Possible Real Estate Downturn ???

Question

😕😕  Talked to some people i know from the loan industry who work with residential loans nationally. (USA). They say they are starting to see/hear  up tick in calls of people asking questions about loan defaults and bankruptcies in different parts of the country.  These people say the data looks similar to some data from back at the beginning of the last real estate crash. If the data continues they think sometime in 2017 we could see the beginning of another (somekind) down turn.

Ryland Taniguchi · Answer

Downtown more like 2000 based on a stock market crash. The banks love to make risky investments in places like China and when these stock markets crash they always get hit. And then he banks with lobbyists always get bailed out and gobble up the smaller banks. Been happening since 1800 in America.

Real estate always goes down.

Maxwell Hunter · Answer

I thought this was an interesting article that popped up today in the Atlanta Journal Constitution.  To be clear, I am not making any claims that we are headed for a downturn, but I thought the stats were interesting nonetheless.

Atlanta home sales: Trouble beneath the surface?

Luka Milicevic · Answer

2 years ago I purchased my primary residence in Nashville. At the time homes were flying off the market in a matter of days.

Fast forward 2 years; they are selling before they even make it onto the MLS.

I spend a lot of time on yahoo finance reading about RE articles. So many articles have the headline "when will housing recover". I haven't really spoken to anyone in just about any market that told me their market isn't ridiculously hot.

I don't know about a downturn, but I sure would love to have one.

Mike Dymski · Answer

I'm not a not a fortune teller; so, I just try to purchase stable cash flowing investments that perform similarly in up and down markets.  My property values likely went down during the recession but the rents did not...actually went up a little.  I'm interested in investing versus speculation and fortunately my market has cash flowing opportunities.

Leo K. · Answer

On a macro economic level it's just a matter of time until the market crashes, but I don't think it will happen this year because it's an election year.

The fed will keep pumping money into the economy via a fourth round of quantitative easing, but the boat has too many holes to be patched up. A fourth round of QE will only serve as a temporary fix. The underlying issue is there's too much debt, China is crashing and will take most of the world with it.

The semi good news is that America is probably the cleanest shirt in a pile of dirty shirts, the impact here won't be as bad as it will be in other parts of the world but we'll certainly feel the impact.

Several wealthy people that I know aren't buying anything right now - they're waiting for real estate to go on sale in the next downturn.

Ryan K. · Answer

Unless there is significant shock to the overall financial system I don't see much of a downturn in real estate any time soon especially the next year or two. The reason is low inventory. Let me repeat that - low inventory. Especially on the more affordable end of the scale, under $200k. When is the last time inventory was this low? And construction costs are getting expensive which I believe is a factor in markets appreciating. You simply can't build anything under a certain price point.

Trace S. · Answer

I welcome another down turn myself. Especially since i missed the up turn in this real estate market because of my adventures doing some government contract work.

Bill Devola · Answer

I think trying to predict a downturn from any one subset of data points (in this case anecdotal evidence from mortgage lenders) is not going to give you an accurate idea.

There were A LOT of factors that went into the downturn.  Im pretty confident that we will see an uptick in foreclosures for two reasons.  The first is as the fed tightens.  But thats years away given the gradual pace they seem to be proceeding at.   Second, the banks are holding back so much inventory its obscene.  I'm not being hyperbolic either.  My area of the country is pretty high value, and I can go through so many houses that are either sitting vacant (already foreclosed), occupants have been living mortgage free for 2-3 years, or a listed REO property has sat marketed months on end getting offers the lender refuses to accept.

My point being, these larger lenders seem to be propping the market.  My guess is they are doing it because flooding the market with inventory right now would depress prices.  They aren't hurting balance sheet wise any more, so they will take their time foreclosing and disposing.

That said, I think there would have to be a major shock to the economy for another severe downturn to happen.  I agree some markets like San Fran, maybe NYC are overpriced, but I would say the majority of the country is not in a bubble like it was in '08.

I also agree that a downturn would be welcome for conservative investors.  Its getting almost as hard for me to find inventory in NJ now as it was in '05.

Brit Foshee · Answer

@Trace S.@Milad Keshavarz

It's funny to see the fear that still exists from 2007-2008.  I think it's a healthy fear, but we need to move beyond this idea that 2007-2008 is going to repeat itself some 10 years later.

Could we see a downturn? Yes.  We are currently seeing some slowdown in my area.  Could we see loan defaults ? Yes.  However, the conditions today are totally different than the conditions of 2007-08.

Secondly, a downturn is not a bad thing.  All I hear today is investors complaining of high prices and thinner margins. The only thing that will help that is a downturn.

Prudent investors are wise and will take advantage of any market up or down.

Possible Real Estate Downturn ???

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