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Those historically low interest rates from the not-so-distant past changed the game for many: “When you’re looking at a 30-year mortgage that’s down in the threes, people that couldn’t afford to be a homeowner could now afford to be a homeowner,” Potter said. “They didn’t have to wait for a raise or a promotion. They could now borrow money cheaper and make affordable housing a reality.”
The market takes a turn
But then, the market took a turn: “That all changed at the end of last year when the Fed saw the inflation rate was skyrocketing and the influx of capital into the market through the CARES Act and all that wasn’t helping the economy – in fact, it was hurting it.” He referred to the Coronavirus Aid, Relief and Economic Security Act – a $2.2 trillion economic stimulus bill signed into law by the former US president, Donald Trump, in 2020.
“So the Fed came back and said ‘we need to start raising interest rates, bring inflation down.’ So they now raised the Federal Reserve from zero to 6% and it may go even higher than that in the next 30, 60 or 90 days. What that does to the market is cause a lot of banks to pull back, which means the guidelines are tighter for leverage and approvability – putting [fewer] buyers on the market for these properties, causing seller to not be able to get as much for a property or pull their house off the market. That’s a negative for the primary residence side of the world, but it’s a positive for people investing in real estate.”
Who can capitalize on the shift? “People that are taking their retirement funds and building a ‘mailbox money’ pipeline where they’re getting rent checks, residual income and stuff like that,” Potter said.
“This is a positive because now sellers are having to drop the price of their house, and it’s not a seller’s market. We project that over the next six months it will turn into a buyer’s market where buyers can go in there and make really good offers on properties – making it affordable for them to buy, rehab, and turn into rental or resell it. There are always two sides of the coin, and this is what we’re seeing. We’re kind of excited about it to be honest.”
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