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. 

[J. Mitchell Bernier]

Quote from @James Hamling:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

Quote from @Greg Scott:

The market may correct, but I firmly believe there won't be a crash.  The reason is simple, equity.

There is no  house of cards here to come tumbling down.

I respectfully disagree. The house of cards is this - too many people....millions.....bought houses with hugely inflated prices in the past few years. This is especially true in certain areas. It's gonna suck to own a home that you bought for $800k that is only worth, say, $500k....especially if you bought that with any type of adjustable loan.....

I do agree that it will not be a full-on 'crash', but more a serious correction. It has already started. look at the stats...

 keep in mind that if those 800k houses drop 20% they are now selling for less than replacement costs and builders will simply stop building.   At least at todays prices for lots and materials.. you will need lot values to drop a ton and materials and labor.. pretty tough to get all of those to drop.. I know being a land developer .. those farmers that control a lot of the land for new development will just hold on before they sell the land for less than what they think its worth.. Most have no debt and owned it forever etc.  we stop building and well you know what happened in AZ last time building came to a halt.  Not good for the area at all. 

But a "800k house" right now was a 500k house a couple years ago. In many of those scenarios it was purchased for +/- 450-500k and with a 4ish rate. I don't think it's unrealistic to see prices correct to pre bubble prices. If something peaks so quickly, why would we believe it can't return close to it's pre-peak price in an equal amount of time?

From a very basic/ simplistic standpoint. How can someone who was able to afford an 800k house a year ago afford it now that the rates have doubled? 

Someone going in w/ 10% down  on 800k purchase is a 720k loan balance, how much would it cost to get a 30 year fixed down to the mid 3's or low 4's? a single point in this scenario is $7,200? I'm not a lender so perhaps someone could help shine light on this situation and how many points would be needed. In any event, who is going to eat the cost, the buyer or the seller. The current market conditions require someone to take a big hit if the other is going to benefit as if the market conditions were the same as a year ago. 

 It's just not that simple Greg. 

Just because 2yrs ago a home was say $500k, it does not mean tomorrow it can be $500k. 2 years ago the inputs to build that $500k were totally different. Cost of living was different. You have to take things in context. The entire economy is not going to regress 2 years. 

What you describe in buyer capacity is market compression. A buyer who was able to buy at say $700k, now via rate increase, is pressed into looking at the, say $600k market level. As the rates shift buyer capacity downward, it add's additional stress on the lower level of say $200-$300k level. Pressing a "glut" of buyers into the lower rung actually drives UP the prices in lower strata, as demand is driven up unless inventory can rapidly grow to meet which that also raises those prices. Compression.     

Builders at the top strata of builds are not over building today, there being smart about it, so it looks like supply is self-regulating to adjust to demand. This insulates against significant drops in that strata. 

 "The entire economy is not going to regress 2 years" Ask anyone with retirement accounts and they will tell you otherwise. Understand Housing is a different asset class, but it can happen. 

I hear you on people lowering their buying and expectations but what happens when the Bank just says "No". So instead of the person being able to afford less, they can't afford anything. Look at the treasury markets right now, many banks are discussing why lend money when they can make the same net interest margin by buying "risk free" bonds. So instead of lending it out and making 6-8% on your money, since they are giving you less than 50 bps, they are going to make the same interest margin as last year with just buying treasuries and not have to worry about default risk. These discussions are happening and if this happens, hold on to your butts. 

[James Hamling]

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

@Joe Bertolino

hot off the press.

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

https://www.cnbc.com/2022/09/2...

I thought sellers wouldn’t sell, prices wouldn’t drop, and theres no inventory?

I posted the math here a few days ago about how all the equity during Covid was phantom here: https://www.biggerpockets.com/...

this is just getting started folks, this is July data…rates are up almost 2 percent since then. unless rates come back down fast, the winter numbers are going to look abysmal. 

