Thoughts On Real Estate Prices?

Question

To the guys that are experienced in real estate long enough to have seen multiple cycles, what are your thoughts on what is going on right now? Where are we at in the cycle of high prices, foreclosures, low prices, etc?

I'm not one to say this is a "bubble" and it's about to "pop" because I simply don't agree with blankly believing that statement. If someone with more experience has an opinion on what this could mean, I'm very interested!

Jay Hinrichs · Answer

I tend to agree with the appraiser,  If I look back at my career in real estate which started in 75 ish.. market ( at least in Northern California) tended to go in 10 year cycles.. but each cycle interruption was caused by something different..  1. High interest rates of the early 80s and Savings and Loan crisis which spawned resolution trust .  2.  1989 regional to mainly CA  was earth quake and war    3. 1999 Dot com bubble which hit N. CA pretty hard     4. 2008 the mother of all of them since the great depression the GFC which was global.

When I think back on these events the market did not bounce back like a rubber band it took years to slowly move out of those markets and get to new all time highs..  If I just look at one property I owned IN Palo Alto CA  a little 900 sq ft rancher that  Paid  180k for in 1985 ( a huge sum in those days for a post war 3 and 1 ..  it peaked in 89 to 90 at about 500k .  then came back a tad .. then peaked in dot com bubble at about 700k in 99   only to come back a tad ( dot com was in my experience the shortest bubble burst.   By 2007 or so back up to about 1 mil.  then GFC hit and most everything fell nation wide 10 to 80% depending on location..  So then that address  684 Encina Grande Palo Alto makes all new highs in about 2014 at over 1.5 mil and now probably worth about 2.5 to 3 mil..  so values do rise over time in many markets.  And in my mind the Market did not turn until about 2013 to 2014.. so to me we are in year 7 or so of a 10 years cycle if that is what we have these days.. and who is to say we cant have a 15 year cycle or a 20 year cycle..  WE all worry about the black swan event well we had one with Covid who would have predicted with that event that real estate would turn from robust to white hot ??

Conclusion I agree this could be the new normal.

John Underwood · Answer

I've talked to many experienced investors and appraisers. According to the experts this is not a bubble but the new normal.

One appraiser said he sees a steady price appreciation for the next 10 to 15 years.

You can still find deals and motivated sellers.  I just bought a condemned house for 12k inside my ROTH IRA. Nothing structural wrong with it. It will be a long term rental that will create tax free money inside my IRA and tax free when I withdraw it in retirement.

Joe Villeneuve · Answer

What difference does it make?  You're not buying stocks.  The deals you get in REI are the deals you make, and the deals are based on the terms...not just what the sale price is.

Henry Lazerow · Answer

I had same thoughts. Look at the 100 year real estate price chart. 08 really was a once in decade event. The real estate chart does not have the many crashes that our stock charts had over 100 years. I dont think we will continue rapid growth at this rate but I definitely do not think prices will fall either and expect 2-3% average appreciation.

Jeffrey Donis · Answer

I agree with @John Underwood. I've heard successful investors say that before COVID, we were nearing ninth inning of a nine inning game. However, after COVID, we're now back in the first inning. This was his opinion, but I think it was wise.

Thoughts On Real Estate Prices?

Most Popular Reply