The housing market in many regions across the nation can be best described as “sideways” where home prices remain relatively stable and listing inventory is still well below historical averages.
While housing trends are more localized and can vary from a stronger sellers’ market to a better buyers’ market depending on the region, we’re seeing sideways types of stable home price trends in many regions that fluctuate within a more narrow price range swing. It’s not an obvious appreciating or booming price trend or a downward, busting, or depreciating price movement.
Whether your local housing market region has a balanced market supply of buyers and sellers or many more sellers than buyers, home listing prices aren’t drastically falling on a large scale as of yet.
For any type of product or service, an equalized number of buyers and sellers is usually more positive than negative to at least keep the prices relatively stable or flat.
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Our Unusual Sideways Housing Market
I describe average price trends in most regions as “flat” in spite of so many historic negative housing and economic trends that would’ve acted like a figurative anchor in previous housing cycles and pulled home values back down. If so, it would’ve created more “underwater” properties where the mortgage debt exceeded the current home market value.
Let’s take a closer look at sideways types of housing market characteristics:
Flat home prices: A more typical home price trend for a sideways housing market is when home prices remain flat or stagnant, partly since the number of buyers and sellers is more balanced. However, home prices are either flat or slowly appreciating in spite of the record imbalance of sellers vs. buyers.
An inverted housing market: We’re not seeing home prices crashing like they did during the 2008 to 2012 era at this point in today’s housing cycle. Nationally, there were an estimated 1.99 million sellers competing for approximately 1.48 million buyers, as per Fortune and Redfin in Q1 of 2026.
The whopping number of an all-time record 630,000 more home sellers than buyers should’ve created a much stronger buyer’s market as home listing price averages should’ve trended downward. However, we’re still not seeing that happen on a large scale in more regions.
Doubling Home Listing Numbers: You’ve probably noticed the national home listing supply numbers moving up over the past year from a low near one million to almost two million today.
What’s a bit confusing is that many of these national home listing supply numbers just focus on older existing-homes for sale, while not including the near record number of new builder homes for sale as well.
Average new U.S. home prices from motivated builders continue to remain priced below older existing homes for sale. This price trend differential is highly unusual because buyers used to willingly pay an average of 15% higher for new homes due to the obvious benefits of brand new appliances, roof, windows, plumbing features, and lengthy home warranty plans.
After combining the older and brand new home listings, this number gets closer to two million. However, it’s still about half as large as the four million home listings for sale back near the previous housing bubble peak in 2007.
As I’ve shared for many years, the number of distressed (forbearance, loan modifications, pre-foreclosures, etc.) and vacant “shadow inventory” supply of homes absolutely dwarfs the national home listing inventory supply by a significant number.
After this huge number of distressed properties, which may have delinquent mortgages that haven’t been paid for several years, later turns into foreclosures and future listings, then median home prices are likely to remain stagnant or start falling.
A positive population trend that I’ve shared before is that there are now 40 million people living here in the U.S. today than there were back in 2007 when national home listing inventories peaked near 4 million homes for sale. However, how many of these additional 40 million people living in the U.S. can qualify to purchase a home or lease a property?
Older Buyers and Sellers, Fewer Families
Adults between the ages of 61 and 79 continue to dominate the U.S. housing market and represent the largest group of home buyers and sellers, according to the National Association of REALTORS®’ newly released 2026 Home Buyers and Sellers Generational Trends report.
Baby Boomers (born between 1946 and 1964) accounted for 42% of all U.S. home buyers and 55% of home sellers, according to this NAR report. First-time home buyers fell to their lowest share on the NAR’s records that date back to 1981, comprising just 21% of all home buyers.
The average first-time U.S. homebuyer age in 2025 was 40 years of age. Sadly, the average first-time homebuyer age in California last year was closer to an all-time record high of 49. If a California buyer takes out a 30-year mortgage and doesn’t pay any extra principal payments, then they will be 79 years of age by the time their home is free-and-clear with no debt.
In 2025, there were more home buyers across the nation over the age of 70 than under the age of 35. Last year, the average U.S. home seller was 64 years of age.
Both marital and fertility trends are near historic lows as fewer people are truly in love or financially secure enough to get married and have children. Raising children from birth until just the age of 18 in today’s America can cost an average of $300,000, as per CBS News.
The number #1 cause of divorce these days is not related to a spouse being unfaithful. No, it’s related more to financial pressures. Ironically, the top 2 reasons for financial insolvency these days are tied to unpaid medical bills and divorce.
Unhappy relationships and feelings of disconnection among the younger generations will eventually be a major factor causing declining future single-family home sales, especially if they don’t have any loving family members living with them.
Mortgage Rates and Record Debt
Those new record low 3% mortgage rates are long gone. Yet, today’s rates that are swinging from the low-to-high 6% rate range for many applicants are still well below the 50-year historical average for 30-year fixed mortgage rates that are closer to 7.76%.
A major difference today for many people is the fact that our dollar’s purchase power keeps falling at a rapid pace. This is painfully obvious for many of us who go grocery shopping.
A prime example of how bad food prices have gotten is the fact that a recent LendingTree survey found that nearly one-in-three Americans are using Buy Now, Pay Later type of costly installment plan services to buy groceries.
The average new car payment is nearly $775 per month, while some new truck payments can be in the $2,000 to $3,000 per month range. Gas prices here in California are more likely to be above $6 per gallon than below that figure. Car insurance and maintenance costs keep rising as well. As a result, it may cost a car owner an average of closer to $1,500 per month (car payment, gas, insurance, maintenance, etc.) or more to keep driving their car.
Total unpaid credit card debt reached a new record high in Q1 2026 at nearly $1.25 trillion dollars. With APRs (Annual Percentage Rate) for many rates and fees somewhere within the 28% to 40% APR range, it’s becoming incredibly challenging to pay off consumer debt.
Buying and Selling Timing Options
It’s been said that the three most important factors for real estate are “location, location, and location.” While this may be true for prime coastal beachfront properties in Southern California like those found in Huntington Harbour, Newport Beach, and Laguna Beach, I would add market timing as the fourth most important factor.
How often do we look back and clearly see that the housing market was peaking or busting? With 20/20 hindsight today, it’s much easier to see the positive or negative housing trends in the past.
What’s more important is to pay close attention to the positive or negative trends in your housing market regions of interest today!
If this perceived flat or stagnant housing market suddenly turns into a downward home price cycle, then you as a buyer will have less competition to purchase discounted properties that interest you.
For sellers in a declining housing market with a record imbalance of sellers-to-buyers, you will need to seriously consider reducing your home listing prices instead of waiting and holding out for all-time record price highs for your neighborhood.
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Please closely watch the average Days on Market (DOM) for your region to have a better understanding of home value trends. An increasingly longer number of active days for sale is more likely to lead to future home price drops rather than price hikes.
For savvy real estate investors who closely follow Realty411, if you’re the only active investor in your region interested in a distressed property that may or may not be currently listed for sale, you might boost your nest egg by purchasing well below market value and holding on to it for the long run.
As many of us know, real estate has proven to be an exceptional hedge against inflation. Our dollar will continue to keep weakening and inflation will keep rising each year more often than not. As a result, property values may keep rising as well in spite of a potentially weakening economy.
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California.
Rick provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California.
Please join my So-Cal Real Estate Investors group that meets at Canyon Lake Golf & Country Club, Shoreline Yacht Club in Long Beach, and online: So-Cal Real Estate Investors.
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Property tax and homeowners insurance payments have risen so much in many U.S. regions that the monthly property tax and homeowners payments can both be as high as an average mortgage payment. It’s truly a pity that the monthly PITI (Principal, Interest, Taxes, and Insurance) payments have reached unaffordable levels for so many homeowners across the nation.
An analysis by Lending Tree that was published and updated in May 2025 found the median property taxes across the nation rose by an average of 10.4% between 2021 and 2023.
Whether or not a homeowner owns their property with or without a mortgage, they must continue to pay at least their property tax payments or risk losing the residential or commercial property to a future foreclosure tax sale.
By comparison, the decision to hold a homeowners or landlord insurance property on a free and clear property is solely up to the property owner who is willing to take the risk associated with fires, floods, and other damaging events. Many landlords today with free-and-clear properties may also have negative cash flow, so they stop paying for insurance.
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Property Tax Trends
Let’s take a closer look at what was gathered, analyzed, and shared by both Lending Tree and the Tax Foundation as it relates to property tax and homeownership trends through 2023:
● U.S. homeowners paid a median property tax payment of $2,969 annually, or about $247 per month.
● Homeowners without a mortgage can select insurance policies with lower coverage limit amounts because they don’t have to also protect a mortgage lender on the same policy. As a result, the annual premium amounts are usually lower for homes with no mortgage debt.
● Homeowners without a mortgage for their free-and-clear properties paid a median of $2,474 in annual property taxes, while those with a mortgage paid almost $869 more per year at a median of $3,343.
● More than 40% of U.S. homes today are now owned without a mortgage. Some of these homeowners choose not to obtain any insurance for their properties to keep expenses low. In theory, this may make sense until a future firestorm or horrific flooding situation damages their property so severely that they must tear it down.
Low and High Property Tax Regions
Depending on the price paid and the tax assessment percentage rate for the subject property’s county region, annual property taxes paid can vary from $1,000 to $100,000+ per year.
Between 2021 and 2023, property taxes increased in each of the 50 largest metro regions. The three metropolitan regions with the lowest annual property tax payment increases were as follows:
This same Lending Tree study found that among the 50 largest metropolitan areas, Birmingham, Alabama, had the lowest median annual property taxes at $1,091 per year. Memphis, Tennessee and Louisville, Kentucky had the second and third lowest annual property tax payments out of the 50 largest metro regions at $1,856 and $1,912, respectively. Amazingly, Birmingham’s annual property tax payments were 41.2% lower than the #2 lowest annual property tax region in Memphis.
Among the 10 metros with the highest annual property taxes, four are located in California and two are in Texas. Out of the large 50 metros, these three regions have the highest annual median property taxes:
1. New York, NY: $9,937 2. San Jose, CA: $9,554 3. San Francisco, CA: $8,156
Birmingham, Alabama and Phoenix, Arizona pay the smallest percentage of their home value in property taxes out of the 50 largest metropolitan regions at an effective tax rate of just 0.48%. Both Las Vegas and Denver pay slightly higher amounts at 0.50%.
Surprisingly, Buffalo, New York (2.11%), Chicago (2.08%), and Cleveland (1.74%) had the three highest effective tax percentage rates out of the top 50 metropolitan regions.
Property Taxes by County
Within each state, counties can assess different property tax percentage rates and special assessments that can increase or decrease the property taxes paid by each homeowner. Sometimes, counties or county equivalents can run out of cash and file for bankruptcy. If so, they may increase the property tax percentage rates owed to help cover their annual budgets for schools, roads, and other expenses.
Lowest Property Taxes
In 2023, the lowest annual property tax bills in the nation were found in 11 counties, or county equivalents (parishes, boroughs, etc.), with median property taxes of less than $250 per year, according to the Tax Foundation.
