Stocks and housing CRASH
Naperville, IL · Member since 2017 · 29 posts · 8 votes
Stocks and housing CRASH
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49 Replies
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes7y
Originally posted by @George W.:
Originally posted by @Kent Leach:
@Paul Flynn
I believe that the next "crash" whenever it comes will be fueled by the student debt crisis. These kids are graduating with the equivalent of a house payment on student debt. Coupled with the fact that many of these graduates will choose to rent rather than own makes a recipe for a significant housing downturn. Wish I were smart enough to know exactly how to capitalize on it.
Agreed it's definitely a bubble. It's not good when there's 1.5 trillion total debt and pretty much nothing to show for it.
I don't think you guys have a firm grasp on what constitutes an economic bubble .
For a host of reasons, chief among them that it can't be discharged in BK, student debt won't be the primary root cause of a short term economic downturn.
It can however act as an anchor on long term economic growth.
- Investor · NJ · Member since 2018 · 869 posts · 921 votes7y
Originally posted by @Bill F.:
Originally posted by @George W.:
Originally posted by @Kent Leach:
@Paul Flynn
I believe that the next "crash" whenever it comes will be fueled by the student debt crisis. These kids are graduating with the equivalent of a house payment on student debt. Coupled with the fact that many of these graduates will choose to rent rather than own makes a recipe for a significant housing downturn. Wish I were smart enough to know exactly how to capitalize on it.
Agreed it's definitely a bubble. It's not good when there's 1.5 trillion total debt and pretty much nothing to show for it.
I don't think you guys have a firm grasp on what constitutes an economic bubble .
For a host of reasons, chief among them that it can't be discharged in BK, student debt won't be the primary root cause of a short term economic downturn.
It can however act as an anchor on long term economic growth.
It's not a bubble in the sense of housing. in the sense that thirty years ago it was unheard of for someone just starting their life to have 30-50k in debt. And the fact the college expenses have risen faster than inflation and there is no physical assests, some body somewhere will lose lots of money when a bunch of students defualt on on loans. You'd have to be crazy to think that 1.5 trillion and growing couldn't hurt the economy in other senses even if it's not dischargable. Those graduate students need somewhere to live and if they can't afford it because of bankruptcy then that would hurt the economy.
Second I never really said that it was gonna cause a housing crash. Im a firm believer that the health care industry which is over 18% of our gdp is gonna cause the next stock and housing crash with all the crazy mergers on insurance companies and hospitals. You don't think theres companies over leveraged in health care? That's 3 trillion a year and encompasses many different industries that employ a very large perecent of Americans.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
By broad category, it seems like responses are focused on residential real estate vs. commercial, industrial, or land. Nothing wrong with that, but I'll throw in commentary from a different perspective.
In the land sector, specifically agriculture, the crash is happening now in the business of agriculture, but not yet in the land asset value. Not yet. Farm loan delinquencies are at a 9 year high. And the USDA forecast contains some troubling balance sheet facts for leveraged farms. Farm land prices are flat, at best, over the last 12 months. The USDA link above shows that on average, 83% of farm assets consist of real estate (the farmland). As long as farmers remain large buyers of available for-sale land, and investors remain happy with 4% cap rates, prices should be stable. If land prices drop, farm assets drop, and debt ratios worsen (see USDA link, specifically under solvency) which could increase delinquencies further. Note, farm loan delinquencies are already at 9 year highs.
The farmland values in the big grain producing states... that's the canary. Government bailouts to farmers of $12 billion in 2018 and $15 billion announced a few weeks ago are a band-aid. Equipment companies catering to the AG industry are also feeling the heat. If the yellow line starts to fall... delinquencies will escalate and broader economic impacts will impact GDP and the stock markets beyond the AG sector.
What does this have to do with housing? Not much. However, I have converted farmland into other uses (e.g. solar farms) so knowing details about the specifics of this real estate sector (AG) may be of interest to some who may see converting to new residential developments or other 'higher and best' uses. Regional markets vary, but troubles in the AG sector could bring opportunities down the road...
