Housing crash deniers ???

[Greg R.]

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

[JD Martin]

Quote from @David Song:

Quote from @Jay Hinrichs:

Quote from @David Song:

Quote from @Bruce Woodruff:

Quote from @David Song:

I am tempted to offer at around 740k range. If there is no crash, the price stabilizes, that will be a good deal.

I see your point, but are you sure...?

Sure about what? If I know the future, I will not hesitate now.

 offer 700k quick close  have you gotten a trio on it to see whats owed ?? 

 Thanks for the suggestion. I will give it a try, and report back. It’s a trust sale. Nothing owed.

 One house can just be an anomaly. Those kinds of things have a way of becoming self-fulfilling prophesies. Sellers start dumping the price fast and everyone else looking at it says "What's wrong with this house that they can't sell it?" I've bought a couple of houses like that, and it turned out there was nothing wrong with the house. It was just the timing of the thing. You see this even more with trust/probate sales or regular sales of multiple heirs, where they have nothing in the house and just want to get their hands on cash as quick as possible and have no interest in waiting around for the best deal they can make. 

[Nicholas L.]

@David Song

I'm seeing that too... but only at those high price points.  And I think a lot of us aren't looking for investment properties in the $700K-$1.2M range!  I know David Greene is busy turning $2M houses in Oakland into $3M houses in Oakland, but I'm looking for bread and butter 3/1 rentals, and they're staying stubbornly high - sellers are holding out for 2021 situations even though there is slightly less demand at the moment.

@James Hamling

Agree with your post about new household formations.  It seems to me that even though US population growth is slowing slightly compared to previous decades, there is still strong demand in desirable areas, and a major shortage of affordable housing.

@Jay Hinrichs

To get back to one of your previous posts about housing starts - Bloomberg just reported this:

"The government’s report showed single-family housing starts decreased 10.1% to an annualized 916,000 rate, the slowest since June 2020. Permits for one-family dwellings dropped 4.3% to a two-year low. Meanwhile, construction of multifamily dwellings fell to 530,000 in July."

If this market "cooling" causes builders to slow, isn't that just going to exacerbate the shortage, especially at the price points some of us are after?!

[Mike Dymski]

Quote from @Nicholas L.:

If this market "cooling" causes builders to slow, isn't that just going to exacerbate the shortage, especially at the price points some of us are after?!

The short answer is "yes" but there are many moving parts.  For example, 90% of homeowners have fixed rate mortgages and most of those mortgages have interest rates that are well below current rates.  You could make a case that the mortgage is more valuable than the house.  So, people can't or won't want to move and that will also keep inventory very low.  On the flip side of the coin, if there is a recession and unemployment goes up, some people won't be able to make their mortgage, rent, or other payments and inventory will increase and households will consolidate.  There was an article on Bloomberg yesterday that 1 in 6 households (20 million people) are behind on their utility payments and it's not even winter yet (natural gas prices are at record levels).  Lots of moving parts.  None of us have a crystal ball on what will happen with housing prices but we are in denial if we don't believe that we are in a recession or headed for one based on the unprecedented hawkish commentary and intended actions from the Fed.

Below has the monthly supply of new and existing homes (ratio of homes for sale to homes sold).  The supply of new homes has increased to 10.9 months in July, primarily due to the low level of homes sold from higher interest rates and low consumer sentiment.  The supply of existing homes is still low at 3.3 months and is on a trajectory to reach 6 months by early 2023.  These are the national figures...results will vary by market.

[Bob Stevens]

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

[Chris Clothier]

Quote from @David Song:

This is getting really interesting. I just looked at a house today.

SFR in Castro valley, ca

7/17: $925k

7/27: $825k

8/22: $759k.

I have multiple rentals in this area. This house, 6 month ago, will easily sell around 1 m, with multiple offers and a bidding war.

So I called the listing agent and want to know if there is any offer on the table. No.

I am tempted to offer at around 740k range. If there is no crash, the price stabilizes, that will be a good deal.

On the other hand, I also want to wait a little longer to see if the market will further soften and get a bigger discount.

I am surprised that nobody offered at this price point. 

 You make some great points here.  You are an investor who knows his market.  You have identified target properties and know the history of the area, but also the history of the property itself.  You are weighing your options and recognize that when you buy, it is just one property in a bigger portfolio.  You know your own position and know that you can act now and you will have a deal that fits your expectations and your portfolio well.  You can also wait and watch and if you lose it, no big deal.  If it comes down and you buy, you have a slightly better deal.  If it stays the same, then again, you buy or you don't buy - both are the right decision for you when you make it.  

