If you're an active real estate investor or investment property manager like I am, the short answer to this housing bubble question is, "I don't know."
The somewhat longer answer to whether we're close to the bottom of the housing bubble is, "I don't think so."
Where Is The Housing Bubble Bottom?
Let's start with this chart from the Census Bureau that tracks home ownership rates for the past 16 years:
This next chart uses data from the Case-Shiller Housing Price Index and tracks back to just post World War II, a better view than going back just to 1995:
Up until the year 2000 when the housing boom went vertical, the price index bounces around between 100 and 120.
You may know from experience that the pendulum always swings further in one direction before going back to the norm, so you could guesstimate that housing prices are going to drop another 15% - 20% in the next few years.
Should You Wait For The Housing Bubble Bottom?
No body has a crystal ball, so the answer to that question is going to vary with each investor.
Here are a few things to consider:
Has the market bottomed out?
The favorite definition of a buyer's market is when there are 10 properties for every 1 buyer.
Experienced real estate investors will never, ever, try to time the top or the bottom of any market.
Investment Strategy and Product Types
What is the real reason for buying a property and what asset class matches your business skills & personality?
CAP rate
What is projected for the property and are you satisfied with that return?
Cash-on-Cash return
What is projected for the property and are you satisfied with that return?
Capital reserves
No matter how many profit & loss variables an investor considers, some of them are going to be wrong.
Market rents could significantly drop, competitors could flood the market, the economy could stagnate for years, property taxes could increase, and it could take much longer than expected for the house to rent.
Is there money in the bank - the capital reserves - to cover these worst-case scenarios?
Cash. Speaking of money in the bank, many experienced investors will pay cash for a property and seek to finance later. In a distressed market the ability to close quickly with few contingencies will lead to more deals being made at lower acquisition prices.
In The Basic Property Management eBook I really focus and drill down on how to find the right real estate investment property, how to set the right investment expectations, and how to set up a system to profit and make money from your investment real estate.
=> Learn more about Investment Property Management
There are certainly opportunities in residential investment real estate right now that are created by the housing bubble.
Experienced real estate investors will take their time, analyze the investment returns with each individual deal, and always have a drop dead point where if they can't get exactly what they want, they'll move on to the next deal.
The housing bubble has given us a lot of great real estate investment deals to pick and choose from.
I hope you've found this article on the housing bubble and investment property management useful!
Jeffrey Roark
Basic Property Management Blog
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