7 Signs That Prove the Real Estate Industry is Booming Again

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Real estate, like any other investment vehicle, is subject to boom and bust cycles as part of the larger economy. While the reasons behind these booms and busts may be debated, the fact is that they exist and we are currently riding through another cycle. I have been investing in real estate long enough now that I have witnessed both the boom times and the busts. What’s more, I am old enough to remember other cycles like the S&L Crisis. By remembering and riding these waves up and down, I have gained valuable experience, which provides insight into where we are in the cycle today. This insight enables me to think strategically on where to and how to steer my real estate investing business.

So where are we now?

We are definitely back into the boom times again. I say this not because I have studied loads of big economic data and crunched numbers from the Fed or Goldman Sachs, but rather because of what I am seeing and hearing around me — what some might call “small data.” I really do not have time to study all that big data. Sure, I read some of the reports from time to time, but for me small data is a much better indicator, if you know what to look for. This is especially true in my opinion at the local level.

Why do I think we are back in a boom phase? There are numerous small data indicators that lead me to that conclusion. Here are 7 that I am seeing today.

7 Signs That Prove the Real Estate Industry is Booming Again

It is hard to find good contractor crews who even have time to look at your job.

Everyone is busy, working hard, and does not have time to take on more work. This is a very different scenario from the bust of 2008 when contractors were calling me hungry and begging for work. Now it is taking real effort to find quality workers.

People are asking me to sell.

This simply did not happen during the bust times. I have had more than one person ask me recently if I would consider selling portions of my portfolio. Perhaps I should. Or perhaps I should ride the wave up a bit higher or even wait for the next one in a few years. A tough and interesting decision, but I’ll leave that for another post.

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Our local real estate club is busting at the seams again.

I can remember back in 2005 and 2006 at the height of the last boom, our local real estate club could not find a big enough room to hold a meeting. When the crash came, I was lucky enough to become president of the organization, and I watched membership dramatically drop to near starvation levels. I actually thought we might have to close out doors. But we survived, and today there are lots and lots of new faces looking to get into real estate again.

People are once again asking me how to get into real estate.

I make no secret about what I do, and I am always glad to help someone out. During the bust, I remember most folks asking me how we were surviving and how we were going to make it. No more. Now everyone wants to know my secret and how to get into it. It’s all out there if you want to take the time to read it.

Related: The Real Estate Market: How to Analyze and Predict Cycles

Prices are rising.

Any investment property that is priced properly and in a decent area is not staying on the market long. Things are moving, and the money is flowing.

The Californians are back.

In 2006, the folks from Southern California were swarming all over Memphis buying up properties faster than anything I had ever seen. They would bid on anything and bid up prices to an unreasonable level. I even remember one investor telling me he was happy to get a 1% cap rate! Many of them disappeared after and went bust after 2008. How could they not bust at a 1% cap? Those guys are coming back. We are not back at the 1% cap rate levels, but we are getting there.

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People are asking to loan me money.

Yes, the money is definitely flowing again. And it is not just me. I have spoken to several people who tell me that they are in the same situation. There is simply a lot of money out there chasing the deals now (helping in part to drive prices up). Money was quite scarce a few years ago.

Related: What Warren Buffett Just Told Me About Real Estate is Great News for Investors

This boom we are experiencing will not last, and another bust will happen. When? Who knows. No one can tell — and do not let anyone convince you they can. I personally do not think we have reached the top. It simply does not feel the same as it did in 2007, at least not yet. The wild frenzy is not there, but it is heating up.

So what should you do business-wise while things are heating up? First, always listen to your numbers. Do not overbid and do not get in a heated bidding war. Let the fools have it. I can remember during the craziness in 2008, I lost every bid I submitted and was basically forced to sit on the sidelines. I was upset at sitting on the sidelines while it was happening, but I am rather glad I was looking back. Do not worry about if you have to sit on the sidelines for a while. Be patient.

Second, consider selling. The money is flowing and now may be the time. There is nothing like a bidding war for one of your properties.

