My Top 5 - 2024 Predictions in Mortgage Note / Lending Space

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:

1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)

2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.

3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.

4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.

5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

7e investments53 Reviews

Website View Page

23 Reply

122 views

Most Popular Reply

Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

Quote from @Chris Seveney:

5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

Thanks Chris. Your reasoning sounds right on.
Here’s the reason I no longer make any predictions about real estate.
I was 100% wrong predicting what would occur from Covid 2020.
I was 100% wrong in predicting what would happen with Bitcoin
I was 100% wrong in predicting the 2016 Presidential election

Amazingly I still increased my net worth a factor of 15 times since 2001. That’s why I believe so strongly in investing in real estate. Where else can you be so wrong and still be so successful?

Private Mortgage Financing Partners, LLC

Website View Page

21 Reply

See this reply in the discussion

53 Replies

Jump to latestLatest

Sort by

Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:
1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)
2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.
3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.
4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.
5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.
So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…
However once we are pro in RE we know we can crush that number by investing properly.
2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol
1 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
2y
Quote from @James Hamling:

Quote from @Bruce Woodruff:

All good points @Chris Seveney... I agree (mostly) except something tells me that come spring we will see a change in the RE market......more 'back to normal' for lack of a better term.
With the interest rates likely IMO to drop (Due to the upcoming election and the current Prez putting pressure on the Fed) combined with the built-up pressure from the market being stagnant in '23, there has to be a release of sorts. I see a temporary seller's market with higher prices along with slightly more inventory.....turning into more of a buyer's market by mid-year up to the election, and then who knows...?
I could be completely wrong though....

Keep in mind that in the past 100 years not 1 sitting president has EVER been re-elected during a recession / economic hardship created under there watch.
With that in mind, which political strategists well know front of mind, consider polling #'s. I lend 40:1 odd's of some action of significance to attempt some manner to flip polling #'s. It's not much of a prediction as it's more just reciting from the political play-book on election strategy.
And while that's politics, in this case it's economics, because it's people making economic actions for political reasonings. Which we will see how political the FED's gotten because if they want to prove impartiality it means a FED fighting the politicians actions, one throwing gas on the inflation fire as another dousing it in water. Question is, does someone decide to bring the napalm vs gas?
Imagine home buyer stimulus, NINJa 2.0, at same time as cranking rates up even more. That would be an interesting bubble. No doc stated income 40yr mortgages for all..... at 16.7% interest rate..... but don't worry it's only 4% the first 2 years...... than resetting to full impact..... Lol, could get interesting, 1-hand fighting the other.

Yessir, this could get very interesting indeed.....possibly the most interesting year in our history.
And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......
5 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Bruce Woodruff:

Quote from @James Hamling:

Quote from @Bruce Woodruff:

All good points @Chris Seveney... I agree (mostly) except something tells me that come spring we will see a change in the RE market......more 'back to normal' for lack of a better term.
With the interest rates likely IMO to drop (Due to the upcoming election and the current Prez putting pressure on the Fed) combined with the built-up pressure from the market being stagnant in '23, there has to be a release of sorts. I see a temporary seller's market with higher prices along with slightly more inventory.....turning into more of a buyer's market by mid-year up to the election, and then who knows...?
I could be completely wrong though....

Keep in mind that in the past 100 years not 1 sitting president has EVER been re-elected during a recession / economic hardship created under there watch.
With that in mind, which political strategists well know front of mind, consider polling #'s. I lend 40:1 odd's of some action of significance to attempt some manner to flip polling #'s. It's not much of a prediction as it's more just reciting from the political play-book on election strategy.
And while that's politics, in this case it's economics, because it's people making economic actions for political reasonings. Which we will see how political the FED's gotten because if they want to prove impartiality it means a FED fighting the politicians actions, one throwing gas on the inflation fire as another dousing it in water. Question is, does someone decide to bring the napalm vs gas?
Imagine home buyer stimulus, NINJa 2.0, at same time as cranking rates up even more. That would be an interesting bubble. No doc stated income 40yr mortgages for all..... at 16.7% interest rate..... but don't worry it's only 4% the first 2 years...... than resetting to full impact..... Lol, could get interesting, 1-hand fighting the other.

Yessir, this could get very interesting indeed.....possibly the most interesting year in our history.
And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......

This is the first time USA is acting like Africa fourth-world country that they blocked presidential candidate by using a "judge".

