The bidding wars seem more intense than 2006

[Tom Fidrych]

I bought several rental properties in 2004-5 before the bidding wars drove prices to the point that it didn't pencil to rent them out. At the time, agents told investors that you would make it back through an almost guaranteed price appreciation. I didn't buy that argument and stopped purchasing and good thing. I say good thing because my other business took a major hit during the downturn and If I was feeding the rentals each month then perhaps may have had to walk from them. A couple years later it was surprising how many real estate agents and mortgage brokers submitted rental applications having been foreclosed upon. I'm just sayin'.

Here we are 15 years later and to me it seems the bidding is even more frenzied than 2006. It seems once again that investors are buying rental property that doesn't cash flow and planning on continued price appreciation(that may not occur). Also, based upon bids I just received for a place that was listed last week, there are many FHA buyers putting 3% down and asking for a credit to pay closing costs. This could be perceived as buyers being stretched thin with little skin in the game.

My net perception is that a market top appears to be present and I'm selling half my places. Obviously low rates are driving pricing but if you've purchased building materials recently, you can't help but notice virtual hyperinflation within the building materials category. Is the FED going to eventually drain the punchbowl(thing back to late 70's hyperinflation and 18% home loans) or let the party continue indefinitely? I'm not sure so that's why I'm not selling 1/2 my rentals.

To newbies, caveat emptor. Don't necessarily assume continued price appreciation. If it pencils and your planning to hold, no problem though.

The only time I can recall such bidding was 2006, and the savings and loan fueled buying frenzy of the late 80's, early 90's. Wasn't a soft landing, ehh?

Perhaps some folks with grayer hair than mine can enlighten me as to why it's different this time.

Thanks in advance.