Did anybody say the rate of growth wouldn't stop? overall still up, but slowing growth (which is beyond expected). Are people actually saying that there will be no slowing to the growth?  Or are people just saying the market won't crash which would be 20% reduction or more? All this says is it's slowing (and not even that much all things considered). 

 I don’t know if he actually read the story or if he thrives on click bait.  

I lost my desire to debate him when he “couldn’t remember” the subdivisions in Dallas he was claiming had hundreds (if not thousands) of completed homes sitting in standing inventory. 

 you must be thinking of someone else, I never said anything about dfw subdivisions.

Also, showing historic data being released is not click bait, they are facts based on real data in markets all across the country. What you say in your replies is click bait based on false assumptions of reality. While you can still live in your fantasy land there thinking prices won’t drop, there’s no supply and prices won’t drop..they already are, and it’s just getting started. What positive spin do developers and realtors get out of the article? That data is 2 months old, it’s already much worse now than it was then. Take off your tunnel vision blinders 

 Fact is, it is the biggest drop ever in a month, and the first drop in over a decade. But sure, nothing to see here all is well. 

 Obviously If rates stick at 9% for an extended period of time the market activity will grind to a halt. Will it drop 20%+ year over year nationwide.  I don’t think so.  I don’t see how it can.  There is not enough inventory.   3.7 months in my area with very little standing inventory from builders.  The BIA hot list has 17 homes.  I predict people just won’t do much.  They will stay put until numbers start to pencil out again.  Considering most homes have a ton of equity and rentals are extremely expensive,  unlike 15 years ago,  people won’t be walking away from their homes in mass.  

@Joe Bertolino @james hamling 

Seems like despite the data released today which shows:

1) people are listing homes (there is inventory)

2) prices are dropping 

3) largest drop in history 

So your saying this is just temporary and not indicative of what is to come despite rates being 200 basis points higher now than august (when this data is from) 

Neither of you think a 20 percent peak to trough drop is possible, so I guess we actually have to see official numbers of 20 percent drop for you to realize it.

the likely outcome here is 20-30 percent drop. Fed cuts rates and housing goes back up to reinflate the bubble eventually like they always do. But prices needed to drop while rates are high, and they officially are now. 



 

 Joe, those of us who want to understand what's happening use things like median pricing. And no, it will not drop by 30%. You've clearly decided the whole storyline and are just going to find anything to help support your decided position, so i see no point in this. 

Will there be a drop from the absolute highest sold, yes, it is a little thing many of us call winter, it tends to come around once per year. 

So if your looking at month-over-month as you said before, ignoring YOY like the rest of industry, yup, your going to see this "crash" happening most years in the highest sold in given month vs lowest in given month. These are called seasonal variances. 

You might as well also call out a school session "collapse" while at it, given the MOM highest vs lowest solds in connection to school start. 

Again, variances. 

My question is, how many properties are you selling right now? If your so certain there is a 30% drop coming without doubt, you must be happily selling everything now then, right? Taking advantage of these "high prices"? 

It’s the first monthly drop in over a decade. The data is seasonally adjusted, so it takes into account what you are speaking about. 

im not selling because I don’t care about phantom equity, and it’s too late to sell to realize peak equity. If I list now I’ll just be cutting prices, and eventually the fed will pivot and housing prices will reinflate. There’s also ridiculous closing costs associated with selling a home. It’s crazy to think people like yourself make 6-7 percent on transactions with values this high. Can’t wait for the techies to advance blockchain technology so real estate closing costs can be a fraction of what they are today. 20 percent minimum median real estate decline is a lock (unless fed pivots to lower rates) the peak was June 2022.

@Jay Hinrichs makes good points. The supply chain issues during Covid are being worked out though. Lumber prices will drop, it takes several months to work through the system. Once people start losing jobs, the cost to build will drop substantially. It will take some time, but as rates stay high there will be a fed induced reset. 

