The Housing Market Unveiled: Expert Insights from Rick Sharga and Daren Blomquist

Yesterday, I had the incredible opportunity to sit down with industry experts Rick Sharga and Daren Blomquist on the Uncontested Investing Show, presented by REI INK Magazine and proudly sponsored by RCN Capital. Talk about perfect timing—the interviews coincided with the Federal Reserve's game-changing announcement, making our conversation even more relevant and urgent for real estate investors.

These full recordings will air starting next week. Make sure you subscribe to our show, via YouTube or your favorite podcast player. Click here for easy access.

The State of the Housing Market

First off, let's talk about the elephant in the room—the Federal Reserve's recent meeting. Their "Higher for longer" stance has shaken up the bond market, and we're raising our DSCR rates by .4%. The 10-year and 5-year treasury yields hit 15-year highs, which are the benchmarks that DSCR and homeowner rates are tied to. So, what's my advice? BE CAUTIOUS! I think mortgage rates could run past 8%.

Mortgage Rates: A Tale of Two Perspectives

Rick Sharga believes that mortgage rates will gradually come down. He predicts rates could be in the high sixes by the end of this year and anywhere from the low sixes to mid-fives by mid-next year. On the flip side, Daren Blomquist warns of a possible double dip in market pricing over the next 12 to 18 months. He advises investors to be cautious and data-driven in their decisions.

Market Stability vs. Imbalance

Rick doesn't see a housing market crash in terms of pricing. He points out that the rate lock effect is in place, meaning homeowners with low mortgage rates are less likely to sell, keeping inventory low. Daren, however, emphasizes the importance of a balanced market for long-term health. He feels that governmental interference is causing an imbalance, which could have long-term consequences.

Investment Strategies: Distressed Sellers vs. Data-Driven Decisions

Rick suggests that investors should focus on people who need to sell their properties, like those going through divorces or job losses. Daren advises investors to look at the data and not bury their heads in the sand. He believes in consolidating data from multiple sources to get an objective view of the market.

The Rental Market and Thin Margins

Rick sees more activity in the rental market than in the fix-and-flip market. He advises new investors to be very careful with their math, especially considering the thin margins in today's market. Daren notes that buyers are being more disciplined now compared to the frenzy seen in late 2020 and 2021. He attributes this to seasoned investors who understand market cycles and are cautious in their bidding.

Insurance, Taxes, and the Government's Role

Rick warns that insurance rates are doubling or even tripling in some cases. Property taxes are also on the rise, and investors need to factor these into their models. Daren is concerned about the government's role in the housing market, especially with the extension of moratoriums. He believes this could lead to unintended consequences.

Demographics and Household Formation

Both Rick and Daren touch on the subject of demographics. Rick talks about the largest cohort of young adults (25-34) in history, who are now in prime ages for household formation. Daren points out that demographic changes, like slowing population growth due to fewer children being born and potential changes in immigration, could impact household formation and, by extension, housing demand in the long term.

Regional Focus: Digging Deeper

Rick advises investors to pay attention to regional markets, as different areas have different dynamics. Daren encourages investors to look at regional data, not just national trends. He believes that platforms like auction.com can help investors identify opportunities in different markets.

The Road Ahead: Navigating the Storm

Opportunity often follows chaos, but you've got to navigate the storm first. Both Rick and Daren offer invaluable insights for any real estate investor looking to navigate the current market landscape. Whether you're a seasoned investor or just getting started, these insights can help you make more informed decisions.