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HOT TOPIC I'm worried about the real estate market right now

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Kid

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This exact prediction has been realized and going on for a long time in Chicago, even before the pandemic! The scare tactic they used was crime and violence which they started incessantly calling Chicago "ChiRaq" to push that are city is so scary and dangerous, same as Iraq.

Out of state investors and successful companies want all of our lakefront property for their employees who don't want to drive or commute via public transportation to work... but want to walk and bike instead. They acquire the most desirable properties and locations by manufacturing a reason to push everyone out.

Every one is looking to the right, where the false story is being told, while all the real and truth of what is really going on is happening to the left.
Just recently have read that Chicago has some average 15 people killed over weekends.
People do read newspapers, statistics like that make impression and people make life decisions based on what they've read.
Is 15 a lot? Is it more than in NY or Washington?

The point is that public is being manipulated on few occasions.
From small things like what's is latest corporate "trend" to being scared out of own city and selling property at slashed prices.

Striking things happened with our neighbours. When the Fed announced zero interest rates and QE policy, the borrowed money became essentially free.
Just as side note: China did it in recent 5 years. Money ended up in stock market and created bubble that promptly burst.
If you think we'll face inflation, then it'll all make sense.
I don't know how much Canada has printed but states approach $5trillion of printed money in last 12 months alone.


Back to the topic.

Basically what i see in renting market (family RE) is that rents hold still even while there is little to no renters.
That goes against typical economic principle of demand and supply.

Owners probably try to wait out the situation without making any decision.

What's next?
A gap might occur between owners patience (plus cash flow) and economy recovery.
If recovery will overlap, market will return to "old normal" minus those who decided to move out of big cities.

If not, there will be short term panic sell off until renters will come back to market.
Basically its a question of how much money was saved by owners and how long they can pay non occupied units expenses.

It would also be interesting to know how many people did in fact moved out of big cities.
Having such number might allow to approximate lost revenue for existing commercial real estates.
 
D

Deleted78083

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Basically what i see in renting market (family RE) is that rents hold still even while there is little to no renters.
That goes against typical economic principle of demand and supply.


OMG YES!!! I thought I was crazy for noticing that, but I am not!!!

It would also be interesting to know how many people did in fact moved out of big cities.


Yes, as well as how many of them will actually stay there...New Yorkers that went to Florida already miss New York, for example.


Overall, I am very skeptical about the current frenzy everywhere.

1. RE is insanely overpriced in Brussels, rent are increasing while tenants are decreasing. This is madness.
2. The stock market is insanely overpriced.
3. My crypto portfolio did 150% since mid-February. I sold almost all of them and cashed out.
 

WJK

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I just came across this in an appraisal newsletter...

"Industrial Property Values Up; Limited Supply Hinders Market: Data
Industrial property values have increased 8.8% during the past year while warehouse property values rose 10%, according to a report from real estate data firm Real Capital Analytics, WealthManangement.com reported Mach 22. Values are expected to continue rising due to increased demand and constrained supply; facilities in large population centers should see the greatest increases"
 
D

Deleted78083

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I just came across this in an appraisal newsletter...

"Industrial Property Values Up; Limited Supply Hinders Market: Data
Industrial property values have increased 8.8% during the past year while warehouse property values rose 10%, according to a report from real estate data firm Real Capital Analytics, WealthManangement.com reported Mach 22. Values are expected to continue rising due to increased demand and constrained supply; facilities in large population centers should see the greatest increases"

"Increased demand and constrained supply" is the picture of so many industries right now. Look at the chip shortage....

We were discussing this today in another thread. What if inflation did not happen as a result of the money printed, but as a result of the money people earned and did not spend?

On one hand, C0VlD halted production. On the other people didn't spend and have now more money.

That leaves us with lower supply, and higher demand. Mmhh...
 

WJK

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"Increased demand and constrained supply" is the picture of so many industries right now. Look at the chip shortage....

We were discussing this today in another thread. What if inflation did not happen as a result of the money printed, but as a result of the money people earned and did not spend?

On one hand, C0VlD halted production. On the other people didn't spend and have now more money.

That leaves us with lower supply, and higher demand. Mmhh...
In this same vein, I read that underperforming golf courses are being converted to industrial uses. It all because they have a lot of developable land. I wonder if old shopping malls can also be converted to industrial spaces. It would take some land-use zoning changes. But think of all those miles and miles of parking lots that are already in place...
 

