Is the market going to go KABOOM?

Karl B.

Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes

6y

I think prices will drop in most markets. I'm stacking cash and am in the process of listing my house in Los Angeles (realtor will have it on the market in roughly a week; I had a contractor rehab the outside and inside over the past few months).

I plan on sitting on that capital until I see some delicious deals!

7 Reply

Victor Ong

Developer · Los Angeles, CA · Member since 2020 · 90 posts · 50 votes

6y

I don’t think it’s just housing facing an adjustment. Other asset class such as equity and bond are also heading into an adjustment. Bond already defaulted if you look at the how the yield has compressed.

But i guess everything is relative. If you are buying a $150k house for yourself, then a $50k-$75k adjustment would hurt but given your income level you would still be fine. In the end, it is about your balance sheet and income on how well you can take a hit.

PS: we cashed out all of our properties and LOC to prepare for the nuclear winter.

Matt Jones

Real Estate Agent · Pensacola, FL · Member since 2014 · 379 posts · 307 votes

6y

I can't speak to what the overall economy and housing market will do but I was listening to a recent interview with one of the largest brokers and developers in Pensacola who is known for really digging into the market statistics and trends. He said that Pensacola has a shortage of inventory(definitely true) and that it would take 3-5 years for inventory to catch up with demand. If those 17 million unemployed people don't go back to work fairly quickly that will have a long term impact on our economy but assuming we don't head into a major recession it's unlikely that prices plummet. Could they stagnate or drop a little? Sure. A major price drop seems very unlikely though. I have put 4 homes under contract in the last week. None of them lasted more than 3 days on the market and that is only because the owners were sorting through 3+ offers for each which means 2 or more buyers for each house that went under contract are still looking. I believe in setting your buying criteria and sticking to it(don't overpay because the market is hot or you feel impatient) but if the right property hits the market now and meets your criteria I wouldn't pass on it in anticipation of getting a 2008 type deal 6 months from now.

21 Reply

Joshua Adewuyi

Rental Property Investor · Mint Hill, NC · Member since 2020 · 5 posts · 8 votes

6y

Hey Kevin, while I don't have a lot to say about your market. I don't believe we would see a repeat of the 2008 crisis this time around.

1. The CARES Act protects FHA, VA and USDA loans until August 31, 2020

2. The Accts further states, If you experience financial hardship due to COVID 19, you have a right to request and obtain forbearance up to another 180days (total 360 days- Earliest March 2021).

3. As congress works on another around of cash patent I expect the mortgage payments to be tacked into the bill.

4. Lastly, 2008 was a financial service industry led crisis while 2020 is a Pandemic induced shock. Once the COVID case numbers flatten out more folks will get jobs especially jobs requiring people direct contacts. Will, there be deals to obtain yes, will it be a repeat of 2008 I say no

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Tom Wagner

Real Estate Agent · Minneapolis · Member since 2019 · 338 posts · 219 votes

6y

Originally posted by @Patrick Doyle:

I also live in and Invest in Pensacola. Yes. I do forsee a small housing crash and will be waiting to jump on the deals that arrive.

Is there something about Pensacola that makes it harder hit than the rest of the country by unemployment?

0 Reply

Dion McNeeleyPro Member

Rental Property Investor · Port Orchard, WA · Member since 2018 · 116 posts · 123 votes

6y

Seems there are too many people looking for a place to park cash. This is one of the reasons people are buying deals that have negative cash flow. We are a long way off of supply outweighing demand.

0 Reply

Austin Mudd

Real Estate Agent · Los Angeles, CA · Member since 2015 · 149 posts · 75 votes

6y

Originally posted by @Karl B.:

I think prices will drop in most markets. I'm stacking cash and am in the process of listing my house in Los Angeles (realtor will have it on the market in roughly a week; I had a contractor rehab the outside and inside over the past few months).

I plan on sitting on that capital until I see some delicious deals!

Good for you. Inventory is very low right now.

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Russell BrazilBusiness Member

Moderator

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

6y

You know what you do if prices were to fall.....you double down and buy more. Trying to predict prices is a fools game.

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10 Reply

Steve Sellers

Member since 2017 · 14 posts · 19 votes

6y

A few points (based on data) to keep in mind here amid the doom and fear.

https://siepr.stanford.edu/research/publications/how-working-home-works-out?fbclid=IwAR3JHNVOvIvfeDiM7t58MIYwZhdqvt-_JYby10OpfI0mZjrYiWAq6MT2tTI

* 70% of jobs can have an element of WFH.

