When Will We Hit Bottom?

Real Estate Agent · San Diego, CA · Member since 2020 · 3 posts · 0 votes

When does everyone think the market will start dropping and for how long?

I work in the San Diego Market, and we haven't seen any sales comps yet to support depreciating prices. I believe that since interest rates are still extremely low, that is the only thing that is still driving this uncertain market. A lot of my investors I have worked in the past have stopped looking for deals, but the big, big players in our market are still bullish and looking for under market deals.

There have been some sharks who have written lowball offers on some of my listings, and other agents in my office's listings as well, but we think it's still premature.

When will the impact of record unemployment, bankruptcies, loss of revenue, etc. be felt?

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

We should hit the bottom somewhere around 2010.

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y
We should hit the bottom somewhere around 2010.
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Brian G.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Jason Lee as @Russell Brazil points out, we’ll know the bottom only AFTER we have several years of hindsight and data. No one knows until we look back. Hindsight is 20/20. Last time after the GFC it took approx 2 YEARS from the beginning of the recession to the bottom of the the market (2008-2010).
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Brian G.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Jason Lee my guess is 12-18 months before the impact of the CV fallout is known/felt.
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Jason Lee
OP
Real Estate Agent · San Diego, CA · Member since 2020 · 3 posts · 0 votes
6y
@Brian G. Great point, I do understand that no one has a crystal ball, and knows the answer to my questions, I just wanted to hear your thoughts and calculated predictions.
0 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
6y
@Jason Lee I hope “WE” don’t hit the bottom. You go right ahead if “you” insist.:)
0 Reply
John D.
Investor · Wake Forest Area NC · Member since 2020 · 42 posts · 70 votes
6y
Guessing, projecting and debating is great. When you use those to "call the bottom" you are likely "catching a falling knife." Wow, two of the tiredest expressions we hear.
As many members already stated, taking action based on predicting market highs and lows is a dangerous and usually short lived past time.
If a property fits my investment parameters I buy it, regardless of market psychology. Using the right parameters and being disciplined protects you from emotionally driven markets under most circumstances.
3 Reply
Vincent A. Cipollone
Investor · Washington, DC · Member since 2020 · 15 posts · 24 votes
6y
Just a quick note, I didn't look up specific figures for this. Also, I'm more well-versed in personal finance as opposed to real estate.
On Christmas Eve 2019, stocks took a huge dump. It was one of the largest one-day drops in the ten-year bull market. What was the reason for it? I don't remember and I don't think there was one thing that caused it. It turned out that Christmas Eve was the bottom in that short-lived drop. However, while we were opening our presents, we didn't know how long the drop was going to last. Some thought it was "THE" drop. Turns out they were wrong.
Nobody knows when we're going to bottom out or even IF we've already bottomed out (depending on the market, of course). Much like stocks, the best thing to do is stick to YOUR plan that you had before all this happened. Things may be different now, and you should certainly see how the market you're operating in has been affected. However, most of the experts say that this is not the seismic shift that 2008 was.
Ultimately, you're going to do whatever it is you want to do. Focus on the deals that make sense now and will continue to make sense. People are still going to need a place to live. If anything, this is a great reason to up your vacancy reserves.
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Account Closed
Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
6y
This is a pretty uneducated comment, I may be wrong... But it feels like most of the unemployment hit of COVID was at retail/foodservice/hotels/etc, which aren't always large homebuying populations, and most business failures are smaller businesses with smaller number of employees.
My market was hot before, it's completely bananas now. A friend is currently trying to buy a house (retail buyer) and basically anything reasonable is in contract before he can even get one of the few appointments. Demand is very high, supply artificially low (sellers keeping their homes off the market to maintain social distances) ..
As long as interest rates are low and typical retail buyers feel secure in their jobs, I don't think we really will have much of a bottom... at least in areas like mine where average buyers can afford homes.
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Justin Thorpe
Member since 2020 · 437 posts · 675 votes
6y
@Jason Lee
Normally the impact happens when all buyers disappear. Right now the market is full of buyers. Funnily enough my broker contacts and I have been looking at property deals in Manhattan and SF and they have started to get interest even from overseas buyers!
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Daniel C.
Rental Property Investor · NH · Member since 2018 · 50 posts · 28 votes
6y
Real estate is local, but as far as I can see..
Supply is low, and new demand is not being met.
Interest rates are already low and going down.
Lending is tightening based on some of the concerns you pointed out.
Prices didn’t drop because supply fell as fast or faster than demand during the lockdowns. As things open up, rates will continue to cause demand. Low inventory will continue to throttle supply. I expect prices to climb.
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Joe Cassandra
Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6y
As others pointed out, if there's a bottom in RE, it'll happen in 12-24 months.

Best way to track if something is happening is to watch inventory and DOM.(Zillow actually gives this info for free).

Any foreclosure wave that would happen would take 12 months to materialize due to the lengthy process of foreclosure and how buyers can kick it down the road (filing for bankruptcy being one).

I think we'll see an impact.

