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In my local market, most of the purchases are either all cash or jumbo mortgages which require 20% down. I don't doubt there are parts of the country where it's 2007-ish all over again with people buying more home than they can afford with no down, but the data I see suggests that in the large urban centers and their surrounding suburbs, the root cause is that the upper class is pricing the upper-middle class out of the prime locations, so the upper-middle class then goes and prices the middle class out of their locations. The middle class who don't want soul crushing 2 hour commutes then have to beg, borrow, and steal enough to compete, so these buyers overborrow.
I don't disagree that lending should be tighter, and I'd personally be fine with requiring 20% down. It wouldn't affect my local housing market (which is already very high), but it might collapse some of the less affluent markets out there. While this seems the responsible way to go, it may cause more harm than good. I'm also not convinced it wouldn't create a chasm between the lowest-cost housing and luxury housing where the homes in the middle have a lack of qualified and interested buyers.
Which local area are you in?
I would not mind there being a lack of qualified buyers in middle to lower markets. Allows people who are responsible to save to save for large down payment or even full cash purchase in normal metros like Detroit, Atlanta, Minneapolis, Orlando, Tampa, etc.. where prices are high now but nothing like the super expensive areas, it would push prices back to 2010-2013 levels for starter 1000 Square feet homes costing $120K to $150K in good neighborhoods instead of the $230K to $250K plus they cost now.
The high end metro area markets where prices are so high and higher than 95% of the rest of the United States like Los Angeles, San Diego, Bay area, Seattle, Washington DC, Boston, NYC prices are so high even in 2010-2012 for a starter little home were so far out of whack that of course rich people will buy them up as those are really all that can afford them and they have millions in cash to be able to do so.
I would not mind there being a lack of qualified buyers in middle to lower markets. Allows people who are responsible to save to save for large down payment or even full cash purchase in normal metros like Detroit, Atlanta, Minneapolis, Orlando, Tampa, etc.. where prices are high now but nothing like the super expensive areas, it would push prices back to 2010-2013 levels for starter 1000 Square feet homes costing $120K to $150K in good neighborhoods instead of the $230K to $250K plus they cost now.
The high end metro area markets where prices are so high and higher than 95% of the rest of the United States like Los Angeles, San Diego, Bay area, Seattle, Washington DC, Boston, NYC prices are so high even in 2010-2012 for a starter little home were so far out of whack that of course rich people will buy them up as those are really all that can afford them and they have millions in cash to be able to do so.
Boston. Condos in my local zip codes start around $500k for a 400-square foot studio up to 8 figures for single-family brownstones on the nicer streets. Median price is over $1 million so most sales are either all cash or jumbo as previously mentioned.
Other than for the subsidized housing for lower incomes, there's not much 0-5% down mortgaging going on here.
These aren't naive people, they're successful and smart enough to be able to afford a $500k home. They have money and are willing to spend it for what they want. In markets like this even if you listed your home for 20% under current market value you'd likely end up with a bidding war on your hands and it would still go for market value... don't blame the sellers, blame all the buyers bidding each other up. Again, economics 101
Boston. Condos in my local zip codes start around $500k for a 400-square foot studio up to 8 figures for single-family brownstones on the nicer streets. Median price is over $1 million so most sales are either all cash or jumbo as previously mentioned.
Other than for the subsidized housing for lower incomes, there's not much 0-5% down mortgaging going on here.
Wow. Thats crazy expensive. That's like as bad as Bay area. Even LA, NYC, Washington DC, and Seattle are not quite that bad as they are around $670K for a starter 1000 square foot home. Well on average although the super expensive areas of those metros may be more like your area in Boston as opposed to the avrage.
Is that price the average in the whole Boston area, or just in very upscale areas of Boston.
Like Los Angeles has Huntington Beach and Newport Beach which prices of homes start at $1 million for starter bungalows or ranches of 1000 square feet I think. And if actually on the beach even a starter condo is close to $1 million.
Wow. Thats crazy expensive. That's like as bad as Bay area. Even LA, NYC, Washington DC, and Seattle are not quite that bad as they are around $670K for a starter 1000 square foot home. Well on average although the super expensive areas of those metros may be more like your area in Boston as opposed to the avrage.
Is that price the average in the whole Boston area, or just in very upscale areas of Boston.
Like Los Angeles has Huntington Beach and Newport Beach which prices of homes start at $1 million for starter bungalows or ranches of 1000 square feet I think. And if actually on the beach even a starter condo is close to $1 million.
Inner neighborhoods where everything is walkable are the most. Think neighborhoods the historic districts with brownstones where the tourists like to visit. Gets cheaper as you radiate out from the center.
Not sure what you consider upscale. We're about to sell a single-floor condo in a 125 year old building with mice in the walls