1:06 I meant to say 2008* not 2018. When you film these videos as late as I do you mispronounce words and get them all wrong. Still getting comments about this. Just for clarification ;)
Graham Stephan isn't there something in real estate that's like a future contract where you lock in a agree upon price (in this case interest for mortgage) in order to assuage systemic/market risk ?
1xxicecatxx1 - the rates are locked in for 30 years, at which time the loans are paid off. So none are adjustable..but for purposes of the video, the SAME loan would cost 39% more TODAY than it did back when I locked it in. My rates don't increase throughout the term of the loan, thankfully.
I totally understand what you're saying but I truly hope interest rates have a direct impact on real estate prices. Property values need to be driven down. I live in NYC and home prices are out of this world nowadays. Its ridiculous how speculators and investors are driving the prices up. It's a joke to look at the historical asking price; $50k+ here, $100k+ there. How? How Sway? If you go outside of the city, taxes are more than doubled. Just a joke. The American dream is dead.
I think locking in the low rates, breaking even renting for a year or two while rates go up, then renting for cash flow is the way to go. Do you think rates going up and prices not dropping will increase what you can rent a house for? Thanks! I'm new to this.
I partially agree. The expected increase in interest rates will boost short-term demand for homes as home-buyers attempt to lock in low interest rates - this will place upward pressure on home prices. Subsequently, prices will then experience downward pressure in the mid-term as potential home-buyers will be priced out of the market. This assumes that Supply (inventory) remains constant and does not increase.
Meanwhile, because of mortgage regulations being so strict, I can't buy a $50k 2 bedroom country house in the middle of nowhere. I pay $900 a month rent for a similar sized 2 bedroom townhouse.
Expect at least 50% correction. When interest rates goes up people can’t pay their repayment and they will sell. And when everyone start selling at the same it will increases the supply and less demand due less affordability.
Dont forget there is an entire new generation looking to buy homes for the next 10 years. There are places such as seattle and san fransico where there is no more room to build.
You can reduce higher interest rates with refinance, but you can't reduce purchase price with refinance... I'd rather have higher interest rate than higher price. Am I right?
Graham Stephan in addition to lower prop taxes there is more appreciation potential which is equally as important if not more important than cash flows.
So I looked into getting an investment property a few months ago. The bank I was negotiating with said the absolute minimum interest rate for an investment property is 6%. My credit is around a 780 so I don't think that has anything to do with it. How are you getting a sub 5% for an investment property?
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
Blockchain is about to absolutely disrupt the real estate industry. Tokenized commissions plus decentralized and streamlined process is all being done by something called Deedcoin. Highly worth looking into if you want to save money on broker commisions and support the blockchain revolution.
Graham Stephan thanks for replying, I love your videos. You inspired me to take classes to get my realtor’s license and work hard wholesaling until I have enough saved to start investing myself.
Hey Graham. Dumb question but for those of us who own a home and are paying about $1500 a month at the current interest rates, will an increase in interest rates cause that payment to go up?
Tan P it will only go up if you have an adjustable rate mortgage, otherwise known as an arm. Which I sincerely hope that you do not, as interest rates have been at a multi-decade historically low rate.
Tan P "Dumb question but for those of us who own a home and are paying about $1500 a month at the current interest rates" Do you have a poor grasp of the English language or were you just lying when you posted this . Just curious because either way you have proven yourself to be an idiot
Before the financial crisis the FED increased interest rates 17 times over 4 years. Over the past 2 years they have increased interest rates 7 times... it's a downward spiral. They have already said that interest rates are likely to be further increased over the next few years. Once they hit near 4%, we will see a crash far worse than 2008. Where real estate dropped massively. This debt crisis is far worse. The BOE (I'm from the UK) have released 'stress test' reports that show the stimulated response on real estate in the event of a crisis. The estimate a minus 35% drop in residential and 40%+ in commercial... now is an awful time to buy. You will be taking out a mortgage on the current property valuation, which is near all time highs. Yes, prices could go higher, but that would require more stimulus in demand in the economy - which would require another round of QE which could lead to extreme inflation or hyperinflation... interest rates follow in the footsteps of inflation, so at 0% interest rates (or even negative) when inflation is high could lead to hyper inflation. Yes your asset might be worth a lot more in USD, but USD will become worthless if there is hyperinflation. Plus, with rising interest rates - WHO is buying??? As you said, it's all about supply vs demand... people are currently buying real estate as the price is constantly increasing, it seems like a smart investment - when interest rates go up, there will be no buyers - but a lot of sellers, which will cause the prices to drop massively. And in terms of cash flow, renters won't be able to meet monthly payments so occupancy rates will drop as well, which give you two option... 1. Lower the monthly cost or 2. Liquidate the asset. At the end of the day, markets are controlled by emotion. For as long as people believe real estate is going to forever increase, it will go up (as it will be a buyers market with supply capped) but remember that this has all occurred at a time when it has never been easier to get money - negative interest rates in some places!! One thing I do agree on is not putting a date on it, this could still take a while to play out. But the odds are that they Fed will keep on increasing interest rates and then people will start to default. As soon as that happens, this bull market is over. Just my opinion...
41st. PS my dad in the early 2000's bought a fixer upper sort of house in Vallejo for 70 K, and a few years later with barley any improvements he sold it for 230 thousand. And it was mostly luck considering he wasn't looking to buy-fix-and than sell.
