Is a crisis or a pull back coming?

30 Replies

We are already witnessing cracks in the Chinese real estate market. In fact, they are expecting a recession in 2019. The US stock market is in a free fall and just a few points away from being in a full blown Bear Market, and our R.E estate market is certainly softening. What's going to happen when homeowners are 15% or more under water in their mortgages? Will we have a wave of foreclosures and short sales? Now, Australia's real estate market is about to blow up. Is Australia too big to fail? Will Australia's real estate recession have a ripple effect throughout the global economies? Unfortunately, I think that we are going to experience a major global economic crisis in 2020-2021. Stock market computer trading algorithms and governments can only buy us so much time. I call Bigger Pockets The BiggerPockets Index because we can get a feel for what is going on in RE throughout the country. I have been reading chatter in the last few months that we were not talking about just a couple of years ago. Ultimately, we are responsible for our own finances.  Invest wisely and be safe out their!  https://www.youtube.com/watch?v=smPR0s2W-Ck

I cant see how Australian recession derails the global economy there are only 30 million people there.  and keep in mind thousands upon thousands of Aussies came to the US to invest at the bottom of the market. when their dollar was valued higher than ours.. and they had equity run up.. 

in the past I have seen falling stock market create a run to real estate ?  I am sure it affects some aspects of it. 

also when you look at home owners so many millions of them locked in 3% or 4% money and their mortgages are less than rent.. unless you have massive unemployment and they are forced to sell why would these lose their homes even if the values fell ?? 

Seems to me the major risks factors are what they always have been JOBS.. you have good jobs and stable economy real estate tends to keep pace.. 

Even in a slow down in new construction it would be different .. there is such a HUGE labor shortage a slow down in building would actually help that labor pool..

https://www.realtor.com/news/trends/slow-down?identityID=5627f0dd57eb04a236011b7c&MID=2018_1207_WeeklyNL_EMD&RID=3491100882&cid=eml_promo_Marketing_NonPRSL_WeeklyNL_${campaign.id?replace(%27cons.%27,%20%27%27)}_2018_1207_WeeklyNL_EMD-blog_1_slowdown-blogs_trends

@Frank Boet Good insights and thoughts, some we may not see eye to eye on. Thanks for sharing! Are you currently seeking deals still or holding out?

And what chatter is that? If its similar to what your chatter is, Ive been reading that on BP the entire time Ive been on here which is a decade. 

The bears always see tons of indicators no matter what. They ring the alarm constantly and when finally a recession happens they say see I was right, but ignore the 5 or 10 years they were wrong.

And everyone ignores the fact that it doesnt matter what the market does. Do people think you stop making money in recessions? It becomes easier then since all the weekend warriors disappear.

Originally posted by @Grant Rothenburger :

@Frank Boet Good insights and thoughts, some we may not see eye to eye on. Thanks for sharing! Are you currently seeking deals still or holding out?

 I'm putting off buying RE estate. I prefer shorting the stock market with Put options. I'm short home builders, energy and banks.

I do not allow my houses to listen to the news and they will never know that they are worth less.  It worked last time and the rents kept rolling in.  What they don't know can't hurt them.  I'm with @Jay Hinrichs .  The housing market has run up and there is some normalcy now.  We can't expect double digit increases forever.  Long term low fixed rate mortgages are now the norm and homeowners are not going to abandon their homes only to rent a home for more than their mortgage payment. 

@Frank Boet sell me all your reals state at a 30 percent discount to protect yourself from the 50 percent crash that’s coming tomorrow. I’ve seen all the indicators and a recession is coming tomorrow, so hold on buying any real estate for 25 years just to be safe.

I think it's more likely to occur regionally based on localized conditions. For example, a large company in my city announced layoffs. I am sure that is going to slow casual purchases. People will likely be more willing to wait for lower prices. I know I will.

Originally posted by @Caleb Heimsoth :
@Frank Boet sell me all your reals state at a 30 percent discount to protect yourself from the 50 percent crash that’s coming tomorrow. I’ve seen all the indicators and a recession is coming tomorrow, so hold on buying any real estate for 25 years just to be safe.

