MOTIVATED SELLERS WILL EMPOWER DEALS
INTEREST RATES WILL SETTLE
As the real estate market in 2023 continues to come off the last two frenzied years, it is important to understand that home pricing is going to look different and stabilize. The run-up in pricing during 2021 was an outlier, but this industry is dynamic. We can expect to see mortgage rates come down slightly, leaving room for demand to increase and opportunity in the market. As an investor, regardless of trends, there will always be motivated sellers due to life circumstances like divorce, death, disease, debt, or disillusionment to empower your negotiating tactics. We saw skyrocketing appreciation that we are now getting back, with home pricing likely normalizing to a 1-2% increase, which would offer a positive outlook for future real estate investing opportunities.
My prediction is a “pause” until end of Q1 until inflation, interest rates and cap rates all shake out. If inflation slows and the Fed stops or pauses its tightening, interest rates will moderate, and cap rates will not rise dramatically. This will allow for more development due to lower interest rates, looser credit, lower construction and capital costs, and higher terminal real estate valuations. If inflation continues, and the Fed continues to tighten and interest rates rise, development will slow dramatically. My overall prediction is inflation and interest rates will settle in with fewer than another 100-basis point rise in rates. This will shake out some marginal projects, but everyone will adjust with less debt and more equity going into projects.
INFLATION AND INTEREST RATES WILL SETTLE IN WITH FEWER THAN ANOTHER 100-BASIS POINT RISE IN RATES.
THERE WILL ALWAYS BE MOTIVATED SELLERS DUE TO LIFE CIRCUMSTANCES.
Bob Voelker Attorney and Developer Author of Managing the Complexities of Real Estate Development Read Bob’s Book
Glenn and Amber Schworm Authors of The Birth of the Everyday Real Estate Investor Podcast Hosts of The Real Estate Mind Show
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