Why hasn't the market crashed yet?

148 Replies

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%.

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.

You've come to the right place, Grasshopper!

Originally posted by @Alvin Sylvain :
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.

You've come to the right place, Grasshopper!

 I hear you on all of this. My question remains. Can I take out a mortgage on foreclosure properties?  I don't have 300-400k laying around. A mortgage is an absolute must. I can TLC, I can evict. I just don't want to buy a 200k over market price property when shortsales/foreclosures are literally half the price. I don't mind even paying market value for these foreclosures/ short sales but they MUST be mortgaged. Do you know if they can? If not, then I'm running in circles. NYC is an absolute must for me and I am not interested in anything else at the moment. Thank you for your input. 

As far as "crashes" I would agree, once in a lifetime. I think you are talking about corrections though.

Keep your eyes on the T Bills....everything will follow that thermometer. Usually every 7-10 years you see corrections....much more noticeable in the sun belt, but really anywhere there is rampant speculation.  

Originally posted by @Daniel Maciag :
Originally posted by @Alvin Sylvain:

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.

You've come to the right place, Grasshopper!

 I hear you on all of this. My question remains. Can I take out a mortgage on foreclosure properties?  I don't have 300-400k laying around. A mortgage is an absolute must. I can TLC, I can evict. I just don't want to buy a 200k over market price property when shortsales/foreclosures are literally half the price. I don't mind even paying market value for these foreclosures/ short sales but they MUST be mortgaged. Do you know if they can? If not, then I'm running in circles. NYC is an absolute must for me and I am not interested in anything else at the moment. Thank you for your input. 

 You may need to find a "private money" or a "hard money" lender. The rates are higher, but their rules are more lenient. You're still generally going to need 20 to 30% of your own money though. Most lenders want the investor to "have some skin in the game" so you won't be tempted to just walk out the door as soon as things get a little tough.

If you qualify, you can get a cashier's check for Umpty-Ump thousands of dollars. Take that to the foreclosure auction. If you win the auction, most of them want cash (in the form of the cashier's check of course). But also look at "auction.com". I haven't seen one yet, but they claim they sometimes have auctions that accept financing.

I've never done it, so I don't know the details, but I believe they'll give you the check based on the property you're bidding on. It might be the current value (as a dump) or it might be the improved value (after you fix it up). I suppose if you don't win the auction, they'll want the check back.

There do exist ways of investing with little or no money down, but they're not necessarily easy.

But, like I said, search BP. I'm sure there's a forum for no money investing, and I'm sure there's a forum for NYC investing (I found one on St. Louis investing, saved me from investing in a War Zone that looked good on paper). Search it out.

Flips are getting hit hard as buyers no longer want to buy the most expensive home on the block. But the rental market is very strong, at least in Seattle, so we are shifting to a BRRRR type strategy instead.

@Collin Savunen People bought properties in 2007 were asking the same question, why the market has not crashed? When they realize that it crashed in 2009, it was too late. They already bought at the peak. Fact is, Bay Area housing market has already taken a hit, down 10-15% from a couple months ago. Will this turn into another big crash like 2009, nobody knows. Risk mitigation is critical in any investment. Believing price will always go up is simply ignorance and arrogance. I have not bought anything in 2018 yet. Do not want to take this risk at this time. If the price keeps going down, might jump in. Too many people on this forum advocate buying at any time. I disagree with that. Timing is number 1 important thing in investing. I don't have a crystal ball, but just some common sense and gut feeling.

Because the Federal Reserve is run by very intelligent people. They will purposefully slow the economy just to avoid major crashes. And keep in mind that when the economy "crashes," all that means is that we are admitting that we could not afford all that stuff we bought with credit.

Leading indicators = M2 money supply, new housing starts, new building permits. 

Also, watch out when the yield on a 2 year Treasury bond exceeds that of the 10 year note.

(This is for the ECONOMY, not the stock market, which are 2 entirely different things. Measuring one is not measuring the other. In my opinion, the stock market is so ridiculously inflated at all times that it barely makes sense.)

Originally posted by @Jerry Ricci :

As far as "crashes" I would agree, once in a lifetime. I think you are talking about corrections though.

Keep your eyes on the T Bills....everything will follow that thermometer. Usually every 7-10 years you see corrections....much more noticeable in the sun belt, but really anywhere there is rampant speculation.  

 Yes, but the next correction will be nowhere near as bad as the last one. People will panic, but it just won't be as bad.

Also, I think many people now erroneously assume that "the economy" and "home prices" are one and the same just due to the fact that the collapse of housing market was the catalyst of the last crash.

