The bubble is bursting and we're still investing

[Tareq Salaita]

In my humble opinion, the bubble has started to burst and many of us including myself are still in denial. 

The national median home value is now $217,300, an increase of 8.3% on the year and 8.4% above the bubble-era peak. In 21 of the nation’s 35 largest markets, the median home value is now at an all-time high.

Currently, interest rates are at a four year high. Mortgage rates have not reached 5% since 2011. Interest rates also have some correlation with the real estate markets. History shows that real estate interest rates tend to hit their highest after land values peak.

Mortgage applications to purchase a newly built home plummeted nearly 9 percent in June compared with June 2017, according to the Mortgage Bankers Association. This suggests lower new home sales going forward, despite higher price.

Lastly, and perhaps most importantly, what happens when all the biggerpockets crowd and likeminded investors start trying to unload their properties at the same time. An article recently outlined that the Chinese investors in US real estate are now trying to sell their properties. For the first time in a decade, Chinese insurers, conglomerates and other investors have become net sellers of U.S. commercial real estate.  

Prices have gone up so high that simply put, the average American renters are barely able to keep up with rent prices. This is the very definition of a real estate bubble. I really hope we are not in a bubble but I worry about the irrational exuberance in this market..

[Mike Dymski]

Groundhog day...been reading these correction posts for four years.  Yes, markets go through cycles.  If you can predict them, forget real estate and short or long the stock market...it's a lot easier.  We don't need to hear that a correction is coming...we all know that markets cycle.  We need to know what you are doing about it.  Years of idle cash is high risk.