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Data-backed forecast

Jesse says he purchased a home in 2021 by co-signing with his parents and locking in an attractive mortgage rate of around 3% at the time. Home prices and rates have escalated since then. Now, he wants to tap into $100,000 of equity built up in his primary residence to buy another property and rent the first one out for cash flow.

This reluctance to sell isn’t unusual. Many homeowners who locked in ultra-low rates during the pandemic are now unwilling to let go of their units.

This cohort isn’t the only one reluctant to sell. Older Americans, many of whom don’t even have a mortgage, have expressed similar disinterest in letting go of their homes. Recent analysis by Redfin found that roughly half of Baby Boomers owned their homes outright. Around 45% of empty nesters owned homes with three-bedrooms or more, double the rate of millennials with kids.

Put simply, many older Americans have no financial incentive to move even though they live in oversized houses built for families. Jesse says his experience as a health-care worker has convinced him that many would rather age in place than move to a long-term care facility.

“Biggest issue in America is that these people don’t have anywhere to go beyond their homes,” he said.

Jesse believes it to be a major log-jam contributing to the housing crisis. Despite his data-backed analysis, Delony isn’t convinced Jesse’s idea of expanding his real estate portfolio is the best course of action.

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Risky bet

“Don’t do what you’re about to do,” Delony instructed Jesse. “You’re not going to listen to us … but do not do what you’re about to do.”

Delony and Coleman argued, despite Jesse’s confidence, there’s no way to predict the housing market with certainty.

“Nobody knows!” Coleman insists.

“You’re playing a slot machine and Vegas always wins,” Delony chimed in.

Making the wrong bet on a costly venture could be catastrophic. Nevertheless, Delony sympathizes with Jesse’s ambition and temptation.

“I was you 15 years ago,” he said. “I was wrong, I thought I was smarter than I actually was … I dug a hole that took me and my family a long time to get out of.”

Instead of borrowing expensive capital, the co-hosts encourage Jesse to have a little patience and wait for more advantageous circumstances.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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