Interest rates are going up, which means real estate is getting more expensive. So what’s going to happen - will prices decline as rates go up? Or is it better to buy more rates just get more expensive? Add me on Instagram/Snapchat: GPStephan
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Interest rates directly affect how expensive it is to own real estate. As interest rates rise, your affordability goes down since that same loan becomes more expensive. Historically, us “freaking out” about higher interest rates is rather comical. In the 1980’s, the fixed 30-year mortgage rate was 18%. By the 1990’s, it fell to about 10%…and since then, it’s steadily decreased. So what about real estate prices at that time, how did they fare when interest rates were 18%?
Well, the surprisingly - it didn’t have much of an impact on prices. Development began to halt as borrowing became too risky for new projects, but dwindling supply kept prices rather intact. And historically speaking, interest rates have very little direct impact on property values…and the reality is that there are many other factors at play which determine the value of real estate. One interesting note is that usually interest rates are increased in either an improving economy, or to combat rising inflation.
In an improving economy, people tend to be doing better as well - unemployment is lower, wages are increasing, people make more money, people spend more money. This bodes well for real estate prices as people have more discretionary income.
If interest rates are increased to combat rising inflation, because real estate is a hard asset that typically increases in value at the same rate as inflation due to build costs also going up, sometimes the increase in property value from inflation actually outweighs any potential negative decrease caused by rising rates, and the net result can be positive for real estate.
And as they say, when it comes to real estate, it’s location location location…a bigger determination of prices is still the age old supply and demand. Local market health is a much stronger indication of market price versus interest rates alone.
My prediction is that we’ll continue to see upward pressure on real estate prices, even as interest rates slowly rise. Now the FED isn’t so stupid as to raise rates an absurd amount as to shock the market, they’ll do so in small, easy to swallow increases where it’s more like sitting in a simmering pot vs being tossed in a boiling vat of water. It’ll be so gradual that we’ll barely notice it over the next few years.
So with that said…historically, no, rising interest rates have no correlation on real estate prices - even though, you’d think it would. But rising interest rates are more of an economic symptom of a healthy market, than the direct cause of that. So for anyone out there like me who was curious or concerned about this…probably no need to be concerned. Buy what you can afford, buy with the intention of keeping it long term…and hold.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
Interest rates directly affect how expensive it is to own real estate. As interest rates rise, your affordability goes down since that same loan becomes more expensive. Historically, us “freaking out” about higher interest rates is rather comical. In the 1980’s, the fixed 30-year mortgage rate was 18%. By the 1990’s, it fell to about 10%…and since then, it’s steadily decreased. So what about real estate prices at that time, how did they fare when interest rates were 18%?
Well, the surprisingly - it didn’t have much of an impact on prices. Development began to halt as borrowing became too risky for new projects, but dwindling supply kept prices rather intact. And historically speaking, interest rates have very little direct impact on property values…and the reality is that there are many other factors at play which determine the value of real estate. One interesting note is that usually interest rates are increased in either an improving economy, or to combat rising inflation.
In an improving economy, people tend to be doing better as well - unemployment is lower, wages are increasing, people make more money, people spend more money. This bodes well for real estate prices as people have more discretionary income.
If interest rates are increased to combat rising inflation, because real estate is a hard asset that typically increases in value at the same rate as inflation due to build costs also going up, sometimes the increase in property value from inflation actually outweighs any potential negative decrease caused by rising rates, and the net result can be positive for real estate.
And as they say, when it comes to real estate, it’s location location location…a bigger determination of prices is still the age old supply and demand. Local market health is a much stronger indication of market price versus interest rates alone.
My prediction is that we’ll continue to see upward pressure on real estate prices, even as interest rates slowly rise. Now the FED isn’t so stupid as to raise rates an absurd amount as to shock the market, they’ll do so in small, easy to swallow increases where it’s more like sitting in a simmering pot vs being tossed in a boiling vat of water. It’ll be so gradual that we’ll barely notice it over the next few years.
