In this video, we analyze the trajectory of real estate and interest rates, offering key insights that will empower homebuyers, sellers, and investors alike.
Delve into comprehensive forecasts, regional variations, and expert perspectives to stay ahead of the curve in the dynamic landscape of real estate.
Whether you’re navigating the market for your dream home or keen on strategic investments, this video is your guide to understanding the nuances of the housing market and interest rate landscape for the upcoming year.
Don’t miss out on the valuable information that could influence your real estate decisions – hit play and gain the foresight needed for success in 2024!
Transcript:
Chris Bounds 00:00
What are your thoughts on the current state of the market?
Chris Salerno 00:01
It’s a fun, fun environment, I think it’s definitely separated the big boys from a little boys in this current market environment, I think feds are going to raise interest rates a little more, and then they’re going to taper down, we got a very large presidential election coming up in about a year and a half. So, you know, politics do have something to play with in the market. And so I think they’re gonna watch out very closely, people are still spending a lot of money. You know, so it’s a very interesting times, the more they raise interest rates, I think, the more benefits for multifamily because people need a place to live, it’s a necessity. It’s not going anywhere at all. And and it’s a business that I truly love. And I try, we’re I’m actually in the process of starting another business. And that business is in necessity. And I was thinking, you know, I love businesses that are necessities, no matter the type of downturn you’re in, if, if it’s a necessity, people need it for their health for to live. It’s always going to be around. Yeah.
Chris Bounds 01:06
Food, shelter, shelter being real estate, and it’s not going away anytime soon.
Chris Salerno 01:12
It is not know very much. So we all need water, we need shelter. You know, it’s very important to make sure that we can, you know, utilize that and live with it. And we’re going to have to because we need it.
Chris Bounds 01:25
Yeah, there’s definitely something to say something to be said for interest rates. They’ve gone up so high over the last 1824 months, it shocked a lot of investors that didn’t do proper due diligence. But beyond that, it’s created another problem for affordable housing, which is going to force a lot of homeowners to stay put some of those actually, quite a lot of homeowners are staying put just because they’re not letting go of their 3% mortgage. So there’s that a lot of those folks may never ever sell their house.
Chris Salerno 01:59
I mean, yeah, you know, it depends. It
Chris Bounds 02:03
all depends on that it’s, they’re gonna be a lot more reluctant to sell their house. Then there’s the first time homebuyers which I mean, they were pricing mortgages two years ago and then pricing it now like it’s, it’s a problem for them, and then you got the price of homes, something’s got to give, they gotta make more money, or they got to really start adjusting their their expectations on the quality of home, which goes plays into multifamily. So if they’re not buying then they’re going to be staying somewhere that’s either because they own a home they’re just not moving or they’re going to continue leasing so that’s the stimulus and really the only way I personally let me know your thoughts. I see out of that rut other than interest rates falling is new construction, which has been from a single famous standpoint very slow
Chris Salerno 03:03
nationally, right So Margaret tell you here in Charlotte single family companies like Dr. Important that a very large companies are building these single family homes and townhomes here in Charlotte with aluminum instead of lumber because of the price of lumber I guess it’s more expensive than aluminum. Wow. Like aluminum or beams or something? Yeah, yep. All aluminum kind
Chris Bounds 03:32
of like the retail strip centers and yeah.
Chris Salerno 03:36
Oh and office space. They’re using that now. Because it according to the rep here in Charlotte, it’s a lot cheaper than lumber right now, the moment I’m shocking,
Chris Bounds 03:47
can you imagine trying to hang out hang a picture? So the stud you hit the aluminum beam?
Chris Salerno 03:51
I know you need a metal detector or something, you know, try to find it
Chris Bounds 03:58
could be a new, new hot product. So instead of those, what do they call them? The the magic? Put things you put on the wall and you just have one so like a super magnet or something? I oh there
Chris Salerno 04:10
you can. Yeah, changing things are different. I think also, you know, the price of labor is astronomically high. So you know, it’s different. So
Chris Bounds 04:23
that’s one side but but the other side of the high interest rates is it very much impacts valuations of all housing. Single family is a little different. Because it it has owner actual owner occupant utility multifamily doesn’t, you know, it’s it’s a business, it’s purely a leasing business. So investors buying or buying on yield and higher the debt costs. It impacts their yield. So it definitely impacts valuation. in which over the past 1218 months at bid ask prices, it’s been wide. I don’t know that it’s really narrowing maybe a little bit. How do you see that shaken out? At least over the next say, like, 12 months or so? Don’t you think we’re gonna still see a wide wide gap? Or is it gonna start closing up?
Chris Salerno 05:19
You know, being an agent, and I’m sure everyone can relate to this, if you’re a true listing agent, you know, that when you go into a listing appointment, and you talk to a seller, and the seller thinks their homes were 600, but you got to break the news to them and say, hey, the market, your neighborhood, here are the comps, your what your other properties, you know, have going for them. It’s that 525 And, you know, you’re gonna get the sellers know, you’re ridiculous, get out of my house, blah, blah, blah, blah, blah, I’m listing with that agent who told me 600, and it sits on the market for 90 days, then they come back to you and say, you know, why is this not selling? And you said, Well, Mr. Seller, I told you it’s not selling, because there’s a huge price gap. And they may say, Well, you’re still wrong, you know, I’ve had that happen all the time.
I’ve had some come back and say we want to listen with you. And I’m like, well, that 525 is no longer 525. It’s 480. You know, that’s just the market. And you know, I’m a messenger, I’m not, I’m telling you what buyers are doing right now, that is happening in the multifamily space, we are trying to buy assets, and we there’s a far gap still sellers don’t want to sell however, up until 2025, there’s about 1.7 trillion, I believe a little more, or excuse me 1.2 5 trillion, because I looked it up the other day of deals, or of loans that are come due. And so you’re going to have to sell, you probably can’t refinance.
If you do, you’re gonna bring more money down to refinance, but you’re going to have to sell. So what happens in that scenario, what do you do in that scenario, you’re gonna have to either talk to your investors and say, Hey, you’re gonna take a little loss, or, Hey, we can break even or you may be able to profit a little money off of it. But that is going to be opportunity. If you can stay strong during this market cycle, you have to stay strong, you have to underwrite correctly when it comes to these deals, that
Chris Bounds 07:17
the debt is one thing that keeps commercial real estate moving, because 30 year fixed, very common in single family, not quite as common in commercial finance, they’re typically fixed for a period of time, shorter period, 23457 years or whatever, 10 years. And then after that they’re floating, if they’re not floating date one. But even if they are floating, there’s rate caps, and those expire and you get to buy new ones and the restaurant astronomical now, so it’s a lot more complex with commercial, but that can force a hand and I think there’s a record amount of bridge loans this year that are coming due. And a lot of those folks, if you bought it over the past couple of years, you’re probably not in the best position to refi to meet, you know, debt coverage ratios that agency debt will require
Chris Salerno 08:09
a good rate, you know, it’s all different. The lovely part about commercial debt is you can negotiate I mean, you have fixed you have a floating rate. You also have some bite down options of the rate which we’re doing right now at the moment. So there’s so many multiple options that you have, you just have to know how to negotiate