Upcoming Housing Crash?

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
5y

2015 - Is this a bubble? https://www.biggerpockets.com/...

2016 - Thoughts on the next housing crash https://www.biggerpockets.com/...

2017 - Housing Bubble Crash https://www.biggerpockets.com/...

2018 - Housing Crash in 2018/2019 https://www.biggerpockets.com/...

2019 - Are we heading into the next real estate market housing crash https://www.biggerpockets.com/...

2020 - Housing Market Crash https://www.biggerpockets.com/...

[email protected]301-893-4635Podcast Guest on Show #192
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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    All these youtuber has a new video of stock market crash/real estate crash/economy crash every month or so. They're becoming better at it. 

    19Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Carlos Ptriawan If you actually watched the video, there is a lot of actual inventory data that supports his opinion, which many share. Also he's not a "youtuber", the guy has a ton of industry experience. 

    23Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y

    2015 - Is this a bubble? https://www.biggerpockets.com/...

    2016 - Thoughts on the next housing crash https://www.biggerpockets.com/...

    2017 - Housing Bubble Crash https://www.biggerpockets.com/...

    2018 - Housing Crash in 2018/2019 https://www.biggerpockets.com/...

    2019 - Are we heading into the next real estate market housing crash https://www.biggerpockets.com/...

    2020 - Housing Market Crash https://www.biggerpockets.com/...

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    119Reply
  • Ranga Narapuram
    Member since 2021 · 1 post · 14 votes
    5y

    As long the interest rates stay low and the fiscal stimulus is in place, there is no danger to this rally or boom. There is too much liquidity in the system for a crash to take place

    14Reply
  • Jonathan Mueller
    Real Estate Agent · Park City, UT · Member since 2016 · 113 posts · 112 votes
    5y

    @Minna Reid all these markets have seen significant appreciation, most of these troubled homeowners can probably sell for what they owe. I think his numbers are off a bit as well. This guy has been putting out market crash videos for years, even a broken clock is right twice a day. Same goes for market cycles.....he'll be right at some point, but will it be this year or in 5?

    19Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Jonathan Mueller I think within the next year or two, unless there are more extensions to the moratoriums. I dont usuallly listen to gloom and doomers, but what I found interesting was that in this video he actually compiled all the forbearance/late data from various sources. Numbers don't lie. I've suspected all this but have been unable to gather all the numbers before. Its harder than you think.

    5Reply
  • Jonathan Mueller
    Real Estate Agent · Park City, UT · Member since 2016 · 113 posts · 112 votes
    5y

    @Minna Reid on his numbers, he said "borrowers" i would imagine a lot of those are co borrowers, 2 people on the loan, so maybe cut down his numbers quite a bit just with that. Also I know quite a few people that took forbearance on their mortgages because it was offered to them and just tacked onto the back of their loan. They could start paying their loan tomorrow again without any issues.. And as you can see on bp, there are a lot of investors here that are eager to eat up inventory coming onto the market. Not to mention all the non investors who have been working from home and saving money, unable to travel or eat out or go out to the bars, waiting to buy a home . I could be totally wrong, I just don't se

    15Reply
  • Jonathan Mueller
    Real Estate Agent · Park City, UT · Member since 2016 · 113 posts · 112 votes
    5y

    @Jonathan Mueller I'm also an eternal optimist....

    5Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    5y

    I like Ken McElroy. He's smart, experienced, well spoken, well reasoned, and respectful of those who disagree with him. I like his YouTube channel, I watch every video when they come out, including when this one did! He has massively more experience in real estate than I do, and more than the vast majority of people on BP. He's not some random YouTuber, he is the real deal.

    But - He has also been calling for a market crash for a number of years. I originally learned about him years back when I saw him speak at a seminar. Specifically, he spoke about why he felt the next correction was right around the corner. That was a good number of years ago. He had a lot of very good reasons for expecting a crash then, too.

    In my opinion - the Biden Administration is simply never going to allow the GSEs to foreclose on that many homeowners. They'll do whatever they need to do to prevent that. We will not see the massive forbearance-related influx of inventory to the market. I hope inventory levels recover to appropriate levels, but I do not think it will be a result of a wave of foreclosures.

    24Reply
  • Vasyl Levchenko
    Rental Property Investor · Chicago, IL · Member since 2021 · 24 posts · 30 votes
    5y

    @Minna Reid

    I am confused about today's situation too, to be honest with you. And I think that I am not alone.

    By all textbooks it feels like a bubble is about to burst:

    1) We have been in a cycle for a very long time now, so it's hard to believe in another upswing at this point, which means we are probably near or at the peak.

    2) Stock and real estate investing became hip, everyone's doing it! Robinhood and BP

    3) Repeated interventions in the natural market cycles by the Fed created a lot of fake numbers in all parts of the economy

    But! If the inventory is as low as everyone says and lending is still pretty conservative I can not really imagine where is that crash going to come from?!

    8Reply
  • Bill F.
    Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    5y

    @Minna Reid did you know the median family size in the US is 3.15 people? Second question, when was the last time you saw .15 of a person? Unless you frequent particularly grizzly crime scenes, most likely never. That same logic applies to the video. He falls into the flaw of averages, along with assuming linearity. 

    He treats the US RE market as a monoethnic bloc, which it isn't.  We know there are oversupplies of houses all over the rust belt and drastic shortages all over California. By only looking at aggerate data he has glossed over the realties of the situation. Even if what he says comes to pass, it won't happen in a uniform nature, a la 2008, like he insinuates. The increases in supply will fall disproportionally to where more ppl are in forbearance. The impacts will be felt in the places that not only have lots of forbearance, but limited demand, so generally not the coasts. 

