Has your market peaked?

52 Replies

How do you see your market?  Have sales or prices peaked?  What are the unique characteristics affecting your market?  Where do you see it in 1-2 years?

In Austin, sales are still high, but down a little from last year.  Prices are still rising, days on market low, but holding steady at 42 on average.  It's still a very healthy market, but not growing quite as fast as the past couple of years. 

I see continued growth over the next couple of years, driven by quality job and population growth.  There are speculative pockets that could move back some, but great locations have plenty of fuel to continue upward.  

Jon what are median price for SFR... In Portlandia is about 270ish not sure on median in rents but would not be surprised if it hit that 1500 mark... Inner city for sure. but then median price is much higher.

From what I can see many of the higher price point markets are getting close to the 07 peak for pricing. While other parts of the country ( those that are cash flow driven for SFR's ) or the neighborhoods that are predominately rentals prices are just trundling along, in my mind those lower end areas IE housing under 100k through out the mid west and rust belt will really not move unless some sort of subprime ( low credit score not High interest) can come into play that will allow the folks that live in these ares and are renters to move to home ownership.. Other wise again in my opinion landlords will back into values and what they will pay for these types of homes using ( if they are BP junkies) the 2% rule or other rules talked about here,. thereby keeping prices pretty flat over the years as rents as we know in most markets are steady and are not rising year in and year out.

Jon on these new record highs or just getting back to 07 peak like the rest of the country.. My impression of Texas right now is they are seeing new record peaks... and or we are seeing a market top out as it were.. however with the heard mentality that is going on about Texas RE I can see somewhat of a false market happening in some price points as investors rush in to grab the next shinny object... If you bought lets say 10 years ago in Texas could you sell today for a BIG profit or just gains for the last 2 year run up..?

I have a family member who bought in Dallas and is selling her town house. And she bought it 15 years ago and she will make less than 20k in appreciation gain with the sale next month.. 

I used to write this question 4 years ago when I was investing in Atlanta.. Is it better to buy jAtlanta were the prices got crushed by 70% in many cases or buy in TX were prices pretty much just flat lined through out the GFC...  Well in my case my stuff doubled then we sold it 3 years or less later.. So I think that was a better play 3 years ago... now I think Atlanta is peaking like much of the other markets... I like to make the big pop's not a real fan of trickle income.. But thats just me.

@Jon Klaus     Seems like Austin really has the wind in her sails.  I wouldn't want to 'short' Austin. 

Atlanta market is significantly up from the bottom and has caused a few folks to call it a peak.  However, I think it has a lot of legs left.

Unemployment here is highest of all 50 states, 8.1%.  Real Estate is a significant economic engine of Georgia. The large commercial projects in the pipeline are huge and large new projects being announced regularly so we should see this get back to normal or better in 12 - 24 months.

I don't monitor the outlying counties as much, but they still look depressed.  These areas were like a ring of spec development hardest hit during the downturn.  

Intown, where there was speculation in early stage transitional markets, prices are still significantly below (30%) peak.  These areas have a ways to go and will require job and population normal growth before they recover back to the peak.

Here's a more qualified prognosticator's take on Atlanta thru 2020.

Predicting Atlanta thru 2020

Rick, my experince in Atlanta started when I made about 15 HML in 07 ish they lingered we could not get paid off and by the time I foreclose on them my HML that I thought was well protected at 65% ARV was now totally underwater... we were loaning on 125k ARV in the 75k range.. only to find the homes by 2010 being crushed in value and had a hard time selling a few of my OREO's for mid 30s On a trip out there to look at them first hand I just was amazed at the value compared to the other 12 markets I worked in.. So I started to buy ( kind of like income averaging knowing I was going to get my but kicked on the 5 OREO's I had left) so we got some just smokin deals in those early days after the meltdown.

I would be writting on Out of country RE blogs and there were TK guys really promoting TEXAS and there reason is that Texas never fell or not much in the GFC...

So that begged the question 3 or 4 years ago what was a better investment markets that got crushed or Texas... markets like Vegas Phx CA Atl  .... 

For capital growth I think we know the answer to that.. I don't think I could have bought homes in Texas like I did ATL and doubled my money in 3 years or less... that was my point when writing on the out of country blogs

PS will be in Atlanta airport in a few hours to fly back to Portland been a nice week on the road checking all my markets out.. It fun to see folks back in the swing and things looking up all throughout the nation

I've been posting the Realtors Confidence Index as they are released.

