Despite a Cooling Real Estate Market, Billionaire Grant Cardone Predicts Investors Will Come to the Rescue

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

Buy Now!

Based on being a "natural contrarian", Brett Arends is giving the buy sign for housing.  He's not suggesting that homes have bottomed in every market, but does believe it's a good time to look in many, especially since mortgage rates remain extremely low.

Needless to say each purchase / deal has to be evaluated on its own merits, but I do agree with many of the points that Arends makes.  Even if homes haven't quite bottomed in your market, most likely they have already tanked from boom highs.  Furthermore, the glut of inventory is your friend as a buyer.  Even if homes in your market stand to fall another 10%, what value does this create for you if interest rates move a point higher and tightening supplies force you to submit a strong offer to compete against other competition?

In our own experience in the Phoenix, AZ housing market, it has been tougher to find our opportunities this year due to the huge increase in investor activity.  Even though values have trended lower in some segments of the market, the increased competition has led to higher purchase prices, a decrease in negotiation leverage, and smaller operating margins.

As always, run the scenarios before you make a blanket assertion on whether or not it's the time to buy, since value is not always what it appears to be!
 

Embrace the Confusion!

In between our day to day activities as Real Estate professionals, more and more of us are making time for this online social networking "stuff". Remember in the beginning, your multifaceted platform of choice was Craigslist. Come to think of it, did you really have too many other choices?

Now, the social networking tools / platforms / communities are a dime a dozen - Twitter (of course, right now no social networking article would be complete without shamelessly Tweeting a plug for Twitter), LinkedIn, Facebook, Active Rain, Inman, Plurk, MyBlogLog, FriendFeed, Tumblr, Jumpcut, Brightkite, etc., etc., etc.

To this point, some of you are saying, "yeah, I know these sites, get on with your point" while others are saying, "Tumblr, Jumpcut, Brightkite, what now, where did these guys come from?"

Agreed, this social networking thing seems to be all over the board for most Real Estate professionals. Where do I start? What do I use? Does this fit into my 80%, 20% time spent rule? I don't get it! How many of these things do I need to belong to? This is just silly.

Do any of these remarks sound familiar?

For those of you who've already resolved themselves to using these social networking platforms, new questions arise. How do I stand out in such a large crowd? What's the best use of my time? What's the right tool? Wait a minute, is this a popularity contest or am I looking for business leads?

Make no mistake about it, we're all learning as we go. Even the big boys and girls. However, there's a major difference. The big boys and girls are learning about things nobody yet knows about while the rest are learning about things the big boys and girls have already learned and are now teaching. They take the time to understand the silliness, using and evaluating tools and ideas for countless hours to learn what truly is silly and what potentially has staying power. Are these individuals smarter than you? In some instances, sure. Regardless, it doesn't really matter. The important point and their major advantage (key to success) is that they do this social networking thing for a living, which means they spend a lot of time doing!

As a Real Estate professional, do you earn a living by working an hour or two out of each day while taking countless days off in between? How many hours are you really putting into learning this new social networking environment?

We're not foolishly suggesting that success can be found by simply banging your head into a wall hour after hour with your efforts and pains producing results just because. However, you can't expect to be an expert without putting in the time, practice, and following through with relentless perseverance.

Hard work and dedication has it's rewards. We've all been there, we've all felt successes to one extent or another. This social networking thing is no different with one exception. We're on the ground floor, and this is no ordinary opportunity.

Embrace the confusion. In fact, be thankful for this confusion as you have the ability to be one of many, yet relatively speaking, amongst only a few, that will be able to reap the rewards and enjoy the benefits that this social networking medium will bring.

If you want more out of this, stop treating it like a hobby and start working at it like a job. Give this the respect it deserves, the devotion it calls for, and the effort that it's going to take to figure it out. After all, who said transforming your business was going to be easy? It'll take a lot of work, but it's got to be done.

Make your mark while the gettin's good. And, right now, the gettin's really good!