Housing Market Cools, Home Prices Too High

Markets Signaling a Recession

A recent Fed Study suggests that gap between short term and long term borrowing costs signals an upcoming recession. The Fed looked at the yield on three month and 10 year US Treasury bonds and noticed a narrowing gap between the two. Historically, when short term yields invert over long term yields, we enter an economic recession. 

In light of the evidence on its predictive power for recessions, the recent evolution of the yield curve suggests that recession risk might be rising.
— Michael Bauer and Thomas Mertens

High Home Prices, Cooling Housing Market

The affordability of starter-homes has hit a decade low and Bloomberg says that the US housing market is cooling because prices are just too high. First time buyers need 23% of their income to purchase a home. Just a year ago that figure was 21%. The cost of these starter homes is the highest it has been since the housing bubble blew up back in 2008. 

In cities like San Francisco, New York, Miami, and Los Angeles, that figure goes as high as 59-65%. No wonder the market is cooling.


5 Unreasonable Landlord Behaviors 

In a recent BiggerPockets article posted by G. Brian Davis, he talks about the 5 landlord behaviors that are stopping you from achieving higher returns. Here's the 5 behaviors and how to fix them.

  1. Pocketing All Your Cash: Always earmark a percentage of your cashflow to go into a reserve. Build up that reserve over time. You WILL get hit with a $5000 HVAC bill at some point. You WILL have a plumbing emergency that requires $6000 in cash to fix. 
  2. Postponing Maintenance: Preventative repairs and maintenance is the best way to maintain the value and rental price of your property. Putting off HVAC maintenance will almost guarantee a costly $5000 replacement bill at some point. Not only does preventative maintenance build good will with your tenants, it also maintains the value of your property.
  3. Skipping Property Inspections: Do a 1 year inspection, every year. Do not skip these. Your annual inspection will uncover areas that need preventative maintenance. Your inspection will also help you weed out bad tenants and know how to bill from their security deposit year over year to do repairs.
  4. Use a Move In/ Move Out Sheet: Since you're not allowed to deduct wear and tear from a security deposit, you MUST be able to prove that the tenant caused damages. If not, you'll lose in court. 
  5. Not Allowing Pets: 68% of American households own a pet. By not allowing pets, you disqualify 68% of Americans that may have been willing to pay higher prices and even taken better care of your home. Rethink your pet policy.

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