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?

[Jay Hinrichs]

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @Dan H.:

Quote from @Eric N.:

Quote from @Dan H.:

Quote from @Eric N.:

Quote from @Edgar U.:

Ever since BP started someone always posts crash this, crash that, crash this year. The only thing crashing are the ones not getting involved in this market, a lot of money to be made! Adjust strategies, be the best at it, and move on. Should a "Crash" does happen, just adjust again until you figure out what is working and move on, adjust, etc. If one follows the news, there is crash almost every month, if one follows the money, there is money in every month!

Impeding crash can be an opportunity for anyone who can leverage it. A lot of people bought homes in CA after last crash, at a good discount, and if they were smart would sell those homes in the past few years and moved their investment (with huge equity) elsewhere. It will also be a great loss for those who paid full retail when market reached the pinnacle, they will be upside down and their homes will go on foreclosures. It's good to think about it and try to foresee it, so one is not victimized by it at very least.

As to people saying things, people will always say what they want and think. That's why we have Freedom of Speech, versus tyranny where people get their heads cut off if they speak unpopular things. But all the empty talk set aside, there is a reason to expect a new crash. Dodd Frank was good at keeping it at bay until the COVID pandemic hit. Ever since, with hyperinflation, rising RE prices (in part fueled by historically low rates in 2021, before feds started to hike them) and massive cash flow from hedge funds, foreign investors and etc., the RE prices skyrocketed far beyond what US buyer can afford to pay. With US median household income in upper $70K, there is no way your regular 9-5 worker can afford to buy homes at the prices they were selling recently. Once tide changes, investors pull, foreclosures roll things will get ugly. At this point it is not a question of if, but it's a question of when. Most certainly you can thrive in roller coaster if you are well informed and can make the right decision as to when you should buy and when you should sell your RE, just like any other commodity on the market. 

 Simple question: can you list any item ever that crashed when there was less supply than demand?   If you can, what was the item and when did the crash occur?   All studies show a shortage in housing where people want to live.   

It is tough to predict a crash of a commodity that has a shortage.  Many people may never be able to afford to purchase their own home but as long as demand exceeds supply I question if it matters. 

I do think we are in a tough market for RE investors.   Recent purchases are almost universally cash flow negative.  Without rent growth or appreciation, these purchases produce terrible return.   Buy the buyer qualified for the loan with the poor cash flow implying they can handle the poor cash flow. 

Best wishes.  

 Same to you, best wishes and all. The reason for crash is what I have mentioned above. Commodity is not worth what it is sold for, the only reason it is so high is the abundant flow of the cash from hedge funds, financial management companies, foreign and domestic investors who pay cash to purchase 32% of existing inventory. But there is no perpetuum mobile and this will not continue infinitely, just as housing boom of early 2000's didn't last forever. There will be a breaking point, and once investors pull out and lots of underwater homeowners go in foreclosure, things will change. It will likely be accompanied by lower interest rates, with Feds bringing them down to stimulate growth post apocalypses, which will further increase the affordability of houses. One once the chain reaction sets there will be a flood of people existing RE, just as there was flood of people buying in during 2021 rat-race. I think it will be a good time to buy RE when the market crashes. Those who will have cash at such juncture will have an opportunity to gain big time. 

 I notice you did not answer if you could think of one commodity that crashed when demand exceeded supply.  I am assuming that you could not.

At the great recession there was years of significantly adding to the housing supply.  There was not a shortage of housing where people want to live like today.  

So in your scenario the houses are too expensive so people stop purchasing them and investors sell a commodity in short supply at a loss? But people have to live somewhere.  They can increase occupancy a certain amount but that has limits.   The prices today have not reached the point that investors are not still Buying.   So what would cause an investor to sell a commodity in high demand and short supply at a loss?

Note I am not saying it cannot happen but I would not count on it.   I have done my underwriting last 2.5 years reflecting no near term appreciation but my market has appreciated on average over $100k in that time span.  Was I too conservative?  Possibly.    Those who sat the sidelines for the last 2.5 years need $100k of depreciation to maybe be close to same as if they purchased 2.5 years ago.  I say close to the same because those that purchased 2.5 years ago still would have the equity pay down. 

Sitting on the sidelines has risk.  It is a different risk than the risk of purchasing RE.  I guarantee that historically the risk associated with sitting the sidelines has impacted at a higher rate than the risk associated with an RE crash.  

By the way 2.5 years ago going back to GR I was hearing similar stuff about price of RE in my market being too unaffordable but statistically it was more affordable than most of the previous 60 years.   Today my market is still more affordable than it was in the 1980s.  

Sit the sidelines and take the risk or purchase RE and take the risk.  I plan to continue to purchase.  

Good luck

 I see no point in arguing about something that , to me, is certain to occur. But since it had no occurred yet, there is no evidence of it happening at the moment. So, it would be futile to argue this back and forth. I just set out my reasoning, why I believe it will happen. Feel free to ignore it and do as you wish. I don't owe you fiduciary duty and , frankly, don't care how you manage your own affairs.