 Why will I sell you my real estate at a 30% discount? I'm not buying RE now because shorting the stock market makes more sense to me right now. We all invest differently. RE is not the only investment.

@Frank Boet - The truth is no one really knows although my personal opinion is that it won't crash but maybe just slow down. I can tell you for a fact that if it was to happen it wouldn't be for the same reasons in 2007. We're not dealing with the same subprime mortgage crisis that had us in the last recession.

@Russell Brazil brought up a good point when I posted a while back about noticing a slow down. He mentioned that when talking about a real estate crash on the national level, it hardly ever happens as it's mostly a regional thing. The last national real estate crisis before the 2007 crash was about 80 years ago.  

All that to say, I'm still buying if the numbers work but deals are no doubt getting harder to find. 

Even after reading the below recent articles I just offered 60% of value on a re-purposing off-market-ish deal with a high likelihood of acceptance.  Make your own opportunities no matter what is 'being said'!

Dec 5- Chinese firms dump $1B worth of US Real Estate last quarter:

https://www.zerohedge.com/news/2018-12-05/chinese-...

Dec 6- Seattle area home prices down 11% last 6 months...

https://www.seattletimes.com/business/real-estate/...

I did switch a stock fund to a short fund but not all in on that. It is borderline might have to switch back idk and probably not. Might know for sure Monday so in anticipation.

IMO, buying options (puts OR calls) is a sucker's play, unless you're hedging or covering. 21st century gold-panning, for all practical purposes. Blind squirrels and nuts, broken clocks, etc... 

I'm not the sharpest knife in the drawer--I got an MA in English, for crying out loud!--but I know the road to financial perdition has been paved in part with sky-is-falling hand-wringers who thought they'd properly timed a market hemorrhage, compliments of their crystal ball, tarot cards, Motley Fool newsletters, and Ms. Cleo (RIP).

Show me a screen shot of your hearty short position on SPY, or better yet long-term shorts on e-mini or SnP futures and I'll know you have the courage of conviction :) 

I'm with @Jay Hinrichs and @Bob B. Meh. AusieAusieAusie, OyeOyeOye!

Originally posted by @Dave Lawrence :

IMO, buying options (puts OR calls) is a sucker's play, unless you're hedging or covering. 21st century gold-panning, for all practical purposes. Blind squirrels and nuts, broken clocks, etc... 

I'm not the sharpest knife in the drawer--I got an MA in English, for crying out loud!--but I know the road to financial perdition has been paved in part with sky-is-falling hand-wringers who thought they'd properly timed a market hemorrhage, compliments of their crystal ball, tarot cards, Motley Fool newsletters, and Ms. Cleo (RIP).

Show me a screen shot of your hearty short position on SPY, or better yet long-term shorts on e-mini or SnP futures and I'll know you have the courage of conviction :) 

I'm with @Jay Hinrichs and @Bob B. Meh. AusieAusieAusie, OyeOyeOye!

I hear ya, the trend is your friend vs cleo. SQQQ was up 10% friday for a kind of real possible reason. Peeps can always put their head sand and pretend like it is not happening and lose half their retirement in 24 months, or save 90% of it by getting into cash. If you are retiring soon these are some realities to consider. No reason to go down with the ship now.  

Updated 5 months ago

Stock market is not always local real estate related we can understand,

Excellent thread. Thank you, @Dave Lawrence for the laughs! I needed that! "21st Century Gold~panning"...

Seriously, the last few hours, in-between my studying, I did happen upon a few YouTube videos that were rife with "The National Housing Market is Crashing", "The Stock Market is Crashing", etc.,etc., and for a moment I was a bit spooked, but I have been here before. We all have. Honestly, I am sitting tight, if anything, excellent deals will be plentiful. Listen to the wisdom of @Jay Hinrichs , @Caleb Heimsoth , @Russell Brazil , and the other resident experts on BiggerPockets. It sure is calming to come onto BP and read the voices of calm and reason.    Thank you!

There may be some bloodletting, but, meh, life proceeds.  :)

Best in Profits!  $$$

~Daniel F. Harb, ARRT,RT(R)

I remain bullish for the RE market for the next years.

