How is everyone feeling about rates?
Member since 2022 · 8 posts · 3 votes
How is everyone feeling about rates?
Most Popular Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votesI have no idea what is going to happen with rates
I will keep buying on the assumption that I will never be able to refinance, and I will make sure deals pencil out based on the rate I lock
31 Replies
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
If interest rate is the only factor your probably right values will go down.
Right now though I expect my CRE investment values to increase due to inflation and higher costs to build. And that is the case with our last building. Just the building material went up $600,000 in two years.
Plus asset type will play a big role. If talking housing then a local discussion. In our area there is a shortage of housing. That is not going to correct anytime soon. That will keep prices higher. Also as rates go up fewer people will want to sale and take on a higher rate. This means less inventory on the market which props up prices and the buyer pool shrinks to cash buyers or seller financing.
The above aren’t straight line actions. Life happens. Death, divorce, financial issues etc that will always cause movement. If your in a market with forced movement such as military bases with government BAH payments then the market prices should stay high.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Peter Xiao:
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?
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
I'd better go check what happens to my fixed rate mortgages when the Fed raises rates! BRB.
- 3yRonald RohdePro MemberAttorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
Go find ways to increase rent. Inflation also increases hard asset values...
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Peter Xiao:
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?
no need for feeling, my new mortgage is high 4% now.
people doesn't care about interest rate now as they are all chasing homes, home appreciation is 10% this month.
it's mathematically impossible for USA interest rate to be 12%, even Fed already did QE starting from December this year. Wake up....
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Inflation.
A. Every day I buy a large Diet Coke as breakfast at McD's.
Month ago and for years before it was $1.07.
A few days ago $1.30.
Today $1.49.
The major ingredients in soft drinks are Water, Sweetner (corn syrup usually) and Carbon Dioxide. All of these are cheap and easy to make or produce. The ingredient not shown, is the freight and processing costs.
B. Last year we raised our storage units on average 15% across the board.
C. You folks that doe housing, since there is a housing shortage, can chime in on how you increased rental rates.
D. Oil- we used up a large portion of the Strategic Reserve, and that has been stopped. OPEC is slowing down production. All fuel and Oil based products have or will go up.
E. China is opening up from Covid, which will strain resource demand and increase prices.
F. Don't know about you but got our new tax assessments across all of properties they went up about 20%. Have to wait and see what the property tax rate will be, to see if total taxes go up. This will not be a temporary inflation hike.
G. Inflation going down. The one bright note is lumber prices went down. The US had imposed significant tariffs on Canadian lumber causing lumber to skyrocket. After lifting most of the tariffs, lumber is now 1/3 the price in 2023 from a year ago. Although this is a good thing. It is an example of a stroke of the pen over the past 4 years causing a product to go up. This can just as easily be cheap steel from China.
Inflation is both here to stay and will go up. 12% is possible, but only momentary. The US Governments debt to GDP ratio is totally different today than in the 80's when interest rates went to 18 to 20%. The US would have to print Trillions of dollars to pay its debt service, while at the same time the BRICS countries are trying to go off the USD trading standard. If OPEC switchs to a different currency than the US in trading Oil, there will be a huge negative impact to the dollars value, while at the same time the Government would be printing tons of dollars. Both actions would very quickly devalue the dollar, causing massive inflation, like Central and South America in past decades.
@Peter Xiao I wouldn't worry about inflation at 6 to 9% or interest rates at 12% and what it means to the rest of us. Each of us are in different situations and different risk/reward models. A young person at 30 can go gun ho, because they are invincible, will live forever and can recover. A person in their 70's will go bankrupt and not recover.
"This is not Financial Advice".
A. I would take an inventory of your debt, assets, and cash flows.
B. Trim the weakest assets and cash flows, extended out or refinance your debt beyond 5 year balloons, ask for 7 year balloons. And if you have near terms remaining, refi back out to 20/25/30 years if possible. You will probably make more money long-term, paying your debt off in the future with cheaper dollars.
C. Although normally I would say pay down debt, now I would keep cash around, even if it loses value due to inflation. If you keep it in CD's and other cash equivalents, don't use terms greater than 6 months for now.
D. Make sure your cash flows meet your debt service. Do a cash flow stress test with 10%/20%/30%/etc reduction in cash flow and see which of your assets will challenge you the most. Do an asset valuation stress test, again decreases of 10%/20%/30%, etc.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.