Sellers markets do not equal bubbles. Buyers markets do not equal crashes. Everyone needs to get over the PTSD of what was likely a once in a lifetime bubble and crash from a decade ago.

@Todd Dexheimer and whos to say we don't make new highs.. who says that 2007 has to be the peak of the real estate market and values at anytime if they exceed 2007 levels are bubbling :) we make new highs every decade or so.... the high in Cupertino were I grew up in the 60s was 30k.. then the 70s saw 60k then 1977 ish 100k.. then in mid 80s 500k then early 90s 750k then 2000 750 to 1 mil.. then 2007 900 to 1.2 now 1.2 to 2 million.. and so on an so forth.. what was the prices in your market in the 80s compared to today.. what was the high that decade and have they made new highs and gone higher.. Not disagreeing with anyone but to me it seems markets make new highs or they get obsolete.. like Detroit or Rochestor or Buffalo where I suspect prices peaked in the 80s and 90s and have been in steady decline every since.. ????? just musing..

I agree with @Hattie Dizmond I see a correction but not a crash that some people are predicting. People see rapidly rising prices and automatically assume we are heading into trouble like we did in 2007-8. The underlying fundamentals are different. For example, no one can get a loan in a SFH for 125% of the value of a house. Underwriting is much stricter than before the last crash, which is a good thing. Some random thoughts: Arguments for continued appreciation: - lack in inventory in many markets. Net absorption rates are low in some major cities, pushing up rental rates. Developers are building to catch up but new inventory always lags demand as it takes years for new product to be built and come online. - Politics of liberal states. NIMBY-ism, anti-development, building restrictions, etc will always put a vice on inventory growth, thus raising prices of existing stock. - low interest rates. We have historically low interest rates. decades ago, people bought houses with 10%+ interest rate mortgages. The Fed cannot raise rates to those levels anymore. The US government has so much debt, payment on high interest alone will cripple spending. - For rental property investors - the generational shifts occurring will increase demand for MF and some SFH rentals. Millennials burdened with various debt cannot and will not buy SFH at the rate past generations have. Baby boomers are retiring and scaling down. Saving what they have in retirement and taking their equity in their home and moving into apartments Arguments for correction - Debt levels are highs - student loan and consumer debt are at scary levels. People who have equity may leverage further to pay off their kid's debt, etc. - Decrease in investment money from international investors. This is usually concentrated in hot markets, such as SF, LA, LV, etc. ie, Chinese government is cracking down on cash outflow from wealthy investors...but then again, investors will find a way to funnel the money out to safe havens. - Lack of wage growth. this is a huge deal. everyone knows wages have flat lined over many decades. even decreased in some areas adjusted for inflation. If people don't make money, people can't buy houses...simple economics. Good for MF landlords since they are perpetual renters. CANARY IN THE COAL MINE - Money velocity (M2) is ridiculously low, I mean historically low. Lower than post recession. Money is being printed (QE), which should increase inflation but it's not. People/corporations/international gov/whoever are hoarding money, not spending it. If the money velocity declines rapidly during an expansionary monetary policy period, it can offset the increase in money supply and even lead to deflation instead of inflation. The fed is trying to fight this by increasing interest rates. They don't care if the housing market gets hit with higher rates. They absolutely do not want deflation. Inflation can be controlled. Deflation cannot. Look at Japan over the past decades. Their economy is at the same level where it used to be in the 80's/90's. https://fred.stlouisfed.org/series/M2V

Yes. They do. I'm just fairly sure most of them won't still be there in 2-years, with or without a bubble. Most of these folks have swallowed the marketing whole and believe it's the simplest thing in the world. They haven't figured out yet that it's hard work and, yeah, you probably do need some of your own money!

