Are We in a Real Estate Bubble? An Investor’s Analysis of Current Market Trends

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I am a real estate investor. This is not an easy career path in many respects, not the least of which is that it requires an uncommon amount of discipline!

Indeed, we have to define in great specificity our criteria for action, and we must have control over ourselves to stay within those self-imposed parameters.

It’s Not About Action

That’s right – as it relates to discipline, as hard as it may be to stay true to the pre-defined guidelines for action, it can be a lot more difficult to maintain the plan when it requires that you do nothing. I mean, when you are doing lots of deals, and therefore feel like you are moving ahead, it is not too difficult to turn things down that you don’t deem good enough.

But what about when you’ve found yourself sidelined for one month, two months, six months, or more? All you’re doing is following your criteria for action, which causes you to stay out – nothing is good enough to act upon in the marketplace, at least not at a price that makes sense to you. Everyone else is in a mad dash doing deals like there is no tomorrow, but you are sitting around wondering if you are stupid and missing out on a ton of opportunities, or if the masses of investors are lemmings marching toward their demise.

Related: The Savvy Buyer’s Guide to Winning Deals in an Seller’s Market

My Real Estate Situation

Last time I bought was in 2013; you can read about it here, and some more here. It took 2 years to reposition this project, which was hard work. It was certainly worth it, but as a result of this work, I’ve further tightened the screws on my underwriting. If I am going to work this hard, the margins have to be what they must be.

I am not at all infatuated with the privilege of being called a real estate investor. I was at one time; I thought, it’s cool to own property. Now, it either makes a great return safely, or it doesn’t – finita la comedia

It’s not that I haven’t placed any offers; I have. But there is always someone willing to pay more. I know what I want, and I go for it. But I don’t need to do deals to feel accomplished anymore. I only need to do great deals.

A month ago I went after a building with 128 units. I was at $4.1 million; someone else came in at $4.4. I understand why they did, and some would say I could have paid more. But if I did that, I’d be working too hard for too little, and I don’t need that pain. I am sorta comfy, and I have other interests… you know what I’m saying. 🙂

By the time this article goes out, I will have an LOI in for 150 units. We’ll see what happens there…

Is This a Bubble?

After losing so many deals, no matter how sure I am of myself and my underwriting, I have to wonder, is this a bubble, or am I missing the boat and it’s time to adjust my methodology? Is it time to start working harder…?!

The economic fundamentals seem to be moving in somewhat of the right direction, though this of course depends on who you listen to. Ninety million people out of work in this country does put a moment of pause into those fundamentals for me, but the demographics are looking strong for a few more years I’d say. So, is all of this growth investing exuberance warranted, or are we in another bubble?

The Answer

I don’t have one. However, I invite you to consider the following perspective: Let’s remember what causes bubbles. Bubbles are not about fundamentals. Bubbles are about behavior of market participants.

So, as you look around, are we in a bubble? You tell me. I log onto BP, and I see rampant amateurism. Everyone and their mother, father, and uncle is a real estate investor, and 90% of them are wholesalers, seeing as it’s the best way to get in… I don’t know whether to laugh or cry!

In a lot of ways, this market behavior is not unlike circa 2005, and I would certainly qualify this as a bubble. Real estate has once more turned into tulips. I do think, however, that while the behavior of investors looks to be same across the board in all asset classes, in reality there are more fundamentals to support further growth in some sectors than others.

Related: The Real Estate Market: How to Analyze and Predict Cycles

Do You Zig or Do You Sit?

That’s the question, isn’t it? Do you zig when everyone zags, meaning that there is still opportunity, or is it time just to sit down at the dining room table and help kids with homework, and call it a day? I try to zig — with not much success to report.

What about you? Are you making deals in the current market, or holding off? Do you believe we’re in a real estate bubble?

Leave your thoughts, opinions and stories below!

