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. 

[Alex Hochberger]

Crash vs Bear vs Correction - Why it matters

If a typical investor puts 20% down, and has fees of 8% to get out, then the market dropping 12% doesn't wipe out equity. That's solidly a correction.

Even in a bear market that drops 20% over 12-24 months, that brand new investor is probably NOT upside down because of amortization.

A crash: 25%-30% in 1-3 months is VERY different. Lots of people are wiped out in a crash that would survive a bear market, let alone a correction.

Corrections just happen and aren't things to really worry about. Your equity drops for a few months then resumes recovery. Bears are slightly worse but same concept.

Crashes are a different disaster, because the market ceases up. Deals can't get done, you can't get out, you're losing everything.

A correction hurts, a crash wipes out the amateurs and leaves the pros to pick up the pieces.

[Greg R.]

Quote from @James Hamling:

 There is everything wrong with this line of thinking Greg, and I do mean EVERYTHING. You can NOT time a market "bottom", flat out fact. Those of us who have been in this game for some time, and by some time I mean those of us who measure our career in decades not years, we know this fundamental law as fact. 

I get it, your sitting back dreaming of a '08' 2.0 and all the juicy deals your gonna snag up because have spent the last years thinking and saying "oh man, if I had just known I would'a" but fact is NO you WOULDN'T, because you DIDN'T, and you DIDN'T because when you COULDA you thought it was all bad and stupid, just-like-now....... 

Fact is, in '09' when I WAS investing, most and I mean MOST as in 90%+ were saying I was nuts, to "wait for the bottom". In 2010 as I flipped and was selling in less then 72 hours most said it was a fluke, luck, and I better stop while I was ahead. In 2011 they said I was going to go bankrupt any day once I got caught with a hot potato in hand. It was in 2012, as MEDIA caught traction fo things and the flipping shows started to become popular that people finally started saying "huh, maybe you got something there, but bah bah bah, it's way too risky". And by 2015 it was "oh man, I WOULDA _______ IF-I-KNEW....". 

Yeah, well, it's not that you didn't know, it's that you simply don't have the vision to see past the BS and see the opportunity. That's the reality check of it. 

To compare things today to '08' collapse and say it will happen again is just infantile knowledge, it is, because there is NOTHING of the same/similar setup, nothing, zero, zip, zilch nada. 

Are things stepping back today, heck yeah, and it's AWESOME! It's called CONSOLIDATION, and it's a GREAT sign and signal for INCREASED pricing. See, this is how economics work, I understand the YT of choice may not understand this in between slinging Nord VPN and then yapping how the world is about to reverse direction and spin backwards. 

We had explosive pricing ascension, if you don't understand the catalyst for this, then you will never understand the consolidation we are in, nor the localized adjustments. We are in the second great suburban migration, empowered by virtual working, civil unrest, politics of the day, and just a desire to not like like a Tokyo sub-division. We have inflation the likes of which has NEVER been experienced in human history and guess what, we are just getting through the 2nd wave of this tsunami of cash-expansion and there is more to come, that's how economics actually works, at least 4 waves from this, the 3rd which is just starting now which is mass increase to consumer expense and wage increase, which will facilitate the elevation in asset pricing yet again due to input cost elevation. 

No, there is NO collapse, unless we are no re-labeling that too so consolidation = collapse, slow moving adjustments over weeks/months = collapse, vanilla on a waffle cone = collapse....... 

Feel free to think you can time the bottom, be my guest, I am used to 80%+ sitting the sidelines talking a lot and doing little to nothing, I am happy to be the minority, I have been it for more then 3 decades. Fact is, home ownership is rapidly stepping away from attainment by most. The very fundamentals are well into transition into a renter nation, and once you realize it, it's too late, your going to be crying saying "oh man, if I knew I WOULDA.....". Again.......

