Is real estate the next asset class to fall? I thought so on January 13, 2016 when I first wrote this post. Then I sold my rental property in 2017 and watched real estate weaken in 2018. However, post-pandemic, the housing market is back and stronger than ever!
Let me share with you from sentiments in the past and see if we can learn from them. It is worth worrying about the housing market again given the huge price increases. Real estate should do well post-pandemic given rates will stay low, job growth is rebounding, and huge wealth has been created in the stock market.
Real Estate Is The Next Asset Class To Fall And Why I'm Not Worried
You might think I'm feeling relatively sanguine during times of market volatility given less than 30% of my net worth consists of stocks. If the S&P 500 corrects by 50%, I only lose 15% of my net worth right? Well that's absolutely wrong because whenever the stock market corrects, the real estate market is never too far behind.
Roughly 40% of my net worth is in San Francisco/Lake Tahoe/Hawaii real estate. If the weakness in the equities market continues, it's always a reflection that corporate earnings are under fire. Less earnings means less jobs. Less jobs means less disposable income. Less disposable income means the demand for housing declines.
Even if you are doing relatively well, there's a psychological desire to hold off on buying anything due to the expectation that prices will go lower. The specter of deflation is an economist's worst nightmare.
Why You Shouldn't Fear A Real Estate Market Correction
I've come to grips my real estate holdings will decline in value over the next two to three years. If I could sell at least one property for less than a 1% fee in a click of a button, I probably would. Unfortunately, the internet has so far failed in lowering real estate commissions much below 5%.
For those of you with real estate, I think you should mentally expect a decline in your real estate holdings as well. Trees don't grow towards the sky forever. Sometimes they get decimated due to wind, fire, lightening, or torrential rain.
So much about achieving financial freedom is believing everything will be OK in the end while doing everything possible to improve the things you can control. Let me share with you why I'm not worried about a large potential decline in my net worth, and why you shouldn't either if you own property.
Reasons To Stay Sanguine
1) Your primary residence is your home. Real estate is my favorite asset class primarily because it provides incredible utility compared to stocks. During the housing crash, all I remember about living in my home is the late night snuggling on the coach watching a favorite movie, potluck parties with friends, and BBQs on the deck.
There are so many fantastic memories even though at one point my house's value probably declined by 20%. I prefer living in a nice home rather than trying to squirrel away money by living in a crappy rental. Life is meant to be lived now, and a home is where we spend the most amount of our time. Always buy real estate for a better lifestyle first, then consider capital appreciation and rental income.
2) Rents are incredibly sticky on the way down. If you buy gas for your automobile, you are understandably amazed and annoyed how quickly gas prices skyrocket, but decline so slowly. If you own rental property, there's a reason for sticky rent. A contract! After 11 years as a landlord, I've never once had to lower my rent. By the time my tenant leaves, the downturn has ceased because bad economic cycles generally don't last longer than the average duration of my tenant. For example, the last recession only lasted a couple years.
3) Occupancy can be improved through hustle. You have the ability to increase your occupancy rate if you negotiate and plan well. I've not had one month of vacancy in 11 years due to open communications and aggressive hustle. In other words, you can positively affect your outcome, unlike the stock market where you are a passive investor.
4) Costs decline in a down market. During the last downturn, for four years I successfully reduced my property taxes. The goal of every property owner is to make their house worth ZERO in the eyes of the property assessor's office every year. You'll also be able to refinance your mortgage as investors flee to the safety of bonds as they are doing now. I've refinanced multiple properties around 10 times, saving me hundreds of thousands of dollars in mortgage interest. Finally, when real estate is out of favor, you can get contractors to do home improvement projects cheaper.
5) Opportunities to upgrade increase. It's human nature to always look to upgrade to that next nicer home. Even though your $500,000 home may have declined 20%, if the $2,000,000 home also declines by 20%, you've caught up by $300,000! (you lost $100,000, but the new house is $400,000 cheaper). I don't plan on buying a new home in 2017-2019, but with my CDs coming due, perhaps I might just go for a nicer pad and write about my journey.