Although it still kind of scares me that I called my credit card company asking for a limit increase and they didn't even ask for proof of income. They just took my word for it and increased my limit. And this is a major bank.

I don't think that we will see a crash, but a pull back is certainly being expected. I just found this article this morning. The "whisper" of the Democrats impeaching Trump may be the "excuse" for a market selloff. Many believe that the stock market and real estate markets are not related, I disagree. The Chinese stock market has tanked 20% this year and now Chinese real estate is catching a cold. It is expected to go into a recession in 2019. All assets have cycles. This is a great thing. Money is made on pull backs. Why should I buy a $300k duplex today when I can buy it for $250K within the next two years? Like Jim Cramer says, "there is always a Bull Market some where". Even if that Bull Market is shorting the market. So invest prudently. Personally, I'm sticking to shorting real estate stocks. I'm doing very well trading Pulte Home and  Zillow Put options.      https://seekingalpha.com/article/4223051-sentiment-speaks-will-see-30-percent-correction-due-trump-impeachment

I haven't read all the posts. I don't need to because I've seen this time and time again.

  I have been through the last crash. I've been investing since 1999 and I weathered 2007-2010 without major issues (those were actually good years overall for my portfolio).  This was simply because I did not overleverage nor did I invest in anything with pure speculation.  I just stuck to the fundamentals and tried to buy cash flowing real estate from 1999 until now.

If anyone thinks they're going to get the 2010-2013 deals then you're dead wrong.  

There will be a short term cycle downturn, a recession and a correction in the foreseable future, but if you're expecting a "MEGA" crash because we had a bad crash in 2008-2009 then you're in the wrong industry and should instead be playing the stock market.  First there's not the "big short" style over leveraging in real estate as ther was prior.   Overall the fundamentals like supply and demand for housing are 'good'.  

 If you invest in sound cash flowing properties or know what you're doing with value-add you should be able to continue to find decent deals and weather storms to come.  If you're expecting to time the market and wait for the buying opportunity of a lifetime you're a fool... You're also a fool if you're buying for speculation right now.

If you're new I'd definitely wait it out, but if you know what you're doing just keep on trekking...

 The problem is that people don't truly know how to buy cash flowing properties, and they underestimate capital improvements or rely on proforma numbers for their analysis... Or they simply think they can manage an underperforming property better than the previous owner, which often isn't the case...(but sometimes is)

My strategy is to continue buying cash flowing multifamily real estate every year for the next 30 years.  I will obviously take advantage of market cycles and only buy fundamentally sound properties OR properties I can easily turn into a sound property (or flip, but I don't want to get into that lol)

 Be careful out there!

Originally posted by @David Song :
@Collin Savunen

People bought properties in 2007 were asking the same question, why the market has not crashed? When they realize that it crashed in 2009, it was too late. They already bought at the peak.

Fact is, Bay Area housing market has already taken a hit, down 10-15% from a couple months ago.

Will this turn into another big crash like 2009, nobody knows.

Risk mitigation is critical in any investment. Believing price will always go up is simply ignorance and arrogance.

I have not bought anything in 2018 yet. Do not want to take this risk at this time. If the price keeps going down, might jump in.

Too many people on this forum advocate buying at any time. I disagree with that. Timing is number 1 important thing in investing.

I don't have a crystal ball, but just some common sense and gut feeling. 

I get that for bay area  were your values are so strong that cash flow only happens when you pay cash or just about.. LOL.. other areas of the country though the values might be up 20% from the bottom  so the  80k house is now 96k..  but it still cash flows with 20 or 25% down.. that's what we are seeing out in cash flow markets.

Originally posted by @Patrick Philip :
Originally posted by @Jerry Ricci:

As far as "crashes" I would agree, once in a lifetime. I think you are talking about corrections though.

Keep your eyes on the T Bills....everything will follow that thermometer. Usually every 7-10 years you see corrections....much more noticeable in the sun belt, but really anywhere there is rampant speculation.  

 Yes, but the next correction will be nowhere near as bad as the last one. People will panic, but it just won't be as bad.

Also, I think many people now erroneously assume that "the economy" and "home prices" are one and the same just due to the fact that the collapse of housing market was the catalyst of the last crash.

Although it still kind of scares me that I called my credit card company asking for a limit increase and they didn't even ask for proof of income. They just took my word for it and increased my limit. And this is a major bank.

that's how the gurus sell their 30 to 40k training class's there is usually a whole modual on how to raise your credit card limits. 

Originally posted by @Jorie Aulston :
@Frank Wong but those same no doc, stated income loans that drove the last crash are popping up all over the place again. So....

