My Real Estate Prediction for 2019...

What's up you guys? It's Graham here. So I hope you're sitting down, because we're gonna be having a very serious talk today about what's happening in the real estate market; some of the things that you should be watching out for and what I think is gonna be happening in real estate in 2019. I hope this video should answer anyone's concerns about whether or not you should wait to buy real estate, if the market's gonna come crashing down, or if the world is about to come to an end.

So make sure to stay tuned and also smash that like button! But really quick, for anyone new here, a little bit about myself: I have been a full-time real estate agent since early 2008, with just over 130 million dollars worth of total sales volume. I've also been a part-time real estate investor since late 2011, buying and renovating rental properties. And also, fun fact, I'm very good at stopping the microwave just before it hits zero.

So with that said, I think it's pretty safe to assume that all I pretty much do day in, day out, every waking hour of my life is spent keeping tabs on the real estate market, both for my clients and for myself, especially considering that I just recently purchased another property here in Los Angeles about two months ago.

So here's what I predict is gonna happen with real estate in 2019 and how you can use this information to make you some money. There, just for some reference here, in November of 2017, just a little bit over a year ago, I made a video about my predictions of what was going to be happening in real estate. Here's what I ended up saying in that video, and then here's what ended up actually happening. You can see my prediction so far was pretty spot-on.

What I've noticed so far is that there is a huge construction boom; there is a ton of inventory coming in the market. The problem comes, I would say maybe another year down the line, maybe a year and a half down the line. I think we're gonna see a huge surge of new homes coming on the market. I think that is going to outpace the demand for these homes.

What's realistically going to happen is that interest rates are slowly going to rise over the next maybe five to eight years. I don't think anything is gonna be dropping like 10% in price, but I do see the market not appreciating at like ten, fifteen percent a year like it has been, which is just absurd, and that's not healthy. I see it instead appreciating at a very modest maybe two to four, maybe two to five percent, depending on the area overall annually.

So it appears that my prediction from a little bit over a year ago was for the most part reasonably accurate. I mean, we all knew that interest rates were going to be rising this year, and they did. We all knew that home sales were going to be slowing a little bit as new projects came onto the market, and they did. And because of that, we knew we weren't going to be seeing a huge increase in prices this year, and we didn't.

To be honest, there wasn't really that much that you can get wrong in 2018, but what about in 2019? Is this the year where it's finally gonna happen that real estate is going to get its almighty crash? Well, what about that spooky real estate bubble that everyone loves to talk about? What about all this stock market worries? Or what about Bitcoin hitting 3,500? This is the stuff we really gotta talk about, so brace yourselves. Here, we're about to get into an economy lesson about what affects real estate prices.

Number one, we have interest rates. Number two, we have supply and demand. Number three, we have excess unsold inventory. Number four, we have upcoming tax changes, and number five, we have global turmoil.

So let's first talk about these spooky interest rates, because I guarantee this is going to be a very hot topic in 2019. This pretty much has a ripple effect across the entire economy. We're coming off historically low interest rates, which in my opinion are pretty much the lowest that many of us will see in our entire lifetimes. These extremely low interest rates were able to prop up the stock market and the real estate market because borrowing money became extremely cheap for people and businesses to do, allowing them to buy more than they ordinarily would be able to afford.

And this isn't necessarily a bad thing; it's just that people were able to spend a lot more money because the net cost of borrowing became a lot cheaper, and affordability because of that became a lot easier. But as they say, all good things must come to an end, including historically low interest rates.

But the Fed must raise rates to a point where it actually makes sense to lend money and actually get a profit in return. And as they raise interest rates, real estate tends to get a little bit more expensive, and they can only raise rates so much before it starts affecting home prices. But my prediction for 2019 is that the Fed is going to be very strategic with their rate increases. They see the immediate impact a rate increase has on the stock market, and any huge rate hike would be detrimental to the economy.

And because of that, I think they're only gonna be raising rates about half a point in 2019. Right now, interest rates are just below 5%, and I'd love to come back to this video exactly one year from now. I'll bet that interest rates at that time will be anywhere from 5.4% to 5.5% by the end of 2019.

And also, I just want to say hi to future Graham. If you're coming back to this video and watching it exactly one year from now, what's up? Make sure you smash that like button; hope everything's going well and hope the channel is still doing good. I don't like to say, but anyway, with that out of the way, when it comes to rising interest rates, there are three good things to somewhat keep in mind.