These counties, or county equivalents, had property tax amounts at $250 per year or less, as follows:
● Alabama: Lamar and Choctaw counties ● Alaska: Northwest Arctic Borough, the Kusilvak Census Area, and the Copper River Census Area ● Louisiana: Allen, Avoyelles, Madison, Tensas, and West Carroll parishes ● South Dakota: Oglala Lakota County
In many regions of Alaska, there are actually $0 property tax payments due each year. As such, these areas in Alaska would officially have the lowest property tax rates and payments in America.
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Highest Property Taxes
Now, let’s review the 16 counties with the highest median property tax payments in the nation that all have annual tax bills exceeding $10,000 per year:
● California: Marin County ● New Jersey: Bergen, Essex, Hunterdon, Monmouth, Morris, Passaic, Somerset, and Union counties ● New York: Nassau, New York, Putnam, Rockland, Suffolk, and Westchester counties ● Virginia: Falls Church City
Additionally, two counties in New Jersey (Hudson and Middlesex), three counties in California (San Francisco, San Mateo, and Santa Clara) and the Western Connecticut Planning Region in Connecticut have annual median property taxes above $9,000 and slightly below $10,000.
Reasons for Increasing Property Taxes
Property taxes are the primary tool for financing local governments. For example, property taxes comprised 27.4% of total state and local tax collections in the U.S., which was more than any other tax revenue source.
Property taxes collected are then used to fund schools, police departments, fire and emergency medical services, roads, and other services. As a percentage of local tax collections in regions like counties, property taxes accounted for more than 70% of local tax collections in fiscal year 2022.
Rapidly increasing salaries, underfunded pension needs, and overall county budget increases for county employees are also reasons why property taxes are going higher to cover these budget deficits.
Because home prices have reached all-time record highs in many U.S. regions, the corresponding property tax assessments have risen as well because they are based on the home purchase price or latest assessed value.
Skyrocketing Insurance Costs
Sadly, insurance costs are seemingly increasing at an even faster pace across the nation than property taxes and monthly mortgage payments.
It’s not uncommon these days for homeowners or landlords to pay $500, $1,000, $2,000, or $5,000+ per month (not year) to have sufficient insurance coverage that protects them and their mortgage lender.
As I’ve shared in past articles like The Drying Disaster-Relief Insurance Pools, a large number of insurance companies and government agencies that back insurers may be technically insolvent after several decades’ worth of costly and deadly firestorms, floods, hurricanes, tornadoes, and other natural or manmade events.
California’s own “insurer of last resort” named the FAIR Plan had upwards of $336 billion of property exposure a year ago with just a cash surplus between $300 and $700 million, as per the California Assembly Insurance Oversight Committee.
This FAIR Plan budget analysis took place well before the absolutely horrific firestorms that hit my former neighborhood of Pacific Palisades and Altadena near Pasadena, which I shared back in January 2025 one week after the firestorms hit these beautiful regions as I shared in my Steps to Recover from the Pacific Palisades Firestorm article.
There are 10 times more California homes in low-fire risk zip code regions than homes in high-fire risk regions that currently have much more expensive California FAIR (Fair Access to Insurance Requirements) Plan insurance, according to CBS News Los Angeles.
Fire Hazard Severity Zones (FHSZ) & Local Responsibility Areas (LRA)
On March 24, 2025, OSFM (Office of the State Fire Marshal) issued the 2025 Recommended Local Responsibility Area (LRA) FHSZ maps for California.
FHSZ Classification
Properties are designated as Moderate, High, or Very High Fire Hazard Severity Zones based on: ● Terrain and topography ● Vegetation and fuel conditions ● Fire history and frequency ● Climate and weather patterns
As a result of the issuance of this map, a large number of homeowners in California are losing their insurance and have no other option to choose from than the usually more expensive FAIR Plan.
Just recently, the California FAIR Plan proposed the raising of home insurance rates by an average of 35.8% starting next spring in 2026, according to this article by the San Francisco Chronicle. If this hike request is approved by the state, it would be the largest payment increase in at least seven years.
However, approximately half of California FAIR Plan customers might experience annual rate increases of 40% to 50%, while other customers could see their rates jump by more than 300%.
The Lock-In Effect
I’ve written about the lock-in effect over the years as it primarily relates to homeowners who didn’t want to sell or refinance their record low mortgage rates.
It’s not just homeowners who hold near record low 30-year fixed mortgage rates who are not motivated to sell their homes whether or not they can afford the monthly payments. Rather, a large number of homeowners today aren’t selling their homes because of factors such as fear of higher future property taxes if they acquire a more expensive home.
Many homeowners also don’t want to pay higher insurance and/or lose their low fixed rate mortgage that might be somewhere between 3% and 5%. Other homeowners are afraid to make any claims on their insurance policies even if completely justified because they don’t want to risk losing their insurance or seeing their annual premium payments double or triple.
As a result, the lock-in effect also applies to a combination of mortgage rate, insurance, and property tax swings that may be almost impossible for the average homeowner to afford if they decided to sell their home.
It’s somewhat akin to a deer-in-the-headlights type of frozen reaction for many homeowners where they don’t know what to do and the safest decision may be to sit tight and do nothing. Yet, the same holds true for potential buyers who are currently renting. Can they afford these rising mortgage, tax, and insurance payments?
At some point, home prices will be affected, for better or worse, when the number of sellers exceeds buyers or the number of buyers exceeds available home listings.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
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How are so many asset prices (homes, commercial real estate, gold, stocks, etc.) today at or near all-time record highs, while the purchasing power of the dollar is at all-time record lows? Is the economy booming like never before or is the dollar’s purchasing power seemingly crashing and burning?
A recently published Statista Consumer Insights survey that was conducted in June and July 2025 found that 49% of U.S. adult respondents said that the high cost of living was their biggest daily concern.
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The Top 8 answers provided in this survey of 4,098 adults between the ages of 18 and 64 were as follows:
1. Cost of living – 49.1% 2. Physical health – 26.3% 3. Mental health – 26.0% 4. Work-life balance – 25.8% 5. Political or social issues – 22.7% 6. Age-related concerns – 16.7% 7. Housing – 16.6% 8. Career dissatisfaction or uncertainty – 16.2%
Why does it seem that many items are less affordable today than in previous years? One answer is that our dollar’s purchasing power continues to rapidly decline at an accelerating pace.
Dollar’s Purchasing Power Turns to Ash
The federal government’s published inflation rates in 2025 are still lower than inflation rates back in the 2021/2022 years that peaked near 9%. However, it sure doesn’t seem like our dollar buys the same amount of goods and services here in 2025 whether or not the published inflation rates are 2%, 3%, 4%, 5%, 9%, or 10%.
Here’s a summary of the decline of the dollar over the past 112 years:
$1 in 1913 (the year when the Federal Reserve was formed, ironically, as a way to “contain inflation” and “stabilize the dollar”) now has the equivalent purchasing power of almost 3 cents today.
The purchasing power of $1 fell to about 7 cents over the past 50 years, so most of the dollar’s decline in value has taken place during this 50-year time period that followed the removal of the dollar from the gold standard during the 1971-1973 years.
Since 2000, the dollar’s purchasing power has dropped by -41%.
The M1 money supply (cash or cash equivalent) increased from $4 trillion dollars in January 2020 to $20 trillion dollars by October 2021. The more money in circulation, the less purchasing power for the dollar.
The dollar’s purchasing power has fallen 10% in the first seven months of 2025 as the dollar’s losses are accelerating.
Because real estate has proven to be an exceptional hedge against inflation and an imploding dollar or fiat currency that’s backed by “thin air,” these are key reasons why home values today are near all-time record highs.
Falling Rates & New Buying Opportunities
The average 30-year fixed rate over the past 50 years was about 7.7%, which is actually much higher than today’s 30-year fixed rate average that is almost 1.5% lower as of the first week in September 2025.
The peak high 30-year fixed rate over the past 50 years reached 18.63% in October 1981, while the low rate average fell to 2.65% in January 2021.
On September 5, 2025, the 30-year fixed rate reached a 6.29% rate average, as per Mortgage News Daily and CNBC. This rate was near the lowest 30-year fixed rate average dating back to October 2024.
Even if the Fed takes short term rates down to near zero again like in past years, the 10-year Treasury yield may still increase due to factors such as fewer foreign buyers for our Treasury bonds, rising federal debt, and potential future credit downgrades by credit rating agencies such as Moody’s, Standard & Poor’s, and Fitch.
To learn more details about potential interest rate directions, please read my article published on August 8, 2025: Are Lower Rates on the Horizon?
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Commercial Real Estate Trends
Each commercial asset class like multifamily, industrial, office, retail, and mixed-use across our nation has both positive and negative trends.
For some commercial properties owned by fortunate landlords, they may see 100% occupancy rates, record high rents, and all-time peak high property values. For other property owners, they may experience high vacancy rates, negative cash flow, and upside-side down values because their mortgage debt exceeds their current market value.
Let’s take a look below at some of the latest commercial real estate trends:
The estimated total dollar value of commercial real estate was $22.5 trillion as of Q4 2023, which makes it the fourth-largest asset class in the nation following stocks, residential real estate, and Treasury securities. (Federal Reserve’s April 2024 Financial Stability Report)
By July 2024, the national office vacancy rate reached a whopping 20.1%. This was the first time ever that the U.S. vacancy rate surpassed 20%. (CommercialEdge)
By early 2026, Moody’s forecasts office vacancy rates hitting 24%+.
In August 2025, the delinquency rate for office mortgages securitized into commercial mortgage-backed securities (CMBS) spiked to 11.7%, the worst ever default rate and a full percentage point above even the peak meltdown rate of the Financial Crisis (10.7%) during the 2008 to 2012 years, according to data by Trepp.
Almost 45% of all office buildings nationwide that are leveraged with debt are upside-down or underwater where the existing mortgage debt exceeds the current market value, per Bloomberg and Morgan Stanley.
Unlike most residential one-to-four unit properties that have 30-year fixed rate terms, most commercial properties have shorter term mortgages that may only last for a few years before they balloon or mature and must be paid off or refinanced.
Let’s review the ballooning commercial mortgage numbers below:
Approximately 20%, or $929 billion, of the $4.7 trillion dollars’ worth of outstanding commercial mortgages owed to lenders and investors were scheduled to balloon or become all due and payable by the end of 2024, as per the Mortgage Bankers Association’s 2023 Commercial Real Estate (CRE) Survey of Loan Maturity Volumes.
However, many of these ballooning loans were extended well beyond their maturity date because banks don’t want to acknowledge all of their current financial losses, just like back during the 2008 to 2012 era, or their bank’s stock value may go “pop.”
Upwards of $2.7 trillion for commercial and multifamily mortgages are set to balloon or mature by the end of 2026. (Mortgage Bankers Association)
In 2024, the U.S. apartment construction industry was expected to break a new all-time record for apartment units delivered with well over 500,000 units completed, which is 30% higher than back in 2022. (Fannie Mae)
When apartment unit supply exceeds tenant demand, rents and values tend to fall.
The rising multifamily apartment loan default rate is increasing due to a combination of rising adjustable rates that are resetting after 3, 5, or 7-years and skyrocketing insurance costs that creates negative cash flow.
