“I think we're going to see a massive transition into the Midwest,” Kathy Fettke recently told Financial Sense Newshour. “We have three really serious issues coming up that this world is going to have to deal with. We're running out of water, we're running out of food, and we're running out of oil.”
Looking forward 20 years, these are likely to be major issues we’ll have to face, the co-founder of Real Wealth Network said, and this is likely to make farmland more valuable in the future.
States like Ohio are likely to benefit long-term and, in general, she sees a migration into the Midwest as people search for value and lower costs of living with higher food and energy prices.
“We don't want to face the reality of that,” she said. “This is going to be something people need to think about over the next decade. Some of the areas that we've kind of poo-pooed so to speak are going to become very valuable, and it’s the farmland of America.”
Tax Changes Affect Some More Than Others
The tax bill includes three provisions that directly impact real estate, including a new limitation on home mortgage deduction for homes up to $750,000 — though older mortgages are grandfathered in, Fettke noted. Also, the limitation on property taxes is now capped at $10,000. Lastly, now, state income taxes are no longer deductible on Federal returns.
These changes likely won't affect high-end real estate very much, Fettke noted. Normally, when she helps people buy homes, they’re happy to have the tax deductions, but that's not generally why they’re buying the home.
Instead, their choice hangs more on the quality of the local school district or their overall dream of home ownership. Generally, the cap won’t affect most people either, because outside of places like California, most houses are not even close to $750,000.
“That's my personal opinion,” Fettke said. “But with that said, I think we're still going to see an exodus of people moving out of California for many reasons.”
California’s Appeal Diminishes
Many are choosing to leave states like California for a variety of reasons, including high taxes and overpriced real estate. There are 10,000 people retiring every single day, Fettke noted, and that will continue to be the case for at least the next decade. For those with the opportunity to sell their property at the peak of the market, it can be very attractive to move somewhere else.
In many cases, this means being able to live a similar lifestyle for most people, but with more cash in their pocket and more options in retirement.
“I see it across the board,” Fettke said. “They can finally go anywhere and have this amazing opportunity to cash in.”
What’s Driving Markets Like California’s So High?
While it may be tempting for those who face higher taxes or those who are priced out of California’s real estate market to leave, part of the problem is that for those who bought a long time ago, the incentive to move just isn’t as strong.
“If somebody has hit retirement and they bought their house 30 years ago, they have it paid off and they're locked into a low property tax rate, they're not going anywhere,” Fettke said. “And that's kind of the problem.”
If those who've lived in highly-desirable areas within the state for a long time aren't moving, prices will go up for those looking to start families.
There's really a split between those who are forming families and those who have already bought in long ago. Young people struggling to remain in California are finding themselves buying into areas with less than ideal conditions just to remain afloat.
“If you're so desperate to own property in California that you're going to move into a really low-income area with terrible schools, is that really the choice you want to make?” Fettke said. “A lot of people are saying, ‘No, I'm going to move to Texas where the schools are great and where I can live comfortably and raise my family.’”