* High income quartiles are almost all WFH.

* 60% of college educated adults can WFH.

The facts don't lie. People in a position to buy a house are the people best positioned to have a WFH compatible job, thus stable income and less uncertainty. Combined with record low rates, this groups buying power has never been greater. It wouldn't be a surprise that in nice neighborhoods almost every household would have a stable paycheck enabled by WFH.

Try to understand the situation before spouting fear, uncertainty and doubt.

8 Reply

Bryce R.

Member since 2020 · 8 posts · 13 votes

6y

I'm stacking gold and silver. When they are at their peak, real estate will be at its bottom. These are the only two asset classes I've followed for 19 years. They work inversely generally speaking, and each swing is worth 3-20x your money. Currently I'm completely outta real estate except for my primary residence, and have all my investments in precious metals and related assets.

4 Reply

Chris John

Member since 2020 · 671 posts · 937 votes

6y

We're refinancing our rentals and pulling cash out. As much because we've been lazy in utilizing that money and rates are low as anything else. Having said that, we're super conflicted on our next move. We initially decided to wait 6 months or so to see if anything dramatic happens (not gonna lie, my spider sense is tingling - doesn't mean I'm right) before we deploy it. But,... the 4-plex that I've had my eye on in my hometown has come up for sale again and I really want it. haha. So, we'll see...

The real reason I'm commenting on this thread is because it looks like @Keenan Finkelstein quoted himself. haha. Just giving you stick and no hard feelings.

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Brian Singh

Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes

6y

I did a similar thread bay area crash 2020. Look at how I went about looking at bay area demand destruction and the pushback I got from local investors. It was a fun and interesting discussion .

Will price correct yes, will it crash ( more than 20%) depends on the market.

Crash market uptil now that are going to feel it

1. Las vegas
2. LA
3. SF and nearby area
4. Seattle
5. New York

rest is local

Kevin McGuirePro Member

CTO of BiggerPockets · Seattle, WA · Member since 2019 · 178 posts · 178 votes

6y

@Joshua Adewuyi I agree that’s it’s extremely difficult to predict the outcome given the unprecedented factors at play, and I also agree it’s incorrect to compare this to 2018. 2018 had two unique components to it: higher and higher risk loans were given out, and the financial industry committed fraud by misrepresenting that risk, exposing the global financial industry that in many cases were unaware of the true underlying risk of the products they had bought. The market can’t price in what it can’t see. What’s difficult for me to get my head around today is the combined impact of widespread unemployment with trillions of extra dollars sloshing around, and low interest rates propping up valuations. On the positive side, it’s a great time to lock in a fixed rate mortgage, and I trust the long term intrinsic value of real estate more than I do stocks. Best to price in extra vacancy reserves though.

4 Reply

Juan Pardo

Member since 2020 · 201 posts · 118 votes

6y

Originally posted by @Kevin Parekh:

*This thread hasn't been written to instill fear or troll other investors!

So I am a new investor in the market (in Pensacola, FL). Important to note, that even though I have a professional degree and make over $100k a year, I have not bought a house bc I was waiting for the market to slow down. Needless to say, houses do not stay on the market very long in PNS. Most low income houses ($100-150k) stay on the market for 15 min... not very long. Larger, more expensive house ($350k+) stay on the market for 2-3 months.

I have a good chunk of money saved for a cash offer and a withering 1031 that I am pondering to trash. Why? I really think the market is gone wildly out of control in PNS. United Airlines just released information about laying-off 50% of their workforce, 17 million are on UE, and the $600 UE is about the expire... and the leads me the conlsuion that many houses may be on the market in 6 months.

What do you think is going to happen? Are you trying to save cash for the impending housing crash?

Thanks yall!!!

I think the debate should not be centered on timing the market but on working with the information we have now to anticipate what the market might do, and make rational decisions. Following this line of thought, it is likely that prices fall, as you are anticipating. It is all a matter of waiting a few months.

It would be silly to just jump into the market and buy properties that are illiquid, taking into account that the economy gets worse by the hour, and many companies are bleeding cash and struggling to survive.

3 Reply

Scott Matthew C.

