Is the market going to go KABOOM?

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Is the market going to go KABOOM?

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

*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!!!

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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.  

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  • Ibrahim Yamini
    Member since 2020 · 101 posts · 32 votes
    6y

    If the housing market crashes won’t everything be on sale?

    0Reply
  • Nicole E Auquilla Maggio
    Member since 2020 · 1 post · 0 votes
    6y

    I think you are right and with the economic history of America we were due for this drop to happen at some point.  Now is the time to perfect your formats and get ready for fast growing money soon. 

    0Reply
  • Breann Jones
    Member since 2020 · 1 post · 2 votes
    6y

    Here is what makes me nervous (see picture!). I went to pay my mortgage and saw this advertised. I'm a newbie to all of this, but isn't the idea of not checking any of this stuff part of the reason for the 2008 crash? I definitely think a downturn is on the horizon that will affect various markets differently. But how do you best prepare for that? Everyone loves real estate when it's easy and the market is flooded with deals, but how do you survive the tough times? Especially starting out? 

    2Reply
  • Joe Cassandra
    Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
    6y

    What ultimately will happen...

    If we take a look at history of when we saw mass unemployment...1929. 

    In the Roaring 20's, house prices were rising at a rate of 60% in 8 years (much like we see now). Difference was...like 2008...mass financing and loose lending. 

    So there's no comparison, right? "Supply is low, real estate can't crash." 

    ...

    Right now, the market is propped up by low interest rates and the Fed buying mortgage securities from banks so banks don't have to hold them on their books. 

    We haven't seen a flood of foreclosures yet because 1) Forbearances 2) Foreclosures take 6 months or so

    Banks are hoarding credit reserves at their highest ever expecting problems in the next 12 months. Banks don't like having money sitting around dormant. 

    The reason they need it is for solvency. 

    I was talking to a banker a few days ago, and she was telling me a lot of their mortgagees (as they're a portfolio lender) are requesting forbearances. 

    I told her flat out: "No offense, Deb, but you guys aren't our friend. You're going to find a way to get your money no matter what the government says." 

    She responded "You're right, Joe. We're here to make money. We're not a charity business." 

    The more the government tries to let people not pay mortgages, the more pressure is put on banks to remain solvent...

    To do that, they tighten up lending (much like in 4Q 1929)...

    When they do that, stocks will likely take a hit. That collateral is then shot again. We already saw that happen in March when the markets tanked 30%. Many lenders became insolvent. So did businesses who relied on credit to float their business. 

    Eventually, real estate would then need to crash as there won't be enough buyers who will have money...and banks willing to lend to them...

    Then, sellers who can't pay their mortgage as unemployment stays high...

    Thus lowering demand and raising supply. 

    5Reply
  • Chris John
    Member since 2020 · 671 posts · 937 votes
    6y

    @Breann Jones

    At least it's for refinancing instead of purchasing, but that's a little scary.  haha.

    I remember around 2007/2008 my buddy told me (he was a lender) that I could live in a million dollar house for 6 months (or however long it took the bank to foreclose) because I had over a 700 credit score.  I was a teacher making 40k, but he told me we could "state" that I tutor on the side for 300k.  I don't remember how much the down payment was, but it might've been 0%.  I know it couldn't have been more than 5% because I actually had money to pull this off...

    Anyway, he was kidding about actually doing it (although I actually could have done as he described), but I remember telling my wife that the jig was gonna be up soon.  Crazy times, for sure!

    1Reply
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