As to question you asked, we have a shortage at this very moment because house owners who locked low APR loans are unwilling to sell. They know they will get less house and very high APR to finance their next purchase, so why sell now? With home values either appreciating or holding, it does not make sense at present time to sell if you are one of those homeowners. And construction can't catch up with demand. Besides, new constructions are selling for astronomical price out of the reach of ordinary Americans (why would they sell for less than a current marker value? It's better to sell fewer home for retail than build homes at loss. Builders are not charitable organizations to deliver below market cost houses). When I say current housing prices are beyond affordability of average Americans I refer to median household income of ~$79K. 32% of the homes bought not by your average Joe Six Packs, but paid in cash by high equity individuals, hedge funds and investors. Median household earning $79K/year doesn't have $400K-$800K cash in a bank to buy the houses, much less finance it with 7% APR. But circumstances will change. On June 21, 2024 Freddie Mac got approval to purchase second mortgages on SFH occupied by primary residents. Why do you think they were approved to do that? And what do you think will happen with housing market when people who can't afford to pay their bills take HELOC and max out LTV? Where will they get money for food and other necessities once HELOC is depleted? What do you think will happen to their homes once they no longer can afford them? It's coming. I don't know when, but housing market will crash. And it's good to know and anticipate it ahead of the time, so that you don't make mistakes that others do. I have almost 50% equity on my current home and have opened HELOC line on it just before rates skyrocketed, just to have a back up cash for emergency purposes. I haven't touched it since, my HELOC balance is ZERO. I would rather cut my expenses than touch it, especially now when I know what is coming. And my HELP rate is just under 10%. How many home owners do you think do the same and not using their HELOCs to pay their bills or to maintain lifestyle that is suddenly out of reach due to crazy inflation we saw in the past 3 years? Once these homes start going to foreclosure, en masse, they will drag down the prices of homes in general. With prices going down all the hedge funds and financial account managers will start dumping the RE. Since any mortgage becomes an instrument , those will be dumped as well. Then you will have more housing that anyone will have means to buy (and those who have means won't be touching something in freefall). That's when things will change. I know it and I am prepared for it. I hope to have good credit, good money at hand and ability to purchase homes when the correction occurs. It will be the best time to invest in RE. 

 So you reasons for things will go into foreclosure are interesting. I don't think it'll happen exactly that way, but if remotely does you bet the government will bail out homeowners. So I don't think it'll be a tangible concern. With that said, when foreclosures come the private money will not be sell side but buy side. Home ownership will get more concentrated. 

Also, if/when a crash happens, you got to take into account where does it bottom. Same decision with equities.  We can use VOO, Vanguard's S&P 500 index, as an example. In Oct of 2022, it hit sub $330 after trading north of $430 within the 1 year window. This weekend it rolled off just south of $510. Do you see a crash taking us back to that $330 level? That's a 35% hit. For akin results, go check RE in Sep-Dec 2022. Same things in most markets, they traded 15 to 30 less than they are now. How deep does this "crash" hit, more than 30%? The crash in my opinion already happened in H'2 22. The correction has yet to come. Of course this is market to market and case by case.

lenders,  Servicers ( who actually own most of the SFR mortgages in the US) and the FED.  learned a very deep and expensive lesson  from 07 to 2012. So at this point foreclosure is a last resort.. These entities will do everything they can to help a homeowner out.. U will still have foreclosures but its not going to be like it was prior to 08.

[Marcus Auerbach]

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

[Dan H.]

Quote from @Eric N.:

@Dan H.: >>That does not define a shortage. That defines a supply/demand constraint. The shortage is because the country is short a significant number of housing units where people want to live. <<<

LOL. Are you saying that shortage does not define shortage?))) Ok, you want to lighten up and try to crack a joke. I get it. But that set aside, my point is not to define shortage (it is what it is, lack of supply), rather to explain WHY it exists. One of the main REASONS is that homeowners don't want to sell homes. Why? Because they are locked into low APR. If you think about the main reason WHY there is a shortage it's obvious that it is circumstantial and that reason will evaporate with changed circumstances.

>>a buyer does not need $400k to $800k. using owner occupied loans can get 96.5% LTV. At that LTV, $35k can purchase a RE worth $1m. 7% apr is historically moderate and why home were statistically less affordable in the 1980s. <<

Wrong. Even if you get 100% LTV , with $35K you can't purchase a 1m home at 7% APR, unless the banks will write you a 1000 year loan. $35K can afford to pay around $1000 on housing. How long will it take you pay off 1 mil loan with 7% APR with $1000/mo installment. I mentioned earlier that I still remember 8% APR on mortgages back in 1990's. But I also noted that the exact same homes that fetch $600K today were priced at $140K back then, and they were in much better shape being 30 years younger. Current prices and APR are not sustainable, it will inevitably crack and crash.

>>In addition to the affordability not being at a worse case, the information to educate on home buying options has never been greater. There are programs like NACA, FHA, VA, etc. There are finance options like owner financed, assumable, sub-to, DSCR, lease to own. there are alternate rent options such as STR, MTR, rent by room. There are numerous property types such as self storage, Mobil home parks, office, industrial, commercial residential, non commercial residential, etc. There are numerous value adds such as traditional rehab, development, change of zoning, TIC, etc. then there is taking a role in the financing such as hard money lender or notes. There is flipping, BRRRR, and rent ready units and turn key. <<<

You do you. If you don't like what you hear plug your ears and do as you wish. Your decisions and glasses you wear are none of my business. But none of what you say will avert impeding crash.