Sometimes, investors can make things way more complicated than they need to be.  Reading or paying attention to too many headlines can only make that worse.  I do hope other lesser-experienced investors read this buried deep in the thread and understand that buying decisions need to be made on your own criteria and needs.  What any of us on BP or any economists in the news has to say doesn't matter a whole lot.  Good luck David and hopefully whatever you decide to do it works well for you.  Best

[Jay Hinrichs]

Quote from @Nicholas L.:

@David Song

I'm seeing that too... but only at those high price points.  And I think a lot of us aren't looking for investment properties in the $700K-$1.2M range!  I know David Greene is busy turning $2M houses in Oakland into $3M houses in Oakland, but I'm looking for bread and butter 3/1 rentals, and they're staying stubbornly high - sellers are holding out for 2021 situations even though there is slightly less demand at the moment.

@James Hamling

Agree with your post about new household formations.  It seems to me that even though US population growth is slowing slightly compared to previous decades, there is still strong demand in desirable areas, and a major shortage of affordable housing.

@Jay Hinrichs

To get back to one of your previous posts about housing starts - Bloomberg just reported this:

"The government’s report showed single-family housing starts decreased 10.1% to an annualized 916,000 rate, the slowest since June 2020. Permits for one-family dwellings dropped 4.3% to a two-year low. Meanwhile, construction of multifamily dwellings fell to 530,000 in July."

If this market "cooling" causes builders to slow, isn't that just going to exacerbate the shortage, especially at the price points some of us are after?!

new builds cant compete with existing inventory in cash flow markets those structures by and large are still being bought for far less than replacement value. there are only a few specific markets in the US were construction/and land prices are low enough to build a new product and have them make sense as rentals. All other new builds on the SFR side are going to owner occ.

2 million rehabbers to sell for 3 mil in the east bay right now to me might be a tad scary if what we are reading about the SF Bay area is some price compression.  Especially 90% of those flippers are using some sort of high priced private money to do those deals. 

[Jay Hinrichs]

Quote from @Bob Stevens:

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

 Rust belt cities with all that existing inventory that can be bought and has been bought for decades for far less than replacement value simply does not compare to many markets in other parts of the country. you could say the same about Detroit bAltimore Philly  south chicago etc etc. 

[Michael K Gallagher]

Quote from @Randall Weatherall:

Anyone that says anything in the housing market is 'impossible' probably isn't worth listening to or are very new and get a little too swept up in articles written by people with something to gain.

 This right here!  this is exactly how you should be looking at information on the web and on social.  thank you for the reminder @Randall Weatherall

[Jay Hinrichs]

Quote from @Chris Clothier:

Quote from @David Song:

This is getting really interesting. I just looked at a house today.

SFR in Castro valley, ca

7/17: $925k

7/27: $825k

8/22: $759k.

I have multiple rentals in this area. This house, 6 month ago, will easily sell around 1 m, with multiple offers and a bidding war.

So I called the listing agent and want to know if there is any offer on the table. No.

I am tempted to offer at around 740k range. If there is no crash, the price stabilizes, that will be a good deal.

On the other hand, I also want to wait a little longer to see if the market will further soften and get a bigger discount.

I am surprised that nobody offered at this price point. 

 You make some great points here.  You are an investor who knows his market.  You have identified target properties and know the history of the area, but also the history of the property itself.  You are weighing your options and recognize that when you buy, it is just one property in a bigger portfolio.  You know your own position and know that you can act now and you will have a deal that fits your expectations and your portfolio well.  You can also wait and watch and if you lose it, no big deal.  If it comes down and you buy, you have a slightly better deal.  If it stays the same, then again, you buy or you don't buy - both are the right decision for you when you make it.  

Sometimes, investors can make things way more complicated than they need to be.  Reading or paying attention to too many headlines can only make that worse.  I do hope other lesser-experienced investors read this buried deep in the thread and understand that buying decisions need to be made on your own criteria and needs.  What any of us on BP or any economists in the news has to say doesn't matter a whole lot.  Good luck David and hopefully whatever you decide to do it works well for you.  Best

 ONe other minor point Chris as it relates to what a vast majority of investment property buyers especially BP members are looking for is the sub 200k rental that does not exist in their state by and large.. so if values say in those markets fall 5 to 10% thats what 10 to 20k from the high or on 125k rentals which is the bulk of what I see come through my shop that 5 to 10k .  So the investor is well insulated which these price fluctuations and certainly sitting on the side lines over 20 bucks a month waiting and hoping for a repeat of 08  well they maybe sitting a long time.. Plus like I have said many times.. if it gets that bad credit by and large will leave the average investor they wont be able to get a loan investor loans will be very very tough

[James Hamling]

Quote from @Greg R.:

Quote from @James Hamling:

 Sorry Greg, it makes all the sense in the world now, it's crystal clear how your strategy to buy in the bottom is not you planning to buy at market bottom, yup, got it, perfect sense....... 