 How will block-chain walk seller/buyer through a transaction contract?    How will block-chain devise a marketing strategy, deploy and manage that?  The notion that block-chain will replace agents is just being drunk on the Cool-aid at the worship of tech..    

And there is mitigation for 6-7%. Not everything is 6-7%, you clearly have not bought or sold anything in some time, or of any pricing level because it's rather common and standard for those fee's to move downward as gross sale $'s move upward. Not to mention 6-7 is for BOTH sides, seller and buyer agency. It's not uncommon to get into a combined 4% agency fee's depending on price level. Then there is all the alternative options which go as low as 1% per agency side. 

I don't understand why your dead set that people will have to sell. Increased rates have a direct relationship with volume, not sold $. Reduced volumes are what can have a relationship with reduced sold $. "Can" being the operant term. People can choose to simply, not sell, if the choice exists. Does that choice exist today?     

What is "Phantom" equity? Equity is equity. If your saying it's not real until it's realized, that's ALL equity. That premise would also make all home values "Phantom" home values until time of closing. 

First drop in over a decade. Not sure what market your talking about because I know of many drops and adjustments in median home price since 2012, a lot. 

20% drop in median home price, at MINIMUM..... well ok, we will see. By what time are you willing to commit that these will come to pass by. And are you willing to come back on B.P. and make a post entitled "I WAS SO WRONG, ADN THEY TOLD ME SO" if/when that date comes and goes and there is NOT a minimum 20% drop to median home prices?     I am still waiting to see just 1 of those posts from all who were screaming in '21' how it was all about to crash, huge drop about to hit "any day". Not a 1 has owned up to being dead-flat-wrong in the doomsday preaching. 

What happened during Covid? Wasn’t everything done virtually or mostly Virtual for the most part? Are we forgetting that everything happened during Covid with how it has changed the way business is done. I didn’t say it will replace agents, I said much lower commissions and outsourcing, there will be fewer realtors that are needed. Perhaps the agents who don’t stay in the business can transition to “real jobs” like you mention to help lower the labor costs for new construction that this country needs.

when I say 6-7 percent, that’s what the majority of citizens pay. I’m not talking about the small bubble all of us are in here on BP. Of course there are ways to reduce and cheaper alternatives, but I’d estimate 90 percent of transactions are still using legacy commissions and systems. Blockchain isn’t just a payment method, it stores records, title companies, all the ridiculous paperwork that’s needed that can just be stored on a blockchain. That’s the future. 

people are already selling at lower prices.I’m dead set on it because it’s already happened. Peak housing was June 2022, the data and stats prove that people are selling and median values are already on the decline. Even if there’s less inventory, there’s way less buyers to bid it up. Those transactions are real. Price drops are real. Fewer transactions are leading to lower prices. It’s a myth that you need heavy sell volume to lower prices, you just need fewer buyers, which is what we have because the prices are too high relative to interest rates 

its phantom equity because once interest rates went from 3 to 7 percent that “equity” is not real. It was real when rates were 3 percent), it’s just going to take several months for the market (people like you) to realize it. 

did you not see the article today? We are talking about median home values across the whole country. No cherry picking markets. 

I guarantee prices will not go higher until the fed cuts rates again. I base my guarantees on what the fed does. If they aren’t lying and keep rates high like they claim them within a year prices will be down 20 percent. I’ll guarantee it. Eventually the fed will cave in, and prices will rise again. I’ll come Back and admit I’m wrong if that happens.
this is the first time I’ve come on here proclaiming this. Don’t fight the fed. 

 On agent side of things, oh yeah there is WAYyyy too many agents. We got the "Pandemic Agent" thing which for those not in the know, it seems like everyone decided to become an agent once stuck at home. In the industry we are happily expecting a lot to leave, and justly so. On average there is roughly a 70% failure rate, or higher, for new agents. It's always been a big revolving door, 80/20 rule in R.E. Agency is very true, if not more a 90/10 rule. last year, I did more volume then all agents in my entire brokerage, combined. And weird part is, that's normal for this industry. Each brokerage has a few Top Performers, those of us who are veteran, serious FT professionals, and then a giant mass of novices and part-timers. Par for the course. Always been, always will be. I wish all leaving it the best on future endeavors. 

