저자: Kevin · 외국인
요약 보기
연준 보고서 이후 부동산 과열을 경고하며, 금리 상승으로 주택가격이 5~15% 조정될 수 있다고 봄. 매도 시 중개수수료·세금 등으로 약 8% 이상 손실이 확정되므로 일반인에게는 보유가 낫다고 권함. 본인은 새 투자기회를 위해 보유 26개 부동산 중 20개를 매도 중이며 6개만 남긴다고 밝힘. 가격 하락이 더 크면 재진입을 늦추고 주식 포트폴리오 리스크를 우려함. 자산 가격 예측은 미국 주택시장 중심이며 한국 상장 종목 발언은 없음.
다듬은 글
Hey everyone, me Kevin here. Last week I posted a video called "The Fed Just Said This: Coming Housing Crash." And I explained the evidence the Federal Reserve gave for exuberance in the real estate market. They provided us three really detailed charts, and evidence as to why they believe that there's a lot of euphoria and FOMO happening in the real estate market, something that also preceded the 2008 real estate crash.
Now, this is something that I've been warning about since January of this year. This report from the Fed came out about a week ago, and in this video I want to give you an update on my because I want you to know where my head is on do I think it makes sense to sell? What do I actually think is going to happen?
Do I think, and this will be more towards the end of the video, do I actually think that real estate prices potentially going down slightly could lead to a larger recession? And if real estate prices do go down a little bit, again, is is it actually worth spending the money to sell for for that short-term fear?
Well, let's talk about that. So, first of all, we know a couple of things. One, we know that interest rates are up almost 2% since January. That reduces buyer purchasing power by about 20%. However, the real estate market is still screaming ahead because so far demand has been substantially outpacing supply.
Inventory is still ridiculously low, and folks don't want to miss out on home ownership. So, you could potentially be in a scenario where there's like 30% excess demand to supply. Real estate interest rates push down that excess demand by 20%, but you still have excess demand over supply. So, you actually could still see prices move up, albeit at probably a slower pace, right?
We also know that if the real estate market does fall, or when it does, there can be a substantial or substantial slowing force on our economy as individuals feel their net worth has declined or is declining, and then they're inclined to spend less money on things like going to Home Depot or Lowe's or hiring contractors or whatever uh they're not spending money on home improvement because they they don't feel as rich anymore, or they're not spending as much money on travel, or luxury goods, or going out to restaurants, or whatever, because they see their net worth declining a little bit, right?
So, these are a lot of sort of baseline things to know. Like, the real estate market affects a massive percentage of our gross domestic product. And if we get a negative GDP print, uh then it's two quarters in a row, then we're in a recession, right? So, how do we reconcile all this? How do we put all of this together?
And what's potentially the best thing to do? And what am I doing? So, let's talk about that. First of all, when you sell real estate, you've got to know this. You're going to be instantly taking a haircut on the value of your home. Why? Because you have selling costs, taxes, and repairs. So, consider this.
Let's just say to make numbers easy, you have a $1 million property, and you have to pay commissions of 4 to 5% plus escrow and title fees of 1 to 1 and 1/2% plus repairs, which could be as much as 1 to 2%. You're probably going to be left after selling about a million-dollar property, maybe around $920,000, or about an 8% loss uh on on the value of the property that you had.
And at this point, you start wondering, "Geez, well, maybe in certain markets it just makes sense to refinance your home instead of selling, because if your equity is a million, you're going to sell it, you're automatically taking an 8% decline in the value of your equity, or actually probably more of your equity, right?
But of the entire value of your home by selling." So, like, selling costs are really, really high in real estate, which is a big barrier for selling, and in my opinion, a big reason to refinance properties. In January, I quickly refinanced properties that I definitely wanted to keep because I saw rates going up, and we talked about that on this channel as well.
For most people, in my opinion, I think it makes great sense to consider refinancing a primary residence. Now, I know rates are higher now, but if you've got equity that you want to tap in your primary residence, and you want to potentially use that money not to go do crazy things like buy boats, RVs, and TVs, or whatever, but to potentially invest in other real estate deals or the stock market, well, I still think it's a good idea to refinance a primary residence.
Problem is, it's getting really expensive to refinance rental properties. For example, I just got quoted refinance a rental property with a jumbo loan, 5.5 into a percent interest with three points. That's insane. If you're not in the real estate world, it's insane. If you're in the real estate world, it's insane.
Like, it's absolutely ridiculous. Now, I know that was a jumbo property, so you get a penalty for that. It's investor property, you get a penalty for that. But, five and a half with 3% and no chance to to to get a zero point rate at, you know, I don't know, maybe five .75, probably six. That doesn't even exist for investor ones.
