Is a huge real estate crash coming soon?

[Nate Armstrong]

Is a massive real estate crash on the horizon? Experts are divided, but what do you think—are there warning signs suggesting caution for potential buyers and investors?

[Russell Brazil]

Been hearing about said crash for 14 years now. 

[Andrew Postell]

@Nate Armstrong yes, huge crash coming.  So, stopping competing against me on all these houses.  Come back in 10 years.  Should be ok then ;) 

[Jay Hinrichs]

Quote from @Russell Brazil:

Been hearing about said crash for 14 years now. 

actually I thought we would have a pivot in 2019 I actually put together a presentation called the Pivot.. well I was slight off on that one :)

[Becca F.]

I don't see a crash at least with residential. Too many people with under 4% loans, not enough inventory and lots of people own their homes with no mortgage. Warning signs: maybe massive unemployment, WWIII, nuclear missiles in the sky (half joking but half serious). 

I see corrections in the market locally - this is the first time homes are selling below $1 million in San Francisco (it still needs a lot of work). Homes are sitting longer but some properties get multiple offers in good locations. Prices are lower than 2021 prices. If they drop to 2008 prices, I'll be one of the first ones lined up making an offer lol

Not sure about commercial RE with some vacant office spaces and businesses (what were stores and food places) here but there are still are still lots of businesses here

[Becca F.]

What was your reasoning for the pivot in 2019? Now I'm curious.

[Jay Hinrichs]

Quote from @Becca F.:

What was your reasoning for the pivot in 2019? Now I'm curious.

things were slowing down a lot in my world.. But it was short lived and we were about 10 to 11 years into the cycle.. we are now about 15 years into the 10 year cycle.. since i started in 75 it seems like RE cycled about every 10 years  from valley to a new peak.

[Jay Hinrichs]

Quote from @Becca F.:

I don't see a crash at least with residential. Too many people with under 4% loans, not enough inventory and lots of people own their homes with no mortgage. Warning signs: maybe massive unemployment, WWIII, nuclear missiles in the sky (half joking but half serious). 

I see corrections in the market locally - this is the first time homes are selling below $1 million in San Francisco (it still needs a lot of work). Homes are sitting longer but some properties get multiple offers in good locations. Prices are lower than 2021 prices. If they drop to 2008 prices, I'll be one of the first ones lined up making an offer lol

Not sure about commercial RE with some vacant office spaces and businesses (what were stores and food places) here but there are still are still lots of businesses here

ya and office buildings in SF are in free falls as well.. office is the hardest hit segment.. SFRs seem to be holding their own.

[Chris Seveney]

@Jay Hinrichs

I see some corrections in specific markets

I was looking at a STR we had owning in 2020 that seller pulled back and later sold - property is now $600k more than they time / I can't see it being sustainable for anyone to pay that much as revenues will never come close to cover costs

[Sarita Scherpereel]

I don't think there will be a crash. But I hope there is a price adjustment. Thanks to BP and the internet in general, real estate investing is not just for the super rich anymore. Many people are looking to get started. They are faced with low inventory and high demand. That is creating a lot of bidding wars. I'd love to see a more even market but I don't think that is happening anytime soon. 

[Eric James]

Real estate has always gone up and down in cycles. Something like 10 year cycles. We're overdue for a downturn. It seems naive to think these cycles will somehow end.

[Jay Hinrichs]

Quote from @Eric James:

Real estate has always gone up and down in cycles. Something like 10 year cycles. We're overdue for a downturn. It seems naive to think these cycles will somehow end.

agreed and the longer we stay on this upward swing the closer we get to some sort of correction so managing prudent debt loads is critical.

[Chris John]

Quote from @Eric James:

Real estate has always gone up and down in cycles. Something like 10 year cycles. We're overdue for a downturn. It seems naive to think these cycles will somehow end.

Fair warning, I have absolutely no idea what I'm talking about, but I feel like this cycle was extended with cheap money and it lasted longer than it ordinarily would have.  And now, ironically, that cheap money has mothballed the cycle's extension. 

So, I'm kind of expecting things to trend pretty sideways (maybe a little up or maybe a little down) for at least a few years.  It's like this market is a fossil stuck in amber for a lot of us.  I know the pros are still clicking along, but the low hanging fruit seems to have dried up, for me at least.

[Bill B.]

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

[Dan H.]

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

 The houses did not sit unowned. Someone owned virtually every property.  So the primary difference would have only been who benefitted from the appreciation.  

The people who properly saw the benefits of RE, low rates and took a risk on those beliefs benefitted as should have happened.  Those that did not take the risk did benefit as should have happened.  

Best wishes.  

[Paul Azad]

Who knows? but the economic data keeps coming in and pointing toward an aggressive slowdown and probable Recession. 

1) Today the BLS data showed Unemployment Rate now at 4.1% from 3.4% last year, which for first time has broken The Sahm Rule (FED economist Claudia Sahm), who developed a simple shorthand rule years ago that whenever unemployment rises by 0.5% over the 3month avg low within the last 12 months then >95% chance of an impending recession. That got violated today.

