is a correction coming?

[Jason Malabute]

Before I proceed with my blog I want to make 2 statements:

1) I am politically neutral.  I am not red or blue. 

2) I truly feel bad for people going through hardships right now.

With that said, prior to COVID, real estate prices were sky rocketing. Sellers wanted 2-3 times what a property was really worth. Even in the middle of the pandemic sellers wanted $80-100k per unit in markets where it should only be $30-60k per unit. Sellers were telling me I was in the wrong market because I trying to actually find deals.

Landlords were hesitant on selling because they believed this is a short term down turn and people still believed in the "V recovery".

As the clock keeps ticking as congress argue about relief packages tenants continue to fall behind on rent. I read an article that said landlords are running out of cash. Even if the government passes relief packages I personally believe it is a band aid approach. $600--1200 hardly covers 1 months of rent in most markets. Additionally, even if they cancel rent and defer mortgage payments for a year landlords still have to pay for insurance, property tax, and repairs. Paying for monthly repairs becomes challenging when rent stops. I.E. when something breaks and needs repairs you can't tell the repair man to defer his payment to when tenant start paying rent again. Very few landlords have liquid reserves.

I predict that things are going to get worse before the get better. When the bubble burst the mainstream media is going to say, "real estate is a bad investment" and there will be an increase of supply and many of these sellers who laughed at me while demanding above market price for their apartment building will need to humble themselves on their asking prices.

Just remember,  "be bullish when others are fearful". When times are hard people think times will be hard forever. They forget that everything is cyclical.

Historically speaking, most of American wealth was built during a downturn!

[Russell Brazil]

Your analysis seems way off.

"Sellers wanted 2-3 times what a property was really worth. Even in the middle of the pandemic sellers wanted $80-100k per unit in markets where it should only be $30-60k per unit."

What makes you seem to think the properties are worth less than what people are willing to buy and sell a property for? Markets set prices. You wanting a property cheaper than its worth, is not the market.

We were already at a critical inventory shortage pre-covid.  Covid exasperated the problem, and there is no end in site to that problem.  We are talking about needing something like a 500% increase in inventory in most markets to get to a normal market.  For prices to fall, we would need something like 1,000% increase in inventory.