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??

Buying & Selling Real Estate

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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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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Michele B.:

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.
and all I am saying is its not realtors fault.. they work at the pleasure of their clients.. no one is forcing anyone to buy or sell anything.. except maybe some wholesalers LOL …. I fail to see the ethics argument here..
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Jeremy England:

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.
also highly regional.. just like one of the posts above .. JOBS JOBS JOBS then scarcity scarcity scarcity = supply demand and is there credit. We do have to remember the drastic drop in values in many areas ( 08 to 2010) was caused by Capital markets in full blown freeze mode.. you could not get an investor loan to save your life in those days.. you had owners of buildings that were performing perfectly and had 5 year calls that could not refi and lenders foreclosed.. because the borrowers could not cash out their loans when they were called.. it was a unique time in our economic life and while I agree prices will go up and go down no doubt about that.. but a full blown credit crisis and crash.. I don't think anyone I have talked to in Banking believes that at this time.. at least I am still getting some pretty sizable credit facilities and some that are so big they Know I cant stroke a check to pay them back they know the only way to retire the loan is to build the homes and sell them.. Does not mean they are right and they miss the mark but the banks are far more cautious like these days I can only have 12 spec loans at once.. when pre 08 I could have had 50 LOL..
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
Tax incentives, the economy is very strong. In our area it is the money from stock options that made many younger people who would be rent to own and they will pay any price to get a home.

