The Market Crash 🤔 or lack thereof ?
Lender · Member since 2019 · 47 posts · 97 votes
The Market Crash 🤔 or lack thereof ?
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Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
4yThe market will crash on January 12th, 2025, at 3:35pm EST.
69 Replies
- Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes4y
Properties are still selling because we're early in the rate hikes and people expect rates to go higher, so they're trying to buy while they can. If rates are x% now but you expect them to be 100-200 bps higher later this year, you're probably a bit less price sensitive right now. I expect that demand to eventually get worked out of the system.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
in my mind markets just don't crash over night. And the latest talk (the world is going to end as we know it in real estate ) started with rates abrupt rise from all time lows back to historic norms.
I am sure there are sales not happening now or refi's not happening now because of this. but there is also a extreme lack of inventory in many markets.
Will be interesting to see how consumer confidence goes rest of the year. The last big blow up ( the GFC) was based on booking hundreds of thousands of bad loans and then lenders stopped lending all together. I dont think we are seeing that lenders are still lending under the same financial criteria we have been using post GFC all that I can see that has happened is rates have gone up on most products.
- Lender · Member since 2019 · 47 posts · 97 votes4y
Quote from @Jay Hinrichs:
in my mind markets just don't crash over night. And the latest talk (the world is going to end as we know it in real estate ) started with rates abrupt rise from all time lows back to historic norms.
I am sure there are sales not happening now or refi's not happening now because of this. but there is also a extreme lack of inventory in many markets.
Will be interesting to see how consumer confidence goes rest of the year. The last big blow up ( the GFC) was based on booking hundreds of thousands of bad loans and then lenders stopped lending all together. I dont think we are seeing that lenders are still lending under the same financial criteria we have been using post GFC all that I can see that has happened is rates have gone up on most products.
For me I'm wondering just how high home prices can climb before affordability is gone. Are we looking at testing max home prices that can be attained and then staying at that level till inventory catches up ?
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Anthony Michael:
Quote from @Jay Hinrichs:
in my mind markets just don't crash over night. And the latest talk (the world is going to end as we know it in real estate ) started with rates abrupt rise from all time lows back to historic norms.
I am sure there are sales not happening now or refi's not happening now because of this. but there is also a extreme lack of inventory in many markets.
Will be interesting to see how consumer confidence goes rest of the year. The last big blow up ( the GFC) was based on booking hundreds of thousands of bad loans and then lenders stopped lending all together. I dont think we are seeing that lenders are still lending under the same financial criteria we have been using post GFC all that I can see that has happened is rates have gone up on most products.
For me I'm wondering just how high home prices can climb before affordability is gone. Are we looking at testing max home prices that can be attained and then staying at that level till inventory catches up ?
I grew up in Cupertino CA and owned my first homes in Palo Alto this is ground zero for some truly insane SFR values in the US.
when homes in our neighborhood in Cupertino got to 100k for a 1800 sq ft 3 and 2 rancher we all thought there is no way they could go higher. then a decade later when that 125k home in Palo Alto circa 1980 got to 500k to 600k by end of the decade NO Way could it go higher .
then by 1999 those homes were approaching 1 mi. then by 2013 to 2015 they got to 1.5 to 2.5 and now some are over 3 million same home same lot.. So how high can they go if we look back we all invest in real estate with the idea our props are going to go up in value over time. I know I know the cash flow only crowd on BP does not care if their cash flow home goes up or if it goes down because they only want cash flow .. But to me the Main reason to buy RE is to have your values increase over time if you get some cash flow that is cherry on the top.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes4y
There have been daily posts on the forums around a market crash for the past couple of months and weekly posts on one for the past eight years. The consensus - no one knows - and those who feel they know are unable to convince the others who also feel they know. There is one clear fact - the average earner's mortgage capacity versus the mean home price has inverted swiftly in 2022. Lots of moving pieces though, unprecedented government actions, no inventory, extreme rarity of crashes, etc.
- Lender · Member since 2019 · 47 posts · 97 votes4y
Quote from @Mike Dymski:
There have been daily posts on the forums around a market crash for the past couple of months and weekly posts on one for the past eight years. The consensus - no one knows - and those who feel they know are unable to convince the others who also feel they know. There is one clear fact - the average earner's mortgage capacity versus the mean home price has inverted swiftly in 2022. Lots of moving pieces though, unprecedented government actions, no inventory, extreme rarity of crashes, etc.
