Why hasn't the market crashed yet?
Specialist · Shelton Washington · Member since 2018 · 42 posts · 31 votes
Why hasn't the market crashed yet?
Most Popular Reply
Member since 2018 · 214 posts · 175 votes
7yBe patient, be patient, it may take another 5 to 100 years to see the crash...
148 Replies
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes7y
The market will have a correction soon. If you keep saying that, you will eventually be correct.
The one thing that I know to be true is that prices today are higher than last year and much higher than the bottom. In most market cycles, however, we see the top much higher than the previous top. Today most markets are less than 10% higher that 2006, giving me reason to believe that we still have a ways to go before our next peak.
When we all let our guard down, we will see the market correction. I think that is starting to happen, but we still need to get a bit more arrogant, before a crash
- Keene, NH · Member since 2015 · 22 posts · 22 votes7y
It's crashing right now. The high end real estate market has dropped dramatically. People don't talk about it. But that's where it starts.
Inventories are starting to build, and prices are coming down in the most expensive areas. California in particular is seeing some of the worst real estate sales since the crises in many areas. We're starting to see compression in New York and in the commercial markets.
One factor however, is that houses aren't actually that expensive, priced in a stable monetary baseline, like gold. (Try a site like stockcharts.com or pricedingold.com to see that for yourself.) What's anomalous is that rents are extremely low compared to carrying costs.
So could housing crash down? Yes. But I think it's somewhat more likely that rents (and taxes and energy and other carrying costs) all go up while home prices continue on as "normal" in nominal dollar-denominated terms.Hope that helps!
- 7yLevi BennettPro MemberReal Estate Broker · Charlotte, NC · Member since 2014 · 285 posts · 248 votes
People who are trying to tell you that the RE market is about to crash are definitely trying to buy from you.
- Here are my thoughts on crashes, be it real estate or stocks. You can sit around waiting for the crash so you can jump in and make easy money (which sounds alot easier than it is when everyone thinks the world is about to end) or you can be a smart investor and find good deals and make solid money the whole time while the other guy is waiting on the crash that may not happen for 25 years. My bet is the guy hustling the whole time will come out on top!!
- Rental Property Investor · Dayton, OH · Member since 2015 · 312 posts · 273 votes7y
Its unexpected market dislocations - 2007 it was the unexpected size of derivatives markets that so few people understood. If you did you saw it was SO risky - a house of cards bound to fail. Enter the government to make sure that doesn't happen again.. I like real estate because it is buffered against a widely predicted precipitous drop in the dollar market dislocation. Not buffered against robots taking 30 % of the jobs. Or the legislature and top bankers getting murdered. How will we fair if the donald takes it all for himself? I just love the cash flow, its the stuff that backs the AAA bonds. lol.
- Rental Property Investor · Houston, TX · Member since 2015 · 43 posts · 28 votes7y
I'm anticipating a 2× to 4x increase in price within the next 3-5 yrs. Call me crazy, but after record money printing and slow lending, we might not be in for another crash anytime soon. Consider construction stops during the last crash, the lack of bank lending, the lack of present day private lending (playing too safe and requiring returns that won't make sense for investors), the lack of deals due to all the foreclosures drying up, inflation in everything else from groceries to building material, and the destruction of tens of thousands of homes from natural disasters...from a supply demand stance we'll be seeing some rising prices. Plus, interest rates will rise, new election gov't will pressure banks to make easy loans, and buyers will flood market with newly lent money that banks have been sitting on. Of course I could be wrong, but...time will tell. If you're a new investor, play it safe by acquiring deals only, and hold. A deal is 35%-45% off lust price retail. If you're not seeing that in your area, then consider value add opportunities in commercial where you're getting the deep discount, but have proactive plan to increase value by 20%-30% over retail pricing. I'd say hold what you have if possible, and buy very low where it makes sense. Good luck.
- Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes7y
I think the market is softer than it was a year ago - stuff is sitting around for longer, and there are more places being sold for reduced prices. Who knows what a few more rate hikes will do, not to mention, the reality that we have gone a record time (or close to it) without a recession? Granted, the 2007-09 downturn was really bad, so crawling out of that hole took longer, so that may be why this cycle has gone for longer.
The thing is, unless you are an experienced investor, or have at least done several deals and have some relationships, I think assuming that you'll be able to pile in and buy during a major slowdown is not a great idea. The people doing deals earlier in the cycle, or in the market for a long time, are more likely to get their hands on those opportunities, than someone who is not known. I think even in 2008 to 2011, when we were at the trough, most of the folks who grabbed great deals had prior experience. So, figuring out what you are looking for, and doing good deals based on it, makes more sense than waiting around IMHO.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Shiva Bhaskar:
I think the market is softer than it was a year ago - stuff is sitting around for longer, and there are more places being sold for reduced prices. Who knows what a few more rate hikes will do, not to mention, the reality that we have gone a record time (or close to it) without a recession? Granted, the 2007-09 downturn was really bad, so crawling out of that hole took longer, so that may be why this cycle has gone for longer.
The thing is, unless you are an experienced investor, or have at least done several deals and have some relationships, I think assuming that you'll be able to pile in and buy during a major slowdown is not a great idea. The people doing deals earlier in the cycle, or in the market for a long time, are more likely to get their hands on those opportunities, than someone who is not known. I think even in 2008 to 2011, when we were at the trough, most of the folks who grabbed great deals had prior experience. So, figuring out what you are looking for, and doing good deals based on it, makes more sense than waiting around IMHO.
in those days is was cash buyers.. credit froze like a rock there for 2 to 3 years.. and only the top 1% ers were getting financing.
those I knew were borrowing against their stocks and bonds to buy deals at 1 over libor.. the rich got richer.. :) average person could not get a investor loan to save their life.. banks went into lock jaw mode and that's one of the reasons the market CRASHED...
even if rates go up that will create a slow down no doubt.. but not a crash.. its lack of financing altogether that created the crash.. along with all the crappy loans that were written. pre 07
- Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Shiva Bhaskar:
I think the market is softer than it was a year ago - stuff is sitting around for longer, and there are more places being sold for reduced prices. Who knows what a few more rate hikes will do, not to mention, the reality that we have gone a record time (or close to it) without a recession? Granted, the 2007-09 downturn was really bad, so crawling out of that hole took longer, so that may be why this cycle has gone for longer.
The thing is, unless you are an experienced investor, or have at least done several deals and have some relationships, I think assuming that you'll be able to pile in and buy during a major slowdown is not a great idea. The people doing deals earlier in the cycle, or in the market for a long time, are more likely to get their hands on those opportunities, than someone who is not known. I think even in 2008 to 2011, when we were at the trough, most of the folks who grabbed great deals had prior experience. So, figuring out what you are looking for, and doing good deals based on it, makes more sense than waiting around IMHO.
in those days is was cash buyers.. credit froze like a rock there for 2 to 3 years.. and only the top 1% ers were getting financing.
those I knew were borrowing against their stocks and bonds to buy deals at 1 over libor.. the rich got richer.. :) average person could not get a investor loan to save their life.. banks went into lock jaw mode and that's one of the reasons the market CRASHED...
even if rates go up that will create a slow down no doubt.. but not a crash.. its lack of financing altogether that created the crash.. along with all the crappy loans that were written. pre 07
Very true. Know a guy who, with his dad, bought 5 or 6 courthouse auction single family properties, in a 6 month span, in southern California. This was in 2009. All of these were homes in the Inland Empire, built between 1990 to 2000, or later, so very little deferred maintenance.
Kept them rented and cash flowing throughout the slow times, and they are worth probably 3x what they paid, if not closer to 4x. Think they refinanced out to buy elsewhere :-) Cap rates are insane if you look at what they got these for (I think around $40K to $60K each), and they rent for like $1400 to $1700 today. Can't imagine an opportunity like that again.
