Is the Market going to crash

[Jose Arreola]

Good morning BP fam!

What with all this talk about the bubble going to pop? I am about to get into a flip project. Should i be nervous? What do you guys think?

[Matthew Masoud]

The market is certainly slowing down due to rising interest rates but there is little evidence that a bubble is coming.

People have been saying a bubble is coming since 2016.

Make sure you have a thick profit margin because we are expecting another rate hike during the upcoming fed meeting which will affect home prices even further.

Best of luck.

[Robert Reynolds]

Good morning @Jose Arreola,

I actually just talked with David Greene about this yesterday. His perspective, which I agree with is that it will not crash in the foreseeable future, especially in markets like Los Angeles or the bay area, where Demand is High, Supply is Low and there are little to no new builds going on. Higher interest rates certainly are slowing things down, and there are no longer 20 offers on every home. Instead there are 2-6 offers on every home. So it's actually a better time to purchase than it was  few months ago, even with the higher interest rates. 

I personally know many friends who have been renting the last 10-15 years, and are tired of wasting their money on rent, when they could instead buy a home, take advantage of appreciation, principal pay down and tax savings. Not to mention that their mortgage payment won't keep increasing like rent does every year. So I think that once the sticker shock of these higher rates wears off, more people will get back into the market. Historically, 5% is still really good. When I bought my first house in 2009, my rate was 5.5% and I thought it was a steal. Because of the pandemic, we had artificially low rates that we may never see again.  Hope this helped. 

[Eliott Elias]

no

[Brian Garlington]

The easiest way for people to get clickbait is to have a title like this.///////////////but I digress.

To answer your question, no.

People keep thinking and hoping this will be like 2006-2008 so investors have an excuse to wait. 

In 2006-2008.....there was an overabundance of inventory on the market.

Is that the problem now? Quite the opposite.

In 2006-2008 the banks had been very creative in how they were qualifying people for loans. I knew of several married couples that worked as cooks for some very famous fast food chains that were getting 103% mortgage loans because they could NOT afford the down payment.

Is that the problem now? Quite the opposite.

People had no equity in their homes in 2006-2008 so the banks foreclosed.

Is that the problem? People have more equity in their home now then ever before.

Stop looking at clickbait articles online.

[Scott E.]

Nobody knows.

[Basit Siddiqi]

Prices can go up.
Prices can go down.

Where do you think the market is heading? 
You have to go with your gut sometimes.

You may want to be more conservative and maybe try not go take on a project that will take a long time.

[Joshua Janus]

Quote from @Jose Arreola:

Good morning BP fam!

What with all this talk about the bubble going to pop? I am about to get into a flip project. Should i be nervous? What do you guys think?

I know many investors that are buying heavily, and many others that are on the sidelines waiting for who knows.

Up to you! If you find a deal where you buy into a large amount of equity, I say buy it. Best way of creating a safety net for yourself

[Will Barnard]

"Nobody knows", "No", "go with your gut", etc. None of these opinions will answer your question and even the better answers above can easily leave you still guessing. You have to look at the facts, your local market conditions, and ensure you bought right. Should you worry? Only if you are sitting on a very tight margin or a long hold period should you worry if you are flipping in LA. Look at the average DOM, look at the inventory levels, and look at the affordability index. For the short term, I would not be too worried if I bought right and have a short time horizon for my flip investment.

[Patrick Kaiser]

My advice to the flippers I have been working with:

Interest rates drove everyone's pre-quals down. Out of state buyers (here in Phoenix) we are repeatedly seeing them making offers hoping their houses in XYZ state would sell for XYZ price, then their offers are coming in lower than they hoped, also driving their purchasing power down. Right now the only thing I am seeing selling well are houses that are PRICED WELL compared to the competition. This sounds obvious, but a few months ago, even at astronomically high prices, what was selling well was NICE FINISHES. So there was a market for nicely done houses even in lousy neighborhoods. We struggled with appraisals but not contracts. 

So, the advice at least here in Phoenix is: lower price points, smaller flips, just clean it up, clean it up, clean it up, do bare minimum finishes, and price on the lower side of active listings and we are still doing well. My most recent flip (not mine but represented owner) was actually a $220,000 manufactured home on owned land (not a park) seller put $20k into it, and sold for a $65,000 profit. One of their most profitable flips ever and it was at the absolute bottom of the market. The reason is, everyone's pre-quals went down and there's hardly any inventory left in the under $400,000 price point. 6 months ago it was hard to flip these kinds of houses and make money, now it's the frickin rage. 

I don't know if its like here but my primary advice is do not aim for the top of the market in whatever price point you are in. All buyers are very price sensitive right now.