Posted on 01/13/2023 6:19:19 AM PST by CFW
Home prices have started to correct as interest rates rose sharply in 2022. However, the real problem for home prices is still coming in 2023 as the standoff between sellers and buyers comes to a head.
However, before we get there, let’s review how we got here.
Since the turn of the century, there have been two housing bubbles, with home prices reaching levels of unaffordability not previously seen in the United States. Such was, of course, due to lax lending policies and artificially low-interest rates luring financially unstable individuals into buying homes they could not afford. Such is easily seen in the chart below, which shows home equity versus mortgage debt. (Home equity is the difference between home prices and the underlying debt.)
(Excerpt) Read more at realinvestmentadvice.com ...
That smacks of market manipulation at a high level.
Don’t expect much of a “fall,” and when/if prices back off, it won’t be much and affordability will still be an issue given the economy and interest rates.
This is an imflationary, not another “bubble.” The last inflationary cycle took over a decade to fix - and America wasn’t nearly as stupid and devolved as we are now.
Dammit I hate using my phone for this.
It’s not market manipulation, but it is population manipulation.
Bring in tens of millions of new people without bringing in new housing, and you get a chunk of this.
Good article—bottom line:
—Interest rates are much higher than they were a year ago.
—Home prices/median income are at record highs.
—There are tons of vacation homes, rental homes, homes owned by hedge funds which add record instability to the housing market. These homes can be dumped on the market at any time.
Everything is in place for a record breaking housing price crash.
That does not mean it will happen with 100% certainty but all the pieces are there.
What’s coming is by design.
It won’t be pretty.
We have been looking for another home in a different part of the state wher we live. The prices and the bidding wars over the last 2 years has been ridiculous. I’m not over paying or getting into a biding contest over a house. I am however see some downward movement on prices these last few months as people begin to realize that their house isn’t selling...higher interest rates are a big factor.
Inventory is typically lower during the winter months. Come spring time it will be enlightening as to where the housing market will be when homes are listed and at what prices. The days of over pricing I think have ended and realistic prices will be happening. You can ask whatever you want for a house...and I can offer what I’m willing to pay. We will see if that will holds true this year.
Thank you Captain Obvious
Sorry, could not resist being a smart A$$
I came across a YouTube channel about 12 months ago called Reventure Consulting. He was the first to call for a correction in the general real estate market in the country.
This was when most people were still saying it was going up forever.
The first cracks appeared in markets like Boise. This was a pretty obvious call because real estate prices in Boise had doubled in less than 3 years. All because the mass exodus from CA & Seattle.
The exodus from CA was driving the increase in all western states plus TX and FL even. The exodus from NY, NJ, CT, IL & MI was fueling the market increases in FL, SC, ME, NH, VT, TN, KY, TX and others.
Now, prices are dropping in multiple places. So, if you can not sell your house in San Fran, you typically can not afford to buy a house in Austin.
FL was the number one state that people moved to in 2022. NY was the number one place they left. This and the 4 point increase in mortgage rates has the largest effect on demand.
However, that does not mean that Houston is going to go down as much as Austin.
The same thing could be said in Knoxville vs. Nashville.
FYI, Reventure Consulting stopped posting YouTube videos a few months ago. He was a calling for as much as a 50% correction in some markets. Time will tell.
As a lumber broker I can tell you that the price of lumber/osb is back down to the same levels(wholesale) as it was a few years ago. Roughly 25% of it all time highs in 2021. However, the costs to produce lumber has gone up just like all other commodities. Therefore, do not expect Anderson, Pella, Jeldwen, or Marvin to drop the price of their windows and doors. I bought a Marvin sliding patio door yesterday because there is a 5% increase going in today. Six foot Elevate sliding patio door $2095 delivered to my house in NH. CHAA CHING!
Lack of inventory is keeping prices steady in Atlanta.