Also take a look at how Elon Musk is treated when they're not voicing the same song as the elites.
Something really broken in America.
4 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
2y
Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

Quote from @Bruce Woodruff:

All good points @Chris Seveney... I agree (mostly) except something tells me that come spring we will see a change in the RE market......more 'back to normal' for lack of a better term.
With the interest rates likely IMO to drop (Due to the upcoming election and the current Prez putting pressure on the Fed) combined with the built-up pressure from the market being stagnant in '23, there has to be a release of sorts. I see a temporary seller's market with higher prices along with slightly more inventory.....turning into more of a buyer's market by mid-year up to the election, and then who knows...?
I could be completely wrong though....

Keep in mind that in the past 100 years not 1 sitting president has EVER been re-elected during a recession / economic hardship created under there watch.
With that in mind, which political strategists well know front of mind, consider polling #'s. I lend 40:1 odd's of some action of significance to attempt some manner to flip polling #'s. It's not much of a prediction as it's more just reciting from the political play-book on election strategy.
And while that's politics, in this case it's economics, because it's people making economic actions for political reasonings. Which we will see how political the FED's gotten because if they want to prove impartiality it means a FED fighting the politicians actions, one throwing gas on the inflation fire as another dousing it in water. Question is, does someone decide to bring the napalm vs gas?
Imagine home buyer stimulus, NINJa 2.0, at same time as cranking rates up even more. That would be an interesting bubble. No doc stated income 40yr mortgages for all..... at 16.7% interest rate..... but don't worry it's only 4% the first 2 years...... than resetting to full impact..... Lol, could get interesting, 1-hand fighting the other.

Yessir, this could get very interesting indeed.....possibly the most interesting year in our history.
And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......

This is the first time USA is acting like Africa fourth-world country that they blocked presidential candidate by using a "judge".

Also take a look at how Elon Musk is treated when they're not voicing the same song as the elites.
Something really broken in America.

And, in this digital age, with TX now the 8th largest economy in the world among nations, does TX really "need" the Federal Union any longer? Is the Union more an asset, or a negative? These actions are now starting to press things to such considerations.
When prospect of alternatives is removing such lead boot's, and remaining in top 10 of national economies..... it's viable....
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Bruce Woodruff:

Quote from @James Hamling:

And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......
There's no need to follow money trail. The Fed is working for JP Morgan and Blackrock capital.
1 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
2y
Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......
There's no need to follow money trail. The Fed is working for JP Morgan and Blackrock capital.

Well you just came out and said it. Love ya Bro...!
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Bruce Woodruff:

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......
There's no need to follow money trail. The Fed is working for JP Morgan and Blackrock capital.

Well you just came out and said it. Love ya Bro...!

we need structural changes in America. We need to replace Fed with AI or automatic policy.
we can't keep 5 people BS-ing the entire population of planet earth.
2 Reply
J. Mitchell Bernier
Lender · Southwest Georgia · Member since 2017 · 315 posts · 278 votes
2y
Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:
1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)
2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.
3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.
4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.
5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.
So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…
However once we are pro in RE we know we can crush that number by investing properly.
2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol

By Pivot year, are you referring the Fed pivot or are you saying its pivotal in regards to the structural changes that could be coming as @James Hamling is mentioning when it comes to the FED action?
My day job is an AVP for a community bank so I follow closely on the bank side and the investor side. From what I am seeing, the FED will do more as the BTFP has grown over 20% just this month and outlook for certain sectors, manufacturing and agriculture, are not pretty. Couple that with a Consumer who has been fighting inflation on gas and groceries, and as James mentioned, could be fighting more rent increases. So if they do nothing and let the BTFP just expire, liquidity in the markets will be toast. Which as we have all mentioned is unlikely in an election year.
Question is how much does Washington and the FED do?
2 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @J. Mitchell Bernier:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:
1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)
2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.
3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.
4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.
5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.
So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…
However once we are pro in RE we know we can crush that number by investing properly.
2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol

By Pivot year, are you referring the Fed pivot or are you saying its pivotal in regards to the structural changes that could be coming as @James Hamling is mentioning when it comes to the FED action?
My day job is an AVP for a community bank so I follow closely on the bank side and the investor side. From what I am seeing, the FED will do more as the BTFP has grown over 20% just this month and outlook for certain sectors, manufacturing and agriculture, are not pretty. Couple that with a Consumer who has been fighting inflation on gas and groceries, and as James mentioned, could be fighting more rent increases. So if they do nothing and let the BTFP just expire, liquidity in the markets will be toast. Which as we have all mentioned is unlikely in an election year.
Question is how much does Washington and the FED do?