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Jeremy Taylor
Investor · Southern California · Member since 2018 · 61 posts · 6 votes
8y
I'm new here and I'm not trying to be a troll or stir things up so I hope its not taken that way, but I am curious. Of the people that were investing and in real estate in general twenty 15-20 years ago, how many of you saw the Bubble in 2007 coming before it burst. I feel like I'm pretty intelligent and try to make informed decisions, but back then I was real young and over confident I bought my first house in may of 2007, one month later It crashed. Before I bought back then I felt like I do now; that prices are just too high for the income of the average person. I kept saying in 07 this and literally every person I spoke with (even successful investors) back then told me I was wrong and a lot of the same things I'm hearing today. If you did see the last one coming, what do you see if anything, thats similar. I understand the differences in lending now a days and the main reasons for the crash. Im just seeing so many similarities in the opinions im hearing today vs. 07 and im curious what long term professionals are seeing that they did or did not see the last time.
From what I remember everyone was very confident the market wasn't going to crash in 07 until it did and everyone can see why it did AFTER the fact. What if anything are we missing this time? What are your thoughts?
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Scott TitusPro Member
Rental Property Investor · Lake Ozark, MO · Member since 2017 · 102 posts · 86 votes
8y
@Justin Thiesse I think it may happen this fall, not to turn this into a political debate, but the market always gets a little volatile when there appears to be a shift in power. What I mean by that is if the house and senate change (meaning turn heavily democratically controlled) the market may take a dip. If consumer spending turns sour, consumer fears raise, and the job growth slows down, I believe we will all see it in housing. Right now so many people are working, so many people are seeing development and the general consumer sentiment regarding our country is strong. If that all starts slipping, I believe it will avalanche. Again, I’m not trying to make this political, but I’ve grown up around construction and development my entire life. My father always swore when consumers were confident, the business was swamped...but when they were not, the market dipped. Just my .02.
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Account Closed
Member since 2018 · 214 posts · 175 votes
8y
Selling a house: Realtor commission is 6%. Property Transfer tax is 0.5%. Other misc escrow fee such as owner title policy, recording fee, escrow fee, flood certificate, escrow inspection fee, HOA resale packet fee, HOA demands fee, HOA transfer ownership fee etc etc is about 2% Capital Gain: Long Term : 15% Tax Short Term : 25% Tax If the houses drop 20%, would you sell the house? I would not.
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Vinay H.
Cambridge, MA · Member since 2017 · 268 posts · 247 votes
8y
just seeing Netflix, facebook and twitter getting hammered by 10-20% in a single day is proof positive of the bubble being popped, slowly but surely.
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Brit Hale
Real Estate Agent · Joplin, MO · Member since 2018 · 112 posts · 96 votes
8y
Originally posted by @Justin Thiesse:
@Hattie Dizmond They need a down payment?!! That’s very funny, because I talk to a lot of people that want in the game and they have no money. I recommend to them to find a good paying job and bank as much as possible. I also tell them to sell their house and live in a 4 plex or similar that they would own. They usually look at me like I’m crazy. They want what took me 20 years to create right away with little work. The new generation will make great renters!
I mean... that's kinda what/how they suggest on the podcasts? Not how I'm going about it or really would be comfortable with it, but it must be working for somebody!
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Account Closed
Rental Property Investor · Houston, TX · Member since 2018 · 106 posts · 56 votes
8y
@Justin Thiesse
Here is my two cents on this topic.
I do a lot of modeling in my 9 to 5 job and I think we are in either side of the peak in real estate cycle.
1. Definitely, interest rates will be a killer for most new real estate loan given that cap rates are at all time low. Cap rates have to raise up to compensate for the interest rates and as we all know, cap rate goes up, prices comes down.
2. Commercial loan- Most commercial loans are 5 to 10 years and people who locked in low rates in 2008 are coming out and refinancing their properties with much higher rates now.
Please let me know what your thoughts on it.
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Account Closed
Member since 2018 · 214 posts · 175 votes
8y
People were talking bubble in 2003 last time, the bubble last 3 more years until 2006, then burst in 2007 or 2008. People start talking about bubble in 2018, last at least 3 more years? Then burst in 2022 or 2023? Even though we are in bubble today, it is at the very beginning of the bubble. Just lIke robert shIller say, thIs may be the very begInnIng of the turnIng poInt, StIll have a long way to go. The balloon still have a lot of room to absorb more air and become a much more bigger balloon before it finally pop a few years later. It is ok to be in the bubble stage, still have a lot of room to make money between now and a few years later.
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Josh Lyons
Charlotte, NC · Member since 2016 · 82 posts · 41 votes
8y
@Justin Thiesse Markets always go through cycles. To me it seems like the stock market and real estate are experiencing very inflated prices. I believe there will be a correction in the near future. Hard to say when.
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Steve B.
Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
8y
@Hattie Dizmond please don’t fall for that “offsetting tax” scam many politicians push every year. Here in Oregon we have politicians which emphatically plea every few years for the voters to pass a state sales tax; saying it will offset our property and income tax. That’s a complete fantasy in our local political climate. Most interestingly is that a sales tax is the most “regressive” tax of the three, hitting the poor proportionally harder. And the politicians urging its Implementation are the most “progressive” in our legislature.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Scott Titus:
@Justin Thiesse
I think it may happen this fall, not to turn this into a political debate, but the market always gets a little volatile when there appears to be a shift in power. What I mean by that is if the house and senate change (meaning turn heavily democratically controlled) the market may take a dip. If consumer spending turns sour, consumer fears raise, and the job growth slows down, I believe we will all see it in housing. Right now so many people are working, so many people are seeing development and the general consumer sentiment regarding our country is strong. If that all starts slipping, I believe it will avalanche.
Again, I’m not trying to make this political, but I’ve grown up around construction and development my entire life. My father always swore when consumers were confident, the business was swamped...but when they were not, the market dipped. Just my .02.
consumer sentiment is very real..
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
Short term is still good.
In SFBA we have finally seen some price erosion (-4%, -3% each month even in Silicon Valley since April 2018). The reason is most home sellers thought prices could not get much higher thus finally there are more homes released than previous year when most wanted to time the market.
US Treasury has been delaying a catastrophe for sometime by printing cash and issuing IOU T-bills. Russia has just stopping buying bonds. China can follow by unloading $1T T-bills and bonds by disrupting deficit process. If the new administration can not sustain a recession, it is likely to start. The Wall Street people now keep arguing inverted yields hinting there is something in the horizon developing then it will happen. On real estate if one has equity and income recession or value drop, it is lessor a concern than those who have to refin big mortgage or have little cash flow.
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Account Closed
Member since 2018 · 214 posts · 175 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..
I agree with new highs in each real estate cycle. I do not think that coming peak would stop at 2006 price, and then crash.
The new high should be much higher than last peak 2006 price before the bubble pop...
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Account Closed:

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..
I agree with new highs in each real estate cycle. I do not think that coming peak would stop at 2006 price, and then crash.
The new high should be much higher than last peak 2006 price before the bubble pop...
If I look at it from a land then build scenario lots and land are already back to the market highs in our market.. but build cost has gone up 10 to 30% per house.. so right there any new construction is already about 20 to 30% higher than the 07 highs in many spots around the PDX market.. now were I am building in Charleston.. I was not around before the crash there.. but I can tell you when I started there about 5 years ago the first lot I bought was 20k to buy the same lot in N> Charleston would be 60 to 75k.. today.. and in Charleston were we have been regentrifying areas.. the first lot I bought was 40k and the house we sold SHEP on southern Charm sold brand new for 350k that same street I have 7 lots bought right now all going through permitting and I paid 120 to 160k each for those all cash of course.. and the end product will all be 525 to 600k... and this is an area just WEST of downtown that was considered ROUGH you can read into that.. so I don't think anything sold for anywhere near these prices in history we are making new highs.. and I am a big proponent of building in areas of scarcity.. one just needs to look at a map of Charleston water on 3 sides no real large parcels to bust into 100s of lots and HIGH demand.. makes for some nice projects.. And Portland has false scarcity or government created scarcity with their urban growth boundaries that CANNOT be changed for decades so there is a huge shortage of land or lots here.. we still are about 30,000 homes short of pent up demand in Portland..
this PDX market built 8 to 10 thousand new door homes a year from early 90s to 2007.. 2008 700 permits total next year about 1500 next year 3k and so on.. so by the time the banks started doing spec lending here about 4 years ago and demand never diminished we found ourselves with a critical housing shortage and all the big national builders moved in because they can self fund.. us little guys were stuck.. with lack of market liquidity.. so anyway I have gotten about 100 homes built in the last 5 years personally and all have made profit not as good as Charleston but still a profit and much easier than flix and flip... which I used to do a ton of but don't do much or any anymore the new builds are far more predictable and I have NO where near the competition from smaller investors.. that competition is squarely in the fix and flip space.. and is brutal in this area.
what this also did when new construction halted and once things stabilized coming out of 2012 or so. rents went up 50 to 100% so landlords we held through the down turn PDX even though it was a neutral cash flow market or typical west coast low cap market some of those guys have killed it..
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Todd Dexheimer
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
8y
Originally posted by @Jeremy Taylor:

I'm new here and I'm not trying to be a troll or stir things up so I hope its not taken that way, but I am curious. Of the people that were investing and in real estate in general twenty 15-20 years ago, how many of you saw the Bubble in 2007 coming before it burst. I feel like I'm pretty intelligent and try to make informed decisions, but back then I was real young and over confident I bought my first house in may of 2007, one month later It crashed. Before I bought back then I felt like I do now; that prices are just too high for the income of the average person. I kept saying in 07 this and literally every person I spoke with (even successful investors) back then told me I was wrong and a lot of the same things I'm hearing today. If you did see the last one coming, what do you see if anything, thats similar. I understand the differences in lending now a days and the main reasons for the crash. Im just seeing so many similarities in the opinions im hearing today vs. 07 and im curious what long term professionals are seeing that they did or did not see the last time.
From what I remember everyone was very confident the market wasn't going to crash in 07 until it did and everyone can see why it did AFTER the fact. What if anything are we missing this time? What are your thoughts?
I think a big difference is right now most people think that the market is going to crash. I hear it all the time on bigger pockets and everywhere else that I go. Everyone thinks the market is going to crash. In 2006 and 2007 very few thought the market was going to crash.
For the fundamental aspect, we have affordability that is much higher than it was during the last High Point. We also have very low inventory, with moderate building. Couple that with rising income levels and much tighter lending standards.
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Jeremy Taylor
Investor · Southern California · Member since 2018 · 61 posts · 6 votes
8y
Originally posted by @Todd Dexheimer:

