Can I Stop Looking for Deals Now?
Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
Obviously, there is some sarcasm there.
Generally speaking though, there seems to be the consensus that in the next 2-5ish years, there will be some sort of market correction.
In that same breath, it seems like there is ALWAYS this underlying pressure (not really the word I'm looking for...) to KEEP BUYING DEALS, almost regardless of what the current state of the market is. Of all of the podcasts I listen to (mostly about multi-family investing) and people I talk to, I've only heard one person say that they aren't buying right now, intentionally.
Now clearly, a 'deal' is something that cash flows or will make profit from day one.
I'm not saying skip over a true DEAL.
What I'm asking though, is if there are experienced investors who've been through more than one full market cycle, that have periods of not buying ANYTHING, even if there 'are deals out there'?
We could have a crash that starts tomorrow or we could die on the sidelines while we wait for the crash.
It's always a good time to invest. Strategy might change, action will not.
Fantastic insight as always @Sean Davidson I need join in on these market reviews.
One of the key things I want to point out about the above post is the price constraint. We have huge population growth and That trend will continue for a long, long time. Companies are moving down to Nashville, folks losing manufacturing jobs in the rust belt are moving down here, and it is such a “trendy” city. I haven’t met anyone that visited me that hasn’t said they want to move to Nashville. There is just something about it that makes it special. I must say so myself, whenever I’m downtown I’m always impressed with just how awesome the city really is.
With that being said…..
When we talk about the market there’s a substantial difference between a correction and a collapse. It seems whenever anyone talks about the real estate market they always refer to the 2008/2009 financial crisis as if it should be viewed as the benchmark. That crash is the exception to the rule and a crash of that magnitude only happened once in the history of time. It absolutely CAN happen again, but I don’t think it should be viewed as the benchmark for market cycles.
With all of the development, Nashville is so neighborhood specific that it makes it difficult to explain with a blanket response.
A correction has already started in certain areas that are oversupplied. East Nashville right now has an abundance of homes in the 350-400 range that are sitting. It is officially a buyer’s market with over 6 months’ supply.
Venture over to the Nations and homes aren’t sitting as long as they are as compared to East Nashville. If you drive through the Nations it looks like every single lot is being developed, but the size of the Nations area vs East Nashville can’t be compared. East Nashville is just so much bigger.
That area is also starting to get over supplied with expensive homes. The same home that was selling in a week is now taking a month. I think that is also largely because that same home was 320 at one point vs 420 now.
If you look at the affordable suburbs (not Green Hills), you will notice that they are beyond smoking red hot at the moment because it’s pretty much the only area you can get anything decent for under 300. If you listed a home in Bellevue for 275 you would get people sending you fruit baskets along with offers over your asking price. Where else can you get a 3/2 with a 2 car garage for under 300?
I think the population growth should not be confused with people’s ability to buy homes. We can have 10000 people moving here each day, but if they can’t afford a 400k home then there probably won’t be a lot of demand for $400k homes despite the huge population growth.
Every agent I have spoken to has told me the demand for homes under 280k is nearly unlimited. The supply is nearly non-existent. I honestly think the largest problem with affordable housing right now is the city not supporting increased density. There is absolutely no way for me to build an affordable home as a “2 build”. The land and construction cost is just way too high. If I had an acre with R10 zoning that would comfortably support more than 2 homes, you have to go through city planning to try get it rezoned which can take years and tens of thousands of dollars. Then you have to deal with the neighbors that will try shut down your development and in the same sentence complain about how homes are unaffordable.
There are a lot of real estate issues in Nashville right now that we as investors need to try and figure out. With all that being said, I find it alarming that investors are still paying for land as if the market is still skyrocketing. Do they not know building costs are going up FAST, the city is adding new expenses daily and home prices are dropping.
Good luck out there everyone!
This thread is expanding my mind and I love it.
To the point of the whole thread, I think it's always a good time to buy good deals, but in some market cycles they are harder to find (now). Yes, it's tempting to say you'll wait for the next downturn, but you will likely miss out on a lot of profit while you wait. Challenge yourself to get creative... What can you do that others can't or aren't in this market?
Below-median buyers and new investors are bidding the heck out of affordable houses (below median prices) in Nashville. I have always wondered why builders don't do more below-median houses but @Luka Milicevic made me realize it's the regulation costs of construction keeping it from making sense for developers.