You have 6 months to liquidate your assets

[Thor Sveinbjoernsson]

I’ve been doing a lot of research lately and I wanted to share with you guys what I have found about the correlation between unemployment, delinquencies and housing prices. During the 2008 housing crisis the housing market bottomed about 2 years after the peak in delinquencies. Note that delinquencies are very much so correlated with unemployment rates (see graph on link below). Unemployment is already about twice the peak in 2008 so it is very likely that delinquencies will follow, which will lead to increased supply of housing.

See data here, gathered by stanford researches: https://web.stanford.edu/~pavelkr/jmp_slides.pdf

Conclusion: You have about 6 months to sell off your assets until the market will be flooded with fire sales and forclosures.

[Dave Renaud]

Please excuse the poor proof read.

[Shane Ussery]

I’ll tell u how bad it can get.. you’ll be out their Grandpa George style with a Cigar in your mouth Telling your Tenants Either they’ll pay you or the Doctor..

[James Hamling]

Originally posted by @Sonja Sevcik:

How does someone correlate tax cuts in the 80s with a budget surplus 15 years later? Dumb!! Two things led to the 90s surpluses ... a massive improvement in productivity &  new forms of corporate finance. Productivity & a money multiplier!!! That is all it take folks! This time around we need to focus on massive productivity gains & like after WWII ... programs that tax the wealthy and get the money back to the young in innovative never been done before ways.

 "tax the wealthy and get the money back to the young in innovative never been done before ways".... you've got to be kidding me Sonja, socialist redistributionism, that's your golden goose solution? 

I have been dying to ask a socialist this question in response to that slogan: What gives the right to those who have earned little to confiscate from those who have earned much?    How do you not acknowledge the punitive system that institutes to those who work harder, who do more than average, to achieve more than average?     

A last point I have been dying to counter to a socialist, how will you "tax the rich" because when your "rich" you can just go else where, because you're rich. Are you going to confiscate their accounts? Business? What if I decide "screw you" and I move my organization offshore, what will you do to stop me? Exactly how will you tax my wealth when I place my wealth in Isle of Man? Barbados? Crete? 

[Shane Ussery]

@James Hamling me and a buddy had it out the other day over communism Socialism the other day. I finally got so mad I told him if u want to be a communist go live their. Then I told him I was going to take his property and he would be executed he looked at me strange then I said that’s what they did in China when the communist took over. Point being people please know what your voting for.

[Karen Schimpf]

@Thor Sveinbjoernsson   You have to read George Ratiu, Sr. Economist at Realtor.com. Mr. Ratiu predictions for 2020 (go here for the article https://www.realtor.com/resear....) is Millennials will take on more mortgages than the Baby Boomers and Gen Xers combined.

[David Goldsmith]

Originally posted by @Michael Temple:
I am currently refinancing my primary residence to get a lower interest rate and my mortgage guy said I was one of the lucky ones because not only was I getting a super low rate (2.99%) but I was actually able to do it. He said most of the lenders have started tightening up on lending requirements by making people have better credit scores and put down more money. He has been in the business for 38 years and probably one of the smartest guys I know in the biz.

This told me one key piece of information that may be useful to everyone. The number of first time home buyers will be pushed out of the market either because their credit isn't strong enough or because they need to save more money. Since many of the homes investors buy are also the same ones first time home buyers get as investors we have lower competition for the next year or so.

I know in my area going every time I found a reasonably good deal on the MLS for a property offering full asking price still didn't land me the house because first time buyers would push the house well above the asking price and I wasn't typically willing to chase the price. This type of activitiy might start to go away if my mortgage lender is correct.

Any sort of credit crisis (and I'm seeing the same thing you are) will absolutely crush the RE market which has been mostly fueled (like it has been for the 40 years I've been doing this) by whether the flow of funds is too loose (market up) or too tight (market down). What is concerning right now is that even though the Fed is unleashing a tsunami of money which is designed to keep liquidity flowing, most banks appear to be pulling back on issuing new mortgages.

And take a look at credit spreads:
https://fred.stlouisfed.org/se...