Terrible investment bro you should have cash got you pops to refinanced the house for new cash if you had Atleast 20% down on the 70k like 15k than cash re fiancé at 230k pay off 70k loan 160k cash equity created for other investment properties
My real estate agent says there is no such thing as a bear market in real estate. It is always a good time to buy. As expected from people who are trying to sell you houses for a living. What do you expect them to say? Don’t buy? Basically the message is to buy now or regret later when it goes up in price. Remember fear of missing out? Don’t give in to the fear. Buy low and sell high, not the reverse. This housing market is unsustainable for average people and wages are not going up.
I think it’s better to pay less for house with the higher interest rates. This way you’re not trapped in case you want the option to sell. A realtor I talked to in Florida just sold his 10 properties. He said tenants weren’t paying do to lack of jobs in his area. If stock market drops 10% then we are 6 months away from a realistate crash. The factor that many aren’t thinking about is the collapsing petrodollar. If the dollar begins to hyperinflate because nobody’s buying are treasuries the cost of goods will go through the roof. People will choose to stop paying their rent before food. US debt situation is beyond return. Graham, have you seen Inside Job? It won an Oscar for best documentary and it talks about the housing crisis. Kiyosaki talks about it: ruclips.net/video/_5pCulILQi8/видео.html
haha no idea how that slipped past editing, too...usually I'll re-watch it a few times to make sure it all flows nicely and if there's anything else I need to mention or delete. I usually edit late at night so occasionally something might slip through!
Time in the market beats timing the market. Just buy real estate when you can. As long as it's in a good location and produces cash flow, you don't need to worry about whether or not the market gonna crash in the future because you can't control that.
this is horrible advice. Housing used to only go up with inflation. Housing as an investment has only been a phenomenon with interest rates going lower over the past 40 years. After the next crash government will not be able to lower rates again because they are already to low. Inflation will be rampant and we will be wishing to have the stagflation of the 70s back. You should rent and spend the extra money on gold.
Hey Graham I just turned 18 last week so I am finally going to be able to get my real estate license in Orange County! thanks for all of these videos Im feeling excited for this crazy journey
There wasn’t really a period of low interest for regular people which eventually pushed up prices. The low interest was for Wall Street investors who via Corporatism/cronyism had the credit velvet rope lifted for them to buy up SWATHES of properties to rent to the people who lost their homes in the first place. It was a double whammy where bailouts/tarp/quantitive easing etc was done on the premise that the banks lend to the middle class. The opposite happened. They locked up credit UNLESS you had rich peoples credit/connections. Only when investors picked the bones clean of a bottomed out market did the banks lift the velvet rope for the middle/working class to scramble for the scraps. The result is banks upped the % PLUS did so AFTER the houses got more scarce (expensive) AFTER the 1% feeding frenzy. It’s why rent is so high. The same people who caused the crash, profited from the fallout. The banks are not worried about the current climate of lending to regular folks for current higher prices because...Bailouts, quantitive easing etc etc is the new normal. Once again they can blame the victims for overspending on mortgages and lobby for bailouts again. It should be front page news. I give it a year before rent/interest on mortgages for overpriced houses becomes unsustainable with lower wages. It’s not just a double whammy. I’m running out of whammy’s. The “economy” is owned by the 1%. The average family has very little invested in “the market”. Most are in the same boat as the crash. If food stamps were breadlines, the lines would wrap around Walmart. They blend in as it’s a credit card. People don’t have more money. The job statistics don’t take into account most of the jobs are paying less or at best stagnant wages. Nearly all of the economy is booming aspect is telling us how amazingly rich a small amount of people got post bailouts/quantitive easing.
But Graham! My uncle's wive's friend's coworker got a 4% percent interest rate that's making good cashflow in LA. What about those deals Graham? Dislike, Unsub, Block, Report as Spam.
what makes the economy good? corporate earnings propped up by a drop in the corporate tax rate. Consumer spending? consumer is all time debt loads. stock market prices? propped up by record low interest rates and Quantitative Easing multiplying the cash in the system by 4x.....Wages? barely higher than the year 2000. What do you define the economy? I mean if you go buy a bunch a stuff with the credit card is your financial life doing better or worse? I would argue that the economy has only medicated the symptoms of 2008 and once the medication wears off it will reveal the debt sickness that existed in 2008 but only magnified.
I've wanted to buy my first duplex to house hack in the next few years but looks like with interests rate going higher, I might get fucked unless people are willing to pay a higher rent. However, I think there are always deals to be found. Broken down houses to fix up and house hack with. We'll see.
Don’t tell us to LIKE & SUBSCRIBE! As soon as you said that I changed the channel and came back to tell you this as I made sure to pause your voice. You must earn that! We decide if we like or subscribe! Newb
2br 1ba 1 car garage Town Home in Denver Colorado with 300$ HOA fee back in 2012 was sold for 108k$ now its going for 265k$ and already under contract average home going for half a million dollars. In popular cities like Denver or Seattle that everyone moving to, is impossible to get a home and price going to keep on rising at astronomical rate.
I think that interest rates will hit 6% or higher as the economy keeps going strong. Buying is not rational right now relative to rental income. But tight inventory is def the problem/driver of the current price increases.
Don’t buy the argument - it’s statistically proven that the supply of credit is the no.1 factor for raising property prices. We are drowning it thanks to your not so friendly bank. Nothing to do with supply that’s BS. Interest rates up, over leveraged property down - simple.
