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401: Real Estate Market Trends

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A lot has happened over the past year in real estate. It goes to show how quickly things can change.

Unless you have been living in a cave, you know that interest rates went way up really quickly. When that happens, housing typically goes down in value significantly.

Oddly enough, in much of the country, that wasn’t quite the case. Why? Well, there wasn’t much inventory. Record LOW rates created both a frothy market and a huge amount of liquidity in the housing market.

People thinking of selling at that time sold. People thinking of buying were able to buy much more expensive homes than they normally could because of cheap money. And many of them locked those rates in.

When there was a huge increase in interest rates, liquidity in the markets went way down keeping prices still elevated because of a supply and demand imbalance.

A similar story was seen in investment real estate that is largely driven by cap rates. The difference being that much of investment real estate is purchased on floating rates. And, as many of us have seen, that has resulted in forced selling.

Anyone who does not have to sell right now is not selling. Those who are forced to sell are losing money. This period in time for real estate investors will be emblazoned in our memories the way the financial crisis of 2008-2009 is. Hopefully some of us will also take advantage of what is occurring like people did in 2010.

I anticipate 2024 will be a time with blood in the streets as many rate caps are expiring. This will be a great opportunity to pick up properties at significant discount. And those who do will very likely be rewarded for the ice in their veins.

Why? Because predictions of lower interest rates in 2025 are overwhelming. If those predictions come true, it will create a situation where the investment real estate market becomes frothy again. People unable to hold on to properties is 2024 will be the biggest losers because they didn’t do what they had to do to stay in the game.

I know that staying in the game is not easy. For many of you, this period in real estate time has been the first and only time we’ve ever experienced loss. We know rationally, that, investors are not supposed to win every single time but that’s what we witnessed for the past 14-15 years and we got used to it.

But real estate is like every other asset in that it has cycles. This cycle ended abruptly and violently but another one is about to start.

In this week’s episode of Wealth Formula Podcast, you’ll once again hear from an expert on the real estate market from the National Association of Realtors. 

When you hear what he has to say, along with other economists, you will understand why the mantra in the real estate investor ecosystem continues to be, “stay alive until 25”.