you know, that's what happened around the time of the stock market bust of 2000
before that time, I would never buy a multi family home unless the cap rate was 12% or better on the sales sheet, and I preferred to buy at 15% or better (yes, back in the old days I had a few multi's, but never went over the 4 unit level into "commercial properies", although I would have, had the right opportunity arose)
at that time, single family rentals were selling at a premium, and multi's were cheap
if you asked your realtor why this was, "well, it's because multi family rentals are more risky...you have people moving in and out all the time, which means more damages, and more collections on bad debt....where single family homes are more secure...you might have one family move in and stay there for years and years"
then the dot com bust came....everyone fled the stock market and into big real estate deals
suddenly, I'd see multi family properties priced at 6% cap rate!
when I had moved to my new town, I inquired about a nice 4 plex in a solid area, and the realtor showed me the numbers
I almost fell over! hell, I'd have to put an additional $30k down just to make the numbers work! How the heck could this be????
"well, you have to understand that multi family properties have less risk than single family homes...you have more people paying rent, besides, just look at how they've gone up in value!....with single family homes, if you have ONE vacancy, you're 100% vacant!"
well, I think the property is about $30,000 over priced, if you can get him to come down, I may be interested
"we'll just sell it to someone else"....and he did!
a year or two later, I attended a meeting at the HBA (their appartment association sponsored the meeting) where some of the big commercial brokers and a couple of the big developers (all of whom are broke now, by the way)were showing off some software program that one of them had that would figure cap rates and such....and they concluded that as long as you could buy a multi family property with a cap rate 2% higher than your cost of capital, you were fine
guess who stuck with those "risky" single family properties since then?
A second bubble in the same commodity does not usually form -- so they have to look at prior bubbles and busts to see. Housing bottoms probably 2015 or 2018 at best ... all this 2011 bottom talk is like the bottom talk in 2009 and now that is being considered a "dead cat bounce" created by the tax credit and housing falling from a great height -- but it continues the down-ward trend now.
Tax credit is expected to come back again this year and create another illusion probably in the latter part of 2011 or 2012 because we've pulled forward so much demand now, prices go down further as a pay back in 2012 and so on ...