That’s it. I said it on the internet, so it must be true! It’s on Facebook too, so you should all stop buying houses immediately and send your leads to me! Below this text, you’ll see a fun “dialogue” I had with someone on Facebook yesterday. It was started by a Dallas/Fort Worth REALTOR® that was commenting on price drops and increased days on the market. Unfortunately it was followed by someone else (who I do not know) saying several analysts were projecting 30% – 40% price drops. This is really becoming common place, so I thought I’d chime in with three points.
- Price Drops: I’m not seeing these as a result of a soft market. I see these as a result of overly aggressive pricing. While overly aggressive pricing has largely been successful over the past few years, it is not necessarily working these days. While this would indicate a cooling (sorry, maybe the house won’t be worth 5%-10% more in six months) of a super hot market, it is hardly a meltdown or a crash. We’ve basically gone from lava to fire. Hopefully, slow wage growth and rising rates will continue to slow the market appreciation. That’s how you prevent a meltdown.
- Days On The Market: Just last week my wife said something funny to me. She said I can’t believe Emberwood (one of our flip properties) took so long to sell. I asked her how long, and her reply was two weeks. Okay, reality check, that’s still below average for that zip code. As soon as she said it (she’s been doing this longer than me) she laughed at how ridiculous it sounded. You can’t keep breaking records over and over. Everyone was worried about a bubble “bursting”. It seems like natural factors (slow wage growth, rising rates, millennial trends, etc) has slowed the run up (by the way it’s still above average in DFW) which I think will end up protecting us from collapse.
Those are the two points in the post that were brought up. I’d also like to point out that I believe times have permanently changed. We may never have a real estate crash again. Look at the UK since their 1980’s crash. That’s when “Hedge Funds” started buying rental properties in London. Now, anytime there is a slight dip, big money pours in and props up the market. Most houses in the US are still below replacement cost, which means we have a way to go before the pricing doesn’t make sense as an investor.
So, in my opinion, if you are reading Facebook waiting for the market crash; don’t get your popcorn ready. If you are sitting on the sidelines waiting to get back in the game when the “good deals come back”; you might not want to wait too long. Be smart, stay disciplined, and don’t listen to other peoples’ fear mongering. If someone does say there is “a crash coming” please get the data and send it to me. I really to like to be educated, and I could be wrong, I frequently am! This blog really is just The Way I See It!
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Yes…..when you still get 10 offers…or even 3 or 4 within 3-4-5% over or under your list price, the market is very strong in that price range. I still see more buyers than sellers under $300K in most areas of DFW. Upper price ranges…maybe over $600K to $1mil in our market there are plenty of choices from rehabs, to regular resales, to new build. A couple of weird things I see now though is one off investors who take crappy returns. Buy in Frisco at $400K and rent at $2000 doesn’t make sense to me….and we’re starting to see plenty of that. I also wonder what happens when the big institutional investors decide to sell. Do they do it in a smart way or will they do something that is good for them and bad for the market. Think if all the hedge funds in DFW decide today that the ride in housing is over and now want to shift to Tesla or Alibaba today.
20,000 $250,000 homes hit the market tomorrow. That could take a while to absorb.
I don’t see the funds selling anytime soon. You also have to remember that it would still be a 1 to 1 trade off of demand. For every house they sell, there’d be another tenant. I know several of the big funds are looking for ways to sell to their existing tenants.