Both .. Fed pivot because they are panicking or part of the plan

I heard btfp growing because banks wanna do risk free arbitrage ? Not sure about that but make sense
0 Reply
J. Mitchell Bernier
Lender · Southwest Georgia · Member since 2017 · 315 posts · 278 votes
2y
Quote from @Carlos Ptriawan:

Quote from @J. Mitchell Bernier:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:
1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)
2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.
3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.
4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.
5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.
So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…
However once we are pro in RE we know we can crush that number by investing properly.
2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol

By Pivot year, are you referring the Fed pivot or are you saying its pivotal in regards to the structural changes that could be coming as @James Hamling is mentioning when it comes to the FED action?
My day job is an AVP for a community bank so I follow closely on the bank side and the investor side. From what I am seeing, the FED will do more as the BTFP has grown over 20% just this month and outlook for certain sectors, manufacturing and agriculture, are not pretty. Couple that with a Consumer who has been fighting inflation on gas and groceries, and as James mentioned, could be fighting more rent increases. So if they do nothing and let the BTFP just expire, liquidity in the markets will be toast. Which as we have all mentioned is unlikely in an election year.
Question is how much does Washington and the FED do?

Both .. Fed pivot because they are panicking or part of the plan

I heard btfp growing because banks wanna do risk free arbitrage ? Not sure about that but make sense

Yes that is part of it, but as technically the program ends next march and then you have a year to pay it back. So unless you are flush with cash, and most banks aren't now, and you match up duration, which as SVB showed us that many don't, it is not really the best play.
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

And the FED has never been apolitical. Who appoints the Head? And who can fire them? Always follow the money trail......
There's no need to follow money trail. The Fed is working for JP Morgan and Blackrock capital.

Well you just came out and said it. Love ya Bro...!

we need structural changes in America. We need to replace Fed with AI or automatic policy.
we can't keep 5 people BS-ing the entire population of planet earth.

Wrong. I am here to serve.
2 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Nicholas L.:

@James Hamling
thanks, great point about taxes and other costs going up and offsetting a slight decline in rates. I guess that will be somewhat market specific. what impact do you think that will have on rents?
RTP is going to tighten. By default it has to given all these.. Now is it both going down, with price a higher amount. I can't really tell. But it's going to tighten.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Jay Hinrichs:

I think the Auto industry is in for a wild ride.. I think mom and pop will prioritize a home to live in before spending 100k on a SUV with 1500 dollar payments. younger folks will realize rent is a loser and try harder to be home owners in the better cities markets of the US.
Investment property will continue to sell for what an investor will pay for a given cash flow. This mindset changes over time up and down.

You'll go with 1 car family lifestyle. Or if young single whippersnapper or couple, no car & live near the action. 100% going that trend.
Forget just Opex that's going to be passed through, it's also going to make some investors sell. The issue on the price point of houses will remain affordability so it'll come down due to unemployment and be spurred by rate decreases & incentive packages. The supply issue now a bearish sentiment than a bullish one anymore; everyone already factors we are at just ridiculously low levels supply so any uptick is net bearish on RE.
I see supply coming on strongly due to various reasons-- agents pushing Q2 lists, people willing to swap interest rates when they are lower, etc-- which is going to negatively impact pricing to at best flattish for 2024. Combine that with I believe an uptick in rental pricing--- we lead to a tighter RTP. I think this Q2 won't be like previous one's except for a quick pump fake in the market by the rate "drop". Once people realize how insignificant .25 is they'll quickly go back to realizing this isn't sustainable still. Sub 6% primaries will get people thinking, sub 5.5%% will get people moving, sub 5% for an extended period will first be a buyers market then move to a sellers market. We will see if there will be an incentive program to boost home buying, and wonder how conditional that'll be.(primary only, no investor benefits).