So, curious, as you apparently have Nostradamus like powers, why are you not getting the Powerball? That seems to make the most sense. I mean, you clearly know the future to the point that you can predict something that literally all data and actual industry professionals say has a LESS a chance of happening then getting hit by lightning while being mauled by a Grizzley, but hey, you got that foresight bud. 

Lmao... "all data and actual industry professionals say [a crash] has a LESS a chance of happening then getting hit by lightning while being mauled by a Grizzley"

Thank you for putting this gem out there. Says a lot about your opinion on these topics. 

 Facts & data, NOT opinion. 

[Bob Stevens]

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

 Rust belt cities with all that existing inventory that can be bought and has been bought for decades for far less than replacement value simply does not compare to many markets in other parts of the country. you could say the same about Detroit bAltimore Philly  south chicago etc etc. 

 Sure, but I will take buying for all in 50k with 1200 in rent that now has a value of 125k, vs paying 500k, with 2k 3k  in rent and can drop, 100k :) 

All the best 

Also there is no inventory in the Cleveland markets, sure if you want to pay retail. But for those with little to know experience they cannot get deals far below the appraised value, I can but they cant . This is why I say you make your money when you buy . Just like I have done for years and years and my personal home that we purchased Mid may. All in about 675k, can sell tomorrow for 850k. But it the market turns 10- 15% we are still in good shape .

[Jay Hinrichs]

Quote from @Bob Stevens:

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

 Rust belt cities with all that existing inventory that can be bought and has been bought for decades for far less than replacement value simply does not compare to many markets in other parts of the country. you could say the same about Detroit bAltimore Philly  south chicago etc etc. 

 Sure, but I will take buying for all in 50k with 1200 in rent that now has a value of 125k, vs paying 500k, with 2k 3k  in rent and can drop, 100k :) 

All the best 

Also there is no inventory in the Cleveland markets, sure if you want to pay retail. But for those with little to know experience they cannot get deals far below the appraised value, I can but they cant 

 dont now about that I funded about 8 of those last 45 days all of them as you describe..  they are there for those who work the market they are just your competition  LOL.. its a big city and big market.   my main point though is that  all the rust belt cities for those who know how to get the deals have the same metrics or darn near them

I have my clients in baltimore city that routinly are all in at 60 to 90k with 1400 to 1800 Section 8 rents.. now ranted rents skyrocketed last 20 months it was not always that great of spread but I have done about 50 for those guys .. I was just there last week for those that work hard and in the know these deals exist every day.. and even with refi rates up they are still killing it. 

[Bob Stevens]

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

 Rust belt cities with all that existing inventory that can be bought and has been bought for decades for far less than replacement value simply does not compare to many markets in other parts of the country. you could say the same about Detroit bAltimore Philly  south chicago etc etc. 

 Sure, but I will take buying for all in 50k with 1200 in rent that now has a value of 125k, vs paying 500k, with 2k 3k  in rent and can drop, 100k :) 

All the best 

Also there is no inventory in the Cleveland markets, sure if you want to pay retail. But for those with little to know experience they cannot get deals far below the appraised value, I can but they cant 

 dont now about that I funded about 8 of those last 45 days all of them as you describe..  they are there for those who work the market they are just your competition  LOL.. its a big city and big market.   my main point though is that  all the rust belt cities for those who know how to get the deals have the same metrics or darn near them

I have my clients in baltimore city that routinly are all in at 60 to 90k with 1400 to 1800 Section 8 rents.. now ranted rents skyrocketed last 20 months it was not always that great of spread but I have done about 50 for those guys .. I was just there last week for those that work hard and in the know these deals exist every day.. and even with refi rates up they are still killing it. 

 Hmm I have at least 10 guys bringing me deals weekly, most are in the war zones  and overpriced, I pass on those as they are only good on paper .  There are very few GOOD deals in the Cleveland markets I do not know about, especially MF, I know them all.  