Not sure why you're making the assumption that I'm waiting. I've said repeatedly in this thread that I closed a deal in Jan, at the top of the bubble. And I'm not thinking that I am going to buy at the very bottom of the market. But I'm also not going to buy at the top of the market in a hyper-inflated market and get into a deal that doesn't cash flow well and has a poor COC return - not going to happen. The writing is on the wall of what's to come. My plan is to exercise patience and buy when the time is right. Not to listen to "gurus" that insist that it's always the right time to buy. Inventory is still tight now (albeit slowly improving), but let's see where we are Nov/ Dec. The buyer pool is definitely drying up, proven by steep decline in mortgage apps. A lot of signs point to there being a significant amount of foreclosures in the next 6-12 months as well.

[Chris Clothier]

Quote from @Nicholas L.:

@James Hamling I agree with most of what's in your post.  Just one question for you - if we were transitioning into a renter nation, wouldn't the homeownership rate be going down instead of being steady / up?  If the US continues to grow - and I hope it does, because I really like it here - won't the absolute number of both homeowners and renters continue to increase?

 The easy answer is no.  As a country, we produce roughly 900,000 to 1.4 million new single family homes annually.  New household formation, I believe is annually over 1.5 million.  Since 2008 we have consistently under-built for basic consumption.  With rising rates, many of those new household formations will not form and instead remain or enter the renter pool.  If 40% of whatever we build becomes rental, which is a possibility, then 60% of the newly built homes will be owner occupied.  Same goes for existing homes entering the market.  You would need a significant portion, up to 40% to be purchased for investment to see the owner occupied percentages goes down.  My opinion anyway.

[Greg R.]

Quote from @Larry Zucker:

The market is not crashing. The current market is very different from 2008 when inventory flooded the market as people could no longer afford their mortgages. Inventory levels alone tell that picture. In the raleigh, NC market, Year over year (YOY), July 2022 saw the number of listings increase by a modest 1% with a sale-to-list of 101.7% (down from 105%) and median sale prices are up 18% YOY.  While Average days on market have increased 33.3% as interest rates have forced some buyers out of the market, that comparison can be deceiving since the comparison is between 9 days on market last year to 12 days on market this year - historic lows numbers.

The current market changes are the start of balancing and normalization, not a crash. Keep an eye on that inventory. If it skyrockets - which I don't think it will because of solid homeowner equity - then the discussion about a crash may be relevant. But for now, it is not.

@Greg R. - Don't buy into the fear mongers that are promoting a market crash to improve their ratings, likes and reach. You asked for data, and I provided it above. Now rest easy. From an investor perspective, demand for rentals go up whether there is low inventory (people can't find/afford a home) or a market crash (high inventory created by sellers who now need a place to live) so your cash flow numbers should improve in this market either way.

Hi Miles, I agree - the market is currently not in a crash. However, many economic markers indicate that's where we're heading. To your point, certain markets are going to be hit harder than others. And trust me, I'm not listening to social media gurus. Nor am I fearful about it - I'm simply preparing for the scenario as I believe it's the most likely outcome. When it happens I am not going to be surprised/ flat footed.

[Carlos Ptriawan]

 >>>
Whether there will be a future crash or not is extremely dictated by short-term Fed rates and 30YFRM mortgage. It seems a 5-ish rate now is the max but it slowly reaching 6% again. If mortgage rate reached 6-7% def. it will cause more pain.

Since Fed is so reckless now we don't know what we don't know. I think they may just want to kill the economy temporarily, even after gas price is already back to normal price now.

[Larry Zucker]

Quote from @Greg R.:

Quote from @Larry Zucker:

The market is not crashing. The current market is very different from 2008 when inventory flooded the market as people could no longer afford their mortgages. Inventory levels alone tell that picture. In the raleigh, NC market, Year over year (YOY), July 2022 saw the number of listings increase by a modest 1% with a sale-to-list of 101.7% (down from 105%) and median sale prices are up 18% YOY.  While Average days on market have increased 33.3% as interest rates have forced some buyers out of the market, that comparison can be deceiving since the comparison is between 9 days on market last year to 12 days on market this year - historic lows numbers.

The current market changes are the start of balancing and normalization, not a crash. Keep an eye on that inventory. If it skyrockets - which I don't think it will because of solid homeowner equity - then the discussion about a crash may be relevant. But for now, it is not.

