8% Mortgage Rates Are Coming: Real Estate Disaster or Opportunity?

SPEAKER_1 (0:01)

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Michael Zuber (0:30)

Don't look now, folks, but we are getting closer and closer to 8%, 8% mortgage rates for real estate investors. Frankly, could come this week, could come next week. But I want to have a bigger question. Will 8% mortgage rates kill the housing market?

Will it hurt the housing market? Will 8% be actually an opportunity for some of you?

We're going to have this conversation with Casey from Brick by Brick, who's been investing in real estate for a long, long time. And Casey, it wasn't too long ago, almost two years. We actually had 8 and 8.5% mortgage rates. Don't know if you remember that, but... I do. What say you? Does 8% mortgage rates just kill, crush, crash the housing market? What should people do?

Casey (1:15)

Honestly, I think it really does hurt a lot.

It really does. There, you know, that's a new number, an 8, you know, that we haven't seen in a while. And I think people were just starting to finally come around to something in the 6s, really. And we were starting to see it pick back up. If you're like, okay, I'm just going to buy anyways, even if it's a high 6%. And then the 7% range, still the new investors that I talked to were still even trying to buy their rate down as an investor from the 7s into the 6s, because that's just the comfort level. You can feel comfortable with something in the 6s for the next 30 years or a long time and not worry about 8

That's a new big number in the front. And I do think it's going to have a big impact on everybody, just their thought process, their subconscious mind, all those things, that is expensive. Now for investors, right? It brings a lot of opportunity with people out of the game and scared and not wanting to buy. But I think, overall, if we're starting to see the number eight in front, I do think that's going to negatively impact the housing market. People aren't going to want to sell their homes, buy homes, you know, all of those things, for sure.

Michael Zuber (2:28)

Yeah, the whole transaction engine of the housing market is going to grind to a halt. And that's saying something, because we're already down almost 40% to think that we bring 8% mortgage rates and housing is going to get better. It's not. The first thing that comes to mind, again, studying the consumers for 30 years and we frankly saw it in last week's weekly mortgage numbers, is buyers, and I'll use buyers and air quotes, because it could be homeowners or investors, right? People are transacting to purchase.

Casey, they're leaning into adjustable rate mortgages, which, folks, stop that. Don't do that. I mean, if you can't afford it, you can't afford it. It's okay. You can save more money. You can wait for the future, whatever it is. But getting adjustable rate mortgage is just not a good idea. You don't know where rates will be in the future, right?

Casey (3:17)

Yeah, I remember we saw this. I mean, adjustable rate mortgages, back before the housing crash, I remember I was in real estate. I was the real estate agent, you know, started. Got my license in 2007, so that's gonna tell you how old I am. I mean, you already know, but everyone else, it doesn't. And so that sort of deal was kind of, you know, people that couldn't afford the loans, subprime, lending, all those things, which we aren't seeing today, but people that can't afford the loans, getting the loans, and then the properties, perhaps they go down in value, they foreclose, they don't have a lot of money in the deal, they can't afford the refinances.

Like, just too many issues. And I feel like, especially because of the adjustable rates, they're short terms, you know? They're five year, seven year terms. That's too short.

Michael Zuber (4:03)

Sometimes three years, yeah.

Casey (4:04)

Yeah, that's stupid. I mean, you can't guarantee that you'll be able, that you're probably even worth what you bought it for in that time frame, especially with the economy. What's happening out there with the war and all these things? Like, we are in a rising economy, so taking on a short-term adjustable rate is just dumb. I'm on the proponent of the longer the better. If you're gonna have to do it, like, 10 years really is my comfort zone for that, because at least you can get the recycle.