Real estate world is changing, New deals recorded.
I drink up a lot of newspapers and magazines and digital information, and lately it's a lot about housing- lots of perspective and lots of opinions. What is true is that the rise of interest rates will no doubt make a big dent in demand, and the higher you go up the price ladder, the bigger that demand drop might be.
Take a $450,000 loan, which would be a $550k purchase with a traditional 20% down and 80% borrowed. At 3%, that is $1900, or 8% that is $3300. And in the upstate real estate environment, those new $500k-$800k purchase benchmarks (that existed very infrequently pre-pandemic), if that price point market gets soft, then a lot of people are in for a lot of trouble.
There are all sorts of warning signals flashing - one I've notice recently are huge price drops in some homes that were priced wrong to begin with (some so wrong I can't help but think the sellers/developers/builder violated the golden rule of respecting your buyers' intelligence), and the big move towards 'open houses'. No one does open houses up here, and the idea that you have to staff and entertain an open house rather than spending your day fielding 8 offers must be a real drag to the realtors that thought this was an easy game, lulled into misperception by the ease of the pandemic fulled upstate sales seen. Welcome to the big leagues, where sailing is not always smooth.
Of course, another way to look at it, is an additional payment of $1400 a month is really not a lot of money for a lot of our buyers, and is not the final detail of a decision. Value is, and if you can articulate it and demonstrate it, then you still have a client base. If you've been swimming without shorts, and the only way you can make money was at pandemic level sales prices and volume, well, good luck to you.
One of the single biggest factors for us heading into this uncertainty is the certainty we have of free cash flow, low debt load, and at least 6 sales lined up for 2023 already. The trick for us will be not get in impatient and start buying other people's distressed assets too soon. I hate to be stingy and not be paying any interest payments to our good friends at Jeff Bank, but hey, business is business. At 7%, at our debt levels last year at this time, we literally would be paying $20k-$30k a month, which gets painful very quickly.
That's been the story of the last 2+ years. One thing after another. Lockdowns, lumber shortages, labor shortages, lumber price jumps, interest rate jumps, - you name it, we've seen it. Keeps life interesting for sure. Would hate to the guy with a lot of real estate debt right now -
Couple of houses we just put into contract -
Upper Big Sky in North Branch, at our Crest project. I believe nearly 10 acres of gigantic pasture and views.
Ranch 55 in Cochecton on 18 acres.
Ranch 56 in Narrowsburg on 10 acres. No pics yet.
To me, and what I know of the marketplace - these are homes and lands that are value-oriented, and unique. The idea we've never lost sight of the fundamentals - privacy, good taste, reasonable pricing, personalization - these are mantras and chants that have served us well. I literally don't think we had one client who regretted buying with us at the last downturn in 2008-2010. Life goes on.