6) The government has your back. The government wants Americans to own homes. This is why they provide $250,000/$500,000 in tax free profits for individuals/married couples when they sell. The government also allows you to deduct 100% of your mortgage interest up to $1 million in mortgage indebtedness plus the interest from a $100,000 HELOC. If you make even more than $250K/$500K in profits, you can simply roll your property into a new one via a 1031 Exchange and never pay taxes. Finally, the government has a history of bailing out homeowners who've stopped paying their mortgages due to whatever reason. All of these benefits are for the price of yearly property taxes.
7) You'll eventually have a paid off asset. No matter what happens in life, so long as you pay your PMI mortgage on time, you'll eventually have a paid off home. If you look at property over a 30 year period, chances are extremely high the nominal value will be much more than your purchase price. During this time, you'll have enjoyed your life (#1) while completely adapting your spending to your mortgage payment. I've owned one property for 11 years now and it feels amazing that even if I don't pay extra principal, the property will be completely paid off in 19 years automatically.
8) It feels good helping the next generation. Buying a house after college can be very difficult given the downpayment and the price of homes in high job growth areas. If I can provide subsidized shelter for my children (not free, b/c there won't be any free-riders in my family), then they can focus on pursuing a career more true to their hearts without overly worrying about making money. They can also focus on saving for retirement, starting a family, and all sorts of wonderful things when housing becomes less of a burden.
9) It won't be as bad as the last downturn. The good thing about going through the worst financial crisis in history and surviving is that the next go around won't be as bad. Since the last housing downturn banks have tightened their lending standards so that only the most prime borrowers who put significant down payments can get a loan.
Banks, themselves, are much more capitalized with higher tier 1 capital requirement ratios. I feel happy that because my mortgage refinance was rejected in 2015, those who are getting loans have rock solid financials better than a 800 FICO score and $250,000 in income.
Related: What If You Buy A Home At The Top Of The Market
FORTUNES ARE MADE DURING DOWNTURNS
60-70% of my net worth is going to take a hit from a potential downturn. I've accepted this inevitability and so should you if you own stocks and real estate. In the meantime, I'm working hard to build more income and savings through my online business and other side hustles to help soften the blow. My hope is to actually make my business so big that it pushes stocks and real estate to comfortably under 50% of my entire net worth.
Nobody should be in a rush to buy real estate now. Periods of weakness never only last for a year. Be super picky about what you buy and the terms of your contract.
Don't be afraid to back out of a deal because there will always be another real estate opportunity. The best time to buy is almost always when there's blood on the streets. The key is to have enough cash and cash flow on hand to take advantage of opportunity.
Invest In The Heartland Of America Real Estate
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Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. Heartland real estate where there is more value. The demographic trend post-pandemic is towards lower-cost areas of the country.
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I have a SFH rental property(valued $700K) with no mortgage and currently collects $3K/mon rent. I want to sell it and 1031 exchange to a triple net commercial retail property with 5% cap. My reason to sell because of my cap rate low for instance, $3k/mon – $1k expense=$2k/mon cash flow. Cap rate $2k x 12=$24,000/$700k equal 3.4% cap. If I 1031 exchange to a similar property with 5% cap which earn me $35,000/year. I bought SFH rental property in 1994 for $200K. Should I sell it and exchange to a commercial retail? Please advise.
Hi Sam,
I currently live in Manhattan where I’ve been a coop owner for the past three years. Although I love my home, the coop board only allows up to 2 years of sublease for the lifetime I own it. Also, the board nickel and dime the owners — there is even a 2% flip tax if you choose to sell!
