In this episode of the Forever Cash Podcast, Jack Bosch shares his insights into why the real estate market is set to boom in the post-pandemic economy.
Over the past 18 months, we have experienced several global events that have had dramatic and unforeseen effects on just about every aspect of our lives. The same is true for the worldwide economy.
The pandemic has impacted everything from global supply chain management and manufacturing to how people work, travel, and manage money.
In this episode of the Forever Cash Podcast, explore the state of the union and why it is a perfect storm for a booming real estate market.
Shifts in Buying Power and Spending Habits
Eighteen months ago, the government implemented far-reaching restrictions on activities identified as possibly fueling the newly emerging Covid-19 Pandemic.
The lockdowns resulted in offices shutting down and sending their employees home to work remotely. Domestic supply chains slowed, demand for commodities such as gas bottomed out, international trade and travel became impossible, and all spending became domestic.
To mitigate the adverse effects of the lockdown on the economy, the US government rolled out massive relief funding plans that put extra dollars in the pockets of Americans. As a result, people continued to earn money and get additional income with minimal spending opportunities.
People, therefore, have been using their extra income to pay down debt, including mortgages, credit cards, and student loans, to name a few.
As the markets started to recover after the first and second waves of the pandemic, people emerged from the lockdowns with better credit ratings and more disposable income in the bank.
However, opportunities to spend money on out-of-home entertainment, international trips, and manufactured goods remain limited. Logically, we have seen an increase in activity in the real estate market as a result.
Global Supply Chain Crunch
The Covid-19 Pandemic has severely impacted many economic activities. However, the global supply chains that make international trade possible were hit particularly hard.
To make a bad situation worse, an accident in the Sues Canal in March 2021 created a blockage that resulted in shipping backlogs that remain a challenge today.
Thanks to developments in supply chain management over the last decade, most manufacturers have adopted the “just-in-time” production process.
This means that parts are fabricated and shipped just in time to meet the manufacturer’s needs.
When the global supply chain came to a grinding halt early in the pandemic, followed by the Sues Canal crisis one year later, manufacturing capacity across markets was servilely constrained. The result is that even though people want to buy new cars, appliances, and electronics with their disposable income, they can’t.
Domestic Conditions and the Real Estate Market
In addition to people having more money and less debt post-pandemic, the drop in interest rates during the worst of the lockdowns made debt more affordable than ever.
During this time, millions of Americans were confined to their homes and needed to incorporate many new activities into home life, including space to homeschool children and create home offices.
With almost nobody communicating into the office anymore, options to live further away from city centers opened up. The demand for homes in the suburbs and outside of high-density areas has sky-rocketed as a result. The pandemic has created the perfect buyer’s market for homes with low-interest rates, improved credit ratings, and cheap mortgages.
However, with demand for peri-urban housing at an all-time high, supply has quickly become scarce. Developers require new land lots in paths of growth to answer that demand.
In addition, with recreational activities severely limited by the pandemic, people have started to look for alternatives. We have seen an increase in domestic recreational travel to low-density destinations. People are buying RVs and enjoy the pleasures of hiking, biking, and camping on recreational land lots that do not have communal facilities.
The knock-on effect is that the past 18 months have been some of the most profitable for real estate investors specializing in buying and selling vacant land lots across the USA.
Real estate in the post-pandemic economy and into the future
According to a 2009 study published in the European Journal of Social Psychology, it takes 18 to 254 days for a person to form a new habit.
The pandemic has been going in for more than 550 days. It is safe to conclude that reactions to the pandemic have become entrenched in our behavioral patterns and are not likely to change. The old normal is dead!
Employers worldwide have experienced this first hand, with thousands of workers deciding to resign rather than return to pre-pandemic office hours. In what is being termed “the big quit,” people demonstrate that work-life integration is a priority and that the remote or semi-remote working model is set to become a standard.
With people no longer tied to a location to make a living, the needs of homeowners have changed permanently. In conjunction with an increase in buying power, the boom in real estate that we are currently seeing is unlikely to decline in the near future.
In fact, de-urbanization is likely to drive the demand for land and real estate development for many months to come.
Even if the interest rate rises and inflation increases, it is still good to invest in assets that accrue value and generate wealth.
In summary, there is no better time to be in land!
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