Mortgage Rates Over 8%+: 5 Things You MUST Change

Dana (0:02)

Michael, today, I'm going to flip it a little bit. I'm going to ask you some questions. And the reason is, is obviously, you're following the market incredibly closely. The 10-year note is up, mortgage rates are now above 7%.

Tell us what this means for real estate investing, and some of your thoughts there.

Michael Zuber (0:24)

So I think there's actually five things, because again, I've frankly been calling for this, I've been thinking about this for a while, but when I'm talking to you, the CEO of Hemline, I think there's a couple that are right in your wheelhouse. But here are the five I have in no particular order, and then you can choose which one we talk about first. The first thing that's gonna happen is we are simply gonna have less movement. Now, less movement means less home sales, right? So again, it's called turnover in the real estate market. But also as a landlord, you are going to have less tenants move, because everything is just more expensive. So the first thing that's gonna happen in the real estate market is just less movement. Now, that has ripple implications for Home Depot and Lowe's and all these other folks who, you know, painting and, you know, all the other things. So again, less movement is a drag on the economy. Number two, as rates go higher, and again, I think they might go to seven and a half, they could see eight percent, you have to start asking yourself for all of these calls for rent or nation.

Real, like again, I've never wanted to believe it. I don't believe that's possible. But when you look at very sticky prices and an eight percent mortgage rate, at least in the short term, it makes damn near no sense to buy.

So again, you need to talk rent or nation as maybe an opportunity. Next up is the accidental landlord. You know, we talked about this once, I think, six months ago, maybe a year ago. But I think there will be more accidental landlords, because again, as you stay in your home longer, life events happen. But if you're one of those few individuals who have a two percent mortgage, I think a lot of people are going to go, damn, right? It makes it makes good sense just to rent this thing out as maybe, you know, because some people like let's say you got a two percent mortgage somewhere and you need to go somewhere else, but you can't qualify. So you might be a renter in this new city, this new state, at least for a short time. But it makes sense to rent your current place.

Next up, this is one I think is right in Himalayan's wheelhouse. I think a lot of people are going to pull back from real estate, but they already own some. So I think there needs to be a focus on operations, right? Let's manage the assets that we have now. Let's re-quote insurance. Let's just do all of the good work to make sure that we are maximizing the asset we have. And then the last thing is, it's a buyer's market in much of the country. So there will be people that do deals of a decade and deals of a lifetime. Also, selfishly, I'm looking at more and more larger apartment buildings, and I just got a couple of phone calls this week that stresses really building. So I think there's five things that happen because of higher rates. And yeah, I'm happy to go into any of them deeper if you'd like.

Dana (3:12)

Yeah. I mean, I think you're right, the less movement, the overall trend of that, of your mortgage that you have at the 2%, 3%, a lot at 3%, becomes an asset. And then you start thinking about, to your point, maybe I'll just rent in this city and then keep my other property and rent it out, whatever you own. Question for you on it.

So obviously, yesterday, federal, the governor, Michael Barr, gave a speech about affordability, right? And said, you know, housing affordability is at the lowest in 21 years. But then at the same time, realtor.com just reported that asking rents are now falling. And then also that it's 37 consecutive months of rents falling. And then on top of that, one of the things you'll see that's new in Hemline that we had to put in is concessions. We actually had to make concessions, like a product within itself. Wow. And 43.5% of rental listings are offering concessions.

Michael Zuber (4:20)

That's amazing.

Dana (4:21)

And when we implemented that feature was last month in to Hemline, before you could say like one month off or something like that, but it wasn't timed as like a feature that went to the top, had a box around it. Now it does, and you can put timelines on it. Like you can say, oh, one month free if you sign before October 15th or something. So now it's a whole feature within there.