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I love it when people call for 8% interest rates and a housing correction. Like they are basically begging for corporations to purchase the vast majority of the available housing, renting it out, and banking the appreciation. It shows such a basic lack of understanding of economics and who currently has money in the US it's almost funny.
Who is calling for 8% inflation and a housing correction?
Quote:
Originally Posted by TheOverdog
Also unless the recession is depression-level bad, people who are at risk for job loss during a recession aren't currently able to purchase homes. They are not competition and they have nothing to do with current housing prices. So them losing their jobs during a recession will have no impact on the home-purchasing economy.
I think you need to think through this again. Your argument is that a veritable recession and higher unemployment won't affect historically high housing prices because the people who might lose their jobs in a recession couldn't buy a house anyway. At least that's how I'm understanding you, so correct me if I have that wrong.
There are two issues with that:
1. People who can afford a house get laid off in recessions all the time. This is a bizarre argument to me. White collar folks get laid off in economic downturns, too.
2. Renters support housing prices.
The housing market is sensitive to general economic downturns, and perhaps more importantly, rising interest rates act a direct brake on demand. Inflation also diminishes buyers' capacity.
I have no idea what our agent will list for, if we should expect 10 cash offers 20% over asking in 3 days, if we should expect no buyers until a 10% price decrease a month later because recent interest hikes have crippled buying power, or anywhere in between.
I have no idea if market conditions will be the same 8 days from now, or if a recession will kick off on Monday.
I have no idea if there won't even be a recession, and housing prices will continue to skyrocket and we should wait even longer to list.
I love it when people call for 8% interest rates and a housing correction. Like they are basically begging for corporations to purchase the vast majority of the available housing, renting it out, and banking the appreciation. It shows such a basic lack of understanding of economics and who currently has money in the US it's almost funny.
The day you are forced to eat your words, which should happen by end-of-year, if the Fed holds true to its commitment to combat inflation with multiple 50 basis point hikes forthcoming, will be a sight to behold.
As one of the few posters in this thread who has consistently and unwaveringly argued that this housing market is unsustainable, namely because of the historic disparity that now exists between home prices and household incomes, it's rather amusing you have the nerve to suggest that my economic understanding is "basic".
Your argument conflating a housing correction with institutional investors purchasing and then renting out a "vast majority of housing" is ridiculous, and is not supported by historical data, either during the Great Financial Crisis, or over the last two years, where institutional investors accounted for between 15% and 20% of home buyers.
The extraordinary demand for housing since 2020 has been driven by artificially low interest rates. If you truly believe institutional investors are going to be piling into an already-overvalued housing market, as interest rates flirt with 6%, and continue rising, it is clear you have no clue what you're talking about.
Quote:
Originally Posted by TheOverdog
Also unless the recession is depression-level bad, people who are at risk for job loss during a recession aren't currently able to purchase homes. They are not competition and they have nothing to do with current housing prices. So them losing their jobs during a recession will have no impact on the home-purchasing economy.
I can barely comprehend your tangled thought processes, but I'll try.
A severe recession, which many, including myself are predicting, will impact every part of the economy. If inflation remains elevated, wages remain stagnant, and interest rates continue to rise, demand for homes will fall, and prices will fall.
Historically, during recessions, job cuts have affected a subset of the working population, some of which are already homeowners, resulting in more housing inventory.
I do not understand why so many posters on this forum are so emotional and combative about acknowledging this undeniably obvious housing bubble. Even if you own a home, continued and sustained gains in value are predicated on early 2022 market conditions -- low inventory, low interest rates, and a stable economy.
None of those factors are at play now, with surging rates, with the stock market declining precipitously, and layoff announcements increasing. As the Fed's easy money policies abate, the housing market has nowhere to go but down.
The arguments made about how "this time it's different", are the exact same arguments made leading up to the 2008-2012 housing correction. Those who continue to make this erroneous argument as it relates to the current housing market conditions will soon see the errors in their thinking.
The day you are forced to eat your words, which should happen by end-of-year, if the Fed holds true to its commitment to combat inflation with multiple 50 basis point hikes forthcoming, will be a sight to behold.
