3% Rates - You either got in, or you didn't!

Philadelphia, Pennsylvania
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3% Rates - You either got in, or you didn't!

Alan AsriantsBusiness Member
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes

Today's market is much different from the market we have seen in the past 3 years

Interest rates were at an all time low for too long. This gave many people the opportunity to buy in at historically low rates.

This caused prices to go up, while keeping many people in affordable payments.

Now people don't want to let go of those rates. They are holding onto their properties like golden eggs. I don't blame them!

This is causing the supply to go way down, and in some markets even though the demand is low, the supply is not keeping up with the limited demand.

Anything that is well taken care of, in a nice and desirable area is flying off the market at even higher prices than before

This is making it extremely difficult for first time home buyers and for investors who want to see their numbers works.

Throw in the 7% interest rate, and half of the deals are dead in the water, even below asking price.

This is making it difficult for people to pull the trigger on buying Real Estate.

Another aspect of it is FOMO.

Your buddy bought a 400k house with a 3% rate. It's beautiful, everything you ever dreamed of and you want one too. But now you have to pay 450k for it at a 7.125% rate.

How does that make you feel?

Probably not good...

Until people realize that 3% rates were a "either you got in or didn't get in" kind of thing, people will find it difficult to buy.

Everyone feels good about buying a house at a 3% rate.

So if you're looking to buy a house or an investment property, you have to face reality and what the market is today.

It's likely that we won't ever see those kinds of rates.

Buy the home because you love it and you can afford it.

Buy the investment for a long term hold in a strong area. Make sure it is at least covering your expenses.

Today is not yesterday! And tomorrow you might be thinking: "I wish I bought more Real Estate when rates were 7% LOL!"

Rates can only go down or up. 

If rates go down, you can refinance

If rates go up, you would've wished you took out more debt

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Jake AndronicoBusiness Member
Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
3y

Such a good quote: 

"Rates can only go down or up.

If rates go down, you can refinance

If rates go up, you would've wished you took out more debt"

Thank you for putting these wide words out there! Couldn't agree more. 

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y
    Quote from @Alex Bekeza:

    Most of Philadelphia cash flows just fine in the 7s and 8s from what I can see on the DSCR loans we're funding there. Investors have no reason to take their foot off the gas.


     Depends what area. A and B class are practically breaking even if not losing.

    Lots of deals in SW philly, brewerytown, grays ferry, etc are projecting certain rents, but when they go to rent, they sit on the market for months, prices are forced to come down and those deals start to make less and less sense. tough to find cash flowing deals in hot rental areas.

    Where are you seeing those cash flowing properties, maybe im wrong!

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y
    Quote from @Dan H.:
    Quote from @Jake Andronico:

    Such a good quote: 

    "Rates can only go down or up.

    If rates go down, you can refinance

    If rates go up, you would've wished you took out more debt"

    Thank you for putting these wide words out there! Couldn't agree more. 


     RE prices can only go up or down.

    If prices go up, great your net worth increased.  if used as rental, chances are outstanding that rents have risen. 

    If prices go down, you will wish you had waited to buy rather than paid more than your property is currently worth.

    I am unconvinced that the finance issues affecting commercial MF (>4 units) will not impact non-commercial RE (<5 units). 

    I have not purchased since Dec 2021 (bought $4m that month).  I have no FOMO.   My underwriting does not show the return that I expect for residential RE which is not passive.   There are many investment options other than residential RE.

    The future is not ours to see …

    Good luck to all.  


     Fair, do you see that Residential RE might be capped? 

    As in, do you think making returns pre pandemic are going to be possible again in the future?

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y
    Quote from @Vlad B.:
    Quote from @Jake Andronico:

    Such a good quote: 

    "Rates can only go down or up.

    If rates go down, you can refinance

    If rates go up, you would've wished you took out more debt"

    Thank you for putting these wide words out there! Couldn't agree more. 

    Yes, except none of us have a crystal ball of which way it's going to go...
    If you do, let's talk, I'm interested.

     Exactly, no way to know. If you're buying, do it for long term, you shouldn't lose

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y
    Quote from @Corby Goade:

    I've found new investors are always waiting for something to happen that is out of their control. When rates were 3%, they were waiting for the impending "crash," they didn't want to get in to bidding wars. Well...they're still waiting. 

