When will the bubble come?

5 Replies

I constantly hear from friends who are not REI savvy that the bubble will come soon. These are guys who, though they are not involved in REI, are deeply involved in the financial industry and are very focused on daily topics and news sources. Do you, as an investor, fear another housing market crash? Will an upcoming Real estate market crash be synonymous with the financial market crash? When do you think the bubble, if it does indeed exist, will pop?

The end is always close.  Just listen to the NEWs.  Either it is too good to last or it is so bad it will never get better.  

Yes, the market goes in cycles but the key is to buy good deals.  On flips and wholesaling you may get hurt in the cycle, or if you are using a hardmoney lender who may call you loan due.  However if you buy a rental, and buy it right...  You should be able to rent it out and weather the storm.  properties that were renting for 350 to 400 per month in 2000 is now at $650 per month.  

Just find great deals, find good tenants and weather the peaks and the valleys..   

I keep hearing about us being at the top of the market. I am starting out as well but people on BP seem reliable and I have read about market cycles in a few seperate places so maybe there is truth to it. We are at the top of the stock market also.

@John Krasner

Hi John

Just follow the money. They are in the financial services. After Trump took over, markets up 30%, best ever since FDR. And they're talking about a bubble?  With a push of a button, that could evaporate in days.  AT least real estate has a few warning signs.

Believe it or not, many markets an cities are still not back to 2007-08 levels. The problem with real estate is that it is market specific, and many markets do look over bought. I invest in multifamily, and it become increasingly difficult to find deals.  Same thing that happened to oil and gold, too much money flowing into the sector. People need a place to live, and are turning more to renting, which is another factor driving up prices.

We always fear big market corrections. All we can do is try to limit our down side risk by "buying right" with cash flowing properties in growing markets with demand for our product and offering a superior product where tenants will want to rent.

We are in a long almost 10 year cycle, so we are overdue for a correction. Don't know when, and no one else does for that matter.

Gino

@John Krasner Like the different verticals in the public markets, the real estate market is divided into multiple verticals (regions, niche, sub-markets) each with its own set of micro- and macro-economic drivers. 

In most of the country, real estate has been on a tear as is either near or above 2007-2008 levels. Yet, the #s you read about are average #s. For instance, most people buy off MLS or list price but more experienced investors can get better deals based on their market connections to acquire properties below list price. Similarly in public markets, an institutional buyer/seller can buy/sell at a more advantageous price point than the retail investor.

It all boils down to the deal. If an investor buys with enough margin of safety and/or have the capital/financing to ride out the inevitable recession, they'll be fine. But if the same investor is highly leveraged, has minimal margin of safety and an asset/liability mismatch (mortgage is expected to be paid off over 30 years, but financing is only for 10 years), they are going to be in for rough times. 

No fear of bubbles when you don't buy for appreciation. 

As Mark Owens says Cash flow is king!

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