>>>my point is there are so many paths in RE. To believe that at anytime there is not a viable path mostly points to needing more education. <<<

One of us certainly needs some education and I don't think it's me. You can talk about STR, MTR, BRRR, NACA, FHA, VA and etc. all day long, none of it will avert the market crash and correction.

Of course there is always a path to make money. Even and especially crashing market presents the best opportunity in decades to make most of one's investment. Study history, learn a bit about it, you may need it.

> homeowners don't want to sell homes. Why? Because they are locked into low APR.

This does not make the shortage of units.  It defines a shortage of units for sale which is very different.  Someone is living in the unit.   It sells someone else wil live in the unit but the person who sold now needs to find a unit.  Even if the number of sellers increased 10x tomorrow, there is still a shortage of units.  

>Even if you get 100% LTV , with $35K you can't purchase a 1m home at 7% APR, unless the banks will write you a 1000 year loan. $35K can afford to pay around $1000 on housing. 

If they cannot find a way with all the options available, then they will continue to rent.  It will save them money in the short term, but in the long term renting will cost more.   It is an option for those who do not educate to find a way. this has always been the case.  

> But none of what you say will avert impeding crash

This is your opinion but note that without a single instance of a crash of a commodity where demand far exceeds supply, your case seems weak.  No reason to believe RE is about to be the first such occurrence.  

>Study history, learn a bit about it, you may need it.

I will be fine.  I am well diversified.  I have made a lot of money with 3 different paths.  I do not hope a crash on anyone but if it happens, I am positioned well.  If it does not happen, I am Positioned well.  My education has allowed me to be in a position where neither case impacts me beyond seeing others impacted.  

If you sit the sidelines and prices continue to rise, are you good?   Many will be missing out on opportunity to own a home.   They will have made a decision that may make them a lifelong renter.  

Best wishes.  

[Dan H.]

Quote from @Eric N.:

Quote from @James Wise:

Quote from @Eric N.:

Quote from @Eric N.:

@Dan H.: >>That does not define a shortage. That defines a supply/demand constraint. The shortage is because the country is short a significant number of housing units where people want to live. <<<

LOL. Are you saying that shortage does not define shortage?))) Ok, you want to lighten up and try to crack a joke. I get it. But that set aside, my point is not to define shortage (it is what it is, lack of supply), rather to explain WHY it exists. One of the main REASONS is that homeowners don't want to sell homes. Why? Because they are locked into low APR. If you think about the main reason WHY there is a shortage it's obvious that it is circumstantial and that reason will evaporate with changed circumstances.

>>a buyer does not need $400k to $800k. using owner occupied loans can get 96.5% LTV. At that LTV, $35k can purchase a RE worth $1m. 7% apr is historically moderate and why home were statistically less affordable in the 1980s. <<

Wrong. Even if you get 100% LTV , with $35K you can't purchase a 1m home at 7% APR, unless the banks will write you a 1000 year loan. $35K can afford to pay around $1000 on housing. How long will it take you pay off 1 mil loan with 7% APR with $1000/mo installment. I mentioned earlier that I still remember 8% APR on mortgages back in 1990's. But I also noted that the exact same homes that fetch $600K today were priced at $140K back then, and they were in much better shape being 30 years younger. Current prices and APR are not sustainable, it will inevitably crack and crash.

>>In addition to the affordability not being at a worse case, the information to educate on home buying options has never been greater. There are programs like NACA, FHA, VA, etc. There are finance options like owner financed, assumable, sub-to, DSCR, lease to own. there are alternate rent options such as STR, MTR, rent by room. There are numerous property types such as self storage, Mobil home parks, office, industrial, commercial residential, non commercial residential, etc. There are numerous value adds such as traditional rehab, development, change of zoning, TIC, etc. then there is taking a role in the financing such as hard money lender or notes. There is flipping, BRRRR, and rent ready units and turn key. <<<

You do you. If you don't like what you hear plug your ears and do as you wish. Your decisions and glasses you wear are none of my business. But none of what you say will avert impeding crash.

>>>my point is there are so many paths in RE. To believe that at anytime there is not a viable path mostly points to needing more education. <<<

One of us certainly needs some education and I don't think it's me. You can talk about STR, MTR, BRRR, NACA, FHA, VA and etc. all day long, none of it will avert the market crash and correction.

Of course there is always a path to make money. Even and especially crashing market presents the best opportunity in decades to make most of one's investment. Study history, learn a bit about it, you may need it.

FYI, I said banks would have to write a 1000 year term loan to let someone with 35K income pay off 1 mil loan in 1000/mo installments. It's inaccurate. One with 35K income will NEVER pay off 1 mil loan, even in million years. Simply because the interest payment alone at 7% APR will be in excess of $3K, the total gross income of the earner you mentioned. At ZERO APR (suppose home owner finances it), it would take borrower 75 years to pay off 1 mil debt if they paid in $1100 monthly installments. $1100/mo being the maximum installment they could realistically afford with 35K income. Since they have to also eat, pay utility bills and other expenses. And that doesn't account for taxes, insurance, maintenance costs. So, what you propose doesn't work in a world we live in.