@Greg R. - Don't buy into the fear mongers that are promoting a market crash to improve their ratings, likes and reach. You asked for data, and I provided it above. Now rest easy. From an investor perspective, demand for rentals go up whether there is low inventory (people can't find/afford a home) or a market crash (high inventory created by sellers who now need a place to live) so your cash flow numbers should improve in this market either way.

Hi Miles, I agree - the market is currently not in a crash. However, many economic markers indicate that's where we're heading. To your point, certain markets are going to be hit harder than others. And trust me, I'm not listening to social media gurus. Nor am I fearful about it - I'm simply preparing for the scenario as I believe it's the most likely outcome. When it happens I am not going to be surprised/ flat footed.

Your original post asked for data. I provided some, have you?. The inventory is at historic lows there is no getting around that. Inventory would have to quadruple to get the months-of-inventory up to 6 months. Very unlikely to happen. Interest rates, while on the rise, continue to be at historic lows. As the saying goes: "None are so blind as will not see."

[Nicholas L.]

@Chris Clothier I can't tell if we're agreeing or not!  =-)  My point was just that, if the population continues to grow, the absolute number of both homeowner AND renters can increase, while the percentages will fluctuate.

Oversimplified example - say (rough numbers here!) there are 80M households in the US who own and 40M who rent.  Now say that the number of homeowners goes up by 1M, and the number of renters goes up by 2M.  The homeownership rate will decrease slightly - but there are still MORE homeowners AND more renters.

That's all I meant!

[Carlos Ptriawan]

Quote from @Larry Zucker:

Quote from @Greg R.:

Quote from @Larry Zucker:

The market is not crashing. The current market is very different from 2008 when inventory flooded the market as people could no longer afford their mortgages. Inventory levels alone tell that picture. In the raleigh, NC market, Year over year (YOY), July 2022 saw the number of listings increase by a modest 1% with a sale-to-list of 101.7% (down from 105%) and median sale prices are up 18% YOY.  While Average days on market have increased 33.3% as interest rates have forced some buyers out of the market, that comparison can be deceiving since the comparison is between 9 days on market last year to 12 days on market this year - historic lows numbers.

The current market changes are the start of balancing and normalization, not a crash. Keep an eye on that inventory. If it skyrockets - which I don't think it will because of solid homeowner equity - then the discussion about a crash may be relevant. But for now, it is not.

@Greg R. - Don't buy into the fear mongers that are promoting a market crash to improve their ratings, likes and reach. You asked for data, and I provided it above. Now rest easy. From an investor perspective, demand for rentals go up whether there is low inventory (people can't find/afford a home) or a market crash (high inventory created by sellers who now need a place to live) so your cash flow numbers should improve in this market either way.

Hi Miles, I agree - the market is currently not in a crash. However, many economic markers indicate that's where we're heading. To your point, certain markets are going to be hit harder than others. And trust me, I'm not listening to social media gurus. Nor am I fearful about it - I'm simply preparing for the scenario as I believe it's the most likely outcome. When it happens I am not going to be surprised/ flat footed.

Your original post asked for data. I provided some, have you?. The inventory is at historic lows there is no getting around that. Inventory would have to quadruple to get the months-of-inventory up to 6 months. Very unlikely to happen. Interest rates, while on the rise, continue to be at historic lows. As the saying goes: "None are so blind as will not see."

 The inventory is actually now rising to 2021 level for SF market since closed sales growth > new listing growth. In vegas market there're lot of inventory to sell and lesser # of buyers.
For MF, there will be oversupply starting next year especially in Southwest market. Actually rent growth is already stabilizing. 

[Jay Hinrichs]

Quote from @Chris Clothier:

Quote from @Nicholas L.:

@James Hamling I agree with most of what's in your post.  Just one question for you - if we were transitioning into a renter nation, wouldn't the homeownership rate be going down instead of being steady / up?  If the US continues to grow - and I hope it does, because I really like it here - won't the absolute number of both homeowners and renters continue to increase?