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In this same vein, I read that underperforming golf courses are being converted to industrial uses. It all because they have a lot of developable land. I wonder if old shopping malls can also be converted to industrial spaces. It would take some land-use zoning changes. But think of all those miles and miles of parking lots that are already in place...
Excellent question - it really depends on the mall. Closer to the core, our malls are densified into residential uses and are becoming small communities. Downzoning to industrial would apply to those "destination" malls, far and out of the way. Mind you, the owners of these malls probably paid on a cap rate and retail lease rates (while retail was still working) and therefore would have to take a loss to sell. Moreover, you'd be demolishing expensive retail buildings to create industrial; for example - distribution spaces have very specific requirements.

As a result, I haven't seen good examples of this in the areas where we are active as a developer.
 

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WJK

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I'm getting ready to chase foreclosures again. Biden has extended the national hold on foreclosures for federally insured loans to June 30th. That's a year and a half of backed-up defaults. If even a fraction of those defaulted loans go to foreclosure after that hold is over -- just think of the volume we'll see.
(In the meantime, privately held trust deeds are still being processed through the foreclosure system. )

Here's another market that is going to be drastically affected -- the multi-family residential segment. That's both small units and apartment buildings. No one has been allowed to evict tenants for failing to pay their rent. They just had to sign a form without proving that their declaration is true. They have no burden of proof in this moratorium. Again, there is a year and a half of backlog of cases that will be filed. When people are forced to move, those building owners have a huge burden. What a mess and a bucket full of expense. There's the cost of carrying the property over the last year and a half, the cost of the eviction, and then the cost of the turn-over to get ready and find a new tenant. Yes, there were programs to pay back rent. BUT, many people still owe rent which will result in evictions.

About the office market in New York... I spoke to a man who was on vacation here in Alaska. He was here after being laid off from his union job. After 37 years of maintaining the HVAC (heating and air-conditioning system) in a high-rise building in New York City, he's unemployed. The building, which has about 100 floors, is vacant. That's pretty scary.
 

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I'm getting ready to chase foreclosures again. Biden has extended the national hold on foreclosures for federally insured loans to June 30th. That's a year and a half of backed-up defaults. If even a fraction of those defaulted loans go to foreclosure after that hold is over -- just think of the volume we'll see.
(In the meantime, privately held trust deeds are still being processed through the foreclosure system. )

Here's another market that is going to be drastically affected -- the multi-family residential segment. That's both small units and apartment buildings. No one has been allowed to evict tenants for failing to pay their rent. They just had to sign a form without proving that their declaration is true. They have no burden of proof in this moratorium. Again, there is a year and a half of backlog of cases that will be filed. When people are forced to move, those building owners have a huge burden. What a mess and a bucket full of expense. There's the cost of carrying the property over the last year and a half, the cost of the eviction, and then the cost of the turn-over to get ready and find a new tenant. Yes, there were programs to pay back rent. BUT, many people still owe rent which will result in evictions.

About the office market in New York... I spoke to a man who was on vacation here in Alaska. He was here after being laid off from his union job. After 37 years of maintaining the HVAC (heating and air-conditioning system) in a high-rise building in New York City, he's unemployed. The building, which has about 100 floors, is vacant. That's pretty scary.
Smart developers would buy office buildings, remodel them with a more "social interaction" focused design instead of "cubicle" design. For example, large open space atrium in the lobby.
 

WJK

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Smart developers would buy office buildings, remodel them with a more "social interaction" focused design instead of "cubicle" design. For example, large open space atrium in the lobby.
I'm not sure about that. I've seen some trends against the open space floor plans by some of the corporate users. The tech users were really hot on the open space idea. There is some pushback against it. And the failure of the We Work empire further complicates it.

I sitting on the fence about the future of the office market segment of the RE business. We had "see-through" (vacant) office buildings in Los Angeles throughout much of the 1990s. It took that decade to absorb all that inventory and market to recover. That was the moment when the Japanese stock market failed and they dumped their Class A properties in that LA downtown market. And the PC (the personal computer) and the new invention of voice mail first made their marks on that market. Those vacancies cascaded through all the classes of the office market.