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes7y
@George W. Interesting theories.
You oblivious are far smarter than I am on these matters. But that's why I don't spend a lot of time playing amateur economist trying to predict what will cause the next downturn or when it will happen.
All I know for sure is that a correction will happen sometime and thus I've prepared accordingly.
Best of luck to you.
- Investor · Omaha, NE · Member since 2015 · 366 posts · 184 votes7y
Yes!
Everyone should wait on purchasing property until the downturn. Absolutely everyone;)
- Vancouver, WA · Member since 2014 · 127 posts · 60 votes7y
A lot of interesting points on this discussion. Regarding a recession, who knows, but follow the areas/sectors in the bond markets where people/companies stop making their payments. Residential housing appears safe to me if we are talking single family homes in markets with a decent tax structure and a compelling reason to live in the location. I don't see the single family home markets tanking like in 2008. I don't see Healthcare crashing like @George W. states. I feel the need for healthcare will continue to see increased demand and I believe our demographics show this hasn't peaked yet. Yes, there are issues in the healthcare system but I don't see a recession being caused by them. A lot of companies on the other hand appear overleveraged, so the risks remain to be seen if they can delever their balance sheets and refinance their debt before rates go up. If they can't then a lot of bankruptcies will follow when a lot of corporate debt defaults and then rates will really go up. For those that do prepare will have the ability to pick up stocks and bonds super cheap, and commercial real estate (including those luxury apartments) as well. I don't think much will happen to (single family housing stock) residential real estate in comparison. I am sure it will go down a little but nothing like 2008.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes7y
Originally posted by @George W.:
Originally posted by @Kent Leach:
@Paul Flynn
I believe that the next "crash" whenever it comes will be fueled by the student debt crisis. These kids are graduating with the equivalent of a house payment on student debt. Coupled with the fact that many of these graduates will choose to rent rather than own makes a recipe for a significant housing downturn. Wish I were smart enough to know exactly how to capitalize on it.
Agreed it's definitely a bubble. It's not good when there's 1.5 trillion total debt and pretty much nothing to show for it.
The total debt is a lot higher than 1.5T mate..
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes7y
Originally posted by @Bill F.:
@George W. Interesting theories.
You oblivious are far smarter than I am on these matters. But that's why I don't spend a lot of time playing amateur economist trying to predict what will cause the next downturn or when it will happen.
All I know for sure is that a correction will happen sometime and thus I've prepared accordingly.
Best of luck to you.
What have you done to prepare. Hold cash? De-leverage?
- Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes7y
@Kent Leach, I disagree. It will be caused by a pension crisis when the last of the boomers retire only to find out their pensions are halved or worse. You read it here first.
The fed has basically signaled ‘QE forever’ to do anything possible to stave off deflation. ;-)
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes7y
Originally posted by @Joel Fine:
After studying all of the available economic data, along with the comments on this thread, I've determined conclusively that either home values will go up, or they will go down. 100% guaranteed.
You missed a spot: stay the same 😉
Skyline Properties - 7yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
I wish I had started to take down the dates and quotes from the experts (and there have been many) that conclusively, and without a shadow of a doubt, have predicted everything from the downturns to absolute crashes over the past 15 years. I bet I could fill a book. Each expert would have their own chapter, with dates of "absolute" (sometimes spelled "absurd"), all mapped out in chronological order, all with data and history to back them up, all different, and all wrong.
No wait...they all got it right (my mistake) once,,,eventually. I guess that's what made them the expert that they all are, based on that one time they got it right...which is what is remembered. If you didn't notice (that one time)...they reminded you (and many others did to).
You can't predict the economic swings anymore. The biggest reason is that we have changed to a global economy, and internet economy, and a virtual economy...all of which is unpredictable, and also uncontrollable. This also makes it quickly adjustable, and balanceable (I know that's a word because spellchecker found it) almost naturally by those involved with it directly, and naturally balance things by their ability to quickly take advantage of the natural swings of the market.