Third, consolidate your portfolio, pay off debt, and build up cash. When the bust comes — not if, but when — you will thank me for it. Remember that nothing speaks louder than cash, especially if no one else has any.

Otherwise, keep doing what you are doing. Just learn to look for and recognize the small data signs in your area, as they may not be the same everywhere. In this way, you can get a head of the wave and not be left holding the bag, so to speak, as so many were in 2008.

Investors: What are you seeing in your local market?

Let me know with a comment!

About Author

Kevin Perk

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

32 Comments

    • Kevin Perk

      David,

      You have a struggle I completely understand and have wrestled with many times. You also offer very good advice. Do not stray from the formula!

      Thanks for reading and taking the time to comment,

      Kevin

  1. melvin benzaquen

    In our market in the DFW area I am constantly shaking my head at what is being paid for properties, distressed or not. Even the “wholesalers” are retailing. I have to keep reminding myself along with my wife that one cannot compete if you don’t stay with the numbers. Simply buying a property does not mean you are in the game. Making wise decisions to NOT buy keeps you in the game and will keep you in for the long run. However, don’t rely on yesterday’s numbers. Keep not only running your numbers but watch what’s happening all around. Keep the overall focus on the market and don’t get tunnel vision! Great post!

    • Kevin Perk

      Melvin,

      You are absolutely correct about not buying being a wise decision sometimes. It can be very hard not to buy when you go through a long drought of no acquisitions because the numbers are telling you things are over priced. You just get an itch that “I have to get a deal.” But like you say, not buying when things are over heated will keep you in the game for the long run.

      I also agree with what you saw about watching the numbers as they evolve, but remember that what goes up will come down. Lot’s of people bet that things would keep going up in 2008 and got hurt.

      Thanks for reading and taking the time to share your thoughts,

      Kevin

  2. Jeff T.

    Nice post Kevin. I think we are in the “Excitement” phase of real estate and haven’t reached the “Euphoria” phase according to economist John Husing’s real estate emotional cycles. Of course it varies by local area. It’s true about the Californians, I remember that from the last big cycle. I was one of those, but I invested where I grew up in Florida.
    I’m holding everything right now and paying off mortgages and am planning to sell some in the next 2-4 years or so. A lot of that is just due to my situation and goals. 10 years ago I might be doing something else.
    It seems like paying off some mortgages at 5.5% is the best and safest way to get where I’m trying to go.

  3. Frank Boet

    It is for all those reasons above that I’m staying away from real estate right now. I have been out bit on every offer this year. There are price wars even for completely dilapidated properties. No thank you. I will continue to buy gold and oil stocks for now. I’m hearing whispers from several people in different industries that something is about to hit the fan within the next two years, no matter who’s president. I want to be liquid for when better buying opportunities come. Just my humble opinion.

    • Kevin Perk

      Frank,

      I hear what you are saying. I do not think we are quite there however in Memphis as there are still some deals out there. However finding them does take a bit more effort.

      What market are you located in?

      Thanks for taking the time to share your thoughts,

      Kevin

  4. Paul Doherty

    Yes, the DFW market is “frothy” and I’ve been sitting on the sidelines a bit watching. Houses are going for more than asking (when buyers can cover the difference from appraised value in cash) and are selling quite fast. Part of this, IMO, is pent-up demand from the last few years with not enough new construction (new construction was down to 25% of what it had been before the crash up until recently). Another part is that we have many firms like Toyota and some insurance companies (among others) moving to the Dallas suburbs, some coming from house-rich California. Those Californians are realizing they can liquidate their shack in CA and buy a mini-mansion in Texas for less money… Not sure where this ends but I don’t think we’re near the top yet. Maybe next Spring I’ll be concerned (although that’s when Toyota is actually slated to move here, so maybe that won’t be the top yet either).

    • Kevin Perk

      Paul,

      Thanks for taking the time to comment about DFW. I think it is wise of you to watch the local conditions like you are. Real estate is very local and what might be taking place in one location may not be taking place in another.