 With a $35k yearly salary, Banks will let a borrower do a loan around $100k-$115k. What kind of drunk maniac thinks Banks are handing out $1 Million Dollar Mortgages to people making $35k?

 I hope you read the comments on the thread before responding (to put things in proper context) and are aware that it was the poster above who suggested it.

@Dan H.: 

The $35k was 3.5% of $1m which is what is required at 96.5% LTV not including closing costs. Simple math.

it was not stating anything with regard to income necessary.  The income necessary has a wide range depending on loan terms and house hacking where rent can be applied to income requirements.   

note there are a lot of finance options.  I would not be surprised f I have the worst debt to income ratio on this entire site, yet I can still obtain loans.   

Good luck

[Account Closed]

Mehehehe, everybody will see what they want. In case one is a realtor (or hedge fund manager and etc.), everyone also will want to see it certain way, so they can continue making their commission on sales and investments of client's money. Why would they care about crash and someone ending up under water , as long as commissions pile up? LOL

But the reality is what it is. Median income of US family is 79K. They can only afford homes  We are about to see some major correction and once foreclosures, short sales and rat-race to sell (like rat-race to buy in 2021) sets in, there will be flood of properties in the market and the biggest home loan they can afford is $277K. https://personalfinanceblogs.com/how-much-house-can-i-afford-if-i-make-79000/ Who do you think is going to buy the foreclosed homes for $600K-800K when rat-race to sell starts? Pull of investors will surely buy them, direct from the banks, in batches of 20000 homes per transaction. Just like they did last time. Yes, those homes will appreciate back and investors will make a fortune out of the disaster. But don't think for a minute that it won't happen. Some posters suggest gov will help and bail out home owners to prevent foreclosures. Nothing is farther from truth. All gov can do, under loss mitigation laws, is give home owners extra time to scrap up some money and make some sort of arrangement to resume paying their loans. They may offer some refinancing options that make expensive home more affordable by writing a 40+ year loan term with balloon payment at the end. And anyone who can still afford it will pay until they are not under water. But once rat-race to sell starts and mortgages drown under water how many people will make sacrifices and pay their last cents to stay current in the mortgage, as opposed to letting banks to foreclose? All the loss mitigation and other gov protections can do at that point is delay the foreclosure and eviction from property by couple of year. But it will happen nevertheless. I think it will be wonderful opportunity to invest in RE. It's wisest thing to prepare for it and snatch few props when the crash occurs, like people did in 2010-2011. I know millionaires who did just that in CA. They were 9-5 employees until 2010-2011, saved a lot of cash in good time and used it as a down payment to buy 4-5 props and took off from there. Now they sit on over million dollar of assets, preparing to comfortably retire. So, while crash is painful and tragic it also presents opportunities like never before. Those who are informed and prepared will benefit from it the most. Others can do as they will.

[Jay Hinrichs]

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

I never was sold on younger generation being life long renters I mean they are not brain dead and they will understand ownership in most cases is far smarter than just throwing their money away on rent.

[V.G Jason]

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

[Karen Margrave]

There's a saying in real estate, "all real estate is local". Every area have things specific to them that affect the supply and demand for real estate. Nobody knows when or if the market is going to crash. There are so many things going on in the world, it's impossible to say. All we can do is look at what is happening TODAY. What is going on in your local area? Are businesses shutting down, people moving, etc., or is there something there that is a draw for people, where they want to buy homes? Is there an abundance of homes on the market, or is the market tight? On rentals, are there a lot of vacancies, or a huge demand and prices high? 

Real Estate is all about supply and demand. In CA there's no big supplies coming on the market in most areas where there aren't mega developers. The costs to build are too high, and until fuel prices drop and the environmental regulations are toned down, that won't change, meaning existing housing will continue to go up. Other areas may have lower costs to build, etc. and if there's huge demand, it may make sense to do spec homes, etc. 

[V.G Jason]

Quote from @Lenora Dana:

@Nate Armstrong

If not interfered with, you can count on 17 year cycles. We're in the - short inventory, increasing construction phase. In about 5 years, we'll be in the over built but won't stop construction until forced too (price dropping) phase. Then 4 years or so of being able to find good deals more easily. Then 8 years of consistent price increases, looking harder for deals, then lack of inventory again. Rinse, repeat.

Interference = pay attention to the financial instruments markets, when those guys/gals get giddy about making money hand over fist, they're screwing people over and a crash is coming.

This is just pandering to a dogmatic belief of the cyclical stories of REI and some asset classes Heard this same stuff from an AM on Friday, the core differences is the market interpretation and reaction is completely different. Therefore such difference in input variables, the outputs will be different.

To help tell you how wrong this is go check how much new construction is BTR to BTS(build to sell) from 2021 to 2026. Then go check how many BTR & BTS communities had to halt construction in middle to end of 2022. Compare that to any times there was this much growth in new construction. I'll give you a hint there was very little, I mean a minute, percentage of BTR vs BTS in yesteryears and it's significantly up this time. 