0 Reply
Chris SeveneyBusiness Member
Moderator
OP
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
I agree. If we are all being honest, not one of us posting has any clue what’s gonna happen we all can come up with our best guess based on historical data. I love data but also go with my gut on what I sense. If I am right great, wrong it’s ok too as long as I have my business ready to pivot based on what’s going on
One thing I did see yesterday that I thought was interesting was the fed funds rate is targeted to be 4.75% by end of next year (current target - if it’s lower then economy is going worse than anticipated), but back in 2005-2007 ish that’s where the fed funds rate say and rates were in the high 5’s to mid 6’s. Again 10 year treasury and other factors play a role but just sharing some data. Also I do not believe there has ever been a time when fed funds rate was higher than mortgage rates
7e investments53 Reviews
Website View Page
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
most banks prediction these days doesn't come up with 1 forecast but they come into 4 scenario, what happen if there's hard landing , no landing, soft landing or we take off LOL
but most banks are in agreement gdp growth is lower than 2023 and unemployment is higher too so they're all agree that main economy is midly bearish at very least
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Chris Seveney:

I agree. If we are all being honest, not one of us posting has any clue what’s gonna happen we all can come up with our best guess based on historical data. I love data but also go with my gut on what I sense. If I am right great, wrong it’s ok too as long as I have my business ready to pivot based on what’s going on
One thing I did see yesterday that I thought was interesting was the fed funds rate is targeted to be 4.75% by end of next year (current target - if it’s lower then economy is going worse than anticipated), but back in 2005-2007 ish that’s where the fed funds rate say and rates were in the high 5’s to mid 6’s. Again 10 year treasury and other factors play a role but just sharing some data. Also I do not believe there has ever been a time when fed funds rate was higher than mortgage rates

So then we know it won't be 4.75% by EOY 2024, when the Fed puts its projections people work around it to only create the new reality. I expect it to be 4% by EOY 2024, possibly 3.5-3.75%. If it's truly 4.75% it means mortgages will be that 5.5%-6% for primaries-- so anxiously looking but undecided and likely still unqualified for a lot of buyers who have increased DTI, less downpayment, and with YoY house price increases in 2023.

This will make sellers see 5.5% as attractive to swap(relative to 7.5%) and put theirs on the market, not understanding buyers still can't really buy. The sweet spot to get the interest is 6%, the 5.5% is where activity starts but 5% & sub is where the real activity starts and starts coming to that 5-6 month housing supply stock in my opinion. This is where RTP will tighten, and the current regime will either gets rate their by Q4 24 or keeping it high 5s and doing some form of incentive stimulus to promote buying and propping houses again.

If 4.75% is true--it also means a ton of businesses cannot operate, so we'll see unemployment unravel. Right now the Fed's fight is business life cycle debt, they are probably projecting 4.75% to let the public know to not slip up inflation wise, but the truth is business life cycle is the #1 concern in 2024. If that is not managed properly, we face deflation and a true hard landing that'll be a noteworthy one. And there are some theories of this being the emphasis, create a real hard landing and then go back to low fed funds for another 5-7 years to get it out of it and continue the wealth accumulation and separation.
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
If 4.75% is true--it also means a ton of businesses cannot operate --> With current Fed rate Amazon already can not operate , except by laying off people.
1 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
2y
Well, I'll throw my best guess on the residential market out here as well (and I'll leave notes to Chris):

1.) We are going to see more transactions in 2024, but not sure if that will mean more inventory. A lot of people have postponed selling and buying because they were rate-cuffed and now they don't want to wait anymore. Buyer's are ready to absorb, especially with lower rates. So if that translates to an increase of inventory will variy market by market. In some we will see supply go from 2 months to 3 months, but it would take 5-6 months for the market to be considered a buyers market. As for Milwaukee, I am expecting demand to outpace supply.

2.) Rates will come down faster than MBA/NAR are currently forecasting. 10Y treasuries are comming down, but also the risk-premium spread to 30Y fixed will normalize as the perceived risk of a housing market crash is shrinking. We may see 5%-ish rates by spring/summer. (But I have a feeling not lower than 5.0%) However, in comparison, the RE market will like this much better than 8.25%

3.) Real estate prices: home prices are downward sticky. This effect is very powerful. If a seller does not have to sell, they will simply wait for better times before they reduce the price on their home. There will be some markets where we see prices stagnate or even go down a little, but not in a meaningful way. Especially markets that have seen an exuberance and are way above the US average. Prices in the Midwest are likely to creep up towards the US average as people will continue to work remote and move to lower priced markets.

