All Forum Posts by: V.G Jason

I don't know about "Renter Nation", as my definition of that would be that the majority of people rent rather than own, and we have a very long way to get to that point if we ever get there. However, I do think there will be more of a permanent "renter" mentality because it is already the mentality that is becoming ingrained into younger people. Things are for using, not having, and certainly not maintaining. Look at the rate of car ownership. Over 50% of the cars owned in the US are owned by people over the age of 60. People under the age of 40 own less than 10% of all the cars in the US. Last year people under the age of 24 owned less than 1% of all the cars in the US.

Younger people are far, far more likely to own nothing and rent everything. Yes, some of them will transition from renters to owners as they start families or figure that renting is throwing their money away, but a lot more of them are going to be lifetime renters.

Quote from @V.G Jason:

Quote from @Dan H.:

Quote from @Kenny Simpson:

The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.

Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?

I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.

The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases.  Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.

Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.  

Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation.  It will take many months to get inflation to a tolerable level.  My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.  

I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters.  Fed raises rates typically results in increased mortgage rates.

I think we are in for a bumpy ride.

 You think Fed raises rates into Q2 '23? I agree with almost everything you put in there, and I assume you are a believer of renter nation coming to fruition? 

I think we raise rates here in Dec with the half basis as expected, get us to 4.25-4.5 Fed Funds. Then I think we do it one more time in Q1 23. Get us to 4.75-5. I think we sit there for at least 2, if not 3 quarters. Unemployment will tick up heavily end of Q1 into Q2 and that's when the realization of this consumer debt: personal savings disaster that's been brewing will show up.

 @Dan H., I do because of 1 statement by the FED, it is easier to drop rates rapidly, AKA like I did when COVID hit then have to raise them again.  Raising them because he pivot too fast would kill us.  Worst case he went to far, he can pivot as you know really quickly.  I think we will see 50 BPS, 25, 25  at least and then let it sit there, unless data is NOT in our favor.  I do agree unemployment is about to hit hard right at the start of the year, mass layoffs, waiting for holiday.  Renters nation is happening for sure, BIG wallstreet buyers will be back at it in Q1, they are ready.  

Quote from @Kenny Simpson:

The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.

Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?

Im hoping the spread lowers t drop rates even lower! If they get to a 4% again I worry there will be another huge increase in housing prices. 

Quote from @Kenny Simpson:

The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.

Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?

I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.

The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases.  Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.

Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.  

Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation.  It will take many months to get inflation to a tolerable level.  My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.  

I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters.  Fed raises rates typically results in increased mortgage rates.

I think we are in for a bumpy ride.

Quote from @J. Mitchell Bernier:

Quote from @Kenny Simpson:

The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.

Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?

 Sounds like patience is the strategy at this time. 

Don't think we will see rates below 5% for a long time, but even at 5.5% that makes many investments way more attractive. I think if rates fall to around 5.5% the buyers will come back in droves and the market will rebound. Think that won't happen till 2024, but hopefully sooner. 

 @J. Mitchell Bernier I think rates will fall faster than people think, I think when Jan 2023 hits we will see massive layoff's, FED pivot, BIG recession fears and the 10 year T will drop.  Lets see what happens :)

Quote from @V.G Jason:

Quote from @Matthew Failor:

@Austin Fowler very creative. I don't see how the property in question cash flows even taking out the numbers questioned above.

I like how you essentially are a case study on how a bank works and people's first thought is fraud and jail time. Note, life insurance companies do the same thing. Do you think they have 1 to 1 reserves on every policy? No! You might say what about the re-insurance companies? Neither do they! Just ask an actuary.

Insurance companies operate on a different set of rules. We all state we know how a bank works. You think proprietary investor here operates on the same set of rules as them?

 It's really not that complicated, raise capital, keep 20% in reserve, rest in illiquid assets that provide a return on the entire raised capital. Make sure the contract specifies what happens if the reserve runs dry (investor gets penalty interest). In 20 years of operation, I've never needed to pay penalty interest. The math behind fractional reserve banking is sound. Many clients, small balances, smooth operation.

@Austin Fowler very creative. I don't see how the property in question cash flows even taking out the numbers questioned above.

I like how you essentially are a case study on how a bank works and people's first thought is fraud and jail time. Note, life insurance companies do the same thing. Do you think they have 1 to 1 reserves on every policy? No! You might say what about the re-insurance companies? Neither do they! Just ask an actuary.

Hi Juan, One of the easiest ways of scaling in real estate today is to invest in turnkey properties out of state. If you have a busy 9-5 routine but have the money to get started and don't have enough time, turnkey companies provide some of the best resources to scale your portfolio. I have used that strategy so feel free to reach out if you want to discuss.