Real Estate market crash 2021 - What is your opinion?

28 Replies

I have a dilemma.

I am thinking about buying my first investment property, a multifamily complex or duplex/triplex (up to 500-550k). Thinking about picking between Cincinnati, Cape Coral, Albuquerque, San Antonio. Do you think it's worth investing my time and not extremely complicated to get a good deal or should I wait until the market crash (that might happen this year)?

The second option is to invest in ETF (S&P, Vanguard) and FAANG tech companies (Microsoft, Amazon stocks 5x in last 5 years).

I'm looking for a long-term investment (10-15 years)

It depends what your goals are. If you are looking to get involved in real estate, as long as the numbers make sense at the current prices, get your head in the game. Historically rent has almost never gone down in the US, even during recessions. Stocks haven’t done too poorly recently, but if you are concerned about a recession or crash in real estate, it is likely that stocks will tank too!

I believe that a 'crash', or more accurately a major correction, is due. The current market is not just a little inflated, it is absolutely crazy (at least in the areas I know and hear about).

If I were planning on buying Real Estate, I would wait.....unless of course there is an obviously screaming deal....

Albuquerque tends to be a stable market with very little volatility and steadily gains value at about 3.5% per year, on average. The climate is fairly mild, and without extreme weather conditions that cause wear & added maintenance/repair costs. Rental market is strong with steady supply of good quality renters, between the Air Force Base, Sandia National Labs, Intel, Netflix Studios, NBC Universal studios, new Amazon facility, T-Mobile/Sprint call centers, several major hospitals, medical research centers,  University of NM, Orion Center -  aerospace, and other tech companies newer to the region. The highlighted years in the image below are the only years where Year-Over-Year prices declined over the last 36 years. 3 of the 5 years were during the "Great Recession", and one of the other 2 years was a decline of only .16%.

You should wait until you figure out what city you want to invest in.  You should wait until you realize real estate is a long-term play.  There are people that have invested in times where interest rates were quadruple the current rates and higher.  There are people that have invested in times that the market looked like it would never recover. Guess what? These people all wish they would have bought more real estate at that time.

@Artur A.   Nobody knows when or if there will be a crash, including me who has been through several crashes.  There are signs of it happening and not happening;  I have bought and sold property EVERY year for the last 20 years.  When there is a crash, I buy property for less and there is less competition.  And before you ask in 2008, I did NOT lower any rents and all rentals were filled, just like any year.  When people can't afford to buy a house, that just means that there are more renters.  

I don't see a crash happening for RE this year, we are just too behind on building all over the country. The demand will continue and the supply will still be cut short. If the numbers make sense, then go for it, but be careful with forcing a deal to make it work, wishing you the best of luck! 

@Artur A.

I do not see demanding letting up enough for a crash or major correction to occur this year. If the government does what they are promising to do they will continue to add trillions into our economy and prop it up even more for the foreseeable future. Something big would have to burst the bubble for the dominos to fall, and right now in most markets there are dozens of buyers for each home, hundreds of renters for each vacancy, and all of that will keep pushing rents and home prices higher and higher. They are not dramatically raising interest rates in the next 6-12 months. The numbers I have seen would not create enough foreclosures/evictions to create enough supply to massively change the equation, plus that process will draw out over time. 

The short answer is no one knows what will happen, but with almost everyone hiring and a very unmotivated work force looking for employment, I do not see much changing in the short term. 

@Artur A. - the real estate market works very different from the stock market. People tend to confuse those. Nobody needs a stock to go to sleep at night. Housing is a necessity and also one of our biggest life style expressions - prices are based on supply and demand, and neither of them has a likelyhood of change, at least not within the next years. And even then, the market will flatten out, but not crash.

I have been an investor for 14 years in the Milwaukee suburbs and an agent for 6, I have worked with many investors. Truth is very few make it past one or two properties. The ones that made it successfully have a very strong passion for real estate, for physical houses, for working with contractors and tenants, not just a passion for their bank account. Often they have a passion for the particular city or neighborhood thye are invested in. This is what drives them.

If I don't see that passion in their eyes I know this is not going to go very far. It seems to me that based on your question (is it extremly comlicated?) you will be better off with the stock market. It is "cleaner" and more probably more straight forward. And you can get extremly sophisticated as a stock investor as well!

Finally- a thread that is discussing the impending market crash!