First of all, when it comes to home prices, people know that interest rates are only going to be going up from here, so for people who are looking to buy now and hold over the next 20 or 30 years or longer, it creates a sense of urgency to go and buy something now while rates are still pretty low. And also, I'm absolutely no exception to this; one of the reasons I bought my last duplex just a few months ago was entirely because I wanted to lock in a four and a half percent 30-year fixed-rate mortgage, because I knew that was pretty much gonna be the last time that I ever had the opportunity to do that before rates inevitably were to hit like 5%. And sure enough, three weeks after I closed on the property, rates were at 5%.

So secondly, in a weird way, when you think about it, it's pretty good for real estate investors. If higher interest rates end up deterring people from buying, then guess what? They become renters. This means that I predict we're gonna be seeing a huge increase in renters in 2019 that are going to be driving up rental prices by an extra two or three percent. Generally speaking, one of the major advantages of investing in real estate is that when people aren't buying real estate, they're renting real estate, and that helps with rental prices.

As an investor, as a landlord, you end up having more selection, more competition, higher prices, and that in a weird way and some helping out your bottom line. Now the third bit of good information is that the Fed only increases rates in a healthy economy that can actually handle a rate increase. Some people might argue that the economy is overheated from sheep and that the tariffs might provide a little bit of uncertainty about what's gonna be happening in the future, but overall I say we're strong enough to handle a rate increase. They're probably gonna end up raising it just a little bit so that we don't really feel it that much; then we're gonna get used to it, and then they're just gonna raise it a little bit more, and then we're gonna complain about it and we're gonna be reading alarming headlines about what the world's coming to an end.

But we get used to it, and then everything's fine, and then they raise it a little bit more. It's gonna be so gradual that most of us are never going to fully feel the effects immediately.

So next, let's talk about supply and demand, and with that, let's talk about excess unsold inventory on the market because the two are directly correlated. Now, here's the breakdown of exactly how this works in conjunction with rising interest rates. Higher interest rates just means that homes get more expensive, which means less demand from buyers. Less demand from buyers means that fewer homes are selling. Your homes that are selling means more homes in the market. More homes on the market just means that listings compete with each other for a limited pool of buyers. When that happens and listings compete with each other, that means that prices go down. Now the lower the prices get, more people start getting back into real estate, driving back up the prices, and that is basically supply and demand.

Now, I'm personally seeing a lot of excess inventory right now coming from investors and home builders who started these projects six to eighteen months ago and are just now putting them on the market as they finish completion. But these are oftentimes the properties that need to sell. The reason why is because many of these builders end up taking short-term loans at lower interest rates to save on money, so they need to sell these properties to get these homes off the books.

Now for buyers out there in 2019 who have the finances to do this, I think this could be one of the biggest opportunities for you over the next one to two years to buy a new construction or new remodel for less than it would cost to redo that yourself. These are the opportunities that would not have been around a few years ago, so go ahead; enjoy and get yourself a great deal.

No, ultimately this just means that there's going to be more supply coming on the market in 2019, which gives buyers a little bit more affordability in terms of prices, but unfortunately that comes at the expense of a higher interest rate, which almost cancels out any sort of price decline we see in terms of asking price. It's almost as though you end up paying for the property but with a higher interest rate, just like you would pay more for a property with a lower interest rate. In both situations, your monthly payment could pretty much be exactly the same, but when it comes to excess inventory, buyers now have the luxury of being a little bit more aggressive with their offers to try to get a slightly lower price.

And if you're a buyer, I say lowball sellers, and eventually you will find one that needs to sell, and with that, you will end up getting a great deal. But one of the biggest differences I'm seeing now that I haven't seen before is that many sellers who bought over the last few years do not want to sell ever because they don't want to give up their historically low interest rate.

I am absolutely no exception to this as well; I ended up buying a property two and a half years ago at a three point three seven five percent interest rate fixed for thirty years. I am never going to get rid of that because if I sold that property and bought something else, it's now going to cost me like five percent for a mortgage, which it's just the numbers don't make sense for me to ever sell. This is causing a lot of people not to put their homes in the market that would have ordinarily wanted to move, and that just further restricts supply and further restricts prices from really dropping too much.

Now, in terms of price appreciation in real estate, I have a feeling that most of this is going to be very location specific. For example, I think we're gonna see some markets do exceptionally well in 2019. For instance, anything around the new Amazon headquarters… Overall, I'm just gonna predict that we're likely to see prices in real estate increase between 3% and 4% in 2019. Basically, just take our 2% inflation and add an extra 1% to 2% on top of that, and there you go; that is what I think the returns are going to look like.