This... this is the video I've been waiting for!! With regards to real estate, your analysis makes sense, but there's the broader market to consider. People say stocks and real estate aren't correlated, but I think that's bullshit. With the spectre of trade wars ahead, the ripple effect of that could lead to job losses, defaults, and thus lower prices. The fed in addition to simply raising rates, is also selling off all the treasuries and MBSs they bought after the last crash. This is another factor that could sway rates in addition to simply raising the funds rate. All in, if I can wholesale or flip a property I bought below market I'll do so, but buying in now at these prices?? Fuck that, I'm more than happy to wait for a proper recession as I refuse to become impatient and lose my ass during the next recession. It's easy for the Wall St. companies and other investors who bought during the next down turn, since now if/when prices fall again they'll have a huge cushion and won't need to panic sell!! Something that won't be true for people buying now.
In general, people buy houses based on gross monthly payments (Principal, interest, taxes, insurance). As rates go up, prices of houses will adjust accordingly
Ok so you put 10-20% down on a property and the bank creates 80-90% out of thin air. Literally the bank conjures up 90% on your promise to repay, they don’t have that money. Now you are saying that lending money out of thin air and interest rates have no effect on the real estate market. Let me pose this question then, what if banks didn’t exist and there was no such thing as a loan how much do you think a houses would cost then? Probably 50-90% cheaper right! Banking and interest rates are how the market is rigged. When interest rates were 18% in 1980 the average cost of a House was 50-70K. Since 1980 the Interest rate steadily went lower and the price of housing kept going higher. The inverse is also true as interest rates go higher the price of a hoses go down.
Prices have been falling since the start of this year, peaking in December 2017, at least according to the NAHB Housing Market Index, and in all areas around my hometown (Pittsburgh). Perhaps CA/NYC have yet to tumble
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!
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.
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!
This is very market specific. Also people aren't building homes and are opting for used homes. I don't blame them in places like california where permits and code can delay projects 1-4 years on average. In my market, people are buying small 0.5-5 acre plots of land as older generations start to die off and building new. Nobody with money wants to live within city limits as it's (to use the presidential term) a shithole.
Graham, I'm an 8-month view of yours and I need your help again. I just bought my first rental property. It's a duplex that I am living in, to get some sweet househacking money. Now that the property is mine, I'm seeking people and trying to work out the best way to advertise my property and to get paid once I find a renter. With your properties, would you recommend a peoplefinder or background checking service? Do you use an online portal (like cozy.co) for your renters to pay you or do you just have them send you checks via mail? Did you open a separate bank account for each of your properties? When you make purchases to upgrade your properties, do you use a specific credit card or debit card to make your business purchase history easier to navigate? For someone who is reasonably intelligent with only a duplex to keep track of, should I hire a tax professional to maximize returns or will some business-version of turbotax be sufficient? If there is enough to talk about, could you do a video about the organizational logistics of what is next after you buy the property?
I'm new to REI but I think something you're overlooking that is within the near scope of topic of the video is the fact that, if you're spending more on interest even if the monthly cost is nearly the same, your tenants are contributing less to building the equity in your property while only paying for the loan. Cash flow=cash flow, but building equity with 4% loan vs a 6% loan will is not equal. Appreciate your thoughts nevertheless! Thx
I liked your analysis; however you failed to factor in the impact of recent changes in our tax laws which place limits on the amount a homeowner is able to claim for property tax... Here in Taxafornia we are now limited to $10,000 in property tax write offs. This just made owning real estate here significantly more expensive........
Graham, I know this is a year old and maybe you realized it now, but the reason why 7:55 value has been going up is because of the short term bidding up of real estate BEFORE rates really go up. People wanted to get in before then, but now we're experiencing rate cuts in 2019 as me and others that understand the markets predicted the Fed would do when they first hinted at hiking rates
WTF! :30 “if interest rates stay to low for to long inflation will go up” where u been bro it’s been low for over 10 years...I have to assume u must of started in RE in late 2012 or later it’s been crazy in these streets when it comes to free money for a while...I think u should do more research on why rates are low in the first place
More important than interest rate is credit access. Right now, the government buys up most of the mortgages in the secondary market. When the government relaxes the re-purchase condition, as in now, it creates more buyers (since more people quality for getting a mortgage). This relaxing lending standard is pushing up the medium prices in LA. But check the lot prices in LA. They are falling. Why? Because the government is not buying the lot loan. Where there is no government involvement, the pure market is in place.
What if the properties are cheap but you have good cash flow....like values aren't going up because of the area. You don't need a mortgage because it doesn't cost that much. But if you sell you probably won't make much past your initial investment.
This guy fucks! :) Yeah it is really hard to predict the market and that is why whenever there is a good deal it is always good to buy. Timing the market is extremely hard and studies show you lose more by trying to time the market. Anyways, as always, great video by Graham
You have not seen rising interest rates because you are young and interest rates have been falling. The supply constraints are artificial. You cannot find cash flowing properties because investors like you are have flooded the market. At the next down turn in the economy your investments are going to be a burden
My real estate professor said house prices will go down as interest rates go up. He's an old man though. He's like 60 and has seen it all in real estate.
Jordan if Supply was held constant, then he would be correct. But, Supply is not a constant. There are more variables, supply, demand, interest rate, job growth, demographic change in your region (median income), and inflation.