The largest issuers for these ballooning commercial loans are community banks and thrifts that hold over half of these maturing loans through 2028.
Realloans offers interest-only and asset-based, no income verification commercial property loans with up to 30-year terms for most property types.
The Importance of Income-Producing Assets
Nearly 60% of Americans say they live paycheck to paycheck, according to surveys published by LendingClub.
Wealth distribution has become increasingly concentrated in the hands of fewer people since 1990. Overall, the top 10% of wealthiest Americans own more than the bottom 90% combined, with more than $95 trillion in wealth for the top 10%.
U.S. homeowners are 43 times wealthier than tenants. The average homeowner at retirement age has 83% of their net worth tied up in their main home.
The average age of a first-time homebuyer in the U.S. is 38, while it’s 49 here in California due to much higher prices, as per the National Association of Realtors.
The average U.S. home seller age in 2024 was 63. For many of these sellers, they first took a risky chance and bought their home more than 30 years earlier in their early 30s or late 20s.
The average homeowner at retirement age has 83% of their net worth tied up in their main home. Unless you’re in the Top 1%, the odds are quite high that the bulk of your wealth is concentrated in real estate if you’re fortunate enough to own now.
The average Social Security benefit here in 2025 is $1,976/mo. ($23,712/yr.), per Kiplinger.
The fastest growing demographic percentage increase in the workforce in 2024 was over the age of 75 because Social Security and pensions aren’t high enough, according to Pew Research.
Either you work hard for your money or you let your money or investments work hard for you when you’re awake or asleep. Yes, investing can be scary, but so can the thought of not having enough monthly income to cover your debts.
To be able to actually retire these days, many people need some form of income-producing assets creating monthly cash flow for them. It’s much riskier to do nothing today than to start investing as soon as possible.
The best time to start investing is now. Your future self and your family will later thank you.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
https://www.realestateinvestormagazines.com/wp-content/uploads/2025/09/surge.jpg4001000dulcehttp://www.realestateinvestormagazines.com/wp-content/uploads/2013/04/logo.pngdulce2025-09-06 05:29:442025-09-06 05:31:13Asset Prices Surge Amidst Dollar Devaluation Trends
Almost every housing boom and bust cycle over the past 100 years was directly related to access to third-party money sources. When rates are low and the loan approval process is more flexible, home values tend to be high. Conversely, higher rates and tighter loan approval processes usually make home prices stagnant or declining.
The average 30-year fixed rate over the past 50 years was about 7.7%, which is actually much higher than today’s 30-year fixed rate average that is about 1% lower as of the first week in August 2025.
The peak high 30-year fixed rate over the past 50 years reached 18.63% in October 1981, while the low rate average fell to 2.65% in January 2021.
On August 7, 2025, the 30-year fixed rate fell to a 6.63% rate average, as per Freddie Mac and the NAR. This was the lowest 30-year fixed rate average in about 10 months dating back to October 2024.
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The Fed’s Next Move
The next three scheduled two-day Federal Open Market Committee meetings held by the Federal Reserve in 2025, where interest rate directions will be discussed, will be on these dates: ● September 16-17 ● October 28-29 ● December 9-10
The FedWatch Tool, which is managed by the Chicago Mercantile Exchange (CME), now forecasts a 94.4% chance of a rate cut at the next Federal Reserve meeting to be held on September 16 and 17. This is partly due to a combination of weakening and revised past jobs reports, rising consumer debts and delinquencies, and increasing risks of future inflation trends.
On August 1, 2025, voting members like Federal Reserve Governor Lisa Cook shared that the recently revised jobs report from the Bureau of Labor Statistics (BLS) was a bit “concerning” to several Fed members. The BLS had provided a downward revision of its May and June payroll figures by a combined 258,000 jobs, which was the largest jobs reporting correction since 1968.
Back at the previous Fed meeting in July 2025, the Federal Open Market Committee (FOMC) decided to keep interest rates unchanged and within the 4.25% to 4.5% rate range. By early August 2025, the future near term probability of a rate cut skyrocketed to a 94.4% chance of at least a 0.25% rate cut and only a 5.6% chance of no rate cut at the next September meeting.
Some financial analysts believe that the Fed may be inspired to start cutting rates as much as 0.5% at a time and/or will continue cutting rates at the final three scheduled Fed meetings here in 2025 if the U.S. economy is seen as weakening more so than strengthening. This is partly due to the fact that the Fed is usually just as concerned about unemployment trends as they are about core inflation numbers.
Rising Home Inventory Numbers
Has there ever been a time when there is so much contradictory published data about real estate trends that can be viewed as both positive and negative at the exact same time as most metropolitan regions hit all-time record price highs?
There were 4,000,000 homes listed for sale as active inventory in 2007. Here in 2025, there are approximately 1,500,000 homes listed for sale. However, there are also 45 million more people across the nation today.
The vacant and distressed shadow inventory supply of U.S. homes absolutely dwarfs the national home listing inventory supply by a significant multitude. A recent study conducted by the Federal Reserve Bank of New York found that the average redefault rate over 12 months after a previous loan modification approval for a subprime mortgage-like mortgage was 56%.
Many homeowners have been able to keep modifying their delinquent mortgages for more than four years without making one payment. At some point, lenders and loan servicing companies will start filing foreclosure on a larger scale and the national home listing inventory supply will start to rapidly rise.
There were 500,000+ more U.S. home sellers than buyers in June 2025. How will these number trends look later this fall and winter?
The Declining Dollar
The US dollar has lost more than 28% of its purchasing power since 2020, as per the Truflation US Aggregate Inflation Index. Sadly, the purchasing power is declining at a faster pace now by falling somewhere between 10% and 11% through just the first seven months of 2025.
The M1 money supply (cash or cash-like instruments) went from $4 trillion in January 2020 to $20 trillion just 22 months later in October 2021. The more money in circulation, the less the purchasing power.
Upwards of nearly 1/3 of your savings has been severely damaged in half a decade between 2020 and 2025. Inflation is also akin to a hidden form of taxation.
The imploding value of the dollar over the past 50 years is a major factor why home prices have skyrocketed well above the annual published inflation rates. Historically, homes have been an exceptional hedge against inflation. Fifty years ago, $1 had the same purchasing power as 7 cents today here in 2025.
Real estate, however, is usually an exceptional hedge against inflation as homes have historically increased in value at least more than double the published inflation rates over the past 50 years.
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Interest Rate & Home Value Directions
Home values and interest rate trends are usually inverse to one another. When rates are low, home price directions are likely to rise. Conversely, rising rates can cause home values to fall. The 30-year fixed mortgage rates are tied directly to the 10-year Treasury yield, which is inverse to price and demand, while the Federal Funds Effective Rate impacts short-term consumer loans more. Many times, these different rates rise and fall together.
Even if the Fed pivots and starts aggressively slashing rates, a housing bottom tends to take somewhere between 24 and 48 months on average following a Federal Reserve rate cutting campaign such as the rate cuts after the 17 separate rate hikes between June 2004 and June 2006. From 2008 to 2015 when rates were near zero, it took upwards of seven years for some housing regions to rebound following the final June 2006 rate cut.
Record Home Equity and Locked-In Owners
U.S homeowners are now sitting on almost $35 trillion in net equity with or without existing mortgages in place. For homeowners who are locked in with sub-5% 30-year fixed mortgage rates, they may be hesitant to sell and lose these 5%, 4%, or 3% fixed rates.
For others (California homeowners, especially) who have built up equity far greater than the primary home sale capital gain exemption amounts ($250,000 for individuals and up to $500,000 for married couples filing jointly), they may be reluctant to sell and pay capital gains taxes on amounts over and above these maximum capital gains tax exclusion numbers.
In past housing downturns, the key factors that caused the price drops included:
* Rising home listing inventory (the distressed “shadow inventory” continues to be artificially suppressed and slowly released)
* Increasing unemployment numbers (the true unemployment rates are much higher than the published government data as I’ve said for decades)
* Rising foreclosures that later became neighboring home sales comps which, in turn, may drive down the non-distressed home values as well.
* Increasing “upside-down” or “underwater” homes where the mortgage debt exceeds the current market value. In California, it’s easier to walk away from a purchase money mortgage (the rules change, however, once you refinance your original California purchase loan) because the lender cannot pursue you for any financial losses and obtain a deficiency judgment like in other states like Texas.
* Unaffordable mortgage payments
What about long-term rate directions?
Please keep your eyes squarely focused on the next few Fed meeting decisions as well as the direction of the 10-year Treasury yield, which is a direct catalyst for the 30-year fixed mortgage rate directions.
Even if the Fed takes short term rates down to near zero again like in past years, the 10-year Treasury yield may still increase due to factors such as fewer foreign buyers for our Treasury bonds, rising federal debt, and future credit downgrades by credit rating agencies such as Moody’s, Standard & Poor’s, and Fitch.
The potential for any future credit rating downgrades for our federal debt may, in turn, drive bond prices downward and 10-year Treasury yields and corresponding 30-year fixed mortgage rates higher.
Money is needed to get you into and out of your real estate properties whether it originates from a mortgage broker, bank, equity fund, or your savings account. The more affordable the access to cash, the more likely that home values may rise rather than fall in either the short or long term.
We shall see what happens with future rate and home value trends. While there are no guarantees for real estate and life in general, the only constant in life, and also for rates, is change.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
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For many American homeowners, the bulk of their net worth is created by the long-term equity creation in their primary home. Later in life, the home wealth may be used as a way to pay for medical expenses for the homeowners or other family members whether or not they have sufficient amounts of medical or life insurance benefits.
Here in 2025, the big three monthly expenses for a high percentage of Americans are medical, insurance, and housing costs for both owners and renters. Today, these big three costs are all at or near all-time record highs. As a result, this combination of so many unaffordable expenses are financially draining for more people and it’s incredibly challenging to set aside cash reserves.
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The #1 cause of financial insolvency and bankruptcy filings here in the U.S. is directly related to unpaid medical bills. Some past surveys found that upwards of 80% of those Americans who were forced to file for bankruptcy due primarily to medical bills did, in fact, have medical insurance coverage in place at the time.
Sadly, the medical insurance coverage wasn’t high enough to cover the medical bills and/or the cash payment deductibles required to pay these bills weren’t achievable for many cash-strapped medical patients or their families.
Debt, Divorce, and Home Listings
The #2 cause of financial insolvency for Americans is due to divorce which, in turn, is most likely associated with financial stress between the once loving married couple. Oftentimes, the unpaid medical bills for one or both spouses were the major financial strain that led to both significant money pressures and the subsequent divorce, tragically.
Here are marriage, family, and divorce trends that I’ve compiled and shared over the years in articles and books as it partly relates to the most important family word that’s located right in the middle of the “single-family home” description:
Marriage and Divorce Trends
* The overall divorce rate in Orange County, CA is 72%; it’s 60% in California; and 50%+ nationwide. * 41% of first marriages end in divorce, 60% of second marriages end in divorce, and 73% of third marriages end in divorce. * The average length of a marriage in the U.S. that ends in divorce is 8 years from start to finish. * Couples who spent more than $20,000 on their wedding were 3.5 times more likely to divorce than those who spent between $5,000 and $10,000, as per Emory University. * Unmarried parents who live together are more likely to break up than married parents, per the Brookings Institute. * Since 1990, divorce rates for people over 50 have doubled; they’ve tripled for people over 65. * The U.S. now has the highest percentage of single-person households in the world and lowest marriage rates ever. * U.S. fertility rates are the lowest ever, as fewer babies are born. * USA is #1 for highest teen pregnancy rate in the industrialized world. * Approximately 50% of children are born to unmarried women under 30 here in the USA.