Real Estate Broker · MI · Member since 2014 · 594 posts · 183 votes

6y

@Kevin Parekh If you're currently marketing, I suggest being mindful of leads coming in. An example: If your marketing is geared to non-owner-occupants and it's getting you leads, change nothing. If the leads stop coming in, then it's time to ask why that is. Yes, be mindful of market conditions, but if you have a sound marketing system(s) that provides metrics/analytics, I will base my concerns on what I can analyze from my marketing campaigns. Not on what everyone else is saying.

I hope that makes sense.

Phil Wells

Real Estate Agent · Spokane, WA & North Idaho · Member since 2017 · 135 posts · 170 votes

6y

@Kevin Parekh In the eternal words of Malcolm In The Middle - "Yes, no, maybe, I don't know, can you repeat the question?"

You can't time the market plain and simple. Just because one company (united airlines) is laying people off who is to say Amazon doesn't relocate a headquarters there in the near future, for example? That said if your local economy is utterly dependent on once industry (Detroit in the 60s) then absolutely play it safe.

Buy something that cash flows now and in 10 years time you won't be asking whether you bought at the right time but why you waited so long to buy.

5 Reply

Jeff Small

Investor · Sewell, NJ · Member since 2016 · 68 posts · 48 votes

6y

@Kevin I am not an expert by any means. I have been doing this since 1976. I am under agreement on one property to sell it only because eternity is to me to buy it. I think 12 months from now we are looking at a whole different economy and I don’t mean better. I would wait but I am a conservative person. Best of luck whatever you decide.

Colin Reid

Investor · St Petersburg, FL · Member since 2014 · 231 posts · 221 votes

6y

Originally posted by @Tom Wagner:

Is there something about Pensacola that makes it harder hit than the rest of the country by unemployment?

I'm not in Pensacola but I am in FL, in the Tampa Bay area. Florida, in general, relies on tourism for a large segment of the economy, and the height of the shutdown was during spring break. I have friends in the tourism industry, and they're hurting bad. Their biggest money making season is spring break and they were forced to close. I'm sure it's hitting P-cola, too.

Juan Pardo

Member since 2020 · 201 posts · 118 votes

6y

Originally posted by @Phil Wells:

@Kevin Parekh In the eternal words of Malcolm In The Middle - "Yes, no, maybe, I don't know, can you repeat the question?"

You can't time the market plain and simple. Just because one company (united airlines) is laying people off who is to say Amazon doesn't relocate a headquarters there in the near future, for example? That said if your local economy is utterly dependent on once industry (Detroit in the 60s) then absolutely play it safe.

Buy something that cash flows now and in 10 years time you won't be asking whether you bought at the right time but why you waited so long to buy.

It will not cash flow if tenants continue being unemployed due to COVID and stop paying.

Darius Ogloza

Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes

6y

There has never been a time when an anecdotal case could not be made for waiting forever to buy your first house. Just saying.

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Michael K GallagherBusiness Member

Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes

6y

I don't see a substantial "crash" happening in my area of Columbus OH for a couple of reasons. 1) We are not an expensive market to begin with. Therefore the cost of housing is not as large of a percentage of people's income as in say SF or NYC. 2) We are a huge manufacturing and logistics hub. So while some industries like food/dining/Auto might see a short term draw back, other industries like logistics, data centers, higher education perhaps will be there to expand and pick up the slack. 3) As an investor with a property that rents for about or under average for the area, while I might see a little bit of turnover due to people's changing circumstances here in the coming months, I expect we will see what we did back in 08 and that people who go into foreclosure will still need a place to live and will turn to renting at about my rent level.

So my opinion is that yes I can see there being a draw back, but I think it will be localized to several specific markets, most likely the coasts where we are already seeing a negative population growth. But I also echo what many others on here have said, trying to time the market is a gamblers game. If its a good deal you should be doing the numbers to account for situations like this, and therefore it's a good deal in any market.

Kevin Parekh

OP

Pensacola, FL · Member since 2013 · 22 posts · 18 votes

6y

Originally posted by @Darius Ogloza:

There has never been a time when an anecdotal case could not be made for waiting forever to buy your first house. Just saying.

I'm already well into the game- new but not a green horn. I should have been more specific and said that I was in the market for my first "personal" house. I invest in MH, vacant land, and most recently in foreclosures. As a prudent investor, I think I am going to stack cash for then next year and see what happens, unless a sweet deal comes about.

That being said, I really appreciate everyone's amazing help and responses. I am part of dental forum and routinely get rude, off-topic responses. The sky always seems to be "falling" in the dental world, but not here.