Housing prices from 1986 to 2021

25 Replies

Growing up in the mid west I'm pretty good at seeing things at face value. I understand the difference between assets and toys (most cars, motorcycle, boats, RV, etc). I started my investment journey about 4 years ago so I consider my self young in the industry, but I'm seeing property sales that make no sense. Maybe it's a gut feeling or inner defense mechanism but I don't know how some of these people are affording these homes. Neighborhoods that I considered VERY cheap are now priced to the moon. I always try to keep emotion out and let the numbers direct my decisions. The numbers are leading me to SELL EVERYTHING> I don't want to sell> I want to buy and hold!

I have a few single families with an average of 6.75% ROI. They're at market level and fully remodeled. One of my properties is free and clear. How would you fund the next deal? Would you put a mortgage on it and wait for this eviction moratorium to pane out? Are you even buying right now? The chart below is set to the year I was born.

Possibilities:

1. The paradigm has shifted and you haven't shifted with it.

2. Your gut feeling is correct and things are amiss.

3. You are missing critical information that allows you to make informed decisions.

4. You are misinterpreting/misreading the data.

5. You are reading the data correctly but are being influenced by exterior factors.

That's pretty much the crux of it. Look at any investment in any time and you will find people who look like Nostradamus, and people who missed the boat for whatever reason - fear, horse-drawn carriage syndrome, mistaken assumptions, etc.

The bottom line is that you'll never know for sure except in the rear-view mirror. The best you can do is make sure your own bottom line is reasonably secure and make decisions based on what makes you comfortable.

@JD Martin I agree completely. I'm just not a risky investor I guess. The paradigm has shifted in every market and I think investor strategy has to keep up with it. I've remodeled my self into this situation. I completed most of the work my self but for rentals it probably wasn't necessary. 

Originally posted by @Jaron Walling :

@JD Martin I agree completely. I'm just not a risky investor I guess. The paradigm has shifted in every market and I think investor strategy has to keep up with it. I've remodeled my self into this situation. I completed most of the work my self but for rentals it probably wasn't necessary. 

 I feel ya, because I'm not a huge risk-taker either. I started off buying for all cash and it took me a bit before I got on board with cashing out any properties. After awhile I saw the snowball effect of doing so but the conservative part of me has still maintained about 40% of my portfolio with no leverage whatsoever, and the remainder leveraged pretty conservatively at about 50% - meaning my total leverage is somewhere around 20-25%. That's pretty low for leverage, and certainly low for BP :) 

I agree with you @JD Martin  

It can be a bunch of factors and there are have been a couple years where I pulled back on investing due to people telling me there was going to be a crash within the next year or two so just wait.

The best you can do is setup the parameters that you are looking for now, make sure they are not broken, have reserves, cashflow and systems that will allow you to win in every market. 

@Peter Mckernan @JD Martin Thank you for the advice. In today's climate would you lock in 15 or 30 year low interest mortgage only to make $1600 per year COC? I'm considering a 65-70% LTV loan to protect the bottom line like you mentioned.

2 bedroom 1 bath SFH.

All in cost $102K (no loan yet), rents for $950. 

Originally posted by @Jaron Walling :

@Peter Mckernan @JD Martin Thank you for the advice. In today's climate would you lock in 15 or 30 year low interest mortgage only to make $1600 per year COC? I'm considering a 65-70% LTV loan to protect the bottom line like you mentioned.

2 bedroom 1 bath SFH.

All in cost $102K (no loan yet), rents for $950. 

 What that sounds like to me (if I'm wrong let me know): 70k loan 32k cash in the deal $135/month return after expenses? Do you include the principal pay-down in that scenario? Expenses I'm guessing: $400 mortgage/150 taxes 75 insurance/190 mgmt/maint/capex/vacancy?