    Now they are waiting for rates to get back down to what they think is normal- 4ish%, which is absolutely not normal, just the only thing they know. They'll likely be waiting forever. 

    In REI the only thing that matters is taking action. There are opportunities in every market every single day. Taking actionable steps and holding properties for the long term is the only thing that will change your life. I know this is true from experience- Every property I've ever purchased has transformed from an "okay" deal the day I closed to a killer deal after 5 years or so. Not because I did anything special, I just bought a property and waited for the market to catch up.

    People always think I'm joking when they ask me what the best investing book for REI is. It's not "Rich Dad, Poor Dad," it's "Oh, The Places You'll Go," by Dr Seuess. If you haven't read it, you should. There's no simpler message on how to find success in life than that book.

    Happy Investing!


     100%!! In every market there will be people "waiting"

    Those who wait, often don't take action

    Without action there is no way to make progress!

    Going to read Dr. Suess now! LOL

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  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    3y

    @Alan Asriants Yes. We closed both loans with the sale. In affect we moved equity from one property into a cash-flowing rental, and paid zero taxes doing it. That's a win-win. 

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y
    Quote from @Alan Asriants:
    Quote from @Dan H.:
    Quote from @Jake Andronico:

    Such a good quote: 

    "Rates can only go down or up.

    If rates go down, you can refinance

    If rates go up, you would've wished you took out more debt"

    Thank you for putting these wide words out there! Couldn't agree more. 


     RE prices can only go up or down.

    If prices go up, great your net worth increased.  if used as rental, chances are outstanding that rents have risen. 

    If prices go down, you will wish you had waited to buy rather than paid more than your property is currently worth.

    I am unconvinced that the finance issues affecting commercial MF (>4 units) will not impact non-commercial RE (<5 units). 

    I have not purchased since Dec 2021 (bought $4m that month).  I have no FOMO.   My underwriting does not show the return that I expect for residential RE which is not passive.   There are many investment options other than residential RE.

    The future is not ours to see …

    Good luck to all.  


     Fair, do you see that Residential RE might be capped? 

    As in, do you think making returns pre pandemic are going to be possible again in the future?


    If commercial MF affects non commercial residential then yes.  The rent growth has been lagging the property appreciation for more than a decade.  I remember when the 1% rule was the 2% rule.  When 2% properties vanished the rule was changed.  The margins for effort of residential RE has fallen for at least 10 years.   I think if property values decline, rents will not decline as quickly.  Stats show it is cheaper to rent in virtually every market than to buy.  Add in the labor involved in being a residential provider and I claim virtually every market is relying on appreciation which we know goes up long term but goes down or is flat for shorter periods. 

    If the above scenario occurs and rates decline significantly, with a refinance the profits could be even better. 

    However, those buying financed RE today at retail (from MLS) can only make the profits of a few years ago with incredible appreciation and/or rent growth (in general). People buying retail today are purchasing properties that I would not have glanced at with same per forma just 2 years ago. They are either doing aggressive underwriting or more likely poor underwriting.

    There are a lot of investment options, most more passive than residential RE.  Some syndicators are still producing near 20% annual return.  S&p500 has lifetime return near 10%.  CDs, money market have higher returns than in decades.  RE will not always be the best investment option.  


    good luck

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  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y
    Quote from @Alan Asriants:
    Quote from @Alex Bekeza:

    Most of Philadelphia cash flows just fine in the 7s and 8s from what I can see on the DSCR loans we're funding there. Investors have no reason to take their foot off the gas.


     Depends what area. A and B class are practically breaking even if not losing.

    Lots of deals in SW philly, brewerytown, grays ferry, etc are projecting certain rents, but when they go to rent, they sit on the market for months, prices are forced to come down and those deals start to make less and less sense. tough to find cash flowing deals in hot rental areas.

    Where are you seeing those cash flowing properties, maybe im wrong!


     Lately, we've funded quite a few cash flowing rentals in 19132,19143, 19138, 19120, and 19131.

