Is the real estate market crashing? Are realtors getting sued out of business? When is the right time to buy? How does the economy affect real estate?
Hi everyone, I’m Mercedes The Military Realtor🙋🏽🏡🫡🪖.
Today we’re going to answer all of those questions plus more with my professional insight in the market.
Real estate ownership and wealth creation is incredibly important no matter what your industry or career. That’s why, no matter “the market”, deals will be made, we’re responsible to stay vigilant for opportunities. We’ve seen rates at 18% and deals were still being made. We’re currently in a seller’s market with low supply, tighter lending, and rates around 6-7%. Many want the interest rates to drop so they can afford their ideal home.
But when and why will rates drop exactly?
Rates may be lowered to help stimulate the economy with more consumer spending. Now, more spending creates a higher rate of inflation that affects our spending power and economy as a whole. The Federal reserve has said they want at least 3 rate cuts this year but not yet since the data coming in hasn’t been great. So if not the July meeting then maybe the September meeting. The Fed Reserve is supposed to be unbiased so lowering rates by a half to full point before the Election seems odd but we also have to look at it as what’s best for our economy, election or not. Once rate cuts begin, more buyers will be qualified to jump into the homeownership market…right? That is true, but supply is still very slow to grow due to new construction setbacks and the current homeowners with lower rates causing the “lock in effect”. We’ll still have a low supply and even higher demand once rates are lower by a half to full point. That translates to more buying pressure which gives sellers more leverage. They’ve got their pick of offers. As a buyer, you’ve got a lot more competition along with higher prices. If you shop while others are not able to, you can get a better deal. Less competition, more patience, and the ability to walk away from offers gives you an advantage over those that don’t have the time.
“If you can afford it, you should always look for the opportunities to OWN!”
If you can’t afford it at this moment, make a plan to get on track with actual targets of saving or cleaning up your credit. My preferred lender does an amazing job at that! Don’t let the media convince you that paying 100% interest living in a rental is better than owning what you live in. Some locations have real estate that’s better for cash flow or market appreciation. Every market is LOCAL. Your market may be doing incredibly well no matter what the news is fear mongering us to believe. While big companies buy up hundreds of thousand single family homes & rent it right back to us above market rent. Don’t miss out before they end up controlling the whole market. Now, even if your local market is great, you can invest out of state. Be creative!
Market Crash
For a crash in real estate to develop we’ve got to have a massive amount of layoffs, I’m thinking AI could kickstart that but I’m not sure if it’d be enough, that would lead to short sales/foreclosures/bankruptcies along with a big banking issue. The banking issue could be swapped out with a stock exchange issue or combined with one.
So, let’s ask ourselves what can happen and what’re the probabilities based on the historic data of the entire market along with current market signals. Real estate may not crash but the stock exchange/banking/macro economy could which then affects real estate. We’ll talk about that in a few minutes.
Realtors Got Sued
If you’ve heard news about realtors getting sued, it’s true. With the claims on the tail end of final settlement, Our leadership has done a great job protecting us as professionals in our industry. Will realtors leave the industry? Sure, they do every cycle it gets tough. Will this decrease home prices? No, but it can decrease the entire transaction costs. This could decrease the results received at “discount brokerages”. Everything is negotiable so make the best choice for yourself.
When is the right time to buy?
It’s the right time when the right deal comes about. Off market deals are great. There are some gems on the market but it’s a lot less likely. If you can find a seller/buyer for a property in any market, you’re golden. You’ve got to always look, be ready, and jump when the opportunity comes knocking. Factors like your strategy, resources, and time available affect your buy box criteria. Once you answer “The 5 Questions”, that’s another video of mine, things focus in more as we have a more defined target. Our factors may change due to internal or external circumstances and so will our criteria. Some may argue rates are higher than what they’ve been in the last decade so it’s not the best time to buy or sell. True, but if we look further back we see that the median is in the 6% range for interest rates historically. Just because we had historic lows to combat against COVID’s lack of consumer spending doesn’t mean we will go back…statistically it’s not likely. We can’t focus so narrowly on just what the rate is when you can refinance in the future. You don’t have to deal with extra competition and inflated sale’s prices. You can never erase overpaying on the way in for a home. But you can change your mortgage rate over those 30 years.