I’m just sitting in my cheap 500 square feet apartment with plenty of time and money to spend waiting for the housing market to collapse.
“Thank you Captain Obvious
Sorry, could not resist being a smart A$$”
______
Lol! It’s obvious to me and to you, and to most critical thinking people who realize just a bit how the economy and housing market actually works.
However, too many people still believe the government’s narrative that the economy is doing great and the time to buy is now! That type of willful blindness and trust is going to bite them in that a$$, and people are going to be shocked when economic reality hits, and they are laid off and can’t pay that gigantic mortgage. Especially when they put their house on the market and discover that they can’t find a buyer that will pay what they paid for that home, and they are going to have to take a loss.
I believe in this recession, middle-management is going to take the brunt of it. They are used to the lower economic classes suffering the most harm during a recession. Again, they are going to be shocked when they find that THEY are suddenly a part of that lower middle-class.
IF it was up to me(Mrs. Woodbutcher is not keen on the idea) I would buy a retirement home in ITALY. Nice houses and thousands of apartments are available in south central Italy for under $200K Euros(1EU = $1.08 US) So, 200EU = $216 US)
This does not mean you are going to buy a villa on Lake Como cheap. Out in the countryside away from the sea are where the deals are. However, you can by apartments walking distance to the Adriatic/Med for under $200EU.
Please provide your source for data supporting the above statement. Seriously, please.
And which housing market(s) are you referring to? Regional? Local? National? Where?
Exactly. I live in a cheap house near the City that I bought 10 years ago. I was thinking of looking for a retirement home in one of the rural counties south of me, but will wait for a further market correction.
I know I won’t get as much for my current house when I go to sell it as my neighbors did for theirs last year, but I think it will work out over all.
Some links:
https://www.amgnational.com/insights/hedge-funds-gobbling-up-single-family-housing/
https://rethinkrealestateforgood.co/2022/08/08/hedge-funds-and-the-housing-crisis/
https://rethinkrealestateforgood.co/2022/08/08/hedge-funds-and-the-housing-crisis/
Obviously real estate is local so every market is different.
But—the three factors together have a major impact because buying and selling is a relatively small percentage of total home ownership in a given period.
This is a real change in the overall real estate market in many markets—and those who ignore it do so at their peril.
What if a person has bad credit, what if a person’s income is not sufficient to make monthly mortgage payments, what if the property is in bad shape and not worth loaning money against?
One of the largest markets by percentage with investment homes is Phoenix.
When I say investment homes I do not mean a company like Fundrise or Crowdstrike or Blackrock that owns multifamily real estate(apartment complexes) and rents them out.
There are companies that bought single family houses because they thought the price was appreciating. They are not planning on renting them long term. They were speculative purchases. There was a lot of this in Phoenix.
There are also many coastal/vacation areas in the country where houses were bought as SHORT TERM AirB&B rentals. If these are not rented nightly, weekly, the investor can not afford them. There are lake front, ski chalet, coastal ocean houses that were purchased just to rent short term. If the occupancy of these properties is not “X” percent, they are not profitable.
I'm speaking to single home owners here specifically, not those who are in the real estate business.
A single home owner basically buys a home to have a place to live and build equity instead of paying rent to some other owner. Once you have that place to live, you are set, with a fixed mortgage for 30, 20, 15 years, etc.
It should really not matter to you at that point what happens with home prices. You are going to pay that monthly mortgage no matter what the price of your home is assessed to be at a given time.
If you need to move and home prices are low, you make up for it on the other side of the transaction. Yes, you got less for your home than you wanted to, but you should also be buying your next home at a similarly reduced pricepoint.
Same if the housing prices skyrocket. Yes, you got a nice windfall selling your home in an up market, but guess what, you are going to pay through the nose for your new home, so in the end, it's really a wash either way.
The only people that should worry are those who bought a home with little or no downpayment (making them upside down in a down market) or pulling equity out of their homes for other things like remodeling or vacations.
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