Hey, Graham, I don't know if you'll see this or reply to comments like this, but here goes: So, my dad is planning to sell our entire 4.73 acre lot after we get a land swap deal done where they get 1/10th of an acre and we get 1.6 acres. (I believe it's 1.6. I could be wrong though.) We have a real estate investor that's been looking to buy the property and we believe he plans to use it to develop a subdivision. He already has his investors looking at the property and the approval of the county, so he's good there. The water line has already been ran down to the road they would have to pave in for the subdivision, the road has already been cleared, we had about 20 or 30,000 dollars worth of tree work done for free, so all of that's out of the way, and there's also a large level lot on the top of the hill for them to put in the cul-de-sac and a few houses. Also, there's right around 1,000 feet of road frontage. We were looking to get 200,000 for everything, however our bare minimum would be 160,000. Is that a reasonable price or no? Also, I'm not trying to oversell it, but I figured those details would be important. Anyways, sorry for the very long comment and keep up the great work.
Short answer ...No . It's been shown that no matter the cost ? People will pay it . And with the Chinese buying the West Coast . Prices will only continue to rise .
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 :))))
You don’t need to be a real estate expert to know that when prices or interest go up to the point where no one can afford to buy something has to happen. Explain how do you sell something that no one can afford and how do you keep the prices rising? I took a real estate course and one of the things I remember clearly is “your house is worth whatever people are willing to pay for it”
Graham, I will be in Los Angeles next week I have a client looking for a LARD1.5 or LARD3 SFR, We have POF @ $5,000,000 if not enough we have more. Let me know if you have something available we can work something out. I am on the realist every day looking for an interested seller.
What if interest rates indirectly affect supply and demand that causes home prices to drop? Say you are selling that $500K property. If the interest rates go up, and it becomes too expensive for some percentage of people, your demand pool would shrink, causing your property to sit on the market longer, and eventually you accept a low ball offer just to get out of the property.
1:06 I meant to say 2008* not 2018. When you film these videos as late as I do you mispronounce words and get them all wrong. Still getting comments about this. Just for clarification ;)
I KNEW WHAT YOU MEANT LOL
I have a feeling there will be people out there who....somehow...won't understand lol
Graham Stephan if were on the matters of correction then you endured a 39% increase on interest within 2 years
4.7-3.375/3.375
That's pretty insanuo
Graham Stephan isn't there something in real estate that's like a future contract where you lock in a agree upon price (in this case interest for mortgage) in order to assuage systemic/market risk ?
1xxicecatxx1 - the rates are locked in for 30 years, at which time the loans are paid off. So none are adjustable..but for purposes of the video, the SAME loan would cost 39% more TODAY than it did back when I locked it in. My rates don't increase throughout the term of the loan, thankfully.
1:04 Only since 2018!?! Dislike, unsub, block, *restraining order*
GRAHAM STEPHAN EXPOSED!!! ONLY HAS BEEN SELLING REAL ESTATE FOR 1 MONTH!!! GRAHAM STEPHAN TRUTH SECRETS REVEALED!!!
You're a tad late here, man.
Zach Simpson tru
B the Lee
Yeah i thought i miss heard him
HAHAHA, ill sub just for the awesome humor!
I totally understand what you're saying but I truly hope interest rates have a direct impact on real estate prices. Property values need to be driven down. I live in NYC and home prices are out of this world nowadays. Its ridiculous how speculators and investors are driving the prices up. It's a joke to look at the historical asking price; $50k+ here, $100k+ there. How? How Sway? If you go outside of the city, taxes are more than doubled. Just a joke. The American dream is dead.
Development in NYC will drive down prices. At least that's what I think!
I think locking in the low rates, breaking even renting for a year or two while rates go up, then renting for cash flow is the way to go. Do you think rates going up and prices not dropping will increase what you can rent a house for? Thanks! I'm new to this.
I partially agree. The expected increase in interest rates will boost short-term demand for homes as home-buyers attempt to lock in low interest rates - this will place upward pressure on home prices. Subsequently, prices will then experience downward pressure in the mid-term as potential home-buyers will be priced out of the market. This assumes that Supply (inventory) remains constant and does not increase.
This is a great video Graham, especially with what's going on now👌👌
Meanwhile, because of mortgage regulations being so strict, I can't buy a $50k 2 bedroom country house in the middle of nowhere. I pay $900 a month rent for a similar sized 2 bedroom townhouse.
Ouch 😬
Interest rates were higher but the cost of living was better. A loaf of Bread was a penny.
Expect at least 50% correction. When interest rates goes up people can’t pay their repayment and they will sell. And when everyone start selling at the same it will increases the supply and less demand due less affordability.
50%?! Why so much?? Based off what?
Something better drop, Colorado is expensive
LA is even worse :(
Yep and everyone knows that so they come here :)
Utah is becoming unaffordable.
Try SoCal. 600k to 1 million +
Boulder
GENTLY smash the subscribe button and become immersed in the vast wonder world mouse spin wheel mind of Graham Stephen
where do you get that short clip of "WHAT AM I GOING TO DOOO!!" lol
It’s from a Bitconnect annual meeting on RUclips!
Thanks for the financial advice
😏
I’ve always underestimated the impact of interest rates. I thought it was all about property values! Thanks for doing the math
Thanks for watching!
Great stuff. Makes a lot of sense and it is a little disappointing that the rates are going up but it is what it is. Thanks, Graham!
Thanks for watching!
Dont forget there is an entire new generation looking to buy homes for the next 10 years. There are places such as seattle and san fransico where there is no more room to build.
