Buying & Selling Real Estate
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated over 5 years ago, 09/03/2019
It's Feeling a Lot Like 2007
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.
I think about this all the time. You should read the book The Demographic Cliff by Harry S. Dent. This is why I won't buy any single family residential properties. Only commercial multifamily and rental arbitrage through Airbnb.
Originally posted by @Account Closed:
I think about this all the time. You should read the book The Demographic Cliff by Harry S. Dent. This is why I won't buy any single family residential properties. Only commercial multifamily and rental arbitrage through Airbnb.
Did you read this book prior to 2014 or after, when the predicted "the worst downturn and crash of your lifetime" for the early to mid 2014 still didn't happen? I wonder how people predicted all these crashes in writing will be justifying why it didn't happen? Especially to people who didn't buy any SFR based on their "prediction"
Originally posted by @Irina Belkofer:
Originally posted by @Account Closed:
I think about this all the time. You should read the book The Demographic Cliff by Harry S. Dent. This is why I won't buy any single family residential properties. Only commercial multifamily and rental arbitrage through Airbnb.
Did you read this book prior to 2014 or after, when the predicted "the worst downturn and crash of your lifetime" for the early to mid 2014 still didn't happen? I wonder how people predicted all these crashes in writing will be justifying why it didn't happen? Especially to people who didn't buy any SFR based on their "prediction"
Well you're a real estate broker so it's in your best interest to be sold on single family homes. The thing is timing is quite difficult but the inevitable correction and possible crash is coming. Good luck.
I think about this all the time. You should read the book The Demographic Cliff by Harry S. Dent. This is why I won't buy any single family residential properties. Only commercial multifamily and rental arbitrage through Airbnb.
Did you read this book prior to 2014 or after, when the predicted "the worst downturn and crash of your lifetime" for the early to mid 2014 still didn't happen? I wonder how people predicted all these crashes in writing will be justifying why it didn't happen? Especially to people who didn't buy any SFR based on their "prediction"
Well you're a real estate broker so it's in your best interest to be sold on single family homes. The thing is timing is quite difficult but the inevitable correction and possible crash is coming. Good luck.
In her market (Cleveland), many properties in very solid areas are still selling for below their previous peak value (circa 2006), yet rents and incomes are now considerably higher than what they were back then (and we are talking about areas where the house prices were only ever about 3x the annual income, not crazy prices like most of California saw by 2006). If you can achieve "the 1% rule" (or better) in a solid middle class area with stable incomes, it hardly seems like a crash is coming.
All real estate is local, so my presumption is that Irina is looking at it from her perspective, which is that there's really no bubble. I would tend to agree.
Originally posted by @Robert Matelski:
Originally posted by @Account Closed:
Originally posted by @Irina Belkofer:
Originally posted by @Account Closed:
I think about this all the time. You should read the book The Demographic Cliff by Harry S. Dent. This is why I won't buy any single family residential properties. Only commercial multifamily and rental arbitrage through Airbnb.
Did you read this book prior to 2014 or after, when the predicted "the worst downturn and crash of your lifetime" for the early to mid 2014 still didn't happen? I wonder how people predicted all these crashes in writing will be justifying why it didn't happen? Especially to people who didn't buy any SFR based on their "prediction"
Well you're a real estate broker so it's in your best interest to be sold on single family homes. The thing is timing is quite difficult but the inevitable correction and possible crash is coming. Good luck.
In her market (Cleveland), many properties in very solid areas are still selling for below their previous peak value (circa 2006), yet rents and incomes are now considerably higher than what they were back then (and we are talking about areas where the house prices were only ever about 3x the annual income, not crazy prices like most of California saw by 2006). If you can achieve "the 1% rule" (or better) in a solid middle class area with stable incomes, it hardly seems like a crash is coming.
All real estate is local, so my presumption is that Irina is looking at it from her perspective, which is that there's really no bubble. I would tend to agree.
All real estate is Not local my friend. This is a common misconception that catches people with their pants down all the time. Either way we'll all find out soon enough. thanks.
I think about this all the time. You should read the book The Demographic Cliff by Harry S. Dent. This is why I won't buy any single family residential properties. Only commercial multifamily and rental arbitrage through Airbnb.
Did you read this book prior to 2014 or after, when the predicted "the worst downturn and crash of your lifetime" for the early to mid 2014 still didn't happen? I wonder how people predicted all these crashes in writing will be justifying why it didn't happen? Especially to people who didn't buy any SFR based on their "prediction"
Well you're a real estate broker so it's in your best interest to be sold on single family homes. The thing is timing is quite difficult but the inevitable correction and possible crash is coming. Good luck.
In her market (Cleveland), many properties in very solid areas are still selling for below their previous peak value (circa 2006), yet rents and incomes are now considerably higher than what they were back then (and we are talking about areas where the house prices were only ever about 3x the annual income, not crazy prices like most of California saw by 2006). If you can achieve "the 1% rule" (or better) in a solid middle class area with stable incomes, it hardly seems like a crash is coming.
All real estate is local, so my presumption is that Irina is looking at it from her perspective, which is that there's really no bubble. I would tend to agree.
All real estate is Not local my friend. This is a common misconception that catches people with their pants down all the time. Either way we'll all find out soon enough. thanks.
Seems more likely that those who are going all in on short-term airbnb-type endeavors are the ones most likely to get caught with their pants down, so to speak. But I suppose you'll find out in due time. Good luck, Jason!
Originally posted by @Robert Matelski:
Originally posted by @Account Closed:
Originally posted by @Robert Matelski:
Originally posted by @Account Closed:
Originally posted by @Irina Belkofer:
Originally posted by @Account Closed:
Seems more likely that those who are going all in on short-term airbnb-type endeavors are the ones most likely to get caught with their pants down, so to speak. But I suppose you'll find out in due time. Good luck, Jason!