Lately, I thought about moving out to San Francisco. I’ve read and reread your articles on purchasing a home in San Francisco. You have some great pointers, but some are conflicting with one another and I’d love some clarification if you have time. You’ve said…
* Buy in an up and coming neighborhood
* Buy property in a micro area few people have ever heard of
* Buy in the most prime neighborhood possible
* Buy property close to the best schools and convenient transportation
* Not only should you buy a home with expansion potential, you should consider buying a home in the most expensive neighborhood with the largest expansion potential possible.
In other articles, you’ve suggested the readers to look into Golden Gate Heights which is an up and coming neighborhood that no one ever heard of. However, you also say to buy in the most prime neighborhood possible. Which is it?
What is the cost of construction in San Francisco? Is it worth to expand and remodel or purchase something more turnkey? In Manhattan, it’s more expensive to remodel a fixer-upper than buying something already finished.
If I’m interested in a single family house or condo with an expansion potential in an up and coming area with a 7 year discovery time, where should I start — this will be my primary home with an option to rent it out later? What are the prices I should expect? Now that it’s 2016, do you have a different perspective than you did back in 2014 prior to purchasing your current residence?
Being single, I have the flexibility with using various tactics to lower my monthly expenses like having roommates or shared economy route for example. Should I look for something smaller in an expensive neighborhood instead?
Finally, I’ve heard that there might be a tech bubble this year (2016). I know that people have said that for the past 2-3 years, but my tech friends are verifying that this year might be it. How will this correction affect the real estate market? Is it best to wait a few months to see if the other shoe drops?
Hey Sam are you saying not to buy now because you are forseeing market downturn which will result in a better buying opportunity later?
In my area (Central Florida) rent is about the same as a mortgage and I am seriously thinking about buying. The market is such a sellers market here that the 2.5months of inventory is causing any good deal to be snapped up within one day of listing. You almost have to bypass a buyers agent all together and go right to the listing (sellers) agent. We are ready to buy now but at the same time I would like to wait until prices come down a bit. But what if they keep rising as well as rates!? This whole process is making my head hurt. I wish I had a crystal ball!
As a poor renter, I have long chafed at the many ways government rigs the rules to redistribute income upward from renters to owners.
Government really wants only the middle class and higher income groups to own a home; municipal codes are rife with home ownership hurdles difficult for the poor and working class to overcome. e.g. minimum lot size requirements effectively limit renters’ choices to “more home than they can afford to buy” and “buying nothing and continuing to pay through the nose to rent”.
In other words, government ensures landlord profits by maintaining an ample pool of renters unable to buy a home. The landlord tax benefits don’t help renters, either.
Terry,
Look at the bright side. As a renter you don’t have to pay 1.2% of the value of your property every year to support the roads, schools, public facilities, and wages of our service people who are vital to have a smooth running environment.
For example, I pay literally $40,000 a YEAR in property taxes alone. I certainly do not consume $40,000 a year in public services. Maybe if I had 4-5 kids, yes, but I don’t. I also pay even more than that in income tax rates.
As the saying goes, if you can’t beat them, join them!
You might enjoy this post: Going John Galt And Protesting Government Waste
Hey Sam…
I have to comment on your “Unfortunately, the internet has so far failed in lowering real estate commissions much below 5%.” I can’t tell you how many times I have heard “There is no way I am going to pay a Realtor $36,000 to sell my $600K home.” After all, taking that “realtor” commission chunk out every time really hurts the liquidity aspect of an investment property. Even with the cost of capital unusually low, these realtor commissions hurt.
I just heard about a new tech start up that is suppose to change all of this. Apparently their LB 2.0 launch this month brings the FREE MARKET to real estate commission fees. They say Sellers can invite their own list of Realtors to commission bid against each other while the Seller remains anonymous. Have you seen it or analyzed it? It is called ListingBidder. I found them on Twitter and YouTube.
I certainly don’t want to see my net worth go down with dropping property values, but it’s definitely possible. The market in San Francisco is softening after such a long run up. There’s also some winter seasonal slowness thrown in there but I think demand will likely cool off this year. If China’s stock market continues to tank there will probably be fewer Chinese buyers in the Bay Area as well, also lowering demand. But I don’t think there will be a cratering here. SF is still a very popular place to live and I don’t see that changing any time soon.