True!
In the 80s houses were so cheap to be impacted
Is it wrong to hope that it does? I'm buying a house next year lol. I'll sacrifice a little bit of interest rate if it means a lower listing price
Not at all. I’d also like to see a dip!
You can reduce higher interest rates with refinance, but you can't reduce purchase price with refinance... I'd rather have higher interest rate than higher price. Am I right?
All things equal yes. Because that also means less property tax.
Graham Stephan in addition to lower prop taxes there is more appreciation potential which is equally as important if not more important than cash flows.
This is why BRRR strategy is a good idea. Also not financial advice.
Agreed. Brrrr strategy is my favorite!
Screw all your haters! I love your videos , you have a great outlook on the real estate market! Keep making videos! Thank you!
Thanks!!
So I looked into getting an investment property a few months ago. The bank I was negotiating with said the absolute minimum interest rate for an investment property is 6%. My credit is around a 780 so I don't think that has anything to do with it. How are you getting a sub 5% for an investment property?
I'm buying 2-4 units as investment, not commercial of 5+ units. But 6% for 4 units or under is absurd.
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
Higher payments = less money to invest elsewhere. Less money in your pocket, more tied up in the house.
Makes sense, but it's also higher risk no?
Congrats on finally getting your real estate license! Hahaha
😂😂
Love your videos, thank you!
Thanks so much!
Saw a billboard for 100% financing on houses today. That to me is really concerning. Feels like Ninja loan 2.0 is inbound.
Those usually have some sort of twist to them...usually it's to credit worthy buyers, high income, high interest rate, and collateral.
Let us hope.
There's nothing really to hope for, no one is lending 100% to crappy borrowers. It just doesn't exist. No bank ever takes that risk.
Can you make a video about the future of real estate agents and broker. Will zilow and redfin will replace real estate agent? I don't think so.
I made a video like this about 6-8 months ago! In short no I don’t believe anything will take over the realtor.
That desk looks dope.
Thanks so much!
Home Owners Insurance is going up too my friend--- lol
Blockchain is about to absolutely disrupt the real estate industry. Tokenized commissions plus decentralized and streamlined process is all being done by something called Deedcoin. Highly worth looking into if you want to save money on broker commisions and support the blockchain revolution.
Thanks Graham
Thanks Phil!
Smash it!!
🙌🏼🔥
Graham that jacket 🔥🔥🔥🔥🔥
Thanks so much!
Graham Stephan thanks for replying, I love your videos. You inspired me to take classes to get my realtor’s license and work hard wholesaling until I have enough saved to start investing myself.
RE still a good investment.
Agreed!
Hey Graham. Dumb question but for those of us who own a home and are paying about $1500 a month at the current interest rates, will an increase in interest rates cause that payment to go up?
Tan P it will only go up if you have an adjustable rate mortgage, otherwise known as an arm. Which I sincerely hope that you do not, as interest rates have been at a multi-decade historically low rate.
Agreed with Eric!
Tan P
It is really a dumb question. Sorry to say. You should know whether you got that loan with fixed rate or adjustable rate.
busybee duckling I don't own a house. I'm asking about home ownership in general, but thanks for the support.
Tan P
"Dumb question but for those of us who own a home and are paying about $1500 a month at the current interest rates" Do you have a poor grasp of the English language or were you just lying when you posted this . Just curious because either way you have proven yourself to be an idiot
Before the financial crisis the FED increased interest rates 17 times over 4 years. Over the past 2 years they have increased interest rates 7 times... it's a downward spiral. They have already said that interest rates are likely to be further increased over the next few years. Once they hit near 4%, we will see a crash far worse than 2008. Where real estate dropped massively. This debt crisis is far worse. The BOE (I'm from the UK) have released 'stress test' reports that show the stimulated response on real estate in the event of a crisis. The estimate a minus 35% drop in residential and 40%+ in commercial... now is an awful time to buy. You will be taking out a mortgage on the current property valuation, which is near all time highs. Yes, prices could go higher, but that would require more stimulus in demand in the economy - which would require another round of QE which could lead to extreme inflation or hyperinflation... interest rates follow in the footsteps of inflation, so at 0% interest rates (or even negative) when inflation is high could lead to hyper inflation. Yes your asset might be worth a lot more in USD, but USD will become worthless if there is hyperinflation. Plus, with rising interest rates - WHO is buying??? As you said, it's all about supply vs demand... people are currently buying real estate as the price is constantly increasing, it seems like a smart investment - when interest rates go up, there will be no buyers - but a lot of sellers, which will cause the prices to drop massively. And in terms of cash flow, renters won't be able to meet monthly payments so occupancy rates will drop as well, which give you two option... 1. Lower the monthly cost or 2. Liquidate the asset. At the end of the day, markets are controlled by emotion. For as long as people believe real estate is going to forever increase, it will go up (as it will be a buyers market with supply capped) but remember that this has all occurred at a time when it has never been easier to get money - negative interest rates in some places!! One thing I do agree on is not putting a date on it, this could still take a while to play out. But the odds are that they Fed will keep on increasing interest rates and then people will start to default. As soon as that happens, this bull market is over. Just my opinion...
right on, couldn't agree more!
Great info man, I know you meant 2008..keep doing your thing Brother!!!👏✊
Haha thanks Troy!
might have to reupload brootthheerr
Troy Jones haha i caught that too... i played it back 3 times to make sure i wasnt tripping.