6-7% is not a static set point. The national norm IS a sliding scale. As #'s go up, % comes down, that is the norm. As median homes sale price goes up, yes, I see no reason for what was a norm of 6-7 becoming 5-6. It has in a lot of places. It's a sliding scale, not static. 

Not to burst your bubble but, median home price is still on the incline in Twin Cities, just FYI. 

Lower sales volume yes, can lead to lower sales $ totals, of course. BUT your arguing to minimum 20% drop. That comes into territory of FORCED sale level. Jon and Jane Doe homeowner most commonly say "Yeah, were ready to sell, as long as we got $___, or more". You come back and say "Well, best we can get is 20% less", guess what they say? They say "well, looks like were not selling this year".     People DON'T sell at big discounts unless they have a NEED to do so. This is wholesaler 101. A MOTIVATED seller, a reason or cause to press a person to sell at lower prices. This isn't rocket science, it's rather basic stuff. 

And with most sitting on sub 4% mortgages, with giant pile of equity, on average $100k or more, guess what, they don't gotta sell, there's no financial gun to there heads. 

The #1 most common thing agents heard from people the last 2 years in selling there home was they were selling BECAUSE of the equity gains, to tap that profit. That was it. They didn't have to sell, most were only and exclusively motivated by the opportunity of the moment. AND a GIANT clip of buyers, were those sellers. So they came into next purchase with BIG money down, gaining great rates, instant equity AND many used gains from sale to pay down debt. 

Again, setting up a very LIQUID market. Meaning people DONT have to sell on large. 

The ONLY way you get big price drops in Real Estate is via having WILLING SELLERS AT BIG PRICE DROPS. Nobody sells guess what, prices hold. 

You will only get 20%+ real estate price drops when MASSES of people are willing or forced to sell homes AT DESCENDING PRICES. All you doom preachers keep skipping this point completely. There is no "Oz" hiding behind a curtain setting home prices, home prices are exactly what a seller agrees to sell at and a buyer agrees to buy at. ANY ONE OF THESE DON'T AGREE there is NO SALE. 

And in this, sellers set the price. FULL STOP.    Sellers decide the market price.    Data does not, FED does not, E.Warren and her Reptilian Overlords don't, lol, SELLERS set the market price.      

So, I say, for the I don't know how many'th time, how or what will make a FORCED Sale condition where sellers HAVE TO sell at DESCENDING PRICES. Because they have the option, in large part, to just-not-sell. 

Builders can flip to build 4 rent, builder can offer 2-1 buy-downs, builder have options too. 

20% price drop on median home value, jumping back to 2019 home prices IS A PIPE DREAM! Your smoking "hopeium"! 

The crash will be in volume, big time. There was years worth of moving all jamb packed into 24months. Higher rates just helps cement that. We had the rush, now it's the eye of the storm. Until some genius looking to get his votes will concoct some idiot idea to get people who should be renters, the ability to buy on high leverage. Useful idiots they call them, no seriously, look it up, they actually have a book written on this, that's literally what they call them, useful idiots. That will run things up to be built on BS, which sets the stage for a collapse. 

You don't get collapse without leverage. The size of the collapse is in direct relation to the size of the leverage. We don't have a significant leverage today. We have a disparity gap, we have affordability issues, that's just fertile ground for renting, which stokes investor purchasing.  

[James Hamling]

 We call that a Tenant! 

[Bruce Woodruff]

Quote from @James Hamling:

Yep, that's exactly what may happen...

[John Carbone]

Quote from @James Hamling:

 We call that a Tenant! 

