Why hasn't the market crashed yet?

Specialist · Shelton Washington · Member since 2018 · 42 posts · 31 votes

I have been listening to all of the podcasts recently and reading and searching the forums alot. It's has been said that the market will crash soon for the past 3-4 years from what I have found. I am not a market follower and I am not well versed. Why hasn't the market crashed yet. What has made it Outlast alot of well versed people's expectations and estimates? Thank you!

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Account Closed

Member since 2018 · 214 posts · 175 votes

Be patient, be patient, it may take another 5 to 100 years to see the crash...

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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
7y
Originally posted by @Collin Savunen:
I have been listening to all of the podcasts recently and reading and searching the forums alot. It's has been said that the market will crash soon for the past 3-4 years from what I have found. I am not a market follower and I am not well versed. Why hasn't the market crashed yet. What has made it Outlast alot of well versed people's expectations and estimates?
Thank you!
When I asked some podcasters what indicators they were seeing to think a Socal crash was coming, it was based on feelings and not any legit known indicator like Jay mentioned. That was 4 years ago and I stopped asking when I realized they did not know of what they speak. Good luck!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Ron Fletcher:
@Collin Savunen
Waiting for a real estate market crash is faulty reasoning. In 08,09 the banks, in a fight for survival cut back drastically on lending. So if the prices drop but you can’t get it financed, what good is it? Only if you were sitting on a hoard of cash would you truly be able to swoop in and buy at fire sale prices. But what about the returns you would lose out on if as many replies here point out that we may not see another massive real estate correction for years.
A better way to look at it is like dollar cost averaging in the stock market. You put $100 in the market every Friday from your paycheck. Sometimes the market is up that day, sometimes it’s down but over 25 years of investment it doesn’t matter.
Better to buy real estate all along. If there is a downturn you will have the experience to truly know how to buy in such an environment and theoretically the confidence of your bank to still lend to you in such a market.
I will further this comment with this.. in 08 to 2010 it was virtually impossible to get an investor loan. financial markets were in lock down. and those with cash especially foreign investors were buying by the thousands.. now a lot of them did not choose well they bought D class without understanding the tenant risks. but many bought quality assets as well.
I always like to posts this question. If there was no easy 7 year financing how many 75k Escalades would be sold for cash ??? well same with real estate you FREEZE the capital markets and it becomes cash only and you have a free fall.
so unless capital freeze's again a 1% bump in interest while needed to settle in is hardly cause for a melt down. rates could not stay at historic lows for ever.. but we are in new territory will see how sentiment moves the market.
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Erik Schneider
Flipper/Rehabber · Henderson, NV · Member since 2018 · 76 posts · 27 votes
7y
@Terry Lao you could also attribute it to the fact that many creative financing methods are no longer being used in today’s mortgage industry. The house of cards has a very solid foundation now.
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Kevin Taney
Member since 2018 · 10 posts · 20 votes
7y
@Collin Savunen People are smarter today than ever before. Leaders learn from mistakes that lead to passed crashes and recessions and avoid the same mistakes. Supplement that with tax cuts and trade deals that provide more jobs and money in citizens’ pockets. If people have money to spend, they’ll spend it, thus keeping prices up!
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Robert C.
Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes
7y
@Jay Hinrichs, Following up on your comment about historically low rates - do you think that rates will drop again in the next 2-5 years? 5-10? Or do you think the 3-4% deals were as much of a unicorn as the great recession itself (once in a lifetime)? Wondering what you see from your vantage point. It seems like 7-10 year commercial loans are lower than 3-5 year loans lately.
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Collin Savunen
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Specialist · Shelton Washington · Member since 2018 · 42 posts · 31 votes
7y
Thank you everyone for the extensive amount of information being posted! This is the exactactly the kind of conversation I was looking for when I posted this thread. @Terry Lao so to my understanding now. Market supply is measured in if sellers stop posting houses for sale there would only be enough houses to last (x) months. 6months is a balanced market. Less than is a seller's market and more than is a buyer's market. What was the market supply during and after the 08-10 crash? @Jay Hinrichs thank you for jumping in!
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Collin Savunen
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Specialist · Shelton Washington · Member since 2018 · 42 posts · 31 votes
7y
@Mary Mitchell that is a great question! I would also like to pose the question. Is the amount of college debt that students, parents, and grandparents are accumulating effecting the market?
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Joshua Hively
Columbus, OH · Member since 2018 · 218 posts · 134 votes
7y
@Mary Mitchell I think you are on to something. I dont see how that industry is sustainable long term. I think that industry will definitely play a role in the next "correction".
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Account Closed
Member since 2018 · 214 posts · 175 votes
7y
During 2008 to 2010, many markets have inventory supply ranges from 10 months to 18 months.