As one of the few posters in this thread who has consistently and unwaveringly argued that this housing market is unsustainable, namely because of the historic disparity that now exists between home prices and household incomes, it's rather amusing you have the nerve to suggest that my economic understanding is "basic".
Your argument conflating a housing correction with institutional investors purchasing and then renting out a "vast majority of housing" is ridiculous, and is not supported by historical data, either during the Great Financial Crisis, or over the last two years, where institutional investors accounted for between 15% and 20% of home buyers.
The extraordinary demand for housing since 2020 has been driven by artificially low interest rates. If you truly believe institutional investors are going to be piling into an already-overvalued housing market, as interest rates flirt with 6%, and continue rising, it is clear you have no clue what you're talking about.
I can barely comprehend your tangled thought processes, but I'll try.
A severe recession, which many, including myself are predicting, will impact every part of the economy. If inflation remains elevated, wages remain stagnant, and interest rates continue to rise, demand for homes will fall, and prices will fall.
Historically, during recessions, job cuts have affected a subset of the working population, some of which are already homeowners, resulting in more housing inventory.
I do not understand why so many posters on this forum are so emotional and combative about acknowledging this undeniably obvious housing bubble. Even if you own a home, continued and sustained gains in value are predicated on early 2022 market conditions -- low inventory, low interest rates, and a stable economy.
None of those factors are at play now, with surging rates, with the stock market declining precipitously, and layoff announcements increasing. As the Fed's easy money policies abate, the housing market has nowhere to go but down.
The arguments made about how "this time it's different", are the exact same arguments made leading up to the 2008-2012 housing correction. Those who continue to make this erroneous argument as it relates to the current housing market conditions will soon see the errors in their thinking.
It's one thing to assume the same level of housing price appreciation and high-velocity demand we've had for the last two years. I agree that such an assumption is highly risky right now.
It's another to imply that housing prices will fall substantially. It's very hard to see that happening. I can certainly see a pretty likely scenario where they quit going up, maybe soften slightly, as the overall economy stagnates or contracts a bit. But dropping a bunch, why? You do know that in Texas, which was doing very well economically going into the Great Recession, followed by substantial job losses during 2009-2010, still didn't see any real decrease in home prices during that period? The reason is that home prices here were not a "bubble" like they were in other markets driven by unjustifiably loose credit and rampant speculation. I'd say the situation is parallel now.
It's one thing to assume the same level of housing price appreciation and high-velocity demand we've had for the last two years. I agree that such an assumption is highly risky right now.
It's another to imply that housing prices will fall substantially. It's very hard to see that happening. I can certainly see a pretty likely scenario where they quit going up, maybe soften slightly, as the overall economy stagnates or contracts a bit. But dropping a bunch, why? You do know that in Texas, which was doing very well economically going into the Great Recession, followed by substantial job losses during 2009-2010, still didn't see any real decrease in home prices during that period? The reason is that home prices here were not a "bubble" like they were in other markets driven by unjustifiably loose credit and rampant speculation. I'd say the situation is parallel now.
I'd say that's not entirely true - Dallas and Austin definitely saw notable price decreases during those years and the rest of the state took a bit of a hit as well. The decreases weren't as bad as the coasts yes (and we recovered faster) but they did happen.
I do agree that as long as the upcoming recession isn't as bad as the Great Recession was, we shouldn't see crazy price crashes.
It's one thing to assume the same level of housing price appreciation and high-velocity demand we've had for the last two years. I agree that such an assumption is highly risky right now.
It's another to imply that housing prices will fall substantially. It's very hard to see that happening.
It’s difficult to imagine house values depreciating appreciably in this current market, which has benefited from two years of Fed-driven easy money manipulation.
We’re already seeing the stock market meltdown after two tiny rate increases of 25 and 50 basis points over the past three months, and yet you genuinely believe these historically high prices are sustainable?
Homes appreciating at +20% year-over-year, as they’ve done broadly over the past two years, has made home buying more unaffordable than it has ever been in history, both in nominal and inflation-adjusted terms.
