What are your predictions for the RE market? 6.5% interest rates

Glendale, AZ · Member since 2017 · 1k+ posts · 236 votes

Hi guys,

There was a great topic on the real estate predictions. I cant find it.

What do you think will happen with the real estate prices? Now the interest rates are 6.5% I see some prices are dropped may be 15K but still there is a very low inventory...In my area we have 3 houses for sale under 420K which is suuuper low. At a normal market I would expect about 20-30 houses for sale in that area

So, I because of that low inventory cant imagine prices dropping too much.

What do you think?

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

As rates increase, buying power goes down. I'm seeing more houses on the market, price reductions across the country, fewer new mortgages, etc. There are a lot of buyers that have been priced out of the market.

I predict we'll continue to see inventory grow and prices go down. I don't know if we'll see huge drops, but 10% or more seems reasonable. With fewer people buying, rentals will be in demand and we'll see rent rates increase.

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Donna M.
Member since 2020 · 81 posts · 73 votes
4y
Prices of homes will come down due to less affordability for buyers. Rents will come down a little but not much due to demand and less ability for buyers to buy due to high interest rates and mortgage payments.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y
@Mary Jay
Too early to tell. There are too many external forces right now to guess what will happen - what will fed do, what will congress do, what will happen globally. Too many factors for anyone to guess
I think the way things are headed we will see a slow down in transactions and some price depreciation in some markets
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
Rates will go back to the 2's early next year
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John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
4y
@Mary Jay
I’m in Texas and starter type homes under 300k are still going pending within a few days. Homes over 400k are sitting. I see a high demand for cheaper rentals due to low inventory. And prices for cheaper homes staying strong. With home builders not building anymore and a 4-5 million shortage of homes nationwide, I don’t see demand falling off much. Even if mortgage rates keep inching up.
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Mary Jay
OP
Glendale, AZ · Member since 2017 · 1k+ posts · 236 votes
4y
Quote from @Eliott Elias:

Rates will go back to the 2's early next year

I think rates will drop from 6.5 to May be 4.5 in 2023 and real estate prices will start climbing again
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Mary Jay
OP
Glendale, AZ · Member since 2017 · 1k+ posts · 236 votes
4y
Quote from @John Morgan:

@Mary Jay
I’m in Texas and starter type homes under 300k are still going pending within a few days. Homes over 400k are sitting. I see a high demand for cheaper rentals due to low inventory. And prices for cheaper homes staying strong. With home builders not building anymore and a 4-5 million shortage of homes nationwide, I don’t see demand falling off much. Even if mortgage rates keep inching up.
I agree
I feel like prices can come down 10 max 30 percent but not like during 2009. And May be only on expensive house that are sitting now
1 Reply
Christina M.
Rental Property Investor · PA · Member since 2017 · 69 posts · 60 votes
4y
@Eliott Elias I agree they need to create a refinance frenzy. It always happens this way.
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Ezra Henderson
Wadsworth, OH · Member since 2021 · 110 posts · 91 votes
4y
Quote from @Eliott Elias:

Rates will go back to the 2's early next year
Woah I would love to hear why you think this would happen! I hope you’re right. I have no idea/opinions about the subject myself, I’m honestly just curious why you think this
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4y
As rates increase, buying power goes down. I'm seeing more houses on the market, price reductions across the country, fewer new mortgages, etc. There are a lot of buyers that have been priced out of the market.
I predict we'll continue to see inventory grow and prices go down. I don't know if we'll see huge drops, but 10% or more seems reasonable. With fewer people buying, rentals will be in demand and we'll see rent rates increase.
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
Quote from @Ezra Henderson:

Quote from @Eliott Elias:

Rates will go back to the 2's early next year
Woah I would love to hear why you think this would happen! I hope you’re right. I have no idea/opinions about the subject myself, I’m honestly just curious why you think this
It will happen late in recession is the thought. The Fed can’t continue to raise rates without wrecking the economy
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Chris Levarek
Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
4y
@Mary Jay In the end it's always supply and demand. This is market specific. So some markets will have more supply due to rate changes, lowering prices and some will have less, not lowering prices. Depending on what market you are in, you could therefore see in the short term, little change or medium change.

As mentioned however, it is inevitable the FED will lower rates again to not only correct a struggling economy but more importantly seal voter's for an upcoming election.

It would take an outstanding display of courage and fortitude for anyone in the current position of power to maintain or raise rates to "correct" or truly influence the current debt or fiat future outlook.

One of the last time's this occurred was when Paul Volcker, then chairman of the FED in 80,81, raised rates to near 20%. This effectively brought the economy and rampant inflation to a standstill. He was credited as having ended the high levels of inflation experienced from the 70-80s.

Do I see this happening in the political world, not a chance. Remember, our current administration printed 40% of the money supply in two years, an entirely different economic view.

