Author Topic: 2017 Real estate CRASH  (Read 13453 times)

groove251

  • 5 O'Clock Shadow
  • *
  • Posts: 19
2017 Real estate CRASH
« on: March 25, 2017, 02:14:38 PM »
I was wondering if I could get some advice from you guys. Due to a number of circumstances, I can't help but feel like the real estate market is poised to fall again. My concerns are due to:

- Bad ratio of income vs. housing costs in most cities
- Unsustainable appreciation rates over the last two years
- Interest rates starting to rise (slowly, but still...)
- Everyone saying how great everything is (this scares me the most)

My situation is I have about $500k in equity in my house in Portland (I owe around $250K still). My job isn't dependent on local econmy. The house is in a hugely desired area that is walkable to everything and the house is beautiful. I've spent the last 4 years remodeling it and it would sell quite fast. Based on these factors, I was thinking of selling and renting in a less expensive city for a few years while this whole market falls apart again, and then buy my next property outright (with rentable adu or duplex).

Any thoughts or advice?

tyort1

  • Handlebar Stache
  • *****
  • Posts: 2288
  • Age: 47
  • Location: Denver, Colorado
Re: 2017 Real estate CRASH
« Reply #1 on: March 25, 2017, 02:19:47 PM »
I'd sell.  Get rid of the mortgage, reduce your monthly payments AND pocket $500k, that's a pretty good deal.  I too think housing will take a dive, maybe not this year, but probably within 2 years.  You could hold on a little longer and get a bit more $$, but that's a lot of risk, IMO. 

Zamboni

  • Handlebar Stache
  • *****
  • Posts: 2286
Re: 2017 Real estate CRASH
« Reply #2 on: March 25, 2017, 02:40:19 PM »
I also think it is going to definitely slow down and then dive in the next couple of years . . . my local market is just starting to show the signs. I've actually stopped looking at new property as the valuations are getting too high in my areas of interest, and I'm just going to hold steady in a cash accumulation phase for a bit to see what happens.

groove251

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: 2017 Real estate CRASH
« Reply #3 on: March 25, 2017, 02:44:00 PM »
Thanks guys, it makes me feel better about it to hear you guys thinking the same thing. Portland prices are INSANE right now. Out of 11 homes in my neighborhood, 9 of them are priced over 1 million. Despite wages not growing at all. Makes no sense.

Ocinfo

  • Bristles
  • ***
  • Posts: 308
Re: 2017 Real estate CRASH
« Reply #4 on: March 25, 2017, 03:03:53 PM »
I generally feel the same way. Pay is going up way slower than housing prices in many (most?) mid to large size metros. Couple that with higher rates and I don't see how prices don't drop at least some but I don't think it's anywhere as bad as 2008. All of this assumes a rational market but that might not be true.

In your place, I would probably rebalance my NW to have less tied up in the house unless I was planning to stay in the home for years. What worries me is that so many buyers are stretching to purchase based on two good incomes so, during a recession, there really isn't much insurance provided by having two incomes if one is lost since the other can't keep up with mortgage, car and student loans.


Sent from my iPhone using Tapatalk

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 5350
  • Location: Fayetteville, NC
Re: 2017 Real estate CRASH
« Reply #5 on: March 25, 2017, 08:07:17 PM »
What worries me is that so many buyers are stretching to purchase based on two good incomes so, during a recession, there really isn't much insurance provided by having two incomes if one is lost since the other can't keep up with mortgage, car and student loans.

Yes, it's called "Harvest Season" by landlords.

sol

  • Walrus Stache
  • *******
  • Posts: 8492
  • Age: 42
  • Location: Pacific Northwest
Re: 2017 Real estate CRASH
« Reply #6 on: March 25, 2017, 09:05:45 PM »
Successful RE markets, like CA and Australia, have had ridiculous price/income ratios for decades.  Desirable places to live appear to support higher RE valuations.

In some sense, I think it's related to wealth inequality.  In these places, an unusually high percentage of people are renters and only the lucky few can ever actually own property.

Joel

  • Pencil Stache
  • ****
  • Posts: 773
  • Location: California
Re: 2017 Real estate CRASH
« Reply #7 on: March 26, 2017, 03:30:19 AM »
The Sacramento area is at the same level it was in 2007. I hope that we see a drop in the next couple years as we are at the point in our life where we would like to settle down soon...

Another Reader

  • Magnum Stache
  • ******
  • Posts: 4973
Re: 2017 Real estate CRASH
« Reply #8 on: March 26, 2017, 03:54:12 AM »
Unless there is a major shock to the economy, I would expect prices to level off and drop a few percent in the less desirable areas.  Portland is becoming another highly desirable HCOL city, and Sol's comment about valuations in desirable locations is spot on.  When the economy sours, you could see more of a drop.  A 50 percent haircut?  You need another 2008 to get that.

