Real Estate Market Bubble?

[Sam Fowler]

What’re some opinions on the state of the current real estate market? I know the market in many places is very hot currently and continues to rise. Do you foresee another housing bubble or crash? How does this effect your mindset on continuing to buy more properties?

[Jerry W.]

@Sam Fowler, here is my 2 cents, and it's worth what you paid for it.

First this is the weirdest metric I have ever seen in the Wyoming boom, bust economy.  I have seen a fair number of booms and busts.  This one is vastly different from any other boom I have ever seen.  House prices in WY mirror oil prices, oil goes up, jobs go up, house prices go up.  Oil prices go down, jobs and wages go down, and house prices go down.  Oil dropped below $0 for awhile in some places as they were paying for storage on things like oil tankers because they couldn't unload at a refinery as they were full from no one driving or flying and using fuel.  Despite that housing sales and prices spiked massively in WY, ID, ND, SD, UT, etc.  This is crazy.  Covid caused many jobs to become work from home and freed the high paying job from being tied to living in a metro area.  I am renting to folks from MN, NJ, CO, CA, etc.  This is nuts.  Housing prices will not be popping from a burst bubble for a long time.  With interest rates low, and demand high prices will remain high.  Lack of inventory, lack of builders, and lumber prices, copper prices, plastic prices all surging massively new houses are so expensive to build that value will remain in older houses until demand is slaked.  It takes less than 1.5% of folks from CA moving to WY to double it's population.  Housing costs are 1/10th of the cost in my area compared to CA.  Now that the job doesn't tether them there they will move to cheaper and less populated areas.

Another problem is that foreclosures have been held up due to the Covid rules.  That will most likely ease up soon, but it won't solve the housing shortage.  Oddly enough Covid has spurred another housing crisis of folks buying up short term rentals.  Houses are being converted to STRs.  Folks quit using Motels with lobbies that hundreds march through each day for SFRs that only they stay at.  Folks are underestimating the impact that had.  Look at the thousands of homes burned in the fires last year, and the many more destroyed by the record number of hurricanes.  Lake Charles was pretty much destroyed in LA.

No, no bubble, but it is weird and hard to predict.  @Kenton LeVay nailed the lack of a crystal ball problem.  We tend to look to see how things will turn out based upon how things went in similar situations in history.  We don't have anything close to a modern pattern to examine this time.  Black Swan events happen on a regular basis, but how they affect the market can be radically different.

My advice, is buy a ticket and enjoy the ride as best you can.  Don't be a spectator.  @Steve Vaughan put it well.  Figure out a strategy, maybe commercial, or self storage, maybe do a vacation rental, maybe go to building houses or developing land, just buy and flip on a massively more expensive scale like buying 800 sq ft one bedroom houses and adding 1500 sq ft to them.  Use your head, look for opportunity and go for it.  life is not a spectator sport.  Good luck and best wishes folks.