Rates droping a good thing?
Zachary StanleyBusiness Member
Real Estate Agent · Bentonville, AR · Member since 2021 · 17 posts · 23 votesRates droping a good thing?
Most Popular Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votesIf rates are dropped into the mid to low 5s, we're in a recession. That completely destroys your demand thought process.
If rates drop even lower than that, then locked-in rate holders are going to become amenable to selling. So we just hit demand hard and now are increasing supply. We already knew supply was limited, but now it's increasing. What does that do to prices?
All of this is local & regional, but for sure we know the RTP and affordability crisis are probably at their worst points. This will tighten, undoubtedly.
31 Replies
- Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes2y
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
- Member since 2019 · 7k+ posts · 4k+ votes2y
every market is very different right now, for CA it would mean higher price but for FL/TX I am sure it leads to more drops, inventory dynamics are much more relevant than interest rate imo.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes2y
If mortgage rates drop into the 5s, it's because the economy is suffering and that will impact demand.
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
If rates are dropped into the mid to low 5s, we're in a recession. That completely destroys your demand thought process.
If rates drop even lower than that, then locked-in rate holders are going to become amenable to selling. So we just hit demand hard and now are increasing supply. We already knew supply was limited, but now it's increasing. What does that do to prices?
All of this is local & regional, but for sure we know the RTP and affordability crisis are probably at their worst points. This will tighten, undoubtedly.
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Mike D.:
Rates aren't going back to 3% though. They'll be stuck at 5-6% for all of next year if not longer. From what I've seen, high rates have done little to stem the real estate frenzy in the mid-lower priced real estate.
It's done almost everything. Go put lower rates and watch how supply now shows up. We're at what 3 months of supply right now? Go put a primary at 4% and watch it move to 6 months quickly.
A strong decrease in rates means three things-- the economy has been hit, the average consumer has likely been hit harder, and sellers are going to be more open to selling. It's all bearish for real estate. I don't think there's a "crash" imminent, besides maybe in a few markets(Idaho, Montana, South Florida), but there'll be a nice correction.
- 2yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Zachary Stanley:
As all of us know the rates dropping for 2024 have had your average realtor and lender running to facebook to post about how great 2024 is going to be.
I happen to be in the other boat... if you take the same amount of inventory then drop the rates its a recipe for another real estate frenzy.
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
The time to get your deals as investors is now not in the spring or summer of 2024. Thats why me and my investors have been buying the last year. If you can make something work now with current rates you can for sure make it work down the road.
I say all of this knowing that you can find deals in ANY market... But I would love to know what you all are thinking. I would love opposing outlooks that yall may have. What do we think?
Agreed - we may be looking back at this winter as a huge opportunity to scoop up before the market starts raging back up again
Harpoon Capital514 Reviews - 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven, there is so much amiss when we think cash on the sidelines is coming into residential RE.
- Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes2y
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is. - 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.CA is the one of the most disassociated markets. That is a horrible example to use, it's like telling me south of 5th in Miami. Look at the average markets, that's more what I am referring to. Go check out other strong-ish markets--- Raleigh, Nashville, Austin. See how they're faring this year. Then see what I wrote above and wrote earlier in this thread. It'll be a better pulse. Obviously every market is different, I'm talking as an average.
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votesQ4 2024 and Q1 2024 may be the market highs this year.
Quote from @Robin Simon:
Quote from @Zachary Stanley:
As all of us know the rates dropping for 2024 have had your average realtor and lender running to facebook to post about how great 2024 is going to be.
I happen to be in the other boat... if you take the same amount of inventory then drop the rates its a recipe for another real estate frenzy.
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
The time to get your deals as investors is now not in the spring or summer of 2024. Thats why me and my investors have been buying the last year. If you can make something work now with current rates you can for sure make it work down the road.
I say all of this knowing that you can find deals in ANY market... But I would love to know what you all are thinking. I would love opposing outlooks that yall may have. What do we think?
Agreed - we may be looking back at this winter as a huge opportunity to scoop up before the market starts raging back up again
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.Both of you is correct actually, based on Citibank family office survey, most family office ae going to do this in 2024:
- move higher allocation to institution grade debt investment in the range of 25%
- direct real estate investment (rental) in the range of 10% - Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.For us in CA we are sustainable because our income is large (400k per HH) and money keep flowing to tech sector.
For other guy they are not sustainable as it's based on investment or migration.
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Carlos Ptriawan:
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.Both of you is correct actually, based on Citibank family office survey, most family office ae going to do this in 2024:
- move higher allocation to institution grade debt investment in the range of 25%
- direct real estate investment (rental) in the range of 10%How does 10% fair versus other years? I would think 10% is lower than normal, but could be wrong. The 25% debt allocation range must be among the highest in the last 10-12 years.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @V.G Jason:
Quote from @Carlos Ptriawan:
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.Both of you is correct actually, based on Citibank family office survey, most family office ae going to do this in 2024:
- move higher allocation to institution grade debt investment in the range of 25%
- direct real estate investment (rental) in the range of 10%How does 10% fair versus other years? I would think 10% is lower than normal, but could be wrong. The 25% debt allocation range must be among the highest in the last 10-12 years.
The small office is not stupid right.
they now as yield goes higher for longer , risk/reward basis it's more advantageous to invest into debt/lending than equity.
