Where Is Real Estate Headed The Rest Of 2023

Mike DeHaan: [0:01] Welcome to the Collecting Keys Friday Focus. What is going on, guys? Welcome to this edition of the Collecting Keys Friday Focus. Friday Focus number 54, which is outrageous to me that we've been doing this for over a year. And, you know, we're still talking about random stuff that seems to be coming to our heads from time to time. You know, sometimes it's things we think about, sometimes it's questions from other people. So if you do have any things that you'd like us to discuss in these Friday folks episodes, please send me a DM on Instagram at mike underscore invest, and I would love to hear about the topic that you would like us to speak about. That way we can dive into it and give you the answers that you seek. But today, I am going to talk about something that is hot on my mind, and that is what exactly is going to happen to real estate in 2023. So if this is your first time here, my name is Mike DeHaan. I'm one of the main hosts of collecting keys. And you will hear me on all the other episodes as well. But this is your absolute first one. Welcome. We're happy to have you. So what is going to happen with real estate for the remainder of the year? This is kind of something that I've been thinking about a lot primarily well, obviously, because I'm in real estate, but also because in the news, there's not a lot of talk right now. Basically, all the doom and gloom sort of stuff stopped getting clicks. Right? People stopped clicking on the interest rate articles and sort of things.

Mike DeHaan: [1:25] And since the news media, right, is in the sort of spot where they're trying to make money off of your clicks, they decided not gonna talk about that anymore because nobody's been clicking. So as a result, it is kind of a radio silence. And that's okay. There was nothing wrong with that. I just think that it leaves us open to do our own analysis over what's going to happen in the real estate market, both in the retail side and from the investor side. So these are my thoughts. These are based off of purely my own opinions and the kind of habits that I see within the real estate community. They're not necessarily based on absolute facts or like some insider knowledge or anything that I have talking to other people, but just what I know kind of how real estate works and how other investors tend to act, and kind of how the real estate market tends to act after doing this for about five years, this is what I think is gonna happen for the rest of the year with the housing market. So first off, I do not think we will see any sort of real estate crash. That was all the hype for the last year and a bit. We saw a little bit of a dip in several markets, but nothing got too crazy. And I do not think that we will see a giant crash of any kind because, you know, the people that bought with the low rates over the past couple of years, they're not going to give up their stable lifestyle and look to move down in the quality of life that they have or move down into a lower quality home that cost the same price as the one that they bought for a ton of money a year or so ago and had a nice low monthly payment because of interest rates. And also to you, a lot of people are not going to be buying because honestly, they can't really afford stuff right now. So where the interest rates are, the way taxes have gone up, the way insurance companies are increasing, amount of money the insurance company charges you on a monthly basis across The US for different things like crazy weather, all sorts of stuff. The affordability is a problem.

Mike DeHaan: [3:12] So as a result, people aren't gonna be selling, people aren't gonna be buying. House prices are ultimately going to be flat kind of across the board. That being said, I do still think that starter homes will continue to sell fast because that is where a lot of the demand is. That is where a lot of the affordability is. I also think that more expensive homes will be okay. If you're in like the multimillion dollar home sort of position, people that can afford stuff like that, they're not really gonna care about an extra $506,100 dollars for their monthly payment. They're already rich. If they like the house, they're gonna buy it, and that's gonna matter more to them than the affordability. The middle homes are always where it's gonna be tough. Right? So the kind of neighborhoods where people traditionally have sold like the starter homes and moved up to. So like where I'm at in Spokane, this is kinda like the 500 to $700,000 home range. Those ones are tricky because it's not generally affordable for the people that have a desire to live in those neighborhoods. And, you know, those neighbors aren't necessarily desirable to the rich folk. Right? They wanna live up into the multimillion dollar houses, the ones with land, the ones with all the amenities that those people seek. So you have starter homes, those still do well. Those middle ones are probably a little bit tough. Overall, with The United States, we are moving into kind of a funny time in history. And, you know, I was born in the nineties.