The results are state driven rather than metro area, so it's interesting to see how comments on Austin and Atlanta differ from the confidence in the states as a whole.

I don't know enough about SLC, but it seems strong and growing.  Our sleepy area has been doing the same thing it has since the mid-nineties when it emerged (started to, anyway) from the 50's.

Wm

@Jay Hinrichs  

You're right.  Texas pretty much "flat lined" rather than receding, during the sub-prime debacle.  My opinion is that, particularly in Dallas, most of the losses were actually the result of a lack of available funding or the changes in qualification for funding.  It took a huge % of potential buyers out of the market, which forced prices down.  Otherwise, the biggest hit was to the normally steady, but modest appreciation levels.  That said, there are areas of DFW right now showing 30% increases over the same period in 2013.  I don't believe the nature of this market makes that rate sustainable.  However, I also don't believe investing in Texas based upon appreciation is a sustainable model for success!  I view Texas as very much a long-term, buy & hold market.  It isn't a speculative market where you're going to make a huge profit in just a couple of years, unless you get a killer deal and force appreciation.

@Jon Klaus  , I'd be curious to know what speculative pockets you think might cool off a little?  Also be curious to hear what your thoughts are for any underpriced areas in Austin.  

Well there is a small glut of lower priced new construction in 78702 which has cooled off prices a little, but certainly not a dip.  It was propagated by one builder in particular.  I think that stuff will eventually work it's way out of the market and prices may inch higher again. 

I'm actually a little relieved to see some flattening in prices.  To me it means I will be able to build longer and have less volatility in the market even if I would enjoy the peaks, those valleys are rough.  I would gladly sacrifice a peak for a stable market that lasts longer.

Hi @Jon Klaus  

It's hard to believe that Austin's run-up can continue, and I have spent quite a bit of time trying to formulate an opinion. IMHO traditionally this would be the time to head for the exit and let the fools fall in the pit if you follow the contrarians. 

Population growth is the wildcard however.

According to Money:" All of those high-paying tech jobs have driven home prices to a median $221,000, 30% higher than the national median. Homes are also 15% more expensive than Austin's housing boom peak of $192,600, set in November, 2007."

The x factor is the MSA population has increased by 15% since 2007 also .  I personally compare Austin real estate prices to other Tech Hubs,  as we are now firmly entrenched with real blue chip tech for the first time. In that comparison Austin is still affordable.

As long as building permits don't keep up with demand I'll keep a close eye on new job announcements and Inventories, but until the fundamentals change I think we have a ways to run inside the quality city limits. As always the speculative tract builders in the outlying areas will likely feel the hit first. 

@Jay Hinrichs  

The Dallas market can actually have some huge appreciation gains depending on where you live.

I grew up in Frisco Tx and my parents bought a house in a new neighborhood for $220,000 and sold it for $310,000 6 years later in 06. It wasn't a deal when my parents purchased it ; just the going rate. My parents then moved to another new neighborhood where they got in during phase 1 for $330,000 and had it recently appraised over $400,000 now that the neighborhood is fully developed.

At the top of the market in 1989, the housing affordability index (HAI) hit 13% for our Santa Clara County.

At the bottom in 1994, the HAI reached 45%. 

At the top in 2007, the HAI hit 11%. 

At the bottom in 2011, the HAI reached 56%. 

We are currently at 19%.  Definitely we are closer to the top than the bottom.  So tread lightly.  We are potentially on thin ice.

Median Price for our area is up 15.2% YoY - $870,000

Average Price is up 23.6% YoY - $1,154,000

Sales down 30% YoY

Inventory is down 36% YoY

Average Days on Market is 26

Inventory is about 1.5 months

Good, Bad, or Ugly???

Originally posted by @Jay Hinrichs:

@Minh L. 

if Alibaba opens up in Silicon valley  all bets are off :)

Actually, I believe Alibaba sucked a lot of liquidity out of the market. Therefore, I expect the stock market to have a decent correction within the next 2 weeks. I'm hoping for a 20% correction where I will buy back in. I went 40% cash in my IRA on 8/28 based on my charting skill. Looking to raise another 10% - 20% cash this week. Will see if my pathetic charting skill will come to fruition. LOL!!!

