Home Real Estate 2024 Housing Market Predictions: Home Prices

2024 Housing Market Predictions: Home Prices

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Our 2024 housing market predictions are here. Will interest rates finally fall? Will home prices continue to stay strong even with weak demand? And will we EVER “technically” enter into a recession? We’ve got the full On the Market panel here to give their forecasts on everything that could happen in 2024, plus where the biggest buying opportunities could be.

But first, we’ll painfully review our incorrect housing market predictions from 2023 and one BIG guess that we all got wrong. But we’re not the only ones! Both Zillow and Redfin had some predictions that didn’t age too well. From there, we’ll get into 2024 housing price predictions and whether or not we expect to see home prices FINALLY decline after a standstill year.

Then, what everyone’s been waiting for—mortgage and interest rates predictions. If these start to fall, you can assume that home prices will rise, a buying frenzy will ensue, and the bidding wars will begin (again). With the potential for a recession at some point in 2024, lower mortgage rates may result from an even worse economic event. So, what IS going to happen? Stick around for our predictions!

Dave:
Hey everyone. Welcome to On the Market. I’m your host, Dave Meyer. Today we’re going to do… I don’t know if this is everyone’s favorite show of the year or least favorite show of the year, but we are going to be making predictions about 2024. And for this daunting task we have Henry Washington, Kathy Fettke, and James Dainard all joining us today. Hi everyone.

Kathy:
Hello.

Henry:
What’s up? What’s up?

Kathy:
I just want to say that I am feeling lucky because I was the closest to predicting my grandbaby’s birth this morning.

Dave:
Congratulations.

James:
Congrats.

Kathy:
We didn’t have a prize, but I was really good at that prediction. So like I said, I’m feeling good.

Dave:
That’s very exciting. It just happened this morning?

Kathy:
This morning. Yep.

Dave:
And you’re still recording a podcast right now.

Kathy:
Amazing. I know. As soon as this is over you know where I’m headed.

Dave:
That is dedication. Thank you for still being here. If you need to run at any point-

Kathy:
Oh no, I was already there this morning. I’ll go back.

Dave:
All right. Well, Henry and James we’re all screwed now because Kathy has luck on her side. Before we get into this year’s predictions, just as a reminder, we did just re-air our 2023 predictions we recorded about a year ago. So if you want to hear what we thought in detail going into this past year, you can go check out that episode.

Dave:
And also just to make us feel a little bit better about ourselves and showcase the fact that analysts, it’s a tough job to make predictions, particularly in this type of economy, and just to demonstrate that, I just want to recap some of the predictions that Zillow and Redfin made going into 2023. I’m curious if you guys think they nailed it on the head or could do a little better this year. So three of Zillow’s 2023 predictions where number one, housing affordability will grow.

Kathy:
Yeah.

Dave:
Yeah.

Kathy:
Makes me feel better about all my predictions.

Dave:
Yeah. I was wrong about stuff this year, but that one is… Just for everyone’s reference, housing affordability is at the lowest point it’s been since 1985. so definitely whiffed on that one. Number two, Midwest will grow in demand. That one is actually… I don’t know if it’s gone up in absolute terms, but the Midwest is definitely popular right now. So I think relatively that’s a decent prediction. And then lastly, new constructions buyers may have more choices.

Henry:
They nailed that.

James:
That’s for sure true.

Dave:
Yeah. So that one they actually did quite well on. Just for everyone’s information, normally new construction makes up about 10%, 12% of home sales. This year it’s closer to 30%. So if you want some optionality in buying a home, new construction is a great choice. So what do we give them? Like a one and a half out of three here on these three?

Kathy:
Well, they also said that new home prices would go down. And I wouldn’t have predicted that, but I think they were right on that. I think in last year in October it was $431,000 was the median price of a new home? Or no, $479,000. And this year, $431,000.

Dave:
And Kathy, that’s for new construction, not existing home prices, right?

Kathy:
Yeah, because in the article they thought that new home prices would come down, which I would not have guessed, but that is what happened.

Dave:
All right. We’ll give them a bonus point for that. They did better than 50/50. Redfin, they make a long list of predictions, but we just picked three at random. So they said home sales will fall to their lowest level since 2011 with a slow recovery in the second half of the year. You guys know anything about this?

James:
I think they kind of nailed it because the market, it felt like it actually steadily came up from December to April. And now we’ve kind of flattened out and sales are low. I mean, I think they nailed that one.