- Member since 2019 · 1 post · 0 votes7y
I personally think we will see some downside around next election
- Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes7y
Originally posted by @Josh Rogers:
Does anyone have any actual data to evaluate that might predict this? Anyone hear of an inverted yield curve? I've heard that is the best historical predictor?
Besides some data that others have provided, I think of educated guesses. Research has shown that if you take the average of a large pool of guesses as to how many jelly beans are in a jar, it will be pretty accurate. It is called the wisdom of the crowd https://www.youtube.com/watch?v=iOucwX7Z1HU&list=PL11E70446D4EC2C65&index=1.
The second thing is the intelligence community running gambling sites on world events. https://ideascale.com/cia-takes-a-gamble-on-prediction-markets/. People rarely have all the information but they have pieces of it, maybe anecdotal, that on average will sway the consensus and give a better prediction.
In my unscientific observation, there has been a dramatic uptick in people asking if a crash is coming, here on BP and in the news. More than any information I personally have, this gives me pause. Lot's of people are sensing something but have incomplete information. I think it is wise to keep it in consideration. How does this play out for me? I want my flips to be quicker, I want my buy and holds to be solid. Sometimes I'm willing to speculate with a portion of my portfolio. Now, not as much.
- Cheyenne, WY · Member since 2016 · 23 posts · 94 votes7y
@Larry Turowski Makes total sense! Thanks for the info & opinion!
- Real Estate Broker · Los Angeles, CA · Member since 2017 · 655 posts · 293 votes7y
Since early - mid 2018, we've seen some movement downward. This is a great question you ask and it's a fear I think many make out to be even worse than it is.
There is always opportunity, what matters is how you fit in, how you respond. I wouldn't wait for a sale, but I would underwrite my tarnsactions today with tolerance and be prepared to walk away if the math doesn't line up
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
No doubt the mounting student debt and increasing health care costs are a problem, but I wouldn’t call it a bubble and I don’t see how it would crash real estate.
Real estate doesn’t crash over night. It starts slowing for months and the early warning sign is increased inventory (non seasonal), then prices travel down over months or years. Sometimes it is just momentary price flattening.
The problem is just like you can’t predict the top, you can’t predict the bottom either. People wait for something that is only visible after it passed.
Still the facts are, people who lack courage to invest in a good economy are even less likely to invest when there is a crash. That is why prices drop to crash levels, because nobody is buying. When you are worried about losing your job and putting food on the table, you are unlikely to become a landlord.
My advice is always be buying and buy twice as much when prices drop.
- Rental Property Investor · Leander, TX · Member since 2018 · 183 posts · 264 votes7y
Originally posted by @JD Martin:
Originally posted by @Joel Fine:
After studying all of the available economic data, along with the comments on this thread, I've determined conclusively that either home values will go up, or they will go down. 100% guaranteed.
You missed a spot: stay the same 😉
I considered that possibility, and determined that it won't happen. (If it does, it just means you should have waited a month to review the data.)
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
@Joe V. Joe, I largely agree with your post.
Absolutely hilarious! I am waiting for your book. I will anxiously await what you write about Robert Schiller. Some of the dates and quotes below. BTW, the Case Schiller Home Price Index is still used today.
For historical reference, here's one of the few articles I could find from 2005-2006 timeframe (see 1) that spells out Schiller's beliefs. Be Warned: Mr. Bubble's Worried Again By DAVID LEONHARDTAUG. August 21, 2005. I do remember a Fox News program circa end of 2005 where Schiller was laughed at and mocked for his prediction that the housing market may be headed for a correction. I can't find that story or transcript. Seems like sometimes these stories disappear when it becomes clear they were grossly incorrect.
But the following little tidbit is worth posting. "Shiller is predicting the mountain goes into the sea," Robert I. Toll, the chief executive of Toll Brothers, a home builder, said in a recent interview... that was in mid August 2005. They, like others, laughed and mocked Schiller. Take a look at the chart of Toll Brothers (below) and I've identified the approximate point of the interview (within two weeks, but hopefully the point is clear.)