4.) Wages will increase faster than inflation. We have seen this for a few moneths now, I believe this will continue in 2024. The labor market is still tight, profits still good, wages tend to lag behind inflation, but will catch up eventually as they always have since the beginning of the USD. Unemplyment rate is a depression aera metric: we have a different issue now: our work force is declining by half a million to a million per year due to demographics. Boomers retire, not enough zoomers. This creates a never seen before shrinking work force companies have to compete for by pushing up wages. This will ease affordability and normalize home prices.

5.) Rents will remain high and go sideways in most markets, with the exception of where new construction has been running hot causing move in specials. Rents are more fluent than home prices, but before we see rents come down, we will see move in specials and promotions go up. In many markets rents will remain high, in some rents will go at the rate of wage increases.

6.) Migration: in a few weeks we will see the new UHAUL migration report. The strongest trend will probably remain the migration from north to south (FL, TX, NC), out of CA and IL and also a little more away from heat, water shortage, wild fire smoke and storms.

Real estate markets move so slow, that short term is realitvley easy to predict based on leading indicators. Long term 10-30 years is also relativley easy based on historic averages. The hardest part is the space between 1 and 5 years. But for my local market I am bullish, so we continue to grow our rental protfolio, maybe I can still get a few more AO's before the spring market hits us. I also want to make more YouTube videos about Milwaukee RE in 2024 and get my team back to $50M in sales, which is where we have peaked in 2022.
5 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Carlos Ptriawan:

If 4.75% is true--it also means a ton of businesses cannot operate --> With current Fed rate Amazon already can not operate , except by laying off people.

Two ways to look at this.
1. Let it crash and the HYSA & Tbill holders can scoop up after tapping some reserves to survive. Creating a larger divide.
2. It's wrong, but they have to project to keep people on their feet. Fed's meeting earlier this month to me tells me it's wrong, they know very well business life cycle is #1 agenda on 2024 but cannot state that right now. Probably cannot till closer to election.
1 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
2y
Quote from @J. Mitchell Bernier:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:
1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)
2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.
3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.
4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.
5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.
So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…
However once we are pro in RE we know we can crush that number by investing properly.
2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol

By Pivot year, are you referring the Fed pivot or are you saying its pivotal in regards to the structural changes that could be coming as @James Hamling is mentioning when it comes to the FED action?
My day job is an AVP for a community bank so I follow closely on the bank side and the investor side. From what I am seeing, the FED will do more as the BTFP has grown over 20% just this month and outlook for certain sectors, manufacturing and agriculture, are not pretty. Couple that with a Consumer who has been fighting inflation on gas and groceries, and as James mentioned, could be fighting more rent increases. So if they do nothing and let the BTFP just expire, liquidity in the markets will be toast. Which as we have all mentioned is unlikely in an election year.
Question is how much does Washington and the FED do?
That is, in my opinion and outlook, the million dollar question. There is exceptional volatility in politics today, making it very difficult to lend any direction of prediction with any level of accuracy. In short, anything is truly possible at this point, there is significant forces pulling every which direction.

I would say best case is that given political climate, those in control of economic directions take a step back from all political influence as it poses a no-win scenario, and heavily relies upon guidance, direction and leadership from economic/finance professionals to a degree much more significant degree than prior. A stance similar to militaries stance of staying apolitical. Unfortunately that's probably just me day dreaming.
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

If 4.75% is true--it also means a ton of businesses cannot operate --> With current Fed rate Amazon already can not operate , except by laying off people.

Two ways to look at this.
1. Let it crash and the HYSA & Tbill holders can scoop up after tapping some reserves to survive. Creating a larger divide.
2. It's wrong, but they have to project to keep people on their feet. Fed's meeting earlier this month to me tells me it's wrong, they know very well business life cycle is #1 agenda on 2024 but cannot state that right now. Probably cannot till closer to election.

it is number two.
fed methodology and indicator is too laggard to sustain 2023 economics, even if you ask powell personally he doesn't know what he's doing.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

If 4.75% is true--it also means a ton of businesses cannot operate --> With current Fed rate Amazon already can not operate , except by laying off people.