For sure the market has softened a lot I think. As far as I can tell this is the typical ebb and flow with still more of a sellers market in many areas just not at the hot levels anymore. Buyers are asking for more adjustments as inventory grows. To me crash means falling off a cliff, so I am not seeing a crash vs 1 or 2 buyers when it was 10 or 12 last year.
- Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes7y
@Collin Savunen i’m assuming you’re referring to the real estate market . My area it’s simply not crashed because of supply and demand and a growing economy. Good luck and all the best.
- Real Estate Investor · Waldorf, MD · Member since 2014 · 592 posts · 320 votes7y
Waiting for the market to crash is like waiting for Armageddon to come. It'll get here when it gets here. No one can predict the future. When it comes just be ready because the bloodsuckers will come out.
- Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes7y@Collin Savunen, because mortgage lending policy changed and banks are much more careful. I predict when the next crash occurred that the BRRRR method will be trashed. When I worked in the valuations industry, lenders were already skeptical of BRRRR and didn't lend when they suspected it.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @James Galla:
@Collin Savunen, because mortgage lending policy changed and banks are much more careful. I predict when the next crash occurred that the BRRRR method will be trashed. When I worked in the valuations industry, lenders were already skeptical of BRRRR and didn't lend when they suspected it.YUP the BRRR method crashed in 07 to 2011 and took me with it.. it was a painful time to be a rehab lender with your borrower's exit a refi.. even though they were pre approved.. Although today many do the BRRR with thier own cash or heloc's so if they cant refi its not like being stuck in a HML like what happened to thousands of borrowers during the GFC.
and if it gets to be a real crash HELOC"s will get locked.. most folks probably never read the small print.. but banks can freeze and call helocs for any reason.
I am not predicting this just talking about what happened in that very tough GFC .. Many investors especially on this site being newer investors did not experience those horrors . If they did they would be less keen on Mass leverage..
- Rental Property Investor · Greenville, SC · Member since 2017 · 185 posts · 178 votes7y
@Collin Savunen
I've found this article very insightful.
Although, like everyone has said, you can't really predict the crash. - Accountant · Northern Virginia · Member since 2018 · 15 posts · 8 votes7y@Collin Savunen I think people are growing concerned over rising interest rates which tend to put downward pressure on housing (all other things being equal). Personally, I would look at any market downturn as a buying opportunity.
- Real Estate Agent · Phoenix, AZ · Member since 2016 · 69 posts · 83 votes7y
We are preparing for the market to drop by buying multi family investment properties. While the SF space decreases (values based on the comps around it) multi family properties increase (value determined by income produced by the asset). When people lose their homes in the single family space during a downturn- they still need somewhere to live. This basic fact is what helps increase the appreciation of a multi family asset during an economic down turn.
- Specialist · Lafayette, IN · Member since 2018 · 24 posts · 29 votes7y
I hear the word "crash" and words matter.
Crashes, no matter what people will tell you, can't be predicted with any real accuracy. However, there are market conditions which lend themselves to when that has happened.
First off, which market are we talking about? The rental market? The real estate sales market? Residential? Commercial? There were periods in the last 3 decades where commercial real estate struggled while residential was expanding, and vice-versa. Defining which market clearly needs to be the first part of the equation.
Secondly, what defines a "crash" is almost always an oversupply of an asset class. I am not seeing an oversupply of a certain asset type (although an argument can be made for an oversupply of some high-end multifamily, but not obnoxiously so).
All that said, are we due, perhaps "overdue" for a "Market Correction" of most residential asset types? I say yes. A "crash" on the other hand? No. The data just don't support it.
My advice: Don't be a motivated buyer. Keep your powder dry. Make your shots count.