 The easy answer is no.  As a country, we produce roughly 900,000 to 1.4 million new single family homes annually.  New household formation, I believe is annually over 1.5 million.  Since 2008 we have consistently under-built for basic consumption.  With rising rates, many of those new household formations will not form and instead remain or enter the renter pool.  If 40% of whatever we build becomes rental, which is a possibility, then 60% of the newly built homes will be owner occupied.  Same goes for existing homes entering the market.  You would need a significant portion, up to 40% to be purchased for investment to see the owner occupied percentages goes down.  My opinion anyway.

Example of that Chris is the PDX metro area.. prior to 08 there were 12k doors built annually since the mid 90s this MF and SFR. in 09 a grand total of 700 permits were pulled the construction industry was in free fall.. this market is still 20k doors short of needs.. And I am sure there are other metros where this could be the same situation.

[Larry Zucker]

@Carlos Ptriawan - I can't speak to other markets but months-of-inventory in Raleigh, NC for July 2021 was a meager 0.8. This July it is 1.5. Both numbers are historically low. The issue isn't if the market is rebalancing, it is whether there is a crash on the horizon. And the data, at least here is Raleigh, does not support the notion of a pending crash.

[Russ B.]

2008 was a special sequence of events that, honestly, more people should have seen coming. It was like a game of musical chairs, except that half the chairs were gone when house prices stopped rising.

[Michael Deering]

My SFH portfolio in AZ is down -1.7% but still up 48% over 24 months

My SFH portfolio in PA is up 2.2% and still up 67% over last 24 months

Remember RE is regional and places like Ls Vegas and Orlando historically absorb the big swings. Furthermore, a 30% "crash" in a region should be looked at against that regions appreciation over the last 24 months; which is probably a net 20% gain.  Supply and demand still dictates markets.  Inventory is still low and 5.5% interest rates historically have not been enough downward pressure to depreciate prices.

[Greg R.]

Ok, lets talk about historical numbers. In 1980 the median cost for a house was 63k. The CPI adjusted price is 226k. Now compare that the 2022 median cost which is 440k - almost double of the CPI adjusted price from 1980. Also, when we look at the "historically high rates" we need to adjust for inflation and look at the "real rate". In 1980 inflation was raging at over 15%. Rates were +/- 13.5%

You are focusing on nominal rates, not real rates. a real rate is the nominal rate minus the rate of inflation and it reflects the actual cost the borrower is paying. 

So not only were the houses about half as expensive in 1980 per the CPI, the real rate was lower than rates are today. 

If we're going to look at historical data we need to compare apples to apples. You need to adjust for CPI and inflation to have a credible argument. 

[Leo R.]

Regarding inventory, I'm not familiar with other markets or the national data, but I do know that in my city, our inventory was hovering at around 500 active listings this time last year, with an average DOM under 5 days...today, we're at about 1,100 active listings, and DOM is 20-35 days (depending on price category).  

Soooo... yeah. Over double the inventory, and 5-6x increase in DOM.

Of course, the current dynamic may be representative of a more healthy or "normal" market, but who knows if it will stay this way, or if inventory and DOM will continue to increase...

(here are the links to those two respective reports for anyone interested):

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

[Carlos Ptriawan]

Quote from @Leo R.:

Regarding inventory, I'm not familiar with other markets or the national data, but I do know that in my city, our inventory was hovering at around 500 active listings this time last year, with an average DOM under 5 days...today, we're at about 1,100 active listings, and DOM is 20-35 days (depending on price category).  

Soooo... yeah. Over double the inventory, and 5-6x increase in DOM.

Of course, the current dynamic may be representative of a more healthy or "normal" market, but who knows if it will stay this way, or if inventory and DOM will continue to increase...

(here are the links to those two respective reports for anyone interested):

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

 Yes because closed sales < new listing growth. Overall nationwide closed sales are down 20-25% and new listing YoY is increased by 5%.
Our area is the worst in terms of closed sales. It went down to -40%, but the new listing is down 10% as well. Hence we see major price reduction. Actually based on data there're only 5 cities that experienced 10% price reductions. Most cities only decline 1-3% which is essentially flat.

