What do you think of the real estate market
I am looking to bounce ideas off people for my startup that is focused on real estate and closing the housing gap.
The real estate market will be affected in the next 12-18 months. Unlike stock market which is prompt to fluctuation of trends, the real estate market is more delayed. I really believe that class C multifamily and office/retail will be hit the hardest.
This real estate bubble is going to leave a lot of people holding the bag very soon. The federal reserve has put itself into a position where it can either raise rates or continue to debase the currency. This is going to have a huge impact on real estate prices. This can be easily explained by looking at the pricing asymmetry between buyers and sellers. Buyers are making a purchase based on the month to month cost of the home while sellers are looking for the highest price. Rock bottom interest rates allow buyers to bid up the price of homes while maintaining a monthly price they can afford. If (when) the Fed increases rates, as they only have one direction to go, homeowners who bought at low rates are going to be upside down on their homes.
For example, if a buyer today purchases a home for $300k @ 3.8% with 20% down the estimated monthly payment is ~$1400, if mortgage interest rates increase even 1%, to 4.8%, the price of that home would have to adjust down over 10% to $265k to maintain its $1400 monthly payment. If interest rates go up 2%, that same home would have to adjust down 20% to maintain similar terms.
In short, the real estate market is in a lot of trouble in the next decade.