Is a Real Estate crash imminent?

76 Replies

Hey I am Newbie, and I just read this article. Wanted some more expert opinions on this article and FHA loans and people buying homes with poor credit and low income in today’s hot market. What do you all think? Small-Time Bankers Make Millions Peddling Mortgages to the Poor - Bloomberg Businessweekhttps://apple.news/A-FtZMr0uTJSudDsEPZrF-Q -Matt

Small-Time Bankers Make Millions Peddling Mortgages to the Poor - Bloomberg Business Week https://apple.news/A-FtZMr0uTJSudDsEPZrF-Q

i would like to see a nice healthy correction.  Say 20% to 30%. I own RE so yes its against my self interest but im a buy n holder.

I hear auto loans are getting out of hand too.

We already know student loans are way out of hand.

i think cc debt equals levels seen just before last crash.

Yes...so you should sell me all your properties at a 20% discount so you can avoid the 30% crash.

Sure....

I will say in a sellers market (like our area) I find it harder to worry about. Right now i have dozens of good qualified buyers (3% EMD, USDA/FHA/VA/700+ scores/2 years union/ over asking) that are getting beat out left and right. In our area those are good qualifications. If they can't buy now, well, it's not a market that's going to fall due to lack of interest.

Now I will say, during the last recession we stayed fairly flat, our 18% of 100K  up and down was MEH each way. In reality that's a car payment on a Cruze, so we were not hurting too bad. 

But I could be wrong wouldn't be the first time ..... 

Im not saying a crash is imminent..........................i dont KNOW.

All im saying is id like one to happen. I just cant pull the trigger at todays price.  

I think the markets are approaching a correction. These things come in cycles and the market is pretty bloated in places. Though I don't think all places will crash simultaneously herein the good ole' USA. You may be investing in a region that will be largely unaffected when the correction comes. 

Of course there will be a correction eventually. I’m just trying to stay prepared. I now live in the Midwest and it is definitely harder to find cheap rentals now than a few years ago. Big Time Dreams!

@Russell Brazil that was funny!

As for a crash being imminent, I'm saying no.  Inventory levels are down and will continue to drop in most saturated markets.  If you want to see signs of a crash coming watch places where you can add to inventory levels quickly through new construction.  If days on market in those places start to systematically increase it can be the first sign of a correction 1-2 years ahead.  But right now I don't believe we're seeing that.  And now with Dodd Frank scheduled to be rolled back that may fuel the market further, reducing the barriers to entry.  So we may be in for the longest run ever in real estate, after one of the largest declines we ever witnessed (in our lifetimes for sure).

Hey Matt,

My own view is that suburban B neighborhoods will see the most selling pressure and possibly a slow motion train wreck over the next decade as boomers die. Other than boomers, who has the money for all those oversized, poorly built, overpriced, overleveraged, piddling cash flow homes/investments?

I think the opposite is true of inner city C neighborhoods - especially the more decent C+ deleveraged ones where homes go for under 50 k and just recently broke out over 50k for a fixed up places. That's a key threshold where many banks start lending. These you find here in Ohio, particularly Cleveland, Dayton, Toledo. Anywhere else? Detroit? These areas are poised to break out big time as leverage moves back in.

Gordon

 Real estate is local. The Seattle market will be affected by the city council's decisions, but it will not affect TX. Banks are all controlled by Fannie Mae guidelines. Otherwise, the bank can't sell the paper. "Peddling to the Poor" is just a headline. People still have to be qualified. If 76% of Americans live paycheck to paycheck, then everybody should be renting.

Real estate is all location driven. The reckless loans of the 2005/6/7 are non-existent now. Lenders have been conservative in appraisals and require good down payment for mortgages. So even if the market drops 10% you won't see people foreclosing. I know people who bought 5/6 homes with no doenpayments in 2006 and foreclosed all of them. That is not there any more. We are trending towards normal market where the price appreciation will be in line with the inflation. Any one expecting a crash is going to be disappointed.

this topic seems to come up weekly as business magazines look for hyperbole. 

I am wondering what would create a crash... I can certainly see a slow down but a crash.. ???  Nation wide like 08 GFC which was global... so i guess if credit markets freeze like they did... that could happen.

but seems to me lenders are somewhat more prudent then they used to be.. FHA or USDA or VA has been with us for decades those are not the problems it was liar loans and investor loans..

and then credit freeze.. I mean think about it.. what if auto financing froze how many 80k Cadillac escalades would be sold for cash.. ????

What could cause a crash?