[Chris Clothier]

Quote from @Nicholas L.:

@Chris Clothier I can't tell if we're agreeing or not!  =-)  My point was just that, if the population continues to grow, the absolute number of both homeowner AND renters can increase, while the percentages will fluctuate.

Oversimplified example - say (rough numbers here!) there are 80M households in the US who own and 40M who rent.  Now say that the number of homeowners goes up by 1M, and the number of renters goes up by 2M.  The homeownership rate will decrease slightly - but there are still MORE homeowners AND more renters.

That's all I meant!

 Sorry, I was answering your first question.  Which means, I agree with the second question/statement!  All good ~

[Carlos Ptriawan]

Quote from @Greg R.:

If we're going to look at historical data we need to compare apples to apples. You need to adjust for CPI and inflation to have a credible argument. 

>>
I can help something here. So the calculation is, $200k house in 2020 should be  priced 70% higher inflation adjusted. In that case , with inflation adjusted, if price is going to reduce from 2022 level, it should reach 2017/2018 level (as the bottom) which is already happened in few homes in few market.  

I'm actually impressed that the so called flipper is buying again this month (august 2022) exactly at this 2018 level. 

[Larry Zucker]

Quote from @Greg R.:

Ok, lets talk about historical numbers. In 1980 the median cost for a house was 63k. The CPI adjusted price is 226k. Now compare that the 2022 median cost which is 440k - almost double of the CPI adjusted price from 1980. Also, when we look at the "historically high rates" we need to adjust for inflation and look at the "real rate". In 1980 inflation was raging at over 15%. Rates were +/- 13.5%

You are focusing on nominal rates, not real rates. a real rate is the nominal rate minus the rate of inflation and it reflects the actual cost the borrower is paying. 

So not only were the houses about half as expensive in 1980 per the CPI, the real rate was lower than rates are today. 

If we're going to look at historical data we need to compare apples to apples. You need to adjust for CPI and inflation to have a credible argument. 

Now I am beginning to think you are just trolling and only interested in arguing your point. Your contention about real rates conflates two issues - a market crash vs. the relative cost of housing over time. You should pack this one in, Greg. The data is just not there to support the notion of a crash.

[Ray Mulli]

Quote from @Greg Scott:

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

Before 2008 people with no income could get liars loans and buy much more real estate than they could afford.  We heard stories of cleaning ladies buying multiple million dollar homes.  When home prices starting falling, the whole thing collapses like a house of cards because nobody had any equity.  They couldn't sell and get out.  We had cascading foreclosures creating a downward spiral.

Recently, prices have been surging.  Given the laws passed after the Great Recession, appraisals and lending is highly restricted.  Appraisals have not been keeping up with prices and lenders won't lend above appraised value.  We sold a house in 2021 and in one day had 20 offers.  Several of them had acceleration clauses stating they would pay more than anyone else up to $X.  Both of them waived any financing contingency because they KNEW the house wouldn't appraise for what they were offering.  They had to make up the difference with cash.  Those people have a ton of equity in their homes.  If they had to sell, they might take a haircut, but they aren't going to get foreclosed. 

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

 @Greg Scott Good analysis. One caveat is worth noting: Covid, yep I said it! The covid era moratoriums are coming due as home owners are unable to pay owed mortgages, and ma and pa investors reap the bad harvest of non-paying tenants. As they say history repeats itself but it doesn't rhyme.

[Chris Clothier]

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. 

 Nice title!  It's certainly gotten a lot of attention and comments.  As for me, I continue to have a strong belief in the markets I invest including the DFW metroplex and outskirts.  I think so much has to do with semantics and words like crash and correction.  I think a few others have noted this too.  I happen to be a long-hold investor and that is also the investor group my company serves.  It is a cliché, but it has proven true for me personally over the past couple of decades:  Time in the market is much more important than Timing the market.  Subtle differences in letters, but massive difference in meaning.  I try to buy based on the same fundamentals.  I own houses on the same street that I bought years apart and price paid per square foot swings by a wide margin.  However, I dollar cost average with each new property and my blended basis is good.  Demand for quality rental properties and very high quality management remains at an all time high and growing.  My rents grow annually by 2-4%, yet have grown closer to 7% over the past 12-18 months.  I expect rent growth to revert back to 4% at some point, which is still growth.  

