All Forum Posts by: AJ Wong

 Personally shopping for a primary in West San Diego and the valuations and competition is incredible. I even considered renting but suitable properties are $4500+ monthly and good luck securing one.. I've doubled down on my trajectory and investment opportunities for Coastal Oregon. No value like it on the Pacific. 

 In 2004 rates were 6-7% albeit on some creative terms. I don't think rates are 'bad' I certainly wouldn't lend anyone money for less than 10% interest...Comparatively to many countries, the terms available for US properties are quite affordable and favorable. 3% mortgage rates are what got these banks and the FED into the mess they are in. Low yielding, long term 'assets.' The reduction in borrowers obligations also artificially increased economic productivity. Where did all those mortgage and housing savings go? Consumption. To cover the increased costs of everything else. If we see 4-5% mortgage rates in the next year, we will see a historical housing market to match. 

 Couldn't agree more. The government created inflation through excessive, wasteful spending. The solution would've been monetary tightening and fiscal responsibility. The proverbial inflation genie is out of the bottle. If we used the same formula as we did in the 1970-1980's I believe it would be nearer twice the officially reported number. Great point about higher rates keeping supply low. Sadly, perhaps some of the owners will be forced to sell if economic conditions get weak enough?

 Argument could be made that we are already in a recession. The implosion of San Francisco's economy alone should be enough to make a major dent in GDP. I read today that two 1000+ room hotels with $500M in debt just announced they are closing and turning the properties over to the lender. On the other hand I have dozens of very well pre qualified clients looking to invest. Perhaps weaker economic conditions force some of those with 3-4% mortgages to sell, but if the price is lower and rates are cheaper, my assumption is that there will be buyers. Lots of them. 

 I very much agree with this. I think inflation is underreported, the metrics for the official numbers are biased or completely inaccurate and we are in a trough, and due to the suspension of US fiscal responsibility, are likely to see inflation accelerate in the next few years. However Powell is not Volcker and they cannot use the same playbook. 10% interest rates are not feasible due to the extraordinary leverage in the financial system. The goal should not be to return to 2%. An acceptable rate of inflation is 0% Anything greater further justifies investment into hard assets. 

 Very possible they hike rates as implied but I think it's a 180. Potentially another .25% once or twice, but if not consecutively or over the next six months that's essentially a pivot until cuts. I'm not a finance major but I've been a mortgage broker or intimately involved since 2004. Banks are already insolvent. They cannot take higher rates. 

This past week the FED indicated a pause in their historically paced rate tightening cycle. 

The pause in rate increases should have the effect of eventually lowering mortgage rates. 

I have written extensively about the recent spike in mortgage rates paradoxically created buyer opportunities as increased borrowing costs forced many potential buyer's and investors to the sidelines. 

On the Oregon Coast the mild softening in activity provided clients greater likelihood of transactional success or at least the chance to present an offer.

I've had 3-4 recent transactions either close or under contract that might not have otherwise got done if market conditions and buyer demand were that of 8-12 months ago. Examples include, one coastal cash transaction at near 50% of the original listing price, $20k less than asking on a turn-key home and a duplex on a well below asking offer with a full 3% seller concession. 

Certainly my clients paid a higher interest rate, but they got a better deal, and what is the cost of not owning that particular property or investment over the next decade or two or three?

I can tell you that casually shopping for a property to purchase or rent in Southern California has provided new perspective for the opportunities and value of the Oregon Coast. The investors that purchased those properties when rates were 'too high' in the 80's have certainly got their money worth..

With the height of the summer buying season approaching and the news of reduced rates likely to reach home buyers and real estate investors that have been on the sidelines, expect greater competition for the already limited inventory. 

If mortgage rates drop by even 1% there will be considerably more demand and less leverage with sellers for incentives such as seller concessions, interest rate buy downs or repairs.

Additionally (although I'm personally skeptical) if the inflation numbers are accurate and the general costs of living have also peaked, the associated costs of ownership are also likely to have peaked, allowing for buyer's to budget more reliably for insurance, power, water, internet and upgrades. 

The FED is presenting this most recent move as a pause but I think it's more of a pivot. Powell blinked. He knows they can't raise rates further without destabilizing the financial sector. They'll likely hold rates steady through the end of the year, but cuts are coming. The real question is what happens to the value of the USD and how does this effect housing? My money is on dollar decline and property valuation incline. 

Thanks for the reference Michael, if a coastal STR is the goal anywhere from CA to OR I can definitely lend a hand.

Here in Oregon the real estate market is still surprisingly strong. I've written recently about a single family home in Eugene having 14 offers, and three separate clients purchasing properties on the coast, had multiple competing cash offers to contend with.

Rates are not great. The past two weeks average mortgage rates on 30 year mortgages has increased roughly .5% and is approaching the high 6%'s and near 7%. 

Conventional wisdom concludes that more buyer's are on the sidelines due to the rising costs of purchasing property, however if the market is still active when conditions are tight, what will happen when rates drop and those buyer's re-enter the market place?

Most likely, there will be increased demand, even more limited inventory and prices likely to re accelerate. 

Real Estate is geographic, so this might not pertain to all markets, but Oregon and particularly the Oregon Coast has many more buyer's than sellers. There is an extremely limited number of new construction coming to market and notable West Coast value.

Investors can still find buildable coastal lots with utilities under $100,000 and prime location ocean view homes eligible for vacation rental usages in the $350-500k range. Along the I-5 corridor there are still starter homes, with a yard and a large, in a desirable area, in the $300k range. Additionally there are various opportunities for creative or owner carry financing, terms that are less available elsewhere. 

Furthermore as affordability improves and broad real estate activity and prices evolve elsewhere, buyers will look towards areas (like Oregon) for value and growth. 

On the ground I've observed a near ten fold increase in the interest for coastal real estate in Oregon from out of state of absentee owners in just the past four years. 

The restrictive buyer's market in retrospect might be a small window of opportunity, considering recently acquired assets could also potentially be refinanced once rates stabilize. 

Even Barbara Corcoran said recently on Good Morning America...

"It's a good time to buy because the minute interest rates go down, everybody's waiting for them to go down even by a point, and when they do, they're going to come rushing back in the market, Price are going to explode, and you're going to be paying more for the same house. And you can always refinance, remember, when and if interest rates come down." 

I asked my mentor if he would buy in this market and he said if there was something I HAD to have and it was a great deal, yes. If there is a time to be selective, it's now. I imagine there are plenty of condos on the market? Personally, if possible, first investment, buy something with land and make it your own. You'll need less down, get better terms and have more reserves to breath or make improvements. A client with your profile has options.