As the co-founder of Magilla Loans, I am seeing the activity of offerings every day. I deal with bankers responding to borrowers in the throes of a real estate transaction. I’m on the front lines of what is happening in real estate, both commercially and residential.
I refuse to hedge or speak in the vague generalities of the other prognosticators simply because I don’t have to. Magilla’s data is in real-time.
Knowing this, here are my observations from the third quarter and looking ahead:
The natural disasters in Houston and Florida are horrific. As a company, I feel for all those affected and want to help. There will be massive rebuilding efforts. No one has to be a soothsayer to say that these two regions of our country will continue to be a hotbed for real estate financing in the coming months. The problem will be the ability for insurance companies to properly staff these large swaths of areas to approve the manifold insurance claims that will be inundating their offices.
I imagine there will be a massive shortage of labor and supplies in these areas, and this shortage will prolong these areas as hotbeds for the next eight months to a year (if not longer). Much more important than the data, I wish to help provide a way for these people to find the proper financing for their rebuild; an inherent benefit of the free platform I already built.
In sectors closer to home, I see California staying typically hot in both residential and commercial real estate. I feel the markets are white-hot and prices are bordering on ridiculous. The natural inclination is for the prospective buyer to question, if I don’t get in now, when will I ever have the opportunity to own in this area? I say fight that urge. I have all see this before, most recently in 2006 and 2007, and the results are not pretty. The saving grace this time around is twofold: the feelings are still fresh in the collective US housing market conscience and interest rates, while forecasted to keep ticking upward, are still historically low.
What does a prospective buyer do?
Hold, preserve cash, and grind at your homework. While not desirable, pretty, or what you want to hear, it is, nonetheless, the smart thing to do. This will send a collective message to the marketplace that the prices are too high and, perhaps, slowly they will stabilize. When I say grind at your homework, I mean work harder than the next people who are in the market looking for the same house you are. In these markets, relationships and extra work will get you in the home faster than anything else. There is no shame in renting or living with your folks longer. Fight the urge to “keep up with the Jones” because the Jones’ don’t know anything about forecasting.
The commercial market is even more challenging for buyers. The reason is that there is so much money looking for a place to get better returns than the already over-inflated S&P. I work with the largest Commercial Real Estate brokers in the country. I hear it every day. They are crushing it. Things are closing and deals are flying. One insider friend of the company told my co-founder and I that the dentists and doctors are back, full-bore, into real estate investing.
I believe in telling it like I see it. I don’t want anyone to get hurt. Our business is all about lending in America and I have a vested interest in keeping lending thriving as the nation’s search engine for loans. But, I simply see things faster than anyone because our platform is ground zero for real estate in America. When I feel the market is overheated, I am going to tell everyone. It is simply what I see day in and day out.
Be smart, do your homework, and save for the right property or investment. This prudence will pay off.