Texas buy and hold real estate has not really been worth it over the last 24 months or so. Someone earlier hit the nail on the head, rental rates have not kept up with appreciation. Having properties that go up $100k in value but $50 a month in rent is a bit ridiculous. Jay is also right, property tax increases wipe out any rental increases. Buying your holds in a seller's market just doesn't make sense. It looks to me like we are now entering a correction. I would like to see prices slide some over the next few years as well as have property taxes stay stagnant. I don't see a bubble. At least not in Texas. Here we are talking about small changes in rental rates versus purchase price that take properties from a little in the negative to a little in the positive. Additionally I wouldn't want to get caught with a portfolio of recently purchased and fully leveraged properties if prices do slide. Life is full of unknowns and it is better to have a portfolio you can borrow from instead of one that you are upside down on. I think today's real estate investors will play a larger role in mitigating market corrections. The days of fire-sales are over. The days of whole blocks of foreclosures are over. The great thing about real estate is that there is money to be made no matter what the market is doing. If the POTUS causes some huge financial market interruption and people cannot buy personal homes then the right kind of rentals will be in demand. Even if the economy went full on Venezuela someone would make money in real estate, they just may not realize returns for awhile. Those that are at risk are those that play the game at a higher level and with higher risk, but they are always at risk. Those that want their 100$ a month net buy-and-hold rentals are probably going to see opportunity. As anecdotal as it is I do know this...culture is shifting. My kids are growing up fast and I am planning for college. My wife an I are adding onto our property for our kids to be with us long term. We figure Bachelors, Masters, and a few years to save up their own money before they leave. We are thinking that they will be with us until at least the age of 28. We are also fully prepared for fiances or spouses to be living with us. My kid's world is much different than the world of just a few decades ago. I am sure I am not the only post Boomer parent that thinks this way. Because of that I think we will see a market that stays pretty flat on inventory. Niche developments will replace volume developments. Families will change homes less frequently. IIRC market cycles can last about 7-8 years, that puts us at having the oldest of Gen Z thinking about home ownership. There is not enough millennial home owners to replace the dying Boomers. What I see for this market cycle is sliding prices, stagnant inventory, increase in number of renters, and a decrease in homeowners; with more variation in regional markets vs the national market. My comment is speculation and nonsense, don't take it seriously.

My take: The salary of "EVERYMAN" is not keeping pace with the appreciation and escalation of values and rents. I see it in my own rental business. So, what happens? People start to overreach. They rent or buy something that stretches them out to the max. Now, add job loss or economic slowdown and what do you have? As @Matt Millard stated, there are 5 major bubbles. They are all connected. IMHO when one blows, they will ALL blow to different severities. There has to be another 'reset' button hit. We didn't learn from the last recession. :-(

Most of the recent acceleration in DFW can be tied directly back to the missed appreciation, during the period from 2008 to around the middle of 2012 to mid-2013. We have seen appreciation significantly above the usual steady, but unremarkable, historical rates for DFW. However, I believe it is mostly driven by a lack of inventory. Not only did 2008 - 2013's clamp down on lending severely depress home acquisitions, it also killed development. In fact, here in DFW development almost completely shut down, during that time period. We have so little inventory and so many people moving into the area or trying to move into home ownership that it is pushing prices. The good news is that new development has begun to catch up with demand. As far as cycles, Texas is a really big state. Houston saw several significant cycles, usually tied to severe downturns in the energy sectors. However, after the last big bust in the 1980's, Houston began taking significant steps to diversify their economy. DFW has always maintained a very diversified economy and has proven to be resistant to major economic swings. I do expect to see a softening - hopeful a significant softening - of the DFW market, but that should only bring the market back into balance. Bottom line is that normal ebbs and flows may prove to be cyclical, but they hardly represent bubbles. I think our biggest issues right now stem from a combination of lack of inventory and migrations from states like CA. Properties in highly desirable areas are selling above what I would consider market to people moving in from states like CA, because the prices still seem low to those folks. It's making it really difficult for investors to uncover deals in those areas. Again, I expect a minor correction, but I don't see a bubble bursting here.

I would say we are approaching a bubble or sorts, but it may be 5 or more years before we see it crash. Remember, real estate is local, so high growth markets will likely see a crash before others. @Hattie Dizmond Texas has seen it's share of real estate cycles. They did miss the last party, but right now, Texas is seeing prices that don't make a lot of sense. I would not be surprised if markets like DFW and Austin are some of the hardest hit during the next cycle.

Are we in a Bubble??

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Are we in a Bubble??