This means still net little inventory; Wall Street saw a short, and jumped on it harder than private smart money jumped on gamestop shorting. The "hand over fist" has not materialized and they've been caught in the trenches of the market for the last 2 years with the rate increase destroying their intentions. This has created an even less than expected inventory growth. 

2022 fwd will be unlike any other in REI, quit looking at the past. It's such wrong logic to use. I am a firm believer in net asset prices hurting after the first rate cut materialzies, and am a firm believer REI prices get correction per market when inventory tightens to demand. I don't think we'll see inventory exceed demand. If I had to give an easy way to look at it

Q2 2020-Q2 2022
Demand>>>>>>>Supply

Q3 2022-Q4 2022
Demand>>Supply

Q1 2023-Q3 2023
Demand>>>>>Supply

Q4 2023-YTD 2024
Demand>>>>Supply

When we get Demand>>>Supply or lower, the correction is coming in. That's likely going to start this fall in some markets.

[Account Closed]

Quote from @V.G Jason:

Quote from @Account Closed:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

[V.G Jason]

Quote from @Jay Hinrichs:

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

I never was sold on younger generation being life long renters I mean they are not brain dead and they will understand ownership in most cases is far smarter than just throwing their money away on rent.

It's not going to to be their choice. Older gen Zers and younger millennials will likely go to the grave alone. Life today is exponentially costlier than the yesteryears and they're doing it alone.

They're going to be lifelong renters, the only way out is inheriting a house or winning the lottery. The former is more realistic, the latter i wish them the best. We'll be a renter nation, for sure.

[V.G Jason]

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

[Jay Hinrichs]

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

[V.G Jason]

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

[Jay Hinrichs]

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

I think one of the main issue with exiting whole subdivisions of BTR is that the homes were built about as cheap as you can build a home.. and a neighborhood full of rentals, 100% rentals is going to look like crap from a curb appeal standpoint.. and who wants to buy an owner occ surrounded by tenants like the first people coming in would. I dont think most private investors really contemplate those aspects of buying in 100% BTR communities.. its not MF .. UNLESS the community has HOA and HOA is taking care of all the landscaping etc.

I bought 12 BTR post Katrina for the Go Zone bene's which were substantial.. And I was very choosy to buy in neighborhoods of new builds that were not saturated with investors I paid more and they were not as cash flow gifted as others who were focused on cash flow my main goal was Go Zone and then when i went to exit 10 years later I could actually sell them easy on the MLS to owner occs and made a little bit of appreciation while my cash flow was neutral to maybe tiny positive but i saved close to 500k plus in personal income tax over the course of 3 years buying them before go zone expired..

[V.G Jason]

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

I think one of the main issue with exiting whole subdivisions of BTR is that the homes were built about as cheap as you can build a home.. and a neighborhood full of rentals, 100% rentals is going to look like crap from a curb appeal standpoint.. and who wants to buy an owner occ surrounded by tenants like the first people coming in would. I dont think most private investors really contemplate those aspects of buying in 100% BTR communities.. its not MF .. UNLESS the community has HOA and HOA is taking care of all the landscaping etc.

I bought 12 BTR post Katrina for the Go Zone bene's which were substantial.. And I was very choosy to buy in neighborhoods of new builds that were not saturated with investors I paid more and they were not as cash flow gifted as others who were focused on cash flow my main goal was Go Zone and then when i went to exit 10 years later I could actually sell them easy on the MLS to owner occs and made a little bit of appreciation while my cash flow was neutral to maybe tiny positive but i saved close to 500k plus in personal income tax over the course of 3 years buying them before go zone expired..

 The illiquidity of certain market types has not even been rationalized by wall street. This is just them being just being hyper in response to see shorts and creating a deeper end of it. 

[Jay Hinrichs]

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

I think one of the main issue with exiting whole subdivisions of BTR is that the homes were built about as cheap as you can build a home.. and a neighborhood full of rentals, 100% rentals is going to look like crap from a curb appeal standpoint.. and who wants to buy an owner occ surrounded by tenants like the first people coming in would. I dont think most private investors really contemplate those aspects of buying in 100% BTR communities.. its not MF .. UNLESS the community has HOA and HOA is taking care of all the landscaping etc.

I bought 12 BTR post Katrina for the Go Zone bene's which were substantial.. And I was very choosy to buy in neighborhoods of new builds that were not saturated with investors I paid more and they were not as cash flow gifted as others who were focused on cash flow my main goal was Go Zone and then when i went to exit 10 years later I could actually sell them easy on the MLS to owner occs and made a little bit of appreciation while my cash flow was neutral to maybe tiny positive but i saved close to 500k plus in personal income tax over the course of 3 years buying them before go zone expired..

 The illiquidity of certain market types has not even been rationalized by wall street. This is just them being just being hyper in response to see shorts and creating a deeper end of it. 

U dont think they have thought about the exit before they run out and buy thousands of houses. Maybe not.. or maybe the exit really is to just wrap them up and sell them as portfolios of rentals we do see that a lot one hedge fund selling to the new hedge fund on the block.