About Author

Ben Leybovich

Ben has been investing in multifamily residential real estate for over a decade. An expert in creative financing, he has been a guest on numerous real estate-related podcasts, including the BiggerPockets Podcast. He was also featured on the cover of REI Wealth Monthly and is a public speaker at events across the country. Most recently, he invested $20 million along with a partner into 215 units spread over two apartment communities in Phoenix. Ben is the creator of Cash Flow Freedom University and the author of House Hacking. Learn more about him at


  1. CK Hwang

    Hi Ben, thanks for the great article. I was wondering if you could elaborate a little that when you mention bubble, are you talking about the US as a whole? specific markets in the US? global etc? property type, i.e. multi families, commercial, single families, etc

    I think a little background info would really help me get a better perspective on where you’re coming from. Thank you.

    • Ben Leybovich


      There’s no doubt that the SFR space is over-crowded. This also happens to be where all of the newbies are, obviously. Look around BP – most of the discussions are either wholesaling, or long-term hold SFR. Absent some special circumstance, or some very specific markets, I wouldn’t go there is it was the last thing I could do…I’d sit.

      In large multi, where I look for deals, there is also over-crowding to for sure, but there are non the less more solid fundamentals. Yes, some of it (a lot of it) is gambling, but it is macro-economic gambling, which is safer in my view. I do believe, though I’ve not been able to find one yet, that in the large multi space there are some opportunities to buy based on solid fundamental assumptions.

      Hope this helps!

  2. Wilson Churchill

    The largest factor for the “bubble”, at least in my market, seems to be inventory. When looking at listings daily, I always notice the total number of listings for the city. The total seems to be slowly declining, though it has somewhat stabilized for the time being. In one city, i remember there being over 300 listings about 4 years ago, whereas now the number hovers around 80.

    A significant increase in interest rates would increase inventories, as more foreclosures may result (though perhaps not as many as during the last bubble), and fewer people would be able to finance homes.

    • Ben Leybovich

      Wilson – I don’t disagree with your thinking relative to SFR markets. However, for many reasons, I think that the low interest rates, and with it the continued inflation of the bubble, will continue for some time…

      Thanks indeed,

    • Mike McKinzie

      I’m sorry Don, if you were disappointed. But let’s be honest, IF Ben really knew the answer to that question, would he be blogging on Bigger Pockets? I have seen investor’s come and go on Bigger Pockets and they usually go for ONE reason, their time is BETTER spent on deals then on a website. Ben, on the other hand, finds intrinsic value in participating on Bigger Pockets and helping other’s not only find answers, but to ASK the right questions. Plus, Ben gave a very succinct answer, “…LOOK for what CAUSES Bubbles…” The number one suspect is the “Market Participant”, along with loose lending guidelines and builders putting up ‘cookie cutter’ houses.
      If I were to answer the question, I would say that we are 90% not near a bubble (1-3 years). Why? Because lending guidelines are way too tight! Could there be some mini-bubbles in local markets? Absolutely! Southern California is well known for wild swings! I have seen a house sell for $500,000 and two years later, that exact same house sold for $80,000 (consider Hesperia and Victorville, CA)
      So while a housing bubble does not seem to be on the near horizon, it doesn’t mean that other bubble’s might be just around the corner. The Stock Market, the Bond Market, the Money Supply, the Deficit, the Trade Imbalance, and much more. With the Feds keeping interest rates artificially low, pent up pressure is building elsewhere. Can the pressure be relieve slowly or will it release all at once? There are just too many players in the game to predict it with any certainty.

      • Ben Leybovich

        Mike – I’d put it at more like 5-7 years, if I had to put a stake in the ground. Too much very large buying is happening on the delta of 2.5%, and if the rates went up any significant amount, I can see calamity. The FED, in my opinion, will do what they must to keep rates down.

        This is a strange time. It feels like 2006, but residential lending is not there. Multifamily lending IS, but there are fundamentals to support the continued run for a few more years in the sector.

        I don’t have the answer, but you read my mind 🙂

  3. Chad Carson

    you ask some good questions, and I’m not sure I have clear answers either about the overall market either.

    But this question popped into my head about your situation: could you buy deals today using the criteria you used earlier in your career?

