In this video, seasoned broker and investor Joe Homs warns that a housing‑market correction is underway after two years of record price gains and rising mortgage rates. He explains how higher rates (from ~3% to 6‑6.5%) are dampening buyer demand, which can cause home prices to fall either gradually or sharply depending on the Fed’s aggressiveness. Drawing on three personal cycles in Orange County, he shows how property values can plunge dramatically and then rebound, turning downturns into buying opportunities. He advises investors to have cash or permanent financing ready to act when prices bottom, and recommends a more conservative underwriting approach for flippers—lowering the target purchase price to 70‑75% of the after‑repair value (ARV) instead of the previous 80‑85%. He also stresses quick flip timelines, cash‑flowing rentals, and sticking to fundamental numbers to avoid risky positions. The video ends with a call for comments and offers further help for newcomers.
Chapters
In today's video, we're talking about a market correction and how you can prepare yourself as an investor. Coming up next. Risks and opportunities are both present in housing market corrections. There's been a growing concern about a housing market correction after 2 years of record home price appreciation, during which the median national home price increased by 34%. It appears that That correction is finally here, but there's good news. The start of the housing market correction is the perfect time for investors to prepare for what could be coming. Welcome back to the channel. I'm Joe Homs. I have over 40 years of experience as a broker, mentor, and investor. Make sure that you share this video with anyone looking to create the life they've always wanted through real estate. What is a real estate house market correction? Well, it's basically— we— it's almost— well, I don't want to compare it to a stock, but let's say it's a stock and you buy it at $10 and now it's worth $100. Same thing in the housing market. So you bought it at a certain price and it increases in value because you have such a demand there. This happens when the interest rates are really low like they have been. Traditionally low. Banks have been borrowing money from the Fed for close to 0%. Now we have a correction coming. The interest rates have gone up from 3% in January to 6.5%, 6% in June here now. And they're trying to slow the housing market down. What that does is makes buyers have to pay more for their mortgage. And so they may not be willing to do that. So now they're out of the market. So now you don't have a lot of buyers bidding on the property that you may have listed for sale. So it's going to affect the housing market and basically drop the price of the house where it's at today. And it may either slowly drop it or depending on how more aggressive, because they have been aggressive on raising the interest rate. So it depends on how aggressive they are till the end of the year. It may drop a little, it may drop a lot. Let's talk about a couple ways to prepare, okay? Number 1, save your money and be prepared. 12 years ago when we had that massive downturn in real estate, as an investor you should be running in and buying as much as you can. So I have a little, what I call a little farm area where I've done a lot of investing in 'cause I know the area well, I know the prices. I know my market, I know my renters, I know everything about this property. So my properties there, you know, were valued at the time around $500,000. And it's happened to me 3 times. And twice previous, it's gone down dramatically. That 2-bedroom, 1-bath condo here in Orange County was worth $500,000 right before the bubble burst. The bubble bursts, and it was really, really bad bubble that burst. So that price of that condo went down to $100,000, believe it or not. Okay, that is a buying opportunity. I know because I originally bought a condo in there 40 years ago, and I paid $50,000. It went up to $200,000. It dropped back down to $50,000 during my first bubble In my lifetime. It went back up to about $300,000, $350,000. Second bubble, it went down to $100,000. I'm thinking, okay, well, at least I'm $50,000 ahead of what I bought it for during that second bubble. The third one, like I said, it went up to $500,000. Now it's back down to $100,000. I hope you know what I'm going to say because I rushed back in and I bought 10 more properties when they were at $100,000. Those properties, because of the inflation and everything that's been happening in the last few years, are back up to $500,000. Where they're going to be at the end of the year or in 2 years, I don't know at this point, but it's time that you buy at the bottom of the market. Those properties are all rented out. They're all cash flowing. Honestly, like crazy because rents have been going up. So be prepared, have your cash ready to go, or at least some financing, some permanent type financing that you can get to start buying these properties. If you're a flipper, it's time to start being a little bit more conservative with your ARVs. Here in Orange County, we were buying at 80-85% of the ARV. ARV. We're back down to 75%, even 70% of the ARV. You need to hedge for a downturn that is coming. You don't know how quick it's coming, but you need to hedge for that downturn. What I really, really love about being a flipper is once I purchase something, I'm in and out in 3 to 4 months. So I've got time in case I see the market start going down. that I can pull back. I can get my product on the market, sell it as quick as possible, and then maybe not buy it at 80 cents on the dollar. Maybe the next one I look at is going to be more towards the 70 cents on the dollar. So be a little bit more conservative right now. What do you think is about to happen with this real estate market? Let me know in the comments below. As the real estate market cools, The fundamentals of investing are even more important. Stick to your numbers and make sure that you stay conservative so that you don't end up in a risky situation. If you're new to investing and want to know if it's still a good idea to flip in 2022, click on this video right here. As always, feel free to reach out. I'm always here to help.
