Skip to content
Market Trends & Data

User Stats

4
Posts
1
Votes
Coe Davis
1
Votes |
4
Posts

Market crash prep

Coe Davis
Posted May 17 2023, 07:36

What do you do when you purchase a house, rent it out and then the market crashes and the house is no longer worth paying such a high rent rate to potential renters comaparing them to other houses  but you are still stuck with a high mortgage payment?

User Stats

576
Posts
511
Votes
Justin R.
  • Rental Property Investor
  • San Anselmo
511
Votes |
576
Posts
Justin R.
  • Rental Property Investor
  • San Anselmo
Replied May 18 2023, 23:29

Save your money during both appreciating and depreciating markets. Only by at the bottom, and only sell at the very top. Finally and most importantly, please sell me your crystal ball when you are done.

Honestly I’m just kinda holding still at the moment. I’m speculating we will see a market correction, not because intrinsic value isn’t there, but because affordability isn’t.

When a solid blue collar career or public service worker cannot afford a home door to prices and interest rates, something has to correct.

I’m personally saving, but if the right opportunity comes I won’t pass it up.

User Stats

39,728
Posts
58,398
Votes
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
58,398
Votes |
39,728
Posts
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
Replied May 19 2023, 06:40
Quote from @Carlos Ptriawan:
Quote from @Jay Hinrichs:
Quote from @Todd Dexheimer:
Quote from @Bill Brandt:

Ins 2016 the median Vegas home was $219k. In 2020 it was $391k. In 4 years the prices went up 81%. Rents went up about 25-40% depending on the area. Housing prices and rent just aren’t as correlated as you think they are. 

When interest rates doubled in 12 months, buying became way more expensive, rents should have skyrocketed. We’ve just gone through 6 years where buying was cheaper than renting and people still rented. If prices drop 20% (I don’t think they will, too many people have locked in low interest debt.) the cost of buying would still be more than 2021 because of the interest rates. 

I’ve only been at this 25 years, but I’ve never seen a rent decrease. But I do agree if you are in a bad market you could get squeezed by people fleeing. But I think that will happen even if the economy takes off like a rocket. Landlords are fleeing local governments that hate them. Everyone else fleeing taxes/regulations/laws they don’t think improve their lives. Areas that Arjun by the government employees for the government employees. 

As a side note: I watched a video of cities that people were fleeing, almost all in the rust belt. Cincinnati, Pittsburgh, Detroit, Baltimore, Minneapolis, etc etc. Did you know that all 10 cities on the list had peak population in the 1950 census. They’ve all been slowing dying. 


 Most major metros saw rents decline during the great recession

As for the population decline in the midwest, you need to dive more into details. Yes, those cities peaked in the 1950's, but urban flight happened. The MSA increased in most cases, meaning the area is still growing. BTW, Cincinnati and Minneapolis are currently both growing cities. 


some markets saw rents to zero as in they could not find any tenants.. PHX was like this.. I had clients that had 4 plex's there and they went 100% vacant and they lost them to the bank. it happens .. dont think we are anywhere near that with this current market.

 is that problem occurred in that specific particular multifamily or every apartment in the area experienced the same ?


these were a large subdivision of 4 plex's catering to laborers when construction stopped in PHX in 07 to 2010 many of the hispanic laborers left the country or area.. and these buildings went vacant. My clients paid 350k for them ( I did not market and sell to them Linda Gherchek was the promoter) and buy 2011 after going through foreclosure  they were being listed at 80 to 100k.. and vacant or mostly vacant.. I am sure their values are back up to 350 to 450k today but  those investors who owned many of these and of course max leverage just could not sustain the negative cash flow..  I know these folks because I sold them quite a bit of SMall Multi family in the PDX metro area.. those had some issues in those days but NOTHING like what Happened to them in PHX. The melt down was highly regional.
FlipSystem logo
FlipSystem
|
Sponsored
Learn From Our Team. Earn 100% of the Profits. Join our community of 500+ investors! Avg profit per flip: $14k, Avg effort per week: 4hrs

User Stats

19
Posts
7
Votes
Brock Lanoza
  • Investor
  • Honolulu
7
Votes |
19
Posts
Brock Lanoza
  • Investor
  • Honolulu
Replied May 19 2023, 06:57

Rents historically don't ever drop off a cliff.