[Juan Rodriguez]

That being said, anyone looking to liquidate, send me a details on any properties you're selling. 😎

[David Taylor]

I am a high end remodeling contractor and I can’t keep up with the influx of calls. My girlfriend works for a custom home builder that builds 380k to 1.5 mill homes. They have also seen an influx of new clients and have signed more contracts for new builds than they have seen in a very long time. I pray it continues however realistically I know it can not.   Fortunately for many they are still work and also on unemployment with an added bonus to unemployment this time. I personally believe the crash in 08-09 happened because something was broken as we all know. What is going to happen.... who knows ! We can all speculate all we want but unfortunately time will tell !  
As I have always been told from birth plan for the worst and hope for the best ! 

[Tony Blasioli]

Originally posted by @Shane Ussery:

@James Hamling me and a buddy had it out the other day over communism Socialism the other day. I finally got so mad I told him if u want to be a communist go live their. Then I told him I was going to take his property and he would be executed he looked at me strange then I said that’s what they did in China when the communist took over. Point being people please know what your voting for.

How can anyone be so dense as to look at the many times socialism has been tried.... and failed EVERY time? Yet, there they are, still blind as bats, running about screaming the virtues of socialism. Book a vacay to Venezuela. Let us know how it works out. It's a swell place for anyone trying to lose weight.

[Shane Ussery]

@Tony Blasioli your right countless tries at it. And I’m yet to see a communist Country make it happen. Communism is opposite what we all on here do. We are Free Spirited Investors/ Entrepreneurs. We are Americans and Americans won’t put up with it. Not going to happen 

[Tony Blasioli]

Originally posted by @Shane Ussery:

@Tony Blasioli I hate you had to go through that. Looking back on that ordeal did you grow from your experiences? Obviously, you did or you wouldn’t be commenting here. It comes down to experiences. Some people didn’t lose a beat. I know the house I had a mortgage on at the time went underwater I had to let economy rebound so I could sale it. From that experience I had that became my why to become an Investor. Today, I’m Wiser, Stronger, and Better from it. When that happened I didn’t have the skills I have now. Today I choose to have more control over things.

Yeah, it's funny how the "control" thing works. I control everything I can, but sometimes due to circumstances beyond our control, that control is lost.

Example: The way I got where I am. After liquidating in 2008, my wife and I moved to Hawaii, the intent being to start another construction company working for DOD. I did that, then "Sequestration" came along and dried up most of the contracts. While waiting for a large Navy contract to be awarded, I started a political blog in 2013, my own personal/public rant space. I had no idea at the time that a blog could make money. My blog took off immediately and advertisers were contacting me. I was soon making five figures a month and putting that money into investment properties. I had to pay cash for them because I bought them so cheap that they were below most lenders' minimum loan requirements.

Before I knew it, I owned five properties, all vacant and in need of varying amounts of rehab. I rehabbed them, rented them, and now those five properties gross over $4000 a month. I bought a sixth ($30,000 cash deal), rehabbed it, and it is now generating $1,500 a month. When fully occupied, it rents for $2,200 a month. 

So, I owned all of these properties free and clear and they were and are cash flowing very nicely. I now have a seventh property under contract, fully occupied and cash flowing nicely, but I'm stuck!

My blogging income/investment war chest has dried up. Full disclosure: I am among those hated by many (all) on the left. I am a patriot. I am an ex-Army officer, love my country, and owe it much. Thus, my motivation in starting my blog in 2013. We didn't get that Navy contract, but just as well as my blog was rocking. Fast forward to the 2016 Presidential Election and I was working 15 hours a day, seven days a week. No one gave the only candidate in the race with no political experience a chance. He was laughed at, ridiculed. Yet, he won, thanks in large part to the contributions of the right-wing blogosphere and sites like mine. Candidate Trump tweeted one of my articles to the world in February, 2016, for which he received much grief from the likes of George Stephanopoulos, et al. This put me on the radar of the powers that be in Silicon Valley, namely Facebook, Google, and Twitter, all of which are run by leftists who despise patriots like me. After President Trump shocked them all in November, 2016, those Silicon Valley powers vowed to shut down the right-wing blogosphere, which they have effectively done. No matter how hard I work today, my blogging income is a couple hundred dollars a month. Facebook has deleted all six of my pages, including my main page with over 300,000 followers, I am shadow-banned by Twitter, and Google has closed my best advertising account, Adsense, and makes sure that my content does not appear anywhere near the top page of searches. My site has been made virutally invisible.

