Are you ready for an early 1980s repeat?

If you have been following One Rental at a Time for a while, you know about the 54-year spreadsheet I make available to all of our community.

The sheet gives us a clear picture of how different economic factors interact over time. It includes decades of data for 30+ data points, including interest rates, wage growth, housing transactions, and price movements.

As we move into 2025, there’s a key finding from the spreadsheet that I want to call attention to.

This data set is how I’ve been able to make many right calls about the housing market—namely predicting that we would go through a sales transaction crash not a price crash in the years following the Pandemic Housing Boom.

A lot of folks today like to pretend today’s market is completely unique, but in reality, we have a corollary. Markets are never exactly the same, but they can rhyme. We have a Fed that yanked rates before, and the data tells us how the story goes:

—> In 1978, existing home sales were 3,986,000, and the 30-year fixed mortgage rate was 9.64%

—> The Fed hiked interest rates, resulting in the 30-year fixed mortgage rate sitting at more than 16% in 1981 and 1982.

—> The result? Existing home sales crashed to 1,990,000 by 1982. All the while, national home prices did not go down.

By comparing the market conditions of the late 1970s and 1980s to now, we can see where the market is headed in a relatively higher-rate environment. 

This time around, existing home sales transactions have been falling since the Fed began hiking rates in 2021. In 2021, transactions sat at 6,130,000, and in 2024, transactions could be less than 3,900,000.

This is important because that means that the U.S. may see fewer real estate transactions in 2024 than in 1978, despite today’s economy being much larger

ResiClub chart of the week: 

This week, ResiClub’s Lance Lambert reported that Lennar, a giant homebuilder ranked No. 126 on the Fortune 500—expects its Q1 2025 gross margin to be its lowest for a first quarter in more than a decade.

Lance wrote:  

“During the Pandemic Housing Boom, publicly traded homebuilders achieved record profit margins as home prices soared and buyer demand ran red hot. Once the national housing demand boom fizzled out in the summer of 2022, many large homebuilders made affordability adjustments where and when needed to maintain their sales pace. Despite some profit margin compression, almost every major homebuilder entered 2024 with gross margins still above pre-pandemic 2019 levels.”

But recently, homebuilder margin compression has returned, exemplified by Lennar’s performance.

This week, Lennar reported a Q4 2024 gross margin of 22.1%, falling short of the 22.5% the company had expected. Moreover, Lennar executives say they anticipate further margin compression, with gross margins expected to range between 19.0% and 19.25% for Q1 2025.

Why does it matter?

“If giant homebuilders make further affordability adjustments to move product, it could attract more homebuyers who might have otherwise preferred to purchase a resale/existing home, thereby putting additional upward pressure on resale inventory in 2025,” Lance said.

You’re invited to our ORaat Celebration in Las Vegas

In February, fans, millionaires, and real estate investors will gather for an exclusive event to network, and dive even deeper into the world of real estate investing.

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Here’s what you’ll learn:

1. You’ll discover what a "Buy Box" is and isn't

2. You’ll get your questions answered live

3. You’ll build and review audience Buy Boxes

4. Learn how to document your Buy Box findings in a comparison spreadsheet

Here’s how the event is organized:

1. Each speaker will provide 20 minutes of audience Q&A time

2. Our speakers will be there for two full days to enable private conversations

3. Six hours of networking

Tickets:
General Admission: $299
VIP: $699

Join the One Rental at a Time Skool Community

The One Rental at a Time community on Skool is more than 340 members strong.

We’re creating more opportunities for you to interact with those who have achieved financial freedom through real estate investing. 

Being surrounded by people at all stages of their real estate investing journey is crucial to your success, and joining us on Skool is an easy way to do just that.

It is only $20 to gain access to my monthly (or more) live streams as well as various millionaires answering your questions in real-time and connecting with people who can help you. 

Learn more about how I am organizing the ORAAT Skool community content and calendar.

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