Have Real Estate prices peaked?

Miami, FL · Member since 2015 · 84 posts · 69 votes

I am definitely holding off buying real estate for now. There are too many signs suggesting that the Seller's market has peaked. I'm noticing homes staying on the market longer and have seen more price reductions here in Miami at least. Stock prices of home builders like Tol, KB Homes, and LGI Homes peaked in January of 2018 and are going much lower, plus US Housing Starts "rise less than expected". We can not prevent economic cycles and a recession is due within a couple of years, maybe even next year. Housing Starts is a very good indicator, since 1965 it has never been wrong predicting a recession. This is just my own humble opinion. https://tradingeconomics.com/united-states/housing-starts

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Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

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Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
@Frank Boet I'm still buying real estate. Some areas may have peaked, but that doesnt mean good deals cant be found.
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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
39 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
8y
Jack and Jill first time buyers that only use traditional methods of buying off the MLS may be buying at the top of their market cycle, but maybe not. RE is always local.
We are investors and can buy from distressed sellers all asset types for value adds or re-purposing. We can buy off market and get creative with our seller solutions.
These articles are for the 3 or 4 over their lifetime, your house is your biggest asset home purchasers. Which are you? A Jack and Jill emotional home buyer that gets all giddy at the open house or are you an investor that buys right no matter what, solves seller problems, adds value and has multiple exit strategies?
30 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Frank Boet:

I am definitely holding off buying real estate for now. There are too many signs suggesting that the Seller's market has peaked. I'm noticing homes staying on the market longer and have seen more price reductions here in Miami at least. Stock prices of home builders like Tol, KB Homes, and LGI Homes peaked in January of 2018 and are going much lower, plus US Housing Starts "rise less than expected". We can not prevent economic cycles and a recession is due within a couple of years, maybe even next year. Housing Starts is a very good indicator, since 1965 it has never been wrong predicting a recession. This is just my own humble opinion. https://tradingeconomics.com/united-states/housing...
you know everything being equal I get that.. but this time around its not equal.. there is a big gaping hole in construction financing for new builds.. that is keeping starts down for sure.. and then land to build on.. lead times in many jurisdictions are measured in years.
but I believe the prices are stabilizing.. and one thing for new construction that slows it as well is the material costs sky rocketed and there fore unless prices rise margins are too thin to build.. something has to give.. if demand for lumber calms down maybe we will see lumber come back to historic norms.. my lumber packs this last year went up 50% in a mater of months from 20k per home to 30k so either the house goes up or profit comes down.. luckily the market absorbed that cost increase for us.
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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
Investors have been having this same conversation for four years. Any many investors would have lost six, seven, or eight figures of income had they employed the war chest and market timing strategies. It's not easy investing into a hot market cycle but there are prudent ways many investors are finding to do it (good locations, cash flow, value add, prudent debt, reserves).
14 Reply
Jim Goebel
Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes
8y
@Mike Dymski
Hey Mike I wanted to get your input on something. I generally value your input and perspective. I'm not saying I don't here, but I guess my question or what I'd like input on is how you view the market timing question vs. the honest and objective deal analysis part of it - ie ROI etc. I mean, if original poster is suggesting market is peaking - well at least that statement might spur caution and a more detailed analysis of the numbers which I think for some people may be a good/needed thing in my view? Your thoughts on that statement?
I guess I pick up a general negative vibe towards market timing angles/directions (from you and others). I'm just struggling to reconcile that with buy decisions and especially when considering opportunity costs with one's time. I can make a general statement, for instance, that I'm cautious about buying (especially at full market prices!!!) right now. I guess the statement that 'prices are inflated/frothy' vs the statement that 'prices are at peak' are 2 different statements. One implies impact on current decisions vs one implies a statement about what will come.
I'd be curious about your view on these 2 statements as I pick up a general negative vibe towards forward looking stuff. Hoping for your thoughts on this stuff. I feel like I've been communicating a bit more caution with regards to my outlook and am shifting my time over to other stuff from mostly an opportunity cost perspective... Thinking the returns are dropping, we were spoiled with good projects, and I'm eager to get involved in some other business directions... But I want to better understand the negativity towards the 'prognostication' etc.
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Account Closed
Rental Property Investor · Las Vegas, NV · Member since 2018 · 133 posts · 171 votes
8y
@Frank Boet
There used to be a saying "Don't fight the Fed". Well we all know the Fed is tightening, so unless something has changed eventually the stock market will capitulate. Will that be tomorrow? Six months? Two years? Who knows?
I am not going to stop buying real estate because I am trying to build a portfolio, but as a hedge I am starting to short interest rate sensitive areas of the market, namely REIT's.
There's another saying "Trend is your friend". For long term real estate investing the trend for appreciation and rents is up. If you believe that trend will continue for years or decades to come (and I do), then dollar cost averaging by buying over time regardless of the shorter term dips in the market, I think is a good strategy. As long as you buy properties in high demand locations, don't over leverage and have cash reserves you have a much better chance of riding out any downturn in the market or economy and will come out ahead in the long run. That's my philosophy anyway.
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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
@Jim Goebel I am with you...important to be very cautious right now and stick to our guns on our criteria. I agree too that certain market appreciation strategies can require attempting to time the market....or planning to hold very long term. I prefer market appreciation strategies, though, that will perform well regardless of the cycle. For example, investors in many growing markets did fine during the last down cycle.
Adding value makes a big difference too. If investors can add, say 20%, to the value of an acquisition, that leaves a lot of room for a market correction in value...plus you get cash flow and principal reduction in the interim. Check out this example
https://www.biggerpockets.com/forums/311/topics/56...
Many investors can't imagine investing into this hot market without adding value (including me).
For some investors, the opportunity cost (15-20+% returns) of idle cash is more risky than buying into a hot market...but we all have different opportunities and strategies. Who knows...time will tell.
7 Reply
Account Closed
Investor · Portland, OR · Member since 2017 · 182 posts · 115 votes
8y
Originally posted by @Steve Vaughan:

Jack and Jill first time buyers that only use traditional methods of buying off the MLS may be buying at the top of their market cycle, but maybe not. RE is always local.
We are investors and can buy from distressed sellers all asset types for value adds or re-purposing. We can buy off market and get creative with our seller solutions.
These articles are for the 3 or 4 over their lifetime, your house is your biggest asset home purchasers. Which are you? A Jack and Jill emotional home buyer that gets all giddy at the open house or are you an investor that buys right no matter what, solves seller problems, adds value and has multiple exit strategies?
Well said Steve.
1 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
If the numbers make sense one can even purchase in the midst of a recession. Is Amazon stock a good buy? You will get two schools of thought.
However, if there is a 15-20% stock market crash, you will see fewer buyers as many lost the means to cash out their equity.

1 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
Yep there’s factors that could poInt to a recession in the future . We better give up now...we better stop trying and we best wait 8 more years till the economy returns to normalcy and we are paying Kings ransoms for properties again .
4 Reply
Salvatore Lentini
Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
8y
@Frank Boet - cashflow is king. Prices are getting high but my thoughts are in the camp of "prices leveling off or slightly dipping". There are too many stats showing that prices, foreclosures, starts, inventory etc are not anywhere near the levels of 08'. The big correction, if the 18 year cycle theory holds true... may be 2024. But who knows. As long as you buy correctly now and you are relying on solid cashflow and not appreciation you are greatly mitigating your risk. But no one is correct at picking the peak of any market. Well, let me rephrase that, no one is always right on picking the peak of a market. You never hear about the gurus that get it wrong over and over.
2 Reply
Shital Thakkar
Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
8y
FRED data suggest stabilization is House price in top 20 US metros...
But still new construction is historically low and increase construction price will create more pressure on this...
Looks like market will move slow but will not crash...
4 Reply
Hai Loc
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
8y
@Salvatore Lentini I have seen stats were average DOM matches the peak of 2005 as well as number of listings
0 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
@Mike Dymski Calls for a recession and a bubble started in 2005. The pants on the market went down in 2008. So let’s not count what has not happened as victory.
0 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
@Sam Shueh That is very right. Buyers evaporate once the market decline accelerates as many buyers simply are left with no cash (and more debt) to participate.
0 Reply
Melissa Gittens
Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes
8y
We are still finding great deals on and off market. as long as you buy right even if the market tanks you should be fine. it all depends on your strategy
7 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
Originally posted by @Sam Josh:
@Mike Dymski Calls for a recession and a bubble started in 2005. The pants on the market went down in 2008. So let’s not count what has not happened as victory.
My market was fine in 2008 (as were many markets). REI is not a one-size-fits-all game...it's strategy and market specific.
Many investors have made a lot of profit in the past four years and have no concerns with their portfolios if a market correction were to happen now (or another four years from now). I agree...market appreciation plays are not penciling out for me (I just sold one) or for many investors...but there are many other strategies for making a profit in real estate.
2 Reply
Bobby Sharma
Lender · San Francisco, CA · Member since 2015 · 151 posts · 41 votes
8y
We are in 8th or 9th year of the recovery. The big, fat, easy wins are getting harder to find but as a real estate investor, I am in it for the long haul. When people ask what happens if the prices go down, I say be prepared to buy more. Best to buy right, don't get greedy and have a long term horizon. I did sell some properties in California to acquire more attractive buys in the mid west and south east.