    A lot of this confusion is due in no small part because he misunderstands what drove 2008, which wasn't a housing crisis, but a credit crisis centered around the housing market. There is a national market for housing debt, there is not national market for housing. 

    He also misinterprets the Months Supply, which is a ratio of homes for sale to homes sold. Since that measure has two parts, a change can be driven by, one, the other, or both. In this case if rate at which homes are sold increases, maybe due to low interest rates, then the supply will go lower, even if the same about of homes are listed. 

    22Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Ranga Narapuram Yes exactly - government is artificially propping up the market now. That is not something they can do indefinitely. 

    2Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Jonathan Mueller I agree - I think his estimates of 3.3 mil in default with 50% to end up on market is high. Most defaulters end up sorting things out, at least temporarily. But the numbers we cant see yet are those who are surviving off the increased unemployment, the fallout from the businesses that have closed, and we cant see how many landlords will sell after this due to troubles caused by the eviction moratoriums. There will also be more migration from some states to others that is not happening right now. Very market specific though - some will fare better than others. But inventory is coming - no doubt about that.

    0Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Vasyl Levchenko The inventory will come from held back REO, new pre-foreclosures, landlords that can finally evict, sellers that have gotten over their covid fears, state to state migration, forbearance/loan mod failers that give up and sell.

    2Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    5y

    I saw this video a few weeks ago. Ken is smart and he owns/manages more doors than most of us however it's near impossible to predict what year it's going to happen let alone what quarter. Ever since I joined BP roughly five years ago there have been threads of this sort.

    All we can do is prepare by being ready with cash on hand as well as owning investments that will benefit due to the money printing and certain inflation that will come. 

    7Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Bill F. I agree that markets are local 100%. I work two vastly different markets - CT and FL. You couldn't ask for more polar opposite states. I have different expectations for both. Have to disagree on the market supply though. That is very easy to measure. 1-2 months inventory ( which I see in both my markets right now) is a clear sign of severe imbalance, which will be corrected by significant new inventory.

    1Reply
  • Vasyl Levchenko
    Rental Property Investor · Chicago, IL · Member since 2021 · 24 posts · 30 votes
    5y

    @Minna Reid

    All of these things can not happen simultaneously. In precovid Chicago it took 6 month to evict and 2 years to foreclose, I'm sure other big blue cities had a similar timeline.

    Now you will probably have to double that time.

    Let's say they lift moratorium tomorrow, red states will be moving through the process much faster, blue states will take the longest.

    So there will be no critical mass hiting the market at the same time.

    4Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y

    I saw a YouTube video said crash was going to happen early 2020

    saw another said later 2020


    there will be crashes no one knows when 


    you can make money in all sorts of real estate markets.   I’m not concerned 

    4Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Vasyl Levchenko You're only talking about REO which absolutely takes time. But there's a lot more than REO on hold right now.

    2Reply
  • Tucker Cummings
    Investor · Raleigh, NC · Member since 2019 · 433 posts · 743 votes
    5y

    I swear I see a new thread about housing crashes every week. Is it going to happen? Yup. When? Nobody knows.

    I think people just keep pushing these headlines out so that when the next crash happens, they can say “I told you so” and become the next guru.

    13Reply
  • Angelique F.
    Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
    5y

    Everything he said makes perfectly good sense to me and based on his predictions its probably best to wait until about 4th quarter of 2021 to buy anything?

    2Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    5y
    Originally posted by @Angelique F.:

    Everything he said makes perfectly good sense to me and based on his predictions its probably best to wait until about 4th quarter of 2021 to buy anything?

    I promise you Ken McElroy is not sitting on the sidelines until the end of the year.

    12Reply
  • Angelique F.
    Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
    5y
    Originally posted by @Taylor L.:
    Originally posted by @Angelique F.:

    Everything he said makes perfectly good sense to me and based on his predictions its probably best to wait until about 4th quarter of 2021 to buy anything?

    I promise you Ken McElroy is not sitting on the sidelines until the end of the year.

    But wont prices be elevated until then?

    0Reply
  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
    5y

    @Angelique F. Prices will stay elevated until market changes . 

    3Reply
  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Minna Reid he only looks at one of dozens of factors and not even very accurately I may add he even admits his numbers are a total guess. It could be 10% as many houses that go on the market as he thinks or 300% of what he thinks.

    I watched the video and my take is that he comes to the conclusion he wants by stretching numbers, using  flawed math and logic, and ignoring demand and inflation. Flawed math he states that it was 3 months at 1.3 million houses on market now it’s 2 months with 1 million so one month is 300k houses? Ok so that mean with 2 month inventory we must have 600k house? No we have a million so then is a month 300k 500k neither? The answer is neither because demand is the main determining factor. I’m my market less than 10% of people trying to buy right now are able to because of competition. Of the 1 million houses on market how many are only not selling because they are 10% above current market value? How many house are selling every month? How many people want to buy homes but can’t buy houses that will not appraise? What about all the inflation and extra money on the market and all the investors trying to buy? What about how the US is millions of housing units short of what people want? The housing market in most not all of the US is a pan of boiling water sitting on a stove with the fire lit under it. If there are millions that need to sell there housing because of  forbearances that would be like throwing some ice cubes in the pan. The fire from the stove is lower interest rates higher than stated inflation a shortage of housing in most markets high building cost due costs like lumber being up and expensive permitting in many markets like my area California. Will the increase of inventory slow down the crazy rise of housing yes I believe so. will it cause the prices to drop? I think a drop in the market as a whole particularly a large drop is unlikely unless many other facts also come together.

    5Reply
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