These ongoing declining marriage and family trends will likely negatively impact future single-family home trends at some point in the future.
The divorce then inspires the homeowners to sell their family home to pay off both the unpaid medical bills and the rising legal costs associated with the ongoing divorce and unpaid collections related to the medical bills.
There are more than 1.2 million spouses involved in a divorce nationwide each year, as per sources like the CDC. Roughly 61% of all divorcees involved in a divorce end up listing their primary family home which, in turn, works out to more than 732,000 home listings per year that are as a result of divorce, per sources like Smart Agents.
Because there’s an epidemic of skyrocketing unpaid medical bills, financial insolvency, and subsequent divorces, there’s an increasing number of real estate agents who focus on divorce listings for homeowners who really have very few options but to sell their beloved family homes to pay off their expenses.
Medical Debt, Insufficient Insurance & Bankruptcy
An estimated 100 million Americans owe more than $220 billion dollars in medical bills despite the passage of the Affordable Care Act (ACA) back in 2010.
Approximately two-thirds, or a rather devilish 66.6% of Americans, who file Chapter 7 (complete liquidation) or Chapter 13 (bankruptcy payment plan over a few years) bankruptcy do so primarily due to unpaid medical bills, according to sources like SmartFinancial. As per this same medical bill and bankruptcy analysis, it’s equivalent to 550,000 people each year who file for medical bill-related bankruptcy protection even though 80% of these same indebted consumers had health insurance coverage at the time of their bankruptcy filing.
There are many more U.S. consumers who have unpaid medical bills who don’t file for bankruptcy protection than those people who do file for bankruptcy by a factor of more than 30-to-1.
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For example, upwards of 14 million people, which is about 6% of American adults, owe more than $1,000 in unpaid medical bills. Additionally, another three million Americans owe more than $10,000 in medical bills. If true, this works out to 17 million Americans with unpaid medical debt as compared to 550,000 Americans who file for bankruptcy each year due partly to medical debt at a ratio of more than 30-to-1.
These unpaid medical bills can later end up as collection accounts with more aggressive debt collectors who may report the debt on a consumer’s credit report. If so, the declining credit scores for certain consumers can make it very challenging to qualify for various types of consumer loans such as for credit cards, automobile, business, and mortgage loans.
Homeowners who have too much wealth to file for bankruptcy protection from unpaid medical bills do have several ways to pull cash out of their home or investment properties as I’ve shared in past articles such as How to Leverage Real Estate to Reduce Medical Debt.
Is insurance the new “mortgage” payment?
An increasing number of Americans may pay more for medical insurance each month than they do for housing expenses as either a homeowner or tenant. For others, they may pay more each month for homeowners or landlord insurance premiums than they do for mortgage or rent payments, especially in certain high-risk insurance regions like Florida and California.
Past articles from sources like the New York Times have described health care insurance payments as the “new mortgage” for many homeowners who are now struggling to pay their medical bills, insurance, and housing costs in addition to other regular bills like groceries.
* A bill of over $40,000 for the 20 minutes it took for a doctor to stitch a cut. * An ambulance ride of just 200 feet cost $3,421.
Younger married couples may pay more for monthly child care than they do for their monthly housing costs. If so, these rising costs for parents who want one or more children may not be financially practical for them, sadly. This is one major reason why U.S. fertility rates are now at all-time record lows.
In many high-risk flood, storm, or fire regions, the monthly homeowners or landlord insurance premiums might’ve increased somewhere between 25% and up to as high as 1,000% in recent years. As a result, the monthly insurance premiums may be much higher than the mortgage payment as I’ve shared in recent articles such as The Drying Disaster-Relief Insurance Pools.
The Housing and Insurance Umbrella Protection
The greatest form of wealth is good health and happiness. We should all focus, first and foremost, on being as healthy as possible. Otherwise, the outrageously expensive medical bills and rising out-of-pocket deductible cash payment requirements can be financially devastating.
The insurance, real estate, mortgage, and medical sectors are all tied together in many ways with money being the root link between them. We all need sufficient amounts of insurance protection to protect us from any potential known or unknown future risks for both our properties and our bodies.
If someone doesn’t have enough insurance protection in place for medical expenses and/or housing, then he or she might end up penniless and in bankruptcy court.
Again, you’re more likely than not to create the vast majority of your overall net worth from the equity gained in the ownership of your primary home. However, you’re also likely to end up broke by future unpaid medical bills that may or may not be paid 100% by your insurance carrier if you’re fortunate enough to have any medical insurance at the time of the medical billing.
It’s generally very wise to reach out to your most trusted insurance, real estate, and mortgage advisors to assist you with the most creative, affordable, and safest combinations of financial planning that can keep you and your family protected like a sturdy umbrella in an approaching dark and destructive rainstorm.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
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California just reached an all-time record median home price peak of $910,160 in April 2025, as per the California Association of Realtors. This new record state price number was more than $500,000 above the national median home price in the same month.
How much longer will home prices keep rising and home listing inventory numbers remain below historical norms, both here in California and across the nation?
In April 2025, the estimated days on market (DOM) statewide for California was listed as being as low as 31 median days on market by Redfin. The very low days on market listing number is a key factor why California home prices just surpassed all-time record highs.
By comparison, the median number of days a home spent on market in May 2025 as a listing in the U.S. reached 51 days, according to the Federal Reserve Bank of St. Louis. The median list price for U.S. home listings was $431,250 for May.
During the depths of the previous housing meltdown in California back in 2010, the median days on market was listed as 57.5 days as per the California Association of Realtors. However, the average days on market statewide for 2010 listings was listed by other sources as much longer at nearly 140 days, partly since it took several years for some listings to sell.
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California’s active home listing supply is lower today than back in 2019. Ten states are now back above pre-pandemic 2019 active housing inventory levels:
Arizona Colorado Florida Idaho Hawaii Oregon Tennessee Texas Utah Washington
Source: ResiClub
The main exception to the low days on market rule for California home listing inventory is found in some higher price luxury home regions. For example: “San Diego County homes costing $6 million and up are taking an average 633 days to sell,” as per the San Diego Union Tribune.
All-Time Record High Listing Values
The U.S. housing market now has 500,000 more home sellers than homebuyers. What about the huge supply of distressed homes that have been in forbearance as far back as 2020? When will a larger percentage of this “shadow inventory” be added to the national home listing inventory?
After adding up another few trillion in commercial real estate listings, the combined listing values for all real estate property types do really reach all-time record highs.
There are now almost $700 billion dollars’ worth of home listings for sale in the United States, which is a new record since Redfin began tracking this data in 2012. This same study found that the total combined value of homes for sale is up +20.3% from last year.
The total number of growing listing inventory for homes for sale nationwide also had a year-over-year increase of +16.7% in April 2025, as per Redfin and NBC. However, home-sale prices still rose +1.4% over the period of 12 months by April 2025.
Please note that since home values in most metropolitan regions across the nation are likely to be at or near all-time record highs, this all-time combined record home listing number is not necessarily all negative. It just partly means that home values are much higher in 2025 than in years past.
Stale Listings and Canceled Purchase Contracts
The total “stale inventory” number (or 60+ days on the market) for U.S. home listings reached 44% of all home listings in April 2025. This was +42.1% higher than the previous year and the highest April percentage since 2020 following the pandemic declaration a few weeks prior.
There were approximately 56,000 home-purchase contracts that were canceled in April 2025 across the nation, which equals 14.3% (or 1-in-7 purchase deals) of all homes under contract for that same month.
Florida had five of the 10 metropolitan regions in the nation with the highest purchase contract cancellation rates in April 2025, as per Redfin and Newsweek.
The Top 10 Purchase Cancellation Rate Regions
1. Atlanta, GA: 20%+
2. Orlando, FL: 19.4%
3. Tampa, FL: 19.1%
4. Riverside, CA: 19.1%
5. Miami, FL: 18.9%
6. Ft. Lauderdale, FL: 18.9%
7. Ft. Worth, TX: 18.7%
8. Las Vegas, NV: 18.6%
9. Jacksonville, FL: 18.4%
10. San Antonio, TX: 18.2%
All four of the states (Florida, Georgia, California, and Texas) included in this Top 10 cancellation rate percentage list have challenging homeowners insurance issues related to both availability and rising costs.
Other factors for home purchase cancellations include rising mortgage costs and loan denial rates. A larger number of mortgage applicants these days are having to switch from conventional mortgages to non-QM or private money to qualify to purchase homes because their credit scores may be dropping and/or their debt-to-income (DTI) ratios are rising too high and exceeding 40% or 50% DTI ratios.
Real Inflation is Much Higher
Why does “real world” inflation seem significantly higher than published government inflation rates? Are your asset investments booming and/or is the purchasing power of your dollar busting?
How often do you go to a fast food restaurant and spend more than $20 per person? Can you fill up less than half of your grocery cart for less than $200 where you shop?
Between 2000 and 2025, let’s take a closer look at some of my price increase percentage estimates for homes, education, and automobiles:
* Home prices: Up 3 to 5 times in many markets. * College tuition: Up 2 to 4 times at many schools. * Car prices: Up 2 to 3 times for numerous car models.
When I see the federal government’s published annual inflation data that’s closer to 2% to 4%, I wonder where these economists shop. Am I shopping at the wrong stores and paying prices that seem to be more than 10% higher than last year or is the published government data not all that accurate?
Record Consumer and Government Debt
More than 12% of outstanding credit card balances are 90 days delinquent, which is the highest percentage since 2011. Delinquent student loans (in red) are rapidly rising to almost 8% as well as of the first quarter of 2025.
The Federal Reserve conducted a survey recently and asked a large pool of U.S. consumers if they had $2,000 in cash savings to cover an unexpected emergency expense using only their savings and not any credit cards.
The Fed’s survey results were as follows:
52% of U.S. consumer respondents could not cover a $2,000 emergency expense using only their cash savings.
31% of surveyed consumers could not cover a $500 cash expense.
A record 37% of respondents described inflation as their #1 primary financial challenge.
In the first quarter of 2025, the federal debt was increasing in size by about $1 trillion every 100 days.The U.S. dollar has now lost almost 9% of its value this year, according to Barchart.
In 2024, world governments issued more debt than ever before. For example, sovereign bond issuance across the planet reached a record $18 trillion dollars in 2024, as per the Kobeissi Letter. Approximately $16 trillion was issued by developed countries like the United States, and $2 trillion by emerging market economies.
The total world government bond issuance has nearly doubled since 2019. Over the past five years, governments have issued more debt worldwide than in the eight years before the 2020 pandemic declaration.
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Wealth Creation, Leverage, and Home Appreciation
U.S. homeowners have an average net worth of $430,000 (it’s significantly higher or more than double in California for many), while renters average just $10,000.