Economy & Rates
Let’s get back to how the economy affects rates. Our main battle is against inflation due to massive amounts of spending and printing of the dollar. Now, the disparity between our wages & what companies pay is vast which I think is the true issue at hand here. The media & corporations want you to blame inflation & unaffordability on the current administration or the fed without acknowledging that these inflation causing & wildly profitable corporations don’t pay the masses well. To decrease inflation, we increase interest rates to make borrowing money more expensive thus slowing down the spending of the dollar. We don’t want to slow the economy down too much because that can cause deflation or stagflation. It’s the Fed’s job to keep us balanced. External factors like trade, wars, and pandemics greatly affect ours & the World’s economy. Real Estate is an extremely local market industry BUT understanding the Macro view of things can help signal predictable actions in the market.
Here are my predictions for the real estate market:
As we see every year, we will see an increase in market activity this spring & summer due to school being out & the weather being nicer. The last Federal Reserve meeting in March signaled no rate cuts yet with future meetings in May/June/July/Sept. The Fed is still planning for 3 rate cuts which could be .5% to 1.5% total change of rates. It isn’t much. We have to keep in mind the election in Nov, seeing rates drop a point or so in the leading election months makes the most sense even though the Fed is supposed to be unbiased. We’ll see what the numbers look like in the next meeting on May 1st. With Spring/Summer heating the market up and still relatively low supply, sellers still have leverage to push for higher sale’s prices. Let’s then add the possible rate cuts in the Summer leading to the election to further increase demand and put upward pressure on prices. The election will occur in Nov and the market will cool down once again. In 2025 I can see a massive slow down economically for us. What happens election wise can greatly affect what happens, but from a macro scale we’ve got record stock market numbers of only a few companies (mostly AI/Tech), unaffordable housing, okay wages, unemployment flirting with pushing hire, record high consumer debt, regional bank issues, and commercial real estate in financial hot water. That isn’t necessarily the recipe for a booming economy, but with lows come great highs. The smart investor buys when the market is low with little activity, rides the market all the way up to the top of the roller coaster, then pulls money out of the property at the peak for another opportunity, & holds it to continue gaining appreciation and possibly cash flow until circumstances change and another deal makes more cents!
At any time there are tons of factors that can affect a market, but deals are still being made every single day. There will always be a problem for someone in every single market, it’s not always the best for a buyer, seller, or investor, but we still have to keep our eyes peeled for a deal!
What tends to pull economies out of slow downs or recessions (which I really do think we’ve been in a recession of sorts but the numbers being put out are always adjusted & distorted, especially before an election) is war & tech/business.
When businesses grow and come up with new ideas, it helps the economy get better by making more jobs, doing things more efficiently, and getting people to spend money, which can help when the economy is doing poorly. Even though wars cause a lot of problems, they can also make the economy better by making the government spend more money on things like defense and building stuff, which makes more jobs and helps companies that make things grow.
Russia & China
We’ve been indirectly fighting with Russia and China for a long time over who has more influence in the Middle East and control over oil. But in the last 20 years, the battle has changed; now we’re also competing over information, artificial intelligence, and technology. China helped the United States get through a really tough economic time in 2008 by buying U.S. government bonds, which helped the U.S. pay its bills and kept the economy stable. Also, because China’s economy was growing fast at that time, it helped the world’s economy get better, which was good for the U.S. because it meant more trade and investment chances. This time, not so much. China’s real estate market is in free fall and we’ve got heavy trade restrictions with them, not to mention our Apple/Tik Tok/Tesla war we’ve got going on.
Final Outlook
2025 and 2026 will be very interesting years with heavy macro economic, financial, and political influences. The deals are still out there. They always have been. It’s just up to you to LOOK for them. To genuinely BELIEVE that they’re out there and that through your hard work and persistence you will be fortunate enough to find one at the right time. BUT you must be prepared for it, you must know what to look for, you must know how fast or slow to act, you must be ready to ACT. Don’t get tied around the axle about figuring everything out for the next 20 years with every single property. Things will get figured out as you go and with each iteration you’ll become better and better. But you’ll never attain even one property without having the positive intention that there are DEALS out there!!!