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y
    Quote from @Alex Bekeza:
    Quote from @Alan Asriants:
    Quote from @Alex Bekeza:

    Most of Philadelphia cash flows just fine in the 7s and 8s from what I can see on the DSCR loans we're funding there. Investors have no reason to take their foot off the gas.


     Depends what area. A and B class are practically breaking even if not losing.

    Lots of deals in SW philly, brewerytown, grays ferry, etc are projecting certain rents, but when they go to rent, they sit on the market for months, prices are forced to come down and those deals start to make less and less sense. tough to find cash flowing deals in hot rental areas.

    Where are you seeing those cash flowing properties, maybe im wrong!


     Lately, we've funded quite a few cash flowing rentals in 19132,19143, 19138, 19120, and 19131.





    Yep those areas make sense, cobbs creek, strawberry mansion, east oak lane, lawncrest, etc. 
    D/C-


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  • Vito Ciambriello
    Lender · United States · Member since 2019 · 9 posts · 5 votes
    3y
    Quote from @Alan Asriants:
    Quote from @Karl B.:

    You're not wrong! A few years ago I refinanced a duplex and paid down points to 2% (original refinance rate I qualified for was in the high 2%). 

    I moved out of that state but due to the insanely low rate (and the fact I rented out my side of the duplex and am now cashflowing a grand a month) it makes zero sense for me to sell unless someone came to me with a stupid offer, which is unlikely as they would have to be a cash buyer and I'm content holding as my refinance went from a 30 year FHA down to a 15 year and it's a great property and was custom built and not a junky tract duplex.

    I definitely see the sellers who want to sell instead holding for several reasons:

    -They don't want to sell and get into a high-rate mortgage

    And/or

    -They're currently in a low-rate mortgage (as you alluded to)

    And another reason is due to low inventory they don't see a property they would even consider! Or perhaps they can't even get a new loan due to banks tightening. At any rate, we won't see inventory go up until there's blood in the water and people are desperate. I think STR will definitely be the first shoe to drop if the economy gets bad.


     100%! 

    No point in selling if you're cashflowing 1k a month. That's incredible income.

    Like I said in the header - you either got in or you didn't

    The biggest winners were the investors who secured low rate debt on super high cash flowing properties - no point in them selling

    and people who just owned real estate before the pandemic. 

    they saw super high increases in equity and practically pulled out free money.

    I agree i think STR will get hit the hardest. Especially those who did not price them out as LTR

    I tell all my clients that are looking at MTR and STR to run numbers as a LTR! If it covers your basis go for it!

    Unfortunately I saw too many people buying in at AirBnB values

    I was in CO and saw Realtors marketing homes for the potenital STR income. Now they are sitting

    Great post! 

    I always advocate for investors to limit their downside risk.

    All REI numbers should be ran as long term rentals and your expenses should be exaggerated. If the deal still cash flows and makes sense, it'll be an even better investment if you can do a STR, MTR or you're able to refinance and lower your debt payments.

    The biggest mistake I've seen newer investors make is go straight for the STR without any previous ownership experience. Even though it may net you the most profit, it is more time intensive and risky to jump right into this model!

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y
    Quote from @Vito Ciambriello:
    Quote from @Alan Asriants:
    Quote from @Karl B.:

    You're not wrong! A few years ago I refinanced a duplex and paid down points to 2% (original refinance rate I qualified for was in the high 2%). 

    I moved out of that state but due to the insanely low rate (and the fact I rented out my side of the duplex and am now cashflowing a grand a month) it makes zero sense for me to sell unless someone came to me with a stupid offer, which is unlikely as they would have to be a cash buyer and I'm content holding as my refinance went from a 30 year FHA down to a 15 year and it's a great property and was custom built and not a junky tract duplex.

    I definitely see the sellers who want to sell instead holding for several reasons:

    -They don't want to sell and get into a high-rate mortgage

    And/or

    -They're currently in a low-rate mortgage (as you alluded to)

    And another reason is due to low inventory they don't see a property they would even consider! Or perhaps they can't even get a new loan due to banks tightening. At any rate, we won't see inventory go up until there's blood in the water and people are desperate. I think STR will definitely be the first shoe to drop if the economy gets bad.


     100%! 

    No point in selling if you're cashflowing 1k a month. That's incredible income.