Justin Thiesse

Rental Property Investor · Mitchell, SD · Member since 2017 · 57 posts · 68 votes

I have been investing in real estate for over 20 years now. I have seen good times and bad. Lately it seems like everybody wants a piece of the pie. ( things are Great) I keep wondering what will cause this bubble to fail this time. Some thoughts are; 1. Building prices keep going up, maybe tariffs will help this continue and labor is getting higher. 2. Most loans have are stable with money down and good credit 3. HIgher Interest Rates would slow things down I Guess I am look for Opinions on the future of Real Estate

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Hattie Dizmond

Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes

I think it completely depends on what market you're talking about. There are natural features that drive bubbles in areas like CA and FL. Think about it. In CA, you have the ocean on one side and the mountains/desert on the other. Desirable areas for development are limited to a relatively narrow strip down the coastline. In FL you're squeezed by oceans and swamps/everglades. Other areas, like the NE are simply space constrained due to the heavy population. Now, here in Texas, we don't really suffer from bubbles. In 2008, when the bottom fell out of RE, DFW didn't crash. In fact, we didn't even real a real retreat of prices &/or values. The only impact was a stagnation of appreciation for several years, mostly owing to the fact that lenders locked everything down so much, people couldn't buy properties. It wouldn't surprise me to see a correction, possibly major, in some of the overheated markets. CoreLogic is indicating CA could be correcting as we speak. I've seen a slight weakening in the DFW market, over the last 3 to 6 months, but we are still well below a balanced market, with desirable areas still having an inventory of well under 6 months. Bottom line, bubbles don't cover the entire country at one time. Hopefully, a correction in some of the major markets will scare some of the investors out for a while and open things up for the rest of us.

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Account Closed
Member since 2018 · 214 posts · 175 votes
8y
Originally posted by @Alan Grobmeier:

My take: The salary of "EVERYMAN" is not keeping pace with the appreciation and escalation of values and rents. I see it in my own rental business. So, what happens? People start to overreach. They rent or buy something that stretches them out to the max. Now, add job loss or economic slowdown and what do you have?
As @Matt Millard stated, there are 5 major bubbles.
They are all connected. IMHO when one blows, they will ALL blow to different severities. There has to be another 'reset' button hit. We didn't learn from the last recession. :-(
Want to know the truth and the reality what is happening in Hong Kong housing market?
In Hong Kong, from year 1989 to 2018, the salary of "EVERYMAN" is not keeping pace with the appreciation and escalation of values and rent.
In 1989, a new college graduate was making USD $1,250 per month.
In 1989, Hong Kong average 700 sq ft condo was selling at USD$125,000.
In 2018, a new college graduate is making the same USD $1,250 per month.
In 2018, Hong Kong average 700 sq ft condo is selling at USD$1,250,000.
Yes, new college graduate salary stay the same 29 years later, but housing market has raised 10 times 29 years later.
Poor remain poor. Rich get richer. This is what is happening in Hong Kong Housing market.
Renter will never be able to afford a 700 sq ft condo, but condo are still selling at a very high price without any problem...
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Hattie Dizmond
Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
8y
Originally posted by @Conrad Metzenberg:

