Will there be another Real Estate crash?

[BMW F22]

We were looking at some homes over the weekend. I asked an RE agent who's been in the industry for 21 years about a correction and he said that he expects one to be coming up soon (next few years). He said he's seen it go up and down a few times. Mostly because big tech companies are driving prices up (lots of workers coming here on work Visas and foreign investors having money to snatch up those homes).

That is what happened in SF with all those startups. People were being driven out because rent and home prices were simply unaffordable for many. We are starting to see it in the South Bay too. Basically when rent starts to soften when the market corrects itself. Perhapd the tech bubble will burst and that will drive prices down.

[Mr Tonka]

Yes.

Eventually.

[Fundguy1]

Crash not likely. It's still leveling out. No mortgages going to unqualified people, no regulation eases. These things typically have 20-30 yr cycles in real estate. 5 to 10 yr cycles in the stock market. Long term real estate sucks badly as an investment. Short term there's money that can be made.

[csu87]

Its a location specific issue. I dont follow real estate elsewhere, but I have just bought 2 homes in the last 2 years here in Colorado, and Prices are leveling out, but there are no indications to a crash coming. In fact, here in Northern Colorado, RE prices are expecting to almost double in the next 5-10 years. Add into the fact that a lot of the smaller cities in Colorado are starting to put construction caps on new development, and land prices will go through the roof. Not that it matters because I dont plan on selling anytime soon, and if I did, I would just have to move to another house that has also doubled in value so...

[OUGrad05]

Originally Posted by Fundguy1

Crash not likely. It's still leveling out. No mortgages going to unqualified people, no regulation eases. These things typically have 20-30 yr cycles in real estate. 5 to 10 yr cycles in the stock market. Long term real estate sucks badly as an investment. Short term there's money that can be made.

I disagree. Mortgage standards while better than 2000-2008 still appear to be a joke. When we built our house a few years ago we were approved for a mortgage of nearly $800,000. Thankfully, I can do math and realized that would be absolutely stupid and we were only asking for "up to" 200k in mortgage.

I know several people who on somewhat normal incomes have been approved for outrageous mortgages. Three examples:
1) Friend in cali makes 140k/yr was approved for a 900k home, he's putting 210k down. So his mortgage is 690k. He can't really afford it, but he did it anyway.

2) Friend in TX makes 80k/yr was approved for 375k mortgage.

3) Friend here in OK makes 70k was approved for 375k, thankfully only did about 180k in mortgage.

Two of those three have been in their current jobs less than a year. People are beginning to stretch themselves and while rates are low so you can theoretically afford more mortgage than if rates were say 6% people are pushing themselves.

The other thing I would say is property values are going up fairly quickly here in Tulsa despite the area being in recession. My wife and I went to look at a few homes yesterday and if we were building again today, we probably wouldn't build in our own neighborhood because prices are up 30% since we built in late 2012.

I think a broader correction is likely within the next couple of years. I don't think it will be as bad as the previous housing pull back. Another thing driving the current up trend in housing prices was the massive curtailment in home construction from early 2008 through 2012. It has created a true housing shortage in many areas (perhaps mine included). But building has really ramped up the last couple of years for many areas of the nation.

Also if you look at mortgage/lending data, debt to equity, mortgage to income and TOTAL household debt you'll see the metrics have been moving the wrong direction the last couple years, or best case flat (consumer debt) over the same 24 mo period.

People are back to their old habits, keeping up with the neighbors and lending standards aren't near tight enough, although they are better than 2000-2008.

[JasonCSU]

Originally Posted by BMW F22

Wow very nice!! Thinking perhaps when it's time for me to buy I should look at Denver or Texas.

I'm not sure when you are thinking of buying, but keep in mind that prices in and around Denver are still appreciating at a steady pace. Last year alone was around 15%.

http://www.denverpost.com/business/c...ng-market-2016

[OUGrad05]

Originally Posted by JasonCSU

I'm not sure when you are thinking of buying, but keep in mind that prices in and around Denver are still appreciating at a steady pace. Last year alone was around 15%.

http://www.denverpost.com/business/c...ng-market-2016

It's pretty crazy in Denver right now. There's a decent chance we'll be relocating there within the next 24 mos, I'm hoping the market stalls or goes into retreat between now and then, but I'm not sure that'll happen

[BMW F22]

Originally Posted by JasonCSU

I'm not sure when you are thinking of buying, but keep in mind that prices in and around Denver are still appreciating at a steady pace. Last year alone was around 15%.

http://www.denverpost.com/business/c...ng-market-2016

I looked up Denver prices and it's actually not that low. Looks pretty hot right now like you said. Prices are almost identical to here (almost).

[Ali Shiralian]

Originally Posted by fazman

I got some tulips to sell you that I just planted

Sorry, not getting your sarcasm...

[csu87]

Originally Posted by BMW F22

I looked up Denver prices and it's actually not that low. Looks pretty hot right now like you said. Prices are almost identical to here (almost).