    Like I said in the header - you either got in or you didn't

    The biggest winners were the investors who secured low rate debt on super high cash flowing properties - no point in them selling

    and people who just owned real estate before the pandemic. 

    they saw super high increases in equity and practically pulled out free money.

    I agree i think STR will get hit the hardest. Especially those who did not price them out as LTR

    I tell all my clients that are looking at MTR and STR to run numbers as a LTR! If it covers your basis go for it!

    Unfortunately I saw too many people buying in at AirBnB values

    I was in CO and saw Realtors marketing homes for the potenital STR income. Now they are sitting

    Great post! 

    I always advocate for investors to limit their downside risk.

    All REI numbers should be ran as long term rentals and your expenses should be exaggerated. If the deal still cash flows and makes sense, it'll be an even better investment if you can do a STR, MTR or you're able to refinance and lower your debt payments.

    The biggest mistake I've seen newer investors make is go straight for the STR without any previous ownership experience. Even though it may net you the most profit, it is more time intensive and risky to jump right into this model!


     Exactly!

    STR and MTR is a great way to increase cash flow, but the bigger the reward also comes with a larger risk!

    I think COVID tricked people into thinking that REI returns can be outrageous.

    The best thing you can do if you're planning on doing REI is to buy long term. You will see the results 5-10 years from now.

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  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    3y

    Inventory is ticking up and if rates stayed this high I definitely could see prices falling in many areas. This is coming from someone who did refi at 3% lol I am still buying and just offered on a place today that cashflows but its way way way harder and worse deals now forsure. 

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    3y

    Yeah, the 3% (or in some cases, 2%) rates from 2021 to the first half of 2022 have become like a weird caste system or something like that

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  • Vlad B.
    Member since 2019 · 90 posts · 56 votes
    3y
    Quote from @Henry Lazerow:

    Inventory is ticking up and if rates stayed this high I definitely could see prices falling in many areas. This is coming from someone who did refi at 3% lol I am still buying and just offered on a place today that cashflows but its way way way harder and worse deals now forsure. 


    Exactly what I'm seeing too... With the rates I offered 7% over asking on a SFR, and a MF and it would break even with 35% down payment.....and I was outbid. 5-10 years down the road, sure. But what is the thought process with no cash flow and no crystal ball?

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    3y

    @Alan Asriants You could be in the 1980's where there were historically high rates topping at 16.6.% makes these look tame.  Just run the numbers and be sure what works for you. I think people will take time to adjust to rates where money isn't practically free.  However,people are holding on to houses aquired at the low rate and that combined with less people downsizing results in less available inventory. Not sure when the tipping point will be. 

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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Henry Lazerow:

    Inventory is ticking up and if rates stayed this high I definitely could see prices falling in many areas. This is coming from someone who did refi at 3% lol I am still buying and just offered on a place today that cashflows but its way way way harder and worse deals now forsure. 


     which zip code ?

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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Colleen F.:

    @Alan Asriants You could be in the 1980's where there were historically high rates topping at 16.6.% makes these look tame.  Just run the numbers and be sure what works for you. I think people will take time to adjust to rates where money isn't practically free.  However,people are holding on to houses aquired at the low rate and that combined with less people downsizing results in less available inventory. Not sure when the tipping point will be. 


    Why the inventory is very low is because most SF is owned by OO. And 90% of OO has 75%LTV or less. They would never move. The problem is actually more into next generation especialy when this GenZ is reaching 25-30 y.o.

    In many cities in USA, purchasing home as first time *can* only be possible if both husband and mom is working. So if they're married at 26-28 they could only apply for mortgage at 30-35.

    Having said that, home ownership would become more luxurious item in the future,esp in west and east coast where avg home is 1 million. Literally, family can only purchase a house only if they could get help from their previous generation parent. If not most are screwed and end up as renter forever as good salary is hard to catch these days.

    Having said that, acquiring more property in good place is giving us more advantage down the line than even chasing a gold mine. 
    This is why price keeps rising.