The power of leverage for home purchases can increase the annual cash-on-cash return from 5% to 50%+, depending on the down payment invested.
It’s not just your down payment or cash equity that is appreciating each year like with stocks. Rather, it’s the total overall home value that may be leveraged anywhere between 80% and 100% LTV (loan-to-value) with a purchase mortgage.
The average retired homeowner has more than 80% of their entire net worth tied up in the equity in their primary home where they live.
If mortgage rates suddenly fall soon, will buyer demand rapidly increase to help offset the rising supply numbers? Conversely, will rising rates scare off many future buyers who may be struggling to qualify for these high home prices?
It’s more likely than not that both consumer and government debt will continue to increase in the near future. If so, our dollar may continue to weaken and inflation will keep steadily making prices less affordable for goods and services.
If you rent, inflation is not so fun as your annual rents paid may consistently increase. However, homeowners and landlords usually enjoy the power of leverage and appreciation as their overall net worth continues to grow over time.
Two exceptional hedges against inflation have proven to be real estate and gold. The main difference between these two investment choices is that you can live in homes where you can store your gold bars too.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
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Often constrained by banks’ rigid underwriting and lengthy approval process, real estate borrowers find a liberating escape in alternative lending sources (private/hard money loans). This subset of the lending business, designed for non-bankable loan transactions, not only provides financial solutions but also empowers borrowers, showing them that there is an alternative and they have the power to choose it.
Private money is often more in demand when economic constrictions, a recession, or regulatory tightening result in an exodus of institutional lenders from the market. When interest rates are super low, mortgage brokers primarily focus on the refinance market’s easy picking. When interest rates rise and their business disappears, many turn to private money as a business strategy to generate fee income. Other mortgage brokers specifically focus on private/hard money lending as a career focus.
The originating mortgage broker representing borrowers has a fiduciary obligation to their client.
The mortgage broker representing private-party investors acts as a fiduciary on behalf of their clients. This bifurcated role ensures that both parties (borrowers and trust deed investors) are professionally represented. The mortgage brokers and agents must be well-versed in agency laws, ensuring everyone is fully informed and knowledgeable.
The trust deed investment broker’s fiduciary duty is to the private investor parties. This includes conducting due diligence on the borrower, negotiating terms, facilitating the loan process, disclosing all material facts known, and providing a valuable service to both the borrower and the lender.
The broker’s expertise and network of private lenders can often give borrowers more favorable terms and a faster approval process than traditional banks. This intermediary role ensures a smooth and fair transaction for all parties involved, as the broker acts as a trusted advisor, negotiator, regulatory requirements expert, information gatherer, disclosure expert, and facilitator throughout the lending process.
Sometimes, the broker will act as a dual agent for both parties. This arrangement, however, assumes that all parties are professional and well-versed in agency laws, ensuring everyone is fully informed and knowledgeable.
In a real estate loan, the lender is the beneficiary and the individual or entity whose investment interest is safeguarded. Private-party investors are the lender/beneficiaries whose names appear on the borrower’s promissory note (a written promise to repay a specified amount under specific terms), deed of trust (a legal document that gives the lender a security interest in the property), and title insurance policy (a policy that protects the lender’s interest in the property). The promise to pay in the promissory note and the security instrument, called a deed of trust, are contracts between the borrower and private-party lenders, not the broker. After the loan closing, the investors or their loan servicing agents retain the executed documents as evidence of the investment.
• Borrowers:
Real estate borrowers always choose the lowest interest rates and most favorable terms for their circumstances. However, banks, institutional lenders, and government-sponsored entity lenders (GSEs) with the lowest interest rates and best terms also have a much more rigid underwriting and approval process that limits, delays, or possibly kills many loan approvals. Institutional lenders must also comply with strict state and federal regulations, which can further complicate the lending process.
Interested borrowers who expect tremendously low rates with banks must be ready for the maze of paperwork and a drawn-out underwriting and processing period. In many cases, the frustration will be overwhelming and extend beyond the period allowed to close the transaction.
Many borrowers find that alternative lending, particularly private money loans, is a better or the only option. These loans offer a faster approval process, more flexible terms, and a higher likelihood of approval, making them a more attractive option for borrowers looking for a quick and efficient lending process. A two-week turnaround from start to closing the loan transaction is standard, and sometimes faster, providing borrowers with the speed and flexibility they need in the competitive real estate market.
• Lenders, trust deed, or mortgage. Investors are private parties:
Private-party Investors who invest in real estate loans as lenders willingly invest in purchasing and owning a promissory note, trust deed, or mortgage. The ownership of a promissory note and deed of trust is considered personal rather than real property, providing a sense of security to the investors. The promissory note, deed of trust, or mortgage is also considered a security instrument because it represents evidence of indebtedness.
The ownership of a promissory note and deed of trust is a security under the federal Securities Act of 1933 because the documentation represents “evidence of indebtedness.”
Security is defined as:
• Property given or pledged to guarantee the performance of an obligation. • An instrument that functions as proof of a security interest in a public or private body.
If desired, one may review the legal definition of a security under Section 2(a)(1) of the Securities Act of 1933 online.
• Licensing:
Most states require state and federal lender licenses for single-family consumer-purpose lending on 1-to-4 units, both owner-occupied and non-owner-occupied. The key is 1-to-4, where the loan proceeds are used primarily for consumer purposes rather than business purposes.
Many states do not require a license for 1-to-4-unit business purpose loans. A few states require a permit for all lending activity. Many states do not require approval to make loans on five or more residential income units, commercial, industrial, and land loans. However, it’s important to note that licensing fees can be significant and vary from state to state. Understanding these regulations and their implications is crucial for borrowers and investors to make informed decisions and feel fully informed and knowledgeable.
For all properties other than single-family 1-to-4 units, licensing and regulations to procure loans with the expectation of compensation differ in each state of the union. Also, licensing and oversight depend on the state’s political power structure, type of real estate, the purpose of loan proceeds, the use of the property, the location, property quality and amenities, and conformity to zoning and building regulations. Understanding these regulations is crucial to feeling fully informed and knowledgeable.
Generally, state and federal real estate laws govern the entire property lending industry, including contract, agency, securities, and, in some cases, Department of Labor laws.
• Consumer vs. Business Purpose Lending:
A consumer-purpose loan is one in which the proceeds are primarily used for personal, family, and household purposes. In simpler terms, it’s a loan for things like buying a home, paying for education, or covering medical expenses.
Business-purpose real estate loans can be used for various purposes, such as purchasing a property to rent out, using the property as collateral for a business loan, or investing in a property to renovate and sell for a profit.
Business purpose loans are loans on real property where the loan proceeds are used primarily for business purposes. “Primarily used for business” is essential. That means that a portion of the loan proceeds, more than 50%, must be used for business purposes. A percentage of the loan proceeds (less than 50%) may be used for consumer purposes.
Understanding the distinction between business and consumer-purpose lending is crucial. It empowers borrowers, allowing them to navigate the regulations and requirements set by federal and state governments and make informed decisions about their loans. This knowledge is a powerful tool for borrowers, giving them the confidence to make the right choices for their financial needs and making them feel more informed and empowered.
These additional requirements have extreme punitive consequences for any mistakes or deviations by the lender(s) and the procuring mortgage broker(s). These onerous changes, which can include hefty fines and legal action, have caused most private money lenders to exit consumer-purpose lending altogether, as the risks and potential liabilities outweigh the benefits. It’s crucial for all parties involved in private money lending to fully understand and adhere to these regulations to avoid these severe consequences.
While some borrowers search for a loan, they discover they can only find a lender who makes business-purpose loans. They often construct a narrative to make their loan a “business purpose.” Some legitimate examples include using a loan to finance a rental property or a property used for business operations. However, some narratives are not legitimate, such as claiming a personal residence as a business property. Borrowers who claim the need for a business-purpose loan must provide substantial documentation. Borrower documentation evidencing the business purpose is essential.
• Deed of Trust Investments are Securities:
Federal securities exemptions from registration are available to comply with federal securities laws. Federal exemptions for privately funded loan transactions and loan-pooled investors are in Regulation D, Regulation A, and Rules 147 and 147A. Definitions and exemptions are on the www.sec.gov website.
The California Corporations Commissioner’s Rules cover offering and selling specific securities, such as trust deed investments. Several codes allow for exemption from the qualification requirement. These include the private offering exemption 25102, specifically safe harbor rules contained in 25102(e) (f) (n), 25113, 25100(p), and 25102.5.
The fractional note exemption 25102.5 covers multiple investors who may invest in a transaction and allows up to 10 investors (beneficiaries). Under the 25102.5 exemption, ten private investors can co-invest in a single trust deed as tenants-in-common. The fractional note exemption rules are disclosed in the Business & Professions Code 10237-10238, 10232.3, 10232.5, Civil Code 2941.9, and many others. Interested parties should consult a real estate or securities lawyer specialist.
• Regulatory oversight in California for the private money lending industry:
California has specific lending transactional regulations affecting private money loans, including a required license by the state for all individuals who make or arrange loan transactions with the expectation of compensation.
Additional rules apply for trust accounting, agency relationships, and both borrower and investor-required disclosures by the procuring mortgage broker. Many states outside California have fewer regulations, and some have none. This is pointed out to remind people that making and arranging privately funded real estate loans is highly regulated.
In almost all cases, the private-party lending industry has different underwriting guidelines and a less rigorous process than institutional or bank lenders. Standards for analyzing the borrower, credit, income, and collateral property value are more flexible. Whether considering government regulations, stricter bank underwriting, borrowers’ particular circumstances, or COVID-19-related business and personal life disruptions, the private money industry provides a substantially more flexible option and is currently in high demand.
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• How do Private Parties invest in trust deeds?
Private-party investors may co-invest fractionally with a small group as tenants in common or in a pooled entity with other investors. Private-party investors include individuals, family trusts, corporations, IRAs, and pension plans. Most investors invest with multiple ownership methods (holding titles), such as a family trust for a portion and an IRA custodian for a portion. I have noticed numerous titles for couples who establish a family trust for themselves and their descendants and invest in each. Multiple family members living in the same home are considered one investor.
The percentage of the entire trust deed represents the investor’s beneficial interest portion of ownership. For example, if the trust deed investment is for $1,000,000 and the investor purchased $200,000, they would own a 20% undivided interest as tenants-in-common. A $100,000 investor would hold a 10% undivided interest as tenants-in-common with other investors.
• List of Good Reasons For Borrowers To Choose Privately Funded Loans Over Bank Loans:
Here is a partial list of situations where private loan transactions will benefit borrowers.
• Fast loan approval with possible 2-to-4-day funding for bank declines and fallouts: The bank may already have done significant underwriting, including opening escrow and title, obtaining an independent appraisal, and completing the application and financials. Some private lenders can use the banks’ information to fund faster, particularly when they have a mortgage pool or immediate capital available to invest.
• Debt consolidations for consumers, businesses, or a combination of both: In most cases, the loan may be used for debt consolidation, lowering the borrower’s monthly payment obligations. The funding should give the borrower breathing room to improve their credit and obtain a long-term bank loan. Also, when the loan is a second lien, the average interest rate between the first and second should be calculated to show a net effective rate.
