It is just me, or are there a lot of people waiting for a crash?

Question

I've lived through the 2000 and 2008 crashes, but wasn't in a position to take advantage of them. Both were similar, in that most people were taken by surprise, and a few who were in good positions swooped in and took advantage of fire sales in the stock and RE markets.

Since then, people have been predicting when the next crash will happen. Despite a huge run-up of the stock and RE markets, and tons of money pouring into both, they are also many people sitting on the sidelines waiting for the next buying opportunity.

Since I wasn't watching the markets back then, I can't speak intelligently on it. From a gut feeling, it feels like there are a much higher amount of people just waiting for "the next crash" as if it's something that's guaranteed to happen.

If this is true, then wouldn't that soften or even negate the effects of any downturn that may occur? If a huge amount of vulture investors come to swoop up the fire sales, then a crash won't happen. There's a strong sentiment in the stock market and Real Estate markets now that they will ALWAYS recover, and many investors will hold through any downturn, seeing the recoveries that happened with the previous crashes.

To those of you who were in the markets before, were there always this many investors waiting patiently for a crash, or is it a new phenomenon?

Jay Hinrichs · Answer

Bp members have been predicting waiting for the crash, the bubble, what ever you want to call it for about 5 years now.I think just like 08 crash credit markets are getting very very tight and the first to go is INVESTOR credit.. so if you dont have some decent cash or can pay cash.. a good fico and 30k in the bank is not going to get you anything is my prediction if this continues or gets worse.

Tyler D. · Answer

Mar 23 is actually a great example. The market tanked aggressively and then suddenly shot back up, without a whole lot of great news to back that up. Even now, with a lot of uncertainty, the market is slowly climbing because, maybe, there were a lot of people waiting to buy that dip. Doesn't it seem strange that the market shot back up suddenly without a whole lot of positive data to back that jump?

Quentin Mitchell · Answer

It is way too early to tell the effects of this for a number of reasons. First off this is no definite end in site which means it could go a lot longer or be over quickly so the length of this pandemic along with the increased unemployment and freeze on not only credit but consumer spending as well is going to help dictate the market. There will most definitely be a downturn because there are going to be fewer buyers just off credit and jobs alone. But even with that said it takes longer for housing data to catch up to the market and during the 2008 recession and the great depression it took 4 years for the market to bottom out. Now a good deal is a good deal and if you have the means I would still buy the only thing I would do differently in the immediate future is buy for cash and not for appreciation because we have no idea how far things will drop. It could be a small drop or it could be a monumental drop but way to early to tell.

Adam Blachnio · Answer

@Tyler D'AlessandroInstead of waiting, create your opportunities.

Shahriar Khan · Answer

@Tyler D'Alessandro your gut feel is correct that a ton of folks are on the sideline. This perfectly makes sense too many things are moving too fast. On the flip side, folks that I know ,including me, are actively buying. All we did is to change requirements, we are in a recession, we will be in this hole for around 8-12 months (till we have a vaccine), people lost jobs and more to come. Its just the ugly reality. We are not buying lands, or in high end areas as we have postponed all new devs that have not broke ground yet. Key is have financing on hand. And how are we calculating buying price, 2018 values as ARV as we have lost all gains from 2019 already and sellers have not yet calibrated so it may take 2-3 months.

Brad D. · Answer

I agree with this. It's like the old Clint Eastwood line "Deserves got nothing to do with it," except now it 's "Logic's got nothing to do with it" or "The market's got nothing to do with it." When prices were going up, people said, "This is divorced from income, it can't happen, people won't and can't continue to buy at these prices, the market won't allow it" but it kept going up. Now prices will go down and people think "Well, logically, others will swoop in and buy houses, making a killing. No way 'this sucker goes down.'" But it will. Investors won't buy for awhile and people will marginal credit/cash won't be able to buy. A few people with more income than sense will buy but that won't be enough. The bottom line, in our crazy system, logic... and even traditional market forces got nothing to do with it. It's access to credit and cash. The system is a bit rigged. If you have no cash, and credit dries up, you can't buy houses. When you need credit, it isn't there. Basically, during the appreciation cycle, credit becomes increasingly easier to get, especially near the end, as it keeps taking a 'greater fool' to keep the mania going. Then at some point the music stops. Which is where we are now. Now the price will go down, and banks won't lend because they don't want to get stuck with the house/buybacks/losses. So it is actually protecting some people who would jump and buy early, since their lending partner (the bank) is not going to participate. When the bottom is hit and it seems as it prices will start to inch up, lending will loosen, and the mania will begin again.

Joseph Cacciapaglia · Answer

People started talking about a real estate bubble in '04-'05 in the markets I was in at the time. If they got out then, they missed out on a lot of upside for the next couple of years. I bought a property in fall of '05 that sold for a decent profit in '09. Sure, it would have done a lot better if the market hadn't crashed in between, but it did perfectly fine for me. In fact, I don't believe it ever dipped below my purchase price. Of course, back then we had a much bigger run up in prices than what we've had in the last 4-5 years.I think most of the people that are "waiting for XYZ" are missing out today. For the most part it's the more novice investors that I hear this from, and for many I think it's just an excuse. The one that really gets me is the people waiting for a little more "certainty". The idea that we have more uncertainty today than we did at other points in time is just silly. People are just more aware of the risks today. In fact, we know way more about the possible downside risks today than we did in January. You didn't here much talk of uncertainty then.

Huy N. · Answer

With the amount of money the government is pumping into the economy, we might see stagflation instead of a depression or recession. Just my two cents. I was putting offers in for a client of mine for a flooded home in Houston and we are still getting outbid with more than 15 offers over asking price on a listing. The difference I see in this vs 2008 is that seems like all the investors - both big and small, have prepared in advance and have capital ready to deploy. I'm sure that there are plenty of people that overextended when the market is good. There might be a small window of opportunity to catch some good deal before the thing gets back to normal.Stack it up in the bank and keep watching the market I would say. worst case if there is nothing to buy, we will end up with more cash in the bank anyway haha

Kirk R. · Answer

one article said once the market moved up a little the shorts got squeezed & starting covering which drove market higher & more short buying

Tyler D. · Answer

I'm in the same boat. There may be fire sales at some unknown date in the future, but if I find a deal that works for my numbers RIGHT NOW, I'll take that over what may or may not happen 1, 2, or 150 years from now.