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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Andrew Syrios:

    Yeah, the 3% (or in some cases, 2%) rates from 2021 to the first half of 2022 have become like a weird caste system or something like that


     I heard in Canada they offer 90 years mortgage now, I dont know if it's true or not 

    btw 3% actually means nothing if the SF is in midwest as home affordability is still cheap. Also 3% rate doesn't matter much for family weath if they only purcase one home in the last 10 years. Those who are lucky buy multiple property at higher appreciation area at 3%, then the advantage to family is more tremendeous. If one only have 3% SF they're rich in equity but maybe poor in cash.

    All these appreciation thing is mostly useful only if investor is buying multiple properties.

    1Reply
  • Stevo Sun
    Calgary, AB · Member since 2021 · 327 posts · 176 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Andrew Syrios:

    Yeah, the 3% (or in some cases, 2%) rates from 2021 to the first half of 2022 have become like a weird caste system or something like that


     I heard in Canada they offer 90 years mortgage now, I dont know if it's true or not 

    btw 3% actually means nothing if the SF is in midwest as home affordability is still cheap. Also 3% rate doesn't matter much for family weath if they only purcase one home in the last 10 years. Those who are lucky buy multiple property at higher appreciation area at 3%, then the advantage to family is more tremendeous. If one only have 3% SF they're rich in equity but maybe poor in cash.

    All these appreciation thing is mostly useful only if investor is buying multiple properties.


     There's no 90 yr mortgage in Canada. People on variable mortgage with a fixed payment have amortization shooting up,  aka. your fixed monthly payment is barely or not even covering any mortgage principal. On mortgage renewal (Canada doesn't have 30yr terms) you get lit. You need to come up with the cash or your monthly payments goes up by A LOT. 

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Andrew Syrios:

    Yeah, the 3% (or in some cases, 2%) rates from 2021 to the first half of 2022 have become like a weird caste system or something like that


     I heard in Canada they offer 90 years mortgage now, I dont know if it's true or not 

    btw 3% actually means nothing if the SF is in midwest as home affordability is still cheap. Also 3% rate doesn't matter much for family weath if they only purcase one home in the last 10 years. Those who are lucky buy multiple property at higher appreciation area at 3%, then the advantage to family is more tremendeous. If one only have 3% SF they're rich in equity but maybe poor in cash.

    All these appreciation thing is mostly useful only if investor is buying multiple properties.


     90 Year Mortgage!? LOL, why not just do interest only and be done with it?

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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Andrew Syrios:
    Quote from @Carlos Ptriawan:
    Quote from @Andrew Syrios:

    Yeah, the 3% (or in some cases, 2%) rates from 2021 to the first half of 2022 have become like a weird caste system or something like that


     I heard in Canada they offer 90 years mortgage now, I dont know if it's true or not 

    btw 3% actually means nothing if the SF is in midwest as home affordability is still cheap. Also 3% rate doesn't matter much for family weath if they only purcase one home in the last 10 years. Those who are lucky buy multiple property at higher appreciation area at 3%, then the advantage to family is more tremendeous. If one only have 3% SF they're rich in equity but maybe poor in cash.

    All these appreciation thing is mostly useful only if investor is buying multiple properties.


     90 Year Mortgage!? LOL, why not just do interest only and be done with it?


     It was all over twitter lol

    0Reply
  • Stevo Sun
    Calgary, AB · Member since 2021 · 327 posts · 176 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Andrew Syrios:
    Quote from @Carlos Ptriawan:
    Quote from @Andrew Syrios:

    Yeah, the 3% (or in some cases, 2%) rates from 2021 to the first half of 2022 have become like a weird caste system or something like that


     I heard in Canada they offer 90 years mortgage now, I dont know if it's true or not 

    btw 3% actually means nothing if the SF is in midwest as home affordability is still cheap. Also 3% rate doesn't matter much for family weath if they only purcase one home in the last 10 years. Those who are lucky buy multiple property at higher appreciation area at 3%, then the advantage to family is more tremendeous. If one only have 3% SF they're rich in equity but maybe poor in cash.

    All these appreciation thing is mostly useful only if investor is buying multiple properties.


     90 Year Mortgage!? LOL, why not just do interest only and be done with it?


     It was all over twitter lol


     Not a thing, that get fixed on renewal. 