    If so, is your more experienced, less urgent mindset of today clouding your perspective of a bubble? There may be brand new Ben Leyboviches willing to do the work and take the risk that you now are not. That’s unfortunate for the old, experienced Ben, but not necessarily a bad thing for the market.

    If you don’t want to move to other locations or asset classes, maybe you should just lend money to these upstarts, of course at a low LTV with significant skin in the game for the borrower. A lender can always control his/her risk exposure by loan to value and other terms.

    • Ben Leybovich

      I have other interests, and I am pursuing them Chad. I do still feel that there are deals to be had, but you can’t just take them – you have to kiss 500 frogs to get to them:)

      My issue is that I want what I want, and I won’t do anything else. Something that’s good enough for most, as it should be, is just not good enough for me. I know the work involved, and I won’t let myself spend time on anything that doesn’t fit precisely. Perhaps I am spoiled, but then – I am sorta comfortable…comfortable enough to pursue other passions.

      And to that end, other asset classes sound not too bad to me right now, though…:)

      Thanks, Chad!

  4. Georges Arnaout

    As always GREAT article!!! thank you for posting!!

    I think that we are in a bubble (at least in the Greater Boston area). Having said that, I am a buy & hold investor that I KNOW I am overpaying for properties. But while I am overpaying for properties where I have no clue if they will increase in value or not and breaking rule #1 in real estate (you make your profit when you buy) my properties are cashflowing positively and history has proved that the rents are SOLID bubble or not / recession or not in Boston. I believe that as long as the numbers work (calculating the NOI using very conservative OE numbers) it’s okay sometimes to ride the bubble carefully rather than sitting it out. Just my thoughts…

    • Ben Leybovich

      I am not disagreeing with you in principle, Georges. And I think that a lot of us would agree. The difference is in what we consider “safely underwritten NOI” – this is where we differ, and this is where both amateurism and hysteria are bad companions to investor…

      Thanks indeed!

  5. David Roberts

    I think the activity has the makings of a bubble. In SE Michigan the houses are selling like hotcakes. It seems everybody I talk to hears that mom and pop are buying rentals or trying to buy rentals. What does that tell you? In the stock market, what is the clearest warning sign of a bubble? When mom and pop start piling in…

    But given historical values, most ‘rental’ homes are maybe 50-75% back to their stupid highs in 2006.

    I know that it’s making it really hard to find good deals around here…

    • Ben Leybovich

      But can the “stupid highs of 2006” be supported now any more than they could be then?!?!

      That’s the risk…that’s why we are not ready to burst yet, but I couldn’t tell you when we will be either. The income is moving in the right direction, but not fast enough. Same with employment. Currency is sitting on the sidelines, with very subdued velocity in the markets.

      It’s hard to read indeed…

  6. Jay C.

    Bubble……….Oh no one want to hear about a bubble but everyone is looking for confirmation if we are in one. Sorry to tell you folks when you figure out we are in a bubble chances are its already burst or about to. From reading the posts on BP it seems very few have learned anything in the last decade as the more more more posts are about every other blog post. As Ben called it the ” rampant amateurism” has many paying more and more for the privilege of attending the REI party. The first time home buyer has been squeezed by tough lending requirements and hedge funds that come in paying full price for rentals. Yea the big boys are way ahead of you mom and pops. They control the market and when they decide to stop buying look out…or worse when they decide to start selling.

    Oh I got lost for a second back to the bubble. So we have a stock market in record territory, We have oil that has already declined. We have a short supply of homes to buy. Can anyone say 2007-2008. Only difference is the fed has nowhere to go with interest rates to help over leveraged homeowners. As for over leveraged investors who helps those guys…… the under leveraged guys are more than happy to take your properties for 50 cents on the dollar but Uncle Sam will cannot help you. My point…which took way too long to get to…Is all these things above are linked. The stock market,rates,energy prices and home ownership. You cannot just focus on one. One of those legs of the stool has the ability to crash the others. If you don’t believe me…better get your head in the history books.