As an investor, I am selling a few rentals and using proceeds to pay off mortgages.  It's a better uses of my capital when cash yields are so low and most of the appreciation in this cycle has already happened.  However, investors have little effect on the HCOL markets, except for the foreign money seeking a safe haven.  Making foreign investment difficult in Vancouver has affected the market, but not enough to make it profitable to have sold at the peak and buy back now.

Consider your selling costs and how much if any tax on the capital gain you would have to pay as part of your analysis.  You may find the total cost of selling might be more than what you would gain by selling and buying back.

rachael talcott

  • Bristles
  • ***
  • Posts: 286
  • Age: 45
  • Location: TN
Re: 2017 Real estate CRASH
« Reply #9 on: March 26, 2017, 06:46:26 AM »
I know a very wealthy couple that was considering retiring to the PNW.  They would have bought a pricey house with assets accumulated elsewhere over a lifetime. Think of mustachian retirement math and then add on an extra decade of work.  It would be easy to accumulate an extra million if one really wanted to retire someplace like Portland.  Housing prices are not driven only by salaries. 

YttriumNitrate

  • Pencil Stache
  • ****
  • Posts: 536
  • Location: Northwest Indiana
Re: 2017 Real estate CRASH
« Reply #10 on: March 26, 2017, 07:42:48 AM »
My feeling is that 2017 is a bit different from 2007 because if anyone said "Real estate never goes down" or "Your house is your best investment" in 2017 they would be laughed at.

Ocinfo

  • Bristles
  • ***
  • Posts: 308
Re: 2017 Real estate CRASH
« Reply #11 on: March 26, 2017, 08:07:09 AM »
My feeling is that 2017 is a bit different from 2007 because if anyone said "Real estate never goes down" or "Your house is your best investment" in 2017 they would be laughed at.

You give people too much credit...most just think it won't happen to them.


Sent from my iPhone using Tapatalk

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: 2017 Real estate CRASH
« Reply #12 on: March 26, 2017, 09:56:18 AM »
The areas we're talking about are all places where rich people live, folks. Bay Area, Portland, NYC, etc.

Rich/very upper middle class people have done awesome in the last few decades. I am not surprised that the places they (we) want to live continue to appreciate. Many of them have limited housing stock and/or very restrictive zoning that prevents dense/high housing or even new building at all for all practical purposes. That's a formula for crazy prices without any need for irrational buyers or an impending crash.

When crappy condos in the Central Valley or Phoenix or random places in the midwest are going for $400k in a bidding war, then I'll be convinced. Those folks here who have gotten a mortgage in the last few years know very well that no doc/stated income kinda stuff doesn't fly these days, too. Totally different situation than 2005.

Now, that said, I could see interest rates causing a *very* long stagnation in house prices at least at the high end. Demographics right now is going to mean that the entry level will do great in terms of demand (but prices may stay the same/go down as new housing gets built).

-Walt

groove251

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: 2017 Real estate CRASH
« Reply #13 on: March 26, 2017, 10:12:09 AM »
Thanks for the reply everyone. Very interesting to hear your thoughts.

To answer a question from above, our profit from the house will fall under the limit for capital gains on real estate, so we won't be taxed on that. I'll be selling the house and offering a 3% commission to a buyers agent, so that cost will be around $22,500. So we will have right at $500,000 after all is said and done.

In terms of city prices, most of the major cities are really appreciating at a rapid rate. Portland has appreciated the fastest of any US city during the past 3 years (along with Seattle and Denver). The difference in many of these cities is that pay has not come up to match the cost. In San Fran. and NYC, the wages are much higher. Portland has an average pay of $40,000 per year. But you can't buy a house for less than $500,000 in the city. Those numbers are wonky and unsustainable. It doesn't matter how cool a city is if the underlying numbers don't support living there. I realize´there are people here who don't work in the local economy (like myself) and that number isn't reflected in the average, but still.

Many of the rapidly appreciating cities don't have incomes to match cost. I was offered a department management position in Denver for $60k. That job normally starts in the low $100k range. Real estate there is on par or a little more than Portland. Just the income to cost ratio of these cities makes me think it's unstable and unsustainable.

sol

  • Walrus Stache
  • *******
  • Posts: 8492
  • Age: 42
  • Location: Pacific Northwest
Re: 2017 Real estate CRASH
« Reply #14 on: March 26, 2017, 10:41:42 AM »
Those numbers are wonky and unsustainable. It doesn't matter how cool a city is if the underlying numbers don't support living there.