Is the market crashing or correcting? I have no idea. Is it going to continue to crash or correct in the future? I have no idea. However, I continue to buy any property that meets our criteria and will continue to buy based on long-term holding where a resident pays my note down and enables me to take the additional revenue and pay off principle faster if I'd like (which I do). Then, at some point, if rates come down or I can take advantage of a ARM, I can lower my holding cost across any higher interest properties and use the additional cash flow to reduce principle further.

I really do believe that some data gets in the way of making good decisions.  As each of us are individuals in our decision making, we probably all make decisions differently.  I know the data I need to know to make decisions I want to make.  If, like me, another long-hold investor is looking at the current market, I would imagine they are making similar decisions without even considering crashes and corrections.  My thinking anyway.

[Joshuam R.]

Quote from @Randall Weatherall:

Quote from @Joshuam R.:

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.

 Just wanted to say, your logo is pretty badazz.

Thanks, designed it myself while waiting for my brokerage license to come in!

 uff, even better along with the story. Good work.  Best wishes!

[James Hamling]

Quote from @Greg R.:

Quote from @James Hamling:

 There is everything wrong with this line of thinking Greg, and I do mean EVERYTHING. You can NOT time a market "bottom", flat out fact. Those of us who have been in this game for some time, and by some time I mean those of us who measure our career in decades not years, we know this fundamental law as fact. 

I get it, your sitting back dreaming of a '08' 2.0 and all the juicy deals your gonna snag up because have spent the last years thinking and saying "oh man, if I had just known I would'a" but fact is NO you WOULDN'T, because you DIDN'T, and you DIDN'T because when you COULDA you thought it was all bad and stupid, just-like-now....... 

Fact is, in '09' when I WAS investing, most and I mean MOST as in 90%+ were saying I was nuts, to "wait for the bottom". In 2010 as I flipped and was selling in less then 72 hours most said it was a fluke, luck, and I better stop while I was ahead. In 2011 they said I was going to go bankrupt any day once I got caught with a hot potato in hand. It was in 2012, as MEDIA caught traction fo things and the flipping shows started to become popular that people finally started saying "huh, maybe you got something there, but bah bah bah, it's way too risky". And by 2015 it was "oh man, I WOULDA _______ IF-I-KNEW....". 

Yeah, well, it's not that you didn't know, it's that you simply don't have the vision to see past the BS and see the opportunity. That's the reality check of it. 

To compare things today to '08' collapse and say it will happen again is just infantile knowledge, it is, because there is NOTHING of the same/similar setup, nothing, zero, zip, zilch nada. 

Are things stepping back today, heck yeah, and it's AWESOME! It's called CONSOLIDATION, and it's a GREAT sign and signal for INCREASED pricing. See, this is how economics work, I understand the YT of choice may not understand this in between slinging Nord VPN and then yapping how the world is about to reverse direction and spin backwards. 

We had explosive pricing ascension, if you don't understand the catalyst for this, then you will never understand the consolidation we are in, nor the localized adjustments. We are in the second great suburban migration, empowered by virtual working, civil unrest, politics of the day, and just a desire to not like like a Tokyo sub-division. We have inflation the likes of which has NEVER been experienced in human history and guess what, we are just getting through the 2nd wave of this tsunami of cash-expansion and there is more to come, that's how economics actually works, at least 4 waves from this, the 3rd which is just starting now which is mass increase to consumer expense and wage increase, which will facilitate the elevation in asset pricing yet again due to input cost elevation. 

No, there is NO collapse, unless we are no re-labeling that too so consolidation = collapse, slow moving adjustments over weeks/months = collapse, vanilla on a waffle cone = collapse....... 

Feel free to think you can time the bottom, be my guest, I am used to 80%+ sitting the sidelines talking a lot and doing little to nothing, I am happy to be the minority, I have been it for more then 3 decades. Fact is, home ownership is rapidly stepping away from attainment by most. The very fundamentals are well into transition into a renter nation, and once you realize it, it's too late, your going to be crying saying "oh man, if I knew I WOULDA.....". Again.......