A tenant with a soon to be 20 percent discount! 

I did say not to cherry pick markets, yet you cite your local market. That’s great, your market may not go down a full 20 percent, but the us median home value June 2022 will drop at least 20 percent. After the data today, it’s already declining.

Your theory on sellers won’t sell so prices will stay high, assumes you are in a utopia where everyone gets together and says nobody will sell. Reality says otherwise, and just because John doe puts his foot down and decides not to give a price cut, his neighbor will and that will drag down John does home value to an appraiser and the market and poof there went the phantom equity 

[Bruce Woodruff]

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

[John Carbone]

Quote from @Bruce Woodruff:

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

 Jerome Powell will get what he wants.

[J. Mitchell Bernier]

@James Hamling

Since you are still actively buying in this market, what are you buying right now? I am curious on what strategy you are sticking too with all the economic uncertainty. Is there a certain price point you are staying in? Is it buy and hold? Residential or Commercial? What are you doing in your market? 

Really liking this discussion! 

[Carlos Ptriawan]

Quote from @Bruce Woodruff:

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

 what do you mean it's interesting, it's already like Dejavu of 1998 or 2001 again. LOL

[Bruce Woodruff]

Quote from @John Carbone:

Quote from @Bruce Woodruff:

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

 Jerome Powell will get what he wants.

 I'm not sure he knows what he wants or how to get it.....

[Bruce Woodruff]

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

 what do you mean it's interesting, it's already like Dejavu of 1998 or 2001 again. LOL

 Or the 70s/80s. Pull up a chair and get some popcorn...

[Carlos Ptriawan]

Quote from @Bruce Woodruff:

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

So in UK, they don't have 30 YFRM; they only have 2 or 5Y ARM.

When Fed is raising the rate, it's the homeowner and Farmers in Glasglow that are screaming, not in Twin Cities.

[Dan White]

I agree with @Bruce Woodruff - no one has a crystal ball to know for sure. We have been sitting on a 1Bed/1Bath condo for weeks priced way under comps and a great remodel...won't move. Also had a SFH down the street sell in 3 days. We kind of knew the condo had a limited pool of buyers to start with but it has taken a 15-20% hit as of now compared to others in the same building 4 months ago. The SFH sold over ask and with multiple offers. So - while we won't lose on the condo because we bought it well...it still is crazy to see how dramatic the market can be in a short period of time. Side note: I hate condos for flipping. Even before this one.

[Joe Bertolino]

Quote from @Carlos Ptriawan:

I have been thinking about the same, but in Bay Area market is different again. What's funny in this area is, from 2019 to 2021, by average market shifted to $300K regardless it's San Francisco, San Jose or Redwood City. But the baseline of each city is different. San Jose baseline was much lower than San Francisco. So it's not surprising if San Jose experienced more pullback now compare to San Francisco.

However what interesting is, the upper and lower SJ price home experience the same 100k price reduction, so the price is reduced more on the lower side rather than the upper. It seems the buyer didn't want to move 'cheaper' neighborhood per-se when they have money.

Comments about the builder: you are pretty much right. If you see the builder SF new permit, there's already a decline from last year. The permit increase is pretty much on Multifamily units mainly in South region.

 Fewer projects are penciling out so you are seeing fewer projects moving forward.    Construction takes longer and is more expensive and money is more expensive... while there is fear sales prices will drop.  You won't see a bunch of new projects for awhile which will just add to the demand when rates are back down.  The slowing in supply has very little to do with how much demand is truly there.  

[John Carbone]

Quote from @Bruce Woodruff:

Quote from @John Carbone:

Quote from @Bruce Woodruff:

We're all just guessing here. Regardless of what all the experts and fancy graphs show, nobody has any clue what will happen. 

One thing is for sure though, something will certainly happen and it will be interesting to watch.

 Jerome Powell will get what he wants.

 I'm not sure he knows what he wants or how to get it.....

