Bubble, Bubble, toil and trouble
Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes
Bubble, Bubble, toil and trouble
Most Popular Reply
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8yOriginally posted by @Joe Villeneuve:
Originally posted by @Grant Rothenburger:
Stage two bubble... Dang I wasn't even aware.
I feel slighted. I missed stage 1. Where was I?
Probably busy out buying quality assets that help you meet your goals instead of playing amateur macro economist.
81 Replies
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Are those the same words we've been hearing every year for the past <this is where you fill in the blank with as many years back as you can remember> years?
- Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes8y
@Dave Carella When are you selling everything, going to cash and waiting for this "bubble" to collapse? You can be a hero and swoop in when everyone's lost their shirts. You might have to wait for a long time but eventually the bubble will burst and FINALLY you can claim that you saw it coming all along.
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Omar Khan:
@Dave Carella When are you selling everything, going to cash and waiting for this "bubble" to collapse? You can be a hero and swoop in when everyone's lost their shirts. You might have to wait for a long time but eventually the bubble will burst and FINALLY you can claim that you saw it coming all along.
To be fair, all those predicting doom could very well be right...this year. If not, much like the last 10-15 years, they can predict it again and get another chance to be right...and take credit for being a genius.
- Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes8y
Stage two bubble... Dang I wasn't even aware.
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Grant Rothenburger:
Stage two bubble... Dang I wasn't even aware.
I feel slighted. I missed stage 1. Where was I?
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes8y
Originally posted by @Joe Villeneuve:
Originally posted by @Grant Rothenburger:
Stage two bubble... Dang I wasn't even aware.
I feel slighted. I missed stage 1. Where was I?
Probably busy out buying quality assets that help you meet your goals instead of playing amateur macro economist.
- Investor · Port Charlotte, FL · Member since 2017 · 58 posts · 35 votes8y
I'm guessing none of you who have replied to this inquiry, actually read it. I was looking for feed back from my area. Since they don't have forums by state I just threw it out there. Pricing here are starting to flat line, if not drop. construction booming. And another thing. just because your a "pro" on this forum doesn't really make you a pro. you just paid a fee for something a pro doesn't really need.
- Real Estate Agent · Naples, FL · Member since 2015 · 10 posts · 8 votes8y
Hey Dave,
I'm in the Marco Island and Naples, FL area. I have 2 deals under contract now for 1.3 million and 455K so we are still seeing buyers and new construction booming here. (Florida Stats) I will say that there has been an effect to certain micro markets and neighborhoods that have more than average damage from Irma slowing down some transactions because repairs not being completed as fast as people would like and some condo associations/board of directors can't seem to get along well enough to get things fixed. Some areas are still waiting for roofs to be replaced a year after the storm!!
That being said, I have associates that building duplexes (picture below) in certain neighborhoods and land clearing being done by builders like Lennar and Mattamy Homes. (picture below). Contact me if you wanna learn more about buying brand new duplexes in Lehigh Acres Florida or just wanna talk Florida real estate.
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes8y
Originally posted by @Dave Carella:
I'm guessing none of you who have replied to this inquiry, actually read it. I was looking for feed back from my area. Since they don't have forums by state I just threw it out there. Pricing here are starting to flat line, if not drop. construction booming. And another thing. just because your a "pro" on this forum doesn't really make you a pro. you just paid a fee for something a pro doesn't really need.
Florida Real Estate Q&A Discussion Forum
Forums by state and for your nearest MSA.
And I managed to not insult or denigrate how people choose to spend money that they earned.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes8y
Hey Dave. We all know that markets cycle. The discussion we need to have is what to do about it.
We have been reading posts for four years from members predicting a crash but they are not (1) selling (2) buying (3) re-allocating capital or doing anything other than posting their predictions (and apparently hoarding cash for years on end). Alternatively, discussing the actions we are taking is good dialogue.
Just giving you some background on the nature of the replies from regular contributors to the forums.
- Realtor · Wilmington, NC · Member since 2018 · 71 posts · 24 votes8yThe thing with crashes is that they have symptoms. For instance we expect what 1/3 of home sales to be foreclosures, REO, short sales, or predoreclosures. We are no where near that. Prices are beginning to level because of the market is beginning to stabilize. Jobs are good. Economy is good. Just don’t see the normal signs and symptoms of a bubble market. This is just how supply and demand works.
- Lewisville, TX · Member since 2015 · 341 posts · 264 votes8yInstead of trying to time the market I try to bubble proof my investments & hold indefinitely like Buffett. Since I’m not in stocks & I don’t do buy & holds anymore I never build up cash like Buffett. I just fully deploy it in recession proof activities like lease to own & some metals for insurance & upside during a crash!