I did the same thing lol
1:06 2018? I think you meant 2008 :D
I'll never live this down, haha. *****2008*****
ASAP Z Graham is Human!! Unsub!!! ;)
41st. PS my dad in the early 2000's bought a fixer upper sort of house in Vallejo for 70 K, and a few years later with barley any improvements he sold it for 230 thousand. And it was mostly luck considering he wasn't looking to buy-fix-and than sell.
Terrible investment bro you should have cash got you pops to refinanced the house for new cash if you had Atleast 20% down on the 70k like 15k than cash re fiancé at 230k pay off 70k loan 160k cash equity created for other investment properties
You check that same house it will be worth 400-500k today + the equity you could’ve built in mean time + cash flow
My real estate agent says there is no such thing as a bear market in real estate. It is always a good time to buy. As expected from people who are trying to sell you houses for a living. What do you expect them to say? Don’t buy? Basically the message is to buy now or regret later when it goes up in price. Remember fear of missing out? Don’t give in to the fear. Buy low and sell high, not the reverse. This housing market is unsustainable for average people and wages are not going up.
I think it’s better to pay less for house with the higher interest rates. This way you’re not trapped in case you want the option to sell. A realtor I talked to in Florida just sold his 10 properties. He said tenants weren’t paying do to lack of jobs in his area.
If stock market drops 10% then we are 6 months away from a realistate crash. The factor that many aren’t thinking about is the collapsing petrodollar. If the dollar begins to hyperinflate because nobody’s buying are treasuries the cost of goods will go through the roof. People will choose to stop paying their rent before food.
US debt situation is beyond return. Graham, have you seen Inside Job? It won an Oscar for best documentary and it talks about the housing crisis. Kiyosaki talks about it: ruclips.net/video/_5pCulILQi8/видео.html
Lmao 2018 😂 it's ok Graham we know you've been in this shit a lot longer than 1 month!! Still funny lmao
haha no idea how that slipped past editing, too...usually I'll re-watch it a few times to make sure it all flows nicely and if there's anything else I need to mention or delete. I usually edit late at night so occasionally something might slip through!
Research; go listen to what Stephan says: listens: research complete. :D
🙌🏼😜
Time in the market beats timing the market. Just buy real estate when you can. As long as it's in a good location and produces cash flow, you don't need to worry about whether or not the market gonna crash in the future because you can't control that.
Agreed!
Commando Master So true!
this is horrible advice. Housing used to only go up with inflation. Housing as an investment has only been a phenomenon with interest rates going lower over the past 40 years. After the next crash government will not be able to lower rates again because they are already to low. Inflation will be rampant and we will be wishing to have the stagflation of the 70s back. You should rent and spend the extra money on gold.
Jack That’s why the federal board has been constantly raising the interest rate to prepare for the next recession.
Good point!
Im sitting on 250k cash patiently waiting for a down cycle
Me-hoy-menoy
Hey Graham I just turned 18 last week so I am finally going to be able to get my real estate license in Orange County! thanks for all of these videos Im feeling excited for this crazy journey
Happy birthday!!!
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.
There wasn’t really a period of low interest for regular people which eventually pushed up prices. The low interest was for Wall Street investors who via Corporatism/cronyism had the credit velvet rope lifted for them to buy up SWATHES of properties to rent to the people who lost their homes in the first place. It was a double whammy where bailouts/tarp/quantitive easing etc was done on the premise that the banks lend to the middle class. The opposite happened. They locked up credit UNLESS you had rich peoples credit/connections. Only when investors picked the bones clean of a bottomed out market did the banks lift the velvet rope for the middle/working class to scramble for the scraps.
The result is banks upped the % PLUS did so AFTER the houses got more scarce (expensive) AFTER the 1% feeding frenzy. It’s why rent is so high.
The same people who caused the crash, profited from the fallout. The banks are not worried about the current climate of lending to regular folks for current higher prices because...Bailouts, quantitive easing etc etc is the new normal. Once again they can blame the victims for overspending on mortgages and lobby for bailouts again.
It should be front page news. I give it a year before rent/interest on mortgages for overpriced houses becomes unsustainable with lower wages.
It’s not just a double whammy. I’m running out of whammy’s. The “economy” is owned by the 1%. The average family has very little invested in “the market”. Most are in the same boat as the crash. If food stamps were breadlines, the lines would wrap around Walmart. They blend in as it’s a credit card.
People don’t have more money. The job statistics don’t take into account most of the jobs are paying less or at best stagnant wages. Nearly all of the economy is booming aspect is telling us how amazingly rich a small amount of people got post bailouts/quantitive easing.
Nice try but I'm not buying at the top. I'll wait for the prices to come down
Ok
But Graham! My uncle's wive's friend's coworker got a 4% percent interest rate that's making good cashflow in LA. What about those deals Graham? Dislike, Unsub, Block, Report as Spam.
BUT GRAHAM!!! MY FRIEND IS GETTING A 20% ROI WITH 2% DOWN!! WHY ARE YOU LYING TO US!!
Graham Stephan haha
Dropped 50% but not of its real value, it was over valued and still was after the crash.
what makes the economy good? corporate earnings propped up by a drop in the corporate tax rate. Consumer spending? consumer is all time debt loads. stock market prices? propped up by record low interest rates and Quantitative Easing multiplying the cash in the system by 4x.....Wages? barely higher than the year 2000. What do you define the economy? I mean if you go buy a bunch a stuff with the credit card is your financial life doing better or worse? I would argue that the economy has only medicated the symptoms of 2008 and once the medication wears off it will reveal the debt sickness that existed in 2008 but only magnified.