Everyone is aware of this egregious injustice. Congress talks a badass game, summoning Herr Zuckerberg before them multiple times and slamming him for his wrongful censorship. Then they slap one another on the back and rush off to the next dinner party. This censorship has become a priority with President Trump, but, to be honest, the man is being attacked from so many directions at once, I understand him not being able to jump right on it.

So, for the past few years, my wife and I have been struggling, trying to live on our rental income (thank God we have it!). With just a few more units, we could do that, but we can't quite make ends meet with our current rental income alone. So, last year I leveraged four of our properties for a measly $25,000 apiece to flip a house. Long story short, the house wouldn't sell. We lost the $100,000 we had in the flip and now our lender who leveraged four of our properties wants their money. Both Roofstock and an independent appraiser valued those properties at $450,000, and we can't borrow $200,000 to pay off the short-term mortgage, purchase the property we have under contract, and keep the rest as cushion and operating capital. I don't know why we can't find that lender. It doesn't make sense to me.

So, every day, I keep looking. For months, my #1 daily job has been going through the document drill with lender after lender for weeks on end and ultimately being told that they can't do the deal because COVID or per door value or one thing or another, yada, yada. So, I wake up every morning and I try again. I fear what will happen to us if I can't pull off what seems like a no-brainer. The American Dream, right?

[Deborah S Huff]

I am an individual REI who buys vacant bank-owned properties for rehab/rental, about twice a year, anywhere I can find them in the US. Like many of you, I'm constantly searching for deals and testing the markets. I was doing this before COVID, and will continue, undaunted. In fact, I closed on a property today. My family and friends sometimes express genuine concern about how risky this is, and I tell them, "The world's population will continue to grow, and it will need more and more housing units. This is an underlying fact and I'm not scared."

I understand that purchase and rental prices may go up or down over the next several years depending on demographic influences across the nation.  So, I'm interested in any geographical metrics or observations that people have.  

Here is the LA area, there is a huge backlog of frustrated people who would be 1st time buyers, if only they could afford it, including my sons.  So, we watch this market carefully, hoping for a softening that could facilitate their entry into home ownership.  Thus far (despite the high 'temporary' unemployment), no luck.  On the other hand, I have noticed a softening (not a fire sale) in the Northeast and Mid-West.  Where are you seeing signs of softening ?

[Shane Ussery]

@Tony Blasioli inbox me I may have someone that can help 

[Deborah S Huff]

Thomas, 

Agree with you.  Buying rentals in LA doesn't make sense, which is why I have been looking and buying elsewhere.  

[Account Closed]

@Thor Sveinbjoernsson not sure anyone can follow this far into the discussion, but I consider other countries to be sh-tty places to be right now. So does a lot of people. People want to move to the US. Freedoms are being taken from people like never before and the US is one of the last places, there’s a chance you can be free. People want to be free and the land of freedom will not be going down in price too soon, unless China turns over a new leaf and begins really cutting back on restrictions and Europe stops flooding their cities with a certain type of migrant (haha)

[Thor Sveinbjoernsson]

@Account Closed I would argue that the world view of the US has never been as bad as is it right now. The US is being mocked by other world leaders. I think there are number of countries in Europe that provide even greater freedom than the U.S by providing health care for everyone (which allows people to quit their jobs, start their own business or change jobs without worrying about loosing their health insurance), and an affordable education to those that are smart enough to get into universities. The US has a lot of great things going for it and there is a reason that the greatest companies in the world are mostly founded in the U.S, but right now the US seems to be very divided and not as great as it used to be.