Understood. The premise of this post was to collect data from others around the country and what they're experiencing in their markets. You have great insight on the the fact that no one really knows what's going to happen. In my markets everything I see if still multiple offer situations day one of listing, even after the rate hikes we just saw.
- Wisconsin: Eau Claire and Rapids · Member since 2019 · 93 posts · 58 votes4y
@Anthony Michael
It's interesting, and I'm out of cash right now so I'm just watching.
I'm in central WI, so a fairly rural, stable market. Boring, cash flow but appreciation until 2021 was slow, about 2-3% per year. I bought my first rental in 2019. The appraisal had finally reached pre-GFC levels. Since then, it's doubled.
Time on market here is still less than 20 days, no different for past year. Costs of houses go up every month. I'm looking for duplexes and the sold numbers for that type of assest has gone up 25% since summer 2021. The inventory is slowly increasing, but it's mostly fixeruppers hitting the market now.
- Lender · Member since 2019 · 47 posts · 97 votes4y
Quote from @Steve K.:
The market will crash on January 12th, 2025, at 3:35pm EST.
Calendar marked ! Thank you
- Lender · Member since 2019 · 47 posts · 97 votes4y
Quote from @Rebecca E.:
@Anthony Michael
It's interesting, and I'm out of cash right now so I'm just watching.
I'm in central WI, so a fairly rural, stable market. Boring, cash flow but appreciation until 2021 was slow, about 2-3% per year. I bought my first rental in 2019. The appraisal had finally reached pre-GFC levels. Since then, it's doubled.
Time on market here is still less than 20 days, no different for past year. Costs of houses go up every month. I'm looking for duplexes and the sold numbers for that type of assest has gone up 25% since summer 2021. The inventory is slowly increasing, but it's mostly fixeruppers hitting the market now.
What I'm not understanding is in markets such as yours is why the values and buyer demand have gone up so significantly. No offense but I've never heard anyone say they want to move to central Wisconsin lol
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes4y
I have seen the same crazy appreciation in historically low appreciation areas. Like kankakee an economically suffering town with little realistic upside properties were 50k for 2 flats for many years then suddenly it went from $50k to many $100k+ sales in 2021-2022. My guess is these areas will fold at a much faster pace in any downturn. I wouldn't buy them but who knows. Same with Racine WI properties are doubled in 2 years on multi units with the same 500 credit score tenants and poorly maintained buildings. Gary Indiana a beautiful town I know haha has also seen over 100% price increases from 2020-2022 on multi units its wild.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes4y
Quote from @Anthony Michael:
Quote from @Jay Hinrichs:
in my mind markets just don't crash over night. And the latest talk (the world is going to end as we know it in real estate ) started with rates abrupt rise from all time lows back to historic norms.
I am sure there are sales not happening now or refi's not happening now because of this. but there is also a extreme lack of inventory in many markets.
Will be interesting to see how consumer confidence goes rest of the year. The last big blow up ( the GFC) was based on booking hundreds of thousands of bad loans and then lenders stopped lending all together. I dont think we are seeing that lenders are still lending under the same financial criteria we have been using post GFC all that I can see that has happened is rates have gone up on most products.
For me I'm wondering just how high home prices can climb before affordability is gone. Are we looking at testing max home prices that can be attained and then staying at that level till inventory catches up ?
One thing that can happen that no one anywhere is talking about, as best as I can tell, is that the sector *as a whole* can simply shrink. In other words, if housing prices get to a point where they are too expensive for most people, then inventory can become permanently shrunk such that the housing market is still healthy - a reasonable number of buyers exist for the number of houses for sale - but hardly anything goes up for sale because a new equilibrium has settled. Forget for a second that we live in houses and just think about any other "rare" investment - artwork, for example, or rare books, or rare coins. These are all healthy markets, they're just miniscule because they are out of reach for the vast majority of people in this country. The same thing could happen to housing; in many other countries around the world the percent of people who own their homes is relatively small. In Germany it's about 50%. In Switzerland about 40%. Everyone else rents. The houses there aren't any cheaper, they're just much more rare - hence, real estate is a much smaller portion of those country's overall economies than in the US.
