Peter Schiff, expert economist, gained notoriety for his economic forecasts surrounding the historic 2008 housing crisis. He is now raising the alarm about yet another possible housing market collapse in America, one that would result in a flood of homeowners returning their keys via mail.
“Why are housing prices so high? Because for a long time, the Fed kept interest rates at zero and so a lot of people were able to get really low mortgages, 3% mortgages, 4% mortgages,” Schiff explained in a recent YouTube video.
Mortgage rates have indeed increased. A few years ago, the average rate on a 30-year fixed mortgage was less than 3%; today, it is over 6%. Higher borrowing costs typically have the effect of cooling the market, but prices are still persistently high: over the last five years, the S&P CoreLogic Case-Shiller U.S. National Home Price Index has increased by more than 50%.
“And because homes are bought—not based on what the home cost—but based on the monthly payment, the lower the monthly payment, the more somebody could pay for a house,” Schiff said. “Now you have a problem where housing prices went way up, but then mortgage rates went way up and home prices never came back down to levels consistent with more expensive mortgages.”
U.S. Economic Forecasts From Peter Schiff
Schiff predicts that prices would “eventually” decline to reflect the higher rates of today; nevertheless, he cautions that this difficult transition may lead to “a housing emergency.”
“It’s going to create a bunch of defaults and a lot of people are going to walk away and mail in their keys because they can’t sell their houses for more than they owe,” he said.
Some Americans may recognize the familiar situation. Many underwater homeowners—those who owed more than the value of their homes—just sent their keys to the lender and left during the 2008 financial crisis.
The market is different now. Widespread negative equity is less common since lending rules are stricter than they were during the subprime period. Another consideration is supply constraints: According to Zillow, the U.S. lacks about 4.7 million homes, which has contributed to the high costs.
However, Schiff still remains cautious. Because they locked in ultra-low mortgage rates, he contends, many homeowners are sticking put, which reduces the quantity of available properties.
“But at some point, there are people that have to sell their houses for whatever reason and if they have to slash the prices to do it, they may not have enough money to repay the mortgages. And so this could have a cascading effect,” Schiff warned.
Is There a U.S. Gold Rush in the Near Future?
Gold is also frequently brought back into the spotlight when economic clouds roll in. The precious metal is not dependent on the success of any one nation or economy, unlike paper money, and it cannot be printed whenever it pleases. It is therefore a well-liked haven when a recession is imminent.
Over the last 12 months, gold has increased by more than 40%, and Schiff anticipates greater gains.
“I still think we have a good shot at hitting $4,000 gold by the end of the year,” he said in a recent episode of his Peter Schiff show.
The perspective of major banks is similar: JPMorgan and Goldman Sachs predict that gold may reach $4,000 an ounce by 2026. One way for investors to increase their retirement fund with a safe-haven asset is through a gold IRA.
You can invest in gold and other precious metals in real form and take advantage of the substantial tax benefits of an IRA by opening a gold IRA with Goldco’s assistance.
Goldco provides free shipping and a retirement resource library with a minimum purchase of $10,000. Additionally, up to 10% of eligible purchases will be matched by the business in free silver.
Schiff identifies one enduring tendency, despite his apprehension about the U.S. property market: growing rents.
“Rents go up every year,” he also noted on his show.
Housing Costs & Buyer Opportunities
The dilemma in home affordability in America highlights how real estate may act as a hedge and is partly a reflection of larger cost-of-living concerns. Home values typically increase in tandem with inflation, which raises the cost of labor, materials, and land. This is frequently the case with rental income, providing landlords with a cash flow source that keeps pace with inflation.
In fact, legendary investor Warren Buffett has frequently cited real estate as an excellent illustration of an asset that generates income. Buffett said in 2022 that he would “write you a check” if you offered him $25 billion for “1% of all the apartment houses in the country.”
Of course, you can profit from real estate investing without having billions of dollars or even purchasing a single home. An easier approach to gain exposure to this income-generating asset class is through crowdfunding websites such as Arrived.
With the help of renowned investors like Jeff Bezos, Arrived enables you to purchase rental house shares for as little as $100, eliminating the need to deal with challenging tenants, fix leaking faucets, or maintain lawns.
According to Schiff, the procedure is straightforward: go through a well chosen collection of properties that have been assessed for future income and value. After locating a property that appeals to you, decide how many shares to buy, and then relax as your investment begins to yield positive rental income distributions.
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