[Jay Hinrichs]

Quote from @Bob Stevens:

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

 Rust belt cities with all that existing inventory that can be bought and has been bought for decades for far less than replacement value simply does not compare to many markets in other parts of the country. you could say the same about Detroit bAltimore Philly  south chicago etc etc. 

 Sure, but I will take buying for all in 50k with 1200 in rent that now has a value of 125k, vs paying 500k, with 2k 3k  in rent and can drop, 100k :) 

All the best 

Also there is no inventory in the Cleveland markets, sure if you want to pay retail. But for those with little to know experience they cannot get deals far below the appraised value, I can but they cant 

 dont now about that I funded about 8 of those last 45 days all of them as you describe..  they are there for those who work the market they are just your competition  LOL.. its a big city and big market.   my main point though is that  all the rust belt cities for those who know how to get the deals have the same metrics or darn near them

I have my clients in baltimore city that routinly are all in at 60 to 90k with 1400 to 1800 Section 8 rents.. now ranted rents skyrocketed last 20 months it was not always that great of spread but I have done about 50 for those guys .. I was just there last week for those that work hard and in the know these deals exist every day.. and even with refi rates up they are still killing it. 

 Hmm I have at least 10 guys bringing me deals weekly, most are in the war zones  and overpriced, I pass on those as they are only good on paper .  There are very few GOOD deals in the Cleveland markets I do not know about, especially MF, I know them all.  

 OK well I was there a few months ago looking at what i funded and these were not in the war zones of Cleveland I can assure you of that.  agreed though these are not 50k all in.

not that those cant happen in all markets but wholesaler have risen the prices so all those 10 wholesalers bringing you deals are not letting them go for 20 to 30k and then you put 20 to 30k into them which is about standard from what i see on my draws i fund.. that means the wholesaler is buying them for sub 20k  your right dont see that anymore.

I funded 3 in KC  Tuesday and one of those sold for 15k it was a package of 3 props. And not in the war zone at all.. but these companies i deal with are you  same skill sets you have. 

[Greg R.]

Quote from @Jay Hinrichs:

Quote from @Chris Clothier:

Quote from @David Song:

This is getting really interesting. I just looked at a house today.

SFR in Castro valley, ca

7/17: $925k

7/27: $825k

8/22: $759k.

I have multiple rentals in this area. This house, 6 month ago, will easily sell around 1 m, with multiple offers and a bidding war.

So I called the listing agent and want to know if there is any offer on the table. No.

I am tempted to offer at around 740k range. If there is no crash, the price stabilizes, that will be a good deal.

On the other hand, I also want to wait a little longer to see if the market will further soften and get a bigger discount.

I am surprised that nobody offered at this price point. 

 You make some great points here.  You are an investor who knows his market.  You have identified target properties and know the history of the area, but also the history of the property itself.  You are weighing your options and recognize that when you buy, it is just one property in a bigger portfolio.  You know your own position and know that you can act now and you will have a deal that fits your expectations and your portfolio well.  You can also wait and watch and if you lose it, no big deal.  If it comes down and you buy, you have a slightly better deal.  If it stays the same, then again, you buy or you don't buy - both are the right decision for you when you make it.  

Sometimes, investors can make things way more complicated than they need to be.  Reading or paying attention to too many headlines can only make that worse.  I do hope other lesser-experienced investors read this buried deep in the thread and understand that buying decisions need to be made on your own criteria and needs.  What any of us on BP or any economists in the news has to say doesn't matter a whole lot.  Good luck David and hopefully whatever you decide to do it works well for you.  Best

 ONe other minor point Chris as it relates to what a vast majority of investment property buyers especially BP members are looking for is the sub 200k rental that does not exist in their state by and large.. so if values say in those markets fall 5 to 10% thats what 10 to 20k from the high or on 125k rentals which is the bulk of what I see come through my shop that 5 to 10k .  So the investor is well insulated which these price fluctuations and certainly sitting on the side lines over 20 bucks a month waiting and hoping for a repeat of 08  well they maybe sitting a long time.. Plus like I have said many times.. if it gets that bad credit by and large will leave the average investor they wont be able to get a loan investor loans will be very very tough

Thought you all might find this interesting, similar to the pricing decrease you are talking about.

A multi-family in my local market listed on:

8/5/2022

Listed for sale

$629,000$183/sqf

8/11/2022

Price change

$589,000 (-6.4%)$171/sqft

8/18/2022

Price change

$559,000 (-5.1%)$163/sqft

8/31/2022

Price change

$539,000 (-3.6%)$157/sqft

Considering throwing in a offer. They seem extremely motivated to sell. 

