Inflation has only dropped my .1% and Feds are ready to do whatever it takes to drop that. I have been hearing on the streets that interest rates could* go to 12%+. That would be pretty scary heading into a full on recession. I was wondering how everyone is feeling and what everyone is thinking?
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
I am taking advantage of the state of the market and buying as much as I can. When others are fearful is when real estate should be bought. I view this with a lens of optimism not fear.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
3y
@Peter Xiao
I'm not worried. I'm still buying and closing on another property soon. The fed will relax in a few months. They don't want to completely destroy the economy. Many analysts are saying it'll be a soft recovery. Market rent has inched up in Feb according to recent reports, and we're still 6.5 million short of SFH nationwide. Builders have throttled back and demand is very high with low inventory. I don't see the housing and rental market slumping. Especially with millennials starting to buy their first homes finally.
Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
3y
Hey @Peter Xiao - my thoughts are that we need to go through market cycles of ups and downs to keep the music going. We're in a market down right now and headed into more of a low, but it's a great opportunity to find distressed deals and pair them with the right buyers who don't mind paying in cash for a discounted property.. because they know what goes down will likely go back up ;)
Lender · 92703 · Member since 2022 · 326 posts · 538 votes
3y
Hello Peter not a fan of these interest rates being where they are right now. It makes the market slow down and not good for business lol. Currently this is the card the feds dealt us. Its all about how we react and of course everyone has their opinion on where thinks might go or may not go. To be honest all we can do is make the best of what we have and like other people above mentioned do your research run the numbers and continue investing. Those are my thoughts on the current rates.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 798 votes
3y
I feel sick to my stomach, on the other hand there are not 7 offers for one property anymore. Two more rate hikes are expected, but I feel like the Fed has done enough.
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
I'd rather them not hike 2-3 times more, but just do a 1bp hike here in March and say market, if this is not a strong enough warning I will be back but please understand what we just did. Then, just sit for 3-5 months.
Real Estate Broker · Atlanta, GA · Member since 2019 · 34 posts · 23 votes
3y
We're not buying... yet, unless it's crazy good deal. Until the Fed stops increasing, the market will continue to get soft. By definition, the Fed will keep raising rates until they stop growth. To buy now, even if a deal works, is just putting capital into something that could be in a much better deal in 12-18 months. Deals will only get better, builders will offer even steeper discounts in coming months. Builders have to close on projects already underway. That said, builders also have great rates, as they locked 18 months ago. So we are waiting for steep 10%–20% discounts on homes, locking at 5% with builders lenders. Meaning, wait for the builders home to be completed. when the builder can't move it, they'll drop the price significantly just to close. Use that lower price and the builder's lender to secure a house under market and at 5% investor loan. If you can buy 3 or 4 at a time, you'll get better discounts. We just picked up 4 units in ATL subs at 5% rate and 50K (15% discount) off last sold comparable.
I don't think rates will go up too 12% but everyone was saying that once we hit 5/5.5%. With the uncertainty in the banking industry right now due to SVB and other banks that did not manage their risk correctly. I doubt we will see an increase this month. Hopefully we can slowly but surely turn the corner and stabilize the interest rates. This way markets can normalize for investors.
I am saving up to buy my first triplex / fourplex in 2024 or 2025. That is the goal.
Investor · CT · Member since 2022 · 50 posts · 24 votes
3y
Rates will continue to go up. Fed rate will go higher if only in smaller increments. The rate hike cycle was too fast that banks like SVB couldn't mitigate the risks and was undercapitalized to handle a run. The canary in the coal mine was that tech companies were laying off everywhere. Now comes the bank failures. It will ripple through the credit markets and you will see corporate debt break some overleveraged companies that didn't act to reduce their liabilities.
As the banks fail they will start forced sales of treasuries and corporate debt. Bond prices go down and yields go up. So real estate market will freeze as buyers walk away and more commercials default.
Hello Peter not a fan of these interest rates being where they are right now. It makes the market slow down and not good for business lol. Currently this is the card the feds dealt us. Its all about how we react and of course everyone has their opinion on where thinks might go or may not go. To be honest all we can do is make the best of what we have and like other people above mentioned do your research run the numbers and continue investing. Those are my thoughts on the current rates.
Rental Property Investor · Raleigh, NC · Member since 2016 · 393 posts · 995 votes
3y
Rate hikes will pause, at worst they will be .25 raises
I know the Fed talked a big game the last time they raised rates by .5%, but banks are already starting to fail. And it's not just these 3 banks, everyone is in a fragile state right now. 1 big corporation failing can cause ripple effects that cause 20 other companies to fail, spreading the ripple even further.
It was silly to think that inflation could be 'tamed' within a year by beating it over the head with continuous interest rate hikes. We just went through an unprecedented full global economic shutdown, and printed trillions of dollars out of thin air, and the fed thought they could fix this problem quickly? In the words of Joe Biden, C'mon man!
Personally I'm still buying, in fact I'm nearly always buying. Currently homes are sitting on the market for months and have multiple price reductions. The more homeowners are scared of the economy, the more desperate they become to offload their homes and take whatever amount they can get. I'm currently offering 30-50k under MLS prices and am getting a surprising number of positive responses.
Lender · Winter Park, FL · Member since 2021 · 737 posts · 412 votes
3y
I still think we will see a .25% increase when the FED meets, but with all the developments involving SVB, PacWest etc the FED might pause future increases. There's a lot of speculation on both ends.
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
3y
@John O'Leary Agreed with the .25% increase from the FED.
I'm okay with the current rates as our units cash-flow at 7%+. We see no reason to step off the gas and wait around for something to happen. Adapt or die.
If rates drop the buyers will be everywhere. Our market is already flooded with OOS investors and transplants.
I keep buying with my cash so I don't worry about interest rates.
I have bought 4 in last 3 months and will continue to look for more deals.
Baller! If you can float the millions in commercial, you have achieved a next level of flywheel success. @Henry Clark has this too where he can buy a lot of land, float carrying costs, and develop at his leisure.
I keep buying with my cash so I don't worry about interest rates.
I have bought 4 in last 3 months and will continue to look for more deals.
Baller! If you can float the millions in commercial, you have achieved a next level of flywheel success. @Henry Clark has this too where he can buy a lot of land, float carrying costs, and develop at his leisure.
Can't decide if I want to keep doing what I'm doing or sell off a few properties and move into commercial properties with loans.
I don't need to do anything different, but I am always learning and looking for what's next.
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
Don't know your size, but you might think of Loss harvesting. Or let's call it headache harvesting or lower return harvesting. Look across your properties and pick the dogs. Convert them over to properties with more upside or less management.
Or go the other way and harvest your highest gain properties. Do a 1031 with them and do a Cost Segregation on a commercial property, to get the tax benefit against your other income sources if you're a REP.
All depends on how you keep your transaction cost down, buying and selling.
When rates go up, asset prices must come down. The problem in some markets is that the rates have gone up, but sellers and agents are reluctant to bring the price down because comps are looking at the past and not the future. Eventually, they'll get the idea when their property sits on the market longer than average. It doesn't mean stop buying real Estate because the deals are out there; you have to find if the deal makes since for you.
When rates go up, asset prices must come down. The problem in some markets is that the rates have gone up, but sellers and agents are reluctant to bring the price down because comps are looking at the past and not the future. Eventually, they'll get the idea when their property sits on the market longer than average. It doesn't mean stop buying real Estate because the deals are out there; you have to find if the deal makes since for you.
That just means that there will be more and better deals in the future. Especially when the regional banks start to buckle later in the year. 80% of all CRE loans are held in banks with under $250b in assets and 60% of all residential mortgages are.