• Marginal to poor creditworthiness, where a borrower is not bankable, and approval of a loan request is primarily property equity-driven.
• Special purpose-unique properties– Churches, synagogues, restaurants, bars, automotive repair shops, body repair shops, gas stations, and other single-purpose or limited properties.
• Limited document loans, where the requirements are a loan application, credit report, and 3 to 6 months of bank statements. The objective is to prove the ability to pay the outstanding loan payments and other debt obligations.
• Post-COVID fresh start loan. A borrower may need to catch up and give themselves breathing room for accrued and differing payments, which is referred to as a “fresh start loan.”
• Payoff loans coming due or past due: Refinance and pay off existing first, second, and third lien position loans that may be due. Sometimes, refinancing the second and providing cash out is the appropriate answer to the loan request. Loans are available for both owner and non-owner-occupied residential and commercial properties.
• Cash-out for any reason refinances are based upon the protective equity of existing real estate. Cash-out loan proceeds can be used for most business and consumer purposes. The Federal Government and some states, such as California, require a special license to engage in consumer-purpose lending.
• Junior lien or second-position loans on both owner and non-owner-occupied dwellings for business purposes
• Construction completion, rebuilding, or upgrading properties in poor or marginal condition: The loan is usually necessary because the collateral property or the borrower needs to meet bank underwriting guidelines in its distressed or partially completed state. Loan approval by the lender will consider the as-is-value and the as-completed-value.
• A borrower may own and operate a cash-based small business with limited financial strength. A lender will require 3 to 6 months of personal and business bank statements. The borrower is still required to prove they can make the required payments.
• Leveraged existing real estate equity developed over time to borrow additional funds, purchase other investment properties, or invest in a business enterprise.
• Purchase a property with a cash down payment, sweat equity, and seller’s agreement to carry back a subordinated junior lien. The property seller would have the borrower sign a promissory note and a deed of trust with a set interest rate, payment schedule, and due date. The subordinated second is recorded concurrently with the first trust deed, but with a recording number after the first.
• An inherited property where family members and successor trustees who are beneficiaries need funds to distribute to the beneficiaries, pay the estate’s legal costs, or fix up the property for a future rental. Another option is to fix it and sell it on the open market.
• Loan on unimproved raw land. Lending on raw land can be a complex process. Is the land part of an existing subdivision referred to as an infill lot, a commercially or industrially zoned parcel within a subdivision, or a larger parcel held for future development? The borrower may need to use the property as collateral to raise funds for future entitlements, including engineering, architecture, various reports, and fees to develop a fully entitled parcel ready to be built. The borrower would pay the loan off as part of the construction loan.
• Retail strip and community centers, industrial or other properties requiring upgrades or repositioning: Many centers are distressed due to the COVID shutdown vacancies, where tenants could not pay rent.
• Fix-and-flip loans allow high-frequency purchasers to purchase distressed properties, rehabilitate them with the expectation of resale, and turn a quick profit. Borrowers need both experience and some of their capital at risk.
• Litigation settlements: A loan to buy out a business partner, pay off a pesky family member, an ex-spouse, a judgment lien, or a partition suit.
• Pay off civil judgments and liens, including arrearages in property taxes, association dues, and federal and state tax liens.
• Sale of existing promissory notes and deeds of trust to third-party investors: The sale is usually at a discount, whether the promissory note is performing or non-performing. A deal will free up cash.
• Hypothecation or pledge of a promissory note and deed of trust: A borrower who owns a promissory note and deed will assign them to a third-party investor as collateral for a new loan.
• Cross-collateralization of more than one property:
• Cross-collateralize multiple properties that are used to meet lender equity requirements. The borrower would sign one promissory note but have recorded liens that encumber two or more properties.
• Small mobile homes or trailer parks: properties that don’t meet the underwriting standards of institutional lenders.
• Airbnb-type rental income properties: Financials and history are necessary to prove the ability to make payments.
• New ground-up construction or construction completion for a partially completed project: Most requests result from borrowers needing to fund more money to complete the task when their capital or existing construction loan proceeds are depleted.
• Collateral combines real and personal property with mini markets, such as a motel, restaurant, carwash, or gas station. The valuation and the decision to make the loan must be based on the real property only. A trust deed is recorded to encumber the real property, and a UCC-1 financing statement will be filed with the Secretary of State to encumber the personal property.
• A long-term lease on commercial property has or is expected to expire soon. The lease expiration could cause a vacancy and a disruption in rental income. If the master tenant vacates the property, this will disrupt other smaller in-line tenants because the master tenant is responsible for the primary draw of foot traffic to the center. Banks will usually not make this loan. This loan is generally a bridge loan until the owner obtains a long-term lease with a credit-worthy tenant and manages the center back into stabilization.
• Credit approval is subject to highly sophisticated lease analyses, with multiple tenants having different lease terms, including length, lease rate, and lease provisions. Some tenants are on long-term leases, and some are on month-to-month tenancies. Lease documents may include go-dark provisions for the anchor tenant or provide for lease cancellation in the event of excess vacancy or loss of an anchor tenant.
• Some properties require mutual property access easements for ingress/egress or complex usage rights, such as reciprocal parking agreements. Many properties, such as churches and retail shopping centers, sign contracts with multiple property owners to use the entry/exit of the property or the parking in specific ways or at certain times.
• Foreign nationals with and without a Social Security number need loans. The borrower must have a US bank account(s). The borrower must have a process agent service arranged during loan processing.
• “Notice of a substandard condition” or “notice of property noncompliance” is recorded on public records by a building department notifying the public that the property is out of conformance or in disrepair for building and zoning codes. The bridge loan funded by private lenders will provide funds to make substantial improvements and modifications to bring the property up to acceptable building, safety, and zoning standards. Institutional lenders will not make these loans.
• Non-conforming property not complying with current zoning and building standards. As a result, there are strict limitations on repairing or replacing the structures in destructive acts such as fire, flood, windstorm, vandalism, or earthquake. The property may not be rebuilt to an acceptable level after the harmful event occurs.
• Earthquake seismic retrofit. Many older properties must be upgraded with engineered reinforced steel frames bolted into the existing structure and walls shored up with steel support fasteners to withstand earthquakes.
• Tenant improvements. Commercial building owners must provide funds to install interior or exterior improvements to satisfy the owners’ and prospective tenants’ leasehold improvements.
• Cannabis-related properties, manufacturing, and retail facilities: Some states have legalized lending in cannabis-related operations, and others have not.
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When borrowers are unsuccessful at closing their loans or are declined for bank loans, they will discover alternative funding sources that provide much greater flexibility in the underwriting, approval, and speed of funding. Interested parties should consult a highly qualified lending specialist to help.
Private-party Investors who desire to invest in trust deeds with their available capital understand that they are securing their investment by accepting a signed promissory note from a borrower and a signed and notarized recorded deed of trust on the security property. Investors’ names are affixed on a recorded trust deed as beneficiaries.
Trust deed investments usually provide for receiving monthly interest payments from the borrower and distributing them to the investors. Investor distributions are generally a tiny fraction less due to being charged a servicing fee. The annualized yields are comparatively reasonable.
Interested parties should seek out loan broker professionals who understand required regulatory compliance and correct documentation. Lastly, interested parties should seek someone with an experienced track record as their agent and source of trust deed investments.
https://www.realestateinvestormagazines.com/wp-content/uploads/2025/05/hard-money-loan.jpg4001000dulcehttp://www.realestateinvestormagazines.com/wp-content/uploads/2013/04/logo.pngdulce2025-05-21 05:20:292025-05-21 05:21:04Private Money/Hard Money Overview A Vital Subset of the Real Estate Lending Industry
Stagflation is the simultaneous appearance in an economy of slow growth, high unemployment, increasing rates, and rising prices.
The last major stagflation era here in the U.S. was during the years between 1973 and 1982. Back then, energy and overall inflation rates rose so quickly that the Federal Reserve kept pushing rates higher in order to cool or “quash” inflation and unemployment rates rose as well.
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For example, the Fed increased their Fed Funds Rate from 6.75% in January 1978 to 10.25% in April 1979 and later to 20% in December 1980. The U.S. Prime Rate for the most creditworthy borrowers also peaked at 21.5% starting in December 1980 and the 30-year fixed mortgage rate hit 18.6% in October 1981.
Generally, energy price swings are a root cause of overall inflation trends up or down. This is partly due to the fact that our transportation supply chain (ships, trucks, airplanes, trains, etc.) is so heavily dependent upon various types of fuel to deliver consumer goods.
The Oil Shock Crash of 1973 was a key factor or catalyst for this stagflation era:
1973 – Oil Shock Crash: This was directly related to the end of Bretton Woods when the “gold standard” was switched to the Petrodollar (“oil for dollars”) system beginning earlier in 1971. Between October 1973 and January 1974, oil prices quadrupled within just a few months due to the ongoing OPEC (Organization of Petroleum and Exporting Countries) Embargo, or the reduction in oil production, increasing U.S. demand, and skyrocketing oil prices for consumers.
Because the mortgage rates offered by banks and mortgage brokers were so high during this stagflation era, an increasing number of sellers were offering their own versions of seller-financing such as carrying brand new 1st mortgages or offering recorded or unrecorded “wraparounds” like contracts for deed (aka “land contracts”) or AITDs (All Inclusive Trust Deeds) with much lower rates and easier qualification guidelines.
At the most recent two-day Federal Open Market Committee meeting held by the Federal Reserve that ended on May 7, 2025, Fed Chairman expressed concerns about increasing stagflation risks due to rising unemployment and price trends and left rates unchanged.
Real Inflation Trends for Food, Work, and Homes
Is the purchasing power of your dollar rapidly declining and/or are your assets rapidly increasing in value on their own due to supply and demand? The answer seems to be a combination of both.
Since 2019, the true rates of inflation seem much higher than the published inflation data shared by the federal government.
Sixteen popular chain restaurants increased their prices by an average of 42% between 2020 and 2025, according to a Finance Buzz study. IHOP’s menu prices were up +82%.
Over the period of 50 years (1973 – 2023), home prices rose by nearly 1,300% as compared with a 610% gain in the CPI (Consumer Price Index).
The inflation-adjusted hourly work wage has jumped by just a measly 1% over the past 50 years (not an annual 1% increase, but a 1% total gain over and above 1973’s wages in 2023 at a 1/50th of 1% increase per year rate).
By comparison, the inflation-adjusted median home price has gained 100% over the past 50 years. As a result, real home prices have increased by more than 100 times (or 100x) the real wage gains.
Between 1950 and 2024, U.S. home prices increased, when adjusted for inflation, at more than double the rate of inflation in all 50 states, from a low of 107% above inflation in Ohio to a high in Alaska that was 675% above inflation.
Sources: CPI, Federal Reserve, ZeroHedge, & Brilliant Maps
Tariffs Raise Prices
A tariff is a euphemism for a “tax payable by you” and the American business owners who first import these foreign goods. Warren Buffett has famously said in the past that “tariffs are an act of war” because nations will keep increasing tariffs on other nations as the trade wars rapidly increase and more of us worldwide are paying higher prices.