I've wanted to buy my first duplex to house hack in the next few years but looks like with interests rate going higher, I might get fucked unless people are willing to pay a higher rent.
However, I think there are always deals to be found. Broken down houses to fix up and house hack with. We'll see.
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
Hope there’s a drop. Real estate in Southern California is highly overbought right now
Bleeps out shit. Has "Do Epic Shit" on desk :P
i.imgflip.com/2cvmvb.jpg
Don’t tell us to LIKE & SUBSCRIBE! As soon as you said that I changed the channel and came back to tell you this as I made sure to pause your voice. You must earn that! We decide if we like or subscribe! Newb
lolz
What made you ask to "gently tap" like button?
It's like the last 4-5 videos you say that. I like SMASHING IT!
Maybe I should go back to "SMASH AND OBLITERATE THAT LIKE BUTTON!"
I'm buying now suck it.
Brace yourselfs, Real estate crash is coming
🤫
I live in NYC and I'm seeing a lot of houses foreclosing. Honestly, I'm not an expert in this but I know a lot of people are not buying houses.
2br 1ba 1 car garage Town Home in Denver Colorado with 300$ HOA fee back in 2012 was sold for 108k$ now its going for 265k$ and already under contract average home going for half a million dollars. In popular cities like Denver or Seattle that everyone moving to, is impossible to get a home and price going to keep on rising at astronomical rate.
Nahh im good ill wait it out and if it gets too expensive then i just wont buy simple as that !!
I think that interest rates will hit 6% or higher as the economy keeps going strong. Buying is not rational right now relative to rental income. But tight inventory is def the problem/driver of the current price increases.
Don’t buy the argument - it’s statistically proven that the supply of credit is the no.1 factor for raising property prices. We are drowning it thanks to your not so friendly bank. Nothing to do with supply that’s BS. Interest rates up, over leveraged property down - simple.
“Nothing to do with supply that’s BS.” - based on what? Because obviously more supply would lower prices.
This... this is the video I've been waiting for!!
With regards to real estate, your analysis makes sense, but there's the broader market to consider. People say stocks and real estate aren't correlated, but I think that's bullshit. With the spectre of trade wars ahead, the ripple effect of that could lead to job losses, defaults, and thus lower prices. The fed in addition to simply raising rates, is also selling off all the treasuries and MBSs they bought after the last crash. This is another factor that could sway rates in addition to simply raising the funds rate.
All in, if I can wholesale or flip a property I bought below market I'll do so, but buying in now at these prices?? Fuck that, I'm more than happy to wait for a proper recession as I refuse to become impatient and lose my ass during the next recession. It's easy for the Wall St. companies and other investors who bought during the next down turn, since now if/when prices fall again they'll have a huge cushion and won't need to panic sell!! Something that won't be true for people buying now.
2008 all over again. These real estate guys always say it's going up. It's going to be a disaster this time.
Based on what?
Your jacket looks super cool!
Thanks Isaiah! Got it from Zara recently!
Right,he looks very nice in it.nice hands by the way.
Graham Stephan I thought Tom Ford. NOICE
I
THANKS SO MUCH!!!!!!!
In general, people buy houses based on gross monthly payments (Principal, interest, taxes, insurance). As rates go up, prices of houses will adjust accordingly
Ok so you put 10-20% down on a property and the bank creates 80-90% out of thin air. Literally the bank conjures up 90% on your promise to repay, they don’t have that money. Now you are saying that lending money out of thin air and interest rates have no effect on the real estate market. Let me pose this question then, what if banks didn’t exist and there was no such thing as a loan how much do you think a houses would cost then? Probably 50-90% cheaper right! Banking and interest rates are how the market is rigged. When interest rates were 18% in 1980 the average cost of a House was 50-70K. Since 1980 the Interest rate steadily went lower and the price of housing kept going higher. The inverse is also true as interest rates go higher the price of a hoses go down.
Prices have been falling since the start of this year, peaking in December 2017, at least according to the NAHB Housing Market Index, and in all areas around my hometown (Pittsburgh). Perhaps CA/NYC have yet to tumble
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!
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.
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!
Hi, I'm living in Slovakia (europe)...Here we have 1.2 - 3% p.a. mortgage interest ...almost everybody buying apartments and houses here...
This is very market specific. Also people aren't building homes and are opting for used homes. I don't blame them in places like california where permits and code can delay projects 1-4 years on average. In my market, people are buying small 0.5-5 acre plots of land as older generations start to die off and building new. Nobody with money wants to live within city limits as it's (to use the presidential term) a shithole.
Graham, I'm an 8-month view of yours and I need your help again. I just bought my first rental property. It's a duplex that I am living in, to get some sweet househacking money. Now that the property is mine, I'm seeking people and trying to work out the best way to advertise my property and to get paid once I find a renter. With your properties, would you recommend a peoplefinder or background checking service? Do you use an online portal (like cozy.co) for your renters to pay you or do you just have them send you checks via mail? Did you open a separate bank account for each of your properties? When you make purchases to upgrade your properties, do you use a specific credit card or debit card to make your business purchase history easier to navigate? For someone who is reasonably intelligent with only a duplex to keep track of, should I hire a tax professional to maximize returns or will some business-version of turbotax be sufficient?
