are we investors going to cause the recession?

[Rich Weese]

I'm sure most of you are laughing at the label on this thread. Hear me out.

I started a thread several days ago about how high can real estate prices go. The majority of the responders have all acknowledged that we are due for at least a correction in most markets. I realize this is regional. But what if we cause the problems. I heard from so many that have decided to not purchase single-family homes at the present time. I believe that lowers demand... I have always had the feeling that when everyone is getting on the train, I get off. When everyone is getting off the train, I get on. We all know which train is on the tracks currently.

Many people are currently paying much higher prices for flips than they ever had to pay before. This results in a much smaller profit. Will we ever reach the point where so many people have decided not to purchase single-family residences, that the demand will drop below the supply. Everyone knows what happens at that time.

There are more and more of the college kids that are not taking the conventional route to get a job, buy a home, and maybe get married. That will also reduce the demand on the supply of single-family residences. It also helps to increase the number of apartment renters, whatever the level of apartment might happen to be.

In the long range, there are fewer children being born per couple. I believe it takes 1.9 to keep the population rate the same. Japan is going through a period of time right now where they are not even keeping up with the population due to fewer births.

The average life expectancy came down in the most recent numbers for the first time in many years. Is this also a trend?

I guess time will tell whether we have anything to worry about…

[Eric Hornung]

It's very rare that one "party" causes a recession. Even the recent housing bubble of the late 2000s had multiple guilty players from the ratings agencies to pension fund financial consultants to strippers in Miami  - if you believe The Big Short.  Businesses and people are going to respond to the forces around them, incentives and disincentives.  Long-term macroeconomic shifts like generational housing preferences and population growth are going to occur with or without real estate investors. So, while the market may be a bit frothy, I wouldn't be too hurried to purchase an indulgence for your potential transgressions as a real estate investor.  

[Rich Weese]

It doesn't matter which party is in power. They all seem to be after the same thing:

Make more money  and contacts for themselves and

Take more money from us.

If either party decide to mess with Depreciation rates or disallowing interest write offs, we're dead.

[Paul Caputo]

Aren't you answering your own question by looking at other long term societal factors that are not dependent on real estate investing? I'd say it's more of a symptom than a cause. Many things play into the national economy and global economy, real estate being one slice of a very big pie. 

The key is to put yourself in a position that when (not if) corrections and recessions occur you can ride it out and not sell until the market rebounds. Or just wait for recession and buy everything at a nice discount. But I don't think that's anything you don't already know @Rich Weese 

Real estate markets going crazy is usually a good indicator of something about to happen, but I wouldn't say real estate causes the recession; rather the pre-recession creates artificial upward pressure on real estate. 

[Rich Weese]

I agree there are lots of factors that enter into the economic changes relative to real estate. I am concerned about what part of that pie is affected by our decisions to get on the train, or get off the train. My attitude has always been to get off the train when everyone is getting on, and vice versa

[Adam Christopher Zaleski]

If people choose to not purchase a single family home because it's too expensive it means that many other people are willing to buy it, which drives up the price. I don't understand how massive demand will lower the price.

I like your train analogy. However, a true investor doesn't try to time the market. They buy when it makes sense and ignore the noise.

I have two rentals that I purchased in 2007 and 2012. I'm not looking to purchase anything at the present moment because most of the numbers don't make sense. However, when the numbers starting making sense again, I will start buying again.

[Andrew Johnson]

Nice @Rich Weese, if one things spurs the acquisition of multiple properties it's being able to write-off mortgage interest and deprecation.  Tax advantages are a huge benefit to the risk of real estate.  Take that away and prices will drop in a heartbeat as money will stop flowing into them (at current multiples).  I think the bigger risk has nothing to do with a recession but perhaps a drop in prices (quicker than anticipated) when interest rates rise.  You'll have a huge amount of the populous with a rate in the 3's that might want to upgrade but selling costs, a more expensive home, and a new rate in the 5's will be a killer.  Consequently, the buyer pool will dry up and there won't be as much competition for the people that have to sell.  But, hey, I'm no economist.  Just my theory. 

[Rich Weese]

I noticed where you live in Fort Myers. I don't believe you've gone through a large correction or crash in your real estate investing. I actually lived in Fort Myers from 2009 – 2011. I had purchased a storage facility in Bonita Springs and moved there to get the property turned around. If you had seen what that area look like in both commercial and residential, you would not be so sure about no problems occurring. There were new commercial strips completely empty. There was one area out side of Fort Myers that literally had hundreds of vacant, new homes. They were listed at less than 50% of their original value and still no takers.

Be careful and don't assume you know all the things that could affect buyers. There was also an additional problem of Chinese drywall.  That was a massive problem for that entire area.

I think your choice not to purchase anything at the present time makes good sense and I am doing the same.

[Jeff B.]

A broker will tell you that it's about supply and demand and today there's a housing shortage so the demand & prices are high -- there's little inventory available.  If and when the new construction starts improve, the market will change.

[Adam Christopher Zaleski]

@Rich Weese

I moved to Fort Myers in July 2011. Things were pretty bad when I moved there. However, I moved there on purpose because things were so bad. I really liked San Carlos Park because there is no HOA. With all the empty houses the grass was knee high and it looked like a bomb had gone off.

As a result, I picked up a single family home in Jan 2012 for 95K. My mortgage is $658. It will go down to $615 next year when I get to finally drop mortgage insurance. It currently rents for $1700/month. If there is another massive market correction and rent drops by 20%, I'm still doing more than ok. I don't really care about the selling price because I'm not selling. However, it's currently worth about 225K.

You make some good points about new construction, chinese drywall and strip malls. However, I don't think any of that applies to me.

I left Fort Myers in May 2015. I currently live in Hawaii on the Island of Kauai. I also live in the Denver area during the summer.

[Loren Clive]

@Rich Weese sounds like you're feeling guilty for making so much money. Lighten up!

[Rich Weese]

I'm pretty lighted up already... Just look at my icon.  I also happen to belong to the Party tha doesn't feel guilty for getting rich.... on my own doing.

[David Dachtera]

The next downturn will be caused by factors other than the housing situation.

Remember - we're in a housing shortage right now due to the crash. Some 800% of builders / developers went under in the crash. The recovery is slow, and it is happening. Expect demand to outstrip supply for at least another five years.

Wall Street will likely have a big hand in the next downturn. Housing will be impacted, certainly, but likely not a contributing factor.

A lot really depends on how bad the idiots in DC F-up. So far, the track record is not encouraging.