If you buy smart and aren't relying on heavy seasonality trends to carry you ie: Short term rental premiums during certain times of the year, you should be good to go.

User Stats

635
Posts
1,372
Votes
Eric Fernwood
  • Realtor
  • Las Vegas, NV
1,372
Votes |
635
Posts
Eric Fernwood
  • Realtor
  • Las Vegas, NV
Replied May 25 2023, 09:47
Quote from @Dan Heuschele:

according to the department of numbers (https://www.deptofnumbers.com/...) Las Vegas rents fell substantially at the Great Recession.  Las Vegas rents still have not recovered from the GR and is currently lower than in 2008.  

Hello Dan,

The chart below shows actual data (MLS) for how our target property profile performed.


Here is an article from the review journal published on March 22, 2022 on rent trajectory. Las Vegas rental price growth blows past US average.

Your statement, “Las Vegas rents still have not recovered from the GR and is currently lower than in 2008.” is not true.

User Stats

3,459
Posts
4,422
Votes
James Hamling#3 Real Estate News & Current Events Contributor
  • Real Estate Broker
  • Twin Cities, MN
4,422
Votes |
3,459
Posts
James Hamling#3 Real Estate News & Current Events Contributor
  • Real Estate Broker
  • Twin Cities, MN
Replied May 25 2023, 13:29
Quote from @Jay Hinrichs:
Quote from @Todd Dexheimer:
Quote from @Bill Brandt:

Ins 2016 the median Vegas home was $219k. In 2020 it was $391k. In 4 years the prices went up 81%. Rents went up about 25-40% depending on the area. Housing prices and rent just aren’t as correlated as you think they are. 

When interest rates doubled in 12 months, buying became way more expensive, rents should have skyrocketed. We’ve just gone through 6 years where buying was cheaper than renting and people still rented. If prices drop 20% (I don’t think they will, too many people have locked in low interest debt.) the cost of buying would still be more than 2021 because of the interest rates. 

I’ve only been at this 25 years, but I’ve never seen a rent decrease. But I do agree if you are in a bad market you could get squeezed by people fleeing. But I think that will happen even if the economy takes off like a rocket. Landlords are fleeing local governments that hate them. Everyone else fleeing taxes/regulations/laws they don’t think improve their lives. Areas that Arjun by the government employees for the government employees. 

As a side note: I watched a video of cities that people were fleeing, almost all in the rust belt. Cincinnati, Pittsburgh, Detroit, Baltimore, Minneapolis, etc etc. Did you know that all 10 cities on the list had peak population in the 1950 census. They’ve all been slowing dying. 


 Most major metros saw rents decline during the great recession

As for the population decline in the midwest, you need to dive more into details. Yes, those cities peaked in the 1950's, but urban flight happened. The MSA increased in most cases, meaning the area is still growing. BTW, Cincinnati and Minneapolis are currently both growing cities. 


some markets saw rents to zero as in they could not find any tenants.. PHX was like this.. I had clients that had 4 plex's there and they went 100% vacant and they lost them to the bank. it happens .. dont think we are anywhere near that with this current market.

I remember reading about that, the "Ghost Towns/Developments" of the SW. Being in upper Midwest at the time, we had the opposite, tenants galore and rents ascending but, there was an ever present fear that "what-if" it went ugly like other areas (SW) were having. 

Our luxury segment was a wasteland though, near to no tenants and the few there was, were beating you up savagely to negotiate great deals. And they could at the time. $2k rents on $750k+ properties, that was brutal. Thankfully I was all-in on affordable housing at the time. 