He says he wants lower asset prices and lower inflation. He’s getting that right now.

[Jon Q.]

It's called the recession phase of the "real estate market cycle" and it's a guarantee, in addition to the other three phases... Recovery, Expansion, and Hypersupply.  If you've been through one or more full cycles, you'd likely already know this.

[Bruce Woodruff]

In my experience, this cycle starts to feed on itself. Housing starts slow down for whatever reason.....a few houses don't sell for what they were allegedly worth....a random city has a 15% drop.....people start threads on a forum.

At some point, even those with incredible smarts and millions in their pockets just say "nope, not now". And then it happens. People don't use rationale, they just react.

I remember a customer I was building a house for back in '09 when that hit...he had a friend who was a billionaire. The guy lost 3 million dollars one day, freaked out and jumped off a building.

Point is, people are trying to use sense and reason to figure this out when those are not the qualities that make the decisions.....

[Carlos Ptriawan]

Quote from @Bruce Woodruff:

 house for back in '09 when that hit...he had a friend who was a billionaire. The guy lost 3 million dollars one day, freaked out and jumped off a building.

Point is, people are trying to use sense and reason to figure this out when those are not the qualities that make the decisions.....

Yeah, the Fed terminal rate is already entering the suicidal region. Too high too fast. The hospital would be busy next year. It can be from people that invest in stock, crypto, or houses. 

Just yesterday I read one of the biggest pension funds already has the biggest loss ever.

[Eric Fernwood]

Hello Carlos,

I see your point. I should have explained in more detail.

I believe what made the 2008 crash so devastating was the combination of massive job loss and a high percentage of homes underwater. Today is different.

• US unemployment is 3.7%. If people are working, few will be forced to sell their homes.
• I do not recall the percentage of homes underwater during the 2008 crash, but it was a large percentage in some locations. Depending on what report you read, the percentage of underwater homes today is between 2.6% and 3.1%.

If homes had a market value meter, like the stock market, you would see the price go up and down all day/month. The market value of your home does not matter until you decide to sell it. And, homes in all the cities I listed (and many others) purchased two or three years ago are probably not underwater. Also, the 25.2% is if you include the effects of inflation. Still, 18.7% is bad enough.

What is a concern is the financial mismanagement by our federal government. Deficit spending is likely the major source of inflation, and we continue to add major programs that increase the deficit. Another concern is the Federal Reserve. When I listen to the Fed, I question whether they have a clue.

In summary, unless the conditions change significantly, I do not believe we will have a 2008-type crash.

[Sebastian Marroquin]

(For starters let me say… that the more I learn about the real estate market and study or read about the trends, the more I know that I don't really know anything… ). 

With that said, I think we all know that both the question initially posted on here and the responses to the question either believing or not believing a crash or that a huge correction is happening, is merely our opinion, right…?  Or can anyone on here really bet their life on a crash? :) you would have to commit to a definite year for you to be right… bc simply saying that "sooner or later there will be a crash" would be correct, but I can also tell you that "sooner or later we will have a big earthquake in CA…. (at least in 1 to 300 years) and I would be right! 

Therefore, I know we are all just having fun expressing our opinions and guessing on here at this point! Period 

I'm always curious to know - of the people that think a crash is coming 100%: why not sell your home or homes now and - stash the money under your mattress and then buy for .30 to .50 cents on the dollar? Why not (maybe because we ALL don't really know what's going to happen). 

I have seen many more buyers being cautious when buying out here. And I have seen other competing buyers beating us by $200k on a 1,000 sq ft home, so I know there were many- many buyers over paying. Will that affect them though… If that home goes from $1 million to $800k next year, but they are comfortable with their payment, have a stable job, and have emergency funds? Will they be affected? 

Supply is a factor, Equity is a factor and inflation is a factor. 