- WorldWide · Member since 2016 · 1k+ posts · 1k+ votes8y
Redfin just reported earnings. For what it's worth, they've mentioned a slow-down:
- Investor · Woodbury, MN · Member since 2016 · 90 posts · 72 votes8y
I hear a lot of people talking about slow downs or corrections in RE. I've even heard rumblings from a couple people that work for large developers that say developers don't have any plans for new construction over the next two years because they are on hold to see what happens. I have a feeling these people are being a bit dramatic but I've heard this in a few different arenas now and I'm curious to know if they know something I don't. Things have gotten pretty good and that always tend to be when things head south. (I guess you don't hear about bubbles popping at the bottom of a market, that's just part of the correction. But I digress.) I'm pretty well leveraged so I'm naturally keeping my ear to the ground. I'd say the market is overcooked but what would possibly lead to bubble bursting? In my mind, if interest rates go up and Quantitative Easing is slowed down, maybe there won't be as much money floating around for real estate. For example, why buy an asset with 6% return that is full of risk when you could buy a 5% bond with zero risk? My theory is that money will be harder to come by in the future and that might hold back pricing a bit which will probably flatline prices for a while. That might also slow down the amount of free capital in the investment markets which could make it hard to get a new loan. I'm kind of thinking that loading up on loans (smart loans, of course) might be the wise decision before that free capital starts to dry up. I could be wrong but that's how I connect the dots on financial markets.
Additionally, what I am seeing is that there are a ton of homes that cost $650k in my area (upper level housing stock but not elite housing stock by any means) but zero under $300k in nice areas. That tells me that there is still need for under $300k housing but likely a cooling down of $650K housing. I like to think that is the market leveling out a bit or maybe getting a little overcooked in the upper level housing. There are also periods of zero appreciation for housing in past decades so we could be going through that. People tend to freak out when their house value doesn't go up 5% every year so I tend to take the headlines with a grain of salt. We might need pricing to flatline for buyers to catch up to the inventory on the higher end. But I think starter homes are still going to run up as millenials get into houses and boomers downsize. It might be a good time to buy if you're looking for a higher end home in the coming years!
I would love to hear others theories or to hear others disprove my theory. I'm trying to be completely open minded here. In the end, we aren't going to see the next downturn coming and it's probably something that's incapable of being predicted anyhow. I mean, who's going to see this coming first, a bunch of real estate investors in the US or Wallstreet with their connections to the global financial industry? Well, last time around, neither saw it coming. I've got my gold, guns, and hideout, just in case! Haha. No, not really....
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yI just use moderate leverage and good cash flow. If rents drop 30 percent I should still break even (which never even happened in my markets during the last crash), so short of that happening, I should be fine My job is also pretty recession proof as far as industries go and in a few years I’m switching to all cash purchases which will likely make it even more unlikely to happen.
- Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes8y
Originally posted by @Dave Carella:
I'm guessing none of you who have replied to this inquiry, actually read it. I was looking for feed back from my area. Since they don't have forums by state I just threw it out there. Pricing here are starting to flat line, if not drop. construction booming. And another thing. just because your a "pro" on this forum doesn't really make you a pro. you just paid a fee for something a pro doesn't really need.
That was obnoxious
- Rental Property Investor · Toronto, ON · Member since 2018 · 9 posts · 8 votes8y@Josh Collins I agree with your assessment. I think with the QE situation and the global economic situation it's time to be cautious. I also agree with the approach of @Caleb Heimsoth . While I'm big on investors getting returns I think the pendulum has swung a little too far and the entire global economy has to start paying attention to affordability in the form of wage increases. Too much capital is sitting on the sidelines while wages aren't increasing. Just my $0.02 which isn't worth what it used to be 😉
- Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes8yCant speak to the bubble but we did see prices roll back in the Bay Area for the first time in 15 months. I’d say it’s buyer fatigue and not a bubble burst. Hopefully we are not in an era where strippers own8 homes all with 0 down payments.
- Investor · Dundee, OR · Member since 2016 · 104 posts · 162 votes8y
I have lost count as to how many credible real estate investors have suggested to me that we are in the beginning stages of a real estate correction/stabilization. I personally welcome an increase in DOM so to help my long-term investment opportunity. Every investment property for sale in my area has a cap rate of 4% or less. I won't buy unless I have cash flow and a cap rate of 8%, just not a speculative investor, not to mention we worked too hard to get to this point and aren't willing to risk everything on an overpriced property. It has been tough to compete with all the 1031 money in the system the last few years.
I personally welcome higher interest rates and inflation. The last downturn made millionaires of those who weren't leveraged and had access to cash. I, along with everyone else I have spoken with do not believe we are in a bubble, the subprime and 50-year mortgages don't exist. This is just a correction stabilization, a normal cyclical event in real estate.
