Tarl's Weekly Insights 12/29

Dec 29, 2023

Welcome to “Tarl's Weekly Insights," my take on real estate today.

Hey there,

Welcome to Tarl’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...

Why I believe house prices will continue to rise in 2024

(for most, not all, markets)

The rise of interest rates will crash the housing market!

But... it's the end of 2023 and the FED has raised interest rates 11 times since March 2022...and the single-family housing market hasn't crashed...So are interest rates the number one factor for price fluctuations for SFH (single-family housing)? Apparently, it is not!

Supply and Demand, we have been hearing that term since we took Econ 101. On a macro level, it is the biggest factor in determining pricing on almost anything. Supply high and demand low means low pricing. Supply low and demand high, means raising the pricing. Seems that our real estate SFH sector is no different.

In 2007, we had a massive amount of SFH being constructed throughout many major markets, along with a large amount of "junk loans" in play. When the House of Cards fell, bank financing was near impossible to get plus we now had entire sub-divisions sitting empty along with sub-divisions with a fraction of the houses even completed as the builders and investors went bankrupt. It's hard to believe, but the last housing boom over the last ten years pretty much only caught us up with the supply issues of 2009...yet not very much new supply was created between 2009 and 2023...and demand has increased to far exceed the housing markets ability to deliver.

Now, with increased rates, labor shortages, bank finance hesitations (on larger projects), and supply cost issues (still)...builders are having a hard time justifying leaning into building more supply. Why wouldn't they? So many of them have been taking a haircut (AGAIN!) in 2023. Many builders were needing to give 6-10 points in buyer concessions to pay down buyer interest rates, just to sell the houses they had in their inventory.

Supply and Demand continue to dictate, that in most markets, despite rate hikes and uncertainty, that many SFH markets will continue to rise in value in 2024. All markets? Nope! So do your research.

Will this continue into 2025? That all depends on how messed up the banks get with 1.2 Trillion dollars of commercial debt coming due, along with our inverse yield curve. Either way, I think 2024 is safe for now...but that's my educated guess.