2) The M2 money supply has shrunk by >4% in last 2 years, anytime it goes negative in last century, that has a 1:1 correlation with Recession. (Dr Steven Hanke/John Greenwood - Johns Hopkins Economics Dept)

3) Inverted Yield Curve now for >2 years, high correlation with Recession, not perfect, (Campbell Harvey 1986)

4) Our Real GDP was measured in last year's 3rd quarter at 4.6%, then in 4th quarter at 3.6%, then this year's 1st Quarter at 1.3%, and current St.Louis Fed NowCast has it running at 0.76%, so definitely slowing down fast.

average time between recessions in last century has been about 8-10 years (Business Cycle), our last recession was 2008-2009 the Great Recession, but we printed Trillions in last few years so we likely have pushed out the Recession like a dose of Heroine to an addict, we may just be pushing out the inevitable withdrawal

If we do have a Recession, it will definitely affect residential and commercial Real Estate but not equally and not at the same time. The thousands of parts to the economy all have their own cycles, and they don't perfectly overlap. Trucking seems to be sliding into recession, and downtown Office CRE has been in recession for 2 years? Multi-Family? while Data Centers are booming, they all move at different speeds

Recessions like a Fever are necessary to burn away the inefficient allocations of capital that go on during the recovery and expansion phases

Doubtful for a full RE Crash, but would be nice for the average American young family to be able to buy the average size starter home again, it's been awhile :)

[John Morgan]

Fear sells and the doomers and crash bros have been telling us about this crash coming since 2019. Most of them don’t even own real estate and just hoping for price reductions so they can finally buy. lol. We might have some softening in multi family, but not affordable SF where we’re short 4-7 million homes nationwide. 42% own their homes outright. And 30%!have mortgages 3% or less. 60% are at 4% or less. These people aren’t selling for obvious reasons so we won’t have much inventory for a while. Especially if builders are throttling back. Or only building expensive homes. People have a ton of equity and fixed rate mortgages this time around vs 2008 when anyone with a pulse could get a loan. And 1/3 of the mortgages were ARMs back then that reset high. Get back to me when inventory is where we were pre Covid. And if interest rates come down in the next year, expect a lot of people buying due to pent up demand. That will spike prices again and could be a feeding frenzy like we had in 2020-2022.

[Eric James]

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

 Wow, even the great depression doesn't meet your criterion for a real estate crash. LOL

[Chris Williams]

Quote from @Russell Brazil:

Been hearing about said crash for 14 years now. 

 Haha. I been waiting for years. Crash or no crash the best investors will prosper as always and those who are not as cash heavy or as connected will fall off or leave the industry. 

[Chris Williams]

Quote from @Eric James:

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

 Wow, even the great depression doesn't meet your criterion for a real estate crash. LOL

 Usually in my personal experience the people who want there to be a crash either can't afford the current prices or are big billionaires who want to buy things at a discount. 

[Michael P.]

Yes

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In China

[Ross Paller]

The CRASH is for sure coming....

Here's how to protect yourself:

1) Only buy good deals below current market value

2) Prudently escrow the money it takes to get them into service (in service = making money)

3) Don't over-extend on the amount of projects you can do at one time (project = time between purchase and "in service")

4) Continually build your skills in getting deals (sales/networking/marketing), building a better depth chart of vendors, project management, and writing strategic scopes of work for the properties you buy.

5) Put money aside after every successful project. Always have cash reserves.

Do these 5 things always then you won't care what the market is doing.

[Account Closed]

Quote from @Nate Armstrong:

Is a massive real estate crash on the horizon? Experts are divided, but what do you think—are there warning signs suggesting caution for potential buyers and investors?

 It's inevitable. Crash is preceded by pumping exorbitant amount of money into RE which hyperinflates the prices and leads to bubble burst when everyone wakes up. 

Last time it was average Joe who was taking mortgages well beyond his ability to repay. Today it's hedge funds, blackrocks , foreign investors and etc. Dodd Frank could prevent Americans from buying homes beyond their means (that's why few Americans , if they have to finance a purchase, are buying homes now), but it could not prevent hedge funds from dumping billions of dollars of cash into RE industry. 

The smart thing would be to unload all the real estate before complete crash and then buy it all back when prices drop. Since you can't predict when this will happen, you could switch to short term cash cycle models in the meantime. 

[Marcus Auerbach]

Quote from @Nate Armstrong:

Is a massive real estate crash on the horizon? Experts are divided, but what do you think—are there warning signs suggesting caution for potential buyers and investors?

Experts are divided? Really? Name one, who is credible and not a click-bait social media guy. 

Markets ebb and flow and you can always have a let's say 5% swing, but that is hardly a crash. And as long as we have more people than houses it's hard to construct a scenario where residential real estate would come under pressure.

I subscribe to a lot of professional research for my YouTube channel about Milwaukee market data and I always get asked to comment about market crash reasons. When you look into the data, they all fall apart quickly.

[Blake Cogdill]

In our area of Mount Pleasant, SC, people continue to move here paying higher prices than the locals. Prices continue to go up. Our new build that we purchased in March of 2023 has gone up 50% from where we purchased. I don’t think it is reasonable that prices have gotten to where we are in our area, but people keep paying the price 🤷‍♂️

[Jay Hinrichs]

Quote from @Blake Cogdill:

In our area of Mount Pleasant, SC, people continue to move here paying higher prices than the locals. Prices continue to go up. Our new build that we purchased in March of 2023 has gone up 50% from where we purchased. I don’t think it is reasonable that prices have gotten to where we are in our area, but people keep paying the price 🤷‍♂️

Charleston Market is crazy.. Money flows to places people actually want to live though