User Stats

3,459
Posts
4,422
Votes
James Hamling#3 Real Estate News & Current Events Contributor
  • Real Estate Broker
  • Twin Cities, MN
4,422
Votes |
3,459
Posts
James Hamling#3 Real Estate News & Current Events Contributor
  • Real Estate Broker
  • Twin Cities, MN
Replied May 25 2023, 13:34
Quote from @Brock Lanoza:

Rents historically don't ever drop off a cliff.

If you buy smart and aren't relying on heavy seasonality trends to carry you ie: Short term rental premiums during certain times of the year, you should be good to go.


Not true of all asset classes. Luxury segment "norm" is a roller coaster of up's and downs, as activity and inventory is tied to what's going on in the world/economy at the time. Right now, spending is a bit tighter, 2 yrs ago I could think up any ridiculous price like $7k for a 2,300 sqft luxury T.H. and get it in a couple/few weeks. 

"Affordable" housing or there-around, yeah, generally rather insulated if not benefits from any/all big swings, be it up or down. But as a universal statement of Real Estate as a whole, no, asset classification matters and has it's own eco-system and cycles. 

User Stats

19
Posts
7
Votes
Brock Lanoza
  • Investor
  • Honolulu
7
Votes |
19
Posts
Brock Lanoza
  • Investor
  • Honolulu
Replied May 25 2023, 15:09
Quote from @James Hamling:
Quote from @Brock Lanoza:

Rents historically don't ever drop off a cliff.

If you buy smart and aren't relying on heavy seasonality trends to carry you ie: Short term rental premiums during certain times of the year, you should be good to go.


Not true of all asset classes. Luxury segment "norm" is a roller coaster of up's and downs, as activity and inventory is tied to what's going on in the world/economy at the time. Right now, spending is a bit tighter, 2 yrs ago I could think up any ridiculous price like $7k for a 2,300 sqft luxury T.H. and get it in a couple/few weeks. 

"Affordable" housing or there-around, yeah, generally rather insulated if not benefits from any/all big swings, be it up or down. But as a universal statement of Real Estate as a whole, no, asset classification matters and has it's own eco-system and cycles. 


 Fair point, James! Appreciate you making that distinction. 

User Stats

5,238
Posts
6,009
Votes
Dan Heuschele
Pro Member
  • Investor
  • Poway, CA
6,009
Votes |
5,238
Posts
Dan Heuschele
Pro Member
  • Investor
  • Poway, CA
Replied May 25 2023, 22:07
Quote from @Eric Fernwood:
Quote from @Dan Heuschele:

according to the department of numbers (https://www.deptofnumbers.com/...) Las Vegas rents fell substantially at the Great Recession.  Las Vegas rents still have not recovered from the GR and is currently lower than in 2008.  

Hello Dan,

The chart below shows actual data (MLS) for how our target property profile performed.


Here is an article from the review journal published on March 22, 2022 on rent trajectory. Las Vegas rental price growth blows past US average.

Your statement, “Las Vegas rents still have not recovered from the GR and is currently lower than in 2008.” is not true.

The link I provided does not go to today's date.  However, the link shows that Las Vegas rent fell significantly at the Great Recession and took many years to recover (Was not recovered entering 2020).

My point is Las Vegas rents fell substantially at the Great Recession (at least if you believe the Department of Numbers statistics).

User Stats

635
Posts
1,372
Votes
Eric Fernwood
  • Realtor
  • Las Vegas, NV
1,372
Votes |
635
Posts
Eric Fernwood
  • Realtor
  • Las Vegas, NV
Replied May 26 2023, 16:03

@Dan Heuschele

Dan, I am an engineer who has worked with Las Vegas investment properties since 2006. So far, we've delivered over 480 properties and our repeat business rate is over 90%. Investors choose to invest in Las Vegas real estate because rents keep pace with inflation. Rents have to increase in order to keep pace with inflation.

My role in our investment team is data science, and I have been keeping detailed analytics since 2013. Between 2013 and 2021, the average rent increased from $0.70/SF to $1.15/SF for the property segment we target. Notice I did not say all segments.