[Brian Ellis]

Were already seeing about a 10% pull back from list prices and price deductions, in the matter of 2 months.

I dont think a Crash is something to just brush off. Its possible. Keep in mind, 75% of people have that lingering fear from 08' too. In 1929 home values dropped by over 60% in Manhattan. We only saw an 20% decline in 08' so in comparison 08' was nothing like the great depression.

I look at it like this: We had rates in the 2's not that long ago. We are now double where we were. It would be the same as seeing sustained 5% rates all of a sudden jump to 10% over a two month period and seeing house prices reflect that. That is going to really hurt any market. The historically low rates created a massive bubble in both the stock market and housing. Guys, we saw over 100% increase in home values since 2017 (5 year period). You usually dont see that for 20+ years. 

History has shown that a "crash" happened 75 years apart. But history has also shown that we are well beyond the normal appreciation rate. We should have seen rates rise back in 2019, I think the FED fell short and underestimated the world we live in. The pandemic didnt hurt housing, it made it boom. Combine that with extremely low rates, ppp loans, and government hand outs... oh boy

Im not going to fight tooth and nail and argue that it is or isnt going to happen. If its going to happen we'll see it soon. 

[Jay Hinrichs]

Quote from @Brian Ellis:

Were already seeing about a 10% pull back from list prices and price deductions, in the matter of 2 months.

I dont think a Crash is something to just brush off. Its possible. Keep in mind, 75% of people have that lingering fear from 08' too. In 1929 home values dropped by over 60% in Manhattan. We only saw an 20% decline in 08' so in comparison 08' was nothing like the great depression.

I look at it like this: We had rates in the 2's not that long ago. We are now double where we were. It would be the same as seeing sustained 5% rates all of a sudden jump to 10% over a two month period and seeing house prices reflect that. That is going to really hurt any market. The historically low rates created a massive bubble in both the stock market and housing. Guys, we saw over 100% increase in home values since 2017 (5 year period). You usually dont see that for 20+ years. 

History has shown that a "crash" happened 75 years apart. But history has also shown that we are well beyond the normal appreciation rate. We should have seen rates rise back in 2019, I think the FED fell short and underestimated the world we live in. The pandemic didnt hurt housing, it made it boom. Combine that with extremely low rates, ppp loans, and government hand outs... oh boy

Im not going to fight tooth and nail and argue that it is or isnt going to happen. If its going to happen we'll see it soon. 

 my thought is  its going to depend on who needs to sell as opposed to who wants to sell.  Needs generally are those in financial stress, Divorce death etc  or job relocation. 

wants to sell are   better school district,  bigger house,   smaller house  socio impacts like what is happening in downtown Portland with the riff raff and defund the police has caused I know i have sold about 10 of my new builds to folks who 5 years ago would never have dreamed of selling and moving to the burbs.  but these are discretionary and at a point if folks dont get what they feel they want or need from the sale of their homes they dont move.

NOw for investors with income property same things.. and you can add in burnt out landlord, tenant trashed the place for the 5th time etc etc. as motivation to sell.  Although will be interesting to see MF with 5 year call notes that were done 3 to 5 years ago if that creates some forced sales.

[Dan Rowley]

@Greg R.  what real estate market are you referring to?  There is not a single market every metro/submarket has different dynamics.  There are markets that will correct more and some that may correct very little if at all.  And not sure why 'crash' is the term being used most often I think it's because it's a more dramatic headline that gets more clicks and attention.  If a market/pricing is going up rapidly (bonkers in some markets) we should not expect that to be the norm and have to expect a correction back down at some point as that level of increase is not sustainable (except via the easy money / inflationay policies of the last several years).

[Bob Stevens]

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Jay Hinrichs:

Quote from @Bob Stevens:

Quote from @Greg R.:

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

 I personally do not care if the prices go up or down, 10 -15% as I buy below the value now. In the last coupe weeks I bought 4 SF, and a MF  all are about 30% lower the current values.  Also when getting 15- 25% net caps, again who cares , it always comes back . Also I just bought a home in SC for 520k, we just got done putting in about 160k, its now worth about 850k,,, The point is you make your money when you buy 

Good Luck

 Rust belt cities with all that existing inventory that can be bought and has been bought for decades for far less than replacement value simply does not compare to many markets in other parts of the country. you could say the same about Detroit bAltimore Philly  south chicago etc etc. 