  7. Russ Beck

    In my area it’s hard to determine if we’re in bubble territory or just having an issue with low inventory. There are a lot of foreclosures right now since the oil industry laid off thousands. I’ve followed a good number of financial websites, and it seems that markets in different areas are frothy as they were in 06/07. Based on anecdotal evidence, cited by the author, as well as behaviors of consumers and home buyers in my area, I think we’re near the top of a regional bubble, which will likely pop in 4th quarter 2015.

  8. John Barnette

    Thank you for a thought provoking article and also Brandon for your linked article/study. I have seen similar studies pointing to the approximate 18 year cycle. Given that study and similar ones, no we are not in the hyper expansion bubble phase. I guess it depends some extent on what asset class (within real estate).
    In San Francisco Bay Area there is a very competitive market, low inventory, increasing rents, increasing occupancy rates, new construction multi family being sold or rented very quickly. I just rented a modest house in a decidedly unsexy and far from Silicon Valley location in less than a week for about $200-$300 over projections I used with purchase in early 2015. So growth all around.

    Specific to returns on larger multi unit apartment buildings..IRR or cap or whatever measure. I think low returns are a direct result of the low interest rate environment and low cash flow returns on bonds, cash, equities, all investments. So investors are accepting a lower return higher risk scenario on big blue chip realty plays. 140 odd units in Ohio for instance. That is a pure cash flow play, not likely a distressed seller and not likely beginner buyers. It is all about entities with money settling for a lower return because there is no better alternative spring 2015.

    Interest rate environment increasing should have interesting consequences. The obvious for retail home buyers. But I think you will see more money move to bonds and cash. Equity market should have a correction thus making case for a decent return on new money invested there..if buying dividend stocks. So where does that leave “dividend apartment/office/commercial…”? I think you will see less competition from the “new” moneyed buyers plunking down millions wherever has the best of the low blackrock and so forth. Will be back to more historical pricing and upleg exchange buyers for these types of apartment complex investors. The interest rate is important…but behind cash flow, occupancy, and meeting 1031 requirements. A more true investors market.

    And btw that is my running game plan now…acquire and keep Bay Area high fliers for next 10-12 years. Plan on stepping out of JOB about then. Do a big fat exchange into a few large cash cows with paid property management in “cash flow” kind of markets.

    Just hope IRS doesn’t do away with the 1031 deferred exchange!

    Great topic and great feedback

    • Ben Leybovich

      If you even just take Ohio, Columbus has already peaked, Cincinnati is on the right side still, Cleveland is way back still, because of the mountain of economic issues they have. The cycle is local, just like all real estate…

      If the IRS does away with 1031, they will absolutely obliterate multifamily space. There will be deflation like nothing can project. I have to admit, on the surface I kinda like the idea, although I haven’t thought through. One thing is for sure – we’d go back to valuing property on fundamentals again…for better or worse…

    • Ben Leybovich

      I like Schiff, but not as much as I like my cash flow, which I could not replace if I sold now. This is the big issue – who wants to sit on cash, when cash flow is what pays for bread…

      The way I buy, I can ride the storm if need be. I bought in 2006, before the crash, and I bought during the crash, and I bough after the crash. I do think that rents will correct eventually, but not back to the same levels they were in 2005. We’ve had a prolonged period of rent stagnation, and now we are catching up…

      Equity-wise – who cares. Cash flow on properly bought and managed assets is here to stay for a good while I think. No selling for me just yet, mo

  9. Naveen Desai

    Having been active in buying/flipping and renting since 2015, I have not been able to make a deal this year. Yes, I do feel I am not doing much, but I am at a stage where I cannot afford to loose what I have. So will I just sit, ( I dont even have kids to help with homework 🙂 ). But I sure do have a list of things to pursue and I am after that. I know when I come back again, it will be at a larger scale, but don’t know when is that.
    At the moment, prices dont make sense to me. Will be watching from away !.

  10. Matt R.

    Great read Ben. I would not consider myself a “real estate investor” like you have been. I am still trying get that removed from my bp handle. We are at the top for now. Some areas will flat line others can go up or down based on demand. The multi space looks strong in many under served markets for good reasons usually. I think what price behaviors we saw 10 years ago might not relate to todays market. Yes shiat can hit the fan still.

