On August 26, 2021, we stated in a social media post that during Kelly’s 34 years practice as a Certified Financial Planner®, he “was always of the mindset that young people starting out in life should immediately, or as soon as financially possible, acquire an affordable home. Because of this entrenched belief, our firm has historically recommended our client’s children, and grandchildren, buy a home as early in their careers as possible. No more.” (See that post here: https://bit.ly/39IWUut).

Why did this advice change?

Because irrational, unscientific COVID-19 policies clearly drove a temporary increased demand for housing, and less supply due to workers staying at home, home prices skyrocketed! Many Americans sought an escape from cramped city life amid stay-at-home restrictions. However, this demand for primary and secondary homes is coming to a halt as people are increasingly returning back to life as normal, with kids going back to school and cities coming to life again, according to Redfin. We stated on our August 26, 2021, social media post that “This short-term explosion in the price of homes has created another economic dislocation that can only be satisfied and corrected by a significant downside movement in real estate prices. Expect this (see that post here: https://bit.ly/39IWUut)”.

Since housing is the most interest-rate-sensitive part of the U.S. economy, the repercussions of our firm’s predicted escalating interest rate hikes should also cause housing prices to decline. We stated in our September 2, 2021, social media post that, “Interest rates and inflation move in very long, approximately 20- to 30-year, trends. As we bounce off current incredibly low-interest levels, we project that rates will go well into the teens over the decades to come. Over the next three to five years, we would anticipate more than a doubling of current 15 to 30 year fixed mortgage rates. These increased rates will negatively impact home values.”

Reduced demand (as COVID-19 fades), higher tax consequences, and higher interest rates are likely to impair property values long-term. Therefore, it’s important that you consider whether your investment property portfolio is too high a percentage of your assets/net worth and whether this could impair your ability to preserve your net worth – or impair an orderly estate settling after your death. It’s also important that you understand the effect of potential future changes in our tax laws that could immediately diminish the value of real estate property. If you’d like to talk about this, please contact us at (859) 223-6333 or sfa@spectrumalliance.com.

Source: https://fxn.ws/3EZ8VKE

Full listing of all disclosures (bit.ly/3lGX3mM)