Many people have over $200k in equity: and Many in LA have $300k to $500k or more in equity. Is some of that inflated bc of the last 2 and 3 years. yes. So why are we seeing so many price reductions? 

Over zealous sellers that over priced their home. So if a home in 2018 was valued at $1 million and by 2020 the home went up to $1.5 and by 2021 to $1.7 and in 2022 a new seller prices the home at $1.8 and ends up reducing finally to $1.4 (has the market crashed or was that a correction?) 

and in the next year that home goes to $1.2 (has the market crashed when on average over the years that home has seen 5% to 7% over all value increase). 

and from there - it starts appreciating between 3% to 5% for the next 8-10 years 

People that do not have good counsel, or do not want to present their home in the best light (renovations etc ) will sell for much less. 

Homes that are well priced, look good, are marketed well are still selling fast and for profit. 

Why do we always go back to 2008 when talking about a coming crash? I get that we would love to learn from history, but whose to say that another different pandemic won't come… or an earthquake, or a war…. (ammunition for the pessimists out there). 

I choose to be conservative, optimistic and think that at this time, we can still pull through. Supply is extremely low and you have to be proactive in your saving. Can the market crash.. of course. Will it? please tell me if you know! 

(No conclusions were reached here…  :) ) 

[Tony Kim]

Quote from @Bruce Woodruff:

In my experience, this cycle starts to feed on itself. Housing starts slow down for whatever reason.....a few houses don't sell for what they were allegedly worth....a random city has a 15% drop.....people start threads on a forum.

At some point, even those with incredible smarts and millions in their pockets just say "nope, not now". And then it happens. People don't use rationale, they just react.

I remember a customer I was building a house for back in '09 when that hit...he had a friend who was a billionaire. The guy lost 3 million dollars one day, freaked out and jumped off a building.

Point is, people are trying to use sense and reason to figure this out when those are not the qualities that make the decisions.....

It also starts in the rental market. Since cost of materials is high after this many years of prosperity, only 'A' Class apts make sense. The cycle resets when it becomes apparent that we have overdeveloped these A class apartment units and the developers start to default on these properties. The problem is that rental demand is still sky-high. It'll happen eventually though. RE cycles have been happening for thousands of years (think Roman Empire) and they aren't going to go away.

[James Hamling]

Quote from @J. Mitchell Bernier:

@James Hamling

Since you are still actively buying in this market, what are you buying right now? I am curious on what strategy you are sticking too with all the economic uncertainty. Is there a certain price point you are staying in? Is it buy and hold? Residential or Commercial? What are you doing in your market? 

Really liking this discussion! 

 For the most part staying away from commercial right now. Caps have been driven down to levels too tight for anyone sub $100m in holdings, with too much risk exposure in cap-x expenses being realized. Still open to value-add if/when opportunity pop's up but, sellers have better buyers and I don't blame them for taking those insane offers. 

Staying away from flips unless there with a hold component of C4D component for exit strategy. Similar situation, costs are at level where time costs too much usually. 

AAA strategy is still a rock solid one. This is one focused more on portfolio growth, vs NOI.

On cusp of jumping back into some Sec8 positions. Things are looking really good in that segment again, one step better and I would be going heavy on it. The operational side is a pain in the azz though, that's all that's holding me back really. 

I have a few big things in works, significant strategic alliances to launch a C4D program, at scale. 

I am not really the best read for the "average Joe", I have some large things in works where if I didn't have those I would be engaging more actively in other routes. I would be way more into Sec8 and ancillary market investing for sure. Especially those where price ascension has not hit at level like are primary market, and one can get into properties below replacement value. It's a time play. 

There is really more opportunities then I have time or $. More so time because $ can always be found. 

Primary focus is on single family and townhomes. Love love love em. Townhomes is one so many over-look, and please feel free to keep overlooking, lol. 

