Why hasn't the market crashed yet?

148 Replies

@Collin Savunen These are the same idiots who say it's cyclical and happens about every 25 years. Its only been 10 since the last crash. So first we establish they can't do math. Second, fear sells. I in the past it was news papers, now it's 24/7 click bait. I once worked on a tree farm and my boss said something very wise. We would see the forecast calls for rain, but would keep working like it didn't matter. His words were this. "If you keep waiting on it to rain you will never get anything done". Dont over leverage yourself. Keep cash reserves. A housing crash is a great time to build a portfolio.
@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.
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! 

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.

@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.
@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!

@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. 

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!
@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".
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!

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

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. 

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? 

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  !!!

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!

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.

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

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.

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?

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 

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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