[V.G Jason]

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

I think one of the main issue with exiting whole subdivisions of BTR is that the homes were built about as cheap as you can build a home.. and a neighborhood full of rentals, 100% rentals is going to look like crap from a curb appeal standpoint.. and who wants to buy an owner occ surrounded by tenants like the first people coming in would. I dont think most private investors really contemplate those aspects of buying in 100% BTR communities.. its not MF .. UNLESS the community has HOA and HOA is taking care of all the landscaping etc.

I bought 12 BTR post Katrina for the Go Zone bene's which were substantial.. And I was very choosy to buy in neighborhoods of new builds that were not saturated with investors I paid more and they were not as cash flow gifted as others who were focused on cash flow my main goal was Go Zone and then when i went to exit 10 years later I could actually sell them easy on the MLS to owner occs and made a little bit of appreciation while my cash flow was neutral to maybe tiny positive but i saved close to 500k plus in personal income tax over the course of 3 years buying them before go zone expired..

 The illiquidity of certain market types has not even been rationalized by wall street. This is just them being just being hyper in response to see shorts and creating a deeper end of it. 

U dont think they have thought about the exit before they run out and buy thousands of houses. Maybe not.. or maybe the exit really is to just wrap them up and sell them as portfolios of rentals we do see that a lot one hedge fund selling to the new hedge fund on the block.

 This is what will happen.

There won't be the ability to get a real mark to market if you go sell each individually and recreate a BTR environment to own occ. You also run the risk of if it's hard times and they are forced to sell, local Billy & Rachel cannot buy it for the same reasons. So you go get 60c on the dollar from the other hedge fund that is set up for it. Or let an AM swallow you whole like Blackstone did with Tricon. 

This is why when Homes for rent, tricon, prestige, etc., go from no longer buying to no longer building it kicks the inventory shortage can down the road. Some markets are already okay, but most are not.

[Jay Hinrichs]

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

I think one of the main issue with exiting whole subdivisions of BTR is that the homes were built about as cheap as you can build a home.. and a neighborhood full of rentals, 100% rentals is going to look like crap from a curb appeal standpoint.. and who wants to buy an owner occ surrounded by tenants like the first people coming in would. I dont think most private investors really contemplate those aspects of buying in 100% BTR communities.. its not MF .. UNLESS the community has HOA and HOA is taking care of all the landscaping etc.

I bought 12 BTR post Katrina for the Go Zone bene's which were substantial.. And I was very choosy to buy in neighborhoods of new builds that were not saturated with investors I paid more and they were not as cash flow gifted as others who were focused on cash flow my main goal was Go Zone and then when i went to exit 10 years later I could actually sell them easy on the MLS to owner occs and made a little bit of appreciation while my cash flow was neutral to maybe tiny positive but i saved close to 500k plus in personal income tax over the course of 3 years buying them before go zone expired..

 The illiquidity of certain market types has not even been rationalized by wall street. This is just them being just being hyper in response to see shorts and creating a deeper end of it. 

U dont think they have thought about the exit before they run out and buy thousands of houses. Maybe not.. or maybe the exit really is to just wrap them up and sell them as portfolios of rentals we do see that a lot one hedge fund selling to the new hedge fund on the block.

 This is what will happen.

There won't be the ability to get a real mark to market if you go sell each individually and recreate a BTR environment to own occ. You also run the risk of if it's hard times and they are forced to sell, local Billy & Rachel cannot buy it for the same reasons. So you go get 60c on the dollar from the other hedge fund that is set up for it. Or let an AM swallow you whole like Blackstone did with Tricon. 

This is why when Homes for rent, tricon, prestige, etc., go from no longer buying to no longer building it kicks the inventory shortage can down the road. Some markets are already okay, but most are not.

so in essence they will just sell whole communities based on the going cap rate they can get for them.  that makes sense. 

what are your thoughts then on say  100 BTR community and you have 75 different owners and you know that resales will pop up all the time. ??  I wonder how that is going to work out for those investors.. as I mentioned I know how i personally mitigated that during Go zone times.

Now many may not know what the Go Zone was / is..  Post Katrina if you bought new construction for your business you u got automatic 50% day one deprecation.  So thats why you saw re construction in MS and LA go gang busters ..  car dealers building new facilities..but you had to be in the business.. So a passive investor could not take advantage.. I could because I was a full time in RE and qualified.. There were charlatans selling this stuff and not disclosing the requirements and many folks ( including me) got audited for those purchases.. I was fine many where not though and had to recapture and pay penalty.

[V.G Jason]

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Eric N.:

Quote from @V.G Jason:

Quote from @Eric N.:

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed. 

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household  which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do.  During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

1) Shortage is not temporary. Go check how many BTRs and BTS have stalled since mid 2022. This shortage will last longer than most expect. In Q2 2022, most markets would've been alleviated by mid to end of 2028. Now that's next decade. Lots of projects have stalled. The only market that's trending your direction is Austin, and we've seen correction there and thinking the halting of building there is just short of it not crashing to the brinks. Lots of RE are watching this market and seeing what not to do.

