Real estate bubble? New investor looking to learn!!!

[Ryan McGovern]

Hello everyone! I am new to investing and am approaching my first deal. Before I make any moves, I would like to see what other investors think. I have been asking around and I am getting mixed thoughts about a real estate bubble. Is there a possible correction coming? If so, how big of a correction? if not, what makes you think house prices will remain steady. Thank you, Ryan

[Christopher Phillips]

@Ryan McGovern

A housing bubble is defined as a run-up in home prices fueled by demand, speculation and exuberance. Neither has happened.

In most parts of the country, there is a huge shortage of inventory due to the fact that the labor component of construction left after the last downturn and have yet to return. So, housing new starts have not recovered. Yet, our population is slowly growing.

Since construction is down, that means there hasn't been any real speculation building. So, that means no exuberance.

Demand is real because there is a shortage in housing as sellers are still sitting on their hands.

If there is any correction coming, it's with interest rates since they have been artificially held low. Either way, we are still at historic lows.

If the govt. gets their proposed infrastructure plan approved, expect an already tight labor market to heat up, causing inflation and eventually Fed action. It might turn out to be a lot of hot air if the labor force isn't there. The projects are also to be spread over 10 years.

At the end of the day, real estate works on an 18 year cycle. We're only 5 years in to recovery, with many parts of the country still not reaching recovery levels. In commercial real estate, we're only 3 years into a recovery cycle and there is excess inventory out there.