Bubble, Bubble, toil and trouble
Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes
Bubble, Bubble, toil and trouble
Most Popular Reply
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8yOriginally posted by @Joe Villeneuve:
Originally posted by @Grant Rothenburger:
Stage two bubble... Dang I wasn't even aware.
I feel slighted. I missed stage 1. Where was I?
Probably busy out buying quality assets that help you meet your goals instead of playing amateur macro economist.
81 Replies
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes8y
All real estate is local. There's so many things that cause slow downs in areas. Kids go back to school. holidays, etc. Everyone can panic thinking the world is going to collapse over trade, tarriffs, war in Israel, Russia, China, North Korea, climate change, fires in the west, or you fill in the blank. Is there any REAL reason in your region that you should be concerned about the economy? Are people losing jobs? Businesses closing? What specifically is happening that would cause a collapse of the real estate market?
Ever heard the old adage, a watched pot never boils?
- Investor · Portland, OR · Member since 2017 · 182 posts · 115 votes8y
Lets put it this way--- I bought a case of Don for about 120 a bottle earlier this year. I went back to buy another case and it was 200 a bottle and I had to special order from the store... Think what you want--- but it is definitely a good time to sell in my opinion.
- Rental Property Investor · Las Vegas, NV · Member since 2018 · 133 posts · 171 votes8y
Whether there is or isn't a crash coming, I put down at least 40% on rentals so that I am well in the money on cash flow. If there is a crash or rents fall worse case scenario I just cash flow less for awhile until the market recovers. My properties are in locations with high rental demand so I know even in a bad market I can easily cover my debt service and other expenses.
I think if you buy good assets in high demand locations and don't over leverage, you don't ever have to worry about crashes...
- Whitestone, NY · Member since 2017 · 22 posts · 18 votes8y@Josh Collins I agree with your assessment - I think that as interest rates rise and loans dry up prices will flatline or decline. I just don't see what will cause another situation like 2008.
- Honolulu, HI · Member since 2017 · 247 posts · 315 votes8y
Originally posted by @Jay Hinrichs:
Originally posted by @Robert M.:
I have lost count as to how many credible real estate investors have suggested to me that we are in the beginning stages of a real estate correction/stabilization. I personally welcome an increase in DOM so to help my long-term investment opportunity. Every investment property for sale in my area has a cap rate of 4% or less. I won't buy unless I have cash flow and a cap rate of 8%, just not a speculative investor, not to mention we worked too hard to get to this point and aren't willing to risk everything on an overpriced property. It has been tough to compete with all the 1031 money in the system the last few years.
I personally welcome higher interest rates and inflation. The last downturn made millionaires of those who weren't leveraged and had access to cash. I, along with everyone else I have spoken with do not believe we are in a bubble, the subprime and 50-year mortgages don't exist. This is just a correction stabilization, a normal cyclical event in real estate.
I'm jacked up that DOM is increasing, finally going to get back in the game for the right reasons.
Now, who wants to buy some investment real estate at a discount and get instant equity?
I was talking to my banker in Hillsboro and asking them how the other builders are doing and its slow across the board.. and I think what you seeing Is pricing finally starting to level off.. which will mean subs will have to quite jacking their prices and lumber will have to calm down or building is going to slow a lot .
Now one thing that was floated at least in our area here is this was the first summer that many finally felt financially safe enough to go on that extended vacation that they had been putting off so foot traffic is way down.. and I know when I go to PDX I am usually parking on the very top floor :).. and airline tickets to Hawaii have doubled and tripled .. so we know demand is there.
@jay Hinrichs
southwest is going to start flying to Hawaii soon...
- Real Estate Agent · Sequim, WA · Member since 2017 · 64 posts · 39 votes8y
Deffenetly slowing down up here north of Seattle... New construction still really strong, but the pre existing home sales much slower. (Not 1 week sales anymore on $600k homes).
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes8y
We are always ready to fight the last war. The next event will look nothing like the last. No two events are alike, S&L crisis, 1987 stock market crash, 2008 crash, etc.
I have yet to hear a good argument why there is a crash imminent. Quantitate easing and rising rates is not the basis of a crash. It is part of the normal cycle. There is not an over leverage situation as in 2008, further it was about people who would never be able to make the payments. They must sell the house to be kept whole.
It is going to take something big and unforeseen.
