[quote=deadzone][quote=bearishgurl][quote=deadzone]You are naïve if you think these majority cash buyers are going to keep coming out of the woodworks forever. Perhaps their money source(s) could dry up as housing becomes less appealing (which it already is at current prices) or the economy turns south. If/when interest rates rise, investors will flee real estate like yesterday’s news.[/quote]deadzone, if SD County residential property begins to become “less appealing” to end users, this will happen in inland areas (over 15 miles from the coast). It may never happen in close in and coastal areas, IMO, especially those areas on the west side of I-5.
As far as investors, I don’t believe they will flee ANY areas of the county including inland areas or low income areas (or both). Mortgage interest rates have nothing to do with it as the vast majority pay all cash for residential properties. If a flipper purchased a property in an inland (and/or low income area where there are far less all-cash end-user buyers) with the intent to flip it and mtg interest rates rise so quickly that they can’t easily flip it to an end user, they will simply rent it out until a seller’s market presents itself again.
No harm done. Everyone needs a place to live.[/quote]
bg you are obviously ignorant of basic economics. The reason people are paying cash for properties is due to the simple fact that there is nothing else to invest their money into given zero interest rate policies since 2009. If interest rates go up, the investing landscape changes entirely.[/quote]That “landscape” doesn’t change overnight, deadzone. Are we talking about a jumbo CD being paid 2.5% instead of <1% here? What if the initial rate hikes tank the economy and the rates end up going back down (the Federal Funds rate maybe not going all the way back to "0%" but down to 1%)?
If one can pay $340K for a "flipper" SFR and flip it in 60 days to where it is "worth" $475K (in a "0%" rate environment) but is unable to make this profit in a 1-2% environment, then they can just rent it for at $2K to $2400 per month and wait for another day to put it back on the market. The rate of return on a $340K investment + $60K added to it in materials and labor for a total of $400K invested equals rental income of $26,400 yr or 6-7% (not including vacancies).
I can tell you that that is CERTAINLY better than what banks would pay and is a relatively "safe" investment (like bank deposits). The only drawback is that rental property is much more labor intensive than having bank deposits. And most other passive investments are riskier than owning investment RE, imho.
I don't see banks raising their interest rates on deposits above 4% for a long, long time, if ever.