Dave:
Sales are definitely low.

Kathy:
Sales have been-

Dave:
And I do think they were correct about it being the lowest point since 2011. Recovery the second half of the year is what I’m not as sure about.

Kathy:
Not so much.

Henry:
[inaudible 00:04:25].

Dave:
It’s maybe up a tiny bit, but actually I don’t think so. I think there’s still-

Kathy:
Well, I think… Yeah, in that article they were predicting $4.3 million, which was much, much lower than before, but I think we’re at $3.9 million in sales. So yeah, they were almost right.

Henry:
It’s interesting because sales kind of jumped for… There was like a three or four month period where things were starting to really move again and start to… We were getting multiple offers on everything we put on the market and then it’s just kind of…

Kathy:
Yeah.

Dave:
So you’re saying the opposite? So it is slow, even further decline in the second half.

Henry:
Right, right, right.

James:
I kind of feel like that is that domino effect. The expensive markets usually fall first and then they kind of rebound a little bit more because we’ve seen it’s slow but it’s steady right now, whereas we had more of a dip in the beginning of the year, and then it kind of rebounded back up with what Henry’s talking about where there’s multiple offers and then we’ve kind of flattened out.

Henry:
Yep.

James:
And so it depends on what market you’re in. I feel like the more expensive markets actually have kind of rebounded a little bit more.

Dave:
All right. Well, Redfin, we’ll give you partial credit for that. Second, they said mortgage rates will decline ending the year below 6%.

James:
I don’t think-

Kathy:
Oh. Makes me feel so much better about my prediction because I predicted the same thing. It just seemed obvious. Like, inflation inflation’s going down, they’re getting a grasp on it, then mortgage rates usually follow inflation. And that was not the case. I know for me personally, what I didn’t factor in is that the Fed would be unloading and selling off treasuries that they had bought and that was going to flood the market, which we’ve seen. So it’s not just one metric. It wasn’t just inflation that we needed to follow on that one.

Dave:
Yeah, it is very complicated what’s going on with mortgage rates right now. And unfortunately they were wrong about this. I think most people would prefer rates to be around 6% as opposed to where they are at about 7.5% right now.

Dave:
For their last prediction, they said home prices will post their first year-over-year decline in a decade, but the US will avoid a wave of foreclosures.

Henry:
Nailed it.

Kathy:
They were wrong.

Dave:
They were wrong about this.

Kathy:
Yep.

Dave:
So I guess it’s half and half, but these two things seem sort of not connected. Home prices did not post their first year-over-year decline, at least according to Redfin’s own data, which shows it up about 3% year-over-year. But the US has avoided a wave of foreclosures. So.

Henry:
Yep. That’s what I mean by nailed it. We have not seen the foreclosure tsunami that everybody was predicting was coming by any stretch.

Dave:
Don’t tell that to people on YouTube, Henry. Your comments will not nice. They will not agree with you, but that’s just a fact.

Dave:
All right. Well, I wanted to share this with you guys because I want to show that making predictions, particularly about the housing market right now is hard. And we are going to take a break, but after that I am going to share all of our predictions about home prices last year and talk about how wrong all of us were.

Kathy:
Yay.

Dave:
All right. So now we heard about mixed results from Zillow and Redfin. And again, if you do go back and listen to the show from last year, you see that we were right about some stuff, we were wrong about some stuff. But most people want to know what direction home prices are going and all of us were wrong. Do you guys remember what you all said last year?

Henry:
I have a feeling you’re going to remind me.

Kathy:
I remember-

James:
I was way wrong.

Dave:
James, you were the most wrong. And Henry, you were the least wrong. So that is good. We all said that housing prices were going to decline by single digits. That was kind of the theme between all four of us. We were all thinking the same way. James, you said about a 9% decline. Kathy, you said 7.5%. You love those 7, everything that starts with a 7 with you. Me, I said 6%, and Henry you said 5%.

Dave:
As of right now, the Case-Shiller, and this is data from August, is up 2.6%. So I think there is a possibility that that number will decline, but I think if you look at the trends, it looks very unlikely that prices will turn negative year-over-year even by the end of 2023. So just want to caveat all of our predictions that I’m going to make you guys do by just showing our credibility from last year, and it’s pretty low.

Dave:
With that said, James, since you came in last for last year, you have to go first for this year.

