The state of the current real estate market in my area(Western NC) is high prices, non economic prices for landlords looking to increase their holdings. Forced sales are about non existant. This should change as interest rate normalizatuon works through the slowing ecomony.

Totally agree! Part of my cash is in a Marcus savings earning 2.15% much lower than T bills but I can access quickly. Another portion is in a No Penalty Sallie Mae cd at 3%.

The people who were stockpiling cash at the start of the pandemic are kicking themselves right now for the following reasons:

1) Prices are up 20-40%.

2) Inflation has reduced the purchasing power of cash by 15-20%.

Here's the thing: if a person is waiting, then by default he is saying he KNOWS what's going to happen in the future. No offense, but if he can predict the future, then he should be a billionaire by now. Or at least a $100s millionaire.

I know I can't predict the future. So I don't try. No one can.

The market could continue to appreciate at a steady rate of 4-5% for the next 10 years while people sit on the sidelines "waiting for it to come down." There are still dozens of articles over on a real estate investing website that sounds like "Pigger Bockets" from as far back as 2013 (9 years ago!) of people saying, "A recession is coming...I'm waiting for the discounts!"

The Recession never came. Values are up over 100% since then, as are rents. These experts are long gone, probably drowining their sorrorws for having waited.

Am I saying it's guranteed that prices will continue to increase?

Nope. As I said before, I cannot predict the future, so I don't try. It could all fall to crap tomorrow and values could plunge 50% and everyone will be saying what a goofball S i d was for continuing to invest.

But since I can't predict the future, I have to hedge against the major possibilities.

1) The market tanks. Okay, no worries. I'm in good shape because I did buy 10-15 years ago at half of today's prices. I also got rid of all my adjustable rate and balloon debt, so all payments are fixed. This reduces risk a TON. The only thing better would be to have everything paid off, and I'm getting closer every day. Two houses did get paid off this year...yay!

2) The market continues to rise, albeit at a slower rate. This makes the most logical sense. There is more than plenty of money in the market now, and demand is outstripping available supply, which suggests that solid bread and butter real estate will continue to appreciate. Maybe not 10-20% per year, but at least keeping up with inflation.

The risk of stockpiling more cash than you need for emergencies (3-6 months of expenses) is that by the time prices DO go down, the value of your money has become a fraction of what it once was. I think of all those investors sitting out this market these past 9 years...waiting for their timing to work out. Their money today is worth probably 65% of what it was back then, and they missed out on the biggest upswing in recent memory. All of the reasons for that upswing to continue are still here and valid:

1) High demand

2) Low inventory

3) Flush cash markets

The only thing we've seen to the contrary are continued supply chain issues and rising interest rates. A 30 year mortgage is still in the mid 6% range. That's still cheap by historic standards. Class C and B homes are still hard to find and are commanding excellent prices compared to 2 years ago. No one is building new Class C....and new Class B starter builds are few and far between. Most builders in my area are doing Class B "upgrade" homes and Class A. There's no money to be made in Class C or modest Class B.

Class C and starter B, when bought with care, should cash flow to cover all expenses and make some profit. Even the old 1% rule is still a viable plan. Hold for a few years, increase rents, and we should have no issues. Or find well-located commercial opportunity that is being overlooked through poor advertising or lack of a creative eye. Good places to do business are always in high demand. If there's nothing like this in your town, look one town over. Find where the lifeblood of your region flows, and if it's a nice place to live with a diversified economic base, that's where the money is made: literally.

In conclusion: I may be eating crow with this post in a year or two, but like any good pundit who spouts off online should do, I'm going to keep my money where my mouth is: heavily invested in this phenomenal market. I can't think of anything else right now that's got anywhere near the potential of where we are today.

This is a great topic. I have been torn on what to do in these changing times. I have been focusing on paying off mortgages and CAPex. I have replaced 4 roofs this year with 2 more to go. I have bought 2 houses with cash and I am starting rehab next week. The objective of these 2 houses will be cash flow, not appreciation due to the areas. I keep open lines of credit to give me the liquidity needed in case of a macro "buying opportunity". I choose to have liquidity with available credit (credit lines) versus sitting cash for exposure to high levels of inflation. Keep my cash working and let my lines of credit rest.

We've kept the equivalent of 10% of our assets in cash or cash equivalents since 2015. The rest is invested in mutual funds or real estate. We're doing just fine.

We did pile away a couple of thousand in greenbacks recently, as a "bug out" stash in the event of weird weather (EF1 missed us by .1 miles last year) or nuclear threats from Russia (we're in the I-95 corridor between NYC and Philly).

To counter Sid a little, demand seems to be slowing with many listings lowering their asking price, the MLS inventory has been increasing consistently for about 4 months now, and with interest rates increasing enough cash is harder to come by for many folks to purchase.

The Fed has extensive economic models that predict what happens when interest rates rise. Their goal is a "soft landing" where the economy slows and inflation drops to 2-3% without contracting and causing excessive job loss. The problem is the higher they have to raise interest to get the economy to cool, the less likely they can hit that very small sweet spot. I have read a number of articles from different economists that are predicting unemployment will rise to between 5-7% in the first quarter of 2023 based on the models. If inflation is not significantly coming down by that point or you are not seeing unemployment starting to tick up as they predict then it is really going to get ugly for the economy as the fed will be forced to bump rates up by 2-3% at a time rather than .25-.75%. Think 1982 18% interest all over again.

There is not enough houses in NC for the demand. Prices may drop a little or stabilize. If you are waiting for prices to go back to "normal" you will be on the sidelines until you die.

