Future problems for investors....................................

[Troy Forney]

Maybe its just me.....  Being in the Real Estate Business for 20 plus years, I am started to see some similarities of the last bubble.  Now I am not saying we are in a bubble.  I don't know.  They are a lot of factors to consider and lots of signs are present, but if I had to go from my gut only, I would say yes.  The logical mind does tend to consider all the data on shortages and low interest rates, and droves moving from Illinois etc...  Whether you go with your instinct, gut or logical thought, It doesn't matter.   What I do know is this.  I have seen a lot of deals coming across my desk of people over paying for investment properties.  I look at the numbers and think, that doesn't even meet the 1% rule or .80 for that matter.  I think its going to be a couple years, but there are going to be some investors in trouble.  And yes they are taking mortgages.  

[Rick Albert]

I was listening to a housing expert on the news the other day and he brought up an interesting point.  He said we don't know if we are in a bubble until it pops.  Until then, it's inflation.

Over the last five recessions, only twice did price reductions happen.  We have to remind ourselves that if the market takes a dip, it is a paper loss and nothing more.  As long as the bills are still getting paid, you stay the course.

A great example are people who bought literally the day before the meltdown in 2008.  Assuming they kept their homes with no changes, many have had their values surpass what they initially paid and if they didn't refinance, then they are two years away from being halfway done with their mortgage.  They are arguably in better shape than those buying today.

I do agree, for the most part the 1% rule is no more unless you get a stellar deal.  Really it seems like .7 seems to be the magic number.