upcoming real estate crash and home prices

14 Replies

All over the financial news I read talk about the upcoming financial recession.  Some people think it is "just around the corner", some think it will be in early 2020, and others thing its a long way off.  All of them of course think there is a recession coming.

If there is going to be a recession, home prices are likely to take a hit again.  So I wanted to ask, how many people here are considering selling their real estate?  Right now whenever I go look at properties they seem to be selling for above what appears to be reasonable, as if speculators are buying them.  Which reminded me of home prices and even multifamily prices before the 2008 recession.  What are you doing to prepare for it?  Or do you not think there will be a recession?

@Russ Draper , I really don't believe that things are even remotely close to being as bad as they were in 2008. Sure individual markets could take a big hit (I'm looking at you Boston and SF), but I would be really surprised if the national averages took a hit like they did in 2008. Of course, that is what everyone was saying in 2007 so.....

AS @Russell Brazil   says there will for sure be another recession that's a given.

but who can time it.. and will it be regional.. there is always mini recessions and hot markets.

just look at when a factory folds in some smaller burg.. or like right now look at South Carolina which is ON FIRE for jobs.

Boeing 787

New Volvo factory not yet manned but thousands of jobs and support coming in the next year

Mercedes building a new factory same thing.

building a new embarkation debarkation for cruise ships in Charleston  14 hotels under construction in Charleston..

then look at another market where not much is happening and won't be happening.

but right now real estate is hot and frankly its pretty solid right now.

I am not sure on the MF side that kind of goes up and down on over building .. and commercial as well.

Like I probably would be a little nervous in the Mall space or some commercial with brick and motor kind of changing.

But with the owner occ resi seems pretty solid.. no sub prime NO liar loans..  short supply  so if you buy those were there are jobs seems to me its pretty safe bet.

but then we are all just one major incident away from some sort of consumer sentiment stopping sales.  Interest rates will slow things a tad..

I've looked and read a whole bunch of articles, and tried to find various economic indicators to see if there are any that linked to it.  It appears that the 2008 recession actually started in 2007 and people just didn't realize it was happening until it was too late and we had the major Wall St fiasco.  It appears that home prices in several markets did take a bit of a dip in 2007 so there was sort of a warning, but that doesn't mean that it would happen again.

My hope is that prices will stagnate but not come crashing down.  I am in Boston, funny you should mention it!

You only lose money when you sell, so price movements are irrelevant if you dont plan on selling. 

That being said, Id rather lock in more debt at historically low interest rates than pay 2 or 3% less for a property while paying a 2% higher interest rate.

Like @Jay Hinrichs stated above, there are good signs that real estate will most likely not take a big hit during the next recession. Whenever that may be. And one other thing to look at that is a big indicator of safety for home owners is the amount of equity people have now compared to when the housing market crashed a decade ago. This will help people out of there crisis and the recession in the fact that people won’t go under water and have some equity if they have to sell. Other charts, graphs and information from some big real estate players makes sense that real estate will not take a big hit during the next recession. Bruce Norris, Sean O Toole and John Burns have some great info and facts on this stuff. Like Jay said above, I think interest rates will be the biggest slow down at this time right now in certain markets.

@Mike Flora   I was at J Martins last Oakland event.. and Bruce Norris did the keynote and I sat with Sean at dinner.

Bruce likes SFR and half the Q and A for him was exactly that when is the crash coming and how deep will it be.

his comments now were geared towards west coast but I do believe they are germane in many markets.

He feels a market is not heading down until 20 to 30% or more of MLS is foreclosure acitivty or short sales and in our area that boat has sailed.. there is very little of either.

He did mention though that he felt MF was  to use his words  " FROTHY"  his statement was when he talks to other MF owners and ask them would you buy your property for what you could sell it for today or a like kind one.. it was a resounding NO.. which to him or his point was he felt it was over valued and at some risk for moving backwards.. and from my VERY limited knowledge on MF I suspect that only happens in an over build situation to many doors not enough renters and you have rental bonus wars.. Or your in an area were jobs leave and renters go with them.

the other danger at some point is renters turn into owners.. that can have a impact.. although I look at our market here in the NW we have basically a 1% vacancy and a lot of that is because unlike most of the mid west deep south etc.. there are NO where NEAR the amount of SFR's that are rentals.. prices of SFR for a rental at best would break even but most would be severe negative cash flow so they are really only sold to homeowners and that does keep the neighborhoods in good shape.. the renters are in apartments..

Now in our market of PDX from what a bigger PM told me that only manages apartments he said some of the new construction does have stress IE by the time they started them and with cost rises in labor and materials .. the rents are not hitting performa and or over build and rents have to be lowered to fill the units both stressing the owners .

@Jay Hinrichs yes Bruce was a little skeptical on the multi family market but all in all the aspect of real estate actually helping the turn around of the next recession actually made sense in the SFR area. With of course putting all the information together that was provided by these guys. I only really focus on SFR at this time and I’m just trying to grow my portfolio but to respond to the OP an overall crash of everything in the real estate world just isn’t adding up to me and most other experienced investors at this time. There are some markets out here in riverside county that are still undervalued and are trying to get out of the hole the 2008 crash put them in. So many foreclosures and auction purchases in lower income areas have really slowed down the market recovery in those areas. Tons were obviously made into rentals after auction purchase and just flat out not being taken care of by landlords. Hemet CA has a great article on how this has affected their city. I believe over 50% of the city is rented in the multi/SFR. I just picked up a property for 100K and wanted to rent in Hemet but HOA put a stop to that real quick and we just flipped it for 170K. They are making it hard for people to buy and rent in certain cities out here in Riverside county. Do you see that up by you in lower income areas?? Struggling still to catch up to other markets??

@Mike Flora   in our area lots pretty much start at 100k.

rural Oregon now that's a different story but the towns are so small 2 to 5 thousand population sometimes less to really not make a dent on anything.

You will not be able to predict when and where or how bad, how large etc. What you can control is the deal you get on your investment and making sure you get a deal that still is a good deal even in a correction. Don't over pay. If you can't get a good deal and are overpaying in your market, then a correction can really hurt you. So purchase and hunt for good deals that are good deals now and later. That may mean you have to go and hunt for other markets and not just look in your town and state. I live in OR. It is very hard to find good deals in OR now. Like most investors in OR we now are looking in other areas for not just good deals but great deals. 

@Jay Hinrichs I like Bruce Norris, he called the previous recession at a conference in Las Vegas. He went through exhaustive analysis and concluded that he needed to sell over 100 houses within 6 months. The audience laughed at him (I didn't and took heed).

He was right it was huge!

@Mike Hurney   when Bruce was done in Oakland  .. I kind of puffed my chest as today I do basically exactly what he does in his business..  He just went to Florida and bought a subdivision and is building lots and houses.. I just funded a 54 lot subdivision on FLA last Oct.. LOL.. about a week after his talk.

I wish I had listened to him at Vegas I think I was at that event.. if you recall did the guys that sell Life settlements make a big talk ???? was it that event.. I was sitting next to Bruce in the audience  in that one and we were both kind of cringing thinking what a morose business.  

but as stated there will be a recession but his point is foreclosures and short sales are the barometer and right this minute we are a long way off of that.. does not mean it can't happen and with job market the way it is.. I think we still have some room to run..

Peoples understanding of the basic economic cycle is scary......  Go ahead and sell..... I'm still buying.

@Jay Hinrichs

I believe the event with Bruce Norris was in 2012.

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