The issue with Denver is the lack of inventory in desirable markets. Ive had several friends buy in Denver over the last year and each one of them had to eventually pay 15-25% over asking.

If you are going to buy anywhere in Colorado the best time to do so is now, in the winter. Every year you see prices start to jump up in april/may, hit highs in july, and start to decline some in November/December. No one wants to move in the winter. Granted you are only looking at maybe 5% of a decline, but Got also have to factor in that Not as many are looking at that time too so chances are low you will get into a bidding war.

[fazman]

Originally Posted by Ali Shiralian

Sorry, not getting your sarcasm...

no worries, read this: https://en.m.wikipedia.org/wiki/Tulip_mania

you will learn about popular known market cycles and how they evolve and crash

[ORIGIN M.]

Yes it will crash due to the secondary rental markets alone.

Just like like last time. Total corruption from the inside out.

[fazman]

Originally Posted by Ali Shiralian

Yes it's absolutely outrageous what the market looks like now. Young people will NEVER be able to afford a house in GTA any longer and it's a sad truth. My son is fortunate that he has a good job and very fiscally responsible to be able to save some money for down payment but most won't be in that position. I heard a story the other day that this Chinese family approach my agent and selected a house but once they entered the house they liked the furniture and bought that too, including the car on the driveway. They also paid cash for everything. Hard to compete with that kinda approach...

Sounds like a typical salesman answer, make up a sensational story that can't be proven by him and say he is the source of truth

My RE agent told me about this new eskimo invasion of buyers who are starting to buy up local markets. They have a way of making money that hasn't caught on yet, they hunt/track down rainbows to the end and that is where they find a cache of precious valuables that they can in turn sell for money. They do this at every opportunity they get (usually in regions where there is a lot of rain activity). He told me that these buyers were a wild bunch, they would buy houses, cars, furniture, cloths, kitchen food, even the underwear and socks of the current residents... just to get the cuurent residents out of the house asap. Then they would demo the house as-is (stuff and everything). Then they would build huge white dome like structures with really powerful cooling systems. They seem to want to have lots of pet seals as well, go figure

[zx10guy]

Originally Posted by fazman

Sounds like a typical salesman answer, make up a sensational story that can't be proven by him and say he is the source of truth

My RE agent told me about this new eskimo invasion of buyers who are starting to buy up local markets. They have a way of making money that hasn't caught on yet, they hunt/track down rainbows to the end and that is where they find a cache of precious valuables that they can in turn sell for money. They do this at every opportunity they get (usually in regions where there is a lot of rain activity). He told me that these buyers were a wild bunch, they would buy houses, cars, furniture, cloths, kitchen food, even the underwear and socks of the current residents... just to get the cuurent residents out of the house asap. Then they would demo the house as-is (stuff and everything). Then they would build huge white dome like structures with really powerful cooling systems. They seem to want to have lots of pet seals as well, go figure

There actually may be some truth in that story. It's been a long while but back at the start of the big housing boom, I put my townhouse on the market. I had a family actually call me to plead their case for me to accept their offer. In addition during the conversation, he also stated he loved my furniture and wanted to buy all the furniture I had in my house. He wasn't Chinese or Asian though.

The person I did actually accept the offer from was a Korean guy whose parents were helping him buy his first home. All the other offers I got had a I think the typical $500 or 1000 earnest money deposit. This Korean family put down $5000. My agent told me these people are serious in showing they mean business in making their offer heads and shoulders above everyone else. Their offer was hard to ignore with no home inspection contingency as I bought my house new from the builder and it was only 2 years old at the time. They were putting down 20% and using conventional financing versus the other offers with 3% down and FHA financing.

[tc328]

Same here in MA.

[BMW F22]

What would be the best route to go: conventional or FHA? With prices the way they are, I could do 10% down with excellent credit. Looks like conventional is the way to go, no?

What about PMI? Can I take out another mortgage for the difference in order to pay no PMI?

[spdy330]

I believe we are going to have a bigger crash within the next 4 years in certain areas of Southern California. We just purchased our home in the Inland Empire 7 months ago paying $225k more for the same type of home than just two years ago. This is partially due to the investors scooping up everything in the beginning and then the foreigners coming in with all cash. Every time we made an offer an “ALL CASH” offer outbid us for the past two years. Although with banks you need to prove that you have the income to qualify for a loan they are now doing ARM loans and loans as little as 3% down once again. These were part of the issues that caused the crash in 2008. So my prediction is by 2020 we will have a crash once again.

[fazman]

Originally Posted by zx10guy

There actually may be some truth in that story. It's been a long while but back at the start of the big housing boom, I put my townhouse on the market. I had a family actually call me to plead their case for me to accept their offer. In addition during the conversation, he also stated he loved my furniture and wanted to buy all the furniture I had in my house. He wasn't Chinese or Asian though.

