"Market Corrections" or "Bubbles"

[Nick Baldwin]

I am fairly new to actively investing in real estate- however, I don't consider myself a newbie when it comes to understanding the economy and markets. I hear a lot of discussion about a potential all market correction or being close to a bubble burst. Assuming that is correct- I have mixed feelings- what does that look like? Does that simply mean the end of 15%-20% annual appreciation on real estate? Does it mean that the pace of houses being bought slows or comes to a complete stop? Or do people really anticipate a crash which results in a loss in property values of over 10,15, or even 25% or more?? Are investors still just getting over the sting of what happen in the hosing crisis and being overly cautious of what could possibly happen? We are currently getting, at least in the Tampa Bay market, back to values of pre crash. While those numbers were inflated at that time I don't think they are inflated for today's economy and incomes. Was the actual "market correction" the rapid increase over the past few years to get to where we are now and we are just reaching the point of where we will see property values rise at normal 50 year averages?? - this is what I currently believe is happening. This is a long post but it's something I have thought about a lot over the past year. I'd like to hear the opinions of true economist and long time investors- Or anyone else with an opinion :)

[Steve D.]

Great question Nick.  I think about this all the time.  So if the bubble of 2002-2007 had not occurred, and the ensuing crash had not occurred, is this where we would be in the natural cycle of the market?   At least I think this is what you are asking.   It's a hypothetical, but a legitimate point.  

I personally don't think there will be another crash like there was in 2008 because lenders are cautious even today.   They're not loaning to just anyone, it's actually a challenge to get a loan even if one is qualified.    So my feeling is that there will not a major correction nationally like in 08, but local markets may shift based on supply and demand, just like they always have.