9% Mortgage Rates!! Who Gets Hurt The Most?

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Michael Zuber (0:30)

All righty, folks, it is official. Owner-occupant loans are now 7.5 percent. 30-year fixed, good down payment, good credit. Investor loans are now over 8

Are 9 percent mortgage rates coming? If they are, what does it mean to buyers, sellers, and investors? And you know what? We'll even throw in flippers, because I've had some very painful conversations with flippers recently. Casey, I'm going to bring you into this conversation. Again, we're going to think about 9 percent mortgage rates, because we already crossed 7.5 for buyers, 8 for investors. 9 is right around the corner.

So if I were to throw to you 9 percent mortgage rates and say, what impact do flippers have? What are you thinking?

Casey (1:17)

I mean, first of all, Michael, I just bought a house on June 30th. I mean, July, okay? And my rate was in the sixes.

What is going on? I mean, for flippers, I hope you can afford it. I hope you can afford to hold your property or you have another exit strategy.

Michael Zuber (1:40)

The second exit strategy, exactly.

Casey (1:43)

Yes. I mean, it's things like this. Economic circumstances beyond our own control is what makes real estate investing risky. Because, especially with flipping, you do not have control over certain elements, and that's what makes it dangerous. Again, just a couple of months ago, I bought a house on the sixes. If I had intent to flip that, do you think that I would expect the buyer to be buying a property with a rate in the eight or nine percents? No. No.

No, I'm not going to make my money. Home prices are going to come down.

My, you know, ARV, my value is not going to be where I thought it was going to be. I may not be able to pay back my investors if I did get investors to help with the flipping purchase. It's very scary right now for flippers.

Michael Zuber (2:33)

Yeah. I had a conversation with a friend of the channel over the weekend who's a very large flipper in Orange County. And he let me know that he's got two projects that at a minimum, are going to lose $300,000. Two, so times two.

And he's really stuck because he also has a $15,000 burn every month for the debt. And this is the problem, right? If you go in heavy, I call it surface area, right? If your surface area is really big, it doesn't take but one change, and it's going to hurt, right? It's like when you're doing a bombing raid, if the surface area is big, it's really easy to hit it. If it's really small, it's kind of tough, right?

So yeah, I think, I think this market is horrible for flippers. It, you know what? I'll even go one step further. This might be the worst market for flippers I've ever seen. Because it's winter, rates are going up. We're talking eight, nine percent for buyers and investors. We have a war, we have inflation, we have AI going to kill us all. I mean, I could not think of mom and dad being more scared right now than my entire economic career, which is now 30 plus years. Yeah. I'm calling it right now, this is the worst flipping market I've ever seen. Now, of course, that is not a blanket national statement. If you are in the Northeast, you are still fine. But most of the country, worst market I've seen. What do you think?

Casey (4:03)

A lot of properties are still sitting. And I do think it's weird we have this flood market. I help people with their first investment property. So one of the first things we do is we analyze major metro markets across the country. So consistently and constantly, we are looking at new, looking at sometimes the same markets. I mean, I'm looking at the same markets over and over, but they change.

And we are seeing two different types of markets. The South, the Mid-South, we're seeing properties sit and sit and sit, and you can get deals and on deals on deals. If you're flipping there, don't.