    Let’s see how the market takes the rising rates almost certainly coming. I know you mentioned 90 million not working. The flip side of that is more people quit their jobs in March than in 15 years previous. That translates to job confidence for workers. Mixed signals for sure but I think a majority see the glass half full today and not irrationally. Sideling might be a good stance and then again these are different times vs GFC lead up perhaps. Long term everything should be ok so get the low rates while you can is my newbie take.

    • Ben Leybovich

      What bothers me is exactly what you say – “…the majority see it as glass half full today…”. The majority is almost always wrong, and this is as much of a bothersome trend as anything. What the majority is doing today makes no sense to me.

      The majority is buying turn-key pigs in Ohio based on pro forma CCR numbers which I know from experience are BS. The majority is capitalizing valuation of multifamily based on fictitious NOI and ridiculous Cap Rates – this also makes no sense to me from experience.

      I don’t need a crystal ball or some in-depth knowledge of what the FED will or will not do in order to know these people are in for a hell of a rude awakening. This is a hysteria, and it’s bothersome -and this is why I’ve tightened the screws on both my underwriting methodology and projections!

      • Matt R.

        I am with ya. The majority routinely get left in the dust. Let’s face it, it is a sellers market and it can never always be the best time to buy. You just might be the smartest one in the bunch waiting for the next correction….or lost in a previous decades metrics. We will find out shortly.

      • Ron Gines

        I love the “glass half full” analogy. I heard a joke one time that I think perfectly answers the age old question to whether the glass is half full or half empty. … it all dependent on whether you are drinking or pouring. Relating that to REI … when everyone else is drinking, you want to be the one pouring!!

  11. joseph ball

    Hi Ben,
    Challenging article, as always. Good job.
    I think “bubbles” affect market segments in different ways.
    A “bubble” will definitely affect the apartment segment. Commercial buildings. More.
    However, I have never felt the effects of “bubbles”, buying smaller houses from distressed sellers. There are distressed sellers in every market. So, I never worry about “bubbles”.
    When I was in the Navy, I once saw a professional entertainer, named “Bubbles”. I don’t know if she watched market trends. Poor thing had to wash in a large champagne glass-I don’t know why. What were her parents thinking, when they named her “Bubbles”? You think?

    • Ben Leybovich

      And I have never felt effects of bubbles buying value ad apartment buildings from distressed sellers, Joseph. But this isn’t what’s going on. Wholesalers are selling MLS and Loopnet listed property 🙂 Long-term hold money is capitalizing value as though rents will go up forever, and interest rates will stay nothing for 10 years.

      It could be, but damn…

  12. Mustafa Abdulali

    I’m technically a “newbie” (oh how I wish I was 25-27 years old again!) but I’m pretty good an analysis (financial and non-financial). I think we are on the cusp of a bubble but not just any bubble. I think you are going to see an asset bubble that is worse than 2006. Previously the bubble was fueled by low rates and even lower mortgage requirements. While the lending has tightened up a new source of cash is about to be unleashed.

    You are about to witness an unprecedented transfer of wealth from baby boomers to their kids and grand kids. As the baby boomers age out and start pulling money out of Wall street, they are going to use it to purchase homes and cars for their families. You don’t need to worry about cash flow when the money is free! Take a look at all cash sales (I can only go by anecdotal evidence from a variety of Real Estate agents) that don’t make sense when compared to any RE strategy. There’s no positive cash flow, flipping it doesn’t provide any significant return, yet people keep buying. It’s almost as if baby boomers are moving from one asset class (stocks in IRA’s and 401K’s) to another (real estate) and they don’t care about the return because they don’t expect to be around. They just want to make sure their kids have a place to stay and eventually their kids will make some money off of it. Maybe there are complex tax loopholes that are being utilized to help defray costs or mitigate inheritance taxes, I don’t know.

