Have we seen the bottom of the market?

General Real Estate Investing 29 Replies

Do you feel that we have hit market bottom?

Since this might vary from location to location, how do you feel about the market bottom where you are either already invested, or looking to invest in?

No, we're not at the bottom. In fact, I think we've still got a LONG way to go. What we have now is a slight improvement in the stock market (a bear market rally), just like we had during the great depression. In the great depression, that was followed by the bottom dropping out and that's exactly what I expect this time. Bear market rallies with the temporary increase in bear market sentiment occur in all bear markets.

This issue here is VERY simple. We got into this problem because the American government and American people have been overborrowing and overspending for DECADES. The government's solution to this problem is to borrow even more and spend even more! Sure, that HUGE amount of funny money they have pumped into the market is causing a temporary slight rise in the stock market, but don't think for a minute that's going to fix the economy. All that fake money (created out of thin air) is going to DESTROY the economy and real estate along with it.


Mike, if it's going to destroy real estate, why are you in this business?

The fact that real estate has farther to fall has nothing to do with the profitability of my business. In fact, the rental business hasn't been this good for at least the past 6 years. I am COMPLETELY full right now and rents are going up. Even if the prices of property go down, it doesn't affect the cash flow!


I don't think we are at the bottom but there are several areas that have shown signs of recovery and stabilization.
I think the question is to broad to answer from a National level and can only be answered from a local level in my opinion.

That being said, many local areas here in So Cal have seen sales increase, supply decrease, buyers increase, and values stabilize.

I have also seen sevral areas in Las Vegas where the prices continue to fall, however, the rental market is good and you can pick up properties for much less than the cost to build.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com | Podcast Guest on Show #130

Recently, there was data indicating that home sales, especially in pre-owned homes, shot up 5% or something. New constructions are still down. The purchases in pre-owned homes is largely due to investors picking up foreclosures that are good deals. It is very difficult to say, objectively, what is the bottom or what does it constitute? Many investors here are looking to buy their way to the bottom, if the numbers of the property work out.

Also, I guess... I don't have any idea of what I should be looking at to predict the market, though it looks like the gobbling up of foreclosures is the movement towards the equilibrium, and inflows into the system, clearing up a lot of the bad debt. But if you're looking for a deal, I think its really been the time to look for the last few months.

I have to agree with what MikeOH said. If it cash flows, the numbers work, etc- calling the bottom has nothing to do with some individuals making money & how/when they do their deals.

No matter how you define the bottom, calling it a long time after it has happened may be the only way to safely call it. Missing opportunities waiting for the bottom may not work for some, may be necessary for others. Crunching the numbers on a property by property basis is what is required along with a long hard look at your plans, the possible problems, and several different exit strategies..

I agree with Mark, you don't have to time the bottom, just make sure that the deal works today. Having said that, I would stick to stable neighborhoods with a good mix of long term owners. This hopefully insures that will not have a lot of close by vacant properties to compete with you when you have to lease yours. Steer clear of new track developments where everyone bought their house at the same time, you could end up with every other house on the market and these neighborhoods will take a longer time to stabilize.

In Louisiana, there has been no economic effect at all. Everything is still running fine. We are dependent on oil. When oil companies are doing good. Louisiana is doing good. The majority of people here work offshore on the oil rigs.

Leave it to CNN to publish that bit of garbage. Did they even get one "fact" right?


While the statistical facts on the numbers may be correct, I don't think that those numbers are an accurate comparison of what our market conditions are today compared to the depression and would therefore agree with Mike's short answer.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com | Podcast Guest on Show #130

I don't know if we have seen the actual bottom yet, but I do know the recovery will not be a V-shape. It will take YEARS for prices to recover to where they were even if we are at or near the lows.

My gut, tells me some areas still have a ways to go down before starting bouncing along the bottom for a while.

Every city has it's own DNA and some cities will have a flat line while others will continue to drop.

I agree wit Taz in his assessment and would add that anyone thinking that RE recovery equals a steep incline in pricing is sadly mistaken. The market has already proven that obscene pricing can not be sustained unless income ratios increase accordingly.