When you say the 40% of your net worth is in real estate, is this calculation based on the amount of equity you have in each house or the total value of each house? Just curious as it makes a big difference for my calculations since I don’t have a lot of equity in my house or rental property.
Definitely just the equity. I try to be conservative, but nobody really knows how much equity one really has until they sell.
Hey Sam, how much of a consideration is politics when you decide on buying real estate to live in? As nice as the weather is in California, if I became an IPO millionaire it seems like I would rather spend less money for a just as nice of a house in a place with no income tax like Texas or Florida! California has high costs, high taxes, a nanny state, too many rules, laws, and regulations. For a libertarian leaning person like myself, CA sounds like a nightmare.
What do you think about it?
Politics isn’t part of my consideration when it comes to buying real estate. But I am aware of the various policies that aggressively tax homeowners in California to pay for a lot of the public services, whether you have children, a big family, use the services or not.
The key really is to try to make less than $200,000 a year. That income level tends to be the cross point where higher taxes are levied. I definitely see the allure of moving to Washington, Texas, Florida, maybe even Alaska. But life is pretty great here if you don’t have to pay too many taxes. I have yet to receive a IPO million-dollar Wynfal I definitely see the allure of moving to Washington, Texas, Florida, maybe even Alaska. But life is pretty great here if you don’t have to pay too many taxes. I have yet to receive a IPO million-dollar windfall, so I can’t tell you with certainty how I’ll feel.
Check out: https://www.financialsamurai.com/which-states-are-best-for-retirement/
Sam, what should prospective buyers (like me) do if they plan on buying within the next 1-2 years? I am looking at a specific market in the Bay Area where prices are not too high, but I can see them dropping in a hurry since it is at most a class b neighborhood. I also do not want to immediately purchase and have negative equity since prices in the neighborhood could fall a good amount. I am in this house for the long haul.
As to the real estate commission, why not sell it through an attorney, whose hourly fee would be much less than 6%, and who would owe you a greater duty of loyalty than any agent?
If you’re buying in the next 1-2 years, that could be great timing as I see weakness on the horizon. Wha areas in the Bay ARea are not too high? Why not focus on prime areas to see greater upside during good times, and less downside during bad times? The buyers who got slaughtered bought in non tier 1 locations.
I’d read: Should I Buy A House In A Rising Interest Rate Environment?
My partner and I have been lifelong surfers and have prioritized being on the coast over all other factors. Coastal Bay Area, other than Ocean Beach, is still overlooked and still maintains its blue collar vibe with some exceptions. This is probably due to OK schools, and extra time it takes to access the rest of the Bay Area due to the Santa Cruz mountains. I don’t think there truly is a tier 1 location on the coast outside of SF, but of course there are tier 1 houses and prices to match.
I think there is still value in my market, but inventory is low and dominated by 3/1 properties.
Thanks for the link.
Very cool. You are focusing on lifestyle it seems, so that’s great!
Ocean Beach seems to be getting more interest from developers and buyers here in SF. We shall see. I can see Ocean Beach from my house :)
Renting out property is great, but there is still the risk that a tenant will pay late or not at all or destroy the place.
Sam – is that your property in the first photo?
From our perspective, we are in a small 2 bed terraced house in the UK. It’s fine for the moment, but we will probably look to move at some point in the future. I’d love to be able to hold onto it and rent it out if we do move house, as the houses in this area rent so quick.
Carrying on saving like we are we will be effectively be mortgage free in 3 years (savings > mortgage). Will be tempting at that point to pay it off in full :) Even if saving into the market makes sense in the long run, there’s something to be said about peace of mind!
MrZ
Unfortunately no. It is the bathroom of the Minecraft founder who sold his company to Microsoft for several billion. The house is in LA and is worth about $70M.