See also Robert Toll, America's Largest Luxury Homebuilder, Not Laughing Anymore By Max Abelson - 02/06/08, a few years later when Schiller's predictions were accurate and Toll Brothers collapsed.
So, some people know stuff. Schiller. Warren Buffett and Charlie Munger. That's my speed, but it's a matter of following and listening to the right people that you believe have and understanding of the economy and markets. Regarding trends and market conditions, Fannie Mae has one of the best housing industry overviews and they provide it annually FOR FREE via their annual reports. I know 99% of BP Nation won't read such stuff because it requires people to think and reach their own conclusions, but I point out the obvious for those of us who digest facts and can formulate their own course of action.
For me, I don't need to predict because I just look at odds. As an example, type "soybean crop 2019" in google. Pretty clear, from at least one source, the US is irrelevant.
Some economic swings, especially those comprised of demand destruction, aren't hard to figure out. But, again, I don't need to predict, I just play the odds. In my world, housing collapse/crash issues aren't on my radar. My only concern is 'opportunity cost' and alternatives to high asset valuations created by recent appreciation. In the universe of investment opportunity, the question I always ask is 'where is the best opportunity for return going forward.' And my partners and I will look for the best odds and place capital there.
- Rental Property Investor · Los Angeles, CA · Member since 2018 · 84 posts · 54 votes7y
@Paul Flynn I would not wait on the sidelines to wait for the market to crash to buy buy buy....but I'll spare some $$$ to buy (just in case if it's crash or most likely slowing down). There are MILLIONS of people waiting on the sidelines like you to wait for the best time to buy buy buy. I will buy whenever the property can generate a BIG cash flow.
- 7yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Chris Martin:
@Joe V. Joe, I largely agree with your post.
Absolutely hilarious! I am waiting for your book. I will anxiously await what you write about Robert Schiller. Some of the dates and quotes below. BTW, the Case Schiller Home Price Index is still used today.
For historical reference, here's one of the few articles I could find from 2005-2006 timeframe (see 1) that spells out Schiller's beliefs. Be Warned: Mr. Bubble's Worried Again By DAVID LEONHARDTAUG. August 21, 2005. I do remember a Fox News program circa end of 2005 where Schiller was laughed at and mocked for his prediction that the housing market may be headed for a correction. I can't find that story or transcript. Seems like sometimes these stories disappear when it becomes clear they were grossly incorrect.
But the following little tidbit is worth posting. "Shiller is predicting the mountain goes into the sea," Robert I. Toll, the chief executive of Toll Brothers, a home builder, said in a recent interview... that was in mid August 2005. They, like others, laughed and mocked Schiller. Take a look at the chart of Toll Brothers (below) and I've identified the approximate point of the interview (within two weeks, but hopefully the point is clear.)
See also Robert Toll, America's Largest Luxury Homebuilder, Not Laughing Anymore By Max Abelson - 02/06/08, a few years later when Schiller's predictions were accurate and Toll Brothers collapsed.
So, some people know stuff. Schiller. Warren Buffett and Charlie Munger. That's my speed, but it's a matter of following and listening to the right people that you believe have and understanding of the economy and markets. Regarding trends and market conditions, Fannie Mae has one of the best housing industry overviews and they provide it annually FOR FREE via their annual reports. I know 99% of BP Nation won't read such stuff because it requires people to think and reach their own conclusions, but I point out the obvious for those of us who digest facts and can formulate their own course of action.
For me, I don't need to predict because I just look at odds. As an example, type "soybean crop 2019" in google. Pretty clear, from at least one source, the US is irrelevant.
Some economic swings, especially those comprised of demand destruction, aren't hard to figure out. But, again, I don't need to predict, I just play the odds. In my world, housing collapse/crash issues aren't on my radar. My only concern is 'opportunity cost' and alternatives to high asset valuations created by recent appreciation. In the universe of investment opportunity, the question I always ask is 'where is the best opportunity for return going forward.' And my partners and I will look for the best odds and place capital there.
Looks like you found the one time he was right.
- 7yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
I'm really getting tired of these hysterical posts not backed up by any real data...
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