There will always be fluctuations and yes even crashes. The question is when? Even a broken clock is correct 2x a day.
- Member since 2018 · 214 posts · 175 votes8y
Since Majority of us have a deep memory of the 2008 crisis and most of us have preparation already. At least the bank don’t offer 125% loan or zero down payment anymore, so there are “no Investor” having 10 houses with zero down payment, there are not too many investors overleverage like last time in 2008 because the bank don’t offer the loan if the leverage is too high. That being said, even though a correction come, there will not be too many over leverage people who can’t make the mortgage and are forced to sell their properties. The inventory in the next correction will be extremely low because everybody who can afford the mortgage will hold their property tight and do not want to sell it at low price during correction. On the other hand, there are many investors with stacks stacks full of cash ready to buy many properties during next correction.
Guess what, during next correction, a “very low supply” of 20% discount houses and a “very high demand” of cash-ready investors who have been waiting for a crash/discount and sitting on the sideline for a long long long time. The next correction may be a very short period of time when all the cash investors flood the 20% discount house market. Boom time resume again soon after the correction.
If you are a long term buy and hold Investor, not over leverage, have cash reserve, the next correction is not scary at all. Just hold on the properties tight and ride it over to the next next peak with another 200% to 500% appreciation from today price.
- Rental Property Investor · Murrieta, CA · Member since 2016 · 129 posts · 67 votes8y
Originally posted by @Dave Carella:
I'm guessing none of you who have replied to this inquiry, actually read it. I was looking for feed back from my area. Since they don't have forums by state I just threw it out there. Pricing here are starting to flat line, if not drop. construction booming. And another thing. just because your a "pro" on this forum doesn't really make you a pro. you just paid a fee for something a pro doesn't really need.
I pay because I want to support BP, a resource that I value and believe is worth us supporting. As for getting any free advice from anyone here - forget the market work on people skills and how to use a forum. You talk about tools the pros don't need and don't even know the features of the site you are on....
- Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes8y
@Joe Villeneuve I Guess 2008 was nothing AND NOBODY saw it comming
- Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes8y
@Omar Khan what the heck are you talking about? that wasn't professional to say. Sarcasm? really?.
- Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes8y
@Com M. Oh I know. Don't you worry.
- Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes8y
@Grant Rothenburger.... Well now you know! Your welcome.
- Rental Property Investor · Murrieta, CA · Member since 2016 · 129 posts · 67 votes8y
Originally posted by @Dave Carella:
@Com M. Oh I know. Don't you worry.
Sorry, I took you saying that there was no state for him to me but you didn't know there was one. You totally knew it was there just couldn't find it good going Magoo.
Good luck in flipping, to you and everyone in your path.
- Investor · Woodbury, MN · Member since 2016 · 90 posts · 72 votes8y
@Lesley Resnick - I appreciate your comment and sentiment. I agree with your comment that it's going to take something unforeseen. I feel like it's going to be something small that turns into something big.
With that said, I don't think that the future issue is going to be real estate-centric. I think it's definitely going to be something else that "crashes" but I think RE is going to go along for the ride. Probably not a 50% crash or anything that drastic. Hell, prices may not even go down but just stay stagnant. But they could stay stagnant for 10 years.
What I mainly take issue with (okay, that sounds harsh) is that a lot of people are saying nothing in the economy is showing signs of going down in a ball of flames so we have time yet. I'm guessing that's what people said in 2008 and then got burned. I'm certainly not saying anyone is wrong, I just want to brainstorm what issues the industry could see. I doubt any future downturn would be directly related to RE, so that's not what I'm saying at all. I'm mostly trying very hard to contemplate what the effects on the RE industry are going to be in the next downturn or stagnation, that's all.
@Account Closed is alluding to, in my self-storage scene, building materials have gone up around 50% in the past 1.5 years. That's a big ding on returns. That is going to keep a lot of people from building new houses, storage, etc. I think there is going to be further competition for entry level housing (because they haven't really built much of it) which is going to keep those prices pretty flat or slightly rising even in a downturn.
I think with building costs, interest rates, vs. low inventory, I'm guessing we'll see close to flat housing prices. But, if you own a commercial property that resets in 5 years, that might be the buying opportunity many are looking for. Some parties may be looking to liquidate if their new, reset mortgage ramps up and cashflow isn't what it used to be. I am hearing rumblings about interest only loans here and there so some of those people might get burned if their property doesn't appreciate but their loan payments go up. They may not have enough LTV to refi. Again, I think that plays into my theory of getting money is going to be the hurdle in the future, not necessarily the asset class.