4 Reply
Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
8y
I think it-a correction-is far more worrisome if you are selling rather than buying. As an investor you have set your criteria and you let that guide you. If a deal does not work you move on to the next one. A seller does not have that going for them they need that buyer to buy; it is similar for the homebuyer buying a single principal residence, the clock is working against both of them them in a high market like today.
4 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
@Mike Dymski If you recall even savy investors unfortunately were innocent victims in 2008 because by then the herd had come in with limited knowledge of buying but they wanted to get in at all costs. The herd was most vulnerable and ended up foreclosing and impacting values in general. I see the same now. The last 12 months has been a FOMO moment for many an aspiring investor. People who have seen their brother/ in laws/ friends get rich investing in 2010 - 2015, are now violently getting in, saying if they can do it, why can’t I!! I have now sadly lost count of how many people have tapped into rising equities in their primary homes here in the Bay Area to buy in mid west and other areas. Banks and non banks are lending at 3% down payment terms. I hope we normalize soon.
4 Reply
Thomas Staub
Real Estate Coach · Austin, TX · Member since 2018 · 56 posts · 52 votes
8y
@Jay Hinrichs @frank
Jay nailed it on the head.
Material costs are skyrocketing for all sorts of reasons. Timber is yielding double digits returns up from an average of 8.4%.
Additionally back in 2010 there were approx. 12 million construction workers and that is now down to about 10.5 to 10.8 million which is driving up wages or making it impossible to find quality contractors.
New development, which desperately needs to happen in the affordable and middle class arena, just doesn't offer enough margins to build. So you're left with luxury builds which is already cooling dramatically.
You're seeing many people sit in their homes and upgrade also driving down supply.
All in, and from research of many economists, due to lack of inventory, prices will remain stable and but market action will cool and with it prices, ESPECIALLY in the primary markets. I do believe in some secondary markets and tertiary markets you can find deals but mainly for buy and hold. Flips are becoming riskier as people are becoming extremely picky on their purchase and they will buy but you need to produce quality products, which again, squeezes margins. All in, there are always deals, just fewer of them at the moment.
@Frank Boet
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Jared Barnard
Member since 2018 · 1 post · 7 votes
8y
I don't agree with this sentiment. Honestly it goes back to one simple line of thinking, if a deal makes sense and the numbers work don't pass it up. Overall just don't buy to buy. Yes deals are becoming harder to find and the numbers are becoming tighter; however, it just means you have to be a more prudent investor. Also, things depend on what your actual goal is. Mine being cash flow, cash flow, cash flow. As long as I can hit my targeted threshold, the deal makes sense , and I don't become over leveraged and fall in love with a deal, I personally will continue to invest. Right now there is a lot of speculations on the market and there is definitely cause for them. But to put things into perspective, if you pass on a deal that makes sense and the market doesn't shift for three more years, that is three years of income loss, appreciation loss, and equity loss. Just food for thought.
7 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
I don't know about real estate prices but where I'm at it's been raining steady for three days and I'm starting to worry.
3 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
8y
Our local market has been showing signs of holding off it's ability to appreciate. There are still deals to be had. As long as the true value of the property is known, finding the correct buy price is easy.
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