It's not the cost of living there that is high, it's the cost of buying real estate. 

The difference is important because rents are a much better indication of local salaries than are home prices.  In places where home prices go through the roof but average incomes don't rise very much, like many of the places we've talked about, most people just rent.  How many people do you know who own single family homes in New York City, or Seattle, or San Francisco?  Only the very richest folks buy in these markets.  Ordinary folks rent, which is much more affordable.

This makes these particularly bad markets if you're a (cashflow) real estate investor, compared to places in the midwest, because you will have to spend much more to acquire a property for a given rent value.  People who already own these properties are reluctant to sell, because prices are rising 5 to 10 percent per year and their equity is increasing by two or three times the dollar value they could collect in rents, so no new equilibrium is reached.
« Last Edit: March 26, 2017, 12:32:52 PM by sol »

lhamo

  • Walrus Stache
  • *******
  • Posts: 9526
  • Location: Seattle
Re: 2017 Real estate CRASH
« Reply #15 on: March 26, 2017, 10:57:28 AM »
Also, the in-migtation that is happening in these places is probably dramatically skewed toward those in higher income brackets.   Curbed had a report that since 2010, the greater Seattle-Tacoma area has seen about 1000 new arrivals a week, 250 of those moving into Seattle proper.   I would guess that a high proportion of those are in high-income professions, because as we have seen here lots of people at lower salary brackets look at the high cost of housing and choose to go elsewhere.   there are only so many houses available to buy in any given area.   My entire zip code currently has only FIVE houses listed for sale on the MLS.  FIVE!  That is worse than it was in November/December!

Anyway, my main point is that in areas where the tech industry and its high salaries continue to expand, property will likely continue to appreciate.   There is only so much housing.  In my neighborhood people are paying $400-500k for TEARDOWNS.  Which they then put a larger but crappily constructed house on and sell for 1.2-1.5 million.  It is crazy.

Capt j-rod

  • Bristles
  • ***
  • Posts: 339
Re: 2017 Real estate CRASH
« Reply #16 on: March 26, 2017, 01:13:20 PM »
I live in the midwest. Salaries are low. The fuel to the crash IMO is the fact that america still can't come up with 20% down. The buyers around me want to buy all kinds of things, but they end up only able to buy "Perfect" homes through the FHA loans. They are more strict on the inspections, and many properties can't qualify. I use this to buy "less than perfect" houses for cash. Need a roof, needs windows, needs HVAC, needs electrical work. The seller is usually maxed out, can't afford the upgrades and sells for pay off. It usually takes a year of rotting on the market before I can get it. Will it crash? not as bad as 2007. Will it stagnate? Yes.

Another Reader

  • Magnum Stache
  • ******
  • Posts: 4973
Re: 2017 Real estate CRASH
« Reply #17 on: March 26, 2017, 04:04:16 PM »
The person making $40,000 and couples making $80,000 in Portland are not in the market for houses in Portland and have not been for a long time.  They may own houses that they bought before Portland became expensive, they may rent in Portland, or they may live far enough outside of Portland to afford a house and commute a long distance.  They are not part of the effective demand for Portland houses. 

In the Bay Area, people commute to work from the Central Valley to afford a house.  As the population increases, so does the commute radius.  As long as there are plenty of households with incomes of $200,000 or more and people that have cash, houses in Portland and other highly desirable areas will continue to be very expensive and to appreciate.

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 5350
  • Location: Fayetteville, NC
Re: 2017 Real estate CRASH
« Reply #18 on: March 26, 2017, 04:29:20 PM »
My feeling is that 2017 is a bit different from 2007 because if anyone said "Real estate never goes down" or "Your house is your best investment" in 2017 they would be laughed at.

You give people too much credit...most just think it won't happen to them.


You're assuming they actually (a) think about the topic or (b) actually noticed the cause of the problem last time or (c) bothered to remember.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: 2017 Real estate CRASH
« Reply #19 on: March 26, 2017, 05:17:40 PM »
I live in the midwest. Salaries are low. The fuel to the crash IMO is the fact that america still can't come up with 20% down. The buyers around me want to buy all kinds of things, but they end up only able to buy "Perfect" homes through the FHA loans. They are more strict on the inspections, and many properties can't qualify. I use this to buy "less than perfect" houses for cash. Need a roof, needs windows, needs HVAC, needs electrical work. The seller is usually maxed out, can't afford the upgrades and sells for pay off. It usually takes a year of rotting on the market before I can get it. Will it crash? not as bad as 2007. Will it stagnate? Yes.

Yeah, this scenario (nobody can afford anything, houses sit on the market forever, investors swoop in to pick up distressed homes, etc) is the *opposite* of what you'd expect in a RE bubble.