 Sure, but I will take buying for all in 50k with 1200 in rent that now has a value of 125k, vs paying 500k, with 2k 3k  in rent and can drop, 100k :) 

All the best 

Also there is no inventory in the Cleveland markets, sure if you want to pay retail. But for those with little to know experience they cannot get deals far below the appraised value, I can but they cant 

 dont now about that I funded about 8 of those last 45 days all of them as you describe..  they are there for those who work the market they are just your competition  LOL.. its a big city and big market.   my main point though is that  all the rust belt cities for those who know how to get the deals have the same metrics or darn near them

I have my clients in baltimore city that routinly are all in at 60 to 90k with 1400 to 1800 Section 8 rents.. now ranted rents skyrocketed last 20 months it was not always that great of spread but I have done about 50 for those guys .. I was just there last week for those that work hard and in the know these deals exist every day.. and even with refi rates up they are still killing it. 

 Hmm I have at least 10 guys bringing me deals weekly, most are in the war zones  and overpriced, I pass on those as they are only good on paper .  There are very few GOOD deals in the Cleveland markets I do not know about, especially MF, I know them all.  

 OK well I was there a few months ago looking at what i funded and these were not in the war zones of Cleveland I can assure you of that.  agreed though these are not 50k all in.

not that those cant happen in all markets but wholesaler have risen the prices so all those 10 wholesalers bringing you deals are not letting them go for 20 to 30k and then you put 20 to 30k into them which is about standard from what i see on my draws i fund.. that means the wholesaler is buying them for sub 20k  your right dont see that anymore.

I funded 3 in KC  Tuesday and one of those sold for 15k it was a package of 3 props. And not in the war zone at all.. but these companies i deal with are you  same skill sets you have. 

 I got a 3 br 2 bath on Priday ave, for all in 60k , appraisal will be about 125k, rent will be 1300, :) 

[Brian Ellis]

Quote from @Jay Hinrichs:

Quote from @Brian Ellis:

Were already seeing about a 10% pull back from list prices and price deductions, in the matter of 2 months.

I dont think a Crash is something to just brush off. Its possible. Keep in mind, 75% of people have that lingering fear from 08' too. In 1929 home values dropped by over 60% in Manhattan. We only saw an 20% decline in 08' so in comparison 08' was nothing like the great depression.

I look at it like this: We had rates in the 2's not that long ago. We are now double where we were. It would be the same as seeing sustained 5% rates all of a sudden jump to 10% over a two month period and seeing house prices reflect that. That is going to really hurt any market. The historically low rates created a massive bubble in both the stock market and housing. Guys, we saw over 100% increase in home values since 2017 (5 year period). You usually dont see that for 20+ years. 

History has shown that a "crash" happened 75 years apart. But history has also shown that we are well beyond the normal appreciation rate. We should have seen rates rise back in 2019, I think the FED fell short and underestimated the world we live in. The pandemic didnt hurt housing, it made it boom. Combine that with extremely low rates, ppp loans, and government hand outs... oh boy

Im not going to fight tooth and nail and argue that it is or isnt going to happen. If its going to happen we'll see it soon. 

 my thought is  its going to depend on who needs to sell as opposed to who wants to sell.  Needs generally are those in financial stress, Divorce death etc  or job relocation. 

wants to sell are   better school district,  bigger house,   smaller house  socio impacts like what is happening in downtown Portland with the riff raff and defund the police has caused I know i have sold about 10 of my new builds to folks who 5 years ago would never have dreamed of selling and moving to the burbs.  but these are discretionary and at a point if folks dont get what they feel they want or need from the sale of their homes they dont move.

NOw for investors with income property same things.. and you can add in burnt out landlord, tenant trashed the place for the 5th time etc etc. as motivation to sell.  Although will be interesting to see MF with 5 year call notes that were done 3 to 5 years ago if that creates some forced sales.

 I agree, but I think employment rates will have the biggest impact. Something to keep a close eye on IMO.

[Jay Hinrichs]

Quote from @Brian Ellis:

Quote from @Jay Hinrichs:

Quote from @Brian Ellis:

Were already seeing about a 10% pull back from list prices and price deductions, in the matter of 2 months.

I dont think a Crash is something to just brush off. Its possible. Keep in mind, 75% of people have that lingering fear from 08' too. In 1929 home values dropped by over 60% in Manhattan. We only saw an 20% decline in 08' so in comparison 08' was nothing like the great depression.

I look at it like this: We had rates in the 2's not that long ago. We are now double where we were. It would be the same as seeing sustained 5% rates all of a sudden jump to 10% over a two month period and seeing house prices reflect that. That is going to really hurt any market. The historically low rates created a massive bubble in both the stock market and housing. Guys, we saw over 100% increase in home values since 2017 (5 year period). You usually dont see that for 20+ years. 

