PREDICTION: 2024 WILL BE A "MARKET OF CONFUSION"

I predict that 2024 be a Market of Confusion. We should be in a full-on “Buyers’ Market” right now, but we’re not. Many houses that go under contract will fall out of contract (creating an opportunity for landlord-investors). Many homes will sit on the market and not sell. A lot of Sellers—and real estate agents who lack experience—will market their property in the wrong way and will end up reducing the price . . . multiple times. A pent-up backlog of homes that would have gone on the market in 2023 will finally go up for sale in 2024. Areas where landlord-investors typically saw great results in the past will not bring the best results in 2024.

It will be a good year to have a Realtor who understands the landlord-investor market.
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The factors that brought us here have been repeated in article after article—but not everybody reads about real estate trends, so I could possibly mention a few things in this week’s report you don’t know. But let’s start with a few obvious factors: low inventory and high (average, actually) mortgage interest rates.

Low inventory is the result of two main ingredients: a major slowdown in new construction after the 2008 Great Crash and the plethora of potential Sellers who want to move, but don’t want to give up their 3% mortgage interest rate in exchange for 6.8%.

The lack of Buyers willing to fully execute a purchase (a fair number start and then drop out) has similar causes. Prices and mortgage rates are higher than they would like and housing is unaffordable for many Americans. There have been numerous cases of Buyers terminating contracts when they discovered just how high their monthly payment would be or when they realized they lacked the cash to repair the house they thought was a great buy.

We should be in a full-on Buyers’ Market, which is defined specifically by having more than 5 months worth of inventory (we currently have half that or less). I say we “should be” in a Buyers’ Market because real estate commonly follows an up and down cycle of about eight years. Sellers have had it good for quite a while now. And there are millions of potential Buyers, especially Boomers who want to downsize and Millennials who want to buy their first home and GenXers who want to step up to a bigger, nicer home.

But the rapid increase in mortgage rates (the fastest increase in mortgage history) killed it and low inventory put the nail in the coffin.

Will it still come? Absolutely. The market always changes.

In the meantime, the Market of Confusion that is 2024 will provide you, dear landlord-investor, with some opportunities.

Homes that come back on the market after a transaction is terminated: what an opportunity for you! The Seller has just gotten a dose of reality. Their prize property that they are emotionally invested in did not do as well on the market as they hoped. They are discouraged. They are ready to be more realistic about the repairs their home will need and the fact that a Buyer will want to reduce the price and/or receive concessions to offset the repairs.

Houses that have been on market more than 60 days are another lucky break for you. Hedge funds and large investors commonly offer 85% of the “after repair value” that they predict for a house and they tend to overestimate the repair costs. But you, you’re a lot smarter than the Wall Street drones who send out scores of these offers every day mostly to the sounds of silence. You know that business is best handled as a win-win for all parties. Yes, you may get the home for 10% under asking and you may get concessions for realistically appraised repairs. It’s your chance to beat the Big Investors.

Some Sellers are listing homes that are out of date or in obvious need of repairs. In 2021, houses like that would sell above appraised value and eager Buyers were saving so much money on the mortgage rate, they cheerfully undertook home repairs and remodeling like champions.

And some real estate agents only handle one or two transactions a year (49% of Realtors sell 1 or 0 homes per year, yes, it’s ridiculous). So they don’t really have hands-on experience with market trends.

That is why many homes sit on the market (and it’s not always the Realtor’s fault, since many Sellers believe they know the market better than Realtors and they will not listen to advice).

These Sellers will end up reducing the price of their property multiple times. Sale price? $420,000. A month later, $399,900. Then it slowly works its way down to $369,900 and they get a Buyer.

That Buyer could be you.

And you could have something in your pocket most Buyers don’t: real estate professionals who excel at handling repair and remodel projects. You can get better prices from repair contractors and better service by using a Realtor who specializes in landlord-investments.

We understand that landlord-investors are seeing their cashflow shrink when prices and rates are high.

But we also understand that smart investing is still happening every day. And even when cashflow is a bit less, landlord-investors are still engaged in one of the best methods of building wealth. And with experience and intelligent buying, your dream of early retirement and solid investment strategy is very much alive and well in the upcoming Market of Confusion.