Anyone else see opportunities coming?

[Rich O'Neill]

Curious where everyone's head is at this point in the market cycle.

I am looking out the next 6ish months and I think there is a lot of opportunity headed our way, if you're ready for it. This is what I am thinking, though of course, I don't have a crystal ball.

Right now, lot's of sellers still seem to think they can get what they could have gotten in the spring, which is justifiable because a 6 month old comp is back in APRIL, when rates first started their moonshot. At the same time, buyers simply can't afford nearly what they could in the spring due to interest rates. 

I think that's why a lot of markets are seeing DOM and BOM's go through the roof. There's a huge disconnect. 

As those comps age out and the DOM continues to go up, I think we will see a further drop in inventory from "Make me Move" seekers giving up. 

What remains will be sellers that actually need to sell, and will pay attention to any offer they get, even a low one. It will become a numbers game for us buyers, and the odds might start to tip in our favor. 6 months ago if you offered any less than asking, it was pointless. In the next few months, particularly after the holidays, I will be out there throwing offers at anything that looks decent at a number that fits my criteria, regardless of the ask price. 

What will be important here is how professional you look to the seller. They will be tired. They will have dealt with the tire kickers. If you can position yourself as a closer, they will be much more likely to accept. Make sure you are personally in the best borrowing position, as credit boxes are already tightening. It might be harder to fund these deals pretty soon.

"But what about high interest rates???"- It is just a number in your calculator. Conservatively underwrite that number, and you should be fine. 

A unique combination of things over the next few years could turn good deals today into great deals tomorrow, as @Daniel Scruggs put it to me. Rents generally rise more in line with inflation and overall housing cost than the actual value of housing (think monthly payment, vs home value). Both of those things are likely to continue to go up in the next few years, which leads me to believe rents will continue to rise at a faster than average rate (maybe not the crazy rates now, but higher than average). At the same time, I find it hard to believe that mortgage rates will continue to remain this high for 3+ years. If the Fed accomplishes their mission of reducing inflation, they should start to slowly back rates down to earth (maybe not as low as they were, but lower).  I think they still have room to go up, but I don't think they will stay forever.

So hypothetically in 3 years, you will have bought a good deal now, rents will go up, rates will come down. If you refinance then, you could turn a good deal, into a great deal. 

Now, I am not naïve enough to think those things will definitely happen. Let's say NONE of it happens, and the only thing you get is a good deal- you are still getting out ahead! 

Where am I wrong? I would love to hear what others that are smarter than me are thinking.