Not only that, it will be a long time, if ever, that the mortgage industry and Wall Street will get away with the raping and pilaging they accomplished in 2004-2007.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com | Podcast Guest on Show #130

I am just looking forward to the 180 degree difference between doing business in a buyer's market that thinks property is appreciating vs. depreciating.

kudos to you mike. while i don't think we have necessarily bottomed yet you cant wait for that. prices are at levels that you can make money and that's what you must do.
lazy people wait for bottoms in a market like this.
my prediction:people that invest now in this market and hustle through the tough times a little, will be the ones that look back at what a perfect market this was.


I am not sure that it is not going to destroy it.

Real estate is very much a local phenomena. In the area of western NY where I invest it never had the large upswing and it still continues to grow at 4-5% a year. We have had no drop in prices at all.

I found this graph which shows nationally how much real estate prices ran up during the past decade. It points to the potential for large drops to still occur in many areas


Just saw 2 theories on what it will take for a complete correction. I cant say that either was a big favorite of mine. One was to open up the borders and let in any immigrant that has enough money or credit to buy a home. Theory says that 2 years of this would bring about a total correction.

Second theory was to give vacant properties to those in govt programs like Section 8 to fix up and if they do give them the deed. I almost choked at this one.

Fact is, houses need to be affordable. No one making 40K a year needs a 400K house. Unless median income jumps, or the value of a dollar rises we will be at lower levels than the height. The value of the dollar is currently poised to be decimated by "created money". So no major move back to post bubble prices.

Personally, give me 3 more years of this and I will be exactly where I want to be.

My simple minded way of considering the situation is the Case-Shiller data. The graph Paul linked is the Case-Shiller data, adjusted for inflation. Notice that will three exceptions, house prices are flat when inflation is factored out. Yes, there are short term fluctations, but over a couple of decades? Flat.

The first downward adjustment was 1915 to 1920. Not sure what happened then, but recall in those times most loans were call-able, and an 80% loan meant an 80% down payment. The second, upward. adjustment was post WWII when lending was eased and all the GIs were coming back from the war and starting families. The third was the current bubble when lending guidelines were essentially discarded. Now we go back to more normal, or even tighter than pre-2000 guidelines. So, I generally look back to 1999-2000 prices (not always easy to find), and adjust for inflation.

Now, that's probably too optimistic in places where inventory greatly exceeds demand. Detroit and Las Vegas come to mind. Central FL was another area where most of the demand was construction workers building more houses. I'm sure there are areas, even specific neighborhoods where inventory remains low vs. supply.

Things to look for are supply vs. demand. If there is only 2-3 months of inventory, prices should trend upward. If there is a year of inventory, prices will trend downward.

Watch for home builders to start building again. That's positive because they think there's demand, but negative because there will be more inventory.

I would say some areas and some price ranges will see continued downward pressure.

I would also say there will be no recovery. Anyone who's waiting for prices to return to 2005-2006 values will have a very long wait. Eventually, prices will stabilize at some new equilibrium. Knowing nothing else, I think pre-bubble levels are a good guess. Then, they will resume their long term, inflation driven trend, with 10-15% fluctuations off that level over the course of a few years. Some areas will continue to be dismal while other areas will boom. Both, as the result of specific, local condition.

Jon Holdman, Flying Phoenix LLC

I have also seen sevral areas in Las Vegas where the prices continue to fall, however, the rental market is good and you can pick up properties for much less than the cost to build.

Now we go back to more normal, or even tighter than pre-2000 guidelines. So, I generally look back to 1999-2000 prices (not always easy to find), and adjust for inflation.

This is easiest done by going to the tax assessors office of the county where the property is located. At the bottom of the property card is a sales section. If there was a sale of the property during that period mentioned than you will have the value. If not you will have to look at the properties closy by that are similar and look into their property cards for an approx "comp".

I agree it can be time consuming and difficult if the actual property was not sold during that period.

But from what I have read here the higher the increase in prices were since that period the lower you can expect things to go before they stabilize.

Yes, we have hit the bottom of the market but this all due to crises.

So, Michele, what evidence leads you to believe we're at a bottom? Bottoms are easy to call a few years after the fact, but, IMHO, impossible to call when you're actually there.

The county data depends on the county. Two of the counties I watch have detailed data readily available, so the approach you suggest, jawsette, is exactly what I do. Two others have incomplete data.

Jon Holdman, Flying Phoenix LLC

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