1. IF lenders start lending recklessly (like no income verification, multiple loans with no down payment).  (Bleak)

2.A big disaster happens in a location like what happened recently with volcanoes etc. (Possibility)

3. A world war. If this happens believe there are other things to worry aobout that just housing. I don't think the super powers would be even interested in a world war .  (Bleak)

4. A localized event like what some people are talking about in Seattle. (Possibility)

5. If inflation spirals out of control forcing Fed. Reserve to bump the interest rates sky high. I don't think this will happen. Look at Japan and how long they have had their low interest rates. (Bleak)

Originally posted by @Vic Iyer :

What could cause a crash?

4. A localized event like what some people are talking about in Seattle. (Possibility)

are you talking about the head tax, or about a possible megaquake?

or something else?

Originally posted by @Matthew Runfola :

Small-Time Bankers Make Millions Peddling Mortgages to the Poor - Bloomberg Business Week https://apple.news/A-FtZMr0uTJSudDsEPZrF-Q

 Was I the only one who read the article? The article seems to be suggesting that we are headed to a crash because lenders are pushing unqualified buyers into loans they can't afford.

A prudent investor, which I aspire to be, shouldn't care if the market crashes, corrects, or continues upward. Unlike the last crash, I am in a much better position to take advantage of foreclosures than I was 10 years ago. And if you are not over-leveraged and you have plenty of cash flow, a crash is not a scary thing. It is a buying opportunity just like today is a selling opportunity if you want to take some gains.

Originally posted by @Anthony Gayden :
Originally posted by @Matthew Runfola:

Small-Time Bankers Make Millions Peddling Mortgages to the Poor - Bloomberg Business Week https://apple.news/A-FtZMr0uTJSudDsEPZrF-Q

 Was I the only one who read the article? The article seems to be suggesting that we are headed to a crash because lenders are pushing unqualified buyers into loans they can't afford.

 well then i say that simply is not True Anthony.. just try to be self employed and get a loan these days.. 

@Matthew Runfola It's not a matter of "if" but a matter of "when." No one knows when it will happen but it will...eventually. History has a way of repeating itself. ;) 

Specifically where are you talking about?  Statistically nationwide crashes are non existent. The 2008-20010 crash was an extreme anomaly.  We are back to a more normal nationwide market meaning some geographical markets are behaving differently than others.  

I have no doubt some  markets will see downturns - quite possibly very soon.  It is also quite possible we may not see another nationwide housing crash like we saw recently in our lifetimes.  The exception being total economic  crash which brings housing down with it.

I see a correction coming  18-36 months out.  Probably nothing like 2008. However, condos where I like to invest for cashflow likely will get hit harder and sooner than other parts of the market. As far as suburban B neighborhoods, cheap built single famlies not needing 30K plus in updates are selling in days by us. Don't see that changing any time soon, for good suburban locations, the far away stuff just like the condos, will take a harder and faster hit. 

Originally posted by @Ned Carey :

Specifically where are you talking about?  Statistically nationwide crashes are non existent. The 2008-20010 crash was an extreme anomaly.  We are back to a more normal nationwide market meaning some geographical markets are behaving differently than others.  

I have no doubt some  markets will see downturns - quite possibly very soon.  It is also quite possible we may not see another nationwide housing crash like we saw recently in our lifetimes.  The exception being total economic  crash which brings housing down with it.

Right on. "Statistically nationwide crashes are non existent. The 2008-20010 crash was an extreme anomaly."

In fact, The crash was only 6 areas. 1) Maricopa County (Phoenix), 2) Clark County (Las Vegas), 3) Florida, 4) Riverside and Los Angeles Counties (California)  5) everybody's favorite, Wayne County (Detroit) and 6) Mrs. McGreggor's Health Spa and Fishin' Hole in Rosebud Montana.

Everywhere else was down some or stayed neutral. A few areas actually went up in value. The reasons the Crash happened no longer exist so they will find new reasons for a crash the next time. ;-)   @Matthew Runfola

Not imminent, but coming.  Probably not as "bad" as before but frankly I loved the post-crash buying opportunities.  It would be smart to position yourself to make fees on transactions because I think we're going to see a big run up here shortly.

I wonder if during the depths of the recession people were discussing the massive boom that was upon us! I personally don’t recall hearing much of a chatter rather than how much worse things were going to get from how bad were. Not saying we won’t have a slowdown or crash or whatever but it just is interesting how human psychology works.

Vic Anthony Ned spot on. These types of "the sky is falling " posts are nothing more than fear mongering IMHO. A "crash is coming " thats frankly irresponsible. The market is very healthy in the vast majority of the market. Overpriced and unsustainable markets like pockets of NYC/Seattle/Cali /NJ along with high real estate tax markets a different story. These markets have risen rapidly and will fall with the same velocity. They will experience a correction no doubt while the rest of the country will continue to stabilize and experience growth. EG... our market is 90-95% of it's peak before the correction so no a correction is not going to happen anytime soon.. Will there be leveling off of prices - certainly but a correction is not on the radar. Again like it's been said all markets are local even neighborhoods.

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