Personally I'm not crazy about that low of a return - that's 5%, if you exclude vacancy/mgmt/capex - but if you add principal pay-down in there as well it's a little better. For me, I would probably look elsewhere, and I know there's probably not much that meets that criteria. If it was a strong appreciation area, I might think about it especially if I had nothing else going on, but if appreciation has been minimal that would be a hard sell for me. 

Originally posted by @JD Martin :
Originally posted by @Jaron Walling:

@Peter Mckernan @JD Martin Thank you for the advice. In today's climate would you lock in 15 or 30 year low interest mortgage only to make $1600 per year COC? I'm considering a 65-70% LTV loan to protect the bottom line like you mentioned.

2 bedroom 1 bath SFH.

All in cost $102K (no loan yet), rents for $950. 

 What that sounds like to me (if I'm wrong let me know): 70k loan 32k cash in the deal $135/month return after expenses? Do you include the principal pay-down in that scenario? Expenses I'm guessing: $400 mortgage/150 taxes 75 insurance/190 mgmt/maint/capex/vacancy?

Personally I'm not crazy about that low of a return - that's 5%, if you exclude vacancy/mgmt/capex - but if you add principal pay-down in there as well it's a little better. For me, I would probably look elsewhere, and I know there's probably not much that meets that criteria. If it was a strong appreciation area, I might think about it especially if I had nothing else going on, but if appreciation has been minimal that would be a hard sell for me. 

Just a quick read off the top of $1,600 a year for COC would not do it for me even with a $32K DP. I would look elsewhere, or look to find a value add deal where you can BRRRR. That's for sure what I would do in the is market, do a value add where you can have the COC sky high due to the cash out refi and if margins drop due to the market dropping you still have the great cashflow (should be better than $1600 a year).

@JD Martin I knew you were going to say that... It's just doesn't move the needle very far. You got the expenses and income all most exactly! haha

Originally posted by @Jaron Walling :

Growing up in the mid west I'm pretty good at seeing things at face value. I understand the difference between assets and toys (most cars, motorcycle, boats, RV, etc). I started my investment journey about 4 years ago so I consider my self young in the industry, but I'm seeing property sales that make no sense. Maybe it's a gut feeling or inner defense mechanism but I don't know how some of these people are affording these homes. Neighborhoods that I considered VERY cheap are now priced to the moon. I always try to keep emotion out and let the numbers direct my decisions. The numbers are leading me to SELL EVERYTHING> I don't want to sell> I want to buy and hold!

I have a few single families with an average of 6.75% ROI. They're at market level and fully remodeled. One of my properties is free and clear. How would you fund the next deal? Would you put a mortgage on it and wait for this eviction moratorium to pane out? Are you even buying right now? The chart below is set to the year I was born.

If it cash flows don't sell.

I am not what most would call a conservative investor, but underneath the differences it is actually pretty conservative. I don't take out loans to buy a property. I never pay cash. I take over existing financing. I'm picky about the property, the location, the size, the condition, and so on. It has to cash flow or be able to be flipped. Pretty simple. It's just a different allocation of resources. It has worked through every up and down cycle since 1995

I have four properties in Phoenix that I'm currently in discussion with regarding Taking Over Their Properties. Rents pencil out vs mortgage payment and the condition of the houses is good. One couple is moving to a smaller house, another is moving out of state, and two can no longer afford their payments. 

They all won't put their properties on the MLS for a couple of reasons, minor repairs, they don't want the "great unwashed COVIDIANS walking through their house, they don't want to pay real estate agent fees (I'm not an agent so no fees), or some other reason.

It isn't about what You want, it's about what the Seller wants, be flexible.  Or, you can be a conservative investor wondering what to do in this market.