Lastly, I feel like everyone wants to get into real estate and that usually spells disaster; the dumb money chasing the smart money. This is similar to taking the market's temperature by looking at magazine headlines, telemarketing calls, guru sales programs, and the like. I just hope having this conversation makes us wiser and more prepared for any hiccups the market has for us. But I will say that I don't think the next downturn will be focused on the RE industry, but we'll likely have some collateral damage to deal with.
This is a super helpful conversation for me. I'd love to hear more from people that disagree with my sentiment.
- Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes8yFact is since the beginning of June which is supposed to be high sale season, Home sales have slowed, DOMs are up and prices are dropping. On my own properties here in the SF Bay are I have seen Zillow values roll back by 100k. Now keep in mind these prices were going up by nearly $50k per month or more for the last 12 months prior, so we got to come out and say that the market is exhausted after running super fast, the buyer does not want to over pay any more. At the same time lots of new construction has come along. Lots of condo unIts and townhome development. If this situation persists prices have to keep coming down and normalize. Remember this is all just an outcome of demand and supply and not some exogenous event where banks are going belly-up etc which was what happened in 2008 starting with countrywide, Wachovia, WAMU etc.
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Dave Carella:
@Joe Villeneuve I Guess 2008 was nothing AND NOBODY saw it comming
2007, 0006, etc...
Oh, and let's not forget the years 2018, 2017, 2016, 2015, 2014, 2013, 2012, etc...
Why? A lot of people (experts) saw it coming then too. Funny how we'll forget that a lot of them saw it every one of those years, but the only year we'll remember them predicting, is the year it actually comes...and they will say, "see I told you so", and be declared an expert.
- Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes8y
Originally posted by @Dave Carella:
@Omar Khan what the heck are you talking about? that wasn't professional to say. Sarcasm? really?.
No sarcasm here.
Giving your free, actionable advice through which you can take advantage of the "Stage Two" bubble (heard it's bigger than Stage One but less scary than Stage Three).
And I didn't even get a thanks :(
- WorldWide · Member since 2016 · 1k+ posts · 1k+ votes8y
Originally posted by @Joe Villeneuve:
Originally posted by @Dave Carella:
@Joe Villeneuve I Guess 2008 was nothing AND NOBODY saw it comming
2007, 0006, etc...
Oh, and let's not forget the years 2018, 2017, 2016, 2015, 2014, 2013, 2012, etc...
Why? A lot of people (experts) saw it coming then too. Funny how we'll forget that a lot of them saw it every one of those years, but the only year we'll remember them predicting, is the year it actually comes...and they will say, "see I told you so", and be declared an expert.
not verbatim, but the economists have predicted 9 out of the last 5 recessions...
something tells me we'll have issues in tech, as those valuations cannot keep going up infinitely (kinda like RE on the west coast).
- Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes8y
A lot of investors, especially newer ones I deal with ignore the emotional aspect of their investment decisions... i.e. what is and isn't going to keep you up at night. If the idea of a the eminent bubble (regardless of magnitude) terrifies you then get out of the game. Don't even get started if you're going to worry every day. If your mindset is moreso the "I want to do this, but in a fashion that allows me to weather the storm", then keep working towards a viable investment strategy for this market phase.
I believe in playing all four quarters. How do I make the most out of this market phase? Selling rental property to investors. How do I make sure I'm looking out for my investor's best interests while maintaining healthy profit margins for my business? I target markets and assets that have these two major factors:
1. Low volatility. Prices don't go up much (so you're not paying as much into the profit of the guy that bought the same property in 2010) or down much (so if this "bubble" pops your equity losses are as low as possible relative to the national average).
2. High yield. Rent to value ratio. If you, like I, believe most of the appreciation in this market cycle has already been had then don't try to get more of it, go for cash flow. Put your chips on today's returns rather than tomorrows, since they're unlikely.
If you're brand spanking new to this game like I was a few years ago, and you think waiting on the sidelines for a crash is the smart thing to do- you may be right, but remember this:
.... If there is another fire sale, the investors who have the money, experience, teams, and credibility are going to be buying up everything they can. If you're brand new to the game, good luck getting a slice of the land grab. Those who have been in the game, played their cards right, & weathered the storm are going to put their collective feet on the gas and do everything they can to get filthy. You're going to have to get in the ring with them and brawl.