While @Account Closed is correct, many of the job losses are in service based industries, they provide a nice chunk of consumer demand...meaning if they don't spend, executive job cuts would hit as well. Many executive pays have been cut, companies like Uber are shedding 3,000+ jobs (not drivers of Uber, actual behind-the-scenes workers of Uber).
At some point, these millions will run out of money and lower consumer consumption.
That'll take 12+ months to play out.
3 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6y
4/12/2020
1 Reply
Joseph ODonovanPro Member
Property Manager · Ridley, PA · Member since 2017 · 427 posts · 449 votes
6y
@Jason Lee Real Estate is local. Therefore I can only speak for the Philadelphia region. As long as interest rates stay near Zero, I don't see a downturn. Residential Inventory here is low, demand is steady. The Fed is doing everything in it's power to keep credit flowing. Until then, I'm an optimistic. On the hand, commercial real estate not so much.
1 Reply
Michelle Fenn
Real Estate Agent · Cleveland OH · Member since 2015 · 213 posts · 275 votes
6y
Supply is low and there is demand for those with jobs and working from home. Shelter in Place has pointed out the need for more space, or at least a home office with a door that you can close.
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Whitney HuttenPro Member
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Jason Lee I'm not an economist, but I love reading the reports! Your question has many answers. If we are talking the stock market, I personally don't think we've seen the bottom yet... I think that will hit in late Q3 / Q4 as stimulus runs out and the corporate lending bubble fully takes shape.
If we are taking the housing market, I think that is very local. Some markets are overpriced and exposed to industries that were the hardest hit in this pandemic and by oil (let's not forget about the oil crisis!). In general, I feel that housing will hold, but I've seen some very interesting data where markets like Denver and Seattle could see ~7% declines. This is all in hindsight too.
If we are talking about the effects of unemployment and bankruptcy, I think that hits in maybe Q1 of next year as it will take time for properties to be foreclosed on after the forbearances run out. Though I question how big fallout will be as the government is doing what they can to keep that from collapsing quickly.
My question in all of this is how will banks fair as we move through this?
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Scott Kimberly
Cheshire, CT · Member since 2018 · 87 posts · 60 votes
6y
I think it's very hard to guess when the bottom is because the markets are entirely divorced from reality.
Unemployment is 20%-25% and the market keeps moving right on up.
Personally I don't think the bottom will be until a few months after the mortgage deferments end. As far as I've heard, once it's over, all of your deferred payments will come due at once. There will be a rash of foreclosures and refinances. Depending on how big that mess is, or if its a mess at all, will dictate the bottom.
Of course, as others have said, there isn't really any way to know while it's happening.
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Dennis Cosgrave
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
6y
I don't believe we will see a bottom. Inflation is going to kick in with all the trillions in money printing by the Fed. I think we are likely in for a period of stagflation, inflation with higher than normal unemployment. As such, home prices will increase but the question is will the inflation in home prices keep up with the inflation rate in the economy? That remains to be seen. It will probably take several years for the economy to fully recover. Mortgage forbearance will cover 18 months of that, so the 2 year period following that should be interesting.
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Tom Kastorff
Rental Property Investor · Las Vegas, NV · Member since 2014 · 137 posts · 118 votes
6y
Originally posted by @Brian G.:
@Jason Lee my guess is 12-18 months before the impact of the CV fallout is known/felt.

Agree. Need to see UI benefits stop overpaying people, forbearance extensions stop, eviction blocks lift, foreclosures hit, to really see how markets are affected. Half your neighbors could be sleeping on eggshells for all you know. I know a couple neighbors that have gotten really close to losing their businesses or homes, that surprised me (ie not young people, folks I expected to have safety nets in place).
As everyone else has mentioned, this is often hyper-local. Yes SD hasn't seen much movement yet, mostly because inventory is extremely low. I live in a decent higher-end fast-moving property neighborhood and inventory is low, 7 fig props are mostly sitting or dropping (and some have just gone off market), and there are not many lower-priced homes that typically move quick. Stagnation / holding pattern.
Las Vegas certainly has a whole different feedback loop. A third of their workforce is in deep trouble. DOM is mounting, properties are coming online daily.
Vacation rental towns are also hurting badly (think just in CA - big bear, mammoth, palm springs examples)- thousands of Airbnb owners have been low-no revenue for nearly 90 days now due to CA state/governor mandated SIP and lockdowns. The bottom is not even close in these markets. I've been eyeballing these towns for possible STR props for a while, and wouldn't even start to throw lowball offers yet, inventory is high, DOM high, prices will fall hard. Lot of blood in the water yet to come.
A lot depends where you live and/or where you want to invest.

