What Housing Crisis?

Question

"Hi, I'd like to give notice that I will not be renewing my lease, as we have bought a house".

"Hi, would you allow a short term rental, as we are building a house and our last house sold within a week and we now have no place to live."

These are the messages I am receiving for the past month. I'm having a lot of turnover, because my tenants keep buying their own houses! Great for them, not so great for me. I was excited about the low interest rates, until I found out that my tenants now want to buy their own home. Also, that second quote is happening a lot as well. Houses are selling super fast and now people are wondering where to live until their new and bigger house is built.

So I ask, what housing crisis? Stock market climbing back up, people buying houses. Now, where is that 4-8 plex for sale that I've been looking for these past few months???

Taylor L. · Answer

The great @J Scott (of BiggerPockets authorship and podcast fame) posted the following on his Facebook page yesterday (italics, all credit to him):

I was young, but I remember back in mid-eighties before the 1987 market crash when the stock market was on fire -- but the economy was heading in the other direction, corporate valuations were through the roof and interest rates were rising.

A couple years later, everyone was saying, "I'm not sure how it wasn't obvious to everyone that the market was broken and it all had to come crumbling down?"

I remember back in the late-90s when Internet stocks were soaring -- but companies that barely existed were getting billion-dollar valuations and IPO were jumping 1000% in a day.

A couple years later, everyone was saying, "I'm not sure how it wasn't obvious to everyone that the market was broken and it all had to come crumbling down?"

I remember back in 2007 when real estate was booming -- but borrowers were getting no-doc loans and people without income or assets were leveraged up to their necks.

A couple years later, everyone was saying, "I'm not sure how it wasn't obvious to everyone that the market was broken and it all had to come crumbling down?"

Today, the stock market is thriving -- but we have 40M people out of work (and likely 15M that won't go back anytime soon) and GDP at 50% contraction (and that won't fully recover anytime soon).

What do you think everyone is going to be saying in a couple years?

He's talking about the stock market in the post, but the point remains. People are still unemployed. Businesses are still falling apart. This hasn't really started yet. Wait until the stimulus runs out. It's far too soon to draw conclusions from this recession.

Nathan Gesner · Answer

I agree with Taylor and said it a couple months ago. You can't shut down all these businesses, unemploy tens of millions of people, give them "free" money from the taxpayers, and not expect some major repercussions.

I've been saying it for months. This summer will see a major rebound and everyone will get the false sense that the crisis is over. Then the real bill will come due.

Anthony Wick · Answer

@Taylor L.. This week the unemployment rate went down, and the stock market went up.

During every "crisis" that you stated, I sold nothing. I didn't panic sell real estate. I didn't lock in my losses in the stock market. If anybody is looking for a quick buck, I cannot help them. But, I have this get rich slowly scheme I've been working on for the past 35 years. Of course, I also diversify, diversify, diversify. If you invest in ETF's and have money in 3,500 companies, and also a side gig in real estate long term rentals, it's hard to lose all your money. It really is.

Steven Diaz · Answer

I'm in NYC. Demand is still quite high and I dont expect it to come down in the near future

Marian Smith · Answer

@Brian Maxwell  where are you located?

Anthony Wick · Answer

@Brian Maxwell. I would say everything you say is dependent upon types of rentals you have, and location. I've had several tenants give notice because they are buying houses. Yep, low interest rates. But, I've also had a tremendous amount of response for my vacancies as well. I had a 2 bed, 1 bath unit for rent at $1,150 a month. I could have rented out 10 of those in the first week I had it listed. I was fortunate to not have any tenants that asked for rent deferral or assistance. But, there is no way I'm waiving a month of rent. I would work with tenants that are struggling, but to give away a month of revenue? I'll never do that.

Brian Maxwell · Answer

I’ve seen this trend before. We’re about to enter a housing crisis and the rental market is going to suffer greatly. Most educated people know they can buy and get a lower mortgage rate than renting. The rental marketing has been at full capacity for quite awhile, but with SAH orders, layoffs, food shortages etc, the rental market will most definitely drop considerably. If you got tenants locked in try to keep them. People aren’t looking right now and you’ll lose money. If they’re behind, work with them. Waive a month and late fees. Don’t evict unless absolutely necessary if you’re even able to do so. Your kindness now will benefit later when we crash. This isn’t my first rodeo and unfortunately this is growing worse by the day. Get in the trenches with them. I have clients still waiting on stimulus money and on a lay-off so I’m taking partial payments and working with them. My response rate has been around 96% because they feel safe and that we care. We absolutely care about this. These are unknown times.

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