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I find it alarming that a lot of fist-time buyers are currently severely overpaying for their houses. I am referring to the folks that will actually be living in the residences they purchased throughout 2020-21. Sure, the lending is presumably "stricter", but I am not entirely convinced of that either. I have a hard time believing that younger buyers are actually staying within that 28% ratio relative to their incomes. Perhaps with frugal living some would still be able to meet their monthly dues, but that only means that they will be spending a whole lot less elsewhere in the economy, so.. no bueno, either.
I remember seeing plenty of data back in 2018-19 citing all the hardships that millennials were going through, being unable to afford the "soaring" housing prices and most not ever having enough savings for a down payment. That was then! The 2021 starter homes are nearly 50% over those prices and I am pretty sure that incomes have remained largely the same for most first-timers. Talk about down payment affordability now! LOL
Yes, the demand at the moment far exceeds the supply, but that is all for the wrong reasons. It is not because we suddenly had a population boom or millennials somehow got rich overnight, but because that demand is artificial with disproportionate amount of institutional investors and individual sellers not willing to list because they are waiting for the "peak" in order to get the most out the whole enterprise.
Once the market gets to the point of "true demand" and investors begin cashing out, coinciding with all the foreclosures on sales of overpriced housing of the last year or two, will the market crash like a house of cards all over again? Unless the salaries also increase by 50% in the near term, I don't see how the music could play for much longer...
I don't think there's going to be a housing market "crash". Rather, I think that there's a good likelihood that we could see a stagnation in some portions of the housing market if mortgage interest rates rise by 2.5% to 3% over current rates.
This wouldn't affect the affluent buyers who can afford to pay cash for their house(s). However, it would have a significantly adverse impact on first time buyers and the buyers who are already maxed out on house payments and for some reason want or need to move to a different location due to change in family size or job relocation or other urgent matter.
This could cause stagnation or even declines in housing prices for certain sectors of the housing market, but I wouldn't call it a crash like we had back in 2008-2009.
Call it a crash, call it a slowdown, it surely is coming, once the interest rates rise a significant amount. We don't know when, we don't know how much the mortgage rates would have to rise, but the current rate of appreciation is unsustainable. It's fueled by the low rates and the infamous "helicopter" cash. This cash, in the timeless words of Mitt Romney, is borrowed from China.
Do you realize that the Fed is STILL injects the money in the economy by buying bonds to the tune of tens of billions? The talk is only when to stop doing that, not when to actually start raising the rates.
Once the helicopter cash is spent, the ephemeral bitcoin profits gone, the rates rise, the stock market stumbles -- as it has been doing this week at a mere expectation that the interest rates would actually rise sometime -- the RE prices would have to come down. How could they not? Yes, maybe more investors and cash buyers are in the market now, but in the main people still use mortgages and tend to be overly optimistic about their financial futures. When the economy slows, the stock bubble pops, they go down, "their" homes flood the market, and that's when the RE crash/slowdown begins in earnest.
Homeownership is more than making mortgage payments,you need drapes or venetian blinds,you need to water the lawn,and cut the grass,there is HOA fee,homeowner insurance ,you may need more than 1 car,you could be driving more to the stores,there are many small items you do not realise you need until you move in,trips to Home depot to but these items ,there are also maintenance fee like oiling the garage door opener,trimming trees,replacing rotten woodfence,ridding fire ants,termites,rodents,wasps,your utility bills would be higher.
if you use your credit cards to purchase these items and make only minimum payment each month,you are paying high interest to the bank.
The consensus is that there's no obvious bubble burst at which you can point to a date or date range when things will go down by a 10% or more value in the near future.
If rates rise it will constrict the market quite a bit, but even with that you can't accurately forecast big drops in price, it could just be lot's of flat growth years.
What would cause a big drop in prices is if there's some sort of event which rattles the stock market beyond just a V drop / recover like we saw with covid. Reason being is that the profits from housing are fueling the stock market growth and vice versa. If cash disappears from one for a sustained period of time, it will be drained out of the other.
In 2008 it was housing that popped and that rolled over into the stock market. In the future, it could be the stock market that pops, and if that happens it WILL roll over into the housing market.
There is a curious situation - a shortage of new construction - thanks to COVID-19 - and a severe credit crunch coming.
Plus, cash-rich entities are "buying up" houses like craz-zee.
I regularly get offers to "buy house as is" for 150% over current market value. Yet there aren't any houses popping up for sale in our area.
Perhaps "someone" is expecting "something" to happen in the next 12 months, and is holding on to all those properties.
Your guess is as good as mine.
“Crash” tends to mean significant decline of 20+%.
Not going to happen.
Lets imagine a Covid 2022 resurgence, inflation starts spooling up and then interest rates jump 1-2%. Now the stock market gets nervous and all the free money dries up.
Will an overpriced house drop 20%...........................absolutely!
Money has been flowing freely, car dealers are having record sales, Amazon is setting new records......what happens when all that stuff stops?
Palm Beach and Beverly Hills surely won't be offering 100K fixer uppers but the fringe communities will surely take a beating. Like West Palm Beach.
People have said this in Dallas for the last 10 years at least. Will it slow down and even pull back in some upcoming year? Probably. But then it will just rebound and keep going. I think keeping an eye on things and understanding the markets is good, but you can also be so scared into paralysis by the 'what if' of things dropping that you hurt yourself in the other direction.
When I moved to Dallas 6 years ago, everyone said 'Don't buy now, wait for the crash. Things are overpriced'. The house I own is up 85% since then. Is it going to pull back 85%? Very doubtful.
Yes, some people do get hosed if they are needing to sell during one of the pullback cycles and don't have a choice. Outside of that, trying to 'time' the housing market is usually a waste of valuable time in my opinion. If it is your primary house (and you aren't buying to flip or sell in a couple years), buy within your means and don't worry about housing prices again until you begin to feel it's time to move on when the time comes.
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