Why are people talking about a crash?

Question

I see several posts where folks are :

1) Trying to predict the crash using causality of metrics like lower unemployment and low interest rates

2) Trying to preserve cash for the next crash, so they can buy

I want to hone in on #2. What makes people feel there will be a CRASH? To my knowledge the first crash was in the 1930's and the next one was not until 2007. Why do people think there will be another one soon and now. I can completely understand a discussion about a slowdown or a dip but a crash?

Also how prudent is it for people to 'save funds' for a cash, so they can buy more properties!!. Is'nt a crash just a disaster where a lot of things go down including your own employment, savings, higher and rising vacancy rates, rapidly falling rents. How does saving cash now make sense to buy in a crash?

Russell Brazil · Answer

Recency bias coupled with the PTSD from the once in a lifetime crash, and people like to think they are Nostradamus

Christopher Phillips · Answer

@Sam Josh

It's purely psychological.

There are always people in a down market afraid they'll buy and the market will continue down.

In an up market, they think the down turn is right around the corner.

No money will ever be made sitting on the side lines.

If buying across a portfolio over 30 years, yes, there will be swings. A diverse portfolio will weather normal market cycles because those properties will be generating cash and building equity.

James Hamling · Answer

@Sam Josh the short answer is rampant ignorance, charged and driven by entities set to profit from belief in an impending doom, coupled with a means to blast out thoughts and opinions unto the world unchecked, unfettered, with no real means for the average person to accurately discern who's voice is that of legitimacy or lunacy.

Take this thread alone; i read a person say another depression is soon to happen just because it's been a while from the last, inferring 08/09 as a depression.... never mind the obvious facts that there has been a grand total of 1 depression in the history of the us and 08/09 was not a depression but, fact's are apparently perceptual now, I am just curious if gravity is also just an opinion, lol.

The vast majority on BP are novice to the extent of next to 0 knowledge/ experience. Of the 20% who do posses some knowledge/ experience, 80% are of highly limited levels and in that highly limited comprehension and knowledge of what is admittedly rather advanced level understanding to accurately perceive economic theory and forecasting. That leaves what, 2% with actual knowledge, insight and comprehension, in short a whisper against the roar of the ignorant screaming "oh my God the worlds about to end because, well, uhm, ahh, it's cycles, yeah cycles, and I heard a gold guy saying something and ah Youtube....".

We are in a historic election cycle in terms of marketing spend and divisiveness. It is a fact that no sitting president has lost an election while commanding a good economy, and no sitting president has been reelected sitting on a failed economy. In that the state of the economy is a very weaponized message with much motive to convince up or down.

The we have gold brokers, bunker builders and all the others who make a living selling fear based "solutions", just think back to the panic buying of TP, flour and all kinds of other bizarre things during covid, all powered via the fear-4-profit industry in the US of which Youtube is the crowning jewel as fear and terror gets views, blue skys and stability is boring.

Fact is a Macro level event like 08/09 does not exist anywhere on the radar as of this time, that means nothing in any foreseeable future what so ever, zero. On the market by market level there is a shift happening, remote working coming to forefront alone is a disruptor, it will adjust some things but that's the key ADJUST which means some will be losers, others winners. Market shifts are nothing new, they have happened countless times before and will happen countless times again.

Now all this said, let's see how many attack me saying various baseless BS theories of how the end is about to happen.... If your gonna say such a thing 1) put a date on it, if you can't that's because your basing it on NOTHING hence 0 validity and 2) specifically state the indicator/ reasoning for such. Don't just say "the Fed is printing money", explain HOW that will = collapse because guess what, the Fed has printed a ton of money, bout a ton of bonds, for a very long time, get informed.

If your predicting a collapse specific when and why, unless your Nostradamus your opinion is not enough.

Alexander Felice · Answer

The world is always trying to predict market cycles.

The reason people are prediction a market correction is because the short term debt cycle is 7-10 years. We are at the end of this timeline and should expect the market to act accordingly. There are lots of indicators to go along with it that corroborate this expectation.

You say crash, slowdown, and dip as if they all have universally known meanings. They may all be different words to you, but it's important to clarify what exactly you mean by "crash". The same problem applies to people who make doomsday threads. it's important to clarify the economic repercussions you are speaking of, "crash" can mean something different to everyone.

cash is valuable during the downward cycle because there will be opportunity to buy undervalued assets. Here again though you make it sound like a crash affects everyone in totality, equally, and brutally, but this isn't the case.

Jay Hinrichs · Answer

Your on a roll tonight.. I was in Balt city this week quick trip so did not ping you

Oh man  that is a wild place in the C D areas.. :)

Anthony Gayden · Answer

Oh look, another thread about a real estate crash.

@Sam Josh

After the crash, everyone is a naysayer and wants to scream doom and gloom.

Russell Brazil · Answer

I was driving through some Baltimore neighborhoods last week, and jesus its like some of the worst places youll see in the entire country.  Its amazing, being so perferially close to so much wealth throughout the region.

Russell Brazil · Answer

3 years later, no crash

Thomas S. · Answer

There is definatly an "adjustment" coming.

Interest rates will be climbing back to historic levels and this in itself will push down the value of real estate.

Jarrod Kohl · Answer

@Sam Josh

There were many crashes before 1930 (even in the US there were a bunch in the mid to late 1800s) and there were a few between 1930 and 2007.

But that is all beside the point, people like to throw out predictions for many different reasons. And certainly there are some indicators that say there could be another recession on the horizon soon.  Make no mistake, there will be a recession or depression at some point, but that does not mean it is in the next year or even the next decade.

So for your deal, take a good hard look at it.  Are you hoping for appreciation?  Are you trying to do a quick flip and hoping for a buyer in 4 months to pay 80K more than what you paid, what repairs/upgrades would get you there?

Some investors (including many successful ones) are selling off some of their properties.  I think this is a great strategy especially if you own a large portfolio.  I know someone who has over 1500 units who has sold 3-4 buildings in the last year.  He sold them because he is getting a great deal and though he still has plenty of other properties, there is no reason not to cash into a "sellers market" keep in mind he as also bought a property or two when the deal is a good one.  Who knows the market may continue to rise for years and then he will have "missed out" on all that appreciation, but that is not the point.

Think of it like trading stocks.  If you buy at $5/share and the price goes up to $10, there is a popular strategy that says you should sell about half (aka pull your initial investment out) that way if the stock continues to rise you still have money in the stock, but if it drops, you are no worse off than you were when you started.

It all gets back to the same questions.  What is your risk threshold, what are your goals and how will different outcomes change or effect those goals.  If you have 2 single family rentals your strategy will be different than if you own 50 Multifamily buildings.

Why are people talking about a crash?

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