      We have similar conditions here in Memphis, with a lack of buildable lots creating pent up demand. Sound like you have some strong pull (job creation) factors as well. Keep an eye on things and you will know when it is time to jump in again.

      Kevin

  5. 10 years ago I asked my boss, who had 40 houses and counting, and who was also on lenders’ lists whenever they had an REO to unload, if he could let me buy just one of those houses because I wanted to buy a home to live in and it was impossible to compete against the 100% cash investors like my boss always offered and the banks demanded. But noooo. And it wasn’t like if he let me have a house, he would have to let everyone in the office have a house. There were only two people in the office, and one of them was his wife. In those days, I could not buy flipped houses because they were simply over-priced, and everyone knew it except the greater fools who did buy the houses at the peak of the bubble.

    I do not know why people are asking you to sell, but I was really disappointed at the extreme greed of at least one real estate investor who could not bear to give up even one deal in favor of someone close to him who simply wanted a home. I also wonder if the current low inventory is at least partly because of a lot of investors like my boss.

    There are a lot of renters these days who have the money, but are forced to rent because of the low inventory. Not only that, these tenants often suffer the disdain, (if not expressed to their face but in forums like this one), of their landlords who believe they are tenants because they are too financially irresponsible to buy a house.

    • Kevin Perk

      Katie,

      It is too bad you had an unfortunate experience. But it sounds like you have some great real estate experience.

      Do you mind if I give you a bit of unsolicited advice? Please let that resentment I read in your comment go. Some people are just not very nice and there is simply nothing you can do about it. Learn from it and move on. Use the knowledge you have to find and create your own deal and success story. I bet you can do it and if you have already then congrats! I am not trying to be preachy here here with you and I apologize if I have come off that way, but dwelling on these negative thoughts and people is not helpful. Trust me, I know from experience. There will always be someone out there getting in your way or trying to hinder you. Just ignore and go around them.

      As for me, I am hesitant on selling right now because I am not sure I want to give up my cash flow (income) right now and cash in my chips so to speak. I have a feeling a lot of other investors feel the same way. It is a big decision.

      I also feel sorry for investors who have disdain for their tenants. Not everyone can or should be a homeowner. There is no shame in renting. And actually, there are times I wish I could call the landlord to fix my broken stuff!

      Thanks for taking the time to read my post and comment. I do appreciate it,

      Kevin

  6. Karen O.

    Thanks for this.
    The return of the late night gurus in Nov/Dec was my first inkling. I noticed just a few days ago they are back again 4mos later. The 2nd was the increase in newbies at BP. And the 3rd is the roll out of new flipping shows on cable TV.
    All just a reminder to be cautious.

    • Kevin Perk

      Karen,

      Those are all good insights. I should have added the number of invitations I am getting in the mail to “get into real estate seminars” hosted by those folks on the flipping shows you mention. They are becoming more frequent lately.

      Keep investing but yes, be cautious.

      Thanks for sharing,

      Kevin

  7. Kris Martinez

    Awesome post , Kevin. Thank you for perfectly summarizing into an article a complex topic (what can be). You mentioned in your article that access to capital is more readily available. I am not sure what your RE investment strategy is (aside from buy/hold), but for me, just this year, I have decided to try syndicating apartments (3-5 yr hold). The hardest part has been finding the investors/source of capital. In my area, I can find the deals, as the underwriting comes fairly easy to me. Do you have any suggestions on how I can be more successful fundraising? My apologies for the broad question or if this is not your arena; your comments regarding accessing capital prompted me to ask. Thank you.

  8. San Francisco is slowing. Especially high end new(er) downtown high rise condo units and the very high end. Has been straight up since about 2010. So some cooling is welcome. Rents flattening as well. Tech related slowdown for sure, but also fewer international investors. And price gains have outpaced even high Bay Area salaries for too long.

    Don’t expect a dramatic correction as the dynamics are different than 2005-2008. But some softening for sure.

    As far as investing…I cannot imagine paying such high valuations for the “cash flow low appreciation” cities. Does not make any sense.