If there is enough to talk about, could you do a video about the organizational logistics of what is next after you buy the property?
I'm new to REI but I think something you're overlooking that is within the near scope of topic of the video is the fact that, if you're spending more on interest even if the monthly cost is nearly the same, your tenants are contributing less to building the equity in your property while only paying for the loan. Cash flow=cash flow, but building equity with 4% loan vs a 6% loan will is not equal. Appreciate your thoughts nevertheless! Thx
I liked your analysis; however you failed to factor in the impact of recent changes in our tax laws which place limits on the amount a homeowner is able to claim for property tax... Here in Taxafornia we are now limited to $10,000 in property tax write offs. This just made owning real estate here significantly more expensive........
Graham, I know this is a year old and maybe you realized it now, but the reason why 7:55 value has been going up is because of the short term bidding up of real estate BEFORE rates really go up.
People wanted to get in before then, but now we're experiencing rate cuts in 2019 as me and others that understand the markets predicted the Fed would do when they first hinted at hiking rates
WTF! :30 “if interest rates stay to low for to long inflation will go up” where u been bro it’s been low for over 10 years...I have to assume u must of started in RE in late 2012 or later it’s been crazy in these streets when it comes to free money for a while...I think u should do more research on why rates are low in the first place
More important than interest rate is credit access. Right now, the government buys up most of the mortgages in the secondary market. When the government relaxes the re-purchase condition, as in now, it creates more buyers (since more people quality for getting a mortgage). This relaxing lending standard is pushing up the medium prices in LA. But check the lot prices in LA. They are falling. Why? Because the government is not buying the lot loan. Where there is no government involvement, the pure market is in place.
What if the properties are cheap but you have good cash flow....like values aren't going up because of the area. You don't need a mortgage because it doesn't cost that much. But if you sell you probably won't make much past your initial investment.
This guy fucks! :) Yeah it is really hard to predict the market and that is why whenever there is a good deal it is always good to buy. Timing the market is extremely hard and studies show you lose more by trying to time the market. Anyways, as always, great video by Graham
If you use the velocity banking method to pay off your 30 year mortgages in just 5 years you shouldn't worry about this video
1:06 “2018”
CRAP. Meant 2008***** LOL
He made a lot in just a couple of weeks!
You have not seen rising interest rates because you are young and interest rates have been falling. The supply constraints are artificial. You cannot find cash flowing properties because investors like you are have flooded the market. At the next down turn in the economy your investments are going to be a burden
My real estate professor said house prices will go down as interest rates go up.
He's an old man though. He's like 60 and has seen it all in real estate.
He could be right. But historically the data suggests otherwise...but hey, i'm open to hearing other perspectives!
Jordan if Supply was held constant, then he would be correct. But, Supply is not a constant. There are more variables, supply, demand, interest rate, job growth, demographic change in your region (median income), and inflation.
Jordan also, age does not equal wisdom or stupidity. All three are independent variables.
Hey, Graham, I don't know if you'll see this or reply to comments like this, but here goes:
So, my dad is planning to sell our entire 4.73 acre lot after we get a land swap deal done where they get 1/10th of an acre and we get 1.6 acres. (I believe it's 1.6. I could be wrong though.)
We have a real estate investor that's been looking to buy the property and we believe he plans to use it to develop a subdivision. He already has his investors looking at the property and the approval of the county, so he's good there.
The water line has already been ran down to the road they would have to pave in for the subdivision, the road has already been cleared, we had about 20 or 30,000 dollars worth of tree work done for free, so all of that's out of the way, and there's also a large level lot on the top of the hill for them to put in the cul-de-sac and a few houses. Also, there's right around 1,000 feet of road frontage.
We were looking to get 200,000 for everything, however our bare minimum would be 160,000. Is that a reasonable price or no? Also, I'm not trying to oversell it, but I figured those details would be important.
Anyways, sorry for the very long comment and keep up the great work.
Short answer ...No . It's been shown that no matter the cost ? People will pay it . And with the Chinese buying the West Coast . Prices will only continue to rise .
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 :))))
You don’t need to be a real estate expert to know that when prices or interest go up to the point where no one can afford to buy something has to happen. Explain how do you sell something that no one can afford and how do you keep the prices rising? I took a real estate course and one of the things I remember clearly is “your house is worth whatever people are willing to pay for it”
You failed to mention stagnant wages & an artificial stick market fueled by cooperate buybacks with essentially free money
Totally ignored the effect from our national debt. The Fed would love to raise interest rates gradually...but they may not get that choice.
Graham, I will be in Los Angeles next week I have a client looking for a LARD1.5 or LARD3 SFR, We have POF @ $5,000,000 if not enough we have more. Let me know if you have something available we can work something out. I am on the realist every day looking for an interested seller.
Is there nothing listed on the MLS that works for him?
Lol 2018. New viewers are probably impressed as hell. The most knowledgable real estate agent with just 1 month experience ever.
😂🙌🏼
What if interest rates indirectly affect supply and demand that causes home prices to drop? Say you are selling that $500K property. If the interest rates go up, and it becomes too expensive for some percentage of people, your demand pool would shrink, causing your property to sit on the market longer, and eventually you accept a low ball offer just to get out of the property.
In theory, the economy should be improving equally as well, so people should have more discretionary income to spend. In theory of course.
We're in the construction business and we won't work for these carpetbaggers.