The rental market has been softening in some places in the bay area (parts of San Jose). 

Home prices are high, and I think they'll soften up over the next year as forbearances end and owners are forced to sell (not enough owners are underwater to force mass foreclosures, but even a wave of sales will lead to lower prices).

Thanks @Phillip Dwyer for the gentlemanly reference.Vegas prices are softening and the pace has slowed tremendously.

I don't think building an in law quarter will return too much because of high cost of construction- and I think you're exposing yourself to a good amount of risk by doing so because project cost usually runs high, and by the time you're finished the market may be softening creating an instant equity void.  

Possibly I could refi or HELOC to create a reserve and give me an option for another property if the prices soften?

I thought I was getting a good deal since the market had softened quite a bit.  

Ive owned in Petworth and did very well.However you also have to look at development in the area as building of new residential units can soften rent prices sometimes.

Here's a Houston MLS report for June:  June MLS HoustonAnecdotal experience from my own properties are that in some places, rents in 2016 had softened compared to SFH sales.  

Seems to me, they're attempting to soften you up, before you've even started! 

I think we've have experienced a significant softening of the market over the past year as a direct result of all the new builds.