Is the Real Estate market really not going to take a hit?

Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes

I have been watching the last 4 months in absolute awe. Unemployment is through the roof, businesses are going bankrupt, most people are staying home not spending money yet the stock market and Real Estate market are doing great. The US government has done a lot to try and curb the effects that Covid has had on the economy but can it last? The housing market in my local market, Richmond, VA, is red hot. Interest rates are super low and the inventory is low so I feel those two factors are carrying the market for now but how long can that last? We have already seen a steep decline in higher end properties across the nation. I fear people are being lured into a false sense of security with the current market conditions and are not preparing themselves for the fall out. Thoughts?

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

It will either keep going up or start going down. When one of these things happen half the people will say I told you so and the other 1/2 will pretend they never said anything.

As long as the people predicting the crash have sold every property the own I’m willing to listen to them. Anyone who owns 220 properties and predicts a “massive” price crash but isn’t selling anything I can’t believe. Just like believing the person who doesn’t own any properties and has been predicting a crash since 2012.

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Jim Pellerin
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
No one is listing so there's a shortage of listings on the market. Supply and demand. Give it 3 to 6 months and it will reverse.
1 Reply
Nicholas LaGatta
Real Estate Broker · Atlanta, GA · Member since 2017 · 229 posts · 145 votes
6y
@Jim Pellerin I like your thinking. Could you elaborate more on the root cause for this?
0 Reply
Jim Pellerin
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
People won't let people in their homes.
2 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
It will either keep going up or start going down. When one of these things happen half the people will say I told you so and the other 1/2 will pretend they never said anything.
As long as the people predicting the crash have sold every property the own I’m willing to listen to them. Anyone who owns 220 properties and predicts a “massive” price crash but isn’t selling anything I can’t believe. Just like believing the person who doesn’t own any properties and has been predicting a crash since 2012.
2 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y
Extreme pressure on the supply side, and the money printers are running 24 hours a day.
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1 Reply
Filipe Pereira
Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes
6y
Originally posted by @Account Closed:
I have been watching the last 4 months in absolute awe. Unemployment is through the roof, businesses are going bankrupt, most people are staying home not spending money yet the stock market and Real Estate market are doing great. The US government has done a lot to try and curb the effects that Covid has had on the economy but can it last? The housing market in my local market, Richmond, VA, is red hot. Interest rates are super low and the inventory is low so I feel those two factors are carrying the market for now but how long can that last? We have already seen a steep decline in higher end properties across the nation. I fear people are being lured into a false sense of security with the current market conditions and are not preparing themselves for the fall out. Thoughts?

"Too soon, junior"
But on a serious note, the corona virus essentially dried up the supply chain of properties on the market or coming to the market. I admit I am part of the problem. We were going to list a 5 unit deal pre covid, but when covid hit we realized we had little recourse at getting folks into units to view them. So we held back and didn't list it. Now that things are beginning to "normalize" we're getting ready to list it, fully understanding that waiting covid out may have worked out to our advantage. The buyers are still out there, but the properties are far fewer. We're seeing everything go with multiple offers (often times over ask) in all market areas in CT from SFH through MFRs. It's a bit crazy.

I think we're in the "pent up demand" phase right now. Home buyers that were planning on buying early spring are now forced to buy at the same time as those who were waiting for the kids to be out of school before moving. Combine that with low interest rates and the super low supply and it makes for quite the seller's market.
On the investment side, folks are still trying to cash out some big stock market gains and realize that prices haven't done anything but go up in Real estate as of late. Some pent up demand + low rates + low supply = seller's market.

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Account Closed
Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes
6y
Originally posted by @Filipe Pereira:
Originally posted by @Account Closed:
I have been watching the last 4 months in absolute awe. Unemployment is through the roof, businesses are going bankrupt, most people are staying home not spending money yet the stock market and Real Estate market are doing great. The US government has done a lot to try and curb the effects that Covid has had on the economy but can it last? The housing market in my local market, Richmond, VA, is red hot. Interest rates are super low and the inventory is low so I feel those two factors are carrying the market for now but how long can that last? We have already seen a steep decline in higher end properties across the nation. I fear people are being lured into a false sense of security with the current market conditions and are not preparing themselves for the fall out. Thoughts?

"Too soon, junior"
But on a serious note, the corona virus essentially dried up the supply chain of properties on the market or coming to the market. I admit I am part of the problem. We were going to list a 5 unit deal pre covid, but when covid hit we realized we had little recourse at getting folks into units to view them. So we held back and didn't list it. Now that things are beginning to "normalize" we're getting ready to list it, fully understanding that waiting covid out may have worked out to our advantage. The buyers are still out there, but the properties are far fewer. We're seeing everything go with multiple offers (often times over ask) in all market areas in CT from SFH through MFRs. It's a bit crazy.

I think we're in the "pent up demand" phase right now. Home buyers that were planning on buying early spring are now forced to buy at the same time as those who were waiting for the kids to be out of school before moving. Combine that with low interest rates and the super low supply and it makes for quite the seller's market.
On the investment side, folks are still trying to cash out some big stock market gains and realize that prices haven't done anything but go up in Real estate as of late. Some pent up demand + low rates + low supply = seller's market.

Nearly Half Of Americans Consider Selling Home As COVID Crushes Finances Tyler Durden Sat, 06/20/2020 - 22:00
As the virus pandemic has metastasized into an economic downturn, tens of millions of Americans have lost their jobs and are struggling to service mortgage payments.

New research offers a glimpse into struggling households, discovers out of the 2,000 American homeowners polled, over half (52%) of respondents say they're routinely worried about making future mortgage payments and nearly half (47%) considered selling their home because of the inability to service mortgage payments.