I wouldn't go into the office building market unless I had a very strong Plan B to back me up.
 

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I'm not sure about that. I've seen some trends against the open space floor plans by some of the corporate users. The tech users were really hot on the open space idea. There is some pushback against it. And the failure of the We Work empire further complicates it.

I sitting on the fence about the future of the office market segment of the RE business. We had "see-through" (vacant) office buildings in Los Angeles throughout much of the 1990s. It took that decade to absorb all that inventory and market to recover. That was the moment when the Japanese stock market failed and they dumped their Class A properties in that LA downtown market. And the PC (the personal computer) and the new invention of voice mail first made their marks on that market. Those vacancies cascaded through all the classes of the office market.

I wouldn't go into the office building market unless I had a very strong Plan B to back me up.
The only reason I mentioned that is because a well known developer family is doing exactly this in Toronto. It's not really a bad idea, but like you said, I can see why there is pushback from some corporate users.

For me personally, I think it's the perfect time to acquire dying plazas and rezone to mixed use residential and sell the site to a larger developer. One of my friends is in the business. He purchased a dying plaza (all tenants deferring rents) for an extremely competitive price, successfully rezoned it, and is set to make over $5m just from the rezoning to a mixed use residential.
 

WJK

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The only reason I mentioned that is because a well known developer family is doing exactly this in Toronto. It's not really a bad idea, but like you said, I can see why there is pushback from some corporate users.
Your real challenge would be to find the tenant. Then they would dictate the tenant improvements that they need for their business. The trend toward remote working has me spooked on office space. I don't know how many companies will bring their employees back to a centralized office setting. Before the pandemic, it was more of a concept rather than an in-your-face reality. We're going through a similar change in the retail space market because of online shopping. I'm not sure if all of these changes are a mire reset or structural change in how we allocate land uses.
 

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Your real challenge would be to find the tenant. Then they would dictate the tenant improvements that they need for their business. The trend toward remote working has me spooked on office space. I don't know how many companies will bring their employees back to a centralized office setting. Before the pandemic, it was more of a concept rather than an in-your-face reality. We're going through a similar change in the retail space market because of online shopping. I'm not sure if all of these changes are a mire reset or structural change in how we allocate land uses.
The only problem I see with the trend for remote working is that burnout is clear. Social interaction is absolutely crucial to human development. That’s the idea behind the open space. Work that can be done at home stays at home. Meeting with clients, employees, etc. can be done at the office.

For me, I don’t know how anyone can work from home. Hell, I have my own businesses and I’ve been working from home for over 12 months now. I hate absolutely every minute of it. There’s a mindset issue for me. Getting out and going to my own office just makes me feel so much better. Makes me feel like I’m “doing” something.

And unless corporations are monitoring screens for employees, there’s going to be a huge trust issue for employers. I have friends that brag on how they use auto-clickers to make it seem like they’re working.
 
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WJK

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For me personally, I think it's the perfect time to acquire dying plazas and rezone to mixed use residential and sell the site to a larger developer. One of my friends is in the business. He purchased a dying plaza (all tenants deferring rents) for an extremely competitive price, successfully rezoned it, and is set to make over $5m just from the rezoning to a mixed use residential.
I just keep thinking about all those acres and acres of paved parking lots that come with the shopping centers. Alternate uses could get very interesting.
 

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I just keep thinking about all those acres and acres of paved parking lots that come with the shopping centers. Alternate uses could get very interesting.
Yes! Perfect time for creative developers to really make it big.
 

WJK

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The only problem I see with the trend for remote working is that burnout is clear. Social interaction is absolutely crucial to human development. That’s the idea behind the open space. Work that can be done at home stays at home. Meeting with clients, employees, etc. can be done at the office.

For me, I don’t know how anyone can work from home. Hell, I have my own businesses and I’ve been working from home for over 12 months now. I hate absolutely every minute of it. There’s a mindset issue for me. Getting out and going to my own office just makes me feel so much better. Makes me feel like I’m “doing” something.

And unless corporations are monitoring screens for employees, there’s going to be a huge trust issue between employers and employees. I have friends that brag on how they use auto-clickers to make it seem like they’re working.
I agree. Yes, I have a home office, but every day I go to my little office on the highway. It gives me a chance to meet with my tenants and business buddies. I sure don't want them to come to my house.