The business owner usually has two choices when they pay more for a product or service shipped in from another nation. The first choice is for the U.S. business to “eat” the higher tariffs and absorb the losses directly if it doesn’t force them to operate at a loss and later shut down their business. The second option is to increase the prices for consumers if they can afford to purchase these products.
There’s a very fine line here between raising prices for goods high enough to cover the tariff import costs for the U.S. wholesale business and raising the prices too high where it will drastically reduce the number of buyers who can afford to pay for it.
Long Beach and San Pedro Ports
How will tariffs and subsequent trade wars directly impact ports in Long Beach and San Pedro as well as the overall economy here in California and across the nation? Upwards of 60% of all cargo containers that reach the ports in Long Beach, California originate from China.
The proposed tariffs for consumer goods and services from foreign nations may hit upwards of 180 nations across our planet, so it’s just not an issue with Chinese imports.
Specifically, California imports the most goods from the nation of China. As a result, my home state of California may get hit harder than other states if and when the tariff and trade wars are resolved sooner rather than later.
The Law of Supply and Demand simplified: When there are fewer goods available to purchase and the demand remains steady or even increases, the prices shall rise too.
Consumer spending generally represents upwards of 70% of the annual GDP (Gross Domestic Product), so keep a close eye on this ongoing situation.
Inflationary or Deflationary Economic Cycles
As I wrote almost 10 years ago in my Inflation, Money, and Real Estate article, there are a number of wide-ranging economic cycles that can help asset prices rise or fall.
Inflation has been described as an increase in the general level of prices of a certain product in a specific type of currency. Inflation can be measured by taking a “basket of goods,” and then comparing them at different periods of time while adjusting the changes on an annualized basis. There are many different types of measurements of inflation depending upon the “basket of goods” selected.
General inflation measures the value of a currency within a certain nation’s borders, and refers to the rise in the general level of prices. Currency devaluation measures the value of currency fluctuations between different nations. Some related terms associated with inflation are as follows:
* Deflation is a rise in the purchasing power of money, and a corresponding lowering of prices for goods and services. The Fed doesn’t like this economic period of time, and will probably cut short term rates to try to offset it.
* Disinflation refers to the slowing rate of inflation. The Fed may like this type of economic time period, and may stop raising rates at this point in the economic cycle.
* Reflation is the period of time when inflation begins after a long period of deflation. Depending upon the severity of inflation or deflation, the Fed may pause with the rate hikes or gradually begin rate hikes.
* Hyperinflation is rapid inflation without any tendency toward equilibrium. It is inflation which compounds and produces even more inflation. It is when inflation is much greater than consumers’ demand for goods and services. The Fed, and the rest of America, do not typically like this economic period, so they may enact a series of significant rate hikes to slow down these high inflation levels.
Measurements of Inflation
There are many ways to measure inflation. These inflationary measurement descriptions include the following:
* Consumer Price Index (CPI): The Consumer Price Index is the measure of the average change in prices over time for goods and services purchased by households. The Bureau of Labor Statistics reports CPIs for different types of population groups such as wage earners, clerical workers, business professionals and managers, technical workers, self-employed, short-term workers, unemployed individuals, and retirees.
The CPI is an estimate of inflation as experienced by consumers in their daily living expenses. The CPI may factor in the change in the price for food, clothing, rent, fuel costs, transportation expenses, doctor visits, medicine, insurance, and other lifestyle basics which we need in our daily world.
* Producer Price Index (PPI): The Producer Price Index measures the price of goods and services at the wholesale level. There are three types of categories for calculating the PPI. These categories include crude materials, intermediate materials, and finished goods. One of the most important categories for calculating inflation rates is the “finished goods” category. Finished goods are the prices ready for sale to the end user – the consumer. Product prices at the crude or intermediate stages typically may be an early indication of future inflationary or deflationary pressures.
The financial markets tend to focus on the fluctuations of prices for all category types. Food and energy costs are usually excluded as they tend to change quicker than any other goods or services represented within the “core rate.” So, the true annual inflation rates are usually much higher than the reported rates.
* Import and Export Prices: The International Price Program measures the changes in the prices of imports and exports (excluding military goods) between America and the rest of the world. Please focus on this economic data as it relates to the tariff and trade war stories.
* Consumer Spending: It measures the spending habits of American consumers. These spending habits include data on daily expenditures, income, and consumers’ many wide-ranging preferences for certain types of goods or services.
Cash is King
Unfortunately, a high percentage of Americans today live off of credit cards and Buy Now, Pay Later (BNPL) type of debt options. Most people also purchase consumer goods with credit cards much more often than with physical cash.
There have been several prominent telephone surveys with thousands of U.S. consumers who were asked anonymously if they could come up with either $400 or $500 in actual physical cash for an unexpected emergency like a medical bill. Sadly, upwards of 60% of the surveyed American consumers in some of these polls said “No” to their ability to find this cash.
A recent study by SmartAsset included an analysis of median bank deposit data for households by state from the Bureau of Labor Statistics found that households in Hawaii had the highest median bank balance of $43,600. In contrast, households in Mississippi held just $2,000 in the bank.
Whether our economy booms, busts, or remains fairly steady this year, it’s still quite likely that the purchasing power of our dollar will continue to fall like it has since 1913. If so, keeping the bulk of assets in cash under your mattress may not be the wisest choice besides having a “security blanket” by your side in case of an emergency.
The potential combination of rising unemployment, inflation, and rates (aka “stagflation”) is usually not a positive short-term outcome for home value trends.
Real estate investments, however, have continued to show us that it’s an exceptional hedge against inflation, while usually more than doubling in value over and above the published inflation rates.
No matter your perception of the current economic state of our economy (stagflation, disinflation, or hyperinflation), the long-term holding of real estate assets may continue to be a very wise choice through the various boom and bust cycles over a long period of time.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
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https://www.realestateinvestormagazines.com/wp-content/uploads/2025/05/stagflation.jpg4001000dulcehttp://www.realestateinvestormagazines.com/wp-content/uploads/2013/04/logo.pngdulce2025-05-09 05:25:302025-05-10 00:07:49Are Stagflation Risk Concerns Valid or Not?
The greatest form of wealth is happiness and good health, from my perspective. If you live a shortened life due to significant health challenges, it really doesn’t matter whether you’re rich or poor if you’re not around to spend the money on yourself or share with your loved ones.
Unless you’re a billionaire, the odds are quite high for the typical homeowner that the bulk of their net worth created during their lifetime originated from the equity built up in their primary home after years or decades of mortgage payments.
What’s interesting to me is that the average U.S. home seller in 2024 was 63 years of age. If many of these home sellers purchased their home using a 30-year fixed rate mortgage and did not accelerate the mortgage payoffs with bi-weekly payments and/or extra principal paydowns, then many sellers first bought the home 30 years earlier in 1994 at the age of 33.
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I’m sure that a high percentage of these home sellers did not want to sell their homes at the average age of 63 last year in 2024. They either needed to downsize their living space after their family members moved out years or decades earlier, or they couldn’t afford to continue paying rising insurance, property tax, credit card, student loans for themselves or their children or grandchildren, and/or medical bills.
Another motivating factor for some of these home sellers is that they wanted to take their equity gain and share it with loved ones after selling the home and moving to a smaller property. However, there are still ways to stay in a home of any size and later transfer the equity gains to the family heirs by way of family trusts, family limited partnerships, and other entities suggested by their trusted advisors and reverse mortgage solutions.
Medical Dependence and Skyrocketing Costs
Real estate creates the bulk of wealth for most Americans that were likely purchased earlier in life and medical bills later in life can wipe out most or all of the same wealth, tragically.
The U.S., with just 4.5% of the world’s population, consumes 2/3rds, or a rather devilish 66.6%, of all pharmaceuticals on the planet.
The #1 cause of financial insolvency here in the U.S. is directly related to unpaid medical bills. This is in spite of more than 70% of these same people having medical insurance coverage at the time that wasn’t sufficient enough to cover all of the medical debt.
According to the Centers for Disease Control and Prevention (CDC), almost 60% of American adults have at least one chronic disease such as cancer, diabetes, heart disease, stroke, dementia and other neurological challenges, and obesity. Sadly, a high percentage of young children and teenagers also battle one or more chronic disease symptoms.
The medical treatment costs for some of these almost lifelong health challenges can run anywhere between several hundred thousand to a few million dollars over years or decades. For example, some memory care assisted living facilities with 24-hour services can cost between $10,000 and $20,000+ per month, depending on the healthcare provider and state location, as per CareScout.
The other major financial anchor holding back many households today is ongoing student loan debt for either the main homeowner or he or she acted as a co-signer on a student loan for a child or grandchild. Almost 43 million Americans owe an outstanding balance of $1.777 trillion in federal student loans as of the end of 2024, as per USA Today.
The combination of all-time record credit card balances now surpassing $1.2 trillion dollars along with medical, student, mortgage, and other consumer loan debt is quite stressful for millions of families across our nation.
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All-Time Record Tappable Equity
American mortgage holders now have access to a staggering $11 trillion in tappable equity that’s over and above their existing mortgage balances, according to the May 2024 Mortgage Monitor report from the Intercontinental Exchange (ICE).
The amount of residential property equity is so massive that if all 48 million homeowners spent $10 million of their tappable equity each day, it would take more than 3,000 years to exhaust it, as per ICE. This amount of residential equity available is more money than the Gross Domestic Product (GDP) of Japan, India, and the United Kingdom combined.
The same ICE report identified just five housing markets on the West Coast that represented a quarter of that $11 trillion equity number: Los Angeles, San Francisco, San Jose, San Diego, and Seattle.
Housing Wealth and Home Care for Older Residents
Let’s take a closer look at health, wealth, and medical trends for Americans:
● U.S. homeowners over 62 years of age had $14 trillion in housing wealth as of Q2 2024. ● Social Security, Medicare, pensions, and investments are no longer sufficient enough for many people to cover rising monthly debts that especially includes skyrocketing medical costs (#1 cause of bankruptcy). ● Just 14% of American seniors, or fewer in pricier regions, can afford home care, as per Joint Center for Housing Studies, Harvard University. ● Over 40% of Americans aged 65+ live alone, and this percentage number increases after the age of 80. ● 70% of people aged 65+ will need long-term care services, according to the U.S. Department of Health and Human Services. ● Fewer Americans can afford personal home care as costs have risen 20% to 40% since 2021. ● Some in-home care plans are now $5,000 to $10,000 per month and living facility care plans may reach $10,000 to $20,000 per month. ● Nearly 1-in-3 people have left their jobs to help ailing family members with lost wages possibly hitting $147 billion by 2050. ● Today, there are over 50 million family caregivers. ● Only 3% to 4% of Americans aged 50+ pay for a long-term care policy, as per LIMRA (Life Insurance Marketing and Research Association). ● For most homeowners, the equity in their primary home represents the bulk of their untapped wealth. ● Tapping into the tax-free home equity by way of a reverse mortgage strengthens clients’ abilities to possibly retire more comfortably, reduce financial burdens on families, and increase future wealth transfers.
