Housing Crash in 2018-2019
Banker · Saint Paul, MN · Member since 2016 · 45 posts · 6 votes
Housing Crash in 2018-2019
Most Popular Reply
Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
8yOriginally posted by @James Cannon:
Does anyone for see another housing crisis like what we had back in 2007. I heard economist Harry Dent speak on this about 3 years ago in Atlanta. He predicted a housing market crash sometime between 2016-2019.
Let me know your thoughts.
I can guarantee that between now and 2068 the housing market with either go up or go down.
67 Replies
- Investor · Birmingham, AL · Member since 2016 · 446 posts · 305 votes8y
<----Vulture
I am anticipating the fall.
- Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes8y
Originally posted by @James Cannon:
Does anyone for see another housing crisis like what we had back in 2007. I heard economist Harry Dent speak on this about 3 years ago in Atlanta. He predicted a housing market crash sometime between 2016-2019.
Let me know your thoughts.. 7/15/2018. 3:45 PM. Stay Tuned..
- Rental Property Investor · Haverhill, MA · Member since 2016 · 25 posts · 7 votes8y
The market has been hot hot in the Northeast for a pretty consistent couple years. Combined with low inventory and a lot of buyers means driving prices up because of demand. Sellers are making a killing and not having to do a lot of work to get the price, or more, than what they want. I believe that we won't get a "crash" per say, but we are overdue for an organic dip in the housing market pricing. It would actually be a good thing to have a little cooling off period.
- Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes8y
No one can predict when there will another crash because if they could they would bet everything they have on it. Prices might cool down in some places but in most markets there is still a pretty big shortage and constructions cost are still high, i really dont see how the supply can change at this moment. I mean rates are going up but they are historically not that high. One worry would be that people are putting down to little for there properties, we just sold 6 new condos and all the buyers put down 3 percent. I always worry when there is to many properties with small equity in them. But overall i feel the market will rise for the short term. In Chicago there is about 9500 properties for sale vs only 500 new construction. Even if you want to look at it on a macro level, each time we had a crash the prices have always risen above and far above the last high point. In some popular areas the prices have gotten higher then last bubbles but so many areas haven't touched those highs. Who says prices cant keep going up for another couple years and rise above last bubble prices. The issue is that there is a low supply and construction cost are to high to slove that problem. I would get nervous when people no experience starting building house/condos with low equity. I mean back in mid 2000s you could build in chicago with 5 percent down lol, avearge seems 25 to 30 percent right know.
- Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes8y
Allow me to opine on how to stay 'market crash proof': buy great deals that are under current market value (with terms from seller when possible), and if you purchase money mortgage or re-fi, don't go over 60% LTV. Fixed rate 15-year mortgages only--time flies when you're havin fun and it is really sweet when those mortgages get paid off.
Rent must cover ALL expenses, PITI, maintenance reserve, vacancy reserve, etc. Keep a close eye on your properties and keep them well maintained. To me, cash flow from rentals during the first few years is not for spending, it's for reinvesting, either in improvements to the 'generating' property, or in search of another.
If you need cash, do some buy/fix/sell. If the goal is to eventually kick back and have a huge monthly income, get some of those houses paid off, raise rents, have a good manager, and enjoy life.
No one can 'time' the market accurately, except in hindsight. And remember, appreciation of asset should not be the driving force for buying the rental--rather if and when it happens, think of it as a gift.
Lastly, real estate, like all aspects of the economy, has its ups and downs. Adjust if you must, but on rent/hold, think very long term. I am thankful every day for real estate being so good to me and mine.
Good Luck!
- Real Estate Consultant · Brighton, MI · Member since 2013 · 607 posts · 251 votes8y
The "experts" have been wrong about many things (i.e. the stock market crash that would ensue if Trump was elected). In contrast to the naysayers, here are the opinions of three major players in the residential housing market: to view.
A recent article by Teo Nicolais, a real estate entrepreneur who teaches courses on real estate principles, markets, and finance at Harvard Extension School concluded that the next housing bubble may not occur until 2024.
The article, looks at previous peaks in real estate values going all the way back to 1818. Nicolais uses the research of several economists. The article details the four phases of a real estate cycle and what defines each phase.
Nicolais concluded his article by saying:
The reason for the price appreciation we are seeing is an imbalance between supply and demand for housing. This has created a natural increase in values, not a bubble in prices. So long as inventory and interest rates remain low, home prices will continue their upward trend. As interest rates rise, prices will level out.
- Banker · Saint Paul, MN · Member since 2016 · 45 posts · 6 votes8y
Im glad to see most everyone is so bullish on the market.