The person I did actually accept the offer from was a Korean guy whose parents were helping him buy his first home. All the other offers I got had a I think the typical $500 or 1000 earnest money deposit. This Korean family put down $5000. My agent told me these people are serious in showing they mean business in making their offer heads and shoulders above everyone else. Their offer was hard to ignore with no home inspection contingency as I bought my house new from the builder and it was only 2 years old at the time. They were putting down 20% and using conventional financing versus the other offers with 3% down and FHA financing.

i can understand what you are saying. Guess what... i did the same thing when i made the offer for the house i bought 2 years ago. "wow, what an awsome home. I love the way you decorated it. How much for the house with everything in it?" Then once under contract... (because the items of the home are not sold as part of the contract) i flipped the switch and said... nah i don't need anything. I got the home and didn't have any drama with other buyers.

In the long island NY area, no one takes your offer seriously unless you put $15k with the offer. I'm not chinese/korean either. Every market is different and has different laws/rules/norms.

[rob24ert]

Originally Posted by fazman

Sounds like a typical salesman answer, make up a sensational story that can't be proven by him and say he is the source of truth

My RE agent told me about this new eskimo invasion of buyers who are starting to buy up local markets. They have a way of making money that hasn't caught on yet, they hunt/track down rainbows to the end and that is where they find a cache of precious valuables that they can in turn sell for money. They do this at every opportunity they get (usually in regions where there is a lot of rain activity). He told me that these buyers were a wild bunch, they would buy houses, cars, furniture, cloths, kitchen food, even the underwear and socks of the current residents... just to get the cuurent residents out of the house asap. Then they would demo the house as-is (stuff and everything). Then they would build huge white dome like structures with really powerful cooling systems. They seem to want to have lots of pet seals as well, go figure

100% truth to this story. Dealt with clients like that.

Its a frenzy here. Selling above asking is the norm. People camp overnight to get first shot at developer units. Asian clients outbid by crazy amounts just because they like it and want it, artificially raising prices more.

[roastbeef]

the term "crash" gets thrown around a lot and i think it is a very much subjective term. also, regional markets can't be looked at to determine if an overall crash is going to happen. i think those two reasons above are why there are so many differing opinions in this thread.

real estate is a unique thing... i don't think anyone is really wrong in their opinions in this thread, because everyone comes to the table with their knowledge of their specific market. the only people i would say is wrong are those that say real estate is a bad investment.

i had a prospective tenant bring up when he was submitting his application that he would make a good tenant because he, too, was a landlord. perplexed, i had to ask a little more. he went on to say that he "didn't know anything about real estate" when he purchased his home and bought at the wrong time. he lost a lot of credibility with me with that statement. nobody buy yourself is responsible for your own education in an investment or purchase when you are forking over a lot of money.

in the grand scheme of things, interest rates going up would be the "correction." i'm 28, so i haven't seen mortgage rates in the teens, but i know the 3-4% rates i have seen wouldn't have been around forever. properties that could be purchased and rented for a profit with 25% down are now non-existent in socal. we are seeing growth, but i don't think the pendulum is going to swing the other direction far enough to call normal real estate troughs a "crash."

[zx10guy]

Originally Posted by fazman

i can understand what you are saying. Guess what... i did the same thing when i made the offer for the house i bought 2 years ago. "wow, what an awsome home. I love the way you decorated it. How much for the house with everything in it?" Then once under contract... (because the items of the home are not sold as part of the contract) i flipped the switch and said... nah i don't need anything. I got the home and didn't have any drama with other buyers.

In the long island NY area, no one takes your offer seriously unless you put $15k with the offer. I'm not chinese/korean either. Every market is different and has different laws/rules/norms.

The situation I recounted happened in 2001. So things could be very well different now. I do know when I bought my vacation property from my builder on the Eastern Shore in 2012 they wanted $10k down to initiate the contract. And if memory serves me correctly, I had to cut another $10k check when they broke ground. This was way more than what the same builder wanted when I bought my primary residence back in 2001 when I think I only had to put $5k down until I went to closing. So your $15k down payment isn't the big deal you make it out to be.

Back to the story I mentioned in my post above. It wouldn't have mattered if the person changed their mind. I actually liked my furniture and most of it wasn't cheap stuff. The finances didn't depend on me having to sell my furniture to make things work. Also, I would have to buy all new furniture anyways, if I sold it.

[Ali Shiralian]

Originally Posted by fazman

Sounds like a typical salesman answer, make up a sensational story that can't be proven by him and say he is the source of truth

My RE agent told me about this new eskimo invasion of buyers who are starting to buy up local markets. They have a way of making money that hasn't caught on yet, they hunt/track down rainbows to the end and that is where they find a cache of precious valuables that they can in turn sell for money. They do this at every opportunity they get (usually in regions where there is a lot of rain activity). He told me that these buyers were a wild bunch, they would buy houses, cars, furniture, cloths, kitchen food, even the underwear and socks of the current residents... just to get the cuurent residents out of the house asap. Then they would demo the house as-is (stuff and everything). Then they would build huge white dome like structures with really powerful cooling systems. They seem to want to have lots of pet seals as well, go figure

Other people commenting on yours, no need for me to elaborate...