 

Originally posted by @Mike Baxter :
Originally posted by @Jaron Walling:

Growing up in the mid west I'm pretty good at seeing things at face value. I understand the difference between assets and toys (most cars, motorcycle, boats, RV, etc). I started my investment journey about 4 years ago so I consider my self young in the industry, but I'm seeing property sales that make no sense. Maybe it's a gut feeling or inner defense mechanism but I don't know how some of these people are affording these homes. Neighborhoods that I considered VERY cheap are now priced to the moon. I always try to keep emotion out and let the numbers direct my decisions. The numbers are leading me to SELL EVERYTHING> I don't want to sell> I want to buy and hold!

I have a few single families with an average of 6.75% ROI. They're at market level and fully remodeled. One of my properties is free and clear. How would you fund the next deal? Would you put a mortgage on it and wait for this eviction moratorium to pane out? Are you even buying right now? The chart below is set to the year I was born.

If it cash flows don't sell.

I am not what most would call a conservative investor, but underneath the differences it is actually pretty conservative. I don't take out loans to buy a property. I never pay cash. I take over existing financing. I'm picky about the property, the location, the size, the condition, and so on. It has to cash flow or be able to be flipped. Pretty simple. It's just a different allocation of resources. It has worked through every up and down cycle since 1995

I have four properties in Phoenix that I'm currently in discussion with regarding Taking Over Their Properties. Rents pencil out vs mortgage payment and the condition of the houses is good. One couple is moving to a smaller house, another is moving out of state, and two can no longer afford their payments. 

They all won't put their properties on the MLS for a couple of reasons, minor repairs, they don't want the "great unwashed COVIDIANS walking through their house, they don't want to pay real estate agent fees (I'm not an agent so no fees), or some other reason.

It isn't about what You want, it's about what the Seller wants, be flexible.  Or, you can be a conservative investor wondering what to do in this market.

 

Always cracks me up where wholesalers talk about not having to pay a commission then talk the person into selling for FAR LESS than what they would net if they let a good agent market their house.. I have no issue with willing buyer willing seller but the save the commission to me only works if your pretty naive or get talked into it or just plain miss representation of the facts.

 

@Mike Baxter Yeah the property was purchased off market for similar reasons; mainly it was really distressed. I gave them a fair offer and never moved a penny. I'm ready for the next step and want to approach the next deal with a different mind set. You can't do all the labor yourself and be successful in REI especially flipping property. It took the better part of 2020 to remodel this property.

Originally posted by @Jay Hinrichs :
Originally posted by @Mike Baxter:
Originally posted by @Jaron Walling:

Growing up in the mid west I'm pretty good at seeing things at face value. I understand the difference between assets and toys (most cars, motorcycle, boats, RV, etc). I started my investment journey about 4 years ago so I consider my self young in the industry, but I'm seeing property sales that make no sense. Maybe it's a gut feeling or inner defense mechanism but I don't know how some of these people are affording these homes. Neighborhoods that I considered VERY cheap are now priced to the moon. I always try to keep emotion out and let the numbers direct my decisions. The numbers are leading me to SELL EVERYTHING> I don't want to sell> I want to buy and hold!

I have a few single families with an average of 6.75% ROI. They're at market level and fully remodeled. One of my properties is free and clear. How would you fund the next deal? Would you put a mortgage on it and wait for this eviction moratorium to pane out? Are you even buying right now? The chart below is set to the year I was born.

If it cash flows don't sell.

I am not what most would call a conservative investor, but underneath the differences it is actually pretty conservative. I don't take out loans to buy a property. I never pay cash. I take over existing financing. I'm picky about the property, the location, the size, the condition, and so on. It has to cash flow or be able to be flipped. Pretty simple. It's just a different allocation of resources. It has worked through every up and down cycle since 1995

I have four properties in Phoenix that I'm currently in discussion with regarding Taking Over Their Properties. Rents pencil out vs mortgage payment and the condition of the houses is good. One couple is moving to a smaller house, another is moving out of state, and two can no longer afford their payments. 

They all won't put their properties on the MLS for a couple of reasons, minor repairs, they don't want the "great unwashed COVIDIANS walking through their house, they don't want to pay real estate agent fees (I'm not an agent so no fees), or some other reason.