- Investor · Culver City, CA · Member since 2017 · 76 posts · 40 votes8y
Harry Dent has been making wild predictions since the 90's. He predicts bubbles and busts all the time. I read "roaring 2000s" a long time ago. I doubt he has become more accurate over time. He is good at selling books.
- BOISE, ID · Member since 2014 · 77 posts · 45 votes8y
Hope for the best, plan for the worst, and invest for the long-term.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Marc Winter:
Allow me to opine on how to stay 'market crash proof': buy great deals that are under current market value (with terms from seller when possible), and if you purchase money mortgage or re-fi, don't go over 60% LTV. Fixed rate 15-year mortgages only--time flies when you're havin fun and it is really sweet when those mortgages get paid off.
Rent must cover ALL expenses, PITI, maintenance reserve, vacancy reserve, etc. Keep a close eye on your properties and keep them well maintained. To me, cash flow from rentals during the first few years is not for spending, it's for reinvesting, either in improvements to the 'generating' property, or in search of another.
If you need cash, do some buy/fix/sell. If the goal is to eventually kick back and have a huge monthly income, get some of those houses paid off, raise rents, have a good manager, and enjoy life.
No one can 'time' the market accurately, except in hindsight. And remember, appreciation of asset should not be the driving force for buying the rental--rather if and when it happens, think of it as a gift.
Lastly, real estate, like all aspects of the economy, has its ups and downs. Adjust if you must, but on rent/hold, think very long term. I am thankful every day for real estate being so good to me and mine.
Good Luck!
excellent post I would add if your houses are stable and on 15 year mortgages you take the extra 100 or 200 a month and continue to accelerate paydown.. Unless of course your in a market were your buying sub 10 or 20k homes and you have enough cash flow to buy a new one every 3 to 6 months.. the real wealth in real estate is free and clear and no debt.. I mean when you think about it.. you pay off a home and your cash flow doubles with out having to go into more debt more maintenance more risk etc etc.. this fixation with max debt got have a 100 doors and 200 a month so I can get 20k a month not sure how realistic that is.. and for darn sure if you have a mini melt down that can lead to vacancy and all of a sudden if you don't have a good job your not making any cash flow or are negative.
this is who all those syndicators lost so many apartments in 07 to 2011 they went vacant past the break even point could not feed them could not maintain them and they folded..
- Investor · Brentwood, TN · Member since 2015 · 140 posts · 39 votes8y
My favorite prediction is that the next financial crisis will be in student loan defaults. College grads these days are coming out with a ridiculous amount of loan debt. A small blip in hiring could spell default for many and will have a domino effect into other segments of the financial market... when I say "favorite" I don't mean I'm a fan...not hoping it will happen, just think it may be correct...
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes8y
We are likely closer to the top than the bottom. They typical market cycle is 18 years from peak to peak, which would put us at 2024. With that said, we live in different times that we did in 1918 and even in 2006. Be cautious when buying in a down market and an up market and you will be insulated. The biggest things to me to be successful is to be able to add value to your property in order to create equity and keep ample cash reserves.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes8y
There is an old saying in the Stock Market Trading game....
"You are only as rich as your last trade...."
If you keep buying and reinvesting the profits and never take anything back out, you risk it all.
So take some profits while you can before the next crash happens.
- Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes8y
Mortgage interest will like to reach 5% by year end, 5-6% in 2019. That will cool the home prices to an acceptable level. I was wondering the cabinets, counter top is imported from Asia mostly. I wonder if the housing industry will get hit by the tariffs like shoes, clothes. It will be more clear the second half of 2018.
I just do not see how people can afford an entry level 1 br condo for 1.1M here and that is 40 year old. I saw one 2 br condo near Facebook at 1.8M (new).
- Honolulu, HI · Member since 2017 · 247 posts · 315 votes8y
Originally posted by @Annette Hibbler:
The "experts" have been wrong about many things (i.e. the stock market crash that would ensue if Trump was elected). In contrast to the naysayers, here are the opinions of three major players in the residential housing market: to view.
A recent article by Teo Nicolais, a real estate entrepreneur who teaches courses on real estate principles, markets, and finance at Harvard Extension School concluded that the next housing bubble may not occur until 2024.
The article, looks at previous peaks in real estate values going all the way back to 1818. Nicolais uses the research of several economists. The article details the four phases of a real estate cycle and what defines each phase.
Nicolais concluded his article by saying:
The reason for the price appreciation we are seeing is an imbalance between supply and demand for housing. This has created a natural increase in values, not a bubble in prices. So long as inventory and interest rates remain low, home prices will continue their upward trend. As interest rates rise, prices will level out.