History has shown that a "crash" happened 75 years apart. But history has also shown that we are well beyond the normal appreciation rate. We should have seen rates rise back in 2019, I think the FED fell short and underestimated the world we live in. The pandemic didnt hurt housing, it made it boom. Combine that with extremely low rates, ppp loans, and government hand outs... oh boy

Im not going to fight tooth and nail and argue that it is or isnt going to happen. If its going to happen we'll see it soon. 

 my thought is  its going to depend on who needs to sell as opposed to who wants to sell.  Needs generally are those in financial stress, Divorce death etc  or job relocation. 

wants to sell are   better school district,  bigger house,   smaller house  socio impacts like what is happening in downtown Portland with the riff raff and defund the police has caused I know i have sold about 10 of my new builds to folks who 5 years ago would never have dreamed of selling and moving to the burbs.  but these are discretionary and at a point if folks dont get what they feel they want or need from the sale of their homes they dont move.

NOw for investors with income property same things.. and you can add in burnt out landlord, tenant trashed the place for the 5th time etc etc. as motivation to sell.  Although will be interesting to see MF with 5 year call notes that were done 3 to 5 years ago if that creates some forced sales.

 I agree, but I think employment rates will have the biggest impact. Something to keep a close eye on IMO.

 one of the main drivers of the crash in 08 is that new construction basically STOPPED and all the contractors subs and laborers found themselves unemployeed this really affected PHX and Vegas big time.. and let me tell you landlords were not immune.. in PHX I saw 4 plexs that sold for 350k in 06  trading for 80k in 2010 because they were 100% vacant and had been for long time same with Vegas and some other markets.. so folks have to be careful what they wish for. 

[Bill B.]

@Jay Hinrichs

That was another time the difference between MF and SFR was shown. I only had half a dozen Vegas homes back then but there was zero vacancy and we were raising rents faster than ever. People losing their homes had zero interest in moving their family back to an apartment. I am/was a very small fish but you could buy anything and rent it out on closing day for about double the payment. I doubled to a dozen properties as fast as I could. If I had a bigger brain maybe I coulda/shoulda bought some of those 4plexes but my criteria was newer properties with slanted tile roofs in good neighborhoods and most of the 4plexes were the opposite.

I THINK part of their problem was they had gotten away with being only a couple hundred/month less than a house that had private garages, yards, laundry, more space and no shared walls. So the only people whose chose them were those that literally didn’t have the extra $200/mo. But, as they say, hindsight is 20/20. 

[Luka Milicevic]

I read one post:

-We are headed for a crash

I read the next post:

-No crash anytime soon

I have a headache. 

[Carlos Ptriawan]

 I agree, but I think employment rates will have the biggest impact. Something to keep a close eye on IMO.

 True, the Fed can continue to be reckless *as long as* the unemployment remains low.

But if tech company especially started laying off their core foks in big number like in 2001, a sectoral recession would be felt and forced selling due to foreclosure or people cant pay their mortgage will happen because their (overpaid) salary is no longer there.

Since the Fed is very determined to cut the inflation to their target of 2-3%, we don't know how long it's gonna be, lets say if it takes 12 months for CPI to move to 2% ; if during those times company started layoff as Dollar is too high and not too many international buyers for US product, then there will be recession anyway and it impacts many other sectors.

Thing is while we can analyze what the (worse) Fed action can do, we don't know for how long (if) there would be a bloodbath in tech/financial/housing sector.

Even now Home Depot is laying off people, that's utterly stupid as the economy is just started recovering. It seems the whole economy is controlled by bunch of cowboys.

[Stephen Dispensa]

ANYTHING is possible. The market could crash tomorrow and homes could be selling for pennies on the dollar. Or the market could surge to unexpected levels as people continue to hedge against massive inflation by investing in RE. 

What's important to realize is that it normally is an outside factor that causes massive market crashes. People who say things like "these prices are unsustainable" are generally off because just looking at the RE market in and of itself can't accurately predict a market swing.

The 2008 crash wouldn't have had half the impact that it did if it was just another stock market crash. The problem is all the collateralized debt that caused the crash was tied up in the housing market. And even THAT wouldn't have caused the RE crash to the level we saw, except for the fact that banks pulled in the reigns on lending. If no one can qualify to borrow, demand goes down. At the same time you had people losing jobs and needing to get out from underneath expensive variable rate mortgages, which meant available supply went up. If supply goes up and demand goes down, you have a price crash, simple as that. It is classical economics 101.