2)  Median income is an excellent metric to use. My view is it's not going to be Billy & Rachel buying a house, but your FO, AM, or hedge fund. They will be equipped to buy it. And if your previous reason is right of them hitting the bid and causing a crash, you absolutely bet they'd be the first to hit the bid but they'll be at the bottom with their own bid buying back in. My view on median income is that it's going to tighten(wage inflation stays 80% of core inflation, but house prices go down 10-20%, therefore rents can go up a bit) creating a better RTP to invest in RE. I'm also a believer we're trending toward renter nation. Houses are just going to be traded among the private market.

 
3. Printing money would not be the solution for a housing crash, itll be forebearance. And your private lenders would now need to consolidate. So slow joe and speedy trump aren't killing Billy & Rachel but killing your rocket mortgage, ally bank, etc. And you'll see consolidation in those areas. If you think I am wrong, there's  already so much discussion in M&A on this it's not even funny. They are in front of this.

Otherwise, I do agree with your printing money conclusion. But your resolution to that is go to buy hard assets that beat inflation; bitcoin, gold. Oh wait, everyone in the world is already doing that forsees this. 

4. We're on the same side of the spectrum, just at different points. I don't think we'll see a GR- like crash, I do think we'll see a harsh correction though for sure. If people think houses, or other assets, go up linearly then I am at a loss for words.

i was on a cruise last fall and my wife made friends with a lady in Art Class and it we had dinner with  her and hubby.. turns out hubby was on the Board of American homes for Rent... they own about 30k homes.. they morphed from buying from others to building their own.. and then when rates rose they stopped and are just treading water at this time.. at least thats the report for that company.. And last was last NOv/Dec .. things might have changed since then.. But they were very rate sensitive in their model.  U are now seeing the BTR builders using national marketing companies to do their sales.. As individual investors are easier target than corporate.
The big melt down is going to be parts of SWF where Supply far out strips demand.. there are literally thousands of vacant lots that can be bought at anytime.. so no shortage there and its always been in a few of those locations like Lehigh Acres a boom bust cycle its heading to maybe not a bust right now but values are dropping for sure.

 Yup, prestige too. They're all doing nothing. This is inherently going to create a larger short in the long-term because projections more than 2 years go were these guys building more.

Now if they go on the sell side, it just means that's the first domino. I don't think they'll sell and not go back on the bid side within a tight window. Every market is different and yes SW FL is another one that's just too too long. @Bob Stevens and I said this last year-- this was easy. Austin I've been on pause for the last 18 months, and entering this Q4 as I think it'll be the start of some harder falls there. SW Fl is already seeing falls. 

I think one of the main issue with exiting whole subdivisions of BTR is that the homes were built about as cheap as you can build a home.. and a neighborhood full of rentals, 100% rentals is going to look like crap from a curb appeal standpoint.. and who wants to buy an owner occ surrounded by tenants like the first people coming in would. I dont think most private investors really contemplate those aspects of buying in 100% BTR communities.. its not MF .. UNLESS the community has HOA and HOA is taking care of all the landscaping etc.

I bought 12 BTR post Katrina for the Go Zone bene's which were substantial.. And I was very choosy to buy in neighborhoods of new builds that were not saturated with investors I paid more and they were not as cash flow gifted as others who were focused on cash flow my main goal was Go Zone and then when i went to exit 10 years later I could actually sell them easy on the MLS to owner occs and made a little bit of appreciation while my cash flow was neutral to maybe tiny positive but i saved close to 500k plus in personal income tax over the course of 3 years buying them before go zone expired..

 The illiquidity of certain market types has not even been rationalized by wall street. This is just them being just being hyper in response to see shorts and creating a deeper end of it. 

U dont think they have thought about the exit before they run out and buy thousands of houses. Maybe not.. or maybe the exit really is to just wrap them up and sell them as portfolios of rentals we do see that a lot one hedge fund selling to the new hedge fund on the block.

 This is what will happen.

There won't be the ability to get a real mark to market if you go sell each individually and recreate a BTR environment to own occ. You also run the risk of if it's hard times and they are forced to sell, local Billy & Rachel cannot buy it for the same reasons. So you go get 60c on the dollar from the other hedge fund that is set up for it. Or let an AM swallow you whole like Blackstone did with Tricon. 

This is why when Homes for rent, tricon, prestige, etc., go from no longer buying to no longer building it kicks the inventory shortage can down the road. Some markets are already okay, but most are not.

so in essence they will just sell whole communities based on the going cap rate they can get for them.  that makes sense. 

what are your thoughts then on say  100 BTR community and you have 75 different owners and you know that resales will pop up all the time. ??  I wonder how that is going to work out for those investors.. as I mentioned I know how i personally mitigated that during Go zone times.

Now many may not know what the Go Zone was / is..  Post Katrina if you bought new construction for your business you u got automatic 50% day one deprecation.  So thats why you saw re construction in MS and LA go gang busters ..  car dealers building new facilities..but you had to be in the business.. So a passive investor could not take advantage.. I could because I was a full time in RE and qualified.. There were charlatans selling this stuff and not disclosing the requirements and many folks ( including me) got audited for those purchases.. I was fine many where not though and had to recapture and pay penalty.