- Member since 2018 · 26 posts · 2 votes7y
Originally posted by @Matt Smith:
I'm anticipating a 2× to 4x increase in price within the next 3-5 yrs. Call me crazy, but after record money printing and slow lending, we might not be in for another crash anytime soon. Consider construction stops during the last crash, the lack of bank lending, the lack of present day private lending (playing too safe and requiring returns that won't make sense for investors), the lack of deals due to all the foreclosures drying up, inflation in everything else from groceries to building material, and the destruction of tens of thousands of homes from natural disasters...from a supply demand stance we'll be seeing some rising prices. Plus, interest rates will rise, new election gov't will pressure banks to make easy loans, and buyers will flood market with newly lent money that banks have been sitting on. Of course I could be wrong, but...time will tell. If you're a new investor, play it safe by acquiring deals only, and hold. A deal is 35%-45% off lust price retail. If you're not seeing that in your area, then consider value add opportunities in commercial where you're getting the deep discount, but have proactive plan to increase value by 20%-30% over retail pricing. I'd say hold what you have if possible, and buy very low where it makes sense. Good luck.
Alright, following that logic, how am I supposed to find those discount deals on Multi Family properties in NYC. Properties in SF and Seattle are tanking as we speak, but sellers are just taking their houses off the market, leaving supply low.
Should I give up and just buy whatever the asking price is and let it eat half my income? - Los Angeles · Member since 2018 · 466 posts · 471 votes7y
Originally posted by @Daniel Maciag:
Originally posted by @Matt Smith:
I'm anticipating a 2× to 4x increase in price within the next 3-5 yrs. Call me crazy, but after record money printing and slow lending, we might not be in for another crash anytime soon. Consider construction stops during the last crash, the lack of bank lending, the lack of present day private lending (playing too safe and requiring returns that won't make sense for investors), the lack of deals due to all the foreclosures drying up, inflation in everything else from groceries to building material, and the destruction of tens of thousands of homes from natural disasters...from a supply demand stance we'll be seeing some rising prices. Plus, interest rates will rise, new election gov't will pressure banks to make easy loans, and buyers will flood market with newly lent money that banks have been sitting on. Of course I could be wrong, but...time will tell. If you're a new investor, play it safe by acquiring deals only, and hold. A deal is 35%-45% off lust price retail. If you're not seeing that in your area, then consider value add opportunities in commercial where you're getting the deep discount, but have proactive plan to increase value by 20%-30% over retail pricing. I'd say hold what you have if possible, and buy very low where it makes sense. Good luck.
Alright, following that logic, how am I supposed to find those discount deals on Multi Family properties in NYC. Properties in SF and Seattle are tanking as we speak, but sellers are just taking their houses off the market, leaving supply low.
Should I give up and just buy whatever the asking price is and let it eat half my income?You aren't really expecting anybody here to answer, "YES", are you?
I'd suggest looking into rehabs and foreclosures. So long as people continue to let their homes fall into horrible disrepair, there will be a market for somebody to hold their nose, take it off their hands, fix it up and flip it.
Also, don't forget, NYC, SF and Seattle aren't the only games in town.
- Member since 2018 · 26 posts · 2 votes7y
Originally posted by @Alvin Sylvain:
Originally posted by @Daniel Maciag:
Originally posted by @Matt Smith:
I'm anticipating a 2× to 4x increase in price within the next 3-5 yrs. Call me crazy, but after record money printing and slow lending, we might not be in for another crash anytime soon. Consider construction stops during the last crash, the lack of bank lending, the lack of present day private lending (playing too safe and requiring returns that won't make sense for investors), the lack of deals due to all the foreclosures drying up, inflation in everything else from groceries to building material, and the destruction of tens of thousands of homes from natural disasters...from a supply demand stance we'll be seeing some rising prices. Plus, interest rates will rise, new election gov't will pressure banks to make easy loans, and buyers will flood market with newly lent money that banks have been sitting on. Of course I could be wrong, but...time will tell. If you're a new investor, play it safe by acquiring deals only, and hold. A deal is 35%-45% off lust price retail. If you're not seeing that in your area, then consider value add opportunities in commercial where you're getting the deep discount, but have proactive plan to increase value by 20%-30% over retail pricing. I'd say hold what you have if possible, and buy very low where it makes sense. Good luck.
