BOOM BANG AND FANG - Market IS CHANGING

(Disclaimer: I don't advise anything because I'm not a financial advisor. I'm just a real estate entrepreneur. Don't buy stuff just because I said so. Do your own diligence, do your own checks.)

We are living in very interesting times. Financially, this is the most interesting time for me as a professional since I started working. The market is completely different than what it used to be. It's in a place where it's very uncertain and unclear. Today, we're going to talk about both the Israeli and American aspects of it.

As entrepreneurs, bad news means opportunities. It's very helpful to understand where the "bad news" is right now, so we know what to look for.

The View from Israel

Let's start with the Israeli market. If you drive anywhere in the country, you can see the major, crazy, uplifting construction that's going on. Over the past few years, a lot of land was purchased and developed. Now, all these projects are popping. But developers had many difficulties, from COVID to October 7th and the war. The construction sector was, in fact, "harmed" and slowed dramatically by the subsequent ban on Palestinian workers, which created huge problems.

All these buildings are now coming to a market that is not ready. The market cannot buy all these apartments. How do I know? I see the price cuts. All these "no interest" loans, or "pay 7% now and 93% later"—these are basically price reductions.

They are trying to call it something else and mess with the data. So people in Israel don't really know they are in maybe the first real estate drop in our lifetime. And it's happening right now. (And talk about "unclear," some data shows the market is "losing steam" with prices declining 5.6%, while other reports claim prices are still hitting "all-time high" points. This confusion is the point.)

This is the new construction market. Many developers are in danger, and I predict we'll see some lose their business this year. They are in crisis and selling with essential price reductions. The more expensive the apartment, the more price reduction you're going to have.

Who is buying today? Basically, only one group: the soldiers, the Miloim. They are buying, but most are below 35. What type of property will they buy? The least expensive they can—an entry-level apartment. This money is from the government, and it's inflating this specific market. Basically, the government is helping the people to buy properties—of course, they did their service. The government has detailed plans giving reservists priority and discounts on land. I'm just saying the financial situation is that this money is inflating the market.

On the higher-end apartments, nobody is buying. If you buy a penthouse in Tel Aviv right now, you will get 20% off. Seriously. Recent reports confirm the Tel Aviv luxury market is in a correction, with prices dropping 8-18% from their peak. You can absolutely do that. But it may not be rock bottom yet. Why? It's still not in the news. People aren't talking about this.

Now for the second-hand market—the real market. From what I see, these are the best opportunities ever. Go to Be'er Sheva, and you'll find apartments selling for the same prices as three years ago. If you have funds and can negotiate, I'm sure you can get very good deals right now.

The View from America

Now let's talk about America, where the market is stuck. Recent headlines call it a "deep freeze," with only 2.8% of homes selling in 2025. Nobody's selling. Why? Because they have amazing mortgages they don't want to let go of. It's the "lock-in effect," with over half of U.S. mortgage holders having rates of 4% or lower.

I've seen headlines that the Trump administration is considering letting people take their mortgages to a new property. Basically, they could sell and remain on the same terms. This is a real proposal being floated, with talks of "portable mortgages" or even 50-year loan terms to un-stick the market. That means the same thing: this is a price reduction. We are giving better terms that are essentially a price reduction.

We are essentially in a financial crisis. Everyone is trying to wipe it off and manipulate the comps and data because we got smarter after 2008.

What does that mean for you? I don't know. But I do know that in Austin, Texas, single-family homes are selling significantly lower than what they used to, with prices down more than 13% from their 2022 peak. The same thing is happening in Florida, LA, and New York City. And as I mentioned in my previous article, commercial real estate is in big trouble right now.

What This Means for Us

To sum it up: I think it's a very interesting time to be active. All I've said is macroeconomics, but when you buy a property, you are buying microeconomics. You are buying one property, one address, and you need to do your own diligence. All that matters is the specific address you bought.

It's a great time to open our minds to other deals. This transformation of wealth is always good for us as new investors.

One thing to point out: if you are planning to flip (buy, renovate, and sell), keep that macroeconomics in mind. Have more cushions. You may not find the same market when you're trying to sell. I've heard of many people I love who did deals that aren't so good right now. Appraisals didn't come up with the numbers they wanted, or the market is just not there. The market is not willing to buy their property.

Keep that in mind, especially if you're using hard money loans. Always be very cautious and conservative, and make sure you do proper deals.

Good luck, guys. I love you very much.