Originally posted by @Hattie Dizmond:
Hello @Jay Hinrichs. It's good to be back. And, you are exactly correct about taxes and rental values. We still haven't moved back into buy & hold, because - in the areas we are focused - property values have far outpaced rental rates. It will balance out, but it hasn't yet. And, property taxes are exactly why I don't believe the 1% rule works A/B areas in DFW. Dallas County has been incredibly aggressive in revaluation. 10-years ago they were revaluing most properties every 3 to 5 years. Class A areas now appear to being revalued every year. Pretty much everything is being revalued every 2 years, and the valuation model is resting at or very near 100%, unless you have exemptions. I will never advocate for a state income tax. However, I would like to see a move toward slightly higher sales taxes, which would force EVERYONE to participate more in funding services, rather than placing so much of the burden on property owners.
I've been looking into investing in Texas from OOS and this is the one variable that really worries me. How do you determine the likelihood of a tax rate hike? I'm interested in San Antonio.
I'm not terribly familiar with San Antonio. It's about 4.5 hrs from DFW, depending on the traffic and the volume of never ending construction on I-35. But, property taxes will increase, unless there is a huge decline in property values in the area. When and how much is determined by the local taxing authority. In the case of San Antonio, check the Bexar Country Tax District's website and information. Here in Dallas County, most properties are being revalued annually or bi-annually. And, since most properties are seeing some level of appreciation, taxes are increasing annually or at least bi-annually.
I use the Dallas County Appraisal District (DCAD) site to look at properties in specific areas and see what the current appraisal is, when they were last revalued, how long it had been since their previous valuation and what the previous valuation was. This gives me a pretty good indicator of what the current appreciation rate is, at least from a tax appraisal standpoint, and how often I should anticipate being revalued. The information is all available online. I don't know specifically about Bexar County, but all the major counties around Dallas have their data available for free download. The DCAD main file contains 860k records. Fun times!
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Conrad Metzenberg
Rental Property Investor · Santa Barbara, CA · Member since 2015 · 78 posts · 34 votes
8y
@Hattie Dizmond
@Jay Hinrichs
Thank you both for the pointers. Sorry to divert the forum from it's original subject. Here in Santa Barbara, CA I wouldn't call it a bubble. I'd call it more of a plateauing. We're hitting an affordability cap. I don't expect much appreciation in my area, but I don't expect a correction.
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Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
8y
@Justin Thiesse No. Not here, anyway.
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Eric Jacobs
Specialist · Fort Lauderdale, FL · Member since 2016 · 187 posts · 128 votes
8y
I don't like the word "bubble". I'm not saying it doesn't exist but its not really appropriate for real estate for the most part (some rare exceptions). Real Estate is cyclical trending upward. For that reason, the upward must always test new highs and then at some point pull back only to restabilize and then test new highs again. In a macro sense we are undeniably in something of an inflated environment but that means very little unless you are overpaying for property and planning to divest in a fairly short term. If you are buying for cash flow then a pull back doesn't mean much. If you are buying for the long term then a pull back doesn't mean much. If you are fixing and flipping, a pull back probably doesn't mean much. If you buy in the right market at the right time, a pull back doesn't mean much. What matters is clarity of purpose on entry into an investment, flexibility in management and on exit.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Michele B.:

Well, from an economic look at the issue it is macro economics....then I would say we are in a bubble. It will pop how bad I don't know. I blame it on people who buy a house that is asking way too much for it. If it is a hole in the wall in a city it is just that not worth 250k. On the other hand microeconomics we are not all in a bubble. Housing market in some places are not as bad as the bigger cities.
These are just my personal thoughts.
If it cost 50k to build a house in materials, 50k for labor, and then the view/location costs 2 million you have a house worth 2,100,000. Is the house worth anything? That is what is causing issues. So, someone builds it, then they mark it up to make a profit.....it is now 3 million....someone wants to live exactly there and is willing to pay three million but then so is someone else and they are willing to pay 3.2 million.... What is that house worth? 100,000. This is where I see the bubble. It is popular to live there at this exact moment in time but next year or in 5 years it will not be "THE PLACE TO BE" and then the bubble pops and it is only worth 100,000.
I know these numbers are outlandish I am trying to make a point.
Investors usually do not go for those kinds of houses but, realtors are more than happy to sell them all day long everyday. Until the bubble pops and then what? The american people bail out the banks/lenders? Seriously???
Maybe I am wrong, just my opinion.
too funny blame realtors last time I saw … no realtor was pointing a gun to anyones head and saying you must over pay.. realtors work at the pleasure of their clients not the other way around.
but in some markets your exactly correct the land to improvement values are inverse.. take a lot in low value areas where houses cost less than replacement cost.. we know those areas.. land is valueless has negative value.
take Palo Alto CA and a lot will run you 2 mllion for a 6k sq ft lot to build a sfr.. and the SFR will cost you maybe 750k to build maybe a million its inverse.. everything I build the lots are usually 1/2 to 1/4 of the total package in value.. I am building one high end spec in Charleston were I paid 570k for the lot and the build is 630k.. but like your example we will hit the market at over 2 million.. and have the ONLY new build in the historic district for sale.. SCARCITY and demand.. we will sell it..
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Michele B.
Vandalia, MI · Member since 2018 · 569 posts · 264 votes
8y
Originally posted by @Jay Hinrichs:

Originally posted by @Michele B.:
Well, from an economic look at the issue it is macro economics....then I would say we are in a bubble. It will pop how bad I don't know. I blame it on people who buy a house that is asking way too much for it. If it is a hole in the wall in a city it is just that not worth 250k. On the other hand microeconomics we are not all in a bubble. Housing market in some places are not as bad as the bigger cities.
These are just my personal thoughts.
If it cost 50k to build a house in materials, 50k for labor, and then the view/location costs 2 million you have a house worth 2,100,000. Is the house worth anything? That is what is causing issues. So, someone builds it, then they mark it up to make a profit.....it is now 3 million....someone wants to live exactly there and is willing to pay three million but then so is someone else and they are willing to pay 3.2 million.... What is that house worth? 100,000. This is where I see the bubble. It is popular to live there at this exact moment in time but next year or in 5 years it will not be "THE PLACE TO BE" and then the bubble pops and it is only worth 100,000.
I know these numbers are outlandish I am trying to make a point.
Investors usually do not go for those kinds of houses but, realtors are more than happy to sell them all day long everyday. Until the bubble pops and then what? The american people bail out the banks/lenders? Seriously???
Maybe I am wrong, just my opinion.
too funny blame realtors last time I saw … no realtor was pointing a gun to anyones head and saying you must over pay.. realtors work at the pleasure of their clients not the other way around.
but in some markets your exactly correct the land to improvement values are inverse.. take a lot in low value areas where houses cost less than replacement cost.. we know those areas.. land is valueless has negative value.
take Palo Alto CA and a lot will run you 2 mllion for a 6k sq ft lot to build a sfr.. and the SFR will cost you maybe 750k to build maybe a million its inverse.. everything I build the lots are usually 1/2 to 1/4 of the total package in value.. I am building one high end spec in Charleston were I paid 570k for the lot and the build is 630k.. but like your example we will hit the market at over 2 million.. and have the ONLY new build in the historic district for sale.. SCARCITY and demand.. we will sell it..
Ethics of what kind of world you're leaving your children.....
I did not blame anyone I said it was my opinion.....but it is also the truth.
If i could sell you ice in Antarctica and make a profit is it ethical to do so? That is all I am saying....
Yes it is ethical to do so. SO enjoy making the money. Is it moral and making the economy better in the long run...That is your call.
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Bill F.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8y
Originally posted by @Alan Grobmeier:

My take: The salary of "EVERYMAN" is not keeping pace with the appreciation and escalation of values and rents. I see it in my own rental business. So, what happens? People start to overreach. They rent or buy something that stretches them out to the max. Now, add job loss or economic slowdown and what do you have?
As @Matt Millard stated, there are 5 major bubbles.
They are all connected. IMHO when one blows, they will ALL blow to different severities. There has to be another 'reset' button hit. We didn't learn from the last recession. :-(
When you guys talk about five bubbles, specifically student debt, subprime auto loans, and gov debt, are you talking about the levels to which those have risen or the markets in which they trade as being a bubble?
If its the former, by definition, bubbles only exist within markets. Saying, 'the rise in student debt is causing a bubble' is a meaningless statement, since if it doesn't trade it can't have it's price bid up to irrational levels.
If it the latter, since student debt, auto loans, mortgages are all consumer debt, this graph should allay fears. The markets for all three trade in are either within in historical norms, to small it impact the economy as a whole, or have regulations that protect them from credit risk.
Can they have an impact on the economy? Of course, this paper does a good job laying out the impact of increasing household leverage on future economic cycles. In short, debt doesn't change the cycle's components, but it slows growth during the expansion while making them longer, but causes the corrections to be deeper.
Also, QE3 ended in Oct 2014...
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John Fairbanks Miller
Member since 2018 · 5 posts · 5 votes
8y
I just discovered this website through the podcast. So I just completed my first RE investment (since the crash in 2008). $270K townhouse and I put $100K down. We are cash flowing $450 a month on a 2 year lease. Fortunately, I am self-employed and will be able to fund at least one deal like this annually. I too feel like we are on the verge of some sort of correction in my area as prices have surged and as a result there are for sale signs bloody everywhere. As I alluded to I was a victim of the recession and had to foreclose on my house in AZ as I had to relocate for graduate school in CA. So to reply to @Russell Brazil, yes I have PTSD. I have paid interest on 2 things in my life, Student Loans and Home Loans. Never on a credit card and never for a vehicle. Imagine how I felt letting my house go into foreclosure? Our rules for investing is 35% down. I know this goes against the grain of the "Rich Dad Poor Dad" crowd, but like I said, my main hustle provides me a significant income and 35% is pretty comfortable. I'll do 1 to 2 of these a year and see where it goes.
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Shital Thakkar
Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
8y
Today I see this post in CNN, based on that Economy is on the TOP .... but that mean only way is to go down now.
Again dont know when and how inflation will impact real estate.
Economy
- Best Unemployment in last 20 years
- Consumer spending increasing
- Corporate profit highest in 20 years
- mortgage delinquency is very low
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Daulton H.
Rental Property Investor · SC · Member since 2017 · 37 posts · 35 votes
8y
For what its worth, in my area, I get a lot of Zillow alerts on properties that meet my criteria. Lately, those alerts are more for price reductions than new listings. Crude measure but it means something.
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Leland Barrow
Investor · San Marcos, TX · Member since 2015 · 272 posts · 360 votes
8y
Texas buy and hold real estate has not really been worth it over the last 24 months or so. Someone earlier hit the nail on the head, rental rates have not kept up with appreciation. Having properties that go up $100k in value but $50 a month in rent is a bit ridiculous. Jay is also right, property tax increases wipe out any rental increases. Buying your holds in a seller's market just doesn't make sense. It looks to me like we are now entering a correction. I would like to see prices slide some over the next few years as well as have property taxes stay stagnant.
I don't see a bubble. At least not in Texas. Here we are talking about small changes in rental rates versus purchase price that take properties from a little in the negative to a little in the positive. Additionally I wouldn't want to get caught with a portfolio of recently purchased and fully leveraged properties if prices do slide. Life is full of unknowns and it is better to have a portfolio you can borrow from instead of one that you are upside down on.
I think today's real estate investors will play a larger role in mitigating market corrections. The days of fire-sales are over. The days of whole blocks of foreclosures are over. The great thing about real estate is that there is money to be made no matter what the market is doing. If the POTUS causes some huge financial market interruption and people cannot buy personal homes then the right kind of rentals will be in demand.
Even if the economy went full on Venezuela someone would make money in real estate, they just may not realize returns for awhile.
Those that are at risk are those that play the game at a higher level and with higher risk, but they are always at risk. Those that want their 100$ a month net buy-and-hold rentals are probably going to see opportunity.
As anecdotal as it is I do know this...culture is shifting. My kids are growing up fast and I am planning for college. My wife an I are adding onto our property for our kids to be with us long term. We figure Bachelors, Masters, and a few years to save up their own money before they leave. We are thinking that they will be with us until at least the age of 28. We are also fully prepared for fiances or spouses to be living with us. My kid's world is much different than the world of just a few decades ago. I am sure I am not the only post Boomer parent that thinks this way.
Because of that I think we will see a market that stays pretty flat on inventory. Niche developments will replace volume developments. Families will change homes less frequently. IIRC market cycles can last about 7-8 years, that puts us at having the oldest of Gen Z thinking about home ownership. There is not enough millennial home owners to replace the dying Boomers.
What I see for this market cycle is sliding prices, stagnant inventory, increase in number of renters, and a decrease in homeowners; with more variation in regional markets vs the national market.
My comment is speculation and nonsense, don't take it seriously.
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Matt Millard
Lewisville, TX · Member since 2015 · 341 posts · 264 votes
8y
I think millennials as a generation could cause a recession. With low net worth, stagnant wages & high student debt & more they could cause big shifts in our consumer based economy & not only positive ones like ridesharing & air b n b! Google some stats on millennial finances & you’ll see that we make generation X look wealthy in comparison!
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Originally posted by @Daulton H.:

