Is the market too inflated

[Greg Leach]

I've been looking at home prices for a number of months now and it seems that prices have gotten out of hand. Everywhere I look online it shows that the next few years are projected to keep appreciating, but isn't that what everyone thought in 2008? And that's why people got caught with their pants down, and ended up under water.

I've also been listening to the podcasts. It was mentioned that some individuals are holding off investing in Real Estate and waiting for the market to crash again. Is that a good strategy? Are we do for a major market correction? How close are we to the top?

What are steps that new investors can take to lower the risk of losing everything if the market were to crash again?

[John Kesner]

@Greg Leach

If only I had a crystal ball!!

Lots of speculation out there as to what the market will do over the next few years. Here is my opinion. 

If something does cause a "major market correction" it will be for some different reason than what happened in 2008. The days of no doc loans, stated income loans, and the rest of the crazy stuff they did back then are gone! I think the market is on a much more stable foundation and if a correction happens it will be a correction, not a total collapse.

That said, the best thing you can do is to get to know the economic forces driving your area. Are there new companies opening up shop? If housing supply is low, what is the reason? At what rate is the population projected to grow, in your area? Are they building enough new homes to keep up with that growth? Get to know your local economy and you should have a good idea of what is going to happen in the next couple of years. 

As far as what you can do to protect your self is to stick with the fundamentals. Use a conservative approach to your analysis. I can tell you in my area, you can't just buy a property off the MLS, put a tenant in it and collect cash. You need to be creative and add value to a property to make it work. That can mean remodeling, fixing a floor plan, adding a bathroom, finishing a basement or attic, doing a pop top, converting garage space to living space, putting on an addition, doing a lot split, etc...

Goodluck!