    • Ben Leybovich

      That;s a very interesting perspective, Mustafa. I’ve not thought about it in that way, but I think there may be some truth to this. Bottom line, if you are going to cash out of paper, where else would you go if not American real estate. It’s happening all over and at every price point.

      But, doesn’t this disprove a bubble? What they are doing is transitioning from growth to preservation, and that a “real” strategy, and it’s based on fundamental logic – this precludes bubble mentality…


      • Mustafa Abdulali

        I agree that asset prevention is a real strategy. Generally you accept lower returns for security. My concern is the demographic,s with the money, don’t care about the lower returns because they don’t expect to be around. Therefore they are willing to transfer to a different asset class without any expected return. After all, long term data indicates that macro real estate appreciation is either flat or barely keeps up with inflation. Once you defy the fundamentals it starts to create a bubble.
        On top of that most home ownership is based on a couple of rules of thumb, such as “30% of your net pay” or “3x annual salary”. With the wealth transfer people are either overpaying for a home (breaking the 3X annual pay rule of thumb) or they are buying way more house than they normally could (breaking the 30% of your net pay rule of thumb).

  13. John Barnette

    Yes all but one of my last 8 or 9 acquisitions has been distress short sales or reo. Houses and condos. Getting the right price for the right kind of asset makes all the difference. That being a solidly well cash flowing asset in a traditionally high appreciation area. 4x leverage with my 25% down.

    And there is something to “market timing” even in an overall hot market. The Feb-July market in Bay Area often sees outlandish overbidding and sky high prices. Generally to be followed up by a slower digestion phase if you will between Aug-January. I can’t think the last time I bought during feb-July.

  14. John Barnette

    Missed the last part. A whole ton of cash purchases in the Bay Area at many price points. Of course some is unique…tech fortunes. Though also think “traditional” old wealth liquidating paper assets and buying real estate either for themselves or children. And all you hear about foreign money pumping into trendy coastal markets on left and right coast is absolutely true. From all over the world. The perception of a “safe” investment.

    Ben are you seeing foreign money being invested in large blue chip apartment buildings? Who are the bidders coming in are driving up costs and thus returns down?

  15. John Barnette

    It is a pretty cool city. Lived there 92-94 and worked at Bank One to be a branch manager. Went to Denison University. Grew up in Chicago suburbs and Indianapolis. Memories.
    I bet Columbus has good long term investing fundamentals. I remember renting from an outfit who was buying crappy Victorians in Short North and Victorian Village, etc and fixing them up. Turn around and rent to young urbanites with first jobs etc. I rented a refurbished Sears Catalog house at 1002 Hunter for $700 a month. If I only had money back then. Though ended up buying a condo in Denver in 1995 I think. First place. Wish I still had it. But a spring board to bigger and better for sure. And bank branch manager wasn’t for me!

  16. The professional entertainer Bubbles, unlike our bubbles made a higher income from a presentation of false abundance that even though every serviceman could assume was too much to be real, they simply didn’t care.

    Ben I am as always amazed by your ability to pick the subject of the day. Isn’t it always a bubble ? What I mean by that is that just because somebody let some air out of the balls to make them easier for the skilled professional to handle isn’t it still the same game ? As witnessed by us all even when they were caught, didn’t they still win ? Banks and Wall Street, I mean, not football.

    As for myself, bubble or not, I will never again do any deal or profit from real estate without consulting a lawyer and accountant. I am so blessed that I have had the good fortune to get post game advise from the very best defensive prayers in the game !!
    Servant king is the title that I am looking to fill at this point. I work for the best interests of several property owners who allow me to pursue my passion and for that privilege I feel somewhat like a king must. I have stepped in the crap a few times. Point of fact being that for me, many of you are on the mark. It isn’t the bubble I have to fear, it is my very own judgement.

    • Ben Leybovich

      Ha – we’ve all stepped into crap…it’s part of the game. Ability to recognized crap even when it’s dressed up with a bow on top is the mark of wisdom in this endeavor…

      Banks always win! Fractional reserve based on fiat – naturally they win, even when they loose. Those who know this, behave differently.