The danger in that, of course, is that real estate and its accompanying industries is an enormous part of the US economy. The nominal part of housing relative to the economy - buying, selling and building homes - is about 20% of GDP. When you add in the "associated" parts of housing - the mostly retail parts, i.e. buying furniture, paying movers, buying doodads at Home Depot, etc - it adds another 5% or so to the percent of GDP. Housing is thus approximately 25% of the US GDP. Imagine shrinking that by 50% because of permanently higher housing costs relative to wages and affordability, and you can see how it could be a disaster for our economy.
Skyline Properties - Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes4y
The thing is, affordability isn't that bad. Most housing affordability indexes reflect this. Looked it up when the OP mentioned it, too many graphs to choose from to link.
Wages up, employment up, housing about 4 x income. Inventory is the problem at the moment. Ironically, raising interest rates may help this in the short run as they might spur a "get out while the getting is good" moment
- Real Estate Coach · Robbinsville, NJ · Member since 2017 · 185 posts · 99 votes4y
Quote from @Anthony Michael:
We've all seen the fear mongering that's being pushed by a lot of media outlets and influences. My question is are their thoughts justified in the current housing market. Due to Bigger Pockets being very diverse one would assume that someone's market is having a downturn of home sales right ? I'm in Fort Lauderdale and stuff is still flying off the shelve. Even where my fix and flip company is in Clearwater, it's the same story there. Is Florida the outlier where a housing market correction can't happen? How's your market doing where you operate ? This is purely speculative post no suggestion anything is or will happen in the market just looking for opinions and to see what others have to share!
Everything is flying off the shelves as you call it in every market. No one knows for sure what will happen. If the #'s make sense and work in the current environment then buy. If they don't then hold and wait it out.
- Investor · Saint Louis, MO · Member since 2016 · 72 posts · 65 votes4y
@Anthony Michael Great post. It will be interesting to see what happens and I am appreciative of all of the posts others have shared on the subject.
I am of the same mindset as many here, I believe the demographics and inventory shortages tell one side of the story. Large pools of wanna be buyers and limited availability of existing / under building of new homes for decades keep the supply / demand imbalances in place thus keeping upward pressure on pricing. One the other side you have rate increases pushing borrowing costs up and "inflation" pushing RE values ever higher. Because of this I am doubtful we see a "crash" but wouldn't be surprised to see a drop in asking prices and a switch to a more buyer friendly market.
The most interesting argument I am following about downward pricing pressures is the sale of assets (houses) by the institutional investors that have stepped into the RE investment game. A significant number of existing single family homes have been swept up by large funds as investment as well as build to rent (new construction / development). RE is not an efficient investment vehicle for these large funds. What happens when they see opportunity (better total return) elsewhere and start to sell their portfolios to realign capital? Is the demand there to maintain price stability?
- Wisconsin: Eau Claire and Rapids · Member since 2019 · 93 posts · 58 votes4y
@Anthony Michael that's exactly the thing isn't it? Historically places like Wisconsin didn't crash as much as San Francisco or New York because they did not have the crazy appreciation and people in this area are very conservative typically with their money. If we continue those historical trends I think I'll be fine and if we decline I'll be slightly less fine
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes4y
How is everyone missing Inflation? It's like 2005 when nobody wanted to see the bubble, even you could clearly see it in the data. It will probably take several years to get inflation back under control and by the time we are done the dollar will have lost a lot of purchase power.
The mistake everyone is making is that they look at house prices through the lense of dollar value from 5 years ago. When we look back in ten years, we might say, can you rememeber when most houses in the US sold for less than a million??
People seem to think that when inflation is "over" prices will go back to normal - that's not the case, they will just slow down the rate in further increase.
The mainstream media is not always wrong.
- Rental Property Investor · Conway, AR · Member since 2017 · 146 posts · 75 votes4y
@JD Martin that’s an interesting perspective I haven’t thought about. I guess because there is still so much untapped land in the US we’re not really thinking about that yet, but in some markets this will happen quicker than others (Midwest specifically)
- Rental Property Investor · Glenwood Springs, CO · Member since 2018 · 46 posts · 24 votes4y
Sales are definitely slowing here in CO. Real estate agents are having to do open houses and showings more after two years of explosion. Things still selling though. Wouldn't call it a downturn from what I have seen yet, but definitely a stabilization. I think it's more of a shock with rising interest rates than a long term thing. But it's hard to say, we're now as expensive as LA and SD, so not sure how much farther we can go in Glenwood Springs.
