Welcome to βTarl's Weekly Insights," my take on real estate today.
In these newsletters, we'll dive deep into the real estate world, share valuable investment strategies, and explore the craziness that life has thrown my way. Whether it's my struggle and journey of overcoming flipping, deciphering the insanity of the market, successful strategies being used in REI, or just me making fun of social media real estate investors...
I can't wait to share it all with you.
OMG! Mortgage Rates MIGHT Drop Below 6%?!?!
In the 4th quarter of 2023 many borrowers were seeing their 30 year fixed mortgage rates as high as 8% with some borrowers getting into the 7%'s. Many single-family investors who focused on getting a DSCR Loan (Debt Service Coverage Ratio Loan) were even getting stuck with 9%+ debt depending on their situations.
Today, we are beginning to see the average 30 year fixed debt from Fannie/Freddie creep into the low 6%!! Wooohooo! Many 'experts' speculate that we will drop below 6% in 2024! After all these years (months) we are finally seeing the light of day and can once again as investors start getting cheap debt and begin buying properties once more! BRRRR is back baby!
Or...is this just a temporary reprieve? Perhaps the 6% mark is where we stay, with some fluctuations, for the remainder of the year?
What are my thoughts? I believe that we will not see much more of a drop in the rates this year. I think we will possibly get into the 5s, probably high 5s, and float between 5 and 6% for most/all of 2024.
Why? History.
When looking back through history, despite contrary beliefs, the FED tends to not rock the boat during an election year. No matter where your politics lay, the FED historically supports the current President up for re-election, and typically does not want to be the 'reason' someone gets fired (for lack of a better reference). Historically, this means that the FED has 'delayed' and propped up the economy during an election year. I am using these terms very loosely, so bear with me.
Will rates continue to drop and go back to where they were in 2021? Hell no. If they did, then kiss our economy and currency goodbye. Yet will the FED raise rates as they have been and keep us facing recession? Probably not this year.
I personally believe that we as investors have been given some time and a gift in 2024. If you got stuck with a BRRRR or were unable to refinance into lower debt, then now might be a great time to take advantage of the dip in rates. If you believe they will keep going down, great, roll that dice. Additionally, with rates (and the news promoting the rate drops) lowering, this will bring back confidence in retail home buyers, raising prices yet again and seeing an increase in our equity and home prices.
Last thought, how will this affect the Multifamily/Commercial space? With $1.2 TRILLION Dollars of commercial/multifamily debt coming due in 2024 and 2025, this drop in rates will breathe some hope into owners/syndicators/operators in this sector to allow some of them to get out of their current debt crisis. BUT...many will still have issues with cap rates increasing and property values dropping, and we will still have a lot of debt coming due with no way to pay it off.
Take advantage of this rate drop while you can, hope for the best!
P.S.: If you are looking for DSCR funding for your rental/portfolio, or are looking to purchase your next flip, hit up FixatedFunding.com and contact Julian@fixatedfunding.com and give us a shot.
Let's stay connected! Find me on social media at @tarlyarber and stay updated with additional videos and content.
That's it for this edition of Tarl's Weekly Insights! Stay tuned for more each week!
Talk Soon,
Tarl Yarber