I shoulda bought London property in 2005!
When buying, i approach the seller’s agent and say i dont have an agent and will they represent me and agree to give me 2% back of the 6% at closing. The seller’s agent is looking at 4 percent commission with me instead of 3 percent with someone who is represented by another agent. And then the seller’s agent will sell out his seller and share all kinds of inappropriate info re seller’s motivations etc and push my offer over other better offers. Turning the seller’s agent into a conflicted dual agent is a great way to play the game.
I had the opposite experience. We used a dual agent for our purchase of a property in 2011. The property we were trying to buy was appraised for significantly less than our offer. The “dual agent” was worried that the sell would fall through so she reached out to the appraiser to try to increase the appraisal value to match our offer. Fortunately for us, the appraiser wouldn’t budge, we reoffered the appraised value, the sellers agreed, and we got the property for much lower than our original offer. She was working in the best interest of neither party, but was only interested in “completing the transaction.” No bueno.
Sam, I found your site after I locked in a 30yr fixed. I am totally sold on refinancing to 5/1 ARM when rates dip lower. What should be the difference between the 30yr fixed and %/1 ARM to make this exercise beneficial?
Take a look at the yield curve to find the difference between the two durations. 1% or more is usually the spread. Although, the yield curve is now flattening. I FIRMLY believe interest rates are not going up for many, many years. Hence, I’m happy to take the “risk” of only saving 1% a year or maybe even less.
Just curious, do you lock in rental period for say 2 years at least with potential rental reversion built in?
In SF, you can only lock in a 1 year lease, and then month to month after that. I have done two year leases, but it’s more a formality. In a rising market, it is good to be month to month. In a declining market, not as good, but finding new housing to save $100-$300 is a pain for a place like SF. Not sure how it is in Singapore?
Cash flowing real estate is a great place to be. Any shocks will hurt, but as long as the rents can cover the PITI, investors should be able to recover in due time.
When it comes to stocks, I’m just way too much of a wimp to stick out that trade…
I’m with you on hoarding cash…
All the best in what probably will be a most tumultuous 2016!
In Canada, some of my properties experience a bit of a down turn due to the downturn in oil prices. But I’m not worried, it’s just part of the cycle, just like stocks, there’s up and downs. If your strategy is buy and hold for 20+ years, why worry. It just means lower interest rates in Canada! And over the past two years, appreciation has drastically slowed down if not gone down but my networth is still growing because my rental properties are getting paid down year by year as long as I have tenants. Appreciation is icing on the cake, can’t always count on it because of the market.
Are prices pretty stable in Canadian dollars now? Would be interesting to see if there is a deal for US buyers now that C% is down 70%.
Too bad it’s not warm there – would be good time for vacation property buy.
We have 65% of our net worth in real estate (Primary house in bay area and rentals in bay area). I am sure I will get nervous if the market falls beyond 15% but will not panic and sell. I think the high fee to sell and the longer time to sell actually works in favor of not selling in a downturn unless you are forced to.
The stock market fluctuations on the other hand stress me out a lot more as the changes are very visible everyday and you can sell them easily and more chance of panic and selling.
I can confirm your statement “I never have to lower my rent”. I rented out a unit at $550, then the stock market crashed followed by the real estate market crash. My tenant moved out, instead of listing fr $500 or $550. I listed for $650. Then, that tenant moved out, I listed $750. Now, it’s $800. This is all happening during the economic downturn. That was why you see the ads for house for sell “cheaper than rent”.
Readers like me cannot be more grateful for the information and thinking you share in the website. I have been looking at the stock trend vs house price in dot.com bubble: it seems that house price did not fall, instead it just slowed it growth rate. So I am wondering whether the house price in the next two years will be like 2008 or like 2001? As some other people said in the earlier posts, foreign buyers tend to invest more in Americen real estate + millennium.
I would love to see real estate prices tank. It would mean it was a GREAT buying opportunity for those of us with cash.