JK...

People who haven't lived through a few cycles don't realize that what happened in 2008 isn't a regular occurance- that's a once in a lifetime thing- and for the most part, the problems in lending that caused that crash have been fixed- anyone had appraisal issues in the last year? If you are doing any volume, you absolutely have- that's keeping things in check. 

The fact is, NO ONE knows what will happen tomorrow or next week. What I do know is that waiting around for something to happen that is outside of your control is not a way to win freedom in your life. You get yourself free by taking action and accepting reasonable levels of risk. I don't care how great of a deal you find- your first couple are going to feel scary and risky- crash or not, cash or not. Waiting won't change that. 

Originally posted by @Corby Goade :


People who haven't lived through a few cycles don't realize that what happened in 2008 isn't a regular occurance- that's a once in a lifetime thing- and for the most part, the problems in lending that caused that crash have been fixed

True, 2008 was not a normal spike/crash......it was caused by giving everyone and their brother loans that they didn't deserve and couldn't pay back. They are still giving out 'bank statement' loans, etc, which are not as bad, but there are still plenty of ways to get into trouble.

What I see is a buying frenzy and properties that are not worth (I know, a relative term) what people are paying. Some sort of correction is due and soon, it is like a law of physics. If I were looking to buy, I would wait a while unless I came across an insane deal or property, those are always out there...

@Bruce Woodruff I agree on all counts, but a correction or slowing of the insanity is much different than the "crash" that most newbies are waiitng for. It seems to me that they think at some point property values will plunge in a short time frame by 60% and that they will be able to sweep them up with 3% conventional loans. It just doesn't work that way. Even in the last recession, interest rates were in the range of 7%- you can basically spend double right now at 3% and get the same amount of house for the same gross expense. 

In any occasion, yessir- if you look, you just might stumbe on a good deal, just have to keep your eyes open and be ready to pounce!

I agree with the general sentiment here that no one knows. But if you are able to find deals where the numbers actually work, are conservative on your estimates and have a reserve, it makes it a lot easier to weather any storms.

What about those in forbearance who will not be able to come up with the mortgage due at the end of the forbearance- will that not cause a crash of some sort? 

If you are going to buy an investment property, make sure it is within 20 minutes of where you live.  It's hard enough to take care of a property that is within driving distance.  Buying one out of state makes it so much more difficult for so many reasons.  Also you will never get to know a market well enough to build a portfolio if you don't live there so you get to know the values and build the team needed to excel.

It will take 5 years for housing supply to equal demand in the housing market.  The market will slow down and not crash.  Loans are significantly stronger than in 2008 as lending standards have been much tougher since 2008.  

Originally posted by @Artur A. :

I have a dilemma.

I am thinking about buying my first investment property, a multifamily complex or duplex/triplex (up to 500-550k). Thinking about picking between Cincinnati, Cape Coral, Albuquerque, San Antonio. Do you think it's worth investing my time and not extremely complicated to get a good deal or should I wait until the market crash (that might happen this year)?

The second option is to invest in ETF (S&P, Vanguard) and FAANG tech companies (Microsoft, Amazon stocks 5x in last 5 years).

I'm looking for a long-term investment (10-15 years)

 If you can time the market that precisely then yes, you should wait. That being said, No-one can time it that precisely, so you should follow time tested and proven strategies to buy below market priced properties with strong fundamentals that fall within your personal convictions and hold long term. From there, let the market do its best and you will ride out any storm and better yet ride any long term wave.

Originally posted by Mark Hughes:

@Robert Carmody can you reupload that chart? It’s too blurry for me to read but I would love to see this and know where you cited this from. Thanks!

If you have a windows laptop, right click the image and select "open in a new tab". The image in thread is lower resolution than if you open it stand alone. 

@Mark Hughes   Just emailed it to you as a PDF. Hopefully that is easier. Sales data is gathered by the Greater ABQ Assoc of Realtors and released to members and the public in the same format. Our local Realtor Association has sales data, like this, from about the early to mid 80s through today. 

The question I have is this. Do you think the crazy increase in home prices is valid, and that they are actually representative of the markets value for that property? Or is it inflated due to government policies, Covid, lows interest rates and other reasons, and it will go down? Cause if you are like me and think its all over valued, then a lot of people will be stuck with mortgages worth more than the property, and that leads to other issues.