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Chief
I wanna go home 😫
Only a few days late for May the 4th lol
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inhand slaary of 10 lpa
Chief
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Conversation Starter
Chief
I wanna go home 😫
Only a few days late for May the 4th lol
Bowl Leader
Visual Storyteller
inhand slaary of 10 lpa
Chief
No. Mortgage interest rates may keep individuals on the sideline temporary, but when institutional investors have plenty of cash, no issues fundraising more, and access to cheaper debt instruments (and are already responsible for 30+% of purchases in some markets), demand will only go up. People in there homes are going to stay or trade 1 for 1 and aren’t losing their jobs/homes. Increasing demand on constant supply doesn’t look like a crash to me.
My guess is that the impact will be location specific. In markets with job stability, I think ppl will continue to look for homes. They may just have to go down in price because of interest rates. I have seen listing prices decrease and homes staying on the market longer. I am not sure if people will continue to drop their price or decide to stay put. If they seller they will be paying more for a new house and rent prices have also increased. Long story short, I have no idea. Lol sorry.
The best time to start investing is yesterday. The next best time? Right now
Prices won't drop. Buyers are qualified unlike 2007.
Qualified buyers because of student loan forbearance and other moratorium. Don't be fooled by the temporarily inflated credit scores
Coach
I think it’ll be very location driven. Some parts of middle America that have seen prices jump 25%+ plus might see a heavy correction (10-20%). Investors were one of the main buyers in these areas, and grossly inflated prices, although people moving out of coastal states also had a hand in it.
Some other states like NY, NJ, VA, (just to name a few) probably won’t see anything close to that, maybe 2-3% as rates continue to creep up. However long term, 5-10 years, prices will be higher than they are even today.
Coach
I’m in nj, and It could possibly be getting up there. Especially with these ever increasing interest rates. But another reason why prices most likely won’t crash is due to buyers being much more qualified. From what I’m seeing, even those opting to apply for ARM are doing so simply because of the lower rate. They’d be able to afford even if they opted for the higher fixed rate.
Overall home values will continue to appreciate 3%+ in most markets. Plus low interest mortgages taken and restructured over the last few years put homeowners in very favorable equity positions. Housing markets are not at a peak but do expect a softening over the next 6 months which is much needed bc of the accelerated market most of us have been in the last 3+ years.
Subject Expert
Might go up
Might go down
But definitely going to do something
Unless it just does nothing
Or all of the above 🤪
Mentor
Consider this: Inflation is 8% right now. That means at this rate, the same house at a minimum will cost 8% more next year
Mentor
Well, what would cause prices to go down, and see if you could see this happening:
1) suddenly there are so few buyers that even dropping the price doesnt compel people to buy
2) there is an influx in inventory so great that it exceeds the demand
3) there is an economic crash so big that nobody has money, forcing house prices to drop until people can afford it
4) we have deflation instead of inflation
5) interest rates go up to like 20% (though this would cause housing prices to plummet, the cost will still be relatively the same)
Idk, what else might cause prices to go down?
First, OP, are your talking about single family homes as primary residences or actual commercial real estate (and then the property class, etc., comes into play). Obviously this — on the commercial side — is very property and market specific, but what has surprised me is that these days even as interest rates are rising, prices aren’t. Usually, interest rates rising has cap rates rising, but I haven’t seen it. A lot of our stuff has crazily risen in price, but the next question is “what to do”? Hard to find another deal that makes sense. We’re looking at building/development, but that has its own issues. The entitlement process notwithstanding, raw materials and labor is crazy now. We’re kind of in hold mode.
I wouldn’t worry about a temporarily drop in values if you are planning to rent for long term. You are missing on the monthly cash flow as well as the equity growth via principal pay down in the meantime (and tax advantages I didn’t try to quantity).
Quick math with one of my properties. $9k cash profit in 2021, equity growth via principal pay down was another $4k. Value today is $175k. Prices would have to fall 15% to get me to a breakeven return in 2 years. And if my property drops 15%, meaning similar properties are selling for $150k, I’ll just use the $18k cash I made in those two years to buy a new property. Then I’m getting higher % and $ returns (via lower debt expenses1) than my first. I’m now making $18k cash return a year and I don’t have a single concern that the first rental’s value temporarily fell 15%.