- 4yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
Quote from @Anthony Michael:
We've all seen the fear mongering that's being pushed by a lot of media outlets and influences. My question is are their thoughts justified in the current housing market. Due to Bigger Pockets being very diverse one would assume that someone's market is having a downturn of home sales right ? I'm in Fort Lauderdale and stuff is still flying off the shelve. Even where my fix and flip company is in Clearwater, it's the same story there. Is Florida the outlier where a housing market correction can't happen? How's your market doing where you operate ? This is purely speculative post no suggestion anything is or will happen in the market just looking for opinions and to see what others have to share!
I have not been in real estate through a big market crash (2008); however, I believe that the rates moving up are something that will effect the first time buyer's that are right there on the cusp already. The ones that cannot really get in at the prices now and they were able to with the lower interest rates, which now they are changing and the buyer's that really wanted something that have 10% down or 20% down now really have a chance they can just be a little more picky (not a lot because inventory is not going to flood the market). The thing you need to watch is the inventory, the inventory is the one thing that will dictate what goes on and with everyone in their home sitting at a 2.75% interest rate we'll see a kind of "Cold War" stall in the market with no one moving and the only ones getting in are ones that need a home that have not bought a home yet.
The McKernan Group4.954 Reviews - Member since 2020 · 671 posts · 937 votes4y
I feel like we're at the point in the highway where you're cruising along at 75 and all of a sudden everything slows down to 40 for a 1/4 of a mile and then you go back to 75. It seems like there's no reason for it, but it's because there was a crash there a half hour earlier. Traffic just hasn't caught up with the "new normal".
There's been a lot of people getting outbid for a small amount of inventory, now those people can finally grab something. However, it's probably not the house they were hoping for and they're probably feeling that they're overpaying for it with monthly payments - even compared to a few months ago.
Anyway, once those people work their way through the system, I think the housing market might finally see a price drop. I'd be shocked to see a crash because of the stricter lending standards as compared to 2008. Also, with these tighter margins in real estate, the effort it takes to come across a deal, the further effort it takes to make a deal work, the stock market going on sale recently... I'd be surprised to see my next investments not be index mutual funds and probably some stocks that I feel like got unfairly hammered. I don't think I'm alone, so, for me, this covid insanity might be wrapping up as far as the real estate sector is concerned.
I think we're going sideways/slightly down for awhile, but obviously, just my opinion...
- Specialist · Member since 2021 · 322 posts · 273 votes4y
Quote from @Anthony Michael:
We've all seen the fear mongering that's being pushed by a lot of media outlets and influences. My question is are their thoughts justified in the current housing market. Due to Bigger Pockets being very diverse one would assume that someone's market is having a downturn of home sales right ? I'm in Fort Lauderdale and stuff is still flying off the shelve. Even where my fix and flip company is in Clearwater, it's the same story there. Is Florida the outlier where a housing market correction can't happen? How's your market doing where you operate ? This is purely speculative post no suggestion anything is or will happen in the market just looking for opinions and to see what others have to share!
With the way inflation has been going, multifamily is set to continue its strong position into an even stronger one given that there will be even more renters out there. We fully expect the Indianapolis market to hit 15-25% IRR the next 5 years
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes4y
@Marcus Auerbach as long as debt is long term/stable inflation tends to help those with hard assets since they can convert those assets into currency at the new valuation.
- Investor · Saint Louis, MO · Member since 2016 · 72 posts · 65 votes4y
Quote from @Colton Hahn:
Quote from @Anthony Michael:
We've all seen the fear mongering that's being pushed by a lot of media outlets and influences. My question is are their thoughts justified in the current housing market. Due to Bigger Pockets being very diverse one would assume that someone's market is having a downturn of home sales right ? I'm in Fort Lauderdale and stuff is still flying off the shelve. Even where my fix and flip company is in Clearwater, it's the same story there. Is Florida the outlier where a housing market correction can't happen? How's your market doing where you operate ? This is purely speculative post no suggestion anything is or will happen in the market just looking for opinions and to see what others have to share!
With the way inflation has been going, multifamily is set to continue its strong position into an even stronger one given that there will be even more renters out there. We fully expect the Indianapolis market to hit 15-25% IRR the next 5 years
Outside of inflation and demographic / inventory challenges what key data points are you using to prove out this thesis? The reason I ask is that we are looking to step into another multi family sooner rather than later. While I agree with your statement I was curious as to any other data points that I may need to take into account.
- Flipper/Rehabber · Alpharetta, GA · Member since 2014 · 65 posts · 22 votes4y
We should ask Google search when will the market crash.
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