Mike DeHaan: [4:24] So I don't remember, you know, back in the sixties, seventies, eighties, we had a lot of inequality and different things. But for my lifetime, this is a period of time where it really seems like we have a massive gap between kind of the haves and the have nots in The United States. And the people that have no money, are able to afford less and less and buy a lot less with their money just because of inflation and different things that have been going on. That's always how it's been, but it's gotten even more out of hand recently. I mean, it is shocking how expensive stuff has got. Like, my wife and I went to lunch and just got like some pickup sandwiches from a place here in Spokane last week, and it was like $40 for two sandwiches, like two deli sandwiches. I'm like, come on. It's outrageous. Doesn't make any sense. But that's the nature of it. And I'm paying the same price as everyone else. I'm just fortunate that I can afford stuff. Right? There's a ton of people who cannot. To make matters more complicated, there are tons of people that are out there crushing it. There are people that got higher education. They're getting paid a lot of money by companies because there is this employment issue. People are getting high pay raises. There are nurses out there that are crushing it. There's tons of people that are getting into entrepreneurship and doing these different things.

Mike DeHaan: [5:35] And so there's this big gap because they're the people that just don't have them figured out. They're the people that kind of have. And to make it even more complicated, the people that have high salaries and are, you know, bringing in more on a monthly basis, they also have a much higher rate of interest in different kinds of like financial education and investing and buying rental properties, all that sort of stuff. Right? That didn't really exist all that long ago, especially when it comes to real estate. You know, real estate investors, not that long ago, like nineties or early two thousands, they were either like rich people, or they were like that quirky uncle who would say inappropriate stuff at the family get together, and never seem to be working during the week. He didn't understand that. And everyone was like, oh, you know, that's uncle brick, whatever. That was the guy that owned rental properties that you learned as you got older, and you're like, oh, he was a landlord. He had passive income. He kinda had it all figured out. Now, more and more people are understanding that possibility. So you have the people with money that are going and starting to pursue that, so they can also have the wealth generation of financial freedom. People that are in the have not position, despite not even be able to afford it, they also don't understand how that works. Right?

Mike DeHaan: [6:42] This have this huge gap on financial education on top of the actual tangible gap in finances. So as a result, what will happen if prices do start to go down, you have a bunch of these people that are interested in passive income, interested in financial independence, interested in wealth. They see the rates the prices start to go down on the properties, they're gonna start buying. Right? They're gonna have see this opportunity that they have been waiting for, where the prices are come down off the high, and they will start to squeeze tighter and tighter deals because their drive to have this lifestyle that they dream of is so massive. And so, especially in like that kind of starter home price when I talked about earlier, where the most of the cash flow is gonna be on a rental side. If prices start to drop, those investors will be beating out homeowners, especially if they haven't spent if they have spent the last couple of years saving up money from their their jobs in the medical field or as engineers or software developers, whatever they're doing, they're start buying these assets, and it will take more properties off the counter for people that are in that starter home price point. Right? They wanna be retail homeowners. And what they will do when they buy these properties is they will go to rent them out to those that were unable to buy them.

Mike DeHaan: [7:54] And what this will happen, as this happens, right, they will go and they will buy the houses. They will increase rents to cover their mortgage costs. The renters need somewhere to live. They're gonna start to get into, you know, more and more alternative living situations, whether they're getting roommates, whether they're like two families living in the same spot, you know, people renting by the room, whatever they're trying to do, that's what the investor population is going to push towards the renters. The renters are going to have to eat that because that's the position that they're in in life and in the economy. And ultimately, that's gonna happen for a while until it eventually reaches a tipping point. Right? It'll eventually reach a tipping point where even with the rent by the room, the multifamily is in house, the multiple families in a single unit, all this different stuff, they reach tipping point where even that is no longer affordable. And what happens at that point, I have no idea. That's where stuff is going to get really weird. So there's kind of a couple different things that'll happen. Either rents will stop rising, vacancies will increase, it will be a little bit of a race to the bottom from landlords trying to fill units. And then once they do have them filled, the landlord will come under regular pressure as taxes and insurance continue to increase, which will bring their cash flow even lower. And at that point, things might start to get interesting. Investors could be looking to sell when they're asked to turn into a liability because they're no longer able to get the rents that they anticipated.

Mike DeHaan: [9:14] That's one situation. Or if the feds come in and decide to drop rates again, and bring monthly payments way down to who can refinance, everyone will refinance their properties, bring their payments way down. And at that point, we will basically be right at where we started, they will hold on to these properties forever as investors will, and they will not let go of these low interest rate properties, and that will drive prices back up. So either they will force in the fire sale, or the investors that will force them to refinance depending on what the Fed's gonna do. And if you really know what they're gonna do, it's always kind of a shot in the dark. So that's what I'm kind of seeing on like the retail side between, you know, what investors will do, what the situation is with homeowners competing with investors, all sort of stuff. But one of the big question remains now is if you're an investor or a wholesaler, what exactly should you be doing? And I think a big trend that we are seeing is we're starting to see less opportunities with low income and distressed houses. K? And this is primarily because the people that live in those houses and are owner occupants, they have nowhere to go.