It's absolutely nutty. So, I believe that first for for individuals with primary homes, refinancing could still make sense. For people with investor properties, especially more expensive investor style properties, it's starting to get a little bit more expensive to refinance. But again, if you sell, you're taking that immediate loss.
And that immediate loss needs to be outweighed with the fact that you're possibly also going to pay taxes. Now, individuals holding a primary can get exemptions up to $250,000 as a single person and $500,000 as a couple for people who have lived in their property for two of the last five years. That's great, but again, we still think that refinancing makes more sense for primary homes.
For investment properties, you'd have to either 1031 exchange into another property, which at that point it's like, why have the selling costs if you're just going to go from real estate to real estate? I mean, now you're selling and buying in a very competitive environment. Probably doesn't make sense.
So, if you're selling an income property, you're probably going to pay the taxes right now because you're thinking, "Okay, I'm going to wait and prices might come down a little bit to where I could buy a better deal in the future, right?" But again, you need to offset an 8% decline in selling costs, potentially 25% in in long-term capital gains taxes depending on your income tax bracket and what state you're in and so on.
So, you really got to offset like a good amount of loss by selling rental property even, right? Like you have to expect that you're going to move into a better opportunity. And this is where I diverge from what what I think is probably best for the vast majority of people. Now, this isn't financial advice.
I'm a real estate broker, so in theory I could give real estate advice, but I can't give you real estate advice because I don't know your situation. So, even if I could give you financial advice, I don't know what your situation is. You've got to figure it out yourself. But I want to create this sort of like little wedge here.
And I know sometimes people make fun of me. They're like, "Oh, Kevin, you say never sell real estate." And then you sell some real estate. It's like everybody's circumstances are different. And I think the most important thing is that we realize life isn't binary. It's not all one thing. It's not all in or all out, right?
What what life is is, "Hey, what are the circumstances that we have right now and what's the best decision that we can make right now?" This video is brought to you by Public, where you can build a diverse portfolio of stocks, funds, and crypto within a single super social platform. Follow my stock comments on Public by going to meetkevin.com/public, signing up, getting a free stock worth all the way up to $1,000, and seeing what moves I make on my Public portfolio.
@meetkevin. Worth noting, Public puts investors first and doesn't m. Check out their stocks and crypto opportunities at meetkevin.com/public. My guess is that for 98% of folks watching, it's to hold your real estate. It's don't pay those selling costs. It's, you know, focus on the long-term for real estate.
Buy in good areas with declining poverty rates, with increasing population, buy in areas where people want to live. Quite frankly, I think real estate in California, as much as I hate California politics and government, ironically, it's probably a good place to own real estate because it's so hard to build in freaking California, it ironically means you have tighter and tighter supply for housing year after year after year, and it that naturally drives prices up, right?
So, I think for most people with primaries and and individual properties, it it probably makes sense to just hoddle because again, the taxes and just the costs of selling make it punishing to sell. And really, like how much do we actually expect prices to go down? And so, my thesis on this is that we'll probably see some form of headwind beyond that absorption of that excess demand that we have because rates are going up.
Well, we might see some kind of headwind of maybe 5 to 15% in prices, but does that mean that'll definitely happen? No, of course not. I mean, prices could just keep going, right? We also know that at some point, certainly by 2024 or 2025, rates will come down again. So, you could probably, presumably, refinance, and we might see that same sort of pressure for home prices to go up again, right?
So, so really, does it make sense to try to time the market for 5 to 15% if you're going to be paying tax penalties and the selling cost fees? Probably not. It probably doesn't make sense for the vast majority of people. So, when I say that, I'm probably talking to 95% of people who own homes or have rental properties.
Those are very expensive things to do. Selling real estate, very, very expensive. Trying to time the market, very, very expensive, right? Now, am I trying to time the market? And why am I doing something different? What makes me part of that 5% of people that it might actually make sense to to sell for?
Well, I'm in a different boat because I've a really big opportunity that I myself am creating. Now, in my opinion, I'm going to be able to make more money in my new opportunity, which is a kind of a like TBD, but and I can't go into too many details, but basically, if you want to learn more about it, course members are going to be first to hear about it and have the first opportunity to invest in it.
And second, anybody who goes to meetkevin.com/series A, they'll be sort of the second batch of people who hear about it. And then we'll probably talk about it publicly on YouTube down the road, but I don't know if there'll be any allocations left if we have allocations. We'll see what happens for investing in it.
But anyway, so I thought, and again, I can't give too many details here yet, but planning on creating some form of uh to some degree a real estate company that can invest in real estate uh throughout the country in in a in in a model that we haven't seen yet, because I really want to focus on just wedge deals, getting properties below market value.
