My 2019 Forecast and Plan

[Michael Henry]

Do I think a recession is coming? Yes. 

Do I think real estate is overpriced? Yes. 

Will I buy more real estate? Yes. 

I'm planning on picking up 10 to 12 properties this year hopefully before June. I  have two properties under contract already (one single family and one duplex). All the wholesalers out there please put me on your list. 

Wish me luck! 

[Marcus Auerbach]

Real Estate is cyclical and we know that we are and have been in a rising market for at over 7 years now - so at some point we will hit a peak and then possibly turn. The question is how will the next cycle look like?

If you like data based outlooks, listen to this interview with Steve Harney - he is running KCM, a research firm with sole focus on RE markets. It's a paid service I subscibe to, but this video is free on YouTube and very insightful:

https://youtu.be/ihM5mf71UYk   

Personally I think we will see a soft landing and not a sharp down turn like we have seen in 2009. We will see some "buyer fatique" as people get sick of chasing the market, probably much more on the W and E Coast than in the midwest. Home values are are still cheap here compared to new construction or replacement value (ask your insurance angent). We may go from 2 month worth of inventory, to a more normal 6 months worth of inventory, which is a far cry from 18 months and more we had seen in the last recession. But we just don't have enough supply, especially in starter home segment. And there is no new supply. It is impossible to build for under 300k in Milwaukee. The only possible future supply I can see would be OZ funds building highrise condos. 

The 2009 crash was probably a once in a life-time event. I don't believe in timing the market - you will be wrong most of the time. If you are in a down turn, you will be waiting for the bottom and if it goes up you will be worried it's too high. And there is no way to know for sure. I am sure you have seen this before:

People have been talking about the next down turn for years now and I dont see it for 2019, at least it's not in the data. 2009 was very predictable: all you had to do was look at demand and supply, new housing starts, inventory levels and lending volume. Everything went completley off the charts for two years before stuff hit the fan. You could have seen the writing on the wall as early as 2005 just looking at data. I have not had rental properties going into the last recession, but everyone who had seemed to keep very low vacancies. Builders and flippers on the other had dropped like flies.

So as far as my personal goals for 2019, I will probably stay clear of new SF construction (for several reasons), grow our lending base base systematically, refinance some of the commercial financing to hedge against interest rate risk (I expect rates to trentd towards 6%) We will continue to grow our rental portfolio with focus remodelling SF in the suburbs and good school districts. I just closed one two weeks ago from MLS and which we are currently remodelling with a new kitchen for top rents. It was technically move in ready, new roof, windows and a finished basement, but I'd rather update it, before we put it in service. While I certainly paid more than I used to years ago, it will cash flow and I am not planning on selling, so I am indifferent to a softer market, or even a recession.