Not sure why you're making the assumption that I'm waiting. I've said repeatedly in this thread that I closed a deal in Jan, at the top of the bubble. And I'm not thinking that I am going to buy at the very bottom of the market. But I'm also not going to buy at the top of the market in a hyper-inflated market and get into a deal that doesn't cash flow well and has a poor COC return - not going to happen. The writing is on the wall of what's to come. My plan is to exercise patience and buy when the time is right. Not to listen to "gurus" that insist that it's always the right time to buy. Inventory is still tight now (albeit slowly improving), but let's see where we are Nov/ Dec. The buyer pool is definitely drying up, proven by steep decline in mortgage apps. A lot of signs point to there being a significant amount of foreclosures in the next 6-12 months as well.

 LMAO! There is so much wrong in that I don't know where to start. 

You say where am I getting the idea your trying to time the bottom, and then go into detail on how your plans are to time the bottom, LOL. 

Then all the rambling saying you bought in the Bubble referring to this past January, then onto how there is going to be mass foreclosures....... I don't understand, what color is the sky in your world? I don't understand people like you who just make things up out of thin air, then pick n choose singular disembodied data points to then present as evidence. 

We have historic HIGH of equity in homes, how does that = mass foreclosures? 

There seems to be no point trying to speak common sense because you've already chosen the result and are refusing to acknowledge the input which clearly states a completely different result. 

This is no different then all the people who said the sky was falling and R.E. would drop by 30%+ when covid lockdowns started. Well, how well did that work out? Homes are how much more now? 

You have fun with your end of the world, enjoy that cool-aid, I'm going to be busy living life and cashing checks. 

[James Hamling]

Quote from @Nicholas L.:

@Chris Clothier I can't tell if we're agreeing or not!  =-)  My point was just that, if the population continues to grow, the absolute number of both homeowner AND renters can increase, while the percentages will fluctuate.

Oversimplified example - say (rough numbers here!) there are 80M households in the US who own and 40M who rent.  Now say that the number of homeowners goes up by 1M, and the number of renters goes up by 2M.  The homeownership rate will decrease slightly - but there are still MORE homeowners AND more renters.

That's all I meant!

 Maybe this simplification will answer the point of the question. 

During the covid event, with all the deaths, total U.S. population INCREASED. So while we had all this death enhancing stuff going on, population grew, I think that's a hard to argue point that clearly U.S. population continues to expand. Last time I checked, at least 98% of people need a roof over there head. 

The only question is with what or how will people procure that roof over there head. 

The crash non-sense is just that, complete and utter nonsense. The entire premise the doom-preachers stand upon for collapse is mass foreclosure, so mass units added to inventory, with not 1 mention of where those people will get there housing from so apparently they all leap off cliffs. Then we have the false narrative that nobody has income, completely ignoring the countless masses in any technology sector who are arguably in the middle of a renaissance of income. Apparently they don't exist. 

Foreclosure have always existed just like divorce, put a ban on divorce fillings for a year of two then see what happens when it lifts, would we call that a mass epidemic of divorce? Context people, context...... 

And again, how many people turn 18/21 every day? How many babies were born every day 21 years ago? How long can a person let there adult kids live in the basement before going bonkers? Every day more and more are coming into need for there own housing. Every person who can't buy, is a new tenant. Every new tenant = need for a new tenant housing. Last time I checked, yup, were still not getting those units from Lego's. 

We have a net unit shortage. The issue at hand is affordability, not demand. WHEN (when NOT if) the 40yr mortgage get's it's christening via regulatory/gov bodies, the fever pitch of sales is going to make this last run-up look like a warm-up. Again WHEN not if. I guarantee this happening before Q2 '24', 100%. I am happy to accept any and all takers who want to donate to my new boat fund via betting against this happening. 

We are in CONSOLIDATION, with localized market adjustment (ie CA) where there pricing sits at bonkers levels that were never sustainable in first place, based upon heavy perceptual value % vs intrinsic value points. 