      To this end, exuberance in today’s marketplace is not all created equal. On BP it’s all stupid hype and newbies. Out there, where big money plays, bets are being made that are dangerous but highly logical by people who understand the system.

      This article of mine, if you can read between the lines, is all about trying to recognize the difference and make a decision up or down. What I am saying is that while I think I know what the big boys are thinking, I need some more fundamentals in the deal to feel comfortable.

      Next weeks article is about that 🙂

  17. Giovanni Isaksen

    Don’t know if we’re in a bubble but if I had to judge by the way the BP folder in my inbox is filling up every day I’d say it’s beginning to smell a lot like the last time when my local REI club went from meeting in a single classroom in an abandoned elementary school to regularly filling a freshman lecture hall (and balcony) at a fairly large university. While I enjoyed the irony of walking under the communist inspired murals on the way in to discussing how to create personal wealth through real estate the numbers of people joining me kind of creeped me out… now I know why of course.

    A few things though, I think there’s a lot of recency bias where everyone is seeing a bubble around every corner and the other is that at least in CRE LTVs are still fairly modest. As for sfrs 46% of US homeowners with a mortgage are frozen in their homes; they can’t sell and net enough to make the downpayment on another home at the same price let alone move up. Meanwhile the majority of new households forming are Millennials who want to live downtown in trendy apartments, I just don’t see who’s going to drive a bubble in sfrs. Yes investors can go wild but they’re still only a small percent of sfr owners in the US.

    @Mustafa, interesting observations about boomers, I was recently on a call with Peter Linneman, chief economist at NAI Global and he was saying because of the low interest rates boomers can’t afford to help their kids with a down payment, they won’t have enough income from their savings to retire on.

    • Ben Leybovich

      Thanks for jumping in, Giovanni – always look forward to your perspective. Interesting take on the boomers according to NAI. I think NAI is wrong, though. Boomers will do what they must in order to help the next generation – I am seeing it happening all over the place. That’s a lot of what the job at Walmart is about…

  18. Ken A.

    The “Bubble” is just getting started…
    Everyone will be shocked at the much higher prices by 2022-2024. Gains will be higher in the better areas. What can actually drag the “gains” are the stagnant areas that will never go up. Don’t invest there. The Biggest points for MUCH higher prices (since 2011-2012) are

    1. Too much demand chasing too little “retail” ready supply (Hello Economics 101).

    2. Interest rates around 4%. Are you kidding me – Have you looked at the last 50-60 years-that is way too low and makes it much more affordable.

    3. GREED – This will push Better Real Estate much higher – IT NEVER FAILS. There is way way way too much CASH on the sidelines – THEY ALWAYS chase higher yields.

    I don’t know what #3 above will exactly look like. It could be Crazy Investor Loans – giving loans on investment Real Estate packaged by Wall Street (think about the Stupid Loans they gave to Home Owners – So why not Stupid Loans to Investors eventually – just a thought.

    Watch how the FED always mentions Housing Prices, etc. The Gov’t will probably want to find a way to get banks, etc. to make loans. The Government actually LOVES INFLATION. Don’t be fooled. They (gov’t) can then pay off their debt with cheaper money.

    I’ll be selling pretty much everything in 2022-2024 as GREED BUBBLE inflates.

    Added Note:

    What brings new home buyers into the market? What makes them finally pull the trigger and buy?

    For the typical home buyer, housing value has little to do with actual home prices. And it has everything to do with monthly payments.

    Two things have happened… 1) we saw the worst bust in house prices in generations and we still haven’t fully recovered and 2) mortgage rates are near all-time lows, below 4%.

    I don’t think people really understand how incredible current mortgage rates are. The chart below shows mortgage rates since 1900. As you can see, today’s sub-4% levels are unprecedented…

    With mortgage rates this low, housing is now more affordable than ever. It combines home prices, mortgage rates, and incomes.)And that means home prices could still move significantly higher.

    How much could home prices move?

    Based on normal housing affordability, fair value for U.S. housing is around $261,500. So right now, median home prices are well below fair value. Take a look…

    The gap between housing prices and fair value has been closing since 2012, when home prices began to move higher. But housing is still $53,500 below historical fair value. There’s plenty of upside in U.S. housing!