Overall, it's nothing crazy, it's nothing devastating, but it's also gonna be nowhere near what we have seen over the last five, six years. And also, for the way I see it, there's nothing really happening out there that's pushing up real estate prices besides buyers who are urgent to buy to lock in a low interest rate and sellers who would ordinarily sell but choose not to because they don't want to lose their interest rate. And that further restricts supply.

Besides that, there's nothing really going on that would cause me to think that real estate prices are really gonna like go up an incredible amount in 2019. Now, one elephant in the room here that I do want to mention is upcoming real estate tax changes that a lot of people are going to be noticing when they file their tax return in April of 2019. Namely, what this is is the seven hundred and fifty thousand dollar mortgage interest deduction and also the ten thousand dollar limit on the salt deduction. That's really only gonna impact markets like California and New York and New Jersey, who have high property taxes or high real estate prices.

For everyone else in the market, for the most part, like for ninety-nine percent of America, none of this really makes any difference. But in terms of California, because that's where I am, I do have a feeling that this will end up affecting prices in the 1.2 to 2 million dollar range, where these buyers tend to be a little bit more price sensitive than those that are spending over three and a half million dollars or where it doesn't really matter if you buy under a million dollars.

Now on the bright side, because of this going into effect, the demand for properties in Los Angeles under $900,000 have soared higher than I have ever seen over the last few years. This is because all of the buyers who were previously in like the one million to one and a half million dollar range all of a sudden go for lower price listings to end up saving money, causing those listings to end up going in price dramatically.

So if you happen to be in Los Angeles and you bought a property under $900,000, just pat yourself on the back because I have a feeling those properties are gonna end up doing very well this year. And also, I gotta mention when it comes to investment properties that none of these tax changes have any negative effect on it whatsoever. If anything, investment property becomes more attractive because you can deduct whatever amount you have; you can deduct all the property taxes, and if anything, it just makes it a better investment compared to just buying a primary residence.

And one last thing I want to mention is that lately we've definitely seen some stock market turmoil. This does indirectly impact real estate prices, as investors have less money to work with, which means they have less money to spend in real estate. Now, I personally think that 2019 is not going to be a stellar year for stocks. I think it's gonna be pretty meh for the most part. I just don't see there really being any incentive or any drive right now to push stock prices higher, at least until the tariff situation is removed.

Because anytime we have any sort of uncertainty with what's going to happen in the market, people panic and sell, and they don't feel comfortable investing. So once the whole tariff situation is removed and settled, that's gonna give people confidence to go back into the markets. But until that's worked out, I don't see any reason why we should see a big increase in the stock market prices.

Now, at the end of the day, all things considered, long-term, none of this is really gonna make any difference. Thirty years from now, I almost guarantee it that you're not going to be looking back wishing you had bought just like one year later or wishing that you had bought like one year before. Chances are long-term, the markets still gonna continue to be going up, and whether or not we're gonna have big drops and rises along the way, this is totally normal.

Now if you do decide to invest or buy real estate in 2019, do it with the expectation of holding onto the property long-term. I would not recommend buying anything with the intention of flipping it in 2019. I would not buy anything with the expectation of selling it in two to three years for a profit. I would also not recommend making any speculative investments in real estate over the next year; I think that's just too risky.

But to each their own; you guys will do whatever you want to do, but that is just my personal opinion and recommendation. So just keep in mind, if you're buying, buy long-term; buy with a 30-year fixed-rate mortgage so you know exactly what your payment's gonna be over the lifetime. Go alone, and also buy something where you have enough margin of error, where if rental prices do go down or home prices do go down, that you still end up making money on the deal and can sustain the property and hold it long-term.

So again, just to sum things up, in 2019, I believe we're gonna see mortgage interest rates anywhere between 5.4% to 5.5%. I also think we're gonna continue to see more inventory coming in the market in terms of real estate, and with that, overall, I think it's gonna take sellers longer to get their properties sold.

I also predict that overall, on average, we're probably gonna see between a three and four percent appreciation rate on real estates in 2019. I also predict we're gonna see a relatively flat year for stocks again, and also, I predict that if you haven't already, you will be smashing that like button.

So as always, you guys, thank you so much for watching. I really appreciate it! If you watched it all the way to the end, and you haven't already subscribed, make sure to smash that subscribe button. Also, feel free to add me on Snapchat and Instagram; I post pretty much daily, so if you want to be a part of it, feel free to add me there. Also, I have a private Facebook group in the description for anyone who's interested in real estate, real estate investing, real estate mentoring, wholesaling real estate—anything real estate, add yourself to that. Thank you again for watching, and until next time!