[James Hamling]

Quote from @Ray Mulli:

Quote from @Greg Scott:

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

Before 2008 people with no income could get liars loans and buy much more real estate than they could afford.  We heard stories of cleaning ladies buying multiple million dollar homes.  When home prices starting falling, the whole thing collapses like a house of cards because nobody had any equity.  They couldn't sell and get out.  We had cascading foreclosures creating a downward spiral.

Recently, prices have been surging.  Given the laws passed after the Great Recession, appraisals and lending is highly restricted.  Appraisals have not been keeping up with prices and lenders won't lend above appraised value.  We sold a house in 2021 and in one day had 20 offers.  Several of them had acceleration clauses stating they would pay more than anyone else up to $X.  Both of them waived any financing contingency because they KNEW the house wouldn't appraise for what they were offering.  They had to make up the difference with cash.  Those people have a ton of equity in their homes.  If they had to sell, they might take a haircut, but they aren't going to get foreclosed. 

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

 @Greg Scott Good analysis. One caveat is worth noting: Covid, yep I said it! The covid era moratoriums are coming due as home owners are unable to pay owed mortgages, and ma and pa investors reap the bad harvest of non-paying tenants. As they say history repeats itself but it doesn't rhyme.

 Our rent collections are at record high so yeah, not sure what talking about there. 

The mortgage restructuring simply tacked on payments to end of mortgage, so not making much sense there either. Not to mention equity tapping. 

And let's look at jobs market, where if you can fog a mirror, you can have any of about 400 jobs in 48 hours. 

The financial system is flush with cash, no issues with the flow of capital...... 

I'm confused, unless this was a delayed post from 2007.......

[Will F.]

Quote from @Larry Zucker:

Quote from @Greg R.:

Quote from @Larry Zucker:

The market is not crashing. The current market is very different from 2008 when inventory flooded the market as people could no longer afford their mortgages. Inventory levels alone tell that picture. In the raleigh, NC market, Year over year (YOY), July 2022 saw the number of listings increase by a modest 1% with a sale-to-list of 101.7% (down from 105%) and median sale prices are up 18% YOY.  While Average days on market have increased 33.3% as interest rates have forced some buyers out of the market, that comparison can be deceiving since the comparison is between 9 days on market last year to 12 days on market this year - historic lows numbers.

The current market changes are the start of balancing and normalization, not a crash. Keep an eye on that inventory. If it skyrockets - which I don't think it will because of solid homeowner equity - then the discussion about a crash may be relevant. But for now, it is not.

@Greg R. - Don't buy into the fear mongers that are promoting a market crash to improve their ratings, likes and reach. You asked for data, and I provided it above. Now rest easy. From an investor perspective, demand for rentals go up whether there is low inventory (people can't find/afford a home) or a market crash (high inventory created by sellers who now need a place to live) so your cash flow numbers should improve in this market either way.

Hi Miles, I agree - the market is currently not in a crash. However, many economic markers indicate that's where we're heading. To your point, certain markets are going to be hit harder than others. And trust me, I'm not listening to social media gurus. Nor am I fearful about it - I'm simply preparing for the scenario as I believe it's the most likely outcome. When it happens I am not going to be surprised/ flat footed.

Your original post asked for data. I provided some, have you?. The inventory is at historic lows there is no getting around that. Inventory would have to quadruple to get the months-of-inventory up to 6 months. Very unlikely to happen. Interest rates, while on the rise, continue to be at historic lows. As the saying goes: "None are so blind as will not see."

 Larry I agree with all your points.  

But  also wouldn't you say most of the properties priced in the last year or so will not make sense at 6%+ rates.

My fear is that affordability is at a low for decades. Property is unaffordable when taking out loans for most home buyers and many investors. Both prices (RE value) is relatively high and rates are increasing. Costs to hold don't make sense with high LTV loans.

I'm currently buying a multifamily 8-20 u and having to put 40-50% down to get a 6% APR loan to work. DSCR ratio makes many deals not make sense on paper...

Either way I'll continue buying but with more downpay and with more caution for the next year or so