Questions for seasoned investors

[Cole Meier-Hollenback]

Hello BP, newbie investor here, and I was curious if there are any seasoned investors or agents who study the market as a whole that would be willing to chat. I have some questions about the current state of the market and the cycles of the market. Any and all feedback is greatly appreciated!    

[Marcus Auerbach]

You also have different markets in the same location. The often quoted cyclical nature refers to MF properties, as developers respond to demand, build inventory until there is too much etc..

The residential market does no go through cycles, just google homes values over the last 60 years. I talk about this a lot on my YT channel and discuss the data - in a nutshell: the most likely scenario we will see is that the market will continue to appreciate until supply has met demand or until prices are so high that demand slows down. The demand is demographically driven by 82 million millennials, who have decided to get out of their leases and buy a home now that the oldest one of them are approaching 40 years of age next year. 

Until demand is met there may be short term fluctuations, but the market will always return to the trend. Creating enough supply quickly is difficult, we need more trades people, more land, changes in zoning law,  lower lumber prices, more builders - it could take a decade. Analysts are talking about a 4 to 5 million unit deficit nationally, that's about 5 years worth of average production we need to do on top of the usual.

My home town Milwaukee is a good example. Prices are relativley low (on a national comparison we are priced #66 out of the top 100), the city is fully built out, so growth happens only in the wealthy suburbs, which does not help with the roof shortage we have. As a consequence, competition for affordable homes under 350k is fierce, much different to the market over 700k which is still only "warm".