It isn't about what You want, it's about what the Seller wants, be flexible.  Or, you can be a conservative investor wondering what to do in this market.

 

Always cracks me up where wholesalers talk about not having to pay a commission then talk the person into selling for FAR LESS than what they would net if they let a good agent market their house.. I have no issue with willing buyer willing seller but the save the commission to me only works if your pretty naive or get talked into it or just plain miss representation of the facts.


1. No, actually I'm not a wholesaler, I buy and hold or flip. I am the buyer and the only other principal involved.
2. On a $400,000 sale the agent fee at 5% is $20,000. Does an agent provide $20,000 worth of value taking a listing? Certainly not. That my friend is the scam. Especially in as hot of a market as we are in.

3. A lot of agents will "over sell" the buyer to get the listing then reduce the price when it doesn't sell. How honest is that?

4. My method is to provide 3 comps sold in the last 3 months and pictures of the condition of the remodel that was done and we sit down and go over those. If the seller wants to upgrade to that level, spend the money, the time and discomfort, and on top of that pay an agent $20,000 to list, that's up to them. I present the facts and the numbers and contrast the experience.

5. Typically we agree to reduce the sale amount by half of the $20,000 saved by not using an agent and I get to buy the house for a small discount and they get a deal on the fees and have a sure sale. Agents hate that because it cuts them out. Well, the agents need to do a better job then. ;-)

6. I advise the seller to get an attorney who goes over the agreement, we go through title, escrow and closing just like any other transaction. 

I am not sure how that could offend anybody unless it's about the agent's fees

 

Originally posted by @Jaron Walling :

@Mike Baxter Yeah the property was purchased off market for similar reasons; mainly it was really distressed. I gave them a fair offer and never moved a penny. I'm ready for the next step and want to approach the next deal with a different mind set. You can't do all the labor yourself and be successful in REI especially flipping property. It took the better part of 2020 to remodel this property.

Great job purchasing!

I always decide what I'm going to do with a property before I buy it. If buy & hold, I fix up to that standard, if to flip I have a contractor I use and I build it into my costs. Sometimes I help out because I got started in the business flipping and I need the exercise. But, generally, my time is best spent looking for the next deal.

 

Originally posted by @Mike Baxter :
Originally posted by @Jay Hinrichs:
Originally posted by @Mike Baxter:
Originally posted by @Jaron Walling:

Growing up in the mid west I'm pretty good at seeing things at face value. I understand the difference between assets and toys (most cars, motorcycle, boats, RV, etc). I started my investment journey about 4 years ago so I consider my self young in the industry, but I'm seeing property sales that make no sense. Maybe it's a gut feeling or inner defense mechanism but I don't know how some of these people are affording these homes. Neighborhoods that I considered VERY cheap are now priced to the moon. I always try to keep emotion out and let the numbers direct my decisions. The numbers are leading me to SELL EVERYTHING> I don't want to sell> I want to buy and hold!

I have a few single families with an average of 6.75% ROI. They're at market level and fully remodeled. One of my properties is free and clear. How would you fund the next deal? Would you put a mortgage on it and wait for this eviction moratorium to pane out? Are you even buying right now? The chart below is set to the year I was born.

If it cash flows don't sell.

I am not what most would call a conservative investor, but underneath the differences it is actually pretty conservative. I don't take out loans to buy a property. I never pay cash. I take over existing financing. I'm picky about the property, the location, the size, the condition, and so on. It has to cash flow or be able to be flipped. Pretty simple. It's just a different allocation of resources. It has worked through every up and down cycle since 1995

I have four properties in Phoenix that I'm currently in discussion with regarding Taking Over Their Properties. Rents pencil out vs mortgage payment and the condition of the houses is good. One couple is moving to a smaller house, another is moving out of state, and two can no longer afford their payments. 

