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Investor Warns: “Tough Times Ahead For Real Estate”.

It’s well known that modern day opinions are extreme, loud and uncompromising. If you rely on one program, network or the other, you can only receive their one-sided view of things; so I watch all news outlets to get a sense of what’s being said.

Today on Fox News, Shark Tank’s Barbara Corcoran warned that a “bloodbath” is coming for the real estate sector. Switching over to MSN, I saw Barbara Corcoran there as well. This time she was describing how to win a bidding war on an in-demand home. It seems Barbara is making a serious press run. She is also an authority on the subject of real estate, and someone I watch carefully.

This is my takeaway from her appearances, only MY OPINION.
THIS IS NOT FINANCIAL ADVICE. For investing advice please contact a financial advisor.

  1. “Commercial Real Estate is in Trouble”
    As of this writing the Federal Reserve interest rate is rising steadily (Current target rate 5.00-5.25) In a nutshell this is the interest rate that banks pay when they borrow money from the Fed. They in turn charge their favorite customers a “Prime Rate”. Traditionally having good credit puts you close to the prime rate. If your credit is challenged you will pay for it somewhere. Don’t let the late-breaking legislation fool you. Commercial ventures are suffering from the high interest rates, and that will cause a downturn on any planned developments.
  2. “The Homes Market is Starting to Rebound”
    I think this has less to do with interest rates and more to do with inventory. During the COVID lockdowns, hedge funds saw a slowdown in market activity, and began moving their money into real estate. Specifically they purchased just about every single-family-home under $500,000 dollars, that they could find. With the world starting to move again, these properties will become a drag on their balance sheets. There will be plenty of inventory if they decide to unload the houses.
  3. “Win a Bidding War for a Home”
    No doubt about it. We are definitely in a “sellers market”. If you are currently bidding for a property, Barbara recommends the personal touch. Handwritten notes to the owner, explaining how much you love the place can go a long way. When I work as a nurse, I find that this type of honesty is the best way to get through to people. Get to know everyone personally. You might think that money is driving every decision, but there is always something more important.

“But I’m just trying to find an apartment / home, I have no time to watch the market”. You don’t have to be an investor to keep your eye on things. When you go for that first single family home, inventory will be a factor in whether or not you can even find a place. If you plan to rent a little longer, the landlord’s interest rate will have a direct effect on how much you pay. The market is always a delicate balance. I always try to find my way to the center before making decisions.

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