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Austin Mudd
Real Estate Agent · Los Angeles, CA · Member since 2015 · 149 posts · 75 votes
6y
My opinion is that the market will face major headwinds starting 2020Q4

My (probably incorrect) predictions:
- 2nd wave of the virus hits beginning in Q3 (this is a near consensus view among the medical community). My base case assumption is that there will be no vaccine until 2021Q2
- Unemployment doesn't improve in time the 2nd wave hits and remains over 10%... consumption erodes (70% of GDP is consumption spending)
- Corporate defaults lead to further economic weakening
- Commercial real estate (office/retail/hospitality) suffers as borrowers can't refinance or sell at their expectations
- Class-A multifamily suffers in markets with a lot of supply. Airbnb owners are forced to rent their listings long term, causing rent growth to decline.
- Class B/C multifamily suffers as well once unemployment benefits run their course. Those doing value-add deals can't achieve their proforma rents. Those levered at 75-80%+ get crushed, especially those without stringent renter qualifications.
- Mortgage lenders tighten their lending qualifications, leading to a slow down in SFR sales. SFR price growth falls and starts to decline as borrowers cannot obtain mortgages and unemployment forces people to dial their spending back.
I don't know why people are so bullish. I think if you are a seller, you need to get out NOW before the chaos truly begins. Remember, most of the deaths from the 1918 flu came in the 2nd wave. Considering how sick and tired everyone was of the restrictions set forth for public safety during the 1st wave, I assume people are going to take the 2nd wave less seriously and the repercussions will be greater.
5 Reply
Minna Reid
Real Estate Broker · Jacksonville FL & Middletown CT · Member since 2008 · 1k+ posts · 632 votes
6y
There is no way to avoid an impact on the housing market from the current mass unemployment/business losses and failures. It won't come immediately - I would say the problems will mostly appear 6-24 months from now. Many sellers have not listed in the last few months as they normally would, and in the meantime lenders have been tightening up guidelines. There are currently a lot of loan workouts ( I read 8% of all loans are in forbearance currently) which will lead to defaults as courts open up and resume foreclosures and back payments become due. Eventually a flood of backed up listings and new default inventory will meet with the new reduced pool, and things will take a downturn. How bad it will be, will be market specific. However - RIGHT NOW - things still look good. If I needed to sell I would do it right now, before the market starts to turn. It's only a matter of time.
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Casey Powers
Las Vegas, NV · Member since 2018 · 403 posts · 474 votes
6y
I think in Las Vegas we will start to see it around end of the year / early 2021 as unemployment remains high and people really start to realize many of those jobs aren't coming back. Right now people are feeling too comfortable with the unemployment paychecks and the idea that their jobs are suddenly just going to call them back soon. Even when we are allowed to fully reopen, it's not going to just magically bounce right back. It will take a few months for the reality of the unemployment situation to finally sink into the public psyche, and when that happens, we will start seeing the fallout. No one can possibly predict the "bottom" or how long that will take. Or even if there will be a "bottom". Who knows, the government may just keep printing money to keep people spending for the next four years, so **someone** can keep pretending he's great. LOL
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Steve Mandelbaum
Developer · Jacksonville Florida · Member since 2015 · 57 posts · 39 votes
6y
We are in a weird little bubble now. The stock market is driven by currency manipulation, QE. The fed is printing money faster than even they can spend it. How can a stock's revenue fall by 30% - 50% and the valuations still rise? It makes no sense. Stocks should be valued based on how much they earn and/or growth potential. I am not convinced of either. There are a few winners and their prices have been rewarded.
Unemployment is being subsidized by the fed, though all its lending programs to business and the $600 a week unemployment benefit.
The plan is the training wheels come off slowly and the economy returns to a sense of normalcy. Not sure we don't hit some bumps in the road, but there will be no "BOTTOM FIRE SALE". The mortgage industry will be backstopped and the fed will not allow massive foreclosure. They have mandated forbearance. They are not going to then go back and say, we changed our minds give us your house. We are going into 90 days delinquent, the amount of time mortgage companies start to file foreclosures. Mass foreclose did not work out well last time they will not let that happen again.
After the world is open for business again, I see the economy starting to recover at a measured pace.
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Marcus Johnson
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
6y
@Jason Lee
There are companies such as HD, Target, Walmart and Amazone that are prospering. Once the facist allow businesses to open, economies will flourish again. Stop the tyranny.
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Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
6y
There is no real bottom...just interruptions, pauses, and hiccups. Even with the anticipated challenges coming in the Retail and Commercial segments, real estate investors will do what they do best: renovate, reinvent, and innovate new purpose for those properties. With every downturn comes new opportunity. With every up market, there is a good buy. It doesn't pay to time the market. It's time for us to change our thinking and our approach to what we buy and how we use it for the greatest ROI.
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Avery CarlBusiness Member
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
6y
It's difficult to say, but it's definitely more of a micro question than a macro one. Some areas of the country are already open for full business, while some are still on safer at home recommendations. The areas that are on safer at home orders for longer are going to have longer stints of mass unemployment, whereas the ones that are open for business are already seeing a large percentage of those who filed unemployment back to work and earning income again.
This is just my opinion and I certainly am no economist nor epidemiologist, but if things continue as they are with no surprises, I don't think the bottom will be too far down.
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