Are you glad that you work in real estate?

Question

SUMMARY OF FED DECISION (7/27):

• Raising interest rates by 75 basis points unanimously
• Anticipates “ongoing increases” in rates
• Affirmed plan to raise QT caps to $95B/month
• Spending indicators “softened”

The Fed is sending us into a recession to control inflation.

Real estate will collapse despite a housing shortage.

Mortgage rates have more than doubled, new home buyers will be given smaller loans, sellers will be forced to lower prices to meet demand.

People will be losing jobs unable to meet mortgage payment too.

Free fall.

IHS just downgraded first quarter growth to -2.1% others are also going negative. The second quarter will be down by double digits.

Investors are gauging whether the U.S. Federal Reserve has reached the peak of its aggressiveness in hiking rates, with some saying they’re ready to up risky positions again.

They already said they wanted to raise rates to 3.5% by the end of 2022.

Federal Reserve’s plan is to raise rates and QT aggressively, crash the market, then step in and ease when inflation is down to prevent a 1929 type of depression.

Don’t fight the FED.

Brad Jacobson · Answer

Being a numbers and econ geek, I love talking about these things and trying to predict the direction of the market. However, I've learned to love what comes no matter what because I love working in real estate.

Shifts are common and when approached with the right problem solving attitude, shifts are always good.

Yes, these spikes are going to bring prices down and continue to create a lot of fear in the market. However, us professionals set the tone and my tone is positive. I'm simply spending more time exploring creative financing and ensuring that clients who are selling, still net well (I mean look at how much equity they've built these past three years), and those who are buying take advantage of the fear in the market as much as possible to get the best deal they can.

I'm glad I work in real estate!

Ron Brady · Answer

We love working in real estate!

Low mortgage rates for years allowed us to build our portfolio and then the recent Fed quantitative easing, made our property valuations skyrocket (like most everyone elses). We now have inflation hedges in our rental properties. And all the tax benefits that come from owning real estate. Oh, and the government COVID stimulus checks ensured we never missed a single rent payment due to COVID.

Thank you, both Presidents Trump and Biden.

John M. · Answer

Here are the positives:

The good news is that the rental market will be even hotter, so current landlords and builders of multifamily can cash in!

Buyers sitting on the sidelines now don't have to compete with 7 other offers

Realtors will have more listings as inventory creeps us, thus make more commissions

Prices will come back down to earth in most markets

Savings accounts and their associated interest rates will rise!

The housing shortage still exists!

The fed has no control of gasoline prices, wage hikes, and corporate greed. People will have to go back to work and get off of the covid couch to keep up with inflation. Hopefully putting a dent in our labor shortage.

Cap rates will eventually rise and investors can seek a better return!

Are you glad that you work in real estate?

Are you glad that you work in real estate?

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