Kevin O'leary and interest rates

[Jon Quigley]

I hear that Kevin O'leary from Shark Tank is predicting that as interest rates begin to hike, home values will go down or at best stay even for many years.   What do folks think about how the coming rate hikes will affect the RE business and more importantly how should we position our investments?      Thanks.  

[Ned Carey]

Yes i think that is obvious. The only reason the market is where it is, is because of low interest rates making homes more affordable. if interest rates go up homes will be less affordable. That means fewer buyers and that means lower prices. 

However no one can predict the future. There will likely be other factors that will have an effect on prices. If the economy strengthens so much that wages go up, that may keep homes affordable even at higher interest rates.

So what am I doing to mitigate interest rate increase risk.

• Buy at prices that  make sense based on long term norms not necessarily on today's prices.
• Buying below market
• Buy assuming that if I have to refinance (balloon etc) that I will be paying higher interest rates in the future.