What is your view on the market trends for the next 5 yr?

[Allen L.]

I am a new RE investor that entered the market in late 2018, after thinking about the macro trends in RE and policy, I just want to share some thoughts about where I think the market trends are...

Present

The recent run-up in multi-family properties are a sign that investors are looking for cash-flowing, defensive investments in the late stage of the economic cycle. Residential real estate are fully valued at current prices, with rent at a level that makes SFHs unattractive nationally. Given the cyclical nature of SFHs and condos, buying in at late stage is not good, unless you can fix and rent your way into cash flowing properties. There exists many markets today where rental income can support housing prices, but those markets historically cash flowed much better given their local economy and demographic risks. I'm currently looking for small multi-family (2-4 units) properties in suburbs of larger metro cities where I can still achieve >=1% rule.

Next 5 years

A lot of financial market commentators predict recession in 2020. I don't disagree with this as a global view because I don't follow global markets closely, but I disagree with this in terms of US market. In my view, 2025 is a reasonable year for US recession because that's when the Tax Cuts and Jobs Act will expire. Companies have all the incentive for capex investments prior to expiration, and I believe 2024 might even be a great year for US capex investments and spending as companies rush to write off as much as they can. In the years following 2024, capex will be very low -- lower than normal, since companies probably over-invested in 2024. Nationally, we will experience minimal growth, over-leveraged, spending drops significantly, layoffs happen, and the economic engine comes to a halt (almost).

2025 - ?

As recession rolls in, I will be looking for foreclosures on SFHs, which are probably the best deals during any recession periods. During the economy recovery and growth period, buy and flip opportunities are lucrative as the profit spread is high. As SFHs are more cyclical than multi, we can expect price appreciation as the economy recovers. I will use savings, HELOC, refi, borrow against 401k, family, etc and buy up as much SFHs as I can.

[Kerry Baird]

I don’t want to spend all day doing research on the past boom and bust, but the low hanging fruit would be on the Case Shiller index, which reports on 20 cities.  Some larger cities missed the last boom: Cleveland, Dallas, Denver, Atlanta, Detroit, Charlotte (Case Shiller)

In the 1990s, a few major metros bubbled: Boston, New York, Lost Angeles, San Diego, San Francisco and DC.  Forbes says California seems to be particularly prone to unstable housing prices.  

OK, that said, I don’t buy in cities smaller than 100,000.  Being military, we buy near Air Force bases, and I set my rents and find my properties based upon the pay scale set for an E-5 to E-6.   I look for growth and diversity in industry and in population.