The Midwest writ large has been hollowing out for a couple of generations, though. Not so much Portlandia and the Bay Area and ski towns/resort towns.

Really I think the story here is about the massive income/wealth inequality gap. Rich folks are congregating in desirable spots and house prices that seem crazy to middle America are no big deal.

-W

aasdfadsf

  • Stubble
  • **
  • Posts: 103
Re: 2017 Real estate CRASH
« Reply #20 on: March 26, 2017, 09:52:08 PM »
My advice, for what it's worth, is that you should avoid making a big-time bet based on speculation about what the local market might do. Even if you are correct about a crash coming at some point, you could be off by years as to the actual timing.

If it makes sense to sell and buy a place in a less costly area, then by all means, do it. But it needs to make sense regardless of what will happen in your current market, which you shouldn't assume you can predict.

andysandp

  • Stubble
  • **
  • Posts: 156
Re: 2017 Real estate CRASH
« Reply #21 on: March 27, 2017, 05:49:56 AM »
Once you sell and cash out, where would you put your money?  Put it all into S and P? 

People are saying the same thing about S and P, that it's an all time high and may crash. 

Other peoples thoughts about putting it all into S and P?

Capt j-rod

  • Bristles
  • ***
  • Posts: 339
Re: 2017 Real estate CRASH
« Reply #22 on: March 27, 2017, 06:21:45 AM »
It's kinda sad, but the middle class spent, and borrowed itself into extinction. Diversification is the secret to the housing, investment. In 2007 my dad's stocks tanked... His rentals went down in value, but the rents never changed. Now the rents are all higher and the real estate is still under priced. His stocks rebounded, but the rentals carried him. I max out the retirement at work, and try to add 1 house a year. I want to stop at 8 houses. that should be a cozy $50k a year income from the rentals. Everything will be paid off, and then it will be up to the wife when she fully pulls the plug. Is the market gonna crash? For our sake, I hope so! For all the sukka's that are running on fake bank money and "equity"... They better go to church.

yachi

  • Stubble
  • **
  • Posts: 243
Re: 2017 Real estate CRASH
« Reply #23 on: March 27, 2017, 07:26:16 AM »
I agree with some of your conclusions, but not your reasons for them...
My situation is I have about $500k in equity in my house in Portland (I owe around $250K still).
Wow.  Even without getting mortgages on the rentals, this amount of cash is enough to support $40,000 of cashflow in my neighborhood.

My job isn't dependent on local econmy.

The best way to leverage your job is to live somewhere cheap.  You could sell this house, buy 3 houses in cash that rent out for $1500/month each.  Get a property management company to handle finding tenants and checking on properties.  You could even move to an expat beach in Mexico, live on the rental income alone while saving 100% of the income from your location-independent job.  Years later you'll have a fortune saved to rule the world return to the overpriced Portland market.

I was thinking of selling and renting in a less expensive city for a few years while this whole market falls apart again, and then buy my next property outright (with rentable adu or duplex).

Any thoughts or advice?

Considering how far your money goes in so many other parts of the country (if not the world) I think getting out is a great idea.  Planning to get back in is possibly not such a great idea, but years of living it up in a low cost of living area with a high income might get you used to the good life.  If you keep watching Portland area real estate, and it doesn't crash for a DECADE, will you get disillusioned and buy back in anyway at high prices? 

I find it crazy ironic that the World Wide web created pockets of expensive real estate markets like Silicon Valley in California, and Portland Oregon, when the technology itself doesn't really require these areas.  You're finally starting to see technology startups in midwest locations where rent and electricity is cheap.  I think that trend will continue.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: 2017 Real estate CRASH
« Reply #24 on: March 27, 2017, 09:12:09 AM »
Once you sell and cash out, where would you put your money?  Put it all into S and P? 

People are saying the same thing about S and P, that it's an all time high and may crash. 

Other peoples thoughts about putting it all into S and P?

Well, setting aside it's current valuation, the S&P has historically returned about 7% after inflation. Housing has returned about zero (obviously some locations have done much better or much worse than that).

So if you're uncertain what to invest in, the choice is IMO pretty easy.

-W

Another Reader

  • Magnum Stache
  • ******
  • Posts: 4973
Re: 2017 Real estate CRASH
« Reply #25 on: March 27, 2017, 11:09:35 AM »
Once you sell and cash out, where would you put your money?  Put it all into S and P? 

People are saying the same thing about S and P, that it's an all time high and may crash. 

Other peoples thoughts about putting it all into S and P?

Well, setting aside it's current valuation, the S&P has historically returned about 7% after inflation. Housing has returned about zero (obviously some locations have done much better or much worse than that).

