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| Billionaire Grant Cardone Predicts Investors Will Come to the Rescue |
The real estate market is a key indicator of the health of the economy, and when it's in a slump, it can have a domino effect on other industries. The current market conditions have left many homeowners, buyers, and investors feeling uncertain and hesitant.
Buyers are looking for deals, not wanting to pay full price, and sellers have been, thus far, reluctant in taking less for their home than what they "feel" it's worth - especially after the big runup most local US housing markets saw during the pandemic.
Housing prices sticky on the way down
There's always an emotional component to buying or selling one's home, so prices are usually "sticky" on the way down. It's a hard pill for most to swallow that you're going to get less for your home today than yesterday, so the natural tendency is to wait "in hopes" that the "perfect" offer comes in.
In an appreciating market, procrastination can be your friend. In a depreciating housing market, price reductions may not even keep up with or get you out in front of falling prices. There's always a lag between what's happening on the ground today and when the data is released, so we must use data, not our emotions, to project out future possibilities and probabilities to better guide our decisions.
Housing inventory supply and demand stalemate
The emotional dynamic is even more in play today because housing inventory levels remain historically low which is strongly overshadowing the increasing headwinds in the residential housing market. In particular, affordability continues to erode as the Fed remains steadfast in raising interest rates to fulfil their promise to do whatever it takes to curb inflation.
Watch what they do as it will clue us in and significantly impact the direction of the market. As long as they remain restrictive in their policies, that will force a continued cooling of the housing market (again, with a lag effect when it comes to their policies actually impacting home prices).
Until then, there's a stalemate unique to this housing market that we didn't see back in 2008. Since many potential sellers locked in 2-4% mortgage interest rates over the past few years and their home is worth substantially more today, they don't have to sell. And, in most cases, they're not as they'd have to buy less of a home (due to the price appreciation over the last few years) and do so with mortgage interest rates now over 6% (resulting in a significantly higher monthly payment).
Ultimately, the erosion in price will come when this stalemate breaks. For now, the bulk of the housing market is made up from "transactions of necessity" (people having to relocate for work, family circumstances, etc.), so most local housing markets are seeing falling prices, but they aren't dropping as quickly or as much as some expected.
What will the spring housing market bring us?
In fact, in many local housing markets, there's been an uptick in demand this early spring, but there hasn't been a flood of homes hitting the market. With spring approaching, how this plays out will also give us a better feel for what's to come.
Will we see the typical seasonal trend of an increasing number of homes hitting the market this spring? And, what will happen with buyer demand if interest rates keep rising? Even though buyer demand has dried up considerably, the right home, in the right market, is still selling with multiple offers - the Sacramento real estate market is one such example highlighted by Ryan Lundquist a Sacramento appraiser and a great follow on Twitter - @SacAppraiser).
Inventory levels are key to 2023 home prices
Again, the key to 2023 home prices is seeing what unfolds with inventory levels and buyer demand. As it sits today, these historically low inventory levels are keeping the housing market propped up to a large extent, so it will take time, but billionaire investor and entrepreneur Grant Cardone believes that investors will play a vital role in reviving this slowing real estate market when that time comes.
Economists have been calling for a housing crash for several months. Some even predicted that home prices would fall by as much as 30% in 2023. While these claims are understandable considering that rising mortgage rates have priced many would-be buyers out of the market, it appears that a different scenario is beginning to play out.
Best-selling author and real estate fund manager Grant Cardone agrees that the housing market is in trouble, but points out that investors will create enough demand to keep the market from crashing.
“Banks don’t trust borrowers, and those they do trust will have to pay. This will move homeowners to the sidelines and slowly reduce home prices,” Cardone said. “Investors will step in to pick up single-family homes at lower prices with less competition. That being said, there will be no housing crash! Investors, like myself, will save the day and step in to buy the homes, put renters in place and enjoy them for the cash flow, not the kitchens and cabinets.” - Yahoo! Finance
