On this episode of the FortuneBuilders Real Estate Show, JD and Dan sit down to discuss the current state of the real estate market. They break down important topics like how the Federal Reserve System impacts real estate prices, and what investors can expect the future of the real estate market to look like based on current trends.
Listen to the Podcast Here:
The Current State of the Real Estate Market
Hello, everyone, this is JD a sage and back in the booth with you here at the Fortune Builders real estate investing show. It’s it’s been a moment we had a we had a summer break, if you will. And we’re back at it. Happy to be here. Great show planned for you. I’ve got my my confidant good friend, brother in law, awesome real estate investor and just all around good guy. Dan, right. Joining us today. You’re welcome, Dan, we’re gonna have a lot of fun, we’re going to cover a very timely topic around real estate, you know, the state of the market. What’s going on right now we’re going to break it down into a couple of key categories.
Word of the Week
Before we get to that, as always, we have our Words of the Week, ladies and gentlemen, boys and girls, cats and dogs. The Fed that some of you know what that means. And some of you don’t. We’re not going to spend the whole show talking about the Fed. But the Federal Reserve System is a lot about what’s driving what’s going on. So we are going to talk about that, what that means and get into it. So we have got a great show planned. Let’s go ahead and get into it.
Federal Reserve
What is happening now, or over the last, month to two months? What’s happening to change that? Well, the Federal Reserve has a couple of key things really a one, especially when it comes to real estate. Well, the whole market, one key thing that they can do to curb inflation bring inflation down is to raise interest rates. And because we were at zero for a long time, year and a half, maybe they should have raised it a little quicker. But it’s hard. That’s not too soon we’re still in a pandemic, technically. I don’t know. Are we anymore?
I don’t know the definition of when we’re in or not. I was going to answer that. I would say we’re not but that I may be wrong. I’m not qualified to make that definition. But the Fed did. They had to step in and they had to slow down inflation and I know anyone who was in the market, researching reading knew that that was coming. It came pretty quick, very quick, like overnight type of situation.
Yeah. Because we were talking for weeks, you know, always watching interest rates and the overall economy. You know, it’s like, I always think back to college 20 plus years ago, JD Wow. Yeah. So long ago, economics class, you know, it’s like, What a joke of a class when you’re in college. But looking back, it’s what an important class and how to listen a little. I wouldn’t have stopped it when I got a little more.
What has happened most recently, well, the Fed steps in, they increase, they want to slow down inflation. So they raise rates, and they raised them dramatically, very quickly. And so rates go up, right? The real estate market, because that’s what this show revolves around is the real estate market starts to slow down. So when rates go up, people’s buying power comes down. At the same time, you know, for a good period there as rates went up, prices were still creeping up, right, so people can’t afford as much. It cost from their perspective, a lot more to borrow than what it did a few days ago, a few weeks ago. I mean, historically, rates are still low. But when you’re looking at borrowing money below 3%, and now all of a sudden, you’re looking at borrowing money at a 5% range, historically low.
That’s that’s the that’s the key word is the key word lenders love to say it’s still historically low, which it is. But prices are historically high. Those two things right now in this market can’t last forever. And you know, we see that breaking point. Yeah. And that’s, that’s what we’re going to talk about.
That’s what’s happening now. Right rates have gone up the Fed met most recently, and they raised another three quarters, 75% 75 basis points. They need to slow down inflation. They raise rates, especially since 2008 or 2009 when the mortgage meltdown happened. The real estate market is extremely tightly tied to interest rates sensitive to very sensitive. I like that word. Maybe that is the Word of the Week sensitive. So rates went up pretty dramatically in the market slows down. Right. And we felt that certainly with our CT homes inventory where you know, over a weekend of active homes, we’d get a ton of showings and I’d my phone would blow up from texts and calls from agents. And almost overnight that change because buyers are like, Whoa,
“Iis the market going to crash, how higher rates going to go? The Fed is still working on their inflation curbing but what they’ve done has definitely slowed down inflation.”
Future of the Real Estate Market
What will happen? Now, some say they don’t have a crystal ball. But I would, Dan found our crystal ball. Somewhere in the office, he literally found a crystal. I think it was a paper weight. Okay. I’m gonna tell everyone that’s listening and or watching, we don’t know for sure what’s going to happen, okay. But we do have ideas, and we will share what we think will happen, what we hope will happen. And I think more importantly, as we wrap the show up, what can we do?
What can all of you do that are listening, watching to study your market or markets to be more in tune with changes as they come? Okay. So, if you’re reading and studying, and you should be, you know that the rates have gone up, that should show a slowdown in inflation, and that is happening. So what the Fed needed to do in terms of slowing down inflation is happening. It didn’t happen as quickly as they were hoping with the huge change or rate increase of one point that they did a number of weeks ago, I should say last month, but it is slowing down.
That is a good thing because that was the intent of the changes. It affects our market rates and actually starting to stabilize a little bit. We look at them daily, as you know, Dan, and that’s a lesson to everyone, you should be looking at interest rates on a daily basis because when the Fed changes their rates, it doesn’t immediately affect interest rates that people look at to borrow money for real estate. Right. You should look at it daily, you should be looking at what interest rates are going.
When the Fed changed or increased rates most recently, our interest rates for our industry of real estate, different types, that rates actually went down shortly thereafter. So again, it’s not a direct correlation when the Fed makes their announcement basis points, you know, some at times interest rates, the things that affect interest rates in our real estate market, they are already like built into the projections of what’s going to happen.
You got to look at it daily. So rates are starting to stabilize. And I also feel like, and this isn’t necessarily documented with hard data yet, but buyers are starting to be more comfortable with the fact and they will continue to be more comfortable if rates don’t dramatically change on a daily basis, but they’re becoming more comfortable with the fact that they’re going to need to pay a little bit more for the homes that they’re buying and the money that they’re borrowing. But if you compare that against what also is happening in many markets, not all, but pricing is stabilizing, as well and also coming down a little bit. So that buying power while it’s changed because of interest rates, you’re able to get better deals on properties, that’s a good time to be a buyer.
Summary
We appreciate you being here listening and watching. We love feedback. We love suggestions. So you know below the video that you’re watching here, or if you’re listening, you can go to FortuneBuildersShow.com to get more information, give us some suggestions, give us some likes, share the information. And hopefully, before the end of the year, we’ll see you at either a boot camp summit or Ignite. I know Dan, you’re going to be at Ignite. We got a team trip plan with CT homes where we bring ourselves and a plus one and we come out and we all dive into the education that’s November 11 through the 13th. We appreciate everyone being on the show. We always appreciate listening and watching. We enjoyed doing the show and open to feedback and suggestions. So bring it to us. And let me tell you, we’ll see you on the next show coming up very soon.