I'm jacked up that DOM is increasing, finally going to get back in the game for the right reasons.
Now, who wants to buy some investment real estate at a discount and get instant equity?
- Investor · Orlando · Member since 2016 · 151 posts · 72 votes8y
The Dreaded Stage Two Bubble.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Robert M.:
I have lost count as to how many credible real estate investors have suggested to me that we are in the beginning stages of a real estate correction/stabilization. I personally welcome an increase in DOM so to help my long-term investment opportunity. Every investment property for sale in my area has a cap rate of 4% or less. I won't buy unless I have cash flow and a cap rate of 8%, just not a speculative investor, not to mention we worked too hard to get to this point and aren't willing to risk everything on an overpriced property. It has been tough to compete with all the 1031 money in the system the last few years.
I personally welcome higher interest rates and inflation. The last downturn made millionaires of those who weren't leveraged and had access to cash. I, along with everyone else I have spoken with do not believe we are in a bubble, the subprime and 50-year mortgages don't exist. This is just a correction stabilization, a normal cyclical event in real estate.
I'm jacked up that DOM is increasing, finally going to get back in the game for the right reasons.
Now, who wants to buy some investment real estate at a discount and get instant equity?
I was talking to my banker in Hillsboro and asking them how the other builders are doing and its slow across the board.. and I think what you seeing Is pricing finally starting to level off.. which will mean subs will have to quite jacking their prices and lumber will have to calm down or building is going to slow a lot .
Now one thing that was floated at least in our area here is this was the first summer that many finally felt financially safe enough to go on that extended vacation that they had been putting off so foot traffic is way down.. and I know when I go to PDX I am usually parking on the very top floor :).. and airline tickets to Hawaii have doubled and tripled .. so we know demand is there.
- Accountant · La Mesa, CA · Member since 2017 · 477 posts · 476 votes8y
I really want to know what a stage two bubble is.
I think that in my area (San Diego) the real estate market is getting near the end of the cycle because reports have come out showing slowing sales/price increases. However, I don't think there a bubble popping like 2008.
My realtor friends are predicting that in my market rents are going to go down (because that is what they are starting to see), but that any decrease in home prices will largely be contained to condos. The reasoning was that while some bad lending practices may have crept back into the system, by and large most loans are now backed by solid fundamentals and most single family home owners have significant equity.
- Investor · Phoenix, AZ · Member since 2016 · 349 posts · 418 votes8y
Good post by @Josh Collins
Here's my mental download having experienced the highs and lows of the equities and real estate market for the last 35 years.
There are indicators you can see when the economy is doing well versus not well. I see these as symptoms of a potentially overheated or bubble-threatened market, and they are not hard to see if you pay attention. A few are below in no particular order.
- Grocery store checkout magazine barometer - if Time, People and those other yappy magazines start having cover page headlines about new stock market strategies, "new economy" stories, "how to invest in gold or real estate" stories and so on, proceed with caution.
- Cold Call metric - I get voicemails and mail all the time now from "investors" wanting to buy my properties. I did not get any at all 2 years ago.
- Junk mail - I get multiple credit card offers every day in the mail now. They're offering huge mileage bonuses. I also get offers for unsecured lines of credit. Go back a 2-3 years, I only received a few credit card solicitations a week maybe, with much lower incentives.
- And of course there are all the real estate sales stats like DOM, closing/listing price ratio, frequency of multiple offers/bidding wars, etc. We should all be watching this data like a hawk.
So things have been heating up. We all know that. But it's not necessarily a bad thing, and there are a few things that are different now that are a calming force for me not to bail and run for the hills. I'm still a buyer at this point.
So what's different now versus 2005/2006?
- Lending standards, an oxymoron back then, are much tighter
- Rising interest rates will have a dampening effect on demand. This may already be occurring, but the net demand is still increasing so you may not think of it. It may be a good thing.
- One thing I am not getting now that I was getting in 2005/2006 - near daily offers of 125% loan-to-value refinancing for my primary residence. I knew things were getting out of hand when those offers started showing up...that kind of wreckless lending can't go on forever without consequences. And it didn't.
- Most builders got crushed in the Great Recession. The ones that survived have been cautious and selective for the last ~10 years. Not a lot of inventory has been added for a long time. In AZ, the predominant building segment has been in the higher price range of semi-customs where builders could make more profit. Very little affordable, entry-level housing has been constructed. This was not the case before the Great Recession. In AZ back then, they were building houses like crazy. Lots of new developments have now been announced in the Phoenix area in 2018, but it's reacting to demand, not speculating that it will come like in the 2000s.