For what its worth, in my area, I get a lot of Zillow alerts on properties that meet my criteria. Lately, those alerts are more for price reductions than new listings. Crude measure but it means something.
Particularly in strong sellers markets you get a higher amount of people over pricing their properties. This is a historical norm, as peoples greed gets in the way of logic when the market is red hot.
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Eric T.
Portland, OR · Member since 2013 · 6 posts · 5 votes
8y
Fwiw, I'm monitoring two markets at the moment. One on the outer edge of the Bay Area, and one out-of-state. The reason I'm watching these two is because I'm planning to sell in one in order to buy in the other. In both markets, sales have dropped off a cliff in July...so much so that it really has me paying attention. Would be interested to hear from others how your markets are doing this month.
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Todd Dexheimer
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
8y
Originally posted by @Jay Hinrichs:

@Todd Dexheimer and whos to say we don't make new highs.. who says that 2007 has to be the peak of the real estate market and values at anytime if they exceed 2007 levels are bubbling :)
we make new highs every decade or so.... the high in Cupertino were I grew up in the 60s was 30k.. then the 70s saw 60k then 1977 ish 100k.. then in mid 80s 500k then early 90s 750k then 2000 750 to 1 mil.. then 2007 900 to 1.2
now 1.2 to 2 million.. and so on an so forth..
what was the prices in your market in the 80s compared to today.. what was the high that decade and have they made new highs and gone higher..
Not disagreeing with anyone but to me it seems markets make new highs or they get obsolete.. like Detroit or Rochestor or Buffalo where I suspect prices peaked in the 80s and 90s and have been in steady decline every since..
????? just musing..
We are all ready Are seeing new highs. I think it’ll go quite a bit higher still. eventually we will have a cycle and prices will go down, but then they will go even higher the next time. I think you misunderstood what I was saying. I said during the next downcycle I could see Texas getting hit pretty hard. That’s all
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Medi Sarwary
Pleasanton, CA · Member since 2016 · 73 posts · 48 votes
8y
I think it varies city to city. Some places are probably due for a correction but the variables are so different for each region.
For example, in the Bay Area the workforce has been blustered by many H1B visa workers the past decade. Many of these Individuals prioritize property ownership to the extent that families back home will pool their money and sometimes pay all cash of a SFH. This can change with new immigration controls.
That being said I really doubt the next dip will be anywhere near as severe as 2008. The big variables will be Immigration controls, the tech industry relating to California real estate, and oil/petrol for midwest states.
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Mark Hughes
Rental Property Investor · Aurora, CO · Member since 2018 · 288 posts · 117 votes
8y
@Justin Thiesse If we are.... im excited and ready to pick up some more properties after it corrects back downward. If we arent.....I’m excited for more appreciation with my long term rentals.
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Account Closed
Rental Property Investor · Las Vegas, NV · Member since 2018 · 133 posts · 171 votes
8y
The word bubble is sort of hard to substantiate because it means many different things to different people, depending on who you ask. I guess the question really is are prices sustainable, and if not, do you get a mild correction, a deep correction, or a flat out crash? Or maybe nothing at all? That's a hotly debated topic depending on who you are talking to - For example the National Association of Realtors might have you believe there's never been a better time in the history of the world to buy real estate than right now, while Harry Dent and Peter Schiff would insist that a total collapse of the USA is imminent and you should grab your guns your ammo and your gold and run for the hills immediately.
There's a part of me that thinks that the crash from the recession was an unusual event not to be repeated again in our lifetimes, but on the other hand the real estate market is cyclical and local markets are subject to periodic corrections (and crashes) just like any other market. So I can't rule it out.
That said, the market will do what it will do regardless of what I think or say, so all I can do is navigate around it as best as I can and adjust for risk accordingly.
I do think that as a market continues to climb higher and people are forced to take on more and more debt for lower and lower returns, the danger of over-leveraging yourself becomes the biggest risk. So although I wouldn't avoid buying if I found the right deal, I would be just as happy paying off the debt on my existing properties and if/when the market does correct then I can take on new debt at that time.