You're right. How can the corporation make sure they are getting their money's worth of work?
 

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For me, I don’t know how anyone can work from home. Hell, I have my own businesses and I’ve been working from home for over 12 months now. I hate absolutely every minute of it. There’s a mindset issue for me. Getting out and going to my own office just makes me feel so much better. Makes me feel like I’m “doing” something.
Well, this is the problem. People who own a business or manage one and think everyone else is like them. What works for you might not work for someone else. Social interaction might be important, but so it is empathy and understanding that not everyone is an extrovert office mouse and not everyone can do their best work in that environment.

Many people suffer for years in an office environment, specially in those open office schemes. Too many people moving around, too much noise, someone jumping on your shoulder and side-tracking you after 15 minutes of building up what you are working on, etc. That's a productivity killer that many other folks don't get. I'm not saying that remote work works for every company or for everyone, just that working in an office doesn't work for everyone either.


And unless corporations are monitoring screens for employees, there’s going to be a huge trust issue between employers and employees. I have friends that brag on how they use auto-clickers to make it seem like they’re working.
You're right. How can the corporation make sure they are getting their money's worth of work?
The butt in the office chair culture instead of the get the stuff done and add value to the company one. Not having an actual way of measuring results and progress rather than hours of butt in chair sounds like a management flaw. If you don't trust your employees, what's the point in even having them in the first place. Not surprised fully-remote companies are so picky when hiring, specially managers.

Having said all the above, every one runs their business as they please :) in the same way everyone is free to apply for companies that align with their preferred ways of working where they can thrive.
 

WJK

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Well, this is the problem. People who own a business or manage one and think everyone else is like them. What works for you might not work for someone else. Social interaction might be important, but so it is empathy and understanding that not everyone is an extrovert office mouse and not everyone can do their best work in that environment.

Many people suffer for years in an office environment, specially in those open office schemes. Too many people moving around, too much noise, someone jumping on your shoulder and side-tracking you after 15 minutes of building up what you are working on, etc. That's a productivity killer that many other folks don't get. I'm not saying that remote work works for every company or for everyone, just that working in an office doesn't work for everyone either.




The butt in the office chair culture instead of the get the stuff done and add value to the company one. Not having an actual way of measuring results and progress rather than hours of butt in chair sounds like a management flaw. If you don't trust your employees, what's the point in even having them in the first place. Not surprised fully-remote companies are so picky when hiring, specially managers.

Having said all the above, every one runs their business as they please :) in the same way everyone is free to apply for companies that align with their preferred ways of working where they can thrive.
There's two sides and sometimes three -- to every issue and question. Yes, I like privacy to get things done. And people do come in and stop my "flow" at times. I remind myself that they are the reason for me sitting there in the first place. The core of my business is to serve them.
 

WJK

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Yes! Perfect time for creative developers to really make it big.
Here's the other big asset of defunct regional malls and big box stores -- the infrastructure that is already in place. I'm talking about the street lights, road/street improvements, sidewalks, handicapped access, etc. In some cases, they had to put in freeway improvements in order to build out those facilities. Zoning was designed around some of them with buffer zones, walking malls, and access corridors. How can all of these "assets" be used now that things have changed this much?
 

Kid

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There are two very real (and big) forces:
One- real data about hard cold savings on having remote workers.
Two- distress of those workers.

Top talents will be given any choice - remote,office space or hybrid.

The problem is big for lower level workers.
They have no leverage against corporations.
And they might be forced to work remotely for 70%-80% of previous,
at office wages.

So i would be rather pessimistic for office space market, right now.
But there is possibility that such worldview is temporary
and those who will buy distressed office properties now
will be bound to hefty profit.

The trend toward remote working has me spooked on office space. I don't know how many companies will bring their employees back to a centralized office setting. Before the pandemic, it was more of a concept rather than an in-your-face reality. We're going through a similar change in the retail space market because of online shopping. I'm not sure if all of these changes are a mire reset or structural change in how we allocate land uses.

The only problem I see with the trend for remote working is that burnout is clear. Social interaction is absolutely crucial to human development. That’s the idea behind the open space. Work that can be done at home stays at home. Meeting with clients, employees, etc. can be done at the office.
 

WJK

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There are two very real (and big) forces:
One- real data about hard cold savings on having remote workers.
Two- distress of those workers.

