All Forum Posts by: Vinay H.

This year, investors have raised billions of dollars from bond buyers, pension funds and even wealthy Chinese individuals to purchase more homes. They have been particularly aggressive buyers in places like Atlanta, Phoenix, and other metro areas with good schools and faster-growing economies.

Cash to acquire and renovate homes has become so abundant lately that some rental investors can’t spend it fast enough. Without enough homes to buy, some investors are now building their own in popular residential markets like Miami and Nashville, Tenn.—upending a traditional pattern of Americans buying starter homes and moving up

More news from Wall Street JOurnal today

Wall Street is betting that more well-off Americans will want to be renters.

Financiers who loaded up on homes after the housing bust for pennies on the dollar are buying yet more—despite home prices in many markets being at all-time highs.

Their wager: High prices, higher mortgage rates and skimpy inventory are making homeownership harder. Well-to-do families who might have bought a single-family home in another era are willing to rent a house now, especially if it means access to a good school system.

The number of homes purchased by major investors in 2017 was at least 29,000, up 60% from the previous year, estimates Amherst Capital Management LLC, a real-estate investment firm that made nearly 5,000 of those purchases.

A bubble happens when there is an unrealistic rise in asset prices based on unfounded assumptions and the expectation that somebody will pay a higher price for it when sold. A crash happens when the bubble is financed by leverage and the assumptions turn out to be unrealistic. 

Eg if people think that the median houses in cities with median prices close to 1M will keep going up 10% they are creating a bubble. If they borrow more than they can afford to finance those properties, then they risk creating a crash.

Now ponder this headline today in the Wall Street Journal

House Money: Wall Street Is Raising More Cash Than Ever for its Rental-Home Gambit

Investors wager that high prices, higher mortgage rates and skimpy inventory are making homeownership harder for individuals and families

So I would say that the signs are pointing to a bubble. We may not be at top, there may even be a dip followed by a rally (just like stock market in February) but it is looking bubblicious in certain segments/markets.

We won’t know if it has peaked until it starts falling. With crazy appreciation in markets like Portland ME, it is definitely worth taking the contrarian view. I don’t see what is the draw that there would be a large influx of people moving to Portland. True there is some tech and some people drawn to stress free lifestyle but not enough to justify crazy valuations. I can’t predict when Portland will peak but I am sure they will be hit the hardest compared with major metro areas. Therefore I would avoid buying properties with a 3 cap rate there.

How is the Cape cod market? I see it as lukewarm with houses staying on market and price cuts. I suppose people are focusing on flips in major metros rather than vacation spots?

Watch for electricity bill. Maybe they are trying to grow pot or make a meth lab lol

@Jonathan Justiniano You will have a big dilemma.

An owner occupied 2-3 family in desirable towns in Massachusetts will not cash flow. The ones that will cash flow will be in B/C zones (think West of Worcester). So I think your idea is going to bit road blocks either due to budget or due to having to convince wife. Happy wife, happy life is a little too simple. I would say doing good analysis of numbers = healthy bank balance = happy wife = happy life

Are you trying to buy this property or sell it or refinance it? I wouldn't add a driveway just for refi or even to sell.

I am not sure the cost will justify the increase in valuation and I am pretty sure you won't getter significantly higher rent because of driveway. So please study the numbers carefully

Originally posted by @Mike Dymski:

Yes, cyclical markets go through...well, cycles.  The active BP members in these cyclical markets (1) buy well (2) add value (3) use long term debt (4) maintain reasonable LTVs (5) buy in good locations with high demand (6) hold very long term and (7) have reserves.  There is no sense in discussing reckless investment into hot cyclical markets without these safeguards...those investors are not on BP trying to learn how to prudently invest.

These BP market correction posts have been going on for years.

I agree. I am just trying to spot the cycle and ensure we buy well ! if there is downward pressure on rents due to oversupply, then it means the opportunity to buy at better price point must definitely be down the corner (the corollary would be to avoid buying in these markets for now)

Originally posted by @Christopher Winkler:

so true @Jay Hinrichs, in pockets of higher end homes in Dallas, its actually transitioned to a sellers market with over 7-8 months of inventory, vs other areas selling like hot cakes... 

In the attached report of the subdivision called Prestonwood, in the last year, sales have been cut in half, and listings have tripled. Supply has gone from less than a month to 3 month, trending toward that buyers market.

@christopherwinkler - I think you want to say that high end Dallas has transitioned to buyer's market if there is 7-8 months inventory 

As for the above report, your argument seem compelling when you say #of listing has tripled and median price down but

sample size is only 7 to 21 listings, so not so sure. Median listing price is slightly down, but DOM is actually down, so it means the market is in flux. 

To confirm , you want to see rise in DOM, rise in inventory but fall in median price