Is the real estate bubble burst soon?

Rental Property Investor · Boca Raton, FL · Member since 2020 · 25 posts · 17 votes

So I am seeing and hearing a lot of chatter about the coming burst. Do you really think it’s coming soon? If so when? Do you see it affecting Florida terribly?

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Jenni Ellis

Property Manager · Member since 2018 · 174 posts · 185 votes

Hi @Leatha this is a great question. And one that should be answered in a couple parts. Last year many were predicting some level of real estate shift. If you look at history trends we are overdo for a dip. In a buyers market you normally see more than 7 months of real estate inventory. For a Sellers Market you see less than 5 months of inventory. A neutral market is around 5-7 months of inventory. Currently, (at least in Maryland) our inventory is 1.9 months. This is an astounding number. There are more people looking to buy than there are houses for sale. If you look at these numbers alone, we are definitely in a sellers market. Houses are going for higher than list price and selling in record time.

However, to add in the factor of Covid, AND the fact that we are overdo for a housing dip, it will be interesting to see what happens in the next several months. This is the time that the lump payments will be due on mortgages that were paused during Covid. That means people will need to come up with the FULL amount due from the past 3-4 months of payments (unless they worked out a payment plan with their lender). If people haven't properly saved, this could cause a large number of properties to go into delinquency and possibly foreclosure.

The one thing I know for sure, is that when the housing market takes a dip, even during the recession of 2008, our property management/investment company did well. And the reason for that is people still need a place to live. So if properties are foreclosed, and those owners need to find somewhere to live, they will be looking at rentals. In my opinion, if you aren't on the high end or low end of the rental spectrum, you will fare well. On the high end, those tenants may choose to downsize, and on the low end, those tenants may move in with family/friends. In the middle is where you will pull the greatest target market for rental prospects.

If you properly plan for the next dip, you will be ready to invest in additional rental properties, and find amazing deals!

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Jesse Paxton
Member since 2019 · 1 post · 2 votes
6y
@Leatha L. Luttrell personally, I think as long as the fed is printing at light speed and keeping interest rates low, we will see asset/house prices rise. Example is the Venezuelan stock market. Their dollar crashed but stocks went vertical. What I’m seeing right now in my midwest area is rising prices and houses going fast even in so-so neighborhoods. Take it all w a gain of salt though. Good luck!
2 Reply
Alvin Sylvain
Los Angeles · Member since 2018 · 464 posts · 471 votes
6y
I have read a couple of articles, one on Realtor.com, the other on the FreddieMac website. Both are saying pretty much the same thing in that over the past few months there is currently an under-supply of housing to demand.

Yes, people on the low-end, retail clerks, restaurant workers, etc., are seriously hurting from lack of jobs. But most in the middle on up still have their jobs, and now that they can work from home, they want a nice home that's worth living in. They don't want to put up with some over-priced cracker-jack dump just because it's close to work. They want a HOUSE with BEDROOMS and a YARD and DECENT SCHOOLS.

In the meantime a lot of sellers have been holding back. They look at the Covid situation and decide, well maybe we'll sell next year.

So, in the middle of what's been compared unfavorably to the Great Depression of the 1930's, we are seeing bidding wars on houses.

The situation today is completely unique in the History of Mankind. I used to think the market bubble was overdue to burst, now I'm not at all sure. Anybody who tells you they know what's going to happen in the future based on their astute observations of the past hasn't got a clue what they're talking about.

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Jake M.
Member since 2020 · 17 posts · 13 votes
6y
Bob Prisco. Nice narrative you have there, lets not think because it is negative. PS: LOL to you thinking I watch main stream media. Wallow in ignorance and complacency bias. Good luck with that genius.
1 Reply
Albert Ng
Rental Property Investor · San Jose, CA · Member since 2015 · 401 posts · 221 votes
6y
People have been asking this question in the last 5 years, and missed out on a big run up.
3 Reply
Jake M.
Member since 2020 · 17 posts · 13 votes
6y
Bob Prisco, PS: You telling me what to I should or shouldn't read. Typical wannabe liberal dictator.
1 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
6y
What really caused the crash last time was a rapid negative change in mortgage lending. Combined with an increase in supply of homes, especially foreclosures.

Right now, the supply of homes is very tight and mortgage capital is great. As a landlord, I've experienced the least amount of tenants moving - ever. Same for homeowners. Lots are withholding their plans, their moves, their listings because of this era of Covid. So the supply is low.

I expect this to change in time.

For some sectors of commercial real estate, we can see the future and it is a correction. Defaults on a certain type of commercial loan (CMBS) is reported to be way up. Leading the pack is hotels, nursing homes and also retail properties. New lending tightens, and the prices tumble.

On the street, I see restaurants that will never re-open. Hotels that have empty parking lots. And retailers that are shuttering.

Most of us on BP are investors. For flippers - product is tight for now. For landlords, some headwinds including tenants not paying.

For buying properties, this is a very dry time for me. Few opportunities and lots of frightening economic data. I am forced to remain on the sidelines.
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Juan Pardo
Member since 2020 · 201 posts · 118 votes
6y
This time the real estate bubble could burst due to tenants not paying their rents after they stop getting government checks.
COVID-19 will also hit harder over leveraged investors and those who were a bit too creative with their finances
1 Reply
Sara N.
Investor · Washington, DC · Member since 2014 · 60 posts · 26 votes
6y
Agreed with what others have already said. The market will continue to be tough for buyers as are there just aren't many inventories/houses selling on the market. And with COVID-19, I think that's further slowed down the construction--so even fewer new homes in the pipeline so current movers having fewer options to buy up, move and put their old homes on the market (for you to buy). Despite all this, if you really want to buy more properties, there is a will there will be a way (even if the deals aren't amazing as the last bubble.) Good luck. https://money.com/home-price-forecasts/
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Leatha L. Luttrell
OP
Rental Property Investor · Boca Raton, FL · Member since 2020 · 25 posts · 17 votes
6y
@Sara N. Thank yo for the advice. I am excited about finding the next investment and know that luck favors the brave. So onward and upwards ladies & gents. Best of luck to you as well.
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Leatha L. Luttrell
OP
Rental Property Investor · Boca Raton, FL · Member since 2020 · 25 posts · 17 votes
6y
Bravo Jake M. Love the citations
0 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
6y
i think a lot of people are missing one key metric - jobs. If the jobs do not come back, we are headed towards a dip. Will it be as bad as 2008, do not know but I continue to see price wars on homes due to the super low inventory. Once the inventory increases and many of these jobs do not come back I would recommend proceeding with caution. I am sitting on cash right now looking for deals and not really finding any as pricing is continuing to rise. I just don’t see it continuing based on the unemployment rate. We are artificially propping the economy up with all these stimulus packages
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Jake M.
Member since 2020 · 17 posts · 13 votes
6y
Leatha L. Luttrell, good to hear it was of some use.
0 Reply
David Avery
Flipper/Rehabber · Phoenix Arizona · Member since 2020 · 1k+ posts · 686 votes
6y
Times are great in the Real Estate market, Interest rates at all time low. Houses being built in Phoenix are everywhere and the houses are being sold with above multiple offers like in 3 hours!
Hopefully we will have the same smart business going for 4 1/2 years. Couldn't have a smarter business mind in charge!!!
Rents are high, which pushes tenants to buy. Jobs will come back, economy will be strong. The stock market and Lowe's and Home Depot are doing great. People are fixing their homes and are choosing to spend their monies on same.
It won't turn bad for 4 1/2 years. Tr won't let it!!!!
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