One key to why my 14 properties do so well is that I got them at great deals shortly after the 2008/09 financial collapse.
Hi Sam,
Can you please tell us more about how to reduce our property tax? Is there any previous post related to this? Thank you!
Buy a smaller property or live in a low tax area.
Pretty much it unless you can bribe a government hired appraiser. – Probably a bad idea. :)
Sure. Check out:
How To Lower Your Property Taxes: An Inside Look At How Property Assessors Screw Homeowners
I highly recommend primary residence as a real estate holding for financial and enjoyment reasons. Not so much on rental real estate since it takes so much time to get really strong positive cash flow and the expenses of maintaining the property and dealing with tenants. You really need to be a property manager to be successful financially and can’t farm out the cost of property management. I own both primary and rental and will get rid of the rental at a good time. I’ve had the rental for 20 years. Only benefit of owning the rental is for the diversification (and relative stability) so that I don’t have so much as a percent in stocks. The capital gains on the rental and the net rental income isn’t as much as I could get in stock dividends and capital gains. That’s been my experience. But if you’re going to buy rental property it is still the old saying that it is only worth it in the best locations of the country. And manage it yourself.
This has been much on my mind lately as we’re likely to move East in the next 2 years before our children start school. Living so close to all of Apple’s current and future campuses, our home value has skyrocketed well past its 2008 peak. Given the economy, I fully expect a correction, it’s just a question of when and how large.
Given our timeframe, I expect to get caught out, but worst case, we can hold onto the property and rent it out via a management firm until the markets recover. Although it would slow down our plans to purchase more rental properties. Depending on the timing, it may make sense to take the equity hit in the trough and sell in order to reinvest it closer to home while the prices are still down. Need to think about the tax implications more thoroughly.
Looking forward to having some rental properties and being able to take advantage of 1031 exchange.
The great thing is, no matter where you move to, except for Manhattan, your Bay Area real estate will buy you much house.
The one X factor is IPOs. Even though the IPO market sucks for tech/internet companies as valuations come down to Earth, there will still be HUGE windfalls if AirBnB, Uber, Pinterest, Palantir and others go public. I’ve spoken to several $170,000+ income earners at Uber and they all can’t wait to try and buy a $1.5 – $2 M house once public. It’s not like they want to spend that much money, it’s just what it costs to get a decent 3/2 or 3/3 Single Family Home in the Bay Area nowadays.
But again, I see the RE market softening hear and everywhere. Flat to down 10% is totally in the ballpark over the next 2-3 years.
Do the $170k folks expect a huge life changing windfall if their companies go public or just a nice chunk for a sizable downpayment? One of your earlier articles mentioned most non founder employees won’t get very rich at private companies
Not life changing. Enough for 20% down payments on $1.5-$2M homes.
For example, $500,000 in RSUs vesting over 4 years, so that is $125,000 a year plus $170k+ salaries. 300k gross, $210k after tax. Save $110k a year for 3-4 years and you are there.
Real estate is about sentiment and incremental demand since there’s not that much inventory compared to the housing stock.
Thanks, appreciate the insight. I was curious since I’m not in the startup industry now, but lived through the dotcom boom in the 90s when enough people who joined the right companies at the right time and wasn’t too greedy did make a decent size fortune so that it was a realistic goal for even for rank and file workers. It seems the companies that went public in the past year in tech mostly haven’t been doing well. I’m curious to see how the Uber, AirBnB, Palantir, and other unicorns will do once they have to face Wall Street scrutiny quarterly.
I guess it depends on what is considered a fortune? Plenty of people will make $500,000 – $3M here in the Bay Area. Is that a fortune? Not sure if a nice house costs $1.5-$2M. It’s all relative!
The high real estate costs make it difficult for tech guys in the $170k+ range to even consider reaching financial independence early especially if they are single income families who have to put kids through school! I guess it gives more motivation to hustle side businesses.