I don't think that overseas real estate market have much influence on local trends; I am not even sure that we will go in the same direction within the US given the massive differences in valuation between some coastal metro's and for example the Midwest.

The most basic driver is supply and demand. We have simply not built enough houses for a decade and created a gap - production level's support current demand, but still don't make up for the inventory shortage. It will take time.

Cost of new construction in the US is 31% higher than existing inventory, that is an historic extreme. Before the bubble we were at 9% which has caused the market to bubble, because why would you not want a new house for almost the same amount - and make some money with appreciation levereaged on a no-income, no-assets, no-job loan??

Existing home prices will move towards the cost of new construction, which by itself will continue to rise at least with inflation. The labor shortage will continue to drive up construction wages. So it becomes a moving target, esentially the donkey who is following the carrot on a stick.

A little bit of a cool off would actually be healthy. But a consolidation on current levels does not mean that the market will turn. More available inventory will encourage Sellers to list, who are currently afraid that they cant find a new home, if their old one sells in 1 day.

Rising interest rates have historically not been able to slow down the market; the last 4 times this has happened, the RE markets continued to perform very well.

As long as the fundamentals remain unchanged, we will see more of the same in the next years.

Opportunity Zones have the power to chnage the dynamic. Massive amounts of money are pooling up and will probably go into high rise developments. This would have the power to close the supply gap, but will also change the RE landscape to less SF and more rentals and condos. Something to keep an eye on!

Originally posted by @Matt R. :

 If you are retiring soon these are some realities to consider. No reason to go down with the ship now.  

 If you are retiring soon, I hope you are not heavily invested in the market in the first place....any money you'll need in the next five years (some say 10) should be in something more stable. 

We are starting to experience a slowdown in SW FL but I doubt we will have a blow out. Over leveraged under capitalized investors are a dime a dozen in good or bad markets. Just last week I talked to someone with a "deal" advertised on BP. They ran out of money and cannot finish the rehab. 

Originally posted by @Frank Boet :
Originally posted by @Caleb Heimsoth:
@Frank Boet sell me all your reals state at a 30 percent discount to protect yourself from the 50 percent crash that’s coming tomorrow. I’ve seen all the indicators and a recession is coming tomorrow, so hold on buying any real estate for 25 years just to be safe.

 Why will I sell you my real estate at a 30% discount? I'm not buying RE now because shorting the stock market makes more sense to me right now. We all invest differently. RE is not the only investment.

It was sarcasm.  

Originally posted by @Paul B. :
Originally posted by @Matt R.:

 If you are retiring soon these are some realities to consider. No reason to go down with the ship now.  

 If you are retiring soon, I hope you are not heavily invested in the market in the first place....any money you'll need in the next five years (some say 10) should be in something more stable. 

 For sure and some were counting on more gains beforehand maybe. It looks like we officially entered bear market today. Some will adjust exposure and some don't need to. 

My shorts are looking great! BAC, MRO, PHM and TOL. When financials, energy and homebuilders go, so goes the stock market.

I think it depends on the market as some have stated. I know that from the normal consumer side (non-investors) mortgage rates have slowed some activity. I am 33 and feel like everyone around my age and millennials are freaked out by rates above 5%. I am a bit different in that I work for a mortgage company and read up on markets etc. Many of my peers are scared off by a rate not realizing it's only going to increase their payment a very small amount. What I have heard some of our seasoned loan advisors here in the ultra competitive Bay Area market say is that they are seeing a big gap in sellers still expecting unreal prices at the same time borrowers getting cold feet that they will buy and then the market will drop out (though highly unlikely). Lack of education is causing a bit of panic amongst the buyers around here. *I am not a license loan originator

@Frank Boet Here's a question for you. What happens if all the older baby boomers that have been so aggressively buying real estate investment trusts decide to buy real estate instead? They might just get a little jittery in the stock market, pull out and start competing with you!
Miss Cleo says dem markets gonna crash mon ! Better sell those stocks , dump all those houses, and put on the tin foil hat ..go hide in your fall out shelter in the backyard with a 100 pound sack of rice and 400 cans of beans

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