So if you're uncertain what to invest in, the choice is IMO pretty easy.

-W

Return is composed of two things, income and appreciation.  Ir's quite possible to make 10 percent per year in income on real estate that does not appreciate.  It's also possible to lose money in cash flow on an income property in the Bay Area and make a large net return on the resale (if you bought right).

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: 2017 Real estate CRASH
« Reply #26 on: March 27, 2017, 11:27:17 AM »
Once you sell and cash out, where would you put your money?  Put it all into S and P? 

People are saying the same thing about S and P, that it's an all time high and may crash. 

Other peoples thoughts about putting it all into S and P?

Well, setting aside it's current valuation, the S&P has historically returned about 7% after inflation. Housing has returned about zero (obviously some locations have done much better or much worse than that).

So if you're uncertain what to invest in, the choice is IMO pretty easy.

-W

Return is composed of two things, income and appreciation.  Ir's quite possible to make 10 percent per year in income on real estate that does not appreciate.  It's also possible to lose money in cash flow on an income property in the Bay Area and make a large net return on the resale (if you bought right).

All completely true, but in the aggregate stocks have historically been a better investment by several orders of magnitude, even if you include rental income/reinvestment. Capital as a class has accumulated more and more of the real economy in that time, and stock prices reflect that.

I mean, you could cherry pick BAD real estate numbers too, right? I'm not picking any stocks here, just saying you're buying into the whole market (which admittedly would have been a lot harder to do 100 years ago). If you did the same with RE (say, 1000 houses scattered randomly around the country) you'd do much, much worse.

https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

-W

Another Reader

  • Magnum Stache
  • ******
  • Posts: 4973
Re: 2017 Real estate CRASH
« Reply #27 on: March 27, 2017, 11:40:25 AM »
Once you sell and cash out, where would you put your money?  Put it all into S and P? 

People are saying the same thing about S and P, that it's an all time high and may crash. 

Other peoples thoughts about putting it all into S and P?

Well, setting aside it's current valuation, the S&P has historically returned about 7% after inflation. Housing has returned about zero (obviously some locations have done much better or much worse than that).

So if you're uncertain what to invest in, the choice is IMO pretty easy.

-W

Return is composed of two things, income and appreciation.  Ir's quite possible to make 10 percent per year in income on real estate that does not appreciate.  It's also possible to lose money in cash flow on an income property in the Bay Area and make a large net return on the resale (if you bought right).

All completely true, but in the aggregate stocks have historically been a better investment by several orders of magnitude, even if you include rental income/reinvestment. Capital as a class has accumulated more and more of the real economy in that time, and stock prices reflect that.

I mean, you could cherry pick BAD real estate numbers too, right? I'm not picking any stocks here, just saying you're buying into the whole market (which admittedly would have been a lot harder to do 100 years ago). If you did the same with RE (say, 1000 houses scattered randomly around the country) you'd do much, much worse.

https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

-W

You don't do that in the stock market because it is very difficult to pick winners.  The aggregate market is the measurement standard.  In the real estate market, someone with experience and some skill will do much better than the aggregate real estate market.  If you are not making stock market returns or better in real estate, including both appreciation and cash flow, you are taking on more risk than is justified by the reward.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: 2017 Real estate CRASH
« Reply #28 on: March 27, 2017, 12:06:57 PM »
Yeah, it's definitely apples to oranges - RE is running a business/using skill. Stocks is just going along for the ride (if you're smart).

-W

yachi

  • Stubble
  • **
  • Posts: 243
Re: 2017 Real estate CRASH
« Reply #29 on: March 27, 2017, 12:11:19 PM »
All completely true, but in the aggregate stocks have historically been a better investment by several orders of magnitude, even if you include rental income/reinvestment.
...
https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

-W
Do you have a better link for rental historical performance?  The one linked to only says this:
"The index is a simplification of home values and does not account for imputed rent and home mortgage interest deduction, both of which are included in profit/loss considerations for investment purposes."

My real estate purchases have been useful because you can't buy stock on margin with 20% down, on a 30-year repayment plan where the dividends cover the loan payments, and where your loan is never called if you continue making the payments.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: 2017 Real estate CRASH
« Reply #30 on: March 27, 2017, 12:43:34 PM »
Do you have a better link for rental historical performance?  The one linked to only says this:
"The index is a simplification of home values and does not account for imputed rent and home mortgage interest deduction, both of which are included in profit/loss considerations for investment purposes."

My real estate purchases have been useful because you can't buy stock on margin with 20% down, on a 30-year repayment plan where the dividends cover the loan payments, and where your loan is never called if you continue making the payments.

