Trying to get good information on different parts of the economy is difficult these days... in our hyper-connected, piles of data everywhere, world. For real estate data, the Reventure Consulting YouTube channel has become one of my go to sources. This video is why. He shows the heat map of U.S. real estate, and tells us which areas have begun to crash back down to more realistic prices. He also shows a good grasp on the picture across the U.S..
It's hard to remember back this far now, but in May of 2020, I was standing in line at my local grocery store (San Fernando Valley, just north of L.A.), and both the guy in front of me in line, and the cashier himself, were both talking about buying small rental properties, 4-6 unit apartment buildings, in late 2020, when the prices dropped. Very typical of financially savvy SoCal people, they saw one or more small rental apartments as a key part of their retirement income, years down the road.
In a "normal" recession, that's what should have happened, stocks crash, then real estate follows a few months later, and that's when smart investors go shopping. These two years, 2020 and 2021, as we all know now, have been anything but "normal" recession times. But it looks like Southern California real estate is finally beginning to top out, and will finally begin to drop in prices in the next 3-6 months, depending on the specific city or area. All of you chomping at the bit to buy that small apartment building, or get a deal on a new home, will hopefully get your chance by mid to late 2022. But the prices have risen since this whole crazy time started.
When you look at the U.S. map of real estate inventory in this video, there are three main colors for the various real estate markets. Here's the quick key:
Yellow- Inventory, the number of houses for sale in that market, are going up, in many of these areas the prices are already starting to drop. Think of yellow as leading the pack into the real estate crash/downturn.
Gray- Inventory is about the same. There may be a small percentage less on the market, or a small percentage more, but close to the same level. These are the areas where the market appears to be topping out, and may head down in coming months. These areas are expected to follow the yellow areas into the eventual downturn
Red- Inventory of houses on the market is going up. These markets are hot! The real estate bubble is still building, these are real strong seller's markets, and most likely prices are going up in these areas for a while longer. These are the tail end of the market, and will very likely follow the yellow and gray areas into the downturn several months from now.
That will give you a quick read on the real estate inventory map he shows throughout this video. Now for a bit more detail.
For you Californians reading this post, he talks about the Central Valley (Stockton, Modesto, etc) at 7:30. He talks about San Diego and Los Angeles later, starting at 42:25. While inventory is still declining in San Diego, and L.A., listing prices are either flat-lining or dropping in these areas. So SoCal, fromm these metrics, seems to definitely be softening, with prices steady, or beginning to drop in some areas.
Yellow- Crashing areas- My high school hometown of Boise, Idaho has been much talked about because of its soaring home prices in recent months. That's over, and inventory is way up, and prices are declining. Several mountain regions, like Southern Idaho, Eastern Oregon, parts of Nevada, and California's Central Valley, are leading the nation into the real estate crash. Along with Boise, Provo and Ogden, Utah, Reno and Pahrump, Nevada, and Stockton and Modesto, California, are first in the nation into lower prices and become buyer's markets. These mountain region markets are many of the places people leaving the San Francisco Bay Area went to, after Covid hit.
There are also several Midwestern cities where this is happening as well, with rising inventory and flat or falling prices. The Midwest cities, generally, didn't rise near as much in price, percentage-wise, and probably won't drop as much either. Watch the video for more details.
Gray- Most of these areas, spread across the U.S., have inventory levels that either dropped about 10% or less, have stayed about level, or risen about 10%, or less. These markets tend to have pretty flat prices, and are expected to head downward in coming months, following the yellow areas.
Red- Hot seller's markets- He starts talking about these markets at about 9:00, in the video. Southern Florida, and the Georgia, South Carolina, and North Carolina coasts lead the way in hot markets right now. Parts of New England, particularly Connecticut and Rhode Island, as well as a few cities in the eastern Rockies, like Denver, are also some of today's hot markets. Tampa and Fort Myers, Florida are two of the hottest, and Raleigh, North Carolina is another one. Inventory is still declining in these markets, and prices are still rising in many of them, they're still strong seller's markets.
For those of you old enough, or smart enough, to say "No" to the FOMO buying spree, and wait for prices to crash (like California prices always do in recessions), your time find bargains seems to be coming in a few months.
So the insane national real estate market, sparked by The Fed's trillions in "helicopter money," is finally hitting crash mode in a few regions, and slowing down in many others. It's been a weird ride for 18-19 months, and great for agents and brokers, but not for investors looking for bargains. Things are finally beginning to slow down in real estate, which should mean one or two good years for investors to buy are coming.
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