  9. Faisal Farnas

    Tampa Bay market is on fire as well. Multiple offers above listing in many cases, even for houses that need rehabbing. The main driver is low inventory, not easy credit or a booming industry/ high salaries I believe.
    There are some good deals here and there but they are rare.
    A major sign was a woman I work with whom her landlord refused to renew her lease because he wants to update the property and Jack up the rent by $500 a month.

    • Kevin Perk

      Faisal,

      We see the rehabbing of rental properties to get higher rents here as well. And people are getting those higher rents. Some of that is due to job growth, but I wonder if it is sustainable in the long run.

      Thanks for reading and taking the time to share your observations,

      Kevin

  10. We are looking at other states right now but are hesitant about investing out of our area. Currently we are in Southern California and have been itching to pickup another property but the inflation in home prices is just obsurd at the moment. Waiting for this bubble to pop so we can get a reasonable price to rent ratio. It seems that even the flippers are producing minimal returns and we just don’t feel like taking that kind of chance this late in the game. Don’t want to get stuck holding the bag when the music stops….

  11. ali alwash

    Great points Kevin. I am in the process of buying a house here in New Zealand and the market is going crazy. starting from Auckland (capital) and now spilling over to smaller cities. Few rentals available with low interest rates and massive migration has resulted in a crazy market. I have put so many bids on houses i have lost count as people are overpaying massively. Got to keep our head straight as prices will eventually drop. I am finalising the deal on a big old house that needs a bit of work but at a good price.
    Thanks

  12. Marilyn Mike

    I like this article for me being new REI and on BP. Thanks for the information of taking your time to buy. Using your real estate investor knowledge and wisdom. It’s like gotta know when to hold’em and fold’em.

  13. jay hinrichs

    Portland market is very brisk… but price points vis a vi west coast is still quite low and homes are affordable with interest rates were they are at.

    renters though have been HAMMERED … its now cheaper to own a median priced home than to rent it.
    and that does not happen on the west coast often

    for all the reason you mentioned I am a seller as well, nothing is held more than 12 months ( flipping or building new construction) and I sold off my 350 home portfolio at what I think was a peak for cash flow markets. only 5 left and will call it a day as a landlord and just continue to lend and fund JV partners for my cash flow..

    Lastly since I have been around the CA buying mid west phenomena since basically its inception 2002 ish.. were I was one of the larger HML in the mid west.. what I see compared to prior to 08 is completely different dynamics of the buyers.

    pre 08 the sales pitch by turn key companies and those that market them was NO money down get money back at close… and thousands upon thousands were sold that way so you had buyers with no skin in the game and actually took I out.. the turnkey companies and promoters would tout 30% expenses with 100 bucks cash flow well buyers came to realize those numbers don’t work they may for locals but not for out of state… so the 100 month suddenly was 200 negative.. and then you have the mid west hud renter who trash’s the house and now you have a 5k turnover on top of it.. this is why thousands of LA based investors lost there rentals in cities like Memphis.. and the locals just scooped them right back up and renovated them all over and sold them again from 08 to present.. 50% of all turn key inventory is or rental inventory comes from failed out of area landlords.. that’s a fact.. !!! I know I foreclosed personally on 200 of them.. and I am just one little private 30 million dollar HML company.

    So what we see now and what I like much better is so many properties are paid for in cash ( which is a great way to buy mid west properties that way you can weather any tenant and PM issues. ) and buyers now are putting 20 to 30% of REAL cash down and they are realizing that cost to run these assets are more in the 40 to 50% of rent range no 30… So much stronger borrower RATES are very low .. and cash sales that’s what is better and more sustainable with todays turn key or out of state buyers.

    • “…its now cheaper to own a median priced home than to rent it. and that does not happen on the west coast often…” True, enough but an unusual proportion of these renters are professionals because it costs 2-3 times median salary to buy a median priced home. Almost by definition, because wages provide the house payment, a median salary should be able to qualify for a median house.

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