Arbitraging

Arbitraging

People are now profiting from arbitraging the sizable difference between renting and buying

When factoring in sky-high real estate prices, increases in property taxes, and spiralling maintenance costs, it is no surprise that 36% of people seeking shelter opt to rent rather than buy, but is it a good idea.

The number of people opting to rent is at a record high, which confirms that generation rent exists. 

During the free-money buying frenzy in 2021-2022, that figure was between 23%, to 28%, according to the National Housing Survey.

2021-2022 was a period of near-zero interest rates

Average mortgage rates in the US reached their lowest level in history (2.65%) during the first week of 2021. But they quickly rebounded, climbing to their highest point in over two decades (7.08%) by October 2022. While they ebbed and flowed from 2022 to now, climbing to 7.79% in 2023, they’ve yet to fall back below 6.00%.

Those with variable mortgage rates have seen their monthly repayments double.

Americans owe $12.52 trillion on 85.35 million mortgages.

But here is another sign that the money system distorts the economy and trickles wealth upwards, not only has the cost of servicing a mortgage doubled, but so has the cost of buying a home: 50% explosion of home prices since 2020.

What is happening in the residential housing market is a classic example of the trickle-up wealth effect of monetary policy.

Reckless (maybe deliberate) monetary policies through 2021 have created a peculiar situation where, on a monthly cost basis, it is now far more expensive to buy a home than to rent an equivalent home pretty much across the US.

This is the path to neo-serfdom, you will own nothing and be happy while a handful of elites near the apex of the human food chain feast at the central bank’s easy money table will own it all. 

If you are renting, profiting from arbitraging is a pipedream unless by doing so you avoid buying into the high real estate prices, wait for the price crash and snap up a bargain

But ask yourself this question. Do we have a market where a clan keyboards money into existence and decides who gets it? In theory, real estate is a highly leveraged asset, where its value is a derivative of the costs of credit. 

In the past few years, the cost of servicing a mortgage has nearly doubled, and residential real estate prices are up 50%.

Is this financial engineering, with all roads leading to neo-feudalism?

Maybe forget arbitraging and get on the property ladder as soon as you can, if you can. If you can afford to own your home, do it.