Hi Sam, do you think there’s a possibility that individual mortgages/houses will be sold through online exchanges and brokers (not MBS)? I don’t see commissions ever getting as low as 1% because there’s not enough volume of sales and liquidity as stocks and bonds. Also I think from the sell-side point of view we won’t have too many brokers and real estate agents around who are willing to work in an industry with commissions so thin.
Probably not through an exchange due to the lack of volume.
The irony is that b/c of high commission rates, there’s less commissions for the entire industry b/c nobody in their right mind would pay a 5%+ commission rate unless they absolutely had to. A $50,000 commission on a $1M house is too expensive. A $100,000 commission on a $2M house is EGREGIOUS.
Maybe if the internet did not exist would 5% be OK. But the internet does exist and I’ve found all my properties myself, and even negotiated with the selling agent to represent me to save on cost with my last property. We came to an agreement and it was so easy. DocuSign makes bidding on a property literally 2 minutes.
The industry is ripe for disruption. Zillow/Trulia/Redfin make most of their money from real estate agents, so they need to be careful not to crush the hands that feed them. But if you look at ZG, the stock is getting crushed already. Buying Trulia was the top.
I totally agree with you, Sam. Over the past three weeks I’ve made it my mission to learn how to go the for sale by owner route. After slogging it out on Zillow and Postlets, we did three open houses and 30 looky loos but no credible offers. Not to mention the constant barrage of sellers agents trying to convince me that I needed to work with them. The GAME CHANGER was working with a broker on a fixed fee limited representation arrangement basis. In Arizona, I was able to post my listing to ARMLS and the agent would forward me any communication he was receiving from interested agents with buyers. Once you have a credible listing with great pictures(Google has the picture app where you can add light, pop, and color for free), my phone rang off the hook. 8 viewings in two days and three offers which I used to leverage a best and final offer for higher than our asking price. I reached out to a few realestate friends to get comps for the market and we were spot on for the asking price.
I worked with Congress realty who covers the western half of the US and they were also planning to send me a lock box and a standard sign all for 350 dollars. No reason to pay a realtor if you are still living in the market and have 45 to 60 days to sell. The contract documents are not complex and if your an honest person who takes care of their home you have nothing to hide.
Redefy was also another flat fee service which charges 2500 dollars and they have compartmentalized the job into individuals doing the marketing, agent rep, contract work, etc. I see disruption happening on the seller side but still a long way to go.
Sam if you need material for a post on this topic let me know.
Totally agree with you there Sam!
I too think the international buyers will be one of the main forces that tap into the US real estate investment properties next and if the realtors here can pull off international sales by being multilingual or familiar with foreign culture, that’s one aspect I see why people should pay more than 1% in commission — otherwise, I really don’t see the value in 5%+ in commission.
Well, as a native Chinese speaker myself, I am obviously biased, hehe.
I’m not worried either. First, I think that Congress’s recent increase in FIRPTA withholding is going to result in quite a bit more foreign investment in U.S. real estate. Second, millennials don’t really want to buy yet – they prefer renting apartments with nice amenities, as do baby boomers who are downsizing, so I think at least the apartment market could stay stable regardless of how the rest of the economy performs. Third, I’m saving my cash for a buying opportunities, as you said. I’d love to see opportunities to buy at a 10 cap or better come back! And fourth, I guess I could refinance my existing mortgage, but it’s hard to imagine rates will go lower than they already were.
Interesting comment on FIRPTA. I didn’t know what that was (linking to it). US real estate is so cheap compared to other major international cities in the world.
Every Chinese business person I talk to based in the mainland has thought of ways to extract their wealth from the country. One of the top assets is US prime real estate. The top destinations are Vancouver, San Francisco, LA, and New York City.
I’m biased, and think SF is the cheapest international city in the world. Panoramic ocean views for less than $1,000/sqft? Unheard of!
Mortgage rates have actually declined by about 0.2% since the Fed raised rates in Dec 2015!