Now, let's think about the world today and some real world problems today and how likely they could lead to a massive crash:

Inflation: Not likely to lead to a crash because as inflation rises we tend to see RE prices rise as people use RE as a hedge. The question I ask all of my multifamily investors all the time is: How often does rent go down? 

Energy Crisis: A massive world wide energy crisis COULD lead to a real estate market impact. If people can no longer afford to heat / cool / power a large home they may consider downsizing, leading to a spike in supply without an uptick in demand resulting in a price crash. Prices have spiked massively in Europe as a result of the Ukraine war, we have also seen prices for gasoline spike in the US in the past few months, however these price hikes are usually short lived. The speed at which the RE market moves is unlikely to be influenced much by an energy crisis for the simple fact that energy crises tend to resolve themselves kind of quickly. If nation states like the US and the European Union embargo Russian fuel, guess what happens? The Russians sell it on the black market. The initial supply drop usually gets offset when the nation who has been embargoed starts selling the fuel at a discount on a black market. This happens all the time and it's why fuel costs have been dropping since the beginning of summer. The fact is RE isn't as liquid as energy is so it will always be a lagging indicator. By the time an energy crisis spurs homeowners into drastic action, the crisis will likely already be abetting.

Retirement Crisis: This is an interesting one. Many blue states have large public sector guaranteed pension funds that I don't believe are as well funded as they claim to be. With the largest generation (boomers) retiring, there are massive amounts of guaranteed payments these funds are supposed to disperse. What happens when these boomers outlive the original projections of the fund? How many FDNY firefighters worked an insane amount of overtime their last two years on the job to get pension payments that are above what they earned in their career? How much of this was calculated in when the return formulas for these funds were first generated? I predict at some point in the next ten years you will see massive public sector pensions from states like NY, Massachusetts, New Jersey, Illinois, etc. fail. This will have a massive ripple effect throughout the country. First, you'll have a ton of pain in the states that guaranteed these funds. What happens when multiple counties, cities, and states have to declare bankruptcy? Besides the obvious (their credit rating goes to hell and it becomes impossible to issue bonds for public infrastructure projects), they also get hit with austerity measures. What would this look like at the county, city, and state level in the US? In a word: taxes. You would see an increase to property taxes across the board, increase in sales taxes, and an increase in or implementation of income taxes. And all that results in less buying power for people. Since property taxes are calculated in monthly payments, the mortgage amounts individuals would qualify for would decrease to cover the larger tax rate. Higher income and sales taxes would mean even less money for housing. So what would people do? Well many of them would leave blue states ( a trend we have already been seeing since prior to the pandemic and has sped up in recent years). However, if you think living in a red state with low taxes and a sound fiscal policy would save you from this kind of crisis, think again.

Let's take a fictional example: A school teacher works 40 years in a Long Island school system in NY teaching 6th grade. They retire at the age of 65 on a pension worth 75% of their annual salary. They were making $200,000 per year at the end and their pension is worth 150,000 per year. (If these number sound ludicris, they're not, I legitimately know a teacher who has these exact numbers). Now let's say they decide they want to move to the sunshine and live out their days in Florida. So they sell their Long Island home at a high price to a young couple, and go buy a house in West Palm Beach with cash from the proceeds. Everything is going great the first few years as their pension and social security cover a nice life for them in Florida. They bought their Florida home in cash so they don't have to worry about a mortgage payment. Suddenly the pension fund fails. NY State has guaranteed the pension and is able to make payments for a time, but eventually the state has to declare bankruptcy. Austerity measures are introduced, the young couple that purchased the house from our fictional teacher can no longer afford the taxes and have to sell it at a loss. Less money is coming into the states coffers, eventually the pension fund is written off and the guaranteed pension for our fictional teacher of 150,000 is reduced to mere pennies on the dollar. They need to sell their home in West Palm Beach, but because so many retirees suddenly had to downsize, there's a glut of supply on the market. Prices drop and continue to fall. At this point banks have lost billions on public bond investments in the north east that will never be repaid because of states declaring bankruptcy. Lending tightens, buying power decreases across the board, and real estate prices crash nationwide. 

I realize the above example is a little fantastical, but understand this process can be applied to many outside factors that can influence the real estate market. So YES, a crash is possible, but remember real estate is a lagging indicator and also a hedge against other market conditions, so the correlations may vary depending on outside conditions.