510 | Real Estate 2024 Update

ChooseFI | Financial Independence Podcast

Jonathan Mendonsa & Brad Barrett | Choose FI Media, Inc

Investing, Business, Careers

4.8 • 5.2K Ratings

🗓️ 16 September 2024

⏱️ 57 minutes

🔗️ Recording | iTunes | RSS

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Summary

Most people believe rising interest rates make homes cheaper—but the opposite is happening. Scott Trench, CEO of BiggerPockets, explains how the 'lock-in effect' has frozen the housing market: homeowners with 3% mortgages refuse to sell, strangling inventory while affordability craters. Meanwhile, rent growth has stalled for two years straight, creating a paradox where renting now beats buying for more Americans than at any point in recent history. Add in build-to-rent developments and a commercial real estate sector showing cracks, and you've got a market that defies conventional wisdom. [00:00:50] Introduction Brad introduces Scott Trench and the episode's focus on interest rates and real estate market dynamics. [00:01:26] Market Dynamics and Interest Rates Rising interest rates have triggered complex market dynamics impacting home buying behavior. [00:03:30] Lock-In Effect Homeowners are reluctant to sell due to favorable existing mortgage rates, contributing to inventory shortages and stagnant pricing. [00:04:17] Rent vs. Buy Discussion Renting is now a better financial decision for many people compared to buying, with mortgage costs significantly impacting affordability. [00:16:25] Commercial Real Estate Insights Challenges faced in the commercial real estate sector, particularly in multifamily investments, due to high interest rates and decreased values. Key Takeaways Renting vs. Buying: In today's market, renting outperforms buying financially for many. Lock-In Effect: Homeowners are hesitant to sell because of low mortgage rates, impacting housing supply. Commercial Real Estate: The sector faces significant challenges, with multifamily properties seeing declines in value due to high interest rates. Long-Term Strategy: A focus on long-term market cycles can yield better investment outcomes in the real estate sector. Action Items Evaluate your financial situation regarding renting versus buying. Monitor local real estate trends for investment opportunities. Quotes "Renting outperforms buying financially for many today." [00:04:17] "Rising interest rates have triggered complex market dynamics." [00:01:26] "Homeownership is more about stability than financial gain." [00:06:06] Related Resources BiggerPockets ▶ Listen Next: Ep. 511 — Take the Next Step | Essential Listening

Transcript

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0:00.0	Hello and
0:02.0	today on the show we have our good friend Scott Trench,
0:04.3	the CEO of BiggerPockets,
0:06.2	which is the world's biggest online source
0:09.0	and community of real estate investors.
0:11.7	And Scott is just a wealth of knowledge every single time he comes on. I love the conversation. I love his unique perspective and obviously he has the pulse of the real estate market. So we're going to talk everything from the
0:24.7	ramifications of interest rates increasing, what's going on with commercial real estate,
0:29.4	last time he was on he had some interesting predictions, we'll see if they came true to syndications and
0:35.8	what he's seeing there.
0:37.1	I think there's some really interesting stuff going on in real estate.
0:39.9	This is going to be a fun one.
0:41.0	With that, welcome to choose that. I think you're going to be a fun one. With that, welcome to choose that thigh.
0:43.0	Scott, my friend, it is always good to see you. Thanks for coming on.
0:53.5	Thanks so much for having me back, Brad. Really great to be here.
0:56.5	Yeah, this should be fun. So, like we alluded to there, I guess episode 426 came out in February of 23 that's where we talked about some of these
1:07.4	the beginnings right okay interest rates had already started to rise at that point but it was still very very early and
1:14.8	clearly they're up and they seemingly are staying up. What are you seeing on the
1:20.9	ground? I mean you have a better pulse of the real estate market
1:23.8	than anybody I know. What are the ramifications of that?
1:26.4	Yeah, so it's been an interesting couple years. The rise in interest rates have
1:30.2	led to a number of interesting dynamics which may be review for some people or new to folks who haven't been paying attention to the industry as much.
1:37.0	The most notable and I think one that hits the home for perhaps the most Americans is this concept of a lock-in effect where if I have a house that has a 3%
	...

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