Mike DeHaan: [10:17] And we're starting to see significantly more opportunity for nicer homes because those are people that need to sell. Right? They're people that have a value in the convenience. They maybe try to list properties, hasn't sold things like that. And they are starting to value the convenience or the need to sell these properties more so than the actual top line price. Okay. We're seeing this in our business. We're seeing this in our instant investor program with our students and our mastermind over there. I mean, Dan and I, we bought this turnkey 2,005 property out here in North Idaho. To sell our finance, we're buying at 5% down and also getting about 80% of retail value, needs nothing. Basically, they just needed to sell it. They couldn't sell it on the market. They're selling it to us. We don't mind holding it for a couple years with terms like that. Let's create property for us. We got another property for a partner for a partner down in Central Idaho. Property was listed two months ago for like 675,000. We snagged it for 500,000. Okay. The people are looking to move to Wisconsin or somewhere. It had been listed for months. They weren't able to sell it. They got it down to $6.25 on the market. No takers. Okay, we bought it for 500,000.

Mike DeHaan: [11:23] We're gonna pretty much just vacuum. Well, I guess our partners buying 500,000 and just vacuum the carpet. He's a handyman paint up touch up whatever. Let's sell the market at $5.99, which is a much more appropriate price right now. It should go no problem. Right? Easy deal. Beautiful house. Very simple. Two other people in our investor community have literally gotten a class properties with pools, and like nice pools, not like funny scummy ones, but ones that are like, kind of have a round shape, and they have a water slide, and they have a hot tub built in. Like, dope houses, they're buying at steep discounts, just because the house went on the market, didn't sell for some reason or another, usually price point, use something else. And they're gonna buy these properties, gonna turn them into Airbnb's, they're going to, you know, potentially flip them. One guy's even gonna move into one. We have these awesome properties that are coming through that was unheard of years ago in the sort of off market community. So starting to see a lot more opportunities with stuff like that, and allow us dealing with crackheads. Like, we aren't stuck dealing with crackheads anymore. So to round everything up for the rest of the year, and even going forward after that, I think prices are gonna kinda stay flat. We're not gonna see anything go up. We're not gonna see anything go down. Rents will continue to rise, especially because a lot of people are getting fat tax increases with all the new assessments going on in every county.

Mike DeHaan: [12:36] If prices do dip at all, especially if it's significant, investors are ready to jump on the opportunity. There's a ton of us that are accumulating cash right now that are waiting for the next opportunity. Both experienced and inexperienced investors are waiting for their shot to make real money, and so that's what they will do if prices go down. And if you're not marketing to nicer areas, you definitely should be like you again, you don't need to be focusing on crackheads anymore. You can start to expand out, market a little bit more to the nicer areas. And even if it doesn't pay off in the immediate, I guarantee as we get to the end of the summer, we get to the fall, we get to the winter, and the market generally starts to slow down anyway, there's gonna be a ton of opportunity to pick up some a class assets without having to pay too much for it. Oh, we're getting some pretty sweet discounts. So anyways, guys, that is my view on what I think is going to happen with the real estate market for the rest of the year and probably going early into 2024. What do you think? I would love to hear. Do you think that my opinion is completely wrong? Think I suck? Think I don't know what I'm talking about? Perfect. Let's have a conversation.

Mike DeHaan: [13:37] Hit me up on Instagram at mike underscore invest. I would love to get your opinions on this whole thing. Think I'm right too. You should let me know because I love to have my ego stroked with all stuff. Because I do put a lot of time and thought into it. I have been around a while. Sometimes people disagree with my opinions, and those are my favorite conversation to have. So you should reach out to me at Mike underscore invest on Instagram. Besides that, guys, please share this with anyone who has any interest in real estate, the economy, business, or I don't know, you think we'll just vibe well with what Dan and I do. It's a great way for us to grow the show. And if anything, you're honestly being selfish by not sharing this because you you could have people that are listening to the show, they might learn something that could change their life for the better. So share with everybody that you know, you never know whose life might change, and they could eventually become a real estate wealthy themselves. Anyways, guys, thanks for listening, and we'll talk to y'all next week. Thanks for listening to this collecting keys Friday focus. Be sure to subscribe wherever you listen to your podcasts.