[Account Closed]

@Thor Sveinbjoernsson well if your idea of freedom is healthcare, I guess we see things differently. But yeah, there’s a # of issues with the US, but the powers and potential our people have is like no other country. Guns, God, and good weather are things people would move to the US for. Owning a gun keeps gov. In check and gives you the peace to protect your family. God gives us rights, which are reflected in the bill of rights and constitution, and our land is quite useable for farming. The world is moving in a weird direction right now and we rely on movements of people to combat globalism (crazy talk crazy talk). We the people still have a chance to not be globalists (more crazy talk). The constitution is pretty attractive right now, not the current power players.

[Thor Sveinbjoernsson]

@Account Closed Very good points there. I agree

[Sue K.]

Originally posted by @James Hamling:

Originally posted by @Vince Ivanov:

People keep saying that this time it’s different because people have a lot more equity in their houses. This is not entirely true. Many people who bought in 2019 and early 2020 are potentially under water.

 We keep saying this is different from 08/09 crash because it IS different, in every conceivable way possible, every, nothing is the same. 

08/09 was a collapse of a financial system that effected the entire global economy due to the particulars of it, which created a recession. 

This is different, plain and simple. Economy was humming along like a jet plane. Think about it, the economy was performing awesome despite trade wars ongoing, despite political turmoil, thats a beast of a strong economy. 

Then covid, and government restrictions. There is literally nothing the same between these two incident, different catalyst, different mitigating factors, different starting, different players, different responses, different governmental level of primary response, just all around different. 

 It doesn't matter why prices tank to the people who lose equity, though, does it?  An economy crash is an economy crash.  A crash equals lower home prices and usually lower rent prices, tightening lending by banks.  It also doesn't matter at all what the economy was like prior to a crash.  It's just the crash that matters.

Arguing whether or not this crash is created in a different way than other crashes in history doesn't change the result.  If a fire is caused by an electrical malfunction or a propane tank or a forest fire, does the house burn differently?  Does it matter, if the result is ashes either way?

My point was to argue with your assumption that if someone has equity prior to a crash caused by a pandemic, that their equity won't be hurt.  That's simply not logical.  You're assuming that the value of their property won't go down.  I hope you're right, but in my opinion, that's just really simply not logical.

I'm old enough that I've witnessed several crashes.  The result on the real estate market was always the same.

[Sue K.]

Originally posted by @Joseph Cacciapaglia:

Originally posted by @Reid Randall:

@Joseph Cacciapaglia I agree with @Sue K. To assume equity is going to stay the same and homeowners could simply sell to avoid foreclosure shows that home prices are definitely going to drop.  Many homeowners who believe they have equity right now will likely see a huge drop in the next 1-2 years as more foreclosures and sale happen. Unless properties were bought years ago and their mortgage is paid down significantly many recent home buyers are going to be over leveraged.

 I didn't say that I assume equity will stay the same. I said that homeowners have a lot more equity going into this cycle. These are very different claims. There are plenty of people that could withstand a significant decline in prices, and still afford to sell. There were far fewer people in that situation last time around. I posted some data on this earlier in this thread. 

If you look back at my initial comments on this thread, I'm not saying there won't be a downturn. I'm only saying that to assume there will be a large wave of foreclosures in the next 6 months is unsupported. People have additional protections in the form of forbearance and equity that they didn't have last time around. There is also significantly less inventory. I'm sure some markets are going to see their prices decline, especially those areas that have been hardest hit by the virus and/or stayed locked down the longest. To assume those price declines happen quickly and will lead to an immediate and large wave of foreclosures is what I was arguing against.

 Point taken.

[Suzette T.]

Originally posted by @Mary White:

Let's assume for second that your claims are correct. That still gives me zero reasons to liquidate my assets. My properties cash flow heavily and are minimally leveraged. Now is the time to assess the health of each individual asset and consider selling any low hanging fruit, but I do that several times a year anyways. What the market and unemployment conditions are telling me is to stockpile cash feverishly in case opportunities arise. I am not however naïve enough to believe that good properties will be on fire sale. It's more of the same, those poorly managed properties come up for sale with value add opportunities. Unlike 2008, there are thousands of people waiting to purchase. It won't be what you want it to be. 

