Age old question... buy or wait?

Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes

Ok, so I know that none of us have a crystal ball. However, I want to get opinions on purchasing in the next 3 months. This isn't tied to any specific scenario, let's talk in the general sense of purchasing real estate. We're seeing the rates go up, but in general inventory is still very low. Do you think there is going to be a crash? or maybe a collapse of the economy, or perhaps the dollar collapses and is replaced by some other currency? How about WW3, nuclear war? Hyperinflation? Or is it a great time to buy? Would love to hear your opinion.

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Malcomb StapelPro Member

Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votes

@Greg R. personally, I've been less concerned with interest rates and finding deals then I have with rising materials prices. For context though, I'm still finding deals in my market, but I do value add. Which means my spot on construction budget might not be so spot on when the price of a 2x4 jumps from $4 to $8 in the span of 6 weeks! That can eat up my overage budget pretty quick. Something to think on if you are planning value add.

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Jason WrayPro Member
Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
4y
Greg,
We are in a cycle as usual and it will not really break until 2024. You are going to see higher rates due to the artificially inflated real estate market that stemmed from COVID. People were scared and decided to pull money out of stocks and buy more real estate. You had more people moving out of the North East and in general and selling their homes to then go and buy all cash and in most cases above ask setting new markets. Any time the housing market starts to bloom the government gets greedy and wants a bigger piece of the pie. So they hedge up on rates and LLPA/GSE fee's so that the banks have to charge higher rates.
This is all politics and unfortunately this new party is hammering Gas prices, Interest rates, food costs, etc... Its not hard to go back and look at the previous (4) years and see rates were at an all time low. We also had a well balanced market growing at a realistic rate. I would not hold off on buying especially if you own any real estate now that holds enough equity to take out some cash for a Down payment. Just stay frugal and buy smart not getting into something that needs a ton of work that will hurt your pocket.
[email protected]727-637-4289
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Rolly Weaver
Helen, GA · Member since 2015 · 96 posts · 68 votes
4y
You can find a deal in any market. Its tough to find good properties on the MLS right now, but direct to seller can still be good.
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Jason Mileshko
United States · Member since 2021 · 125 posts · 49 votes
4y
I would say that real estate is always in season. Sure there are crashes and economic issues but if you buy intelligently then you should be fine. This means don't purchase property based on what you think that it will appreciate for in the future but rather what cashflow you can generate. Understand important metrics like debt service coverage ratio, break even ratio, etc. This will help you understand if your investment can stand up to a worst case scenario. It also helps if you have more properties because if one starts to do badly you can use the rest to carry it forward.
2 Reply
Malcomb StapelPro Member
Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votes
4y
@Greg R. personally, I've been less concerned with interest rates and finding deals then I have with rising materials prices. For context though, I'm still finding deals in my market, but I do value add. Which means my spot on construction budget might not be so spot on when the price of a 2x4 jumps from $4 to $8 in the span of 6 weeks! That can eat up my overage budget pretty quick. Something to think on if you are planning value add.
4 Reply
Nate Sanow
Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
4y
I vote for buy, caveat being still be cautious.
I don’t think a crash is coming just because things are going up. Foreclosures have been hitting the market but they are more like letting air out from a balloon slowly rather than a pop. Investors are snatching them up, because the marketplace is mostly cash rich.
There are a lot of studies on how many properties don’t have a mortgage and even more on high equity properties- added up it’s something like over 59% of all properties in the USA. Obviously a crash can hurt the other half but I feel like this is so different from 2007-2010 era. We still have realistic lending criteria, you can’t be a professional cat scratcher living in grandma s basement playing video games all day and get a loan.
The one weird thing none of us can foresee is everything the government is doing to all but control the economy. They flushed cash to prevent a crash, now they get the fed to raise rates to curb inflation. I wish that the success of our current market cycle could be legitimately and intelligently attributed to us, we the people- but if we get honest it’s the central banking system, the fed, and the executive branch of government (both parties) who do not want to lessen their control or their reputation as to what will happen.
And that (the government) scares me a little, and so to sum it up I vote buy, move forward, all that… but do it still with wisdom, caution and patience. I don’t think we are in any sort of bubble, but I fully do think we are in a weird new place where the dollar isn’t even being printed it is digitally created. The shift is similar to when 100’s of years ago society went from bartering systems to centralized currency. My hope is that owning assets remains in spite of basic fundamental shifts.