    I’ve been writing this for years, but the story is still true today. It’s still one of the best times in American history to buy a home.

    • Ben Leybovich

      The talk of selling at this time or that is nice, Ken, but it doesn’t take into consideration replacement of income. The right time to sell is usually the wrong time to buy. And for those of us who don’t have jobs, and enjoy this fact, have to do some very serious planning in order to sell…:)

  19. jen kurtz

    Ben, I really enjoyed this. I love your Ohio/midwest shoutouts!

    This reminds me of the saying “when your cab driver is talking about a hot stock, and you have it in your portfolio, sell it. ” I am feeling more bear-ish in general than bull-ish, at least in the stock market currently. I take advantage of dollar cost averaging, but I pile more in during “potholes”, and I have some sitting aside just waiting for it. I wish I was in more of a position to buy like crazy back in 09, but I wasn’t. Hopefully the next time RE takes a hit, I hope I am in the financial position by then that I want to be to gobble up some properties with some nice projections! I get the feeling that you are more conservative in your estimates, as am I 🙂

  20. Jason Miller


    So many competing theories and data, only a select few will predict the outcome and likely for reasons they don’t even foresee. It seems to happen in every bubble. Only after the smoke clears do folks adjust their “theories” to match what already happened and scream to the world “Look how smart I was, pay me some money to see how smart I will be again”
    I think the best answer still follows the old formula; buy right to weather most storms and be ready to pounce once the deals make sense.


  21. Mark Lenox

    Ben, et al.

    Great food for thought both in the original article and all of the follow-up comments. The one thing I keep coming back to in my thinking regarding a potential bubble are the actions of the big players: the ones who hold the notes, namely Fannie, Freddie and the banks. When I read that there are still over 9 million homeowners not paying their mortgages, some dating as far back as four years, it does make one wonder if the current inventory shortage may not be on purpose. If they were to hold back or dramatically slow the rate of foreclosure, even for a fairly short time, it would create precisely the inventory shortage we are seeing today (with well-meaning, excited newbie investors just fanning the flames). It would also create a much better climate for them to then release more of those foreclosures, getting a significantly better return for those properties.

    I know what you’re thinking, and I am actually not a kook conspiracy theorist (most of the time lol), but I also can see that actually creating a bubble would benefit big money and big government with so many defaults out there.

    Just my two cents.


  22. John C.

    Bubble – but a delayed one of 2-3 years as some others have posted. And I assume prices won’t crash initially but just level off and then when rates go up say 50-75 bps and the easy money is mostly gone then it will just keep on dropping over a year or two period. By then people will be tapped out, some of the new & younger RE investors will either have crapped out or realize that it’s a ton of work and not profitable enough for them. And in a few years we’ll have more and more boomers downsizing and selling I’d assume (that could be a decade or more off though).

    Also, I just think there is a ton of built up inventory being held by banks that they haven’t released yet that will eventually catch up to the market (please somebody correct me on this assumptions if it’s just plain wrong).

    The economic numbers coming out are fudged a ton (i.e. unemployment, income growth, etc.) The energy sector has crapped out and with it most of that GDP “growth” the US has seen that put us above Europe and elsewhere these past few years.

    I just don’t see wage growth getting much better, especially with things like TPP and other “free trade” deals getting done, and minimum wage increases hurting businesses and preventing hiring on the bottom end of the wage scale. Plus all the increasing bureaucracy and nanny-state rules and regulations are going to kill off a lot of smaller bricks & mortar new businesses and startups.

    That said, there are certainly regions that will hold their value better than most on the coasts and in certain central areas that have not seen massive price appreciation. Thinking NYC and SF in the primo areas, and maybe certain parts of other major cities where the high-earners have (or love) to live.

    In any case, very nice article Ben and kudos to you for clearly stating that you don’t know when it’s going to pop (who does?). If you did then I’m sure you would be busy shorting RE stocks and selling assets!!.

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