Top talents will be given any choice - remote,office space or hybrid.

The problem is big for lower level workers.
They have no leverage against corporations.
And they might be forced to work remotely for 70%-80% of previous,
at office wages.

So i would be rather pessimistic for office space market, right now.
But there is possibility that such worldview is temporary
and those who will buy distressed office properties now
will be bound to hefty profit.
Like I said before... if you buy those properties, you'd better have a really solid Plan B for them or very deep pockets to carry them for the foreseeable future. We used to call this type of RE situation a white elephant. Yes, the buildings have value to someone, somewhere, IF you can figure out what to do with it. It used to be that you could convert them to residential space, but that's changing with the exodus from the cities. I'm not sure what will come next. The trends are just now developing.

And I agree about the lower-level employees. They are an endangered species. In the past, everyone had a secretary or an assistant. Now they have a laptop and voice mail. It takes a lot fewer people to run a company. And many of the services can be outsourced. That gives us self-employed people all kinds of new opportunities to provide those services. And with Zoom, texting, and emails, a lot of business travel has just become an online meeting or message.
 
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The only problem I see with the trend for remote working is that burnout is clear. Social interaction is absolutely crucial to human development. That’s the idea behind the open space. Work that can be done at home stays at home. Meeting with clients, employees, etc. can be done at the office.

For me, I don’t know how anyone can work from home. Hell, I have my own businesses and I’ve been working from home for over 12 months now. I hate absolutely every minute of it. There’s a mindset issue for me. Getting out and going to my own office just makes me feel so much better. Makes me feel like I’m “doing” something.

And unless corporations are monitoring screens for employees, there’s going to be a huge trust issue for employers. I have friends that brag on how they use auto-clickers to make it seem like they’re working.

as @srodrigo mentioned, many folks do not like going into the office, me one of them.

There is no best or worst solution. Some companies will go back to what they had before (mostly at office), some will become/stay mostly work from home, and everything in-between. If an employee doesn't like the way the company is structured, guess what, don't accept a job there / go work somewhere else... find a company that is structured/cultured the way they want. Some folks need the structure or want the social interactions of being at the office... great, find a company that suits your work style.

Also, depending on how high or low level the employee is, and how (dis)trusting management is, there are better ways to track remote productivity than just keystroke counters. Screenshot programs and daily/weekly reports of active programs and webpages. Or just give clearly defined expectations and reasonable goals - basically a task based or deadline based work structure. If you work from home and want a midday fap, go for it, as long as you are meeting or beating your deadlines.

I think the "open floor plan" working environments touted by management as "better collaboration" is not for employee benefit. The main reason companies do open floor plan is to maximize employees per square foot, reducing the size of space they need and thus, rent.

What I think would be a great setup would be something that @MoneyDoc touched on, which would be more emphasis on community areas for "at office" staffed companies - mixed use - could even have some open space to work on if folks like to work out in the open next to others and other break room type stuff, like gourmet coffee/espresso, whatever the "cool" places have these days. But I would prefer extra large offices with only 4-8 people in them, floor to ceiling walls (or at least decent height) and a door to shut if desired, creating a quiet "work cell". Maybe walls are see through or translucent, but give some privacy to the staff. That way, it's not open, it's not single cubicle and by having smaller cells, they can still fit in several people into one area... kinda like a group cubicle I guess, but don't use the word "cubicle" !
 
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Deleted78083

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I'm not sure what will come next

Me neither. I was talking to my friend today about that and tbh, I wouldn't want to own ANY piece of real estate right now.

My bet one year ago was that cities were going to go through a rebalancing.

Big cities with tiny apartments would see the elite leave and go to smaller cities with bigger apartments for a lower price and better access to nature.

The difference in RE prices between smaller and big cities would decrease.

white elephant.



I think a bunch of these could be transformed into "experience" places.

Eg:

- Gyms
- Skate parks
- Thermal baths
- Museums
- Art schools
- Studios (movie, music)
- Event venues (concerts, etc)
- Open spaces

I said some weeks ago that I was actually bullish on mainstreet. Since people will spend more time at home, they will want to go out more (and they are likely to buy less online).

To attract these customers, shops and malls central to cities should go through a redesign to become more entertaining (shop + experience).

Eg: a cafe inside a book shop, with an aquarium to watch fish.