James:
Great. I will say I had a negative outlook, but we bought more property than we’ve ever bought in this year, so-

Henry:
[inaudible 00:09:20].

James:
… that didn’t affect that we weren’t still buying. So we just we’re buying different types of product, but even though you might think it might be a little bit worse, we just built that into our underwriting. So that just means we got really good deals because we had that little bit of a negative approach and so now the deals look even better than they were. So that’s the good sign right there.

Dave:
So 2024, give us your… Up? Down? Flat?

James:
I think that there is going to be… They’re going to be kind of flat with a small decline, like a 2% decline. I think America’s slowly eroding money in affordability. And it’s going to start pulling back all the extra debt that’s floating around. Credit card debt, car loans. That’s going to cause affordability issues and it’s just going to make people focus on buying cheaper properties.

Dave:
And I think, I mean, negative 2%… Yeah. Close to flat. That makes sense. I mean, it’s hard to split hairs here obviously. So you’re seeing a little bit of downward pressure from where we are now. Kathy, what do you think?

Kathy:
Well, given that we had such a crazy year with 8% interest rates and still… Well, the Case-Shiller report is a little dated, so it says… What? Three months or two months?

Dave:
It lags a lot-

Kathy:
Lags? Yeah. So this is kind of before the 8% rate. So like you said, when we see future numbers, it could be a different story. But even given how high rates were that we could be in a positive place, and I do believe that we will see mortgage rates come down next year, which to me says there will be a frenzy, a buying frenzy. So I’m going to go with up 4%.

Dave:
Okay, I like that. Up 4%.

Dave:
Henry, now you’ve had a chance to survey the field, see what everyone else… Oh, I guess I should go. You won. I should go. Okay. I have a general… Now we’re all thinking the same way. I think it’s going to be close to even as well. My prediction is that it’s going to get worse in the first half of the year because I think affordability is really bad. And I do think that at a certain point rates will come down. I don’t think a lot, but I think rates will come down a little bit probably towards the middle-ish of next summer maybe. And that will put some life into the market and we’ll start to see it recover and probably grow 1% to 2% year-over-year next year. That’s my best guess. Henry?

Henry:
Yeah. So here’s what I think.

Dave:
Oh, Henry’s doing his victory lap because…

Henry:
Let me tell you-

Dave:
He’s only wrong by 8%.

Henry:
… what’s actually going to happen. No. My guess is that, similar to what James believes, I think it’s going to be ugly in the first half of the year or maybe the first quarter. But I think that, A, we are having an election, and even if the same party stays in power or if a new party goes into power, that person will probably push on some level of change or economic stimulation. I think, Kathy, I agree with you, I think rates will come down even if it comes down just a little bit. I think that’s going to create a frenzy. We still have a supply and demand problem, meaning people are still trying to buy the little bit of housing that’s out there, and I think that that’s going to create a situation where home values go up.

Henry:
So I would say probably sub 5%, I’m going to go with three to 4% probably on a national scale. And the smaller markets, I bet it’s higher than that. I also think that even if rates stay flat, if they stay flat for an entire year, people get used to what they are. And I think people will continue to buy. So that’s partially what’s playing into my guesstimation.

Dave:
All right. So we’re all thinking somewhere… Obviously these are different numbers, but there’s a similar pattern of thinking here, just like last year when we were all wrong. All right. Well, thank you guys. We’re all on record now.

Dave:
Now I have some questions that sort of go into your thinking. Right? Because obviously the prices are largely dependent on interest rates, the broader economy. So curious about just these broader economic questions. Henry, let’s start with you this time. Do you see the US going resurgent inflation? Is it going to go down? Where’s the economy heading in sort of a non-real estate, more macroeconomic level?

Henry:
Everything says that it should be recessionary now. Like, people shouldn’t be spending at the rate that they’re spending and doing the things that we’re seeing people. Every time I look on Instagram, everybody’s someplace tropical and spending all kinds of money. But also all the rest of the videos talk about how expensive groceries are and you can’t afford a house. And so I don’t know, man. Will we be in a recession? Probably technically. But will that affect how people are spending money? It’s hard to say. I think people are still spending like crazy and I don’t know how.

Dave:
James, you’re laughing. What do you think?

James:
It’s crazy how much money’s still being spent. I’m at the airports for commuting for work and people are just traveling, the airports are packed-

Henry:
It’s a zoo. It’s a zoo in the airports.

