Grant Cardone is Very Down on RE Right Now - Are You?

[Ben Leybovich]

I saw a perscope by Cardone titled "Real Estate Warning". His attitude is that everything is priced to perfection, which never happens. For an ever-happy Cardone, his scope is quite ominous...

If you tell me where you are on this, I'll tell you where I am :)

You're up...

[George N.]

Prices and rents have moved a lot here in western Montana. I think here and throughout most of the nation we're set to hit a wall, at least. The economy is still a sick man long term and housing affordability is starting to push the limits. What's going to be the driver going forward short/mid-term? We're at near 0 interest rates and housing costs as a percentage of income can't keep rising indefinitely without real growth. Historically we're also well overdue for a technical recession (two quarters of negative GDP growth) though the fact that we've half-assedly emerged from the down turn in most aspects of the economy is probably playing a part in the delay. 

Thing is most people are expressing a recent past bias. Many here are expecting another downturn like the one we just experienced. The recent collapse was epic and historic, something that happens less than even once a generation. So waiting for another such collapse is probably a fools errand and will keep you out of the game all together. The idea that things will either continue going great or collapse is a false choice. We may simply see years and years of moderation or sluggishness. 

I used to be much more heavily invested in the market before I got into RE. What I would do is buy a little during the OK times, buy nothing (or rebalance conservatively) during the great times, and buy a lot during the bad times. Did very well by me. I think a similar strategy works for RE, in fact it's even better with RE. If you try and time the market perfectly you may sit on the sidelines for years with nothing to show. The great thing about RE is that it is so forgiving as an asset class that even if you overpay, fail to catch the falling knife, and buy at a poor time if you just wait it out you will do well long term. That's why RE is such an amazing investment. Time heals all but the worst wounds. 

Right now there is an incredible amount of money chasing very few investment opportunities. This can't go on forever. I have no idea what the time frame will be but there will be another recession. I truly get the sense that every shoe-shiner and yahoo is interested in RE. Builders are living high on the hog again too. Both are usually a good sign of real froth.   

It will probably look more like a normal turn of the real estate cycle meaning sluggishness rather than a massacre. But until then I'm focusing on refinancing and getting cash heavy. As an occasional smallish OK or soso deal with decent long term prospects comes up I'll probably take it. Even if it looks like a bad deal or poor timing after the fact. Like I said, the risk in waiting for some crash to buy anything is it may be a long time before there are really juicy buying opportunities. Perhaps a very long time. If you're on the sidelines for 5,6,7 years buying nothing you likely would have been better off buying and simply holding through the correction anyway. I'd hate to be years down the road still in waiting mode and have not grown my portfolio as a result. In short I'm prepping for the next technical recession to really start looking to shop hard but don't want to totally rule out adding slowly to my portfolio. If nothing else how the RE market holds up the a dip in GDP will prove how legit the recent gains are. In RE a strategy like that should be a win/win proposition.