I’m proceeding with my long term plans.

I’m paying off my mortgages, and planning to replace some of my older homes. The homes will eventually be bulldozed and replaced with new.

What I see is that today’s younger people, my target audience, want newer and energy efficient. They are willing to pay a little more. Generation Z is using to having nice things. Their parents are younger Boomers or older GenX so far, and are using to providing nice things. They are lawn mower parents, typically they mow all the obstacles out of the way of Junior.

We were over working on our newest project earlier. People drove by… asked if they were going to be for rent soon. Well, it is a 1-bedroom, $950/month. I could tell by looking, they would not qualify. The back seat of the car was full of garbage. Not stuff, garbage. Sure enough, “oh, that is too expensive”.

They are likely looking for $500/month. The days of rent being $500/month are gone. Even in my little town. I’m replacing the trash housing I have with new, and raising prices accordingly.

DQ is paying $15/hour. The U has raised their minimum to $15.50/hour, and they provide benefits. Mobil gas station is advertising starting as high as $18/hour.

Roy, I think i would be stockpiling cash even if all my properties were not paid off(they are).

Sid, I think there is some degree of market timing you can use. Most folks can tell if prices are high or low or normal.

High prices could continue except that it looks like the FED could be making a mistake by raising rates so quickly. There is a lot of debt in the system that will be repriced higher. Layoffs coming in the news. Negative GDP coming. This is according to a lot of people much smarter than dumb me! A recession in 2023 is all but guaranteed.

There are four or five houses for sale on a single street where we already own, one is almost next door.

We paid $61k in 2018, a small but very well-kept mobile home on block foundation. We did rehab it a bit: updated colors and kitchen, etc. Very small investment.

Most of the other houses are mobiles, too, some on block foundations, some not. Exteriors are well-cared for, nice yards, but pictures reveal 1980's kitchens, brown paneling, bad carpet, pink curtains. Total cosmetic renovations needed, don't know about structural.

The cheapest one is $175k, reduced from $215k. It's actually a cottage not a mobile. Then the mobiles range from $218k to $330k. Can't get a mortgage on a mobile, or at least not easily and not at a good rate. So these are cash sales.

MikeA, I hear what you're saying. We do get clues and hints, but I question the worth of those? The market has been and continues to be irrational sometimes, but as we've seen recently there are not questionable loans being given out right and left. Many buyers are cash or sizeable cash down payment. Interest rate increases do not affect cash buyers and have only a minimal impact if one purchases with 50% down or more.

We see what's been going on since 2013. I keep hearing "the sky is falling". It hasn't fallen....yet. It may at some point. Or it may not. I do not think the sky will fall. "Soft landing?" Who knows. If the Fed is clever enough to create such a thing, I question why they let us "take off flying" so fast to begin with.

Soft landings do not create massive discounted buying opportunities. So why wait for such things?

Here's a brief history of prices of real estate in the USA over the past 80 years. Totally anecdotal, but I bet most of us have seen something similar.

My grandparents bought a starter home for $8,000.

My parents bought their home that I grew up in for $55,000. Last we checked is it worth $180,000.

My starter home cost $100,000. Today is is worth $225,000.

My current home cost quite a bit more and is worth quite a bit more than what I paid for it. (*grins)

We're still 3 million + housing units short of demand. At current rate of construction, it will take 10-15 years to meet current demand.

We can't win Monopoly by sitting on Free Parking. Gotta play the game. I started in 2005...3 years before the worst down turn since the Great Depression. 17 years later, my business is booming. I bought at the worst time possible in the 3 years before the crash, paying top dollar, and accepting 1% Rule rents.

Sid's 2 cent: prices will continue to climb, but at a modest pace. Markets that drastically overheated will moderate and possible fall a little for a short time, but they will continue to rise over time because people want to be there as evidenced by their solid recovery time after time.

Therefore, since we can't time the top or the bottom, the time to get in is when the fundamentals (rents) are sufficient to cover the expenses and provide a reasonable profit on investment. I do not believe we will see decreases of more than 10% that last for any length period of time, so sitting on cash in a high inflation environment while waiting to score a 40% discount is going to leave folks disappointed.

And if I'm wrong, I'll eat crow and snap up some 40% off houses!

I'm hoping we start to see some signs of inflation cooling in the 4th quarter of this year, but who knows.

What I do know is rates are up so prices will probably drop a bit, the question is just how much.

Opportunities exist in every market.

The real question is what tool in my tool box will I need NEXT.....if you are asking what tool I need now, you are behind the market.

Today "subject to" seems to be hot where I am at. So Land Trust and Sub2 are a my finger tips. I see where a new program was recently rolled out for home owners in Pa so Sub2 will be harder to find.

Like so many other places, we have too much cash here and not enough stuff to buy. So if you are just sitting on cash, I would think you are not thinking that creatively. That is alright if your game plan is buy retail when the market corrects. Real estate isn't a leading indicator of the market, rather a lagging indicator.

Instead of paying off your own debt, you could loan the money out to another local investor who you know like and trust who isn't waiting on the retail market place. I am not a fan of paying off huge chunks of debt off when inflation is high. You are reducing leverage when inflation is working on lowering what you owe naturally.

I went to the tax upset sale last week and stopped with only two purchases. I could have bought upwards of five if I had more time. That said, who here would not purchase a as is valued $85,000 house for $21,000 cash, $4,200 in back taxes and $850 in delinquent sewer bills? In my model it is less about cash and more about finding help.