As for price point, I am staying "in the squeeze", which will vary market to market. No real interest in anything $700k+ unless it's got solid STR analysis. On those I work out things on terms anyways so to mitigate risk exposure. Can have all the data in the world on a STR but you really don't know until your at it, results may vary is the rule of the day.

[James Hamling]

Quote from @Bruce Woodruff:

Quote from @James Hamling:

Yep, that's exactly what may happen...

 How? What mechanism is going to create a forced sale environment? 

[J. Mitchell Bernier]

Quote from @James Hamling:

Quote from @J. Mitchell Bernier:

@James Hamling

Since you are still actively buying in this market, what are you buying right now? I am curious on what strategy you are sticking too with all the economic uncertainty. Is there a certain price point you are staying in? Is it buy and hold? Residential or Commercial? What are you doing in your market? 

Really liking this discussion! 

 For the most part staying away from commercial right now. Caps have been driven down to levels too tight for anyone sub $100m in holdings, with too much risk exposure in cap-x expenses being realized. Still open to value-add if/when opportunity pop's up but, sellers have better buyers and I don't blame them for taking those insane offers. 

Staying away from flips unless there with a hold component of C4D component for exit strategy. Similar situation, costs are at level where time costs too much usually. 

AAA strategy is still a rock solid one. This is one focused more on portfolio growth, vs NOI.

On cusp of jumping back into some Sec8 positions. Things are looking really good in that segment again, one step better and I would be going heavy on it. The operational side is a pain in the azz though, that's all that's holding me back really. 

I have a few big things in works, significant strategic alliances to launch a C4D program, at scale. 

I am not really the best read for the "average Joe", I have some large things in works where if I didn't have those I would be engaging more actively in other routes. I would be way more into Sec8 and ancillary market investing for sure. Especially those where price ascension has not hit at level like are primary market, and one can get into properties below replacement value. It's a time play. 

There is really more opportunities then I have time or $. More so time because $ can always be found. 

Primary focus is on single family and townhomes. Love love love em. Townhomes is one so many over-look, and please feel free to keep overlooking, lol. 

As for price point, I am staying "in the squeeze", which will vary market to market. No real interest in anything $700k+ unless it's got solid STR analysis. On those I work out things on terms anyways so to mitigate risk exposure. Can have all the data in the world on a STR but you really don't know until your at it, results may vary is the rule of the day.

 C4D? AAA? You got help me out with these haha

I am also a big fan of Section 8 homes. We are continuing to evaluate our specific holdings and see how we can move our properties into those as well. 

[James Hamling]

Quote from @John Carbone:

Quote from @James Hamling:

 We call that a Tenant! 

A tenant with a soon to be 20 percent discount! 

I did say not to cherry pick markets, yet you cite your local market. That’s great, your market may not go down a full 20 percent, but the us median home value June 2022 will drop at least 20 percent. After the data today, it’s already declining.

Your theory on sellers won’t sell so prices will stay high, assumes you are in a utopia where everyone gets together and says nobody will sell. Reality says otherwise, and just because John doe puts his foot down and decides not to give a price cut, his neighbor will and that will drag down John does home value to an appraiser and the market and poof there went the phantom equity 

 Lol, ok, so you have just decided everything is going to be 20% less, just cause. 

People are going to sell at loss's, just cause. 

Rents will go down, just cause. 

Lol, ok, great basis. 

Your contradicting yourself. People pushed out of homes but rents go down, yeah, that makes sense. 

So let me get this straight, in your version of reality the Fed raises interest rates, so everyone get's together and decides to sell their homes to each other at 80% or less of it's market value today, just cause. So everyone starts trading homes like baseball cards at lower and lower prices. And rents start dropping because, IDK, I guess tenants saw homeowners at that meeting and held there own and collectively agreed to stop renting places? 

To clarify, is there anything in your world that inflation will not LOWER the price of? Are autos getting cheaper too? Food? Because i think I want to come vacation in your world, it sounds nice, contradictory to pretty much everything but, nice and cheap, lol.