I guess man.
While SFR are twice more profitable than MF, I'll buy them, if it's change other way around - I'll buy other way around. My analysis is not based on some predictions which don't stand time.
Timing is the best and the market is not correcting right now. Even with all economic indicators, we have another 1-2 years but I believe it’s not going south until 2024....so I’m playing accordingly.
When you look at interviews with your “demographic guru” and track the timing- you’d see how he always exclaim I was always bullish but now the crash is coming! It was predicted in 2014 and in 2016 and even now.
Properties I bought in 2015 tripled in price and Rent is up 25-30%. The properties I bought in the end of 2017 now could be sold for the double price. MF are still get you all the utilities for their residents, rents higher with market but not as close as SFR, and you can't flip them, making 30-40% ROI.
Can't say about STR in Cleveland obviously but my clients who buy Airbnb in Florida, selling them now because taxes and maintenance killing the profit. The very same people keep their SFR in Cleveland and buying more. For me, it's much better prediction that any guru capitalizing on his particular niche and scaring people off market when it still have quite some time to make money.
I didn't read through the thread...11 pages is a bit much for a speculative discussion for me.
I'm also a minnow, so what the heck do I know...
But it seems to me, real estate is one of two things. You either make a short or long play.
Short plays only go bad from market crashes when the timing is truly horrible (or a bad deal in the first place, or poor management), and I suspect the losers are a small percentage of the total deals that occur in a period of decline - this is because most people actually do get out before they lose the farm. A savvy investor will have enough money in the deal to weather a market decline. The others have no business investing in the first place.
Long plays ought to be impervious to market crashes, so it's a non-issue.
If the market starts to crash, sell your potential liabilities, turning them into cash, and buy the discounted properties a few months later with all that piled cash.
I think it's pretty easy to get overly analytical about this stuff. Buy low and (hopefully) sell higher - it really is that simple.
Originally posted by @Irina Belkofer:
While SFR are twice more profitable than MF, I'll buy them, if it's change other way around - I'll buy other way around. My analysis is not based on some predictions which don't stand time.
Timing is the best and the market is not correcting right now. Even with all economic indicators, we have another 1-2 years but I believe it’s not going south until 2024....so I’m playing accordingly.
When you look at interviews with your “demographic guru” and track the timing- you’d see how he always exclaim I was always bullish but now the crash is coming! It was predicted in 2014 and in 2016 and even now.
Properties I bought in 2015 tripled in price and Rent is up 25-30%. The properties I bought in the end of 2017 now could be sold for the double price. MF are still get you all the utilities for their residents, rents higher with market but not as close as SFR, and you can't flip them, making 30-40% ROI.
Can't say about STR in Cleveland obviously but my clients who buy Airbnb in Florida, selling them now because taxes and maintenance killing the profit. The very same people keep their SFR in Cleveland and buying more. For me, it's much better prediction that any guru capitalizing on his particular niche and scaring people off market when it still have quite some time to make money.
You're a real estate broker, so of course you have to say that. Personally, the few extra percentage points in returns I can get from single family homes is not even close to being worth the headache of managing tenants and property managers. Flipping? That's not investing, it's a JOB. And not an enjoyable one at that.
Even if you could guarantee me a 30% IRR with single-family homes (and you can't), the time invested and headaches would not be worth it. I'll take my 15% IRR investing in multifamily syndications all day and I can still have an enjoyable life.
I own single unit rentals in paradise, but they were nothing more than a stepping stone to becoming a real investor. Being a (small unit) landlord will make you lose faith in humanity, whether or not you use a PM.
1. I’m not flipping houses, I might sell some of my rental when the market peaks or I might keep them.
2. I'm talking about ROI twice higher on SFR vs MF. You are talking about IRR. Give me the definitions and then we can compare apples to apples....so far it's a nonsense discussion
3. Not sure how being a broker makes me say anything - we are discussing different rental markets: Cleveland and Honolulu might be totally opposite . I just give my opinion why investing in MF in Cleveland doesn’t make sense FOR ME - I bet there are plenty of people in Cleveland who disagree.
4. I don't see how you avoid PM with your investing style - you just pay for it, not like these properties manage themselves. You can pay to manage your SFR as well and not lose the faith in humanity....lol
1. I’m not flipping houses, I might sell some of my rental when the market peaks or I might keep them. 2. I'm talking about ROI twice higher on SFR vs MF. You are talking about IRR. Give me the definitions and then we can compare apples to apples....so far it's a nonsense discussion 3. Not sure how being a broker makes me say anything - we are discussing different rental markets: Cleveland and Honolulu might be totally opposite . I just give my opinion why investing in MF in Cleveland doesn’t make sense FOR ME - I bet there are plenty of people in Cleveland who disagree. 4. I don't see how you avoid PM with your investing style - you just pay for it, not like these properties manage themselves. You can pay to manage your SFR as well and not lose the faith in humanity....lolOriginally posted by @Irina Belkofer:
- You know the difference between return on cash invested (ROI) and IRR (I hope).
- Being a broker makes you biased. You are payed to say such things and be optimistic at all times. A non-broker investor is more pessimistic (which means more cautious) which is honestly a good trait. A non-broker investor doesn't get paid to sell houses. HUGE DIFFERENCE in psychology and the things you tell to others
- Nope, even if you pay a property manager to manage a SFH, you have to communicate with them, hear about $3K turnover costs, and review statements for accuracy. I don't have to do ANY of this investing in a syndication