We discussed this in some depth in a thread on the RE forum about failure modes/equivalent of 4% rule for RE. There is very limited data on rental rates, and rents are very region-specific (or even town specific). OER goes back to the early 80s I think but it's a national aggregate.

The general consensus, though, is that rents rise with (wage) inflation. This makes sense if you think about it a little - if a worker spends 40% of their income on rent, and rents only rise, say, 2% faster than inflation, then in 35 years that same worker needs 80% of their income to pay rent. Obviously that won't work, so rental rates are restrained by wages in general.

If you sit down and work through all the numbers on a 1% rule rental property, you end up right around stock market returns (but with the bonus of the principal paydown and the negative of possibly higher risk).

-W

Scortius

  • Bristles
  • ***
  • Posts: 452
Re: 2017 Real estate CRASH
« Reply #31 on: March 27, 2017, 01:12:36 PM »
Just chiming in to say that banking on a RE crash in Portland is a very risky proposition.  The fact is that Portland is most likely the newest member of the Bay Area/Seattle/Vancouver triumvirate.  Prices aren't going up because people are over-leveraging themselves, prices are going up because demand is shooting through the roof.  People are trading their Seattle and San Francisco houses for an upgrade in trendy Portland of the NW, a city with all the charms of the other large western cities, but without many of the annoyances of its larger neighbors.  If anything, I wouldn't be surprised to see Portland's market continue upwards.  Hell, even secondary western cities such as Bellevue, Tacoma, Eugene, Salem, Corvallis, Bend/Redmond, Ashland, Redding, Sacramento, Santa Rosa, etc are going through their own mini-booms.

I could see the market flattening out... I would be very surprised to see it actually drop.  How did the 2008 crash affect San Francisco and Seattle?  How quickly did they recover?  Now the markets their are above where they were during the previous bubble and still climbing.  Unsustainable?  It's hard to say, but given the economic growth in the tech sector, I wouldn't bet on it.
« Last Edit: March 28, 2017, 09:56:33 AM by Scortius »

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 5350
  • Location: Fayetteville, NC
Re: 2017 Real estate CRASH
« Reply #32 on: March 27, 2017, 03:49:24 PM »
His rentals went down in value, but the rents never changed. Now the rents are all higher and the real estate is still under priced.

I don't want the rental houses I bought to go up in sale value until it's time to sell.  (Then I want them to skyrocket up in value!)

Why?

Because as long as I hold on to them the property taxes will be lower.

Capt j-rod

  • Bristles
  • ***
  • Posts: 339
Re: 2017 Real estate CRASH
« Reply #33 on: March 27, 2017, 05:41:07 PM »
Even though pops was happily retired, he bought two more when the market tanked... The numbers were just too good not to add more... Added another $1400/mo for a $85k investment. He is now selling off one because he is 72. It's time for him to start downsizing as the income is less important. Sold his weakest one and added two of his best.

Ftao93

  • Stubble
  • **
  • Posts: 228
Re: 2017 Real estate CRASH
« Reply #34 on: March 27, 2017, 07:46:30 PM »
We live in the heart of Denver.  We're fortunate that our rent went form 700 a decade ago to 850.  Rents around us are 1600 and 1900 for 2bed.  Houses in the area sell for 300-600k right now.

Wages have nowhere near kept up, so I hope that there's at least some leveling off as the builders catch up.    I'm not terribly convinced we'll ever own  unless a crash happens AND our incomes go up a the same time.

We probably still spend more than is healthy, but a full 24% of my income goes into 401k before I touch it, and most months I put away 1500-2k cash per month.   There's still A LOT of frippery, like fancy pants vacations.  We spent like rockstars from Nov to now.  A car (3500), new couch, and a new computer for me.   But to hell with it, we have no debt and we use all that stuff every day.

I know single people who make less than me that live far beyond their means.  New new car, 2k/mo rent, never cook a meal, etc.    Fortunately most of them are much younger, so there's hope :P.

adamcollin

  • Stubble
  • **
  • Posts: 154
  • Age: 28
  • Location: Texas
Re: 2017 Real estate CRASH
« Reply #35 on: March 28, 2017, 05:32:12 AM »
You should sell your house. That seems like a better idea in current situation.

dougules

  • Handlebar Stache
  • *****
  • Posts: 1571
  • Location: AL
Re: 2017 Real estate CRASH
« Reply #36 on: March 28, 2017, 10:45:57 AM »
Where would you go if you do decide to sell and leave?

trashmanz

  • Bristles
  • ***
  • Posts: 338
Re: 2017 Real estate CRASH
« Reply #37 on: March 28, 2017, 11:51:54 AM »
I find it crazy ironic that the World Wide web created pockets of expensive real estate markets like Silicon Valley in California, and Portland Oregon, when the technology itself doesn't really require these areas.  You're finally starting to see technology startups in midwest locations where rent and electricity is cheap.  I think that trend will continue.