The study, conducted by OnePoll and the National Association of Realtors, determined 81% of respondents had experienced unexpected financial stress due to the virus-induced recession. Over half (56%) reduced spending so they could service mortgage payments.

Since mid-March, or about the time when the lockdowns began, nearly half (47%) of homeowners have explored alternative ways of making money. About two-thirds of respondents (64%) started side projects, while 53% sold valuables to supplement income.

"The swift and unprecedented impact of COVID-19 left many people in a financial emergency, and we want to make sure struggling homeowners know they have relief options, especially during Homeownership Month," said the National Association of Realtors President Vince Malta.

homeowners are in mortgage forbearance plan - representing 7.54% of all mortgages, delinquencies are set to surpass the great recession, which peaked at 10%.

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Joe Cassandra
Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6y
The stimulus and unemployment checks are still flowing.
Once that drys up, and the Fed slows down buying junk corporate debt, the pain will hit.
Look for it starting October.
Or it might not happen until after the election, so Feb/March 2021.
Meanwhile, we are putting a rental on the market this week. Will likely sell in 12 hours (the neighborhood sells out fast. House prices have risen 50% fornus in 3 years...but we bought at a discount)
1 Reply
Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Jim Pellerin

Probably correct. Or at least that is what I am thinking.
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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Bill B.
People have their predictions. Nothing wrong with that. I like to get as many points of view as possible and then make my decision.

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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Russell Brazil

Supply has been a determining factor for sure.
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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Filipe Pereira
The perfect trifecta. :)

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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Account Closed
I think a factor in the future of the market depends on what regulation and additional steps the government takes to save struggling homeowners with their mortgages. Stopping foreclosures temporarily is one thing but what happens when all these people have to catch up on those mortgages.

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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Joe Cassandra

That’s great Congrats!! This response is a little late but the stimulus and employment has dried up now and we still have not seen a big hit. I think a longer delay than we all thought. Think 2021.

0 Reply
Michael Watson
Rental Property Investor · New Orleans, LA · Member since 2020 · 22 posts · 12 votes
6y
@Scott Lennon the direct federal payments have stopped but states have been given access to FEMA funds to boost unemployment payments which were extended something like an additional 16 weeks. There's an invisible wave of evictions leading to a lack of qualified renters and rental property mortgage foreclosures. Those evictions just became legal and take 30-60 days.
Additionally for owner-occupiers mortgage payments come back due in October. 2-3 months after that I would imagine the housing crisis we've been expecting to begin.
IMO how bad it gets depends on if we can get people back in a work first mode. Pausing foreclosures is something the govt would have needed to implement last session to avoid the initial wave. Hopefully it's not another snowball.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y

In Canada people who deferred mortgage payments simply have them added onto the end of their mortgage, so the payments don't increase, you just pay them later. Yes you end up paying interest on it, but for those who are out of work, it is better than being homeless.

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Jim Spatzenfeld
Investor · NorCal · Member since 2015 · 281 posts · 240 votes
6y
Originally posted by @Bill B.:
As long as the people predicting the crash have sold every property the own I’m willing to listen to them. Anyone who owns 220 properties and predicts a “massive” price crash but isn’t selling anything I can’t believe.

I’m not predicting any crash, but even I was 100% sure of a crash I would never ever sell any of my properties. My goal is to accumulate as many properties as possible. A crash would give me the opportunity to buy a lot more properties.
1 Reply
Paul Shannon
Rental Property Investor · Fishers, IN · Member since 2016 · 335 posts · 470 votes
6y
I've read this thread and agree that there is a strong possibility of a significant problem/correction, based on the data already presented.
But, what the point should be is that you need diversification because NOBODY knows what's going to happen. The economy is too complex for economists to predict it correctly consistently. Diversification in stocks, bonds, precious metals, different assets within real estate, other alternatives.
If you only have your money in flipping houses and inventory picks up and prices go down while you're borrowing on bridge-loans, you are going to get hammered and wiped out.
Its prudent to raise cash reserves, diversify, etc. Its not prudent to sit frozen and think you know what is going to happen. You'll look back in 5 years and have missed who knows how many opportunities.
Take proper precaution so when there is a downturn, you're ready to handle it and capitalize on it. That downturn may not happen for quite some time though. Just don't be over leveraged when it happens.
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NaDean Bowles
Investor · Jacksonville, FL · Member since 2020 · 124 posts · 68 votes
6y
@Account Closed it's almost as if the middle class is getting richer, because those office jobs are working from home and still giving money to the banks who are giving them home loans; while the upper middle class that own the businesses, and the poor who work in hospitality are getting much poorer. The rich who own all of those big commercial buildings which are largely empty are also getting poorer.

Having one group move up with inflation while everyone else moves downward, is not sustainable.

How it shakes out though... I'm not sure. A foreclosure crisis was coming even before this but with those payments all going on the back end... I'm not sure what will happen.
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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Paul Shannon

I was over leveraged in 2008 and 2009. Learned that lesson.
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Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
6y
@Theresa Harris

You and me both. That’s why I am out there asking people. Trying to get a grip on it

1 Reply
Kyle Novak
Rental Property Investor · Canton, OH · Member since 2016 · 14 posts · 1 vote
6y

What was your LTV then? What do you consider over leveraged?
0 Reply
NaDean Bowles
Investor · Jacksonville, FL · Member since 2020 · 124 posts · 68 votes
5y
@Account Closed, this popped back up for me and we are still on a wild real estate ride. Any new predictions? I don't see how we can climb so quickly and keep climbing without falling but... here we are.
0 Reply
Account Closed
OP
Investor · Midlothian, VA · Member since 2015 · 305 posts · 199 votes
5y
@NaDean Bowles I agree. So hard to predict the future. I admit I have no idea anymore.
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