***There's always a way to win right now***
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes8y
Originally posted by @Sam Josh:
Fact is since the beginning of June which is supposed to be high sale season, Home sales have slowed, DOMs are up and prices are dropping.On my own properties here in the SF Bay are I have seen Zillow values roll back by 100k. Now keep in mind these prices were going up by nearly $50k per month or more for the last 12 months prior, so we got to come out and say that the market is exhausted after running super fast, the buyer does not want to over pay any more.
At the same time lots of new construction has come along. Lots of condo unIts and townhome development. If this situation persists prices have to keep coming down and normalize. Remember this is all just an outcome of demand and supply and not some exogenous event where banks are going belly-up etc which was what happened in 2008 starting with countrywide, Wachovia, WAMU etc.
California and some other coastal markets have seen a 1-1.5% drop in property values monthly since Mayish. That said, real estate is local. I predict that many markets will see a correction to early 2017 values, by early 2019.
All of my investments for 2018-2019 are going to fund self storage and manufacturered housing, both of which have proven to provide positive returns in the worst of times.
- Rental Property Investor · Chicago, IL · Member since 2016 · 318 posts · 307 votes8y
Stage 2 of 10? or 20? who knows??
I do think Grade A and B areas are at bubble levels.. my definition of "bubble" is where numbers don't make sense if markets do contract.
Not saying a crashing is coming, but several C and even D markets which are ripe. Cash flowing and rising in value.
My 2 cents
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes8y
The key is to do sound fundamental deals today and not overpay. In this way investments are still being made that should help make returns over time and some equity growth. When markets finally go down ( everyone can look at indicators but nobody has a crystal ball ) then investors can accelerate buying at the bottom.
In commercial real estate Trumpenomics with his latest tax laws through 2022 is juicing the economy for more years past then a typical 8 to 10 year cycle period. My clients UHNW investors love knowing what the tax landscape will be for the next 4 to 5 years. It makes them comfortable to deploy cash into hard assets.
My commercial business is doing great and I do not see it slowing down anytime soon. I see selling and a ton of capital out there to buy. Not seeing a slowdown if anything an acceleration. I have seen seller cap rates rise slightly on the commercial real estate in response to interest rates rising. When a change happens the buyers want to adjust offers right away (that week). Sellers tend to take many months to see if interest rate spike was temporary and settles back down or now the increase is a (new normal) and seller has to adjust price to sell. The last 3 to 4 months there was an adjustment period but I am seeing sellers be more reasonable now with expectations for proceeds on a sale.
- Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes8y
Originally posted by @Andrey Y.:
Originally posted by @Sam Josh:
Fact is since the beginning of June which is supposed to be high sale season, Home sales have slowed, DOMs are up and prices are dropping.On my own properties here in the SF Bay are I have seen Zillow values roll back by 100k. Now keep in mind these prices were going up by nearly $50k per month or more for the last 12 months prior, so we got to come out and say that the market is exhausted after running super fast, the buyer does not want to over pay any more.
At the same time lots of new construction has come along. Lots of condo unIts and townhome development. If this situation persists prices have to keep coming down and normalize. Remember this is all just an outcome of demand and supply and not some exogenous event where banks are going belly-up etc which was what happened in 2008 starting with countrywide, Wachovia, WAMU etc.
California and some other coastal markets have seen a 1-1.5% drop in property values monthly since Mayish. That said, real estate is local. I predict that many markets will see a correction to early 2017 values, by early 2019.
All of my investments for 2018-2019 are going to fund self storage and manufacturered housing, both of which have proven to provide positive returns in the worst of times.
Nothing is recession-proof nor recession-resistant.
I know manufactured housing and self-storage are the hot places to invest these days but they, too, are suffering from the same issues - massive spike in prices (over the past few years) and everyone stampeding to get into these assets.
If you look across the major syndicators, you will note that their return projections are going down to account for the increase in valuation increases.
Now you might have an edge in manufactured housing/self-storage facilities because you can source deals better than the average person but contagion risk always exists.
@Jay Hinrichs can chime in and tell you all about sure-fire recession-proof investments that purported to offer positive returns in the worst of times and then acted like any other real estate investment.
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