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    If you're investing, from a position of strength, just dollar cost average your way in. You will win some, lose some. Don't get caught in timing; it's more important where & what you're investing in rather than when. You'll get lucky sometimes, unlucky in others. But again, if you're in a position of strength, it's immaterial. You'll always be net winning. 

    I'm curious to when rates come back down to say 5%-ish, and when they do, how the housing market looks then. I think the seasonality will always play a factor(a little crash end of q4, top of q1, and a rise from late q1 into early q3) but that's par for the course. I'm talking high macro level, do we see less(er) appreciation in house values due to the underlying mortgage cost(for primaries) & do we see lots of people truly holding due to rate and trying to get out as soon as they can(for a variety of reasons). Will that supply factor kill the year or two previous of it's appreciation? I don't know, it's really interesting to see.

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  • Nick Robinson
    Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 344 votes
    3y

    I would be very cautious buying RE right now. If you’re buying any RE right now it has to be CF positive using conservative underwriting. When the yield curve inverts that’s a precursor to a recession every time. Just b/c we have not had one yet does not mean it is wrong. Recessions do not happen all at once they build over time. Why would you even risk buying assets before a recession? The bond market has been projecting low growth and inflation potential. The fed raised the funds rate 525bps and the 10yr only went up 210bps.
    The bonds are telling you it was never inflation it was intervention by central planners. Shut down the world economy that caused supply shocks at the same time you have government stimulus which artificially raised demand. So it was closer to the late 1940s where there is a transitory spike in inflation. It is not like the 70s which saw a secular rise in inflation b/c lending kept increasing. Banks have been lending less since Feb. how can you have inflation w/ a decrease in lending? You may ask what is the difference the price of goods is still going up. The big difference is as that stimulus is taken out of the system the prices will come back down. Not necessarily to the same level they had been but they will still come down. 

    If you look at case Schiller home prices since 1900 there is a clear historic trend line. During the GFC it brought houses back to that trend line. If you look at Milton Friedman plucking model to get back to trend we would need to see deflation to get back to the historical trend line unless you believe something has forever changed the system. 

    The rental market has softened and we are seeing rents flat to negative. Vacancy rates are on the rise and the amount of units on the market is increasing. In the CPI shelter is the largest and a lagging component. If you look at service prices less rent over the last 6mo annualized it comes out to .6%!! We are getting close to a credit event. To make the rental market worse we have seen a record number of Multifamily Housing Units under construction at the same time vacancy is increasing. Not to mention the median rent nationwide is about a $1000 less than the median mortgage with 20% down. Monthly payments have to come down which likely will be a mixture of price and rates. 

    Like others have mentioned we haven’t even brought up $1.6T of commercial loans need to be rolled over. We all know at minimum a lot of syndicators ran very aggressive #s and we are already seeing capital calls. Add in student debt payments start in September that avg. $400/mo per person. So demand is already crashing and more discretionary money is going to go towards student bills. Yeah I am going to sit this one out. Just like in all recessions there will be a premium for safe liquid assets. Long term bonds and Precious metals. If history plays out PM will crash initially then take off. 

    2Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    3y

    I refinanced a bunch of properties and got fixed rates in the 2.5 to 2.875 range.  somebody else I know got a 2.25% fixed for 30 years (owner occupied) then got a job transfer out of state and turned their o/o into a rental.  My biggest mistake during the whole low interest cycle was NOT refinancing everything at those low fixed rates.  And I know better, as I have personal experince getting a 15% fixed mortgage for 30 years when the interest rates were peaking at the high point.  Since 1960, interest rates were never as low as 2%+ except for the last few years.  I think that its possible that we never see tose low rates again within our lifetimes.

    David Krulac, Bugger Pockets Podcast #82

    1Reply
  • Vlad B.
    Member since 2019 · 90 posts · 56 votes
    3y
    Quote from @Jake Andronico:

    Such a good quote: 

    "Rates can only go down or up.

    If rates go down, you can refinance

    If rates go up, you would've wished you took out more debt"

    Thank you for putting these wide words out there! Couldn't agree more. 

    What if...

    Buy now at break even...

    Rents go back up once inflation cools...

    And now you're sitting in a good spot when there is a frenzy to buy and prices go wild when rates eventually go down?

    1Reply
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