Home Prices Will Likely Fall Further

RIA (Real Investment Advice) ^ | 1/13/23 | Lance Roberts

[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.)

[lodi90]

This was true back when a person usually owned only one house their entire lifetime, and never moved.

Today our society is much more mobile with people moving every 3-5 years on average, and so house prices do matter.

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A lot of Europe is still like that. They don’t move around like we do. Many times I’ve had a European look at me like I was crazy when I told them how often Americans move. Or maybe I am just crazy? LOL.

[SaxxonWoods]

Yep, that too. Long term thinking is not their strength, but that’s nothing new in America.

[millenial4freedom]

for reference, Goldman Sach's prediction for change in housing values in 2023.

Miami projected to rise 1-2%, Austin to fall 16%.

[FLT-bird]

Considering house prices jumped 66% in two years in this market, I would love a housing price crash. I simply refuse to buy until a lot more air comes out of the bubble.

[cgbg]

“Interest rates will drop. Real estate prices will go higher again.”

Nobody knows whether that is true or not.

Realtors are pushing that line telling buyers “don’t worry, you will be able to refinance at a lower rate later”.

Homebuyers should worry—that is a very dangerous gamble—and the realtor is not on the hook for the risk.

[TLI]

Considering house prices jumped 66% in two years in this market, I would love a housing price crash. I simply refuse to buy until a lot more air comes out of the bubble.

It's a long way to the ground before I see it as a "crash."

Houses that were at 140k 4-5 years ago are now 250 - 300k.

8% (Dallas) decline is nothing.

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