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
4y
@Greg R. I think "buy or wait" is a false dichotomy. This assumes "buy" means you walk outside your house and close on something today, and that's now how buying real estate works - even if you decided to move forward it could take months. Every deal should be evaluated on its own merits.
2 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
Make your money on the buy, that way you don’t have to time the market
2 Reply
Peter Morgan
Rental Property Investor · West Des Moines, IA · Member since 2018 · 447 posts · 64 votes
4y
@Rolly Weaver
Great point 👌 and I hear this a lot but in a red hot market I always wonder how a seller (motivated or not) would be willing to sell his property for anything less than his neighbors property which was sold through MLS with the help of an agent.
1 Reply
Greg R.
OP
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
4y
Quote from @Nicholas L.:

@Greg R. I think "buy or wait" is a false dichotomy. This assumes "buy" means you walk outside your house and close on something today, and that's now how buying real estate works - even if you decided to move forward it could take months. Every deal should be evaluated on its own merits.
Yes, that's why my scenario said buying within 3 months.
1 Reply
Greg R.
OP
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
4y
Quote from @Jason Mileshko:

I would say that real estate is always in season. Sure there are crashes and economic issues but if you buy intelligently then you should be fine. This means don't purchase property based on what you think that it will appreciate for in the future but rather what cashflow you can generate. Understand important metrics like debt service coverage ratio, break even ratio, etc. This will help you understand if your investment can stand up to a worst case scenario. It also helps if you have more properties because if one starts to do badly you can use the rest to carry it forward.

Thanks Jason. If we look historically, we see times that were great to buy, and others that were bad. I agree that it's possible to make a good/ descent buy in an unfavorable market. However, buying in 2007 vs 2011 were very different markets. That's just one example. Was it possible to find a deal at the top of the bubble and make money? Sure.
Let me clarify, I'm not saying that we're reliving 2008, I know we're not.
I see the consensus that anytime can be a good time to buy if you find the right deal, do research, etc. That's not what I'm asking. I want us to acknowledge that there are good markets to buy in, and bad markets. Why do you think that this market is either a good market to buy in or a bad market? What specifically about this market makes you think that?

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Greg R.
OP
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
4y
Quote from @Jason Wray:

Greg,
We are in a cycle as usual and it will not really break until 2024. You are going to see higher rates due to the artificially inflated real estate market that stemmed from COVID. People were scared and decided to pull money out of stocks and buy more real estate. You had more people moving out of the North East and in general and selling their homes to then go and buy all cash and in most cases above ask setting new markets. Any time the housing market starts to bloom the government gets greedy and wants a bigger piece of the pie. So they hedge up on rates and LLPA/GSE fee's so that the banks have to charge higher rates.
This is all politics and unfortunately this new party is hammering Gas prices, Interest rates, food costs, etc... Its not hard to go back and look at the previous (4) years and see rates were at an all time low. We also had a well balanced market growing at a realistic rate. I would not hold off on buying especially if you own any real estate now that holds enough equity to take out some cash for a Down payment. Just stay frugal and buy smart not getting into something that needs a ton of work that will hurt your pocket.

Hi Jason, may I ask why you think that this cycle will last until 2024? Is this based solely on the president and the assumption that someone else will take the helm?
1 Reply
Bud Gaffney
Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
4y
@Greg R. Wait until prices are higher???
BUY TODAY ! ! !
1 Reply
Greg R.
OP
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
4y
@Bud Gaffney, thanks for the reply. So your position is that prices are lower now than they'll ever be in the future?
0 Reply
Christian Beyer
Rental Property Investor · Phoenixville, PA · Member since 2015 · 119 posts · 61 votes
4y
@Greg R.
Great question.
All the people who buy are out there buying. All the people who are waiting are posting on bigger pockets.
Does that give you any indicator?
1 Reply
Andrey Rudenko
Real Estate Agent · Clinton, MA · Member since 2017 · 35 posts · 35 votes
4y
I have been studying the legend investor Sam Zell. One of his golden nuggets: maintain the staying power. As long as you have power to stay in the position (enough reserves, enough income to cover expenses and effective management) then any storm (that noone is really able to predict) can be managed through. So if you have staying power, then you could use the age old saying: don't wait to buy real estate - buy real estate and wait.
4 Reply
Rolly Weaver
Helen, GA · Member since 2015 · 96 posts · 68 votes
4y
@Peter Morgan.
You have to find the pain. Price isn't the most important thing for all people.
If you can offer someone a clean process, without the hassle of going through an agent/having to show.
At closing for a 6-plex I purchased from an older man with owner financing, his exact words were, "My problem has become your problem," with a laugh.
You look for those kind of properties.
3 Reply
Greg R.
OP
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
4y
Quote from @Christian Beyer:

@Greg R.
Great question.
All the people who buy are out there buying. All the people who are waiting are posting on bigger pockets.
Does that give you any indicator?
Not sure what information you’re using to make this statement. I just closed on a luxury STR less than 60 days ago.
1 Reply
Eric Bilderback
Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
4y
If I was to guess I would predict in five years people will have less access and choice when it comes to goods and services. Generally you would say that means real estate will go down. But the financial engineers have made it so prices increase even when there is a decrease in production. I think there is more and more pressure to dethrone the dollar as the worlds reserve currency, if that happens real estate prices can go much higher in dollar terms even if they decrease in real value.
That being said at the end of the day I don't worry about any of that (although I think its interesting) I just buy good deals if I can find them, so far so good. LOL
2 Reply
Eric Gerakos
Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
4y
It’s always a numbers game. If the numbers make sense, buy. Don’t buy if they don’t.....
0 Reply
Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
4y
@Greg R. I'm buying because I think inflation will continue for at least a few years, huge demand and no supply and the fundamentals are strong. We've purchased 7 houses this year. I want a few more duplexes in Austin and another STR also.
[email protected]512-888-9122
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2 Reply
Jon KellyPro Member
Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
4y
@Greg R. If you find a great deal then buy it! If you don't find a great deal then wait until you find one!
1 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Either buy RIGHT NOW or wait. My opinion only.....
1 Reply
Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
4y
No one knows the future but let's look at the current market and your situation. You asked should you buy in the next 3 months. Well, the market won't change much in this time frame. Regardless of what rates do in the short term if there is low inventory and nothing to buy prices won't go down. Simple supply and demand. If you are happy with the current situation and can hold the next 10yrs, buying makes a lot of sense because of inflation money printing, etc.

A lot of moving parts have to happen for prices to come down or some type of big drop in prices. Let's play devils, advocate, here. What can cause this? Rates are moving up per FED so let's assume they keep that story and raise. Inflation continues to rip up crushing the market. People can't pay for food, housing, basic essentials, rents because of a 20% increase.

What does this do to the general market? People spend less, look for cheaper housing. People stop traveling. Let's say families move into units and share housing and inventory goes up for rentals. Projected revenue now needs to be cut, lots of over-leveraged investors will be in trouble. STR market goes down because people travel less. Now they have to lower their rental rates. Projected returns based on today's rates are slashed and many operators will be losing money and bleed. Some operators will flourish always winners and losers.

The economy is now in trouble and job losses come in. People are laid off and now can't afford homes. They have to list and sell. Let's say lots of homes are listed and sit with no buyers. This is a process and can take 12-30 months of numerous price reductions, new buyers, new sellers, and new floor prices. Real estate doesn't just drop right away like the stock market. What you saw in 07-09 was an inventory spike because of lending and foreclosures. The market got flooded with homes all at once with no liquidity. The liquidity today compared to 07-09 is an insane difference.

So that's just a short bearish argument. A lot of things have to happen for the market to turn. Not saying it can't but it's a process.

On the bull side, let's say the FED raises rates. The market absorbs it and inflation gets in check. The economy continues to move up. Inventory stays the same as its current rate. In this case the status quo the market continues to rip up. I call this a "Lockout Rally". Buyers can't buy because they are scared and there is nothing to buy. If you look at the macro of the market. The cost of labor, materials, land to build homes are all going up. What do you think happens to prices?

I am always long-term bullish in real estate. I have no idea what the prices will be in the short term. I am also open to all possibilities and you have to as an investor. To me it's simple. Home prices can't come down without inventory. It can be just that simple. Until I see a change that's how I will view the market.
2 Reply
J Zev J.
CPA · Colorado Springs, CO · Member since 2016 · 413 posts · 258 votes
4y
It seems that with rising oil prices, the potential of stagflation and its impact on real estate might be another factor to consider. It probably won't hit right away, but it could be on the distant horizon.
1 Reply
Amy Raye Rogers
Real Estate Agent · Minot, ND · Member since 2021 · 131 posts · 223 votes
4y
If you live in a spirit of fear, you will not find success in this business.

There is always a bargain to be had. Repeat the Gary Keller mantra every day when you wake up, "is today the day I make a deal?". Someone is going to make one. It might as well be you!
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