There are a lot of myths out there about real estate investing. People seem to think you can only make money in a hot market, but that's not true! In this video, San Diego Realtor Kyle Whissel will discuss why you should invest in a declining market and dispel some of the myths that keep people from succeeding in this industry.
Should you buy a home when values are declining. I'm Kyle Whissel with Whissel Realty Group. In today's video, I'm going to explain to you why you should buy a home today, even though values are declining. Sounds a little bit crazy, right? Why the hell would you buy if you know values are going down? Well, here's why. I've been in this business for 16-17 years now, bought my first property 20 years ago. I've done this for a long time, sold thousands and thousands of homes.
And here's what the media's not talking about that I'm going to talk about today, 'cause the media is going to latch onto the negativity, right? They want to be all over the fact that values have gone down, which they have, I'm not denying that at all. As of right now, we're in the middle of August, we've seen about a 5% decline here in San Diego in the last few months. So values have definitely declined, but I do not believe that values are going to continue to decline for very long, and the reason is, value started to decline. Let's like rewind, why did this happen? Why did value start to go down?
Well, they started to go down because mortgage interest rates shot through the roof. They shot to 6.25, maybe even 6.5% in the beginning of June. Well, why did they do that? Well, they did that because inflation came in far higher than what anybody expected. Well, whenever inflation comes in high, The Fed steps in and tries to help control things, and so they raise what's known as the federal funds rate. Federal funds rate is the rate that banks borrow money at overnight. Well, if banks have to pay more to borrow money, guess what they do? They charge more money when you borrow from them. So what you saw is when in inflation came in high, everybody knew The Fed was going to raise rates, therefore mortgage rates jumped. We saw rates earlier this year in the threes, and then all of a sudden June happens, with inflation being super high, and rates jump over up into the sixes.
Well, anytime the interest rate changes by 1%, that wipes out about 10% of your buying power. Well, if you go from threes to sixes, you jump 3% in rate, you wiped out 30% of your buying power. Well, when you wipe out 30% of your buying power, a bunch of buyers say, "Peace out, I'm done, I'm not doing this anymore." So that has caused a lot of buyers to get out of the market, therefore there's less people buying the homes. As a result, we've shifted from a seller's market to more of a buyer's market, because nobody's buying homes, and values have started to decline. So now you're saying, "Well, Kyle, why should I buy now?" Like it's becoming a buyer's market, and let's talk about what does that mean, that buyer's market, and then we'll talk about why I think you should buy. In a buyer's market, it's great. Six months ago, if you were buying a home, you had to write an offer, hopefully you were all cash, otherwise you weren't going to have a whole lot of a chance.
If you had a chance you weren't cash, you were having to agree to buy a home for more than it was appraising for, a lot of times you were having to write the offer without ever having even seen the home. Or if you were able to see the home, you had to write the offer with super short contingency periods, for things like inspections and appraisals, like you had to shorten those periods up to almost nothing. And if you found any repairs or anything like that, the seller was going to say, screw you, I got 10 other offers. If you asked them for credit to help with your closing costs, they laughed at you. Like, it was really tough. Well today you can do all of those things.
You have tons of choices. There is about four times as many homes for sale today as there was six months ago, there's sellers that are willing to give you credits to help with closing costs, there's sellers that are willing to give you plenty of time to complete your inspections. You don't have to pay over the appraised value, like you have some of the control back in this buyers market where now you can pick and choose the house you want, and you can get the terms you want. You're not having to bend over for the seller and give them everything that they want. So you got a lot of control right now, which is great. Why do I think that this decline in values this temporary?
Well, the reason I think that is we started, what got us into this situation was inflation was shooting through the roof far more than anybody expected. Well, guess what? Here in the beginning of August, the new inflation numbers came out, and now the exact opposite is starting to happen. Not only is inflation coming back down, but it's coming down more than expected. So if we went up more than expected, that shot rates up, if we're coming down more than expected, guess what that does? That brings rates back down. We're starting to see rates today in the low fives, or even into the fours right now, especially on a VA or an FHA loan, we're seeing rates in the mid fours right now.
But the media doesn't talk about that, right? 'Cause that's not sexy. All the media wants to talk about is like, values are down, which they are, but they're not talking about rates. The smart buyers like you, because you're watching this video, you know rates are coming back down, they're in the fours and fives right now. So now rates have come down a point or two from where they were, now you're getting 10 or 20% of that affordability that you had lost back.
That's a great thing, right? And not only can you now come back in the market and afford the home that you want, but you could pick the home you want with the terms that you want. And I think as the rates continue to come back as inflation continues to decrease, rates continue to get lower, the buyers are all going to start coming back, and then your values are going to start coming up again. So my prediction, I think you're going to continue to see a decline through the end of Q3, I think will start to flatten out around Q4, and I think we'll start to tick back up again as we head into Q1 in 23. And so there's just a small window right now, you need to take advantage of this.
If you're thinking about buying, you need to meet with our team, call us, text us at the number down below. We'll sit down, we'll have a consultation with you, talk to you all about exactly where things are at, so you can decide if now is going to be the time for you. Heck, we even have some lenders right now who are doing mortgages in the threes. We have some special adjustable rate mortgages in the threes right now that we can get you dialed in. So you can get the rate from six months ago, but you can get the buyer's market of today, you combine the two of those together, you're winning. Call us, text us at the number down below. Kyle Whissel, Whissel Realty Group Talk to you soon.