You cited the Department of Numbers, as the source of your claim. The Department of Numbers describes itself as “The Department of Numbers contextualizes public data so that individuals can form independent opinions on everyday social and economic matters.” I have no idea what this means. You should get data from a site that focuses on real estate. For example, Zillow research data (https://www.zillow.com/research/data/). They are in the real estate business, whereas the Department of Numbers seems to be an abandoned “contextualizes” social data accumulation site. They claim their rental data source is the Census Bureau. The Census Bureau is in the population business, not the real estate business.

So, as an engineer, the data you cited on the Department of Numbers site has no validity. Dan, rents have not remained “constant” since 2008 as you claim.

User Stats

5,238
Posts
6,009
Votes
Dan Heuschele
Pro Member
  • Investor
  • Poway, CA
6,009
Votes |
5,238
Posts
Dan Heuschele
Pro Member
  • Investor
  • Poway, CA
Replied May 26 2023, 19:32
Quote from @Eric Fernwood:

@Dan Heuschele

Dan, I am an engineer who has worked with Las Vegas investment properties since 2006. So far, we've delivered over 480 properties and our repeat business rate is over 90%. Investors choose to invest in Las Vegas real estate because rents keep pace with inflation. Rents have to increase in order to keep pace with inflation.

My role in our investment team is data science, and I have been keeping detailed analytics since 2013. Between 2013 and 2021, the average rent increased from $0.70/SF to $1.15/SF for the property segment we target. Notice I did not say all segments.

You cited the Department of Numbers, as the source of your claim. The Department of Numbers describes itself as “The Department of Numbers contextualizes public data so that individuals can form independent opinions on everyday social and economic matters.” I have no idea what this means. You should get data from a site that focuses on real estate. For example, Zillow research data (https://www.zillow.com/research/data/). They are in the real estate business, whereas the Department of Numbers seems to be an abandoned “contextualizes” social data accumulation site. They claim their rental data source is the Census Bureau. The Census Bureau is in the population business, not the real estate business.

So, as an engineer, the data you cited on the Department of Numbers site has no validity. Dan, rents have not remained “constant” since 2008 as you claim.


 Census is a lot more than population and is typically considered highly reliable. 

But I read the article you linked to and it had nothing in it going back to prior to the Great Recession (GR).  You denigrate a source that is based on US census, but have not provided a link for a source that shows Las Vegas rent did not take until end of 2019 to recover from the GR.  

In any market you can cherry pick areas that did better than the market and areas that did worst than the market.  I am referring to the entire Las Vegas market.  I referenced a source (provided the link) based on US Census (most people consider it a reliable source).  

I have yet to see a reliable source that shows Las Vegas rents (entire market) did not decline at the GR or that vacancy rate did not increase.  las Vegas is typically considered one of the areas most impacted by GR (possibly only behind Detroit). 

Good luck

User Stats

635
Posts
1,372
Votes
Eric Fernwood
  • Realtor
  • Las Vegas, NV
1,372
Votes |
635
Posts
Eric Fernwood
  • Realtor
  • Las Vegas, NV
Replied May 30 2023, 11:03

@Dan Heuschele,

The Depart of Numbers (DoN) data is invalid. In this post, I will demonstrate this by comparing DoN data to multiple other sources. Below is the DoN data for Las Vegas rents between 2005 and 2019.

[The Department of Numbers]

Below is a copy of the columns labeled Date and Las Vegas, NV Average from the above table. I added a column labeled Year/Year Change. I also changed the year order to be ascending so Year/Year Change would be valid. This enables us to verify the Year/Year change of DoN against other data sources that cover a different span of years.

The formula I used to calculate the Year/Year change:

% Change = (New Amount − Prior Amount)/ Prior Amount x 100

For example, the DoN rent change for the 2005 to 2019 period would be calculated as follows:

% Change = ($1210 - $1124)/$1124 x 100 = 7.7%

Regarding your statement that I was questioning the accuracy of the Census Bureau data, let me clarify that I have no doubts about Census Bureau accuracy when it comes to population demographics. Real estate trends? Not so sure. Also, the citation link they provided was only to the main page of the American Community Survey; not to a specific set of data. So, it is impossible to determine whether the DoN actually obtained their data, or what data they obtained from the Census Bureau.