Originally posted by @Collin Savunen:
Thank you everyone for the extensive amount of information being posted! This is the exactactly the kind of conversation I was looking for when I posted this thread. @Terry Lao so to my understanding now. Market supply is measured in if sellers stop posting houses for sale there would only be enough houses to last (x) months. 6months is a balanced market. Less than is a seller's market and more than is a buyer's market. What was the market supply during and after the 08-10 crash? @Jay Hinrichs thank you for jumping in!
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Edison Reis
Rental Property Investor · Kelowna, British Columbia · Member since 2015 · 136 posts · 54 votes
7y
The stock market has a 3 year cycle so it corrects itself every 4th and that’s how people make millions . (Most sell when it goes down but fastlaners buy)
The real estate only crashed (truly) once in the last 100 years in USA (Canada was immune during the 2007-2009 crisis due to its stronger and more regulatory banking system) but future tellers from hell keep predicting the next crash.....
Follow market and economic fundamentals and carry on.
Remember .... “crashes” or actually real estate slump isn’t always a bad thing for the wicked
Edison
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Russell Gronsky
Specialist · Baltimore, MD · Member since 2016 · 384 posts · 318 votes
7y
By no means can I predict anything. Not a crash, not even what I'll have for lunch today. But I can say that in any RE market, there is a median, high, low and average income and from there, you can predict how much RE people can/are willing to afford. As monthly mortgage payments eat up more disposable income, you can begin to see where the prices in the local market will start to top out...at least for SFRs and possibly small multi-family. You won't predict a crash but you can see some good indicators on where the top of the prices can get to, roughly.
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Louis Sulek
Investor · Windsor Ontario Canada · Member since 2018 · 14 posts · 7 votes
7y
Grant Cardone suggests large apartment buildings with median rents were virtually unaffected by the 08-09 crash. I'm not sure how to go about fact checking this, but if they are in fact recession/crash proof, that's a pretty big deal!?! Can anyone clarify?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Account Closed:

During 2008 to 2010, many markets have inventory supply ranges from 10 months to 18 months.

Originally posted by @Collin Savunen:
Thank you everyone for the extensive amount of information being posted! This is the exactactly the kind of conversation I was looking for when I posted this thread. @Terry Lao so to my understanding now. Market supply is measured in if sellers stop posting houses for sale there would only be enough houses to last (x) months. 6months is a balanced market. Less than is a seller's market and more than is a buyer's market. What was the market supply during and after the 08-10 crash? @Jay Hinrichs thank you for jumping in!
Miami at one time at 11 years of condo inventory !!!
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Jeff C.
Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes
7y
I've been watching the market here bleed off for months. I don't think anyone would call it a "crash" yet, but it's definitely softened significantly. I'm really not loving this market at this time!
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Collin Savunen
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Specialist · Shelton Washington · Member since 2018 · 42 posts · 31 votes
7y
@Ran L. Thank you! I missed that. There is so much info already haha
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Collin Savunen
OP
Specialist · Shelton Washington · Member since 2018 · 42 posts · 31 votes
7y
@Jay Hinrichs haha that is crazy! Did I understand market supply correctly? If every one stops selling houses then it is (x) months of inventory before it's all bought up.
1 Reply
Craig Jeppesen
Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
7y
The market will not be crashing anytime soon. Unemployment is very low, inflation is great, and inventory is still super low. The market is slowing just a bit as mortgage rates go up, but just a bit. It is still a sellers market. It is predicted that we might have a recession in 2020 or 2021but that does not necessarily means the market will crash and most likely will not. If you want to watch for recessions watch the 2 year and 10 year treasury. If there is a rate inversion it will probably lead to a recession which might cause the market to slow down.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Collin Savunen:
@Jay Hinrichs haha that is crazy! Did I understand market supply correctly? If every one stops selling houses then it is (x) months of inventory before it's all bought up.
over building and no one buying.. you had condo high rises in miami all built out and say 300 units and only 10 sold. that type of thing.
many condo projects where they could were converted to MF.. just to keep them from being vacant.. there was no financing.
in Portlandia this happened to a few of the new high rises in the south water front area.. all recovered now though
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
7y
The real estate market, like the stock market, goes through cycles. Though “crashes” are hard to predict, many markers are/have been in the recessionary phase of the market. See: http://mediacenter.merrillcorp.com/interface/viewer.asp?LocationID=7963945&ClientID=35&Purpose=HUMAN_VIEW&Caller=RETRIEVE_FILE
That said, there may be a crash as FED policy, job loss/automation, and other variables significantly impact markets. We shall see about that. I’ve not made up my mind if and when that might occur.
Finally, if you’re asking in order to determine when to buy, I’d tell you to practice ABB... Always Be Buying. You should always be buying deals that can yield your target investment return. So if you haven’t yet, determine your specific goal and target investment return and no matter what markets do, seek to be a disciplined investor and focus on that.
I look nationally and am confident that at any time, I can locate projects with which I can generate my target return.
I wish you the best.
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
7y
Originally posted by @Jay Hinrichs:
Originally posted by @Collin Savunen:
@Jay Hinrichs haha that is crazy! Did I understand market supply correctly? If every one stops selling houses then it is (x) months of inventory before it's all bought up.
over building and no one buying.. you had condo high rises in miami all built out and say 300 units and only 10 sold. that type of thing.
many condo projects where they could were converted to MF.. just to keep them from being vacant.. there was no financing.
in Portlandia this happened to a few of the new high rises in the south water front area.. all recovered now though
Jay,
I just acquired property in Eugene and was in Portlandia and Bend two weeks ago. Maybe we should meet once I’m back in late November?
0 Reply
Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
7y
Originally posted by @Louis Sulek:

Grant Cardone suggests large apartment buildings with median rents were virtually unaffected by the 08-09 crash. I'm not sure how to go about fact checking this, but if they are in fact recession/crash proof, that's a pretty big deal!?! Can anyone clarify?
Dollar stores and Self-storage perform best during recessions
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
7y
Originally posted by @Collin Savunen:
@Bill F. That brings another question how specific do you take a real estate market to? By type? By state? By city?
Down to the block!
Do your market research... state, county, city, neighborhood, subdivision, block.
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
7y
Originally posted by @Llewelyn A.:

I think there is no point on trying to predict the Market Crash because you should always put in the protection on the downside because the upside doesn't need protection!
The problem is that most regular investors really don't know how to protect their downside.
For instance, they have heard about Hedges, but they either don't what it means or don't know how to implement it in their Investments.
An example would be buying a PUT to protect your Stock if it should Fall. If you followed that, those who owned GE stock would not have lost very much.
Because this is Real Estate forum, finding out about protecting the downside of your real estate investment should be something you should be doing.
In my case, I buy in Prime neighborhoods. Even during the Financial Crisis, there was barely a blip when it came to finding tenants. The rents were stable. Prime Neighborhoods has an implicit PUT in large Metro areas, especially with a lot of job.
The question for most of you who are NOT buying in these Metro areas, especially those with added protection like NYC, what is your protection against the downside?
It would be interesting to hear from those that went through the Financial Crisis. What affected your properties the most in either positive or negative? AND, would you have bought differently if your Investments took a severe hit?
If you were like me and really did not get affected at all, how do you attribute that kind of stability? What was it? If it was stable rents, why was the rent stable in your area versus other places like Vegas and Miami (moved down more than 50% of property values)?
For those wondering what I am attributing to NYC as a resilience against property value decreases in prime neighborhoods, there are quite a lot of reasons.
One primary one, for instance, is that most of the Apts are NOT CONDOs. They are Cooperatives.
A Coop will not put up with flippers. The Coop Board will do a better job of qualifying you than even a Mortgage Company. So you cannot pull the games that were done in Miami. Those big skyrises with empty apts were being flipped online on Websites like CondoVultures.com No one really lived in them. It was playing musical chairs and ultimately, the music will stop.
The other great thing about NYC is that it's very international. Foreign investments and tourism pick up when ever the dollar gets weak, for example, during a Crisis.
And YET another is that NYC has a large amount of Reputable Universities including New York University and Columbia University. When we are in a crisis that affects employment, one of the first things people do when they are unemployed is to get more education to become more competitive in the job markets.
Anyway, these are several reasons I attributed towards why I did not really feel the kind of pain I know occurred during the financial crisis.
Just curious what happened to others.
Good points!
I agree. If you understand and effectively manage risks, you can generate strong returns no matter the market. When the tides turn, many investors will be swimming naked. I bought at attractive prices, created significant value, and manage effectively, so I’m confident I won’t be.
Invest so that if **** hits the fan, you will still produce above market returns.
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
7y
Originally posted by @Edison Reis:
The stock market has a 3 year cycle so it corrects itself every 4th and that’s how people make millions . (Most sell when it goes down but fastlaners buy)
The real estate only crashed (truly) once in the last 100 years in USA (Canada was immune during the 2007-2009 crisis due to its stronger and more regulatory banking system) but future tellers from hell keep predicting the next crash.....
Follow market and economic fundamentals and carry on.
Remember .... “crashes” or actually real estate slump isn’t always a bad thing for the wicked
Edison
That may be, but real estate cycles generally last 5-7 years... and, although not a “crash”, many markets entered the recessionary phase in 2016.
http://mediacenter.merrillcorp.com/interface/viewer.asp?LocationID=7963945&ClientID=35&Purpose=HUMAN_VIEW&Caller=RETRIEVE_FILE
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Louis Sulek
Investor · Windsor Ontario Canada · Member since 2018 · 14 posts · 7 votes
7y
Originally posted by @Jon Q.:

Originally posted by @Louis Sulek:
Grant Cardone suggests large apartment buildings with median rents were virtually unaffected by the 08-09 crash. I'm not sure how to go about fact checking this, but if they are in fact recession/crash proof, that's a pretty big deal!?! Can anyone clarify?
Dollar stores and Self-storage perform best during recessions
Thanks Jon, I believe you, but that doesn't answer the question about big number of units at median rents - is Uncle G right or not?
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