Two ways to look at this.
1. Let it crash and the HYSA & Tbill holders can scoop up after tapping some reserves to survive. Creating a larger divide.
2. It's wrong, but they have to project to keep people on their feet. Fed's meeting earlier this month to me tells me it's wrong, they know very well business life cycle is #1 agenda on 2024 but cannot state that right now. Probably cannot till closer to election.

it is number two.
fed methodology and indicator is too laggard to sustain 2023 economics, even if you ask powell personally he doesn't know what he's doing.

I'm betting on #2, too. Powell knows this, and even politics knows this. We can't sustain north of 4% for too much longer. We're not trying to purposefully create a crash, so he will pivot aggressively when this time comes and believe it or not-- create a softish landing.
I don't think he's clueless, I think he's just playing us for stupid. He knows very well what sentiment he has to sell versus what he needs to do. His playbook as being drawn up and if executed like we anticipate will be arguably the very best way to get out of this rut now that he started the increase in hikes so quick. I think he regrets the escalating rates, and should have done it differently but if it comes out the way we think it does then maybe I am sure he is happy with a result.
If we have a quick, shallow little recession for 3-6 months mid 2024 that's pretty solid.
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @James Hamling:

Quote from @J. Mitchell Bernier:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:
1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)
2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.
3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.
4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.
5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.
So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…
However once we are pro in RE we know we can crush that number by investing properly.
2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol

By Pivot year, are you referring the Fed pivot or are you saying its pivotal in regards to the structural changes that could be coming as @James Hamling is mentioning when it comes to the FED action?
My day job is an AVP for a community bank so I follow closely on the bank side and the investor side. From what I am seeing, the FED will do more as the BTFP has grown over 20% just this month and outlook for certain sectors, manufacturing and agriculture, are not pretty. Couple that with a Consumer who has been fighting inflation on gas and groceries, and as James mentioned, could be fighting more rent increases. So if they do nothing and let the BTFP just expire, liquidity in the markets will be toast. Which as we have all mentioned is unlikely in an election year.
Question is how much does Washington and the FED do?
That is, in my opinion and outlook, the million dollar question. There is exceptional volatility in politics today, making it very difficult to lend any direction of prediction with any level of accuracy. In short, anything is truly possible at this point, there is significant forces pulling every which direction.

I would say best case is that given political climate, those in control of economic directions take a step back from all political influence as it poses a no-win scenario, and heavily relies upon guidance, direction and leadership from economic/finance professionals to a degree much more significant degree than prior. A stance similar to militaries stance of staying apolitical. Unfortunately that's probably just me day dreaming.

Politics will 100% get involved, that'll happen the closer we see some blood dripping versus November. So I anticipate that early-midish Q2.
I hope I am wrong, but I just can't fathom where politics stay out of this.
2 Reply
Chris Wilson
Coupeville, WA · Member since 2016 · 93 posts · 73 votes
2y
Quote from @Marcus Auerbach:

Well, I'll throw my best guess on the residential market out here as well (and I'll leave notes to Chris):

1.) We are going to see more transactions in 2024, but not sure if that will mean more inventory. A lot of people have postponed selling and buying because they were rate-cuffed and now they don't want to wait anymore. Buyer's are ready to absorb, especially with lower rates. So if that translates to an increase of inventory will variy market by market. In some we will see supply go from 2 months to 3 months, but it would take 5-6 months for the market to be considered a buyers market. As for Milwaukee, I am expecting demand to outpace supply.

2.) Rates will come down faster than MBA/NAR are currently forecasting. 10Y treasuries are comming down, but also the risk-premium spread to 30Y fixed will normalize as the perceived risk of a housing market crash is shrinking. We may see 5%-ish rates by spring/summer. (But I have a feeling not lower than 5.0%) However, in comparison, the RE market will like this much better than 8.25%

3.) Real estate prices: home prices are downward sticky. This effect is very powerful. If a seller does not have to sell, they will simply wait for better times before they reduce the price on their home. There will be some markets where we see prices stagnate or even go down a little, but not in a meaningful way. Especially markets that have seen an exuberance and are way above the US average. Prices in the Midwest are likely to creep up towards the US average as people will continue to work remote and move to lower priced markets.

4.) Wages will increase faster than inflation. We have seen this for a few moneths now, I believe this will continue in 2024. The labor market is still tight, profits still good, wages tend to lag behind inflation, but will catch up eventually as they always have since the beginning of the USD. Unemplyment rate is a depression aera metric: we have a different issue now: our work force is declining by half a million to a million per year due to demographics. Boomers retire, not enough zoomers. This creates a never seen before shrinking work force companies have to compete for by pushing up wages. This will ease affordability and normalize home prices.

