You invest in Real Estate? Personally, I've been selling and hope to keep the rest then look to start buying in Q3/Q4 2023 as the market continues to cool. Late '24 could be near the bottom but I also could see demand returning quickly causing a bit of a run as we aren't seeing a sell-off due to too much supply but a cooling due to high rates. Thus, late '24 could have retail demand higher as rates drop.
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You invest in Real Estate? Personally, I've been selling and hope to keep the rest then look to start buying in Q3/Q4 2023 as the market continues to cool. Late '24 could be near the bottom but I also could see demand returning quickly causing a bit of a run as we aren't seeing a sell-off due to too much supply but a cooling due to high rates. Thus, late '24 could have retail demand higher as rates drop.
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TheEye
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That’s my thinking, yes. Buy before the rates drop. I have access to an adjustable line of credit and I may bennefit from high rates scaring off potential buyers and low rates then saving me on the principal of my loan.
I'm not a fan of adjustable lines as we can't trust the FED to drop rates to 2.5 quickly just because the economy cools. What happens if inflation remains high and unemployment is low? The FED would have everything they need to keep rates high and let the markets continue on their own paths. They could even keep raising rates well past 5.5% as some believe they have to get to 8% to truly beat inflation.
I'd rather do a 30-year fixed at 7% with the option to refi once rates drop. You can then cash out to buy another house or simply lower your monthly to increase cashflow.
I'd rather do a 30-year fixed at 7% with the option to refi once rates drop. You can then cash out to buy another house or simply lower your monthly to increase cashflow.
Re real estate; its important to differentiate between different types. Office, retail, hotel, SFH, etc. will likely continue to see prolonged weakness, but there is such a structural lack of supply in multi that I just dont see that taking a huge hit. Any "bargains" will be more a function of a poorly managed property, bad owner, inability to refinance, etc. and not macro market conditions.
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In your opinion does the single family market come roaring back once rates start to drop? The supply hasn't been keeping pace with demand.
Brutal question to answer....my sense is that unless mortgage rates drop dramatically, SF will be a difficult space for a few years, but again, its location, location, etc.
mr.h
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Powell started with his firm 2% inflation level, but eventually said that we are are not going to be in a race for reaching that. He also said that the Fed runs different models before making any decisions. At this point he can’t sound wishy washy, but imo he hinted at 25 bps and possible pauses. We didn’t take the hit we took after his last remarks.
TheEye
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Unfortunately banks don’t want to lend me fixed rates because I don’t make my money from paychecks. I basically either buy with cash or do ARL and pay down early.
There are lots of private banks that do DSCR loans that are 20-30yr fixed. I have a few of them from 2021 at 3.5-5%. They are normally on a 3-4% spread to the FED funds rate so you’d likely get them at 7.5-8% now. No paycheck needed, just cashflow.
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mr.h
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The Fed will take heavy heat for hammering the housing market from both sides of the aisle.
I think there is a structural lack of supply in SFH to the tune of 3M homes. Multi-family- I would be very focused on over 60 communities vs the 3-4 story apartment building with no elevators I see going up everywhere.
SFH will take a hit and like you said- location, location, location as some markets will see big drop-offs while others may not see any. By 2024, I think we see it come bouncing back as rates dip below 5%. Inflation could keep the rates higher for longer so it will be interesting to see how the FED balances the health of the economy vs higher inflation. If unemployment jumps to 6-7%, they may have no choice but to let off the rates which means we could see a V shaped recovery on SFH leading to another BOOM and another quick cycle as inflation jumps, unemployment dips...
mr.h
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Jim Cramer
Progress: The market expert also asserted that more areas of the economy need to cool before policymakers can announce victory against inflation. However, that doesn’t mean the central bank is losing its fight, he told investors.
“If Powell felt that things weren’t going his way ... what he would’ve done is hit us with another 75 basis point rate hike, not a 50. He didn’t do that because he knows we’re making progress,” Cramer said.
Progress: The market expert also asserted that more areas of the economy need to cool before policymakers can announce victory against inflation. However, that doesn’t mean the central bank is losing its fight, he told investors.
“If Powell felt that things weren’t going his way ... what he would’ve done is hit us with another 75 basis point rate hike, not a 50. He didn’t do that because he knows we’re making progress,” Cramer said.
I agree with you, we have a structural supply problem in MF and SF, one that will take years to fix. My point is that if you cant afford a SFH, you are forced to rent, which is why I like that market right now.
Those that are forced to rent aren't forced to rent MF. A lot of them are small families and MF aren't great for families. Security, number of bathrooms/bedrooms, noise, school districts... Now, over 60 MF could be a gold mine in the coming years as aging boomers that can't afford to maintain a home and want to retire will sell their home to produce enough cash to retire while renting. I have one now willing to pay me once a year for a single-floor home with 3 steps to the front door. Much like location, location, location... I see the purpose of MF as being very important.
@mr.h - while it is all great to see Powell slow down, I believe the real damage is done and we are likely heading to a recession by Q2. I hope I'm wrong as onshoring could prop up the labor markets. GDP will likely dip but it could stay just above the threshold due to onshoring as well. It will mean a shift of jobs from real estate and big tech to manufacturing, small tech, and other services. That likely means the equity markets will not do well due to the shift. Markets want stability and we are not close to a stable economy. Thus, we will see a rollercoaster of ups and downs caused by just about any positive or negative news. Stability causes momentum to build either Bear or Bull. The bigger question I have is, if inflation is tamed will people pull out of stocks due to a recession knowing they aren't as likely to lose wealth by holding cash? I guess we will find out soon enough... 3-5 months.
mr.h
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@90scane
We know that inflation is going down, but so will employment and GDP. Powell has to talk the talk, but we’ll see how far the Fed will go. We still have to see about earnings and Corporate profits. I believe Dec. retail sales will still rise. House flipping Is over and I heard this all day that the S&P needs to hold the 3900 level. There are some pretty cheap stocks out there, but I have lowered my entry points.
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Tesla is looking a little better but I have a feeling they aren’t done yet. $100 is possible as others enter the EV space. Tesla has missed major opportunities due to lack of execution. Get the truck out, semi out, roadster out…
mr.h
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Yes….Not only competition, but Musk is being hurt by twitter.
Inflation is "down" to 7%.....still a ways to go. Wage inflation specially is still high.