Wait, prices could go way up when??!!
What do you think is going to happen to home prices? Let’s take the pessimistic view and for the sake of argument we’ll say that because the Fed is predicting a recession in 2023 yet they are raising rates anyway, that:
- The seem to think they need a recession to tame inflation (they might be right)
- They will follow through and continue the of rising interest rates until the labor market breaks (which appears to be the Fed’s goal)
- A recession does occur in 2023 as the Fed is predicting (housing is already in one – fewer sales, lots of layoffs in lending, title companies, and brokerages)
- In some markets there will be high enough increases in housing inventory that housing prices drop
Let’s say all of that occurs, what happens then? Once there is enough pain to tame inflation, the Fed would likely start to lower interest rates, as they have in every recession ever:
But, once interest rates decrease, you are likely to have a rise in demand from pent up buyers. Plus, you have pent up demand from another group to contend with too: Institutional investors.
The amount of cash these companies are sitting on and are planning to deploy as soon as rates drop is mind blowing. The primary subject of this article (https://www.businessinsider.com/single-family-rental-homes-tricon-earnings-dry-powder-2022-11) is currently sitting on 3 BILLION dollars reserved for investing in single family homes. They aren’t the only company saying this either.
So where do you think prices go from there, when traditional buyers can afford mortgages again AND institutions step up their activity at this magnitude? It should go the only direction it can … UP.
How long then before that happens? For that I’ll refer you the folks at the Mortgage Bankers Association who are forecasting the rate on the 30-year Fixed Rate Mortgage to drop below 5 ½% by the end of 2023; and down to 4 ½% by the end of 2024 (https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/mortgage-finance-forecast-oct-2022.pdf?sfvrsn=d32917_1). The economists at the National Association of Realtors aren’t as bold with their forecasting, but they are projecting mortgage rates to decrease to nearly 6% during 2023 and they indicate that even this modest decrease in rates will be enough to spur increases in both sales and housing prices (https://cdn.nar.realtor/sites/default/files/documents/forecast-q4-2022-us-economic-outlook-09-28-2022.pdf).
If they’re right, this could very well mean that RIGHT NOW is the time to expand your single-family holdings before you face potentially even more competition than you faced in recent years. If you are ready to take advantage of today’s opportunities and make real estate investing a reality for you, and you are working with a Lifestyles Unlimited mentor, then I urge you to reach out to a Lifestyles Realty REALTOR™ right now. Go to https://lifestylesrealtyinc.com/our-team/ and find the perfect Property Investment Specialist REALTOR™ for you!
Contributing author:
Jeff Smith
Multifamily REALTOR® / Single Family Sales Manager
office – 713.782.0018 x1115
direct – 713.554.2247
jeff.smith@luinc.com
