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Short Summary
Main recommendation: Graham Stephan says that if you plan to buy real estate in 2019, buy for the long term with a 30-year fixed-rate mortgage and a margin of error, rather than flipping or speculating. He predicts (as his personal opinion, not a guarantee) a modest market in 2019, with interest rates possibly rising to about 5.4 to 5.5 percent and home prices appreciating roughly 3 to 4 percent, rather than a crash.
Key Points
- Graham predicts interest rates will rise gradually, with the Fed raising rates only about half a point in 2019, since near-zero borrowing costs have propped up the market.
- Rising rates create urgency for buyers to lock in current rates before they climb further, which is part of why Graham bought a duplex with a 4.5 percent rate.
- Graham predicts higher rates will push some buyers into renting, which he expects to raise rental prices by an extra 2 to 3 percent and help landlords.
- Excess unsold inventory from builders who took short-term loans is coming to market, giving buyers negotiating leverage.
- Many sellers with low fixed rates won't sell, which restricts supply and limits how far prices can drop.
- Graham says tax changes (the $750,000 mortgage interest deduction cap and $10,000 SALT limit) mainly affect high-priced markets like California, New York, and New Jersey, and in his view do not hurt investment property.
Details Worth Noting
- Concrete instructions:
- Buy long-term, not to flip, and avoid speculative real estate investments over the next year.
- Use a 30-year fixed-rate mortgage so the payment is known for the loan's life.
- Buy with enough margin of error that you still profit and can hold the property if rents or home prices fall.
- Lowball sellers who have excess inventory to pursue a better price.
- Look for new construction or remodels from builders with excess inventory, possibly cheaper than doing the work yourself.
- The speaker predicts a modest appreciation rate and a relatively flat year for stocks, and says in his opinion the stock market needs the tariff situation resolved before it can rise.
- Location matters: Graham predicts markets near the new Amazon headquarters will perform exceptionally well.
- Under the tax changes, Los Angeles homes under $900,000 saw strong demand as buyers shifted from the $1 million to $1.5 million range.
- Graham's own examples: a 3.375 percent fixed-rate mortgage he won't give up, and a duplex bought at 4.5 percent just before rates reached 5 percent.
Bottom Line
The speaker predicts 2019 will be a stable, unspectacular year rather than a crash, and recommends buyers focus on long-term holds, fixed-rate financing, and negotiating for deals on excess inventory.