So with that said…historically, no, rising interest rates have no correlation on real estate prices - even though, you’d think it would. But rising interest rates are more of an economic symptom of a healthy market, than the direct cause of that. So for anyone out there like me who was curious or concerned about this…probably no need to be concerned. Buy what you can afford, buy with the intention of keeping it long term…and hold.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
This is a great video Graham, especially with what's going on now👌👌
The economy was doing alot better in the 80's. Education was affordable, Cost of living, healthcare, jobs. There are alot of misleading stats out there. Stats can be manipulated! Now! different story. Be careful, be smart, plan for the future! LA is a unique real estate market!
Nice Panerai
YU LIE! 2018? LOL
Nahh im good ill wait it out and if it gets too expensive then i just wont buy simple as that !!
were you smoking fucking crack when you labeled this
im confused why the fuck are you giving a speech on interest rates with a title about are prices going to drop.
just to let you know i disliked this video because you like begged
This is the problem with the industry. Now a month old agent is making a video on expert analogy on the market. You're way way way too late mate. The fact that you titled your video "Are we ABOUT. to see…." about? hahaha..i wish you all the best of luck in your new career:)
Screw all your haters! I love your videos , you have a great outlook on the real estate market! Keep making videos! Thank you!
Got it about the interest rate. Is anyone here planning hanging on to their property for 30 years?
make sence! a full time real estate agent who personally buys properties at the high price and rate will say and "hope" that the bubble is not going to burst for another couple years :))))
Nice try but I'm not buying at the top. I'll wait for the prices to come down
What do you think of the Chicago housing market
Realtors make me laugh. Your right they do not give financial advice. There sales people. That’s it. Like a car sales person just way overpaid
I'm buying now suck it.
Hope there’s a drop. Real estate in Southern California is highly overbought right now
where do you get that short clip of "WHAT AM I GOING TO DOOO!!" lol
You failed to mention stagnant wages & an artificial stick market fueled by cooperate buybacks with essentially free money
Totally disagree , secondary Bayarea Realestate is now taking a dump suddenly over the last 3 months, it's about a 10% correction in just the last 3 months ! Alot of the stats are not up to date but lag a few months. Once they raised the interest rate most homes & condos slowed down & most dumb owners have stuff sitting 80 days & more cause they are stubborn and aren't lowering prices. Many homes / condos are selling because of price reductions, down , down baby, It's going to be a nightmare what's coming.
Why not get 15 year mortgages on a cheaper property instead? I mean if you plan on flipping them relatively short term 30 is the way to go but 15 looks a lot better to me from the interest rate standpoint if you plan on keeping it
Quick question for you Grahm, are you worried about people leaving California in record numbers? I live on the east coast so I only have bits and pieces of information to work with, but what I've seen seems to suggest that people are leaving the state for a laundry list of reasons. As someone on the outside looking in it seems like the real estate prices in the cities are a massive bubble that will pop if people keep leaving and the bottom is going to fall out soon.
Wait. I’m not supposed to take financial advice from you? What about all the serious financial decisions I’ve been making based on YT videos I watch? Were they not financial advice either? Have I been doing finacials wrong all this time!? Just kidding. Have a great day!
Sounds like a Crash is coming one of those theories has to give.
Look outside of LA
We're in the construction business and we won't work for these carpetbaggers.
There is more to the economy than real estate alone that can crash housing prices.
I need an interest rate of .5%
Thanks for the financial advice
Donnie McTariff is forcing real estate to go up. Tariffs on construction materials and creating construction labor shortages will result in a reduction of new inventory at a time when buyers are getting overconfident economically. We are headed for a blood bath of an economic crash when it's time to pay the piper.
vid is designed to fuel FOMO
Wow , are you serious?, house price keep going with interest rising?, wow . house price has been dropping badly in san jose in last 5 months.