Baby Boomers & Reverse Mortgage Solutions
Baby Boomers (born between 1946 and 1964) hold the highest percentage of real estate wealth today. Let’s review this generational group’s latest trends and ways to tap into their home equity:
● 12,000 Baby Boomers (born: ‘46-’64) per day surpass the age of 65. ● In 2024, 25% of Americans were 60 years of age or older. ● The average home seller in 2024 was 63 and the average buyer was 56. ● By 2030, 100 million Americans will be 65 years old. ● 10,000 Boomers retire daily. 8% to 10% of them own small businesses that could be purchased by you at discounts for quick cash. ● There’s upwards of $11 trillion in tappable home equity available for reverse mortgage prospects using these loan guidelines. ● Only one of the borrowers on the application needs to be 62. ● An individual or a trust may be allowed to be the borrower. ● Home is still owned by the borrower, not the lender, and can later be sold. ● There are no monthly mortgage payments required. ● The homeowner must pay their property taxes, insurance, HOA payments (if applicable), and maintain the property. ● Borrowers can receive a large lump sum at closing and future payments are paid directly to them each month. ● This is considered a loan and not additional income, as per the IRS. It does not reduce Social Security or Medicare benefits. ● Lower FICO scores and income considered for easier qualification.
Income-Producing Assets & Insurance Safety Nets
It’s not uncommon for wealthier families to have large amounts of medical and life insurance protection plans in place as their figurative “safety nets” in the event of an unexpected medical emergency or death of a key patriarch or matriarch in their family.
These insurance plans help protect family wealth so that it can later be passed on to loved ones instead of exhausted it on medical bills with no insurance protection to cover these staggering bills that can reach hundreds of thousands of dollars or more.
Let’s now compare the Top 0.1% (1/10th of 1%) to the Bottom 50% of Americans by their income and asset holdings as of Q1 2025:
The richest 0.1% (134,000 households) own $11 trillion in equities or stocks, which is their largest asset class. This is worth more than the total combined wealth assets of the bottom 50% (66.6 million households), as per Visual Capitalist.
The Top 0.1% control the bulk of stocks or equities at $11 trillion as compared with the Bottom 50% households’ $0.5 trillion or $500 billion in stock ownership.
Key points: The bottom 50% households’ largest category of wealth is held in real estate and amounts to $4.9 trillion combined as compared with the Top 0.1% households’ $2 trillion combined amount held in real estate.
Visualizing Wealth Distribution In America (1990 to 2023)
Wealth distribution has become increasingly concentrated in the hands of fewer people since 1990. Overall, the top 10% of wealthiest Americans own more than the bottom 90% combined, with more than $95 trillion in wealth for the top 10%, according to the Federal Reserve and Visual Capitalist.
In 2024, the share of wealth held by the richest 0.1% is near its peak with a minimum of $38 million in wealth in just 131,000 households. With $20 trillion in wealth, the top 0.1% earn an average of $3.3 million in income each year. The greatest share of the wealth owned by the top 0.1% is held in stocks and mutual funds.
Households in the lower-middle and middle classes as found in the 50% to 90% income and asset brackets are claimed to have a minimum of $165,000 in wealth held primarily in real estate, followed by pension and retirement funds.
Keep Real Estate Wealth in Your Family Tree
Unless you’re in the Top 0.1%, the odds are quite high that the bulk of your wealth is concentrated in real estate if you’re fortunate enough to own now.
The average American today still owns and controls the bulk of residential real estate. We must continue moving forward to maintain this control of residential properties so that the multi-billion dollar corporations don’t pick up larger shares of properties that form the foundation for the creation of generational wealth and the American Dream for so many people today.
Today, it’s advisable to have the right mix of real estate, mortgages, and insurance to create, maintain, and protect your wealth. We must also stay focused on reducing monthly expenses that can erode wealth on a daily compounding basis.
If you’d like to learn more details about how my team and I can assist you with protecting and increasing the size of your family’s assets and reducing your overall monthly expenses, please reach out to me today for assistance.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
https://www.realestateinvestormagazines.com/wp-content/uploads/2025/04/leverage.jpg4001000dulcehttp://www.realestateinvestormagazines.com/wp-content/uploads/2013/04/logo.pngdulce2025-04-03 03:28:172025-04-03 03:28:19How to Leverage Real Estate Equity to Reduce Medical Debt
Homeowners and landlord insurance policies are akin to your “safety net” that protects your investment from numerous types of disaster, crime, or “bad luck” situations like a faulty electrical outlet that explodes after too many electronics were plugged into it.
Directly or indirectly, your insurance payouts may be coming from pooled insurance company funds with or without government-backing whether you’re aware of it or not.
Because most American homeowners have the bulk of their net worth tied up in their primary home where they reside, it’s quite important to make sure that you have sufficient amounts of insurance protection in place for any sort of negative situation that could damage your property.
Mortgage companies require that property owners maintain insurance policies on the subject property that protects both the owners and lenders. Any loss of sufficient amounts of insurance coverage protection can be akin to a mortgage default that triggers future foreclosure actions.
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The Pooled California FAIR Plan
To simplify, an insurance “pool” shares or spreads out the risk amongst numerous insurance companies. This way in theory at least, one major catastrophe like a firestorm, hurricane, or massive flooding situation doesn’t financially wipe out one insurance company that took on the bulk of the financial risk for a specific region.
Here in California, the FAIR (Fair Access to Insurance Requirements) Plan is considered to be the “insurer of last resort” for property owners who cannot find other forms of insurance.
The FAIR Plan is an insurance pool, which originates from numerous California-licensed insurance companies, that allows high-risk homeowners or investors to gain access to basic fire insurance protection options while limiting any one insurer from having too much liability. Here in 2025, a high percentage of the state of California is now considered “high-risk” as more people are forced to only choose from the much more expensive FAIR Plan.
The FAIR Plan was first created back in 1968 by the California Department of Insurance (CDI). While the FAIR Plan was originally created by the CDI agency and is often described as “state-mandated” property insurance, it’s actually owned and managed by many of the same private insurers who already turned down the property owners before in a much larger giant “pool” of insurance funds.
Insurance Payout Limits
The FAIR Plan caps, or has an upper ceiling limit for claims, for insurance payouts for natural disasters at $3 million for policyholders, according to ABC News. Average home listing prices in Pacific Palisades were closer to $4 million dollars back in December 2024 before the massive firestorm hit.
The rebuilding process, which includes numerous permit fees, could reach as high as $800 to $1,000 per square foot to rebuild according to some estimates. If so, a 3,000 square foot home to rebuild may cost as much as $3 million dollars ($3,000 sq. ft. x $1,000/sq. ft.).
There are several properties located in the Palisades that are valued at tens of millions. How will these FAIR Plan insurance payout caps impact the rebuilding process if the cost far exceeds the $3 million dollar limit?
A Trillion Dollars’ Worth of Damage
Just over the past 12 months alone across the nation, there has probably been more than one trillion dollars’ worth of damage from firestorms, hurricanes, and floods in California, Texas, Florida, North Carolina, and other states. At some point, the bailout funds may run dry from either insurance companies or government agencies.
There’s potentially several hundred billion dollars’ worth of property damage in just Los Angeles County alone from the recent firestorm in January that hit Pacific Palisades and Eaton in Altadena, California particularly hard.
While the Palisades, my former hometown for a decade, got the most national publicity with approximately 6,800 properties destroyed, it was Eaton, near Pasadena, that had even more properties destroyed with an estimated 9,400 properties. Just in these two regions alone, there were more than 16,200 properties severely damaged or completely destroyed.
By comparison, the Los Angeles Riots of 1992, following the Rodney King court verdict, caused $1 billion in property damage at 1,100 property locations.
Insurance Rate Hikes
We’ve all seen significant insurance rate hikes across the nation in recent years, especially in states like Florida where some basic homeowners insurance policy premiums for average-priced homes are near $1,000 per month.
State Farm, the largest homeowners insurance company in California, did cancel upwards of 1,600 homeowners insurance policies in Pacific Palisades on or before July 2024, as reported by CBS News. This was just six months before the horrific firestorm hit this beautiful Palisades region.
However, State Farm, and probably most other insurance companies in California and elsewhere, is suddenly starting to request “emergency rate hikes” to cover their financial losses. The premium rate hike request from State Farm to California state officials is near +22% for homeowners insurance and up to as high as +38% for renter’s insurance.
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Are Your Pools and Agencies Liquid or Not?
Water causes more home damage each year than anything else. As such, water effectively floods the insurance pools more than anything else in spite of firestorms getting more recent national coverage.
Will your insurance or a separate government agency cover your financial losses? Who is more financially solvent these days – the insurance agency or the homeowner?
The “liquid” term when used in finance translates as being flush with cash. Conversely, illiquid means that a person or entity doesn’t have much access to available cash that’s fairly easy to access.
Let’s take a closer about how financially insolvent insurance or government agencies are these days:
FEMA (Federal Emergency Management Agency) is technically insolvent or broke, as per FEMA themselves. The National Flood Insurance Program (NFIP – managed by FEMA) was described as being more than $20 billion in debt in January 2024 at a panel hearing held by the U.S. Senate Banking, Housing and Urban Affairs Committee.
“The Small Business Administration’s (SBA) disaster assistance loan program is out of money after hurricanes Helene and Milton struck parts of the U.S., the agency has announced.”- ZeroHedge
The Citizens Property Insurance Corporation is described as the “last” option for insurance within the state of Florida. However, Citizens was also described by many as being out of money before Hurricanes Helene and Milton reached the Florida shores.
California’s own “insurer of last resort” named the FAIR Plan had upwards of $336 billion of property exposure a year ago with just a cash surplus between $300 and $700 million, as per the California Assembly Insurance Oversight Committee. L.A. County fires might cost $30 to $50 billion for the FAIR Plan.
Hurricane Helene and Milton might’ve caused more than $200 billion dollars’ worth of damage in Florida, North Carolina, and elsewhere, according to The Real Deal.
Who will bail out FEMA first so that FEMA can bail out the National Flood Insurance Program, Citizens, SBA, FAIR Plan, and others? Please note that only 1% to 6% of U.S. homeowners (under 2% in California) have flood insurance coverage protection. If flooded without flood insurance, the homeowners are likely to receive nothing, sadly.
Will Underwater Homes Soon Follow?
There were more than 70,000 homes damaged or completely destroyed by the devastating floods from just Hurricane Helene in North Carolina a few months ago. Some other estimates are as high as 125,000 damaged homes in North Carolina.
In numerous states across the nation over the past year, the number of damaged or destroyed homes from fires, floods, or wind damage probably number somewhere in the few hundred thousand range. A rather large number of these properties either had no insurance in place or not enough coverage protection.
Many insurers also are completely denying insurance coverage payout claims from distressed property owners for a wide variety of reasons. As a result, many homeowners, landlords, tenants, and commercial property owners will just walk away from their property and mortgage obligations. If so, these future foreclosures become sales comparables for the homes that did survive.
At some point, the future home values will start to fall and more homeowners will be living in figurative “underwater” homes where the mortgage debt far exceeds the current market value.
Should you, your family, or friends be in challenging situations like any of these shared scenarios, please research as many different potential solutions as possible and reach out to local knowledgeable third-party advisors to minimize your losses and to maximize your gains.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.
