San Antonio, TX · Member since 2016 · 2 posts · 0 votes
Hello I have a hypothetical question. what would be a good strategy if the housing market crashes and I am just starting out and haven't bought anything? Should I buy or wait?
Lender · Dallas, TX · Member since 2015 · 283 posts · 128 votes
10y
What is your definition of a housing crash? What we saw in 2008 was a financial meltdown that impacted the housing market. It is unlike that that kind of crash will occur. Most likely what will happen (is happening) is that prices will stop rising. As credit markets ease, you will see a return back to home ownership so that I believe we will return to a more normal pattern.
In the Dallas/Ft Worth area, home price over the past 40 years have only appreciated 2% annually. That is not to say that some areas have not seen significantly more than others but the overall average has be very mild.
As for the rental market, there is no doubt that the DFW area is starting to get overbuilt and that rental rates for apartments are reaching a peak. Many new projects are offering free rent and effective rental rates are leveling off.
The housing crash that you fear is either already started or will only be clear once you are in it. I think the comments above are on track for the most part, that being that if you focus on rental income as the basis for you investment, appreciation will take care of itself. If your intent is to make short term money through rising home sale prices, I think that ship may have already sailed.
Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
10y
Depends on what rents are doing. Also depends on how steep the discounts are on property and if you need the rental income or can wait out the market normalizing again. If the market in general is in a downturn, but people locally still have jobs and have fixed mortgages, you won't see much action.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
10y
What has your local market done in past housing declines? What is the industry base in your local market? Jobs are number 1, as said above. Demographics are important, as well. Starter homes will be solid in markets where there are many Millennials for years to come.
My business partner and I bought a number of houses in a small Texas town, and planned on zero appreciation. Well, unexpectedly, that area had prices driven up by oil worker demand for rentals. So we had appreciation that we didn't count on. And we didn't sell (though in hindsight we could have cashed out and bought more). Rents went up, and now rents are coming back down. We have lost oil patch tenants, and house prices are going back down again. We are still ahead of the game, as we have more paid off houses now than when we started. Here is your answer--->>> If we had purchased when house prices were doubled, and counted on those raised rents...only to have prices and rents decline...well, it is the perfect recipe for difficult times.
However, you have a wide jobs base, a lot of in-migration for weather and jobs, and a wide base of industry in SA. Did house prices do crazy loopy rises and falls? Houston has. Dallas has. I'm not sure about SA...do your homework.
In Texas, though, we have picked brick houses (to avoid messing about with painting or repairing siding), 3/2 houses in nice school districts and... in the oil patch, and near a military base. We started buying houses for this portfolio in 2012.
Lender · Dallas, TX · Member since 2015 · 283 posts · 128 votes
10y
What is your definition of a housing crash? What we saw in 2008 was a financial meltdown that impacted the housing market. It is unlike that that kind of crash will occur. Most likely what will happen (is happening) is that prices will stop rising. As credit markets ease, you will see a return back to home ownership so that I believe we will return to a more normal pattern.
In the Dallas/Ft Worth area, home price over the past 40 years have only appreciated 2% annually. That is not to say that some areas have not seen significantly more than others but the overall average has be very mild.
As for the rental market, there is no doubt that the DFW area is starting to get overbuilt and that rental rates for apartments are reaching a peak. Many new projects are offering free rent and effective rental rates are leveling off.
The housing crash that you fear is either already started or will only be clear once you are in it. I think the comments above are on track for the most part, that being that if you focus on rental income as the basis for you investment, appreciation will take care of itself. If your intent is to make short term money through rising home sale prices, I think that ship may have already sailed.