- Trades people were hit hard in the recession. Many went to go do something else for a living. Couple that with the fact that for several generations now young people are dissuaded from non-college paths such as the trades. Result - a labor shortage in the trades. Hard to oversupply the market when builders struggle to find people to build houses.
- Millennials are starting to move out on their own. I've read a lot about how this generation will be different and want to remain in urban, compact and walkable environments. I never understood this. More recently I've read a few articles (that I find more probable) on how this generation is really no different than the previous, they just waited a bit longer to move out of their parents home, get married and start families. And when they do, they will want an SFH with a yard, which probably means a suburban area. The market is starting to reflect this. Regardless, wherever Millenials decide to go to live, if they're moving out on their own it means additional households being added to the market.
If and when we really do have a bubble and it bursts is up to the market ultimately and no one can really time it. But it's a fact that the market at the macro-level has a major correction about every 20 years or so. Michael Kitces walks thru it quickly as a subtopic in the 4% rule Mad Fientist podcast that's very informative.
https://www.madfientist.com/michael-kitces-intervi...
"Be greedy when others are fearful, and be fearful when others are greedy" - Warren Buffet
"The trend is your friend, except at both ends" - not sure who to credit
Cheers,
Dave
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Dave G.:
Good post by @Josh Collins
Here's my mental download having experienced the highs and lows of the equities and real estate market for the last 35 years.
There are indicators you can see when the economy is doing well versus not well. I see these as symptoms of a potentially overheated or bubble-threatened market, and they are not hard to see if you pay attention. A few are below in no particular order.
- Grocery store checkout magazine barometer - if Time, People and those other yappy magazines start having cover page headlines about new stock market strategies, "new economy" stories, "how to invest in gold or real estate" stories and so on, proceed with caution.
- Cold Call metric - I get voicemails and mail all the time now from "investors" wanting to buy my properties. I did not get any at all 2 years ago.
- Junk mail - I get multiple credit card offers every day in the mail now. They're offering huge mileage bonuses. I also get offers for unsecured lines of credit. Go back a 2-3 years, I only received a few credit card solicitations a week maybe, with much lower incentives.
- And of course there are all the real estate sales stats like DOM, closing/listing price ratio, frequency of multiple offers/bidding wars, etc. We should all be watching this data like a hawk.
So things have been heating up. We all know that. But it's not necessarily a bad thing, and there are a few things that are different now that are a calming force for me not to bail and run for the hills. I'm still a buyer at this point.
So what's different now versus 2005/2006?
- Lending standards, an oxymoron back then, are much tighter
- Rising interest rates will have a dampening effect on demand. This may already be occurring, but the net demand is still increasing so you may not think of it. It may be a good thing.
- One thing I am not getting now that I was getting in 2005/2006 - near daily offers of 125% loan-to-value refinancing for my primary residence. I knew things were getting out of hand when those offers started showing up...that kind of wreckless lending can't go on forever without consequences. And it didn't.
- Most builders got crushed in the Great Recession. The ones that survived have been cautious and selective for the last ~10 years. Not a lot of inventory has been added for a long time. In AZ, the predominant building segment has been in the higher price range of semi-customs where builders could make more profit. Very little affordable, entry-level housing has been constructed. This was not the case before the Great Recession. In AZ back then, they were building houses like crazy. Lots of new developments have now been announced in the Phoenix area in 2018, but it's reacting to demand, not speculating that it will come like in the 2000s.
- Trades people were hit hard in the recession. Many went to go do something else for a living. Couple that with the fact that for several generations now young people are dissuaded from non-college paths such as the trades. Result - a labor shortage in the trades. Hard to oversupply the market when builders struggle to find people to build houses.
- Millennials are starting to move out on their own. I've read a lot about how this generation will be different and want to remain in urban, compact and walkable environments. I never understood this. More recently I've read a few articles (that I find more probable) on how this generation is really no different than the previous, they just waited a bit longer to move out of their parents home, get married and start families. And when they do, they will want an SFH with a yard, which probably means a suburban area. The market is starting to reflect this. Regardless, wherever Millenials decide to go to live, if they're moving out on their own it means additional households being added to the market.
If and when we really do have a bubble and it bursts is up to the market ultimately and no one can really time it. But it's a fact that the market at the macro-level has a major correction about every 20 years or so. Michael Kitces walks thru it quickly as a subtopic in the 4% rule Mad Fientist podcast that's very informative.
https://www.madfientist.com/michael-kitces-intervi...
"Be greedy when others are fearful, and be fearful when others are greedy" - Warren Buffet
"The trend is your friend, except at both ends" - not sure who to credit
Cheers,
Dave
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