 I wish I could vote for this comment more than once! :)

[James Hamling]

Originally posted by @Sue K.:

Originally posted by @James Hamling:

Originally posted by @Vince Ivanov:

People keep saying that this time it’s different because people have a lot more equity in their houses. This is not entirely true. Many people who bought in 2019 and early 2020 are potentially under water.

 We keep saying this is different from 08/09 crash because it IS different, in every conceivable way possible, every, nothing is the same. 

08/09 was a collapse of a financial system that effected the entire global economy due to the particulars of it, which created a recession. 

This is different, plain and simple. Economy was humming along like a jet plane. Think about it, the economy was performing awesome despite trade wars ongoing, despite political turmoil, thats a beast of a strong economy. 

Then covid, and government restrictions. There is literally nothing the same between these two incident, different catalyst, different mitigating factors, different starting, different players, different responses, different governmental level of primary response, just all around different. 

 It doesn't matter why prices tank to the people who lose equity, though, does it?  An economy crash is an economy crash.  A crash equals lower home prices and usually lower rent prices, tightening lending by banks.  It also doesn't matter at all what the economy was like prior to a crash.  It's just the crash that matters.

Arguing whether or not this crash is created in a different way than other crashes in history doesn't change the result.  If a fire is caused by an electrical malfunction or a propane tank or a forest fire, does the house burn differently?  Does it matter, if the result is ashes either way?

My point was to argue with your assumption that if someone has equity prior to a crash caused by a pandemic, that their equity won't be hurt.  That's simply not logical.  You're assuming that the value of their property won't go down.  I hope you're right, but in my opinion, that's just really simply not logical.

I'm old enough that I've witnessed several crashes.  The result on the real estate market was always the same.

 The following lesson is going to be summarized by if you don't have a clue of what you're talking about, please, don't try to fake it. 

Firstly and foremost, yet again, there is NO crash, none, zero, zip, nada, zilch. 

Secondly, when talking on economic theory yes, the catalyst does matter, greatly, to the extent that it's almost all that matters because it is the means as to how far-reaching a recession will be, how deep, durable, and the means to mitigate and alleviate. 

Next, median equity matters a LOT! pre 08/09 crash many had leveraged themselves into positions of near to no equity or negative equity. So in a economic downturn as we were, with mortgage resets that would place servicing beyond financial means of many, an exit strategy of selling or refinancing was not feasible for a significant ratio of mortgage holders, it was that combination of factors that carved out the depth of the the 08/09 collapse. NOW with policies and laws that redesigned a system to prevent such, the median equity position is a significant ratio AND the lurking mortgage servicing reset to a non-feasable amount has been in large part eliminated, so that means persons have a) a cushion to sell at net positive or net 0 if need be b) equity to tap for financial use c) consistency in expenses. 

So let's say your fantasy land happens, by some magic unicorns burst from the ground, leprechauns are real and drive uber, and some way or some how in a housing shortage home values drop 30%. guess how many people go into foreclosure because home values drop 30%, zero. This was actually an important economic study of the 08/09 collapse; how long until the housing market reaches full recovery, the general answer is 7 years. So all you have to do is NOT sell your property for 7 years, in general, and you will be back at the value it was before. 

And your flat wrong, economic "collapse" which I assume you mean recession, is a catalyst that INCREASES rents, not lowers my friend. Feel free to research the 08/09 recession, or any for that matter. In a recession consumer mobility is lesson, as is purchasing power, which is all drivers for more people to rent as less can buy. Then there is all those people your saying will loose there homes, are you saying Publishers CLearingHouse is going to hand out millions of homes? Maybe cardboard box's? No, they become renters. Supply & Demand my dear, recessions increase demand in a time frame supply can not keep up with, rents rise. Again, 08/09 recession was a case study in this. 

As I said, your arguing to things you yourself don't understand. I know diddly squat on auto repair, so I would never dare inject and argue with an auto repair pro, I would ask questions. The reason I take such ire with your words and those acting in like manner is because your inciting panic, fear, directing persons to make financially damaging actions. It's not ok, it's not the run of the mill conversation on here. If just 1 person get's all freaked out because your all saying "oh my God you MUST sell your properties NOW" that is 1 too many people, it's not ok. 

