It's Feeling a Lot Like 2007

[Dylan Mathias]

Hi All, 

Wanted to start a discussion on peoples outlook on the real estate market and the economy in general. I know it is a controversial topic but I have not seen many discussions on BiggerPocket on this topic and I believe they are important conversations to have. 

Here are my general thoughts on the topic. 

Economies always go through cycles and we are coming up on the longest bull market era in history. If history is any indication of the future their have always been corrections or crashes every 8-10 years. 

Data

1. Interest rates are rising and the yield curve is flattening a tell tale sign of future growth expectations are declining

2. Corporations are turning to stock buybacks because they cannot find internal or M&A returns that can get a high enough return. Once buybacks are done will corporations begin to "restructure" or contract leading to layoffs and the downward spiral of layoff, people not buying as many goods and services leading to more layoffs. 

3. Inflation is another worry when prices begin to increase at a higher rate after almost a century of 2% inflation people are going to be inclined to buy less leading to the ugly spiral as well. 

4. In the stock market is extremely over prices with PE ratios being the highest they have ever been.

5. Housing prices especially in California have increase much more rapidly then wage increases and I do not see this as a sustainable recipe.

There are many other factors and coming from an analytical background i know there are ways to spin the numbers to make it look any way you want. 

I cannot time the market and nor do I think anyone can but I am writing this post to get others perspectives about where we are and what they think of the future outlook of the economy. With the ways things are, my guess is there will be at least a big correction in 2019 or 2020 but I could be way off as well. 

I would like to get peoples opinions on both sides. I am not someone stuck in my ways and truly believe that debating with someone that has complete opposite views is the best way to learn in life. 

[Jay Hinrichs]

Originally posted by @Account Closed:

The economy needs a good cleansing of bad fed zirp policy.  It has so distorted the economy.   EZ money means asset prices go up.....what has happened ,   asset prices have gone up.

Out of staters buying in the HOOD is always a bad sign.  So whats the play here.   Capital gains play?

 out of state buying in the HOOD has been going on for about 25 years that I know of.. with no stop in sight.   

there was a thread last week titled

" thank you bigger pockets  0 to 15 doors in one year"

Well that got at least 200 responses of which 197 of them were way to go congrats I cant wait to do what you did ..

well what did that investor do.. he ripped a bunch of equity out of his prime CA residence and paid cash for D class in the mid west 

little plex's that have 400 dollar renters in them..  to me I am like OK.... you leverage the family home buy the toughest rentals on the planet and 97% of the people on this site want to do the same thing and cant wait to do the same thing.. so that's your mind set.. 

I hope it works for that guy.. but folks just don't know what they don't know.. and there is this irrational exuberance to get doors at any cost because its the way to financial freedom   ( what ever that means).. for most it means I guess being self employed.