James:
Yeah. And my Uber ride was three times what it should be this last time I flew in because it was that busy. My average Uber ride was like 40 bucks. And it was $130 to get me-

Kathy:
Oh my God.

James:
And I’m like, what is going on? It’s like people cannot turn off the faucet. And credit card debt just hit… What? They said they racked up over… Is it 50 billion-

Dave:
Above $1 trillion now. It’s above 1 trillion, the total.

James:
It’s above $1 trillion. And it hit that record mark about 90 days ago. And since then America still spent $50 more billion on credit cards in the last 90 days. The faucet is on and it is not slowing down.

Dave:
That is true, but I just want to caveat that by, if you look at credit card debt as a percentage of GDP or as a percentage of monetary supply, it’s actually down, which is kind of interesting. There’s so much money printing that $1 trillion in credit card debt is not what it was three years ago. And so if you look at it as a function of people’s income, it’s not actually that high.

James:
Yeah, I mean, it seems high to me. It’s a trillion dollars. That’s a [inaudible 00:15:44]-

Dave:
It is. But yeah. I guess the way I think about that is debt and American debt is a big issue, but it’s a long-term issue. To me, it doesn’t seem like it’s an acute issue that just started in the last year. It has stayed at a similar rate as a percentage of income for decade now

James:
This crazy though. I mean, the amount and the fact that they’re paying 20% to 25% interest on this.

Dave:
It’s insane.

James:
I want to get into the credit card world. Forget hard money, private money. I’m getting into credit cards.

Kathy:
Oh man. I feel way too guilty doing that. But I think the answer is that the GDP at 4.9% annualized or something. I mean. That is robust. We have really, really strong economic output right now. And that’s transferring into jobs. Obviously we know there’s lots of jobs out there. There’s been wage growth, so people have money. Not everybody, but a lot of people are doing just fine and they’re spending it. I mean, look at those hotel prices. I don’t know about you guys, but I have a hard time spending lots of money on a hotel room unless it’s really nice.

James:
The rooms I’m staying in aren’t great right now.

Kathy:
They’re expensive, right?

James:
Yeah.

Dave:
Well, it’s funny because I feel like this past year I was very… I felt strongly that there wouldn’t be an economic slowdown. And now it seems like a lot of people, the markets are feeling better about it and I’m starting to feel worse about the economy just generally speaking. I know GDP just hit a huge number, but there’s just a lot of headwinds. It just feels like if you look at student debt, the jobs numbers are starting to come down a little bit. There’s a lot of geopolitical risk, which is hard to forecast, but there’s just a lot of stuff going on.

Dave:
And even if geopolitical stuff doesn’t directly impact the American economy, it does impact consumer sentiment, in my mind. And so I’m just curious how all of this is going to happen. Now, does that mean that we’ll be in a recession that is officially declared by the National Bureau of Economic Research? I don’t know. But I would expect… Personally, my guess is that we’ll see GDP go to a slower rate next year. I don’t know if we’ll turn negative, but I don’t think it’s staying at 4.9%. I do think we’ll see at least the growth rate decline is my guess.

Henry:
I don’t think any new president is going to want to declare a recession in their first term, first year.

Dave:
Yeah, that’s probably true. All right. Well, we didn’t give any specific predictions there, but I do think it’s really interesting. And this is one of those things that is just really confusing because you just get just constantly contradictory information here.

Dave:
And just want to caveat also that what Kathy said about 4.9% GDP growth. That is above and beyond inflation. So even though inflation is still in the threes, that is the growth rate above the pace of inflation. And so that is strong and it will definitely take a significant slowdown to erode at that. So we’ll just have to see.

Dave:
For this next question though, I’m going to make you say a number. And we’re all going to humiliate ourselves. Kathy, it’s your turn. Interest rates in 2024. Where do you see… A year from now in November of 2024, what do you think the average rate on a 30 -ear fixed rate mortgage will be?

Kathy:
Well, my answer kind of goes with the question you had earlier, is do you think we’ll see a recession next year, and I do. Probably midway through the year, maybe end of Q2, Q3. And usually when there’s a recession and things slow down, then investors buy bonds and that lowers rates. So I do believe that we’ll see rates go down. Probably not till then. Not much till then. I mean, we’re already seeing some relief right now, so I’m going to say to sum it up, 6.5%.

Dave:
I thought we were giving you a layup for 7%. You’re always at 7%, but 6.5% is good.

