Foreseeing the Next Dip in the Market?

Question

I've made the switch from a long buy and hold investor to flipping, which of course adds on the pressures of the overall market. I am buying my properties with the ability to still make $$ as a rental if I get caught with my pants down with a turn in the market, though I do not forsee that to happen in the roughly 3-month rehab/sell period after acquisition.

Therefore, I am wanting to know what the rest of the investors on BP are forecasting the next dip in real estate. And I know, I know, "it depends on where you're located" but I talking on the larger scale we all saw in 2008. And doesnt have to be that big, but a contraction/recession level 10-20% pullback. Market has been strong for too long in my opinion and am forecasting a noticeable pullback in 2019/2020.

Thoughts?!

Jack Bobeck · Answer

@BJ Everson Most Economists see the next recession as either 2019 or 2020, due to the Federal Reserve raising interest rates too high. Lots of discussion on metrics to view and what the Bond markets will be telling us, the schleps of the real estate markets. We shall see.

If you read the latest housing market reports, you will find that the average price of a home is now $320,000 (average of East, South, Midwest, and West). Builders are not building like they did in 2002-2006, and they are pushing the price of homes up as a result. Wages are not growing and there has been little growth of real wages over the last 10 years. So unless banks get stupid, and give away mortgages for people who can breathe on a mirror, I don't see much that can be done on the price of homes, they will continue to rise.

You cannot eat appreciation, nor should you ever "expect it", but watch the banks, see if they start doing stupid loans and the folks in DC loosen up the types of mortgages allowed. That will be the sign to hunker down, because its not the mom & pops that bring down the system, its Financial Institutions that get over-leveraged. Bear Sterns, Lehmen Brothers, AIG, Merrill Lynch. Let's hop that silliness does not return in our lifetime.

Lots of talk this week on inflation, because when wage growth does pickup, more money out there chasing fewer items will send prices rising. That will be a sign that the cycle may...be coming to an end. Of course if I knew when and if, I'd buy a lottery ticket, so my 2 cents.