I have difficulty believing an "expert" that doesn't know the difference between "weary" and "wary"
- Honolulu, HI · Member since 2017 · 247 posts · 315 votes8y
Originally posted by @Jay Hinrichs:
this is who all those syndicators lost so many apartments in 07 to 2011 they went vacant past the break even point could not feed them could not maintain them and they folded..
Were these apartment syndications across all price points? or were they mostly higher end properties?
I am curious which end of the pricing spectrum did better during the downturn
- Real Estate Agent · Vienna, VA · Member since 2016 · 289 posts · 253 votes8y
For sure there will be another market crash/recession/depression/dip/etc. But don’t focus on when it will happen, focus on what you can control:
- Buy great deals that cash flow after you account for ALL expenses
- Build up your cash reserves
- Secure loans with long term fix rates
- Secure access to capital (business lines of credit, HELOCs, private investors, etc) that don’t cost you money if you don’t use them, but that you will have available, if necessary.
- Pay down your loans, if you are done (or close) expanding your portfolio.
- Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes8y
@James Cannon A life without peaks and valley is one heck of a limbo.
When has a crash ever stopped the smart investors from creating wealth? In the 2008 crash, a lot of millionaires were created and a transfer of wealth occurred.
Now, the notion of sitting on the sidelines bitting one's fingers in expectation of this "proverbial crash" is detrimental to wealth creation.
My $0.02 🤑
Thanks! - Ola
- Property Manager · Metro Detroit, MI · Member since 2008 · 305 posts · 362 votes8yRecord low inventory here at the moment. For a "crash" there would need to be a big influx of supply . Where will that supply come from ?
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve K.:
Originally posted by @Jay Hinrichs:
this is who all those syndicators lost so many apartments in 07 to 2011 they went vacant past the break even point could not feed them could not maintain them and they folded..
Were these apartment syndications across all price points? or were they mostly higher end properties?
I am curious which end of the pricing spectrum did better during the downturn
all across the spectrum but somewhat regional with Vegas taking some major hits PHX and GA and some other markets..
The of course you have the never ending cycle of those that buy D and C in rough areas thinking THEY can turn them around only to have the cycle repeat.. Just drive through Memphis you will see Boarded up Multi.. same with the south side of Chicago.
- Investor · Fort Wayne, IN · Member since 2017 · 25 posts · 4 votes8y
I don't see it as a "supply & demand" issue in RE. It's much more likely to be a default issue. According to CNBC as of 8/24/17, 78% of Americans live paycheck to paycheck, meaning most Americans can't afford their car payments, student loans, credit cards, or house mortgages if they would lose their job or have any meaningful increase in inflation of non-fixed rate items to include ARMs, credit cards, and regular items you buy from retail stores. With unemployment at multi-decade lows, potential trade wars and student loan defaults, it could cause a domino effect.
The trouble is a lot of investments are calculated based on low interest rates, 5-10% vacancies, and increasing rental prices. With higher LTVs, any change in either one one could result in losing money. People act irrationally when prices drop quickly, especially stocks!
- Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes8y
Always fun to predict the future. Let me dust of my never-wrong crystal ball....(dust dust dust....hack, hack, cough)
So what is this "market" you speak of? Real estate is not a "market" in a true sense; it's a combination of 100,000 sub-markets all across the nation. Sub-prime was a big deal because once again the ignorant Govt tried to "help" people by making it too easy for financially unsound people to buy homes. It was compounded when industries placed side bets on the results (see movie and/or read the book "The Big Short" for a non-college level analysis of what happened). Nothing today indicates either of these two issues are happening.
So if "this market" crashes, it won't be like 2008-2009. It could crash, but for a totally different set of reasons. Let's talk about some of the risks that affect prices.
Supply in many sub-markets is very low, which should continue to push prices higher. Credit is still cheap by historic norms. I remember when 8-10% on a mortgage was a good deal and reserved only for folks with 720+ credit!. This should keep prices steady or continuing to go up at a more modest pace. Demand for housing is increasing as many Millenials have overcome many of their fears of the housing bust and are moving out of ma and pa's basement to start a family.
Wages are growing, albeit slower than housing prices. Ultimately, that should causes prices to stall and/or drop, but no sign of it yet on a national level. Maybe in some ultra high priced markets (Vegas, Cali, Arizona, NY, etc) the trend is reversing. I don't live in those markets and I don't trust media reports to be unbiased. Interest rates are trend upward, which will have a cooling effect. Student loans are still crippling many buyers, keeping prices lower.
Just a few factors. There are many more.