You seem to underestimate the synergy that can happen in a tech concentrated place like Silicon Valley.  Everyone knows someone who knows someone that can help entrepreneurs get things done.  Much harder to establish solid networking contacts when you work from home in some remote locale.  It works very well for its market. 
« Last Edit: March 28, 2017, 11:56:49 AM by trashmanz »

groove251

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: 2017 Real estate CRASH
« Reply #38 on: March 28, 2017, 09:53:29 PM »
I think if we were going to sell, we would move to a smaller city with hopefully a similar attitude that Portland has. Asheville NC is on our short list. We would buy a place there with an ADU or duplex to rent out and pay for the whole thing with cash. That would take our $1425 a month mortgage and turn it into about a $1000 or so income. Not too shabby of a plan I think.

If we leave Portland, we wouldn't want to come back. The weather is pretty hard to take and this year has been brutal with rain almost daily since late October. That's 6 months of straight rain and it's still here. Kinda hard to take that if you like being outside a lot (which we do).

dougules

  • Handlebar Stache
  • *****
  • Posts: 1571
  • Location: AL
Re: 2017 Real estate CRASH
« Reply #39 on: March 29, 2017, 10:52:01 AM »
I think if we were going to sell, we would move to a smaller city with hopefully a similar attitude that Portland has. Asheville NC is on our short list. We would buy a place there with an ADU or duplex to rent out and pay for the whole thing with cash. That would take our $1425 a month mortgage and turn it into about a $1000 or so income. Not too shabby of a plan I think.

If we leave Portland, we wouldn't want to come back. The weather is pretty hard to take and this year has been brutal with rain almost daily since late October. That's 6 months of straight rain and it's still here. Kinda hard to take that if you like being outside a lot (which we do).

I was curious to see if you had other interests in leaving PDX or if it was just a money thing.  I guess you do. 

Asheville's not as bad as Portland for price appreciation, but I think it's having a bit of the same problem.  It seems like most of the places with a similar attitude to Portland are getting a bit pricey. 
I was wanting to move  back to Portland in a few years when we hit FIRE, but I don't think I'm willing to stack that much up any more.  It will probably be Chattanooga or maybe even Mexico for us. 

I think that at some point prices are going to drive out the people that made Portland a nice place to live in the first place.  Not all that long ago Portland was a cheap place for unconventional people to go to work to live instead of living to work.  Not so much anymore.  You'll have to come back and let us know if you find somewhere that's still like that. 
« Last Edit: March 29, 2017, 10:55:51 AM by dougules »

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: 2017 Real estate CRASH
« Reply #40 on: March 29, 2017, 08:44:44 PM »
Two questions for the OP:

1) How close to FIRE are you and/or what is your net worth? If trading your Portland house for a similar place in Tulsa or Nashville left you with, say, $1M in liquid assets, then you could retire immediately because the numbers are so much different in flyover country. I would do that in a heartbeat rather than working extra years to afford a more expensive house.

2) To buy a "protective put" on your housing investment and limit the impact of any market crash, you could take out a loan on your home equity and invest the proceeds in relatively safe assets with yields similar to your mortgage. If your home loses half its value, let it be foreclosed. You might lose 20%, but as long as you walked away, that's all you'd lose. With investment yields offsetting interest expenses, and the mortgage interest deduction offsetting the taxable income from investments, the cost of this put option is just the fee for setting up the loan.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4545
  • Age: 11
  • Location: USA
Re: 2017 Real estate CRASH
« Reply #41 on: March 29, 2017, 09:52:28 PM »
US housing has been cheap for a long time, and there's plenty of room for prices to grow. Look at other worldly cities for comparison.

North America: https://www.numbeo.com/property-investment/region_rankings.jsp?title=2017&region=021
Europe: https://www.numbeo.com/property-investment/region_rankings.jsp?title=2017&region=150



joonifloofeefloo

  • Walrus Stache
  • *******
  • Posts: 5128
  • On a forum break :)
Re: 2017 Real estate CRASH
« Reply #42 on: March 29, 2017, 11:36:33 PM »
PTF

powskier

  • Bristles
  • ***
  • Posts: 348
Re: 2017 Real estate CRASH
« Reply #43 on: March 29, 2017, 11:37:47 PM »
I would argue that nobody knows what the future will bring.
Your location may become the galactic hub for the next most amazing business that does not currently exist or maybe the ground zero for the newest bubonic plague.