Kathy:
It’s just my wishful thinking. I want it at 6.5%. Plus, I mean, just to be totally transparent, I interviewed Doug Duncan, as you did you. He’s the chief economist of Fannie Mae and has the best track record, and has won awards-

Dave:
He does have a very good track record. Yeah.

Kathy:
… for forecasting. He said 6.5% percent. So I’m going with it. I’m going with it.

Dave:
All right. We’ll all just say 6.5%. Let’s just end the episode. James, what do you think?

James:
Yeah. I agree with Kathy. I think we’re going to go into a small recession about halfway through the year. But I think right now what we’ve seen is we’ve seen the rates go up so high, the median home price is still climbing, and I do think the Fed wants to get housing affordability under control and drive pricing down a little bit so it can get balanced out. So I think that the rates… I was hoping the rates would kind of spike up and then come back down, but the impact of rate increase hasn’t been that dramatic. So I think they’re just going to stay steady and be around that 7% rate throughout the whole year. And they’re just going to slowly keep trying to slow this beast of economy down.

Dave:
All right. Henry?

Henry:
Yeah, I think it’s going to be-

Dave:
Give us 4%.

Henry:
Yeah. No, absolutely not. If it’s 4%, I’m scared of what’s going on out there.

Kathy:
Yeah.

Dave:
Yeah. Something terrible has happened.

Henry:
I don’t want it to be 4% at all. But I do think that we’re starting to see a little bit of a slowdown. I think it’s going to be flat for most of the year, and I think we are going to come down. I am not as optimistic as 6.5%. I’m close to the six and three quarters.

Dave:
Okay. We’re clustering again. I just want to reiterate to everyone some of the thinking that’s going on here and explain it because there is… At least we all seem to believe this inverse correlation between the strength of the economy and mortgage rates right now. And that happens for a couple of reasons. First and foremost is the Fed. They are going to be looking at what’s going on with both inflation and the labor market. And the Fed is unlikely to lower rates unless they’re sort of forced to by either the economy really getting damaged, GDP going down, and the unemployment rate going up. And so that’s one reason.

Dave:
The other reason was what Kathy alluded to, is that when there is a recession area environment or fear of a recession, a lot of investors take their money and want to put them in safe assets. Bonds and mortgage backed securities are two generally considered safe assets. And when there’s more demand for those assets, the yields on them drop. And so that could help bring down mortgage rates.

Dave:
And so that’s why we’re all kind of saying if there’s a recession, rates will probably drop. If the economy stays hot, rates will probably stay relatively similar to where they are within a hundred basis points or so. So hopefully that that makes sense. And generally I agree with all of you, but I will just price this right, James, and say 7.1% so I get the over on top of everything here.

Dave:
All right. This next one hopefully should be the easiest, at least we don’t have to quantify this one. What market do you predict will do well for real estate investors in 2024? James, let’s start with you.

James:
I think all markets are going to do well. There’s so little product out there, even with the low amount of buyers. I think all states are going to actually do fairly well as long as you’re in the right asset class for that. And I mean, going forward for the next year, 2024, we are focusing on affordable single family housing. It might not be affordable in every market, but what’s affordable in our market. Right? If we’re floating around that median home price per city, per neighborhood, that stuff’s still getting absorbed really well. And so that is what we’re focusing on, is affordable rental units with lower rents because where the demand is right now. People need to save money.

James:
Affordable housing, right? ADUs, DADUs, small town homes. Those things are getting purchased fairly quickly. The high end is not moving as much. So that is our primary focus, being able to put out the most affordable product in that market. And it’s doing well. Our single family fix and flip, even with these high rates, if you’re in the sweet spot or the affordability, it trades and it trades quick. And so that is our primary focus. Don’t go custom, don’t go high end. Stick with the masses and make sure that you can market to the most amount of buyer pool.

Dave:
I think that is very wise. I think just affordability in general is a really good theme for 2024. Kathy, what about you?

Kathy:
Oh my gosh. It’s such a broad question. Coming back from BPCON, talking to investors who are just making money in all kinds of asset classes in what would be considered a difficult year to invest or what some people outside the industry might think, I mean, you could just make money in any asset class in real estate if you know what you’re doing. So that’s first and foremost.