If you invest in an area(s) that have solid fundamental of a diverse and robust industry base, quality transportation and infrastructure, and are just generally nice places to live, the odds are highly in your favor that even if you do overpay somewhat and/or the market crashes in the next 1-2 year, it will rebound and you'll be back where you started in 5 years or so. Investors like us think and act for the long-term. Joe Schmoe home buyer thinks and acts maybe a year at a time. When his home value dips below what he has mortgaged against it, he abandons it (strategic default) giving little thought to how that will impact him 5-7 years down the road. We hold on, knowing that nothing lasts forever. The worst time to jump off a roller coaster is when it's moving. Just stick to your goals, execute solid deals, and hang on.
I have one piece of relatively sound advice: Regardless of what the market does: invest in "affordable" housing. People ALWAYS need affordable housing, even in bad markets. Most folks won't live on their college buddy's couch for very long, and the solid renters you want aren't living in Ma and Pa's basement forever, nor are they triple stacking with several other families in one home. Find the 3-4 best school districts in your investing target area, and buy the best deals there. Families will sacrifice a lot to get their kids a good education, and property values should be relative stable even in down times. Think of C+/B- neighborhoods close (5 miles or less commute) to employers, retailers, and entertainment. Older homes (1950s, 60s, 70s), perhaps somewhat dated, but a strong owner-occupant ratio in the neighborhood (at least 50% owners and stable or trending up). Stay away from glitzy or high-dollar property (vacation rentals, $300,000 homes that rent for $1800, etc).
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes8y
@Tyler Derickson On a macro level there is a supply issue. Here is a post from Bill McBride talking about Housing Inventory: short story is its going down and the population is growing.
I've hear similar stats about the percentage of people who could come up with $500 or $1,000 and the results aren't reassuring. However, these don't take into account the average American's ability to shift their budget from discretionary spending to non-discretionary in the event of a serious financial strain.
ARMs make up less than 5% of all mortgages issued and they don't have the terms they once did that handcuffed borrowers so their systemic risk is negligible. I also don't see how an increase in rates will affect an investor how already had a loan? Market changes (lower Rent) could change their balance sheet or if they had commercial note with a term less than the amortization. Both of those tend to contain themselves to specific markets. Mortgage delinquencies sit at about average, may a bit below.
Not saying that everything is all rosy; you and @Tom Shepard both brought up student debt, which will hamper growth. Since you can't get ride of it even in bankruptcy, that means it will act more like an anchor on economic growth than a catalyst for a crash.
In short, I'm in @Erik Whiting camp the data does support another housing crisis. I think housing will feel the localized effects of the next downturn, but won't be at the center of it.
- Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes8y
Originally posted by @Jay Hinrichs:
Originally posted by @Marc Winter:
Allow me to opine on how to stay 'market crash proof': buy great deals that are under current market value (with terms from seller when possible), and if you purchase money mortgage or re-fi, don't go over 60% LTV. Fixed rate 15-year mortgages only--time flies when you're havin fun and it is really sweet when those mortgages get paid off.
Rent must cover ALL expenses, PITI, maintenance reserve, vacancy reserve, etc. Keep a close eye on your properties and keep them well maintained. To me, cash flow from rentals during the first few years is not for spending, it's for reinvesting, either in improvements to the 'generating' property, or in search of another.
If you need cash, do some buy/fix/sell. If the goal is to eventually kick back and have a huge monthly income, get some of those houses paid off, raise rents, have a good manager, and enjoy life.
No one can 'time' the market accurately, except in hindsight. And remember, appreciation of asset should not be the driving force for buying the rental--rather if and when it happens, think of it as a gift.
Lastly, real estate, like all aspects of the economy, has its ups and downs. Adjust if you must, but on rent/hold, think very long term. I am thankful every day for real estate being so good to me and mine.
Good Luck!
excellent post I would add if your houses are stable and on 15 year mortgages you take the extra 100 or 200 a month and continue to accelerate paydown.. Unless of course your in a market were your buying sub 10 or 20k homes and you have enough cash flow to buy a new one every 3 to 6 months.. the real wealth in real estate is free and clear and no debt.. I mean when you think about it.. you pay off a home and your cash flow doubles with out having to go into more debt more maintenance more risk etc etc.. this fixation with max debt got have a 100 doors and 200 a month so I can get 20k a month not sure how realistic that is.. and for darn sure if you have a mini melt down that can lead to vacancy and all of a sudden if you don't have a good job your not making any cash flow or are negative.
this is who all those syndicators lost so many apartments in 07 to 2011 they went vacant past the break even point could not feed them could not maintain them and they folded..
@Jay Hinrichs I will take my goal of 25 free and clear in next 3 years and just sit back and become even picker on what we buy here in good ole SC, NC
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