 That's a better question for RTR, Real Wealth, etc.  buyers that flood those markets or appear to be. I personally avoid markets with high degree of rentals. and try to invest in markets that are more home owner occ and the rentals I provide are in high demand. Those BTR communities are likely going to be hunting for bids all at the same time and driving prices to the floor.

[Matthew Paul]

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?

 Of course there is a real estate crash on the horizon .  Now , how far away is the horizon ? How long will it take to get there ?  Sure real estate will crash but when 

[Kathy Fettke]

Define real estate. Headlines often speak about the current real estate crash, and when you read further, you realize they are talking about "office." The office market is definitely crashing - mostly in urban cores. However, affordable housing is in very short supply - realtor.com says as many as 7 million homes are needed. If you can provide affordable housing- and by that I mean that a family with the average income of the area can afford your rent - you will always have a renter. If you can buy real estate in areas where there is population growth, job growth and infrastructure growth, you're making a good bet that there will be demand for housing well into the future. However, be careful of markets where people are leaving and population is declining. 

[Troy Gandee]

This could be the case in some market, but as other have mentioned, certain markets are experiencing the opposite. I'm in Charleston and our market has hardly slowed despite rates. Our inventory is low. It has been too low even prior to covid. We have about 1/2 the homes on market we should have. It's legitimately a supply and demand issue. 

I've been hearing about this impending "crash" for about 5 years now. I'm not going to hold my breath waiting for it. 

[Chris Williams]

Quote from @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.

 Crash that has been crashing since 2008 right? I just don’t understand how a market can crash without any inventory in most markets. Wouldn’t less inventory make the prices go up? 

[Chris Williams]

Quote from @James Wise:

Quote from @Account Closed:

Quote from @Account Closed:

@Dan H.: >>That does not define a shortage. That defines a supply/demand constraint. The shortage is because the country is short a significant number of housing units where people want to live. <<<

LOL. Are you saying that shortage does not define shortage?))) Ok, you want to lighten up and try to crack a joke. I get it. But that set aside, my point is not to define shortage (it is what it is, lack of supply), rather to explain WHY it exists. One of the main REASONS is that homeowners don't want to sell homes. Why? Because they are locked into low APR. If you think about the main reason WHY there is a shortage it's obvious that it is circumstantial and that reason will evaporate with changed circumstances.

>>a buyer does not need $400k to $800k. using owner occupied loans can get 96.5% LTV. At that LTV, $35k can purchase a RE worth $1m. 7% apr is historically moderate and why home were statistically less affordable in the 1980s. <<

Wrong. Even if you get 100% LTV , with $35K you can't purchase a 1m home at 7% APR, unless the banks will write you a 1000 year loan. $35K can afford to pay around $1000 on housing. How long will it take you pay off 1 mil loan with 7% APR with $1000/mo installment. I mentioned earlier that I still remember 8% APR on mortgages back in 1990's. But I also noted that the exact same homes that fetch $600K today were priced at $140K back then, and they were in much better shape being 30 years younger. Current prices and APR are not sustainable, it will inevitably crack and crash.

>>In addition to the affordability not being at a worse case, the information to educate on home buying options has never been greater. There are programs like NACA, FHA, VA, etc. There are finance options like owner financed, assumable, sub-to, DSCR, lease to own. there are alternate rent options such as STR, MTR, rent by room. There are numerous property types such as self storage, Mobil home parks, office, industrial, commercial residential, non commercial residential, etc. There are numerous value adds such as traditional rehab, development, change of zoning, TIC, etc. then there is taking a role in the financing such as hard money lender or notes. There is flipping, BRRRR, and rent ready units and turn key. <<<

You do you. If you don't like what you hear plug your ears and do as you wish. Your decisions and glasses you wear are none of my business. But none of what you say will avert impeding crash.

>>>my point is there are so many paths in RE. To believe that at anytime there is not a viable path mostly points to needing more education. <<<

One of us certainly needs some education and I don't think it's me. You can talk about STR, MTR, BRRR, NACA, FHA, VA and etc. all day long, none of it will avert the market crash and correction.

Of course there is always a path to make money. Even and especially crashing market presents the best opportunity in decades to make most of one's investment. Study history, learn a bit about it, you may need it.

FYI, I said banks would have to write a 1000 year term loan to let someone with 35K income pay off 1 mil loan in 1000/mo installments. It's inaccurate. One with 35K income will NEVER pay off 1 mil loan, even in million years. Simply because the interest payment alone at 7% APR will be in excess of $3K, the total gross income of the earner you mentioned. At ZERO APR (suppose home owner finances it), it would take borrower 75 years to pay off 1 mil debt if they paid in $1100 monthly installments. $1100/mo being the maximum installment they could realistically afford with 35K income. Since they have to also eat, pay utility bills and other expenses. And that doesn't account for taxes, insurance, maintenance costs. So, what you propose doesn't work in a world we live in.

 With a $35k yearly salary, Banks will let a borrower do a loan around $100k-$115k. What kind of drunk maniac thinks Banks are handing out $1 Million Dollar Mortgages to people making $35k?

 Exactly this isn’t 2007