Kathy:
But to predict the market? For me it’s the same old, same old. We’ve been focused on the Southeast, that’s where so much growth has gone. It’s still somewhat affordable. Like I said, I just bought a duplex in the 440s. That’s cheap for me coming from California. So relatively speaking, the South and Southwest or East are still affordable, in my opinion, and where a lot of people are moving. So that’s where I’ll be investing.

Dave:
Henry, if you had to pick a portion of Arkansas that was your best… if the market you think is going to do best, which one would it be?

Henry:
Northwest Arkansas by far. But my serious answer to this question is I think the markets that will do the best are the kind of… Let’s call it the unsexy, bigger cities. So you’ve got places like Cleveland, Columbus, Indianapolis, places where there’s job growth, places where there’s tech, either moving into that area or thriving in that area, places where the population growth has been steadily increasing year-over-year and where the supply is still under where it was pre-pandemic levels.

Henry:
So in those markets you have homes that are under the median home price, the national median home price. So you’ve got affordability, but you’ve also got high paying jobs moving into the area and you’ve got supply and demand in favor of… Well, you’ve got more demand than you have supply in those areas. And so I think if rates even begin to come down a little bit in those markets, you’re really going to see kind of a frenzy in those areas because people have to move there for the jobs. And it’s affordable, so they’re buying houses there.

Dave:
All right. Well, I think, personally, I agree with you, Henry and James, your thesis, just like these unsexy, big cities and affordable, which is why, I always say it, I am long on the Midwest. I know everyone loves the Southeast right now, but I think the Midwest has some… Maybe not… I mean, in 2024, I think they’ll do okay, but I just think those markets are going to grow. But just want to caveat what Henry was saying. Not everywhere in the Midwest is going to do well. It’s places that do have population growth.

Dave:
I saw something about Ohio that all of the growth in population in Ohio is in like two cities. Everywhere else is shrinking. And so you need to pay attention to those things. But I think when I say Midwest, I think there’s a density of places that are still growing and are still affordable. And that’s honestly where I’m looking for 2024.

Dave:
All right. We’re getting to our last question, our last prediction. I guess it’s not a prediction, but I want your hot takes. Something you’re predicting that maybe others aren’t thinking about. Kathy, let’s start with you.

Kathy:
Well, Freddie Mac said that we are 3.8 million homes short of demand. And I’ve heard much higher numbers. What we know is that there’s 692,000 homes being built in some stage of development right now. So there’s a dearth of homes. We know that. So finding ways to bring on new supply is where it’s at, in my opinion, especially if it could be affordable. So bringing on ADUs, affordable units, multifamily, where I’m getting back into in new development. I know. I know. We talk about it, but new homes is really what’s needed, whether it’s single family, multifamily, ADU. We’ve got to solve this housing crisis. That will solve the affordability issue. So that’s where the opportunity is.

Kathy:
Also, like I said, with our fund, we’re taking kind of old dilapidated homes that wouldn’t be so nice to live in and making them like new. So you don’t have to build ground up. You can just renovate a home that would be maybe somebody wouldn’t be able to get financing on because it doesn’t have a kitchen or whatever. And so you’re bringing on new supply that way. So any way you can bring on new affordable supply is going to be a winner.

Dave:
Okay, I like that. Goes along with the themes that we’ve been talking about. James, what about you? What’s your hot take?

James:
I think this is going to be the year of workout loans with some of these investment banks. One thing that we’re seeing… We’ve actually had some very interesting conversations over the last month or two where there’s a lot of investment debt out there starting to be… It’s concerning. The projects are off track. And what’s happening is these banks are starting to actually discount their notes down too as these syndicators. And they’re giving you different types of structure where you’re really negotiating with a bank rather than a seller at that point.

James:
And they’re focused on protecting principal and they’re offering some very low rates if you can come over and take off that problem off. And so I think the number one seller for us for volume wise over the next 12 months is going to be those big investment banks. And they’re going to be a little bit flexible, especially the ones in the middle of midterms. They do not want a midterm asset that’s all messed up. And there’s been some very bad things happening in the investment space as far as falling apart.

James:
I mean, we’re seeing some big syndication deals that are very poorly managed. They hired the wrong people. They weren’t bad people, but they hired the wrong people. The projects aren’t reno’d right, there’s vacancy issues, there’s collection issues, there’s lease issues. And these banks are holding onto this and they’re going to be a lot more flexible. They just want to push through, get it stabilized, get a good operator in there, and they’re going to cut note amounts down. And they’re going to work with you because the math has to make sense and they understand that as bankers.

