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Real Estate Problems Coming...

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@nealmcspadden
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So everybody is looking at the stock market (and we here at leofinance look more at the crypto market as a proxy) with the Federal Reserve hiking interest rates 0.75% yesterday.

But what is more on my mind is real estate, especially single-family real estate.

Let's look at what happens to an average home buyer's ability to finance as we go from the left-hand side of this chart at 3% to the right hand side of this chart at 5.23% (and rising after this week).

3%

5.23%

$27,742 of purchasing power just vanished!

Said another way, the buying power of random-home-buyer dropped by 14.5%.

Yes, salaries are up somewhat over the same time, but not enough to compensate for the interest rate sensitivity.

And if we somehow actually get to a funds rate of 3.5% like the Fed is projecting...

So yes, there is investor demand for SFR. There are miscellaneous cash buyers too. But the driver for SFR equity is always the retail buyer. And they are losing their ability to buy.

Posted Using LeoFinance Beta