Frame things in accuracy, and if you must doom preach then do it accurately, say that it's how you feel, say it's what you think people should be doing, not this framing of things in means to incite panic and fear. It's running into a theatre and screaming "fire", that's what your doing. 

[Joseph Hennis]

@Thor Sveinbjoernsson In 2008 delinquencies were not a result of unemployment. It was the other way around. Unemployment was caused by delinquencies. Delinquencies were caused by exploding subprime mortgages, when payments went from 1000 a month to 3000 a month.

You need to be careful about correlating any data from the past with data for the future. That's known as over-fitting the data! 

https://en.wikipedia.org/wiki/Overfitting

Look, your overall thesis that "s gonna hit the fan" might be correct, but it may be correct for reasons other than you stated, and you just got lucky in picking the direction. That is confirmation bias, another common investor trap. 

Right now all we can do is outline risks, and plan accordingly for whatever scenario may come. Unemployment is certainly a risk, the exposure of residential real estate to commercial real estate decline due to the large number of AirBNBs is a risk. There are also risk mitigating factors, such as the fed printer and forbearance. So plan accordingly, and if what you feel is an acceptable plan for you is to liquidate, then do what you need to do. Personally I am already sitting on a pile of cash. Plenty enough to ride out the storm and some extra in case opportunities come up. But I am still keeping some assets.

[James Hamling]

Originally posted by @Tony Blasioli:

Originally posted by @Shane Ussery:

@James Hamling me and a buddy had it out the other day over communism Socialism the other day. I finally got so mad I told him if u want to be a communist go live their. Then I told him I was going to take his property and he would be executed he looked at me strange then I said that’s what they did in China when the communist took over. Point being people please know what your voting for.

How can anyone be so dense as to look at the many times socialism has been tried.... and failed EVERY time? Yet, there they are, still blind as bats, running about screaming the virtues of socialism. Book a vacay to Venezuela. Let us know how it works out. It's a swell place for anyone trying to lose weight.

I have discussed this with friends and associates from Eastern Europe, those who experienced socialism first hand. 

First, socialism has a good sales pitch, it really does. Everyone will have all the "necessities" of life taken care of, all you gotta worry about is living your life, everyone gets along, ohhh all your problems are those big bad billionaires and we'll get them it's all there fault. It's a sales tactic that has worked well over the decades, give people a scape goat then sell the cure and the cure is always "just give us all the power and control, don't worry we are good guys, we only want to take care of you". It gives lazy minds a lazy solution. 

Second, we have bread a lazy self-righteous entitled American society, we did it from a place of love wanting our kids to have things better and not to go through the sacrifices we suffered or those we grew up hearing but we actually made them spoiled litter temper tantrum monsters. Is it any surprise how they stomp there feet yelling "but I want it". They are arrogant and ignorant, the most dangerous deadly combination. 

Put those 2 together, and here we are. 

 *For those of you who are thinking "f this guy, socialism is..." just do me this 1 favor before replying. Take a moment to think this math thru; socialism says everyone will be equal, sounds good right, but how, just stop and think on that for a moment how would you make everyone equal because there is only 1 way. You can't force people to be smarter, or to work harder, to put more focus and desire then they want, so you will never elevate lower people up to higher ones, logical impossibility. So, the only 1 way is to, lower everyone else to the level of the lowest common denominator. That is the truth and reality of socialism, surf's and royals. That is parasitic, the fundamental goal and bedrock of socialism is parasitic. 

[Joseph Hennis]

Originally posted by @Thor Sveinbjoernsson:

@Paul Shannon

I agree with you with the inflation that will most likely occur and could potentially push prices up in the short term, but that is not sustainable. With the fed’s balance sheet up to 27 trillion, there has to come a time where rationality will kick in to prevent us from ending up like Zimbabwe.

 The risk right now is deflation, not inflation. You assume much. Don't overfit the data.