They all won't put their properties on the MLS for a couple of reasons, minor repairs, they don't want the "great unwashed COVIDIANS walking through their house, they don't want to pay real estate agent fees (I'm not an agent so no fees), or some other reason.

It isn't about what You want, it's about what the Seller wants, be flexible.  Or, you can be a conservative investor wondering what to do in this market.

 

Always cracks me up where wholesalers talk about not having to pay a commission then talk the person into selling for FAR LESS than what they would net if they let a good agent market their house.. I have no issue with willing buyer willing seller but the save the commission to me only works if your pretty naive or get talked into it or just plain miss representation of the facts.


1. No, actually I'm not a wholesaler, I buy and hold or flip. I am the buyer and the only other principal involved.
2. On a $400,000 sale the agent fee at 5% is $20,000. Does an agent provide $20,000 worth of value taking a listing? Certainly not. That my friend is the scam. Especially in as hot of a market as we are in.

3. A lot of agents will "over sell" the buyer to get the listing then reduce the price when it doesn't sell. How honest is that?

4. My method is to provide 3 comps sold in the last 3 months and pictures of the condition of the remodel that was done and we sit down and go over those. If the seller wants to upgrade to that level, spend the money, the time and discomfort, and on top of that pay an agent $20,000 to list, that's up to them. I present the facts and the numbers and contrast the experience.

5. Typically we agree to reduce the sale amount by half of the $20,000 saved by not using an agent and I get to buy the house for a small discount and they get a deal on the fees and have a sure sale. Agents hate that because it cuts them out. Well, the agents need to do a better job then. ;-)

6. I advise the seller to get an attorney who goes over the agreement, we go through title, escrow and closing just like any other transaction. 

I am not sure how that could offend anybody unless it's about the agent's fees

 

sorry should have pointed out that i have no clue if you wholesale or not .. It just always cracks me up when wholesalers tell seller they are saving money by not paying commish then offer 20 to 30% less than the house will sell for on the open market .. And of course commissions are negotiable as we all know.. up and down.

 

Originally posted by @Jay Hinrichs :
Originally posted by @Mike Baxter:
Originally posted by @Jay Hinrichs:
Originally posted by @Mike Baxter:
Originally posted by @Jaron Walling:

Growing up in the mid west I'm pretty good at seeing things at face value. I understand the difference between assets and toys (most cars, motorcycle, boats, RV, etc). I started my investment journey about 4 years ago so I consider my self young in the industry, but I'm seeing property sales that make no sense. Maybe it's a gut feeling or inner defense mechanism but I don't know how some of these people are affording these homes. Neighborhoods that I considered VERY cheap are now priced to the moon. I always try to keep emotion out and let the numbers direct my decisions. The numbers are leading me to SELL EVERYTHING> I don't want to sell> I want to buy and hold!

I have a few single families with an average of 6.75% ROI. They're at market level and fully remodeled. One of my properties is free and clear. How would you fund the next deal? Would you put a mortgage on it and wait for this eviction moratorium to pane out? Are you even buying right now? The chart below is set to the year I was born.

If it cash flows don't sell.

I am not what most would call a conservative investor, but underneath the differences it is actually pretty conservative. I don't take out loans to buy a property. I never pay cash. I take over existing financing. I'm picky about the property, the location, the size, the condition, and so on. It has to cash flow or be able to be flipped. Pretty simple. It's just a different allocation of resources. It has worked through every up and down cycle since 1995

I have four properties in Phoenix that I'm currently in discussion with regarding Taking Over Their Properties. Rents pencil out vs mortgage payment and the condition of the houses is good. One couple is moving to a smaller house, another is moving out of state, and two can no longer afford their payments. 

They all won't put their properties on the MLS for a couple of reasons, minor repairs, they don't want the "great unwashed COVIDIANS walking through their house, they don't want to pay real estate agent fees (I'm not an agent so no fees), or some other reason.