Alright, following that logic, how am I supposed to find those discount deals on Multi Family properties in NYC. Properties in SF and Seattle are tanking as we speak, but sellers are just taking their houses off the market, leaving supply low.
Should I give up and just buy whatever the asking price is and let it eat half my income?You aren't really expecting anybody here to answer, "YES", are you?
I'd suggest looking into rehabs and foreclosures. So long as people continue to let their homes fall into horrible disrepair, there will be a market for somebody to hold their nose, take it off their hands, fix it up and flip it.
Also, don't forget, NYC, SF and Seattle aren't the only games in town.
Is a mortgage on a foreclosure or short sale in NYC doable? I thought that this process has high uncertainty (if it's even allowed), and can take up to a year to get approved. I have no idea what to do here or who to ask.
Some Las Vegas October market stats for you all: Single family home inventory up 44.3% year over year. Condo and townhouse inventory up 102.9% year over year. Single family home sales down 9.6% year over year. Condo sales down 2.1%.
- Los Angeles · Member since 2018 · 466 posts · 471 votes7y
Originally posted by @Daniel Maciag:
Originally posted by @Alvin Sylvain:
Originally posted by @Daniel Maciag:
Originally posted by @Matt Smith:
I'm anticipating a 2× to 4x increase in price within the next 3-5 yrs. Call me crazy, but after record money printing and slow lending, we might not be in for another crash anytime soon. Consider construction stops during the last crash, the lack of bank lending, the lack of present day private lending (playing too safe and requiring returns that won't make sense for investors), the lack of deals due to all the foreclosures drying up, inflation in everything else from groceries to building material, and the destruction of tens of thousands of homes from natural disasters...from a supply demand stance we'll be seeing some rising prices. Plus, interest rates will rise, new election gov't will pressure banks to make easy loans, and buyers will flood market with newly lent money that banks have been sitting on. Of course I could be wrong, but...time will tell. If you're a new investor, play it safe by acquiring deals only, and hold. A deal is 35%-45% off lust price retail. If you're not seeing that in your area, then consider value add opportunities in commercial where you're getting the deep discount, but have proactive plan to increase value by 20%-30% over retail pricing. I'd say hold what you have if possible, and buy very low where it makes sense. Good luck.
Alright, following that logic, how am I supposed to find those discount deals on Multi Family properties in NYC. Properties in SF and Seattle are tanking as we speak, but sellers are just taking their houses off the market, leaving supply low.
Should I give up and just buy whatever the asking price is and let it eat half my income?You aren't really expecting anybody here to answer, "YES", are you?
I'd suggest looking into rehabs and foreclosures. So long as people continue to let their homes fall into horrible disrepair, there will be a market for somebody to hold their nose, take it off their hands, fix it up and flip it.
Also, don't forget, NYC, SF and Seattle aren't the only games in town.
Is a mortgage on a foreclosure or short sale in NYC doable? I thought that this process has high uncertainty (if it's even allowed), and can take up to a year to get approved. I have no idea what to do here or who to ask.
A short sale can be a problem, as it requires lender approval and there are dozens of avenues the owner can take to make the investor's life difficult.
A foreclosure auction, the lender has already taken title away. All you need to do is compete against other investors, and possibly perform the eviction. Of course, if you win the auction, you'll very likely need to fix the place up.
HUD foreclosures are nice that way. The government will have already evicted the previous owner. The property will still need fix-up, though.
Also, I'll remind you again, if the NYC market sucks, try a different market. Nothing says you must invest nearby. Lots of investors live in investor hostile areas but invest in investor friendly areas. I hear Texas is good right now.
The thing to do now, since you've joined BiggerPockets (affectionately known as "BP"), is to enter some choice search terms next to that little magnifying glass up towards the top of the page. BP has got thousands of knowledgeable participants, hundreds of forums to ask and answer questions, and dozens of webinars, podcasts, and the like where information is freely available.
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