And so, uh without talking about that sort of project more, I want to talk about what that means for my portfolio. So, for my portfolio, this is kind of like a weird kind of coincidence of a time that I kind of believe we we are going to see a little bit a little bit of a headwind to real estate prices, nothing like we saw in 2008.
But it kind of makes sense for me to lock in some of the pricing that I can get now, because I personally, after even paying the taxes and selling costs, can take a good chunk of cash and move it into this opportunity and make way more money, in my opinion, with this opportunity than I could uh by worrying about, you know, the taxes and the selling costs, because even though I'm going to get that, say, 30% hit after taxes and selling costs and everything, I think the amount of leftover cash that I'm going to be able to allocate towards buying deals when maybe they've become slightly cheaper, even 10% cheaper, but beyond that, the way in which we're going to be able to to buy these deals, I think it's going to be a phenomenal opportunity.
And so, that's why personally, since January, I sold 11 properties already. I have five more in escrow, five not listed yet. I've got three in construction, which I'll probably be stuck with, and three that I refinanced. So, within the next 6 days, I expect to be down from 26 properties to six properties.
They're all in Ventura County. And you know, so far the properties have been selling for for more than I have been expecting them to sell for. For example, one property sold for $350,000 more than I thought I would get for it, which is really, really incredible. But again, now I'm going to have to pay taxes on that, right?
But for me, I think my new opportunity is worth it. So if you're yourself kind of wondering like, "Hey Kevin, but like what if the real estate market falls 5 or 10%? Shouldn't I get out now?" Well, no, because you're That's a what if. And again, you're guaranteeing that loss by selling because of the selling cost and the taxes, right?
And so, you've got to ask yourself this. This is what you have to write down. Is is my opportunity, where I plan to put my money, worth taking a 30% haircut? In my personal situation, the answer is yes. I would say for most folks who think, "Well, I should sell." And then they sell and then they sit on the cash, most folks end up taking that money and spending it on butter items, frivolous expenses.
They end up eradicating their net worth. They feel rich cuz they have all this cash, and they don't end up getting back into real estate. Whereas like I'm selling literally to just get into a better real estate opportunity. It just happens to be around the same time that I feel like, "Yeah, there could be a little bit of downside pressure to prices." We don't even know if there will be.
I mean, rates have gone up and people are still buying homes like crazy right now. So we'll see. And know that real estate does take time, too. This is another thing to know regarding sort of the path of real estate. For example, people closing on real estate right now are the people who are closing on real estate based on interest rates when they were, you know, 3%.
Well, now they're like 4 and 1/2 to 4 and 3/4 of a percent. So, the people buying now are basing on those homes closing today in terms of price, but they're paying a lot more per month to own those homes. They just feel like, "Hey, well, we're paying a fair price because that's what the other things have been selling for." Well, when we get a new batch of buyers in like 3 months and they're like, "Dang, like we can't afford it because rates are higher and we're we're maybe starting to see a little bit of a decline in comps or more inventory comes in the market, then we might start start seeing a little bit of a larger kind of decline in comp values.
Again, I don't think more than anywhere between 5 to 15%. Reiterate why I don't think it makes sense to sell. Uh unless again, you have a better opportunity. Now, things could change and the most important thing about making predictions is monitoring your predictions. It's entirely possible that real estate doesn't dip at all.
It's entirely possible the real estate dips more than that amount. That's just my base case now and I'm looking for signs in either direction. Obviously, if real estate prices were to fall more, then I would delay when I would get back into real estate and I'd be a little bit nervous about a potential impact of a recession to my stock portfolio.
If real estate prices fell less or didn't fall at all, no worries. I'll get back into real estate ideally by the end of the year so I could play some tax strategizing to offset some of the taxes that I've now exposed myself to from my other transactions and I could do this by cost segregating new purchases or new buildings, right?
So, there are a lot of things to do and really I would say for the vast majority of folks again, bottom line is doesn't make sense to sell. Hey, does it make sense to wait to buy? Eh, maybe. Uh but if you could get a good deal, if it's off market or you could get a really good negotiated deal because somebody else is trying to sell or you find something that's a fixer-upper and you've got a margin of safety, then that's a wonderful opportunity to buy.
If I came across something that was a good deal today, I would also buy it today. I just bought a property like 8 weeks ago. Uh so, you know, that was a really good deal. So, I don't want folks to think like, "Oh, Kevin used to be all in on real estate, now he's not." It's a transition. Happens to be happening at a time where the transition could be a very convenient time to make, but uh no guarantees.
We'll keep monitoring the situation, but these are sort of Kevin's latest thoughts on the real estate market and what's going on with my portfolio. . Goodbye.
Comments 0