It isn't about what You want, it's about what the Seller wants, be flexible.  Or, you can be a conservative investor wondering what to do in this market.

 

Always cracks me up where wholesalers talk about not having to pay a commission then talk the person into selling for FAR LESS than what they would net if they let a good agent market their house.. I have no issue with willing buyer willing seller but the save the commission to me only works if your pretty naive or get talked into it or just plain miss representation of the facts.


1. No, actually I'm not a wholesaler, I buy and hold or flip. I am the buyer and the only other principal involved.
2. On a $400,000 sale the agent fee at 5% is $20,000. Does an agent provide $20,000 worth of value taking a listing? Certainly not. That my friend is the scam. Especially in as hot of a market as we are in.

3. A lot of agents will "over sell" the buyer to get the listing then reduce the price when it doesn't sell. How honest is that?

4. My method is to provide 3 comps sold in the last 3 months and pictures of the condition of the remodel that was done and we sit down and go over those. If the seller wants to upgrade to that level, spend the money, the time and discomfort, and on top of that pay an agent $20,000 to list, that's up to them. I present the facts and the numbers and contrast the experience.

5. Typically we agree to reduce the sale amount by half of the $20,000 saved by not using an agent and I get to buy the house for a small discount and they get a deal on the fees and have a sure sale. Agents hate that because it cuts them out. Well, the agents need to do a better job then. ;-)

6. I advise the seller to get an attorney who goes over the agreement, we go through title, escrow and closing just like any other transaction. 

I am not sure how that could offend anybody unless it's about the agent's fees

 

sorry should have pointed out that i have no clue if you wholesale or not .. It just always cracks me up when wholesalers tell seller they are saving money by not paying commish then offer 20 to 30% less than the house will sell for on the open market .. And of course commissions are negotiable as we all know.. up and down.

Point well made. No harm, no foul.

 

Originally posted by @Jaron Walling :

@JD Martin I knew you were going to say that... It's just doesn't move the needle very far. You got the expenses and income all most exactly! haha

 😀 I need to become less predictable!

@Jaron Walling - I am sure you already explored this option but if you want access to the equity without selling cash flowing properties, it might be more beneficial to open up a HELOC or a RELOC on those properties for your future purchasing endeavors. With interest rates at an all time low, even if the loan rate is variable, you aren't going to find better loan terms out there other than a conventional 30 year investment loan. You can also utilize these lines of credit for your down payment on the properties keeping your exposure to the variable rate as low as possible. At the end of the day, if a property is providing decent cash flow, who cares what the sales price is. Assets are assets as long as they are making you money day in and out.

It's not the value of the house price that's rising but value of money that's decreasing.

If you see house price in asia country from 1986, to 2021, the chart is even more vertical.

@Zachary Beach

Inflation is a key factor. Even if inflation is 2-3% over the next 10 years. Those cheap mortgage rates of 3-4% will be covered by rent increases. Unless there is some population decrease and demand die off I agree with the posts above it if cash flows currently and you have the reserves knowledge and forethought to weather a possible huddle or too keep investing.

Have you thought about investing in rural areas? Returns are much better and competition is no where near as tough. I’m an hour west of Indy and see much better returns, still a very strong demand, and appreciation is still very good. 

@Dusty Bowling Yeah I grew up in rural Indiana and considered that idea. My mom is rural investor up in Muncie and has some good properties. My problem is driving distance and being around to check on the rental.

I think we need to get together for coffee and have a discussion.  My husband and I keep going back & forth on these issues as well.  I think that your long term goals are what is important - keep focused on those.  Yes, the housing pricing has changed in just the last 2 years.  The report that came out this week was that Indianapolis is up 16% from last year.  (It is still very reasonable when you compare it to other markets though.)  But, there are still plenty of investments out there, we may just have to pivot slightly on neighborhoods or strategies.  We are in the middle of doing a rehab ourselves and it is seeming to take FOREVER.  PM me - would love to chat.