Dave:
All right. That’s similar to what I was going to say, James. I-

Henry:
Me too.

Dave:
Really? What were you going to say, Henry?

Henry:
I was going to say I think that there’s going to be this great opportunity that cash buyers are going to take advantage of. So I think there’s going to be institutions or people that are sitting on a lot of cash, maybe because they cashed out of something from an investment perspective that’s done well in this climate.

Henry:
And they are going to have the opportunity to buy multifamily deals, especially in these less affordable markets like out here in the Midwest. And they can come because these notes are coming due. They’re not making sense at 8% interest. The banks aren’t going to be able to finance them. And so cash is going to win in that perspective because they can put their cash into these deals. Then they’re going to get the cash flow because their cash in, they’ll wait for the rates to come down, and then they’ll refinance those deals when the numbers make more sense.

Henry:
And so I think these institutional and cash buyers are going to be able to scoop up phenomenal deals on multifamily projects that aren’t penciling anymore. And if you couple that with what James was talking about, as well as being able to work with some of those lenders, use some of the cash that they have plus get favorable terms from the lender, you might see a lot of these deals get scooped up at a discount.

Dave:
Yeah, that’s very well said. Honestly, that’s what I was going to say. I think that the multifamily market is going to finally have the adjustment in pricing that I think we’ve all sort of, everyone’s been waiting for. Personally, I thought it would’ve already happened. Frankly, I thought we would’ve seen sharper price declines than we will this year. But people, they’re still building. It hasn’t even peaked the deliveries of multifamilies. It’s still coming out. So I just think that there’s going to be a lot of downward pressure on multifamily, but that comes with a lot of opportunity.

Henry:
Can I give one more hot take?

Dave:
Please.

Henry:
I think self-storage is being extremely overbuilt everywhere. And they may not get the returns that they’re looking for.

Dave:
I like that one.

Henry:
There’s A class self-storage going up all over the country. I mean, every street I drive down, it seems like there’s a brand new facility being built. And the numbers don’t pencil on those things in the first one to three years. And so with that much competition building right next to every other self-storage unit, I just don’t see how they’re going to get the returns that they’re expecting.

James:
Yeah. Not only that, the banks don’t like it that much right now. The banks really don’t like self-storage that much, as far as our conversations have gone. The money’s going to be pretty tight to get access to, which I agree with Henry. That’s going to cause some major fits. Oversupply, lack of funding, that’s going to cause pricing to come down.

Dave:
That’s a good one. I like that one. I mean, I was thinking about, just to shock everyone, saying that office was going to be the best performing asset class next year.

Henry:
To the moon office.

Kathy:
Hey, there could be opportunity.

Dave:
I mean, I was just thinking about if I said that, if I was right, people would think I was an oracle just because no one thinks it’s going happen. And so maybe it’s worth the risk of just putting-

Henry:
You do kind of look like Neo right now. So that would be-

Dave:
Which I’m not. Oh, I’m wearing all black. I’ve got to get my… This is actually a long trench coat and [inaudible 00:33:32].

Dave:
All right. Well, these are always fun. Again, everyone, these predictions are hard. So count this as infotainment. You know? We are making these predictions as best as we can, but the reason we do this show twice a week is that information comes out very quickly and things change and are very difficult to predict. And so we prefer to give you information in real time and share with you what we’re actually doing and what’s actually happening. And so we’ll continue doing that next year, but it is always fun to just try and make some educated guesses about what’s going to happen next year.

Dave:
James, Kathy, Henry, thank you so much for being here. Kathy, congratulations on your new grandchild addition to your family. That’s very exciting.

Kathy:
She’s so cute. Mia. Little Mia. I’m going to go see her right now.

Dave:
All right. Well, go tell Mia that we all love her and want to hear her predictions for ’24.

Kathy:
Okay.

James:
We need to get an On The Market onesie for her.

Kathy:
Oh yes.

Henry:
For sure. Kaitlin, make that happen.

Kathy:
That was so cute.

Dave:
All right. Well, thank you all so much for listening. We really appreciate it. And we’ll see you for the next episode.

Dave:
On The Market was created by me, Dave Meyer, and Kaitlin Bennett. The show is produced by Kaitlin Bennett, with editing by Exodus Media. Copywriting is by Calico Content. And we want to extend a big thank you to everyone at Bigger Pockets for making this show possible.

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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