The only question is: will there be enough people left to go to all of these places?
 

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Me neither. I was talking to my friend today about that and tbh, I wouldn't want to own ANY piece of real estate right now.

My bet one year ago was that cities were going to go through a rebalancing.

Big cities with tiny apartments would see the elite leave and go to smaller cities with bigger apartments for a lower price and better access to nature.

The difference in RE prices between smaller and big cities would decrease.





I think a bunch of these could be transformed into "experience" places.

Eg:

- Gyms
- Skate parks
- Thermal baths
- Museums
- Art schools
- Studios (movie, music)
- Event venues (concerts, etc)
- Open spaces

I said some weeks ago that I was actually bullish on mainstreet. Since people will spend more time at home, they will want to go out more (and they are likely to buy less online).

To attract these customers, shops and malls central to cities should go through a redesign to become more entertaining (shop + experience).

Eg: a cafe inside a book shop, with an aquarium to watch fish.

The only question is: will there be enough people left to go to all of these places?
One of the biggest challenges is to replace the sales tax dollars that have been lost due to the vacant space. Many communities were really dependent on the revenue streams from those properties.

Some of them are large enough to support a mixed-use community with commercial and residential spaces. I was thinking of a specialized community maybe for seniors or specific training/education. It's definitely a balancing act with a lot of different interests that must be considered.
 

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We're just about to see the results of the Federal and State lockdowns on the real estate market. The hot single-family housing market is still with us in many markets. I'm not sure if 2008 will repeat itself in that market segment. But, it sure feels like it could be a bubble again. If it a repeat of history, it will get personal for a lot of people really fast.

With all the disruptions in the commercial and office market, there's going to be a lot of pain coupled with many opportunities available. The path forward won't be well marked. That uncertainty will cause a lot of confusion and missteps. A few people will come out on top either by dumb luck or well-calculated guesses and gambles.
 

Kid

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We're just about to see the results of the Federal and State lockdowns on the real estate market. The hot single-family housing market is still with us in many markets. I'm not sure if 2008 will repeat itself in that market segment. But, it sure feels like it could be a bubble again. If it a repeat of history, it will get personal for a lot of people really fast.

With all the disruptions in the commercial and office market, there's going to be a lot of pain coupled with many opportunities available. The path forward won't be well marked. That uncertainty will cause a lot of confusion and missteps. A few people will come out on top either by dumb luck or well-calculated guesses and gambles.
It indeed might end up like this.
People will stop receiving stimulus checks and overall happiness from helicopter money will end.

The only difference i spot now is a few trillion dollars printed and injected into economy, making higher house prices less higher in reality (purchasing power).
 

Lyinx

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It indeed might end up like this.
People will stop receiving stimulus checks and overall happiness from helicopter money will end.

The only difference i spot now is a few trillion dollars printed and injected into economy, making higher house prices less higher in reality (purchasing power).
and, if you loaned money to pay for the house, now you have more purchasing power to pay it off (figuring that you have a business and your selling price is going up equal to the inflation rate/purchasing power rate... yay :)
 

WJK

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and, if you loaned money to pay for the house, now you have more purchasing power to pay it off (figuring that you have a business and your selling price is going up equal to the inflation rate/purchasing power rate... yay :)
Yes, that is true. BUT, many of the people who lost their homes in 2008 were middle, upward mobile people who had overreached on their housing purchases. And then there were no-paper purchasers and sub-prime people who were counting on the housing market continuing to appreciate -- not crash. Doing the same thing over and over expecting different results is the definition of insanity.
 

Lyinx

Silver Contributor
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I've Read UNSCRIPTED
Speedway Pass
Oct 28, 2019
498
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Lancaster County, PA
Yes, that is true. BUT, many of the people who lost their homes in 2008 were middle, upward mobile people who had overreached on their housing purchases. And then there were no-paper purchasers and sub-prime people who were counting on the housing market continuing to appreciate -- not crash. Doing the same thing over and over expecting different results is the definition of insanity.
yeah, overreach will get you.

if you can get a loan with a no penalty early payment plan, then you can set it up for 30 yrs, but pay it off in 10 if you like. smalltown banks might be a bit easier to get a loan like this, but it's worth looking into (or take out multiple loans, with one of them being an early payoff plan)
 

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