It's just math rather than trend.
why in the world you one to invest to 11% equity if you could have do-nothing 9% debt lol
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Carlos Ptriawan:
Quote from @V.G Jason:
Quote from @Carlos Ptriawan:
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.Both of you is correct actually, based on Citibank family office survey, most family office ae going to do this in 2024:
- move higher allocation to institution grade debt investment in the range of 25%
- direct real estate investment (rental) in the range of 10%How does 10% fair versus other years? I would think 10% is lower than normal, but could be wrong. The 25% debt allocation range must be among the highest in the last 10-12 years.
The small office is not stupid right.
they now as yield goes higher for longer , risk/reward basis it's more advantageous to invest into debt/lending than equity.
It's just math rather than trend.
why in the world you one to invest to 11% equity if you could have do-nothing 9% debt lol
Right which is why I think the RE allocation is lower than usual. And why I say smart money is going to debt, small cap, intl, not RE first. RE exposure will be there, just not this large allocation that BP thinks.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @V.G Jason:
Quote from @Carlos Ptriawan:
Quote from @V.G Jason:
Quote from @Carlos Ptriawan:
Quote from @Account Closed:
Quote from @V.G Jason:
Quote from @Account Closed:
If you pair the dropping of the rates and same amount of inventory with letting the population get used to 6-7% rates then drop them back in the 5's the market will be flooded with buyers again.
100% agree here. To much cash on the sidelines to expect a huge drop in the near future IMHO
Cash on the sidelines isn't going to get invested in residential RE. The cash that is going to get invested in residential RE is already employed by buying properties with limited to no leverage. If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction.
Cash will be getting progressively tied up in debt funds, small cap growth opportunities, international investing, basic S&P and some held for a short-term debt basis to enter CRE.
You think everyone just stock piles cash for RE? Come on, the smart money is betting on a dip or if no dip you lock in high yield debt funds at the turn of the rates and investing in small cap areas that need to tighten to the large cap ratio wise. The American market isn't strictly RE driven.
I think there is a bit more nuance here, tho I see what your saying.
"If cash on the sidelines comes into RE-- it's cause there is a crash or a massive correction." - I do think this is largely incorrect, take a look at the CA real estate market for example. Folks with deep pockets are more then willing to buy stuff at 4 and 5% cap rates right now as is.Both of you is correct actually, based on Citibank family office survey, most family office ae going to do this in 2024:
- move higher allocation to institution grade debt investment in the range of 25%
- direct real estate investment (rental) in the range of 10%How does 10% fair versus other years? I would think 10% is lower than normal, but could be wrong. The 25% debt allocation range must be among the highest in the last 10-12 years.
The small office is not stupid right.
they now as yield goes higher for longer , risk/reward basis it's more advantageous to invest into debt/lending than equity.
It's just math rather than trend.
why in the world you one to invest to 11% equity if you could have do-nothing 9% debt lol
Right which is why I think the RE allocation is lower than usual. And why I say smart money is going to debt, small cap, intl, not RE first. RE exposure will be there, just not this large allocation that BP thinks.
yea and they are not stupid either because they know each local RE has more dependencies to supply-demand dynamics rather than interest rate alone.
this is why even for hedge fund, they only purchase in certain area in bay area only like in cupertino or sunnyvale where it's good school district and next to Apple. They never invest in oakland for example due to those location has highest crime rate in bay area.
so expecting all market to work in parallels was bit inaccurate...
my forecast never inaccurate since 2009 when I examine this aspect in more detail.
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
I don't know that all of us do know that rates are dropping for 2024. Predictions are hard. Seems like they will, but no one knows by how much nor what exact impact this will have.
My plan is: buy real estate
- Member since 2019 · 7k+ posts · 4k+ votes2y
what's certain is Fed is already in bankruptcy is they follow standard accounting practice like a bank.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Nicholas L.:
I don't know that all of us do know that rates are dropping for 2024. Predictions are hard. Seems like they will, but no one knows by how much nor what exact impact this will have.
My plan is: buy real estate
I am going to buy in 2024 if there're massive 60% ARV only lol ... i'm heck so scared with this market, 2024 would be over in 363 days anyway.....better be patient in this crazy times.... wait and see..wait and buy later....
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Sri K.:
there wont be a frenzy imo because people wont forget so soon about the losses/drops in the last year.
This.
This will also be more emotional than logical, never forget that. I am still intending to fully buy and get my portfolio growing: lots of LTR and few quality STRs. I dollar cost average, more or less, with this too.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @V.G Jason:
Quote from @Sri K.:
there wont be a frenzy imo because people wont forget so soon about the losses/drops in the last year.
This.
This will also be more emotional than logical, never forget that. I am still intending to fully buy and get my portfolio growing: lots of LTR and few quality STRs. I dollar cost average, more or less, with this too.
market psychology has changes dramatically , under the surface high net worth individual is asking for redemptions. While low income earner living check by paycheck and that's the reality. Buy cautiously.
- Investor · CO · Member since 2016 · 757 posts · 1k+ votes2y
Depends on what your strategy benefits from.
- 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
There are always going to be people buying real estate for different reasons regardless of interest rates. We don't know what the rates will do (other than they won't be the record low rates we've had for the last ~10 years). If you find a place where the numbers make sense, buy it.
People buying for their personal residence are going to have enough for a down payment and be approved for mortgages-there are always people who seem to find money to do that regardless of prices or rates. I'm in Canada and where I am, reasonably priced homes are still selling pretty quickly.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.