“Buy When There’s Blood in the Streets”
It is said the phrase was coined by 19th century British financier, Nathan Rothschild, and member of the notorious Rothschild banking family, who’s financial influence still reigns supreme today. The phrase is meant to steer savvy investors away from the heard mentality when most people allow fear of uneasy financial markets to prevent them from buying equities or other investments and even fall victim to “panic selling”. Furthermore, Mr. Rothschild was trying to encourage any investor with a listening ear to adopt a contrarian investing style.
Right now, most retail home buyers have been priced out of the market due to high interest rates. Many have decided to opt for renting over purchasing until “better times”. My question for you as an investor is, what do you think will happen in “better times”, aka, when rates come down to reasonable levels? Do you think home prices will fall? At the end of October 2022, DMAR reflected active inventory at 7290 active listings, which is still below the pre-pandemic inventory of 8557 active listings in October of 2019. Prior to the commencement of interest rate hikes earlier this year, we were in an inventory crisis. While inventory has increased dramatically, it’s a mere pause until rates come back down again.
Building wealth in real estate is a long game. If one thing was certain when rates were at record lows, it was that investors had an extraordinarily difficult time competing with other buyers, both investors and retail buyers alike. Now that rates are at the highest levels since the early 2000’s, prices have cooled and buyers have more negotiating power. The name of the game is “cash flow”. And if you can structure your debt to allow yourself a healthy margin/yield, you’ll be positioned well later to refinance when rates come down. And when those rates come down, the feeding frenzy will resume…
Fellow investors, be a contrarian, don’t follow the heard.