Originally posted by @Jeremy Taylor:
I'm new here and I'm not trying to be a troll or stir things up so I hope its not taken that way, but I am curious. Of the people that were investing and in real estate in general twenty 15-20 years ago, how many of you saw the Bubble in 2007 coming before it burst. I feel like I'm pretty intelligent and try to make informed decisions, but back then I was real young and over confident I bought my first house in may of 2007, one month later It crashed. Before I bought back then I felt like I do now; that prices are just too high for the income of the average person. I kept saying in 07 this and literally every person I spoke with (even successful investors) back then told me I was wrong and a lot of the same things I'm hearing today. If you did see the last one coming, what do you see if anything, thats similar. I understand the differences in lending now a days and the main reasons for the crash. Im just seeing so many similarities in the opinions im hearing today vs. 07 and im curious what long term professionals are seeing that they did or did not see the last time.
From what I remember everyone was very confident the market wasn't going to crash in 07 until it did and everyone can see why it did AFTER the fact. What if anything are we missing this time? What are your thoughts?
I think a big difference is right now most people think that the market is going to crash. I hear it all the time on bigger pockets and everywhere else that I go. Everyone thinks the market is going to crash. In 2006 and 2007 very few thought the market was going to crash.
For the fundamental aspect, we have affordability that is much higher than it was during the last High Point. We also have very low inventory, with moderate building. Couple that with rising income levels and much tighter lending standards.
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Hattie Dizmond
Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
8y
Originally posted by @Steve B.:
@Hattie Dizmond please don’t fall for that “offsetting tax” scam many politicians push every year.
Here in Oregon we have politicians which emphatically plea every few years for the voters to pass a state sales tax; saying it will offset our property and income tax. That’s a complete fantasy in our local political climate. Most interestingly is that a sales tax is the most “regressive” tax of the three, hitting the poor proportionally harder. And the politicians urging its Implementation are the most “progressive” in our legislature.
We already have a state income tax. We also have a HUGE problem with illegals. It is a horrible drain on our educational system, which is a major reason for the rate of our property tax. Needless to say, the vast majority of illegals are paying no property taxes. Lowering our property taxes, while pushing more of the burden for school funding to sales tax will force everyone to support public education. Right now, we are paying private school tuition and property taxes supporting public schools. I could go on for an hour about the Robin Hood plan and how it gutted funding for the best school districts and sent those funds to poor districts, because everyone should be equal. Or, about how we have public schools being choked by ESL requirements. It might not make a lot of sense in OR or some other states, but I'm all for having the people using the services pay their fair share.
1 Reply
Ryan D.
Rental Property Investor · San Jose, CA · Member since 2013 · 188 posts · 228 votes
8y
I think the main thing that most people "feel" that leads them to think we are in a speculation bubble, is that prices have nearly doubled over the last ~5 years (in the popular coastal markets) while wages have barely moved over the same time. So the increase in housing costs is a mix of:
- driven by people NOT extracting a living from the local economy, & instead being driven by external forces (i.e. speculation, outside investors, stock market appreciation). This is strongly felt on the west coast with boat loads of money coming in from China, & grossly distorting markets (look at Vancouver for the clearest example).
- driven by people willing to pay a much larger percentage of their income to housing.
If the value of my house goes up by 2x during the same time my salary increased by only 6-8%, I'm going to think something very abnormal is happening.
Ultimately, when a town's housing prices rise so drastically out of step with local wages, this is very very bad for that town.
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Carlos C.
Real Estate Agent · Tampa, FL · Member since 2016 · 19 posts · 6 votes
8y
As a newbie investor, im curious as to what you all think of the Florida market. I have seen an increase in the past three years i started. Should i worry? I have been cautious and making sure my properties cashflow enough to handle a single renter, but i dont know if thats enough.
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Bart H.
Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
8y
Originally posted by @Sam Shueh:

Short term is still good.
In SFBA we have finally seen some price erosion (-4%, -3% each month even in Silicon Valley since April 2018). The reason is most home sellers thought prices could not get much higher thus finally there are more homes released than previous year when most wanted to time the market.
US Treasury has been delaying a catastrophe for sometime by printing cash and issuing IOU T-bills. Russia has just stopping buying bonds. China can follow by unloading $1T T-bills and bonds by disrupting deficit process. If the new administration can not sustain a recession, it is likely to start. The Wall Street people now keep arguing inverted yields hinting there is something in the horizon developing then it will happen. On real estate if one has equity and income recession or value drop, it is lessor a concern than those who have to refin big mortgage or have little cash flow.
China cant just offload their Us Bonds, because they would simultaneously inflate their currency making exports a Lot more expensive.
Plus there isn't anywhere to put the foreign cash reserves. What are you going to sell US treasuries, pay the cost of devaluing your currency and then go to buy Euro bonds at negative rates?
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Jeffrey Almonte
Rental Property Investor · Los Angeles, CA · Member since 2011 · 122 posts · 67 votes
8y
I know some of my friends from Los Angeles stopped pursuing a second home in California after the $10k SALT cap from the Tax Cuts and Jobs Act. My other friends lowered their target purchase price due to the $750k mortgage interest deduction reform. This might prevent or slow down the bubble because it might have stopped some people from over-leveraging themselves.
Is anyone else seeing different investing behavior in their local market after the Tax Cuts and Jobs Act?
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
Affordability is less. Every 1% increase in interest rate reduces the affordability by 10%. More coming with this inflation exposure coming.... Gov't does not include energy and foods are part of inflation monitoring.....
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