5.) Rents will remain high and go sideways in most markets, with the exception of where new construction has been running hot causing move in specials. Rents are more fluent than home prices, but before we see rents come down, we will see move in specials and promotions go up. In many markets rents will remain high, in some rents will go at the rate of wage increases.

6.) Migration: in a few weeks we will see the new UHAUL migration report. The strongest trend will probably remain the migration from north to south (FL, TX, NC), out of CA and IL and also a little more away from heat, water shortage, wild fire smoke and storms.

Real estate markets move so slow, that short term is realitvley easy to predict based on leading indicators. Long term 10-30 years is also relativley easy based on historic averages. The hardest part is the space between 1 and 5 years. But for my local market I am bullish, so we continue to grow our rental protfolio, maybe I can still get a few more AO's before the spring market hits us. I also want to make more YouTube videos about Milwaukee RE in 2024 and get my team back to $50M in sales, which is where we have peaked in 2022.

On point #4 I was surprised by this article I read today about older workers in the work force.
https://www.seattletimes.com/explore/careers/older-workers-a...
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Chris Wilson:

Quote from @Marcus Auerbach:

Well, I'll throw my best guess on the residential market out here as well (and I'll leave notes to Chris):

1.) We are going to see more transactions in 2024, but not sure if that will mean more inventory. A lot of people have postponed selling and buying because they were rate-cuffed and now they don't want to wait anymore. Buyer's are ready to absorb, especially with lower rates. So if that translates to an increase of inventory will variy market by market. In some we will see supply go from 2 months to 3 months, but it would take 5-6 months for the market to be considered a buyers market. As for Milwaukee, I am expecting demand to outpace supply.

2.) Rates will come down faster than MBA/NAR are currently forecasting. 10Y treasuries are comming down, but also the risk-premium spread to 30Y fixed will normalize as the perceived risk of a housing market crash is shrinking. We may see 5%-ish rates by spring/summer. (But I have a feeling not lower than 5.0%) However, in comparison, the RE market will like this much better than 8.25%

3.) Real estate prices: home prices are downward sticky. This effect is very powerful. If a seller does not have to sell, they will simply wait for better times before they reduce the price on their home. There will be some markets where we see prices stagnate or even go down a little, but not in a meaningful way. Especially markets that have seen an exuberance and are way above the US average. Prices in the Midwest are likely to creep up towards the US average as people will continue to work remote and move to lower priced markets.

4.) Wages will increase faster than inflation. We have seen this for a few moneths now, I believe this will continue in 2024. The labor market is still tight, profits still good, wages tend to lag behind inflation, but will catch up eventually as they always have since the beginning of the USD. Unemplyment rate is a depression aera metric: we have a different issue now: our work force is declining by half a million to a million per year due to demographics. Boomers retire, not enough zoomers. This creates a never seen before shrinking work force companies have to compete for by pushing up wages. This will ease affordability and normalize home prices.

5.) Rents will remain high and go sideways in most markets, with the exception of where new construction has been running hot causing move in specials. Rents are more fluent than home prices, but before we see rents come down, we will see move in specials and promotions go up. In many markets rents will remain high, in some rents will go at the rate of wage increases.

6.) Migration: in a few weeks we will see the new UHAUL migration report. The strongest trend will probably remain the migration from north to south (FL, TX, NC), out of CA and IL and also a little more away from heat, water shortage, wild fire smoke and storms.

Real estate markets move so slow, that short term is realitvley easy to predict based on leading indicators. Long term 10-30 years is also relativley easy based on historic averages. The hardest part is the space between 1 and 5 years. But for my local market I am bullish, so we continue to grow our rental protfolio, maybe I can still get a few more AO's before the spring market hits us. I also want to make more YouTube videos about Milwaukee RE in 2024 and get my team back to $50M in sales, which is where we have peaked in 2022.

On point #4 I was surprised by this article I read today about older workers in the work force.
https://www.seattletimes.com/explore/careers/older-workers-a...

we are in structural job market changes in USA (older workers coming back, people with two jobs at all time high,etc).

Next year estimate GDP growth is 0.7-1.0%
Last time it happened like these was 2009.

yes the greatest GFC after 2008 upon us. Would be fun to watch.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.