Expect rates to lower in 10-16 months if not sooner.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
4y
Interested fell a bit since thursday we seen under 6% on non owner occupant and around 5% on owner occupant. Nothing really crazy and pretty normal from what I remember prior to covid. I think we will see slow steady appreciation the days of 10%+ appreciation are long gone but I don't think we see strong declines either.
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Account Closed
Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
4y
@Mary Jay
Who really cares what the interest rates are for buy and holds. Run your numbers on a deal if it meets your criteria jump on it. I have very good cash flowing properties that have rates well above 6%. Heck I'd take 20% interest if the cash flow and deal was right. People get so caught up in the rates when there are so many other components that make for a great deal.
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Mary Jay
OP
Glendale, AZ · Member since 2017 · 1k+ posts · 236 votes
4y
Quote from @Account Closed:

@Mary Jay
Who really cares what the interest rates are for buy and holds. Run your numbers on a deal if it meets your criteria jump on it. I have very good cash flowing properties that have rates well above 6%. Heck I'd take 20% interest if the cash flow and deal was right. People get so caught up in the rates when there are so many other components that make for a great deal.

thank you
what is a good cash flow for you?
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Account Closed
Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
4y
@Mary Jay
Depends on things like:
1. How much of my time will it take before I cashflow
2. CoC %
3. Cash flow
4. Neighborhood
5. Bank terms (but that's really just a component of #2 and #3)
6. How much equity I'll have in property
7. Etc., etc.
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
It's going to scare a lot of retail home buyers and things will slow down. In terms on investors, it's going to week out all the non serious investors and show whose really in it for the long haul
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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
4y
@Eliott Elias I like your mindset and agree with your posts. We're under contract to buy a distressed "as-is" single family right now. Made an aggressive offer $12K below list and the sellers accepted. It had been on and off market due to condition. We're at $85k with comps in the neighborhood around $125-150k depending on quality. Feels like a deal and based on my numbers it could cash flow as rental. Rents are $950-1000 per month. This could be my third property. Not my first rodeo but still nerve wrecking.

We have 2 days to cancel contract.

Would you buy this property?

Would you flip or rent long term? The flip strategy feels shaky to me because an estimated ARV is like a moving target given everything discussed in this thread.

1 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
Quote from @Jaron Walling:

@Eliott Elias I like your mindset and agree with your posts. We're under contract to buy a distressed "as-is" single family right now. Made an aggressive offer $12K below list and the sellers accepted. It had been on and off market due to condition. We're at $85k with comps in the neighborhood from $125-150k depending on quality. Feels like a deal and based on my numbers it could cash flow as rental. This would be my third property. Not my first rodeo but it's still nerve wrecking.

We have 2 days to cancel contract.

Would you buy this property?

Would you flip or rent long term? The flip strategy feels shaky to me because an estimated ARV is like a moving target given the economy and everything discussed above.

If the numbers are that tight i'd long term rent it and take advantage of natural appreciation. How do the rents look?
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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
4y
@Eliott Elias Rents would be $950-1000. My agent told me another investor he knows has one at $1100 per month.

The property needs $14-18k to remodel, repair the roof, and replace the garage doors.

Were using cash to get this done. Maybe is wise to buy it, remodel, rent, and wait until spring of 2023 for rates to go down?
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
Quote from @Jaron Walling:

@Eliott Elias Rents would be $950-1000. My agent told me another investor he knows has one at $1100 per month.

The property needs $14-18k to remodel, repair the roof, and replace the garage doors.

Were using cash to get this done. Maybe is wise to buy it, remodel, rent, and wait until spring of 2023 for rates to go back down?
Seems like a solid 1% rule deal. I’d take it
2 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
4y
Quote from @Eliott Elias:

Rates will go back to the 2's early next year

I think they may go down a bit from where they are now, but they won't go that low.
1 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
4y
@Eliott Elias I think so too. Just need to convince the wife now. She's 49% on board with all this... haha

1 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
4y
Quote from @Theresa Harris:

Quote from @Eliott Elias:

Rates will go back to the 2's early next year

I think they may go down a bit from where they are now, but they won't go that low.

Theresa, I have two fears, #1 future appraisal coming in low 3 months from now after we remodel the place, and #2 rising rates killing our cash-flow. It barely works at 6%.
0 Reply
Paul De Luca
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
4y
Quote from @Chris Seveney:

@Mary Jay
Too early to tell. There are too many external forces right now to guess what will happen - what will fed do, what will congress do, what will happen globally. Too many factors for anyone to guess
I think the way things are headed we will see a slow down in transactions and some price depreciation in some markets

This. It's unsatisfying to say "I don't know" and there are so many different macro forces at work that it's hard to say. Trying to make predictions on the market is mostly a waste of time and an exercise in ego for a lot of people. "The Black Swan" by Nassim Taleb is a great book that goes into the folly of making predictions.
1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y
Quote from @Paul De Luca:

Quote from @Chris Seveney:

@Mary Jay
Too early to tell. There are too many external forces right now to guess what will happen - what will fed do, what will congress do, what will happen globally. Too many factors for anyone to guess
I think the way things are headed we will see a slow down in transactions and some price depreciation in some markets

This. It's unsatisfying to say "I don't know" and there are so many different macro forces at work that it's hard to say. Trying to make predictions on the market is mostly a waste of time and an exercise in ego for a lot of people. "The Black Swan" by Nassim Taleb is a great book that goes into the folly of making predictions.

I also think that people today are always looking for instant gratification. Real Estate is an illiquid asset and therefore its trends take significant time adjust, its not a "hey lets wait a week and see what happens". Its more like six+ months.
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