 I know we see it advertised but I have not seen one come through on any thing I sold in the last year and that's a fair sampling across the country..  and even if those loans are back today.. they wont start to go TU for 3 to 5 years.. most people make it a year or more before they default if we believe those mortgages have a really high default rate.. plus even if its max leverage you still need to qualify.. I know I see stated loans out there but I suspect when you dig into them that would be those that have a ton of equity or money to put down.

not what we saw in pre GFC  NO money down and 100% leverage

@Will F. I totally agree with you regarding rentals and buying sound deals from the start is the key to weather the storms however this inventory being still so tight its hard to find those these where the property is cash flowing decently from the start.  Just curious how many rentals do you buy a year?  It might be a good bench mark for me to know whats realistic

I think the people who believe that owning rental real estate makes them immune from a downturn are being unrealistic.   It may happen, but there lots of examples where people lost everything.  Case in point, Kevin Bupp, who now does mobile home parks.   

https://www.biggerpockets.com/blogs/4430/53887-les...

"Leading up to the crash, Kevin and the investment group wanted to mitigate their risk, so they committed to purchase SFR rental properties for no more than 65% of market value. When the financial crisis occurred, not only did property values plummet, but the rental market crashed as well. Homebuilders who had built brand new homes were unable to sell, so they were forced to hold on to them and rent them out. Unfortunately, these brand new properties were renting for the same price as the 20 to 30 year old homes Kevin and the investment group owned. As a result, they ended up giving 90% of their properties back to the banks."

Any investment has risk.

Originally posted by @John Nachtigall :

I think the people who believe that owning rental real estate makes them immune from a downturn are being unrealistic.   It may happen, but there lots of examples where people lost everything.  Case in point, Kevin Bupp, who now does mobile home parks.   

https://www.biggerpockets.com/blogs/4430/53887-les...

"Leading up to the crash, Kevin and the investment group wanted to mitigate their risk, so they committed to purchase SFR rental properties for no more than 65% of market value. When the financial crisis occurred, not only did property values plummet, but the rental market crashed as well. Homebuilders who had built brand new homes were unable to sell, so they were forced to hold on to them and rent them out. Unfortunately, these brand new properties were renting for the same price as the 20 to 30 year old homes Kevin and the investment group owned. As a result, they ended up giving 90% of their properties back to the banks."

Any investment has risk.

For all the folks who bought low during the recession, there were others who were over leveraged at the peak and lost everything. The methods used by most individuals now were being used then, BRRR, fix and flips etc. Its hard not to drink the kool aid but now more than ever its imperative that acquisitions are made with sound fundamentals.

Originally posted by @John Nachtigall :

I think the people who believe that owning rental real estate makes them immune from a downturn are being unrealistic.   It may happen, but there lots of examples where people lost everything.  Case in point, Kevin Bupp, who now does mobile home parks.   

https://www.biggerpockets.com/blogs/4430/53887-les...

"Leading up to the crash, Kevin and the investment group wanted to mitigate their risk, so they committed to purchase SFR rental properties for no more than 65% of market value. When the financial crisis occurred, not only did property values plummet, but the rental market crashed as well. Homebuilders who had built brand new homes were unable to sell, so they were forced to hold on to them and rent them out. Unfortunately, these brand new properties were renting for the same price as the 20 to 30 year old homes Kevin and the investment group owned. As a result, they ended up giving 90% of their properties back to the banks."

Any investment has risk.

clients of mine bought 350k 4 plexs in PHX AZ that went 100% vacant in the GFC and by 2010 were trading under 100k becasue they were vacant and needed major work.. they let them go in droves.. so yes that was a very bad time.. I had personally 400 plus loans out on SFR rentals and i ended up owning half of them. borrowers walk and lost all their equity.. rents dried up.. it happens. not predicting it.. but just like any small business and thats what rental business is you need sufficient reserves to get you through a tough patch

Originally posted by @David Song :
@Collin Savunen

People bought properties in 2007 were asking the same question, why the market has not crashed? When they realize that it crashed in 2009, it was too late. They already bought at the peak.

Fact is, Bay Area housing market has already taken a hit, down 10-15% from a couple months ago.

Will this turn into another big crash like 2009, nobody knows.

Risk mitigation is critical in any investment. Believing price will always go up is simply ignorance and arrogance.

I have not bought anything in 2018 yet. Do not want to take this risk at this time. If the price keeps going down, might jump in.

Too many people on this forum advocate buying at any time. I disagree with that. Timing is number 1 important thing in investing.

I don't have a crystal ball, but just some common sense and gut feeling.

Very true. Once the FAANG's take a big hit (its headed for its lowest close in 6 months) the tech investors in sand hill will tighten up their spending. The cascade effect to start ups and then real estate will have a profound impact on some states (Not just CA). 

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