Investor activity rises as mortgage rates decrease

[AJ Wong]

The past few weeks I've written about a looming window of opportunity for investors to revaluate and re-engage the real estate market as winter has taken full effect and the rise in rates late last year dissuaded many potential home buyers. 

Many of my expectations have been met the past few weeks as no fewer than five on the fence investors contacted me about revisiting property investment opportunities. A similar trend in activity has seen reported by my colleagues and supported by the recent flurry of sales activity on previously stagnant listings along the Oregon Coast and beyond. 

Increased activity means there will be more competition for profitable properties and sellers will be less likely to accept more aggressive offers. 

According to the the Mortgage Bankers association mortgage rates are down nearly a full percentage point on a conventional 30 year mortgage since their recent peak in October. As a result mortgage application jumped nearly 30% this week! I've personally had three of the five investors that contacted me obtain new pre qualification letters. Two of our preferred lenders have also reported a considerable rise in activity in their pipelines. https://www.cnbc.com/2023/01/1...

With the exception of unforeseen disruptions, as written in my post regarding the US Debt Ceiling this week, a continued decline in rates as the weather warms could set up a very strong and competitive Spring and Summer Market. 

Per usual my best advice is increased due diligence and preparation. If you are considering buyer or selling property the time to prepare is now. Reconnect with your professional team of brokers, lenders and managers. Your broker should be able to provide a curated list of properties that meet or exceed your goals and/or expectations and on the sell side an accurate valuation and timeline for a potential closing. Sales are increasingly sensitive to price and we continue to see the occasional obnoxious overvaluation that could offer an opportunity others are overlooking. 

One area of potential value are commercial or hospitality properties. Many local lenders we are working with offer high quality borrowers with attractive terms that have provided a significant investment advantage. 

There are several smaller boutique hotels, care facilities or multi unit properties eligible for conversion to medium or short terms rentals that with rates returning to the 6% range on fixed term mortgages offer considerable returns and upside. 

Should rates trend lower and fall below 6% I anticipate an even more dramatic influx of buying interest and activity. Investors should keep in mind that the typical evaluation and transactional process can take 30-60-90 days which takes the closing timeline towards the end of winter and allows full preparation for the peak rental season, while avoiding Spring showing crowds and competition. 

Cheers.