couple their business with wholesaling, in order to take advantage of a market condition that looks like it’ll be around for a while.
There’s still growth, but sellers are speculating that values will go negative. KeyGlee’s CEO, Josiah Grimes, thinks they’ll only go a little lower, with the Fed rate hike. For example, he thinks that even if our Phoenix market drops from 24% growth rate to 14%... it still won’t fall to zero.
What this means is that the current ‘negative’ seller sentiment still allows wholesalers to get a little equity, while also getting lifts on properties, due to strong demand for a desirable area like Phoenix.
But what about a real estate crash, like in 2008?
“We tend to think the last crash will be the next crash,” says Josiah. “So, since the last real estate crash in 2008, many people expect the next crash to also be in real estate – but that’s not likely to happen.”
No crash has originated in the same, main niche as the one prior. It was actually mortgage-backed securities that failed in ‘08. And Dodd Frank was created to ensure that will never happen again.
Market sentiment usually aligns with market trajectory, but it doesn’t right now. So this situation means that we can buy, with instant equity, and still benefit from speculation, as wholesale investors.
Other factors contributing to this strange set of wonderful circumstances for the wholesale investor include supply chain issues, and the fact that a lot of builders did not come back after the ‘08 debacle.
Of those builders that did come back, they were more conservative because a lot of banks would not lend to them as they had previously. Consequently, not nearly enough houses were built between 2010-2014. And those that were built simply did not satisfy the demand for housing.
The increased population and housing demand created a huge supply gap that was drastically less than the increased demand for housing.
And now we have supply chain issues, severely impacting new home building. Add the burden of increased borrowing costs for builders, and it’s easy to see how they’ll have an even harder time building enough houses.
All of these disparate factors present a very unique combination, making it the perfect time for wholesale real estate investors at KeyGlee. And the likelihood of this situation to turn around and go negative for wholesaling is pretty slim.
If you’re already wholesaling, a FixNFlipper, a realtor or anyone else looking for the ‘sweet spot’ of real estate investing…
Check out what we’re doing at KeyGlee, by attending a virtual Discovery Day, where you’ll learn about our franchise opportunity that includes all the systems, processes and ongoing training that we’ve used to generate 8-figures a year, since we opened our corporate store four years ago.
Or if you prefer, you can speak directly with our director of franchise development, by telling us a bit about your experience and financial situation – then Chris will reach out to you, personally, to arrange a suitable time to chat.
He’ll discuss the franchise fees, launch day, on-going training, your free marketing leads – and any other questions you have. If it looks like a good fit, we’ll send you the FDD, so you can get started with your own due diligence.
If you live in the Phoenix area (or want to travel here), we’re in Tempe, AZ at our brand new offices and would love to show you around and have you meet the team, who’ll be serving you as a franchise owner. Just make an appointment when you speak with Chris.
To your investing success,