As interest rates continue to rise throughout this year, who do you suppose is going to buy in at these inflated prices when the cost of everything — gas, food, rent, and energy costs are skyrocketing?
Quote:
Originally Posted by LocalPlanner
I can certainly see a pretty likely scenario where they quit going up, maybe soften slightly, as the overall economy stagnates or contracts a bit. But dropping a bunch, why? You do know that in Texas, which was doing very well economically going into the Great Recession, followed by substantial job losses during 2009-2010, still didn't see any real decrease in home prices during that period? The reason is that home prices here were not a "bubble" like they were in other markets driven by unjustifiably loose credit and rampant speculation. I'd say the situation is parallel now.
The Texas economy is strong, and certainly the correction here won’t be as acute as in less prosperous states/regions, but it’s still coming. The Fed created the bubble we’re in, and now they’re letting the air out.
It’s difficult to imagine house values depreciating appreciably in this current market, which has benefited from two years of Fed-driven easy money manipulation.
We’re already seeing the stock market meltdown after two tiny rate increases of 25 and 50 basis points over the past three months, and yet you genuinely believe these historically high prices are sustainable?
Homes appreciating at +20% year-over-year, as they’ve done broadly over the past two years, has made home buying more unaffordable than it has ever been in history, both in nominal and inflation-adjusted terms.
As interest rates continue to rise throughout this year, who do you suppose is going to buy in at these inflated prices when the cost of everything — gas, food, rent, and energy costs are skyrocketing?
The Texas economy is strong, and certainly the correction here won’t be as acute as in less prosperous states/regions, but it’s still coming. The Fed created the bubble we’re in, and now they’re letting the air out.
As long as the principal job base supporting the folks who have been purchasing the homes (plus the renters who are occupying the homes the investors purchase) doesn't shrink greatly, the overall level of pricing is supportable. As I noted, price increases may end, which would be a good thing IMHO. Maybe some softening, or slight price decreases. But, this is NOT like the 2000s markets outside of Texas where the prices were literally not sustainable because sketchy mortgages were letting folks purchase beyond their means.
Yes the Fed held rates artificially low - and Congress pumped a lot of spending into folks' hands as well. But credit has not been "loose." You're speaking more to the overall economy than to home prices.
Not to mention there's been a significant share of all-cash home purchases by people relocating from high-cost states. As long as they haven't taken out home equity loans since then, they're not even that much impacted by an economic downturn in terms of home occupancy.
I'd say that's not entirely true - Dallas and Austin definitely saw notable price decreases during those years and the rest of the state took a bit of a hit as well. The decreases weren't as bad as the coasts yes (and we recovered faster) but they did happen.
I do agree that as long as the upcoming recession isn't as bad as the Great Recession was, we shouldn't see crazy price crashes.
Hmm, maybe you're right, but I'd want to see data. Home buying activity drastically reduced for a year or two, as I recall, but I don't remember falling home prices in TX being a real news item, partly because we didn't have rapid appreciation prior to 2009.
As long as the principal job base supporting the folks who have been purchasing the homes (plus the renters who are occupying the homes the investors purchase) doesn't shrink greatly, the overall level of pricing is supportable. As I noted, price increases may end, which would be a good thing IMHO. Maybe some softening, or slight price decreases. But, this is NOT like the 2000s markets outside of Texas where the prices were literally not sustainable because sketchy mortgages were letting folks purchase beyond their means.
Inflation is at 40-year highs, interest rates are approaching 6% for a 30-year fixed mortgage, household debt is soaring, we are on the precipice of a recession, and incomes are stagnant.
In lieu of all of these factors, I simply do not understand how you can assert that these record-high prices are sustainable.
I have an anecdotal story to share. A relative passed away last year and my mom has been getting the home ready to sell (cleaning out, but not updating). It is located in Stonebridge Ranch in McKinney and was listed on a Thursday. By Sunday morning, she had an offer 17% over asking, close in 3 weeks, 25% down, appraisal waived, and the seller was going to pay for the survey and title fees. There are definitely people out there that are still desperate to buy despite the rising interest rates.
Someone get Leonard123 in here to get his facts straight about Stonebridge Ranch in McKinney.
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