Below are comparisons of DoN data to other data sources against various years spans.

  • Zillow Research data - (All Homes Plus Multifamily Time Series ($)) Comparing DoN vs. Zillow Research data between 2016 and 2019:

    DoN = (1210 - 1112)/1112 = 8.8%

    Zillow = (1352 - 1087)/1087 = 24.3%

  • Zumper.com - The average 3-bedroom rent in January 2015 was $1,100. In December 2019 the average rent for a 3-bedroom home was $1,500. Comparing DoN and Zumper over the same period:

    DoN = (1210 - 1118)/1118 = 8.2%

    Zumper = (1500 - 1100)/1100 = 36.4%

  • Google - Bard - Average rent in 2005 was $1,225. In 2019 the average rent was $2,200. Comparing DoN and Zumper over the same period:

    DoN = (1210 - 1124)/1124 = 7.7%

    Google - Bard = (2200 - 1225)/1225 = 79%

  • Biggerpockets rental data - On 1/1/17, the average rent was $1,150. On 12/1/2019, the average rent was $1,350. Comparing DoN and Biggerpockets data:

    DoN = (1210 - 1139)/1139 = 6.2%

    Biggerpockets = (1350- 1150)/$1,150 = 17.4%

Below is a comparison of average Las Vegas rents between 2005 and 2019 for DoN vs. Google - Bard.

  • If the DoN data were true, Las Vegas would be about the only city in the US where rents did not increase between 2005 and 2019.

Dan, your claim that the DoN data is correct and all other data sources are wrong does not make sense.

User Stats

362
Posts
231
Votes
Konstantin Ginzburg
Pro Member
231
Votes |
362
Posts
Konstantin Ginzburg
Pro Member
Replied May 30 2023, 11:42

If you purchase a house that has enough cash flow to meet your investment return requirements then your best option would be to hold onto the property and wait it out until prices rebound. As long as you don't sell the property when they decline, then the loss is only on paper and are not "realized losses" yet. There is also no guarantee that rental prices will go down even if the price of the home goes down. The housing market and the rental market run independently of one another. Even in the past during recessions, average rental prices only dropped one time. No matter what the economic conditions are, people still need a place to live and rents have tended to be an inelastic price point because of this. This is very regional though so certain areas could be heavily impacted. For example, if you own a rental in a town that is heavily reliant on one industry or company, then there is a greater risk of decreased rental rates if that industry/company experiences a decline as residents may be forced to move elsewhere for work. An example of this is a oil boom town. This is why its important to research an area you are investing in in addition to researching an individual property. If your rental rates do go down that much, then it might be time to readjust your strategy and try something like MTRs to traveling professionals or STRs. If none of these work, then it is likely time to sell if you are unable to meet mortgage payments.

BiggerPockets logo
BiggerPockets
|
Sponsored
Find an investor-friendly agent in your market TODAY Get matched with our network of trusted, local, investor friendly agents in under 2 minutes

User Stats

5,238
Posts
6,009
Votes
Dan Heuschele
Pro Member
  • Investor
  • Poway, CA
6,009
Votes |
5,238
Posts
Dan Heuschele
Pro Member
  • Investor
  • Poway, CA
Replied May 30 2023, 12:13

>your claim that the DoN data is correct and all other data sources are wrong does not make sense

I never made the claim that other data was incorrect.  I made claims about you not citing sources (no longer valid after this last post) and questioned you questioning a source that derived its number from the census. 

I also claimed Las Vegas fell during the GR.   Your reference also shows Las Vegas rents fell during the GR.

DON data was the first data that came up in my internet search and appears to be derived from a good source.  I will state your recently referenced sources are reliable enough that I have used some of these as my source in other posts.  I would have preferred you to provide a link (as I did) rather than reference the numbers without a link. 

It appears various sources have a wide range of the amount rent has changed in Las Vegas (including the sources you cite).  I am surprised to see such variance.  

Good luck