If you feel like your money could be better invested elsewhere, sell and do that.

We all can notice possible or likely or even educated guesses about the future but nobody KNOWS.
Do what helps you sleep at night.

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5211
  • Location: Norway
Re: 2017 Real estate CRASH
« Reply #44 on: March 30, 2017, 04:25:17 AM »
I would argue that nobody knows what the future will bring.
Your location may become the galactic hub for the next most amazing business that does not currently exist or maybe the ground zero for the newest bubonic plague.

If you feel like your money could be better invested elsewhere, sell and do that.

We all can notice possible or likely or even educated guesses about the future but nobody KNOWS.
Do what helps you sleep at night.

This is the best answer. No one can predict the outcome of housing prices.

But there is always something to say for spreading your assets. That is a good argument for selling your house and investing the profit into different things.

I am a bit in the same boat as you. We have 80% of our money invested in one house. Our government is making it less attractive to buy a second house. Therefore experts believe the housing prices will stagnate and even drop a few percent in the coming years. Is it smart to keep living in our house until FIRE (in 7 years) or should we have invested the money in many other things? We'll never know.

Capt j-rod

  • Bristles
  • ***
  • Posts: 339
Re: 2017 Real estate CRASH
« Reply #45 on: March 30, 2017, 08:52:14 AM »
You also need to take into account that you are better positioned and prepared to sell and buy. Everyone other than us (mustacians) blinded by the landscaping, granite, and stainless appliances. They pay top dollar (someone else dollar) for everything in order to maintain their image. It is safe to assume that you can sell and buy and come out ahead. The only exception to this is if you have a very specialized home. I live in a beautiful big house that I bought at the lowest point in the crash. I have it financed at 3.5% fixed for 30 years. It is a great home for my family. When the family is grown, the wife and I will sell this property and remodel a smaller home for sustainability and retirement. I will then sell of the big house and reap the benefits. Sounds like you have the same plan, just make sure you do it your way on your terms. The coolest part of being stable is we have the luxury of making big moves on our terms rather than rolling from crisis to crisis. 
Every time I turn over a rental I always love to hear the sob stories of "poor me" and then throw away fast food bags, pizza boxes, broken Chinese plastic junk, and clothes. This is my saddest time because I am sustaining my family and retirement from the bad decisions and lifestyle of the public.
SELL WHEN THEY'RE BUYING AND BUY WHEN THEY'RE SELLING!!!!!!
Always remember the most important rule of all sales... An item is worth exactly what someone is willing to pay you on the day you want rid of it!!!!! No more no less.

joonifloofeefloo

  • Walrus Stache
  • *******
  • Posts: 5128
  • On a forum break :)
Re: 2017 Real estate CRASH
« Reply #46 on: March 30, 2017, 10:24:59 AM »
I have it financed at 3.5% fixed for 30 years.

This boggles me! Canada people, is this an option in Canada??? Have I not been seeing the option to lock in for the entire period?? My experience is: Lock in for the few years allowed, by renewal time interest has skyrocketed, people lose homes, repeat.

Capt j-rod

  • Bristles
  • ***
  • Posts: 339
Re: 2017 Real estate CRASH
« Reply #47 on: March 30, 2017, 11:02:57 AM »
RE: 3.5%... I did this probably 4.5 years ago. Rates kept dropping and dropping trying to "re-start" the us economy. I refinanced from 4.5 down to 3.5.  I figure after I write off the interest and take inflation into account it is "free" money. I still pay it off at a 10 year loan pace, AFTER I max out everything else. I have the flexibility of making the 30yr payment if something better comes along. Life is very different since I took up frugality. In 3 more pos my wife will be part time, and I will remain self employed. Lots of family time, no financial stress, and a happier marriage... All in exchange for shiny, stupid purchases. Done deal.

Zoot Allures

  • Stubble
  • **
  • Posts: 193
  • Age: 48
  • Location: Pacific Northwest
Re: 2017 Real estate CRASH
« Reply #48 on: March 30, 2017, 03:39:29 PM »
My feeling is that 2017 is a bit different from 2007 because if anyone said "Real estate never goes down" or "Your house is your best investment" in 2017 they would be laughed at.

I hear my friends in Portland say this all the time.

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5211
  • Location: Norway
Re: 2017 Real estate CRASH
« Reply #49 on: March 31, 2017, 01:33:01 AM »
Always remember the most important rule of all sales... An item is worth exactly what someone is willing to pay you on the day you want rid of it!!!!! No more no less.

Really? My mother's house (according to my mother) is worth 650.000 euro (the highest price it ever had), even though a similar house in the same street recently was sold for 380.000 euro. I guess the truth is too hard to swallow.