What an interesting thread!

I see the market on a bubble.  Everyone I talk to is nervous, but no one is willing to draw the line in the sand.  The way I see it, what's driving this thing is the stock market.  Cheap money produces free money, which is then cashed in and brought over to RE in search of safety/yield.  When the stock market deflates, it'll take the RE market with it...

@Minh L. - very interesting perspective.

Memphis has more inventory for sure but no sign of prices flattening yet. Some of the hedge funds have slowed down but still upward price pressure.

(901) 264-8674

Has your market peaked?

One can only hope so, but the markets in many parts of Canada have been defying gravity - and mathematics - for so long that people now believe it to be normal.

It certainly appears to have peaked for us ... we have not bought anything in over a year now and are 0.5 for 8 on 12+ unit properties in our area {the 0.5 reflects an interim position we have taken in a property with another investor}.

1(506) 471-4126

@Jon Klaus  

Yes, MX3.

Here is a great article on the markets I tend to agree with:

http://seekingalpha.com/article/2508115-anatomy-of-a-market-bubble?ifp=0

Although this article suggests that pending market corrections will not come from a housing bubble.  One interesting chart in this article is

So mortgage debt is off its peak but looks like it could be growing again, and housing starts are still historically very low.  Real Estate is also a very localized market, so what happens in your town may not mirror mine.

What I would like to see is a swift and modest correction in the market followed by steady growth so the other shoe drops and investors lose their fear.  Although your guess is as good as mine. 

As Jon said before, the key is to buy the land right so you're not sweating your margins, at least when it comes to new builds.

@Serge S.  and I were just talking about this the other day.  The interesting piece is that if @Minh Le is right, and I tend to agree with his assessment, we should see a substantive correction in luxury SFR markets as well as large (syndicatable) multifamily market...

What's driving activity in both of these RE sectors is easy money being taken off the top (they know the dip is coming), and re-allocated into RE. Some investors are chasing yield, hence run-up in multifamily. Others are going into luxury SFR.

However, when people become entrenched, they usually do so across all sectors. Both SFR and Multi should take a hit alongside paper...

That's when I get my syndicated deals.  Any thoughts @Brian Burke  ?

I'm not convinced that you are going to see that soon, @Ben Leybovich , there is a lot of capital still flowing into the multifamily space and the investment alternatives for that capital carry much of the same concerns about interest rate risk and cycle timing. I think multifamily pricing takes on headwind when rates rise but that doesn't do you much good because your borrowing costs will be higher. So, you buy at a lower price and deliver the same IRR. Less pricing risk, that's true, but not some holy grail that means that you can go scoop up MF all day long and throw off a 20 IRR. It'll still require hard work and looking under every stone for gold nuggets.

@Jon Klaus While I wouldn't want to be unduly optimistic about this one, the DC metro area has one of the most reliable housing markets in the nation. A lot of us are tying this to the persistence of public sector employment and government-tied jobs (feel free to make your own zinger about how government jobs have a stubborn tendency to stick around even when the rest of the job market is getting hit). I would have a hard time quantifying whether or not the DC market has "peaked" per se, but there are no signs of a dip or immediate slowdown in sales.

I'm predicting we'll see a stable holding rate in local sales and prices throughout the next two years, with slight climbs in both. The demand for townhomes/single-family homes within the city itself remains strong, so the highest rise in prices will likely be experienced within the Washington city limits. The nearby suburbs will likely experience a slower (but still notable) rise in prices, while the farther out suburbs less so, etc.

This isn't an atypical pattern for any fiscally healthy metro, but it's especially pronounced considering DC is its own non-state territory and the city's boundaries are immovably constricted. Couple that with the resilience of the local job market, and DC would be better equipped to weather even a hypothetical bubble burst than many other major cities.

Most posts on this thread are borderline bearish. And that's enough to tell me market still has ways to go. :) You don't have market top unless everyone says "Go Go Go". One gent said Canadians are tired of crying wolves foretelling market crash and just think their current market as normal. To me that looks more like a sign of market top.

I have this on my bookmark

http://money.cnn.com/data/fear-and-greed/

Today's reading (9/23/2014) is 23 out of 100, in the "Extreme Fear" territory. That doesn't look bubbly to me at all. Everyone is on the fence scared and that usually means the stock market will keep on rising.... 

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