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First of all I’m a homeowner and I’m not hoping for or cheering on a crash in the housing market. But I think it’s important to be realistic and vigilant as to whether we are in a precarious position.
The big counter argument to the idea that a crash is imminent is that, unlike the last crash, the lending standards are more stringent and prospective buyers are well-vetted. Plus there’s crazy low inventory at the moment. I get that.
But why would or should we expect that the next crash will follow the same formula?
In this inflationary and rising interest rate environment, this is what has me concerned:
The majority of homeowners feel “house poor.” Can we agree that’s not a good thing? Maybe they qualified for $XXX mortgage, and felt that they needed to borrow the maximum approved amount in order to compete in the current market. Or maybe they didn’t max out but bought more than they should have.
Well, now they’re stuck with an exorbitant mortgage relative to their total income, and also have to deal with the rising cost of everything that they can’t lock in with a low interest rate.
Is the thought that these homeowners will prioritize their mortgage payment over all other expenses? They’ve been vetted for creditworthiness, after all. But what if just a small minority start to default? Will the rest continue to prioritize their mortgage even if their overall home values start to decrease, especially below what they paid for it? It just seems like a potential house of cards scenario to me. One that is very different from the last bubble in some ways, but also not so different in other ways
First of all I’m a homeowner and I’m not hoping for or cheering on a crash in the housing market.
"The" housing market? To which one of the 120,000+ housing markets are you referring?
Quote:
Originally Posted by Bluefox
The big counter argument to the idea that a crash is imminent is that, unlike the last crash, the lending standards are more stringent and prospective buyers are well-vetted. Plus there’s crazy low inventory at the moment. I get that.
Again, which one of the 120,000+ housing markets has "crazy low inventory?"
Did it not occur to you that some people have an agenda and they prey on suckers like you?
Quote:
Originally Posted by Bluefox
In this inflationary and rising interest rate environment, this is what has me concerned
Let us know when mortgage rates are the 14%-16% range, you know, like they were in the late 1970s and early 1980s.
Quote:
Originally Posted by Bluefox
The majority of homeowners feel “house poor.” Can we agree that’s not a good thing?
Honestly, I don't give a damn how they feel, since that has no real bearing on Economics or housing prices.
Quote:
Originally Posted by Bluefox
But what if just a small minority start to default?
What if General Lee had B-52 bombers at the Battle of Gettysburg?
Long term homeowner's do not fear a crash. If they move they sell lower and repurchase lower. If it "crashes" back to 2019 levels most people have not lost anything.
Stock market will crash much more quickly. Stock market and housing market do not have to "crash" at the same time. I'd love the stock market to crash (and get in at lower levels).
Believe you will see people Eat lower on the food chain before they miss mortgage payments. You can dramatically cut food expenses and buy nothing. People will cut everything before they stop paying the mortgage.
People can buy smaller homes too (what's normal will change). Once the prices and interest rates rise to such a point that people no longer qualify then prices will start to adjust. When that is -- anyone's guess as you cannot time the market (though you can try).
First of all I’m a homeowner and I’m not hoping for or cheering on a crash in the housing market. But I think it’s important to be realistic and vigilant as to whether we are in a precarious position.
The big counter argument to the idea that a crash is imminent is that, unlike the last crash, the lending standards are more stringent and prospective buyers are well-vetted. Plus there’s crazy low inventory at the moment. I get that.
But why would or should we expect that the next crash will follow the same formula?
In this inflationary and rising interest rate environment, this is what has me concerned:
The majority of homeowners feel “house poor.” Can we agree that’s not a good thing?
Sorry, but I don't agree. I think the majority of homeowners feel "house rich." The wealth effect is real; they see the resale value of their asset go up each year and they feel wealthier - and spend more.
Clearly, there are both "house poor" and "house rich" households out there, but I don't think the majority feel poor.
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