The take away is that we know based on evidence that real estate can lose value, so there's nothing wrong with being a little cautious if conditions warrant it.
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Justin Thiesse
OP
Rental Property Investor · Mitchell, SD · Member since 2017 · 57 posts · 68 votes
8y
@Matt Millard It is the Ninja generation. No income, No job, No assets.
2 Reply
James Mabe
Investor · Winterville, NC · Member since 2015 · 47 posts · 93 votes
8y
@Jay Hinrichs past performance does not guarantee future performance. I hate that disclaimer with passion! Heck, even the Bible teaches us there is nothing new under the sun. @Omar Khan I do think macro, but micro in my own market. Fundamentals in real estate never change. Everything boils down to supply and demand “period!” In Cali you have the Pacific on one side and mountains on the other, high paying jobs and good schools. So is the demand going to go down? If supply is surpassing demand, guess what, prices go down. Nothing new to see here. We are a debt based economy with inflation built in. Is it a house of cards? Heck yeah! But if the world hasn’t ended by 2048, the DJIA will be up a bit and home prices will have increased.
1 Reply
Michael Martin
Rental Property Investor · Tahoka, TX · Member since 2018 · 23 posts · 10 votes
8y
@Hattie Dizmond great insight.
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David S.
Rental Property Investor · Larkspur, CO · Member since 2018 · 198 posts · 179 votes
8y
I posted a month ago that I was seeing weakness in the south Denver/Co Springs rental markets, now that weakness has spilled over into price reductions on homes for sale of 5-8% already relative to what they were asking a month ago. That's significant, especially when annualized, though a portion of it is likely to be seasonal.
One thing that Trumponomics seems to forget (love him or hate him) is the significant impact that labor supply has on GDP. When you hit full employment as we have now, it puts a significant dampener on GDP growth. This claim of 4%+ sustained gdp is frankly ludicrous, 3% is as good as it'll get on a sustained basis but even that's a stretch. Add in raising rates and things can head south quickly.
Let's also not forget that the average wage has lagged cost of living since what, the late 70's? Birth rates are dropping. Deficit is massive at all levels of government. If we don't have a "crash" we'll at least have a significant slowdown, but 9 out of 10 times these days that means a crash since zero bound interest rates have created speculation in just about every asset. Nobody wants to be left holding the bag and many assets can be sold in an instant.
Personally I think something will trigger a cascade effect in the markets sooner rather than later. This leads to uncertainty and contracted 401k's/savings, lower consumer spending, layoffs, and that's all it takes to trigger a major recession. It doesn't take much when investors are skittish, and they are. One of the best measures of investor confidence is the uniformity of speculation... are all asset classes rising at once? If yes, then confidence is high and asset values tend to remain relatively stable and climb. If no, as we've been seeing with sector rotation in and out of stocks like FANG and semiconductors, as well as a divergence btwn corporate and govt bonds, confidence is cracking and downside risk becomes much higher.
I'm betting this is the top, and if it isn't I don't suspect home prices are going anywhere too fast, certainly not like they have in the last two years.
1 Reply
Caesar Ho
Member since 2018 · 1 post · 0 votes
8y
@conrag metzenberg san antonio isnt bad as long as you focus on rental cap. if your looking for equity gain in todays market. id be VERY wary. long time no see btw.
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Jeremy England
Contractor · Pensacola, FL · Member since 2017 · 311 posts · 156 votes
8y
Originally posted by @Jay Hinrichs:

@Todd Dexheimer and whos to say we don't make new highs.. who says that 2007 has to be the peak of the real estate market and values at anytime if they exceed 2007 levels are bubbling :)
we make new highs every decade or so.... the high in Cupertino were I grew up in the 60s was 30k.. then the 70s saw 60k then 1977 ish 100k.. then in mid 80s 500k then early 90s 750k then 2000 750 to 1 mil.. then 2007 900 to 1.2
now 1.2 to 2 million.. and so on an so forth..
what was the prices in your market in the 80s compared to today.. what was the high that decade and have they made new highs and gone higher..
Not disagreeing with anyone but to me it seems markets make new highs or they get obsolete.. like Detroit or Rochestor or Buffalo where I suspect prices peaked in the 80s and 90s and have been in steady decline every since..
????? just musing..
That's my take also. I dont know the future. Market timing in real estate is likely as effective in stocks. What I do know is we just topped 4pct economic growth for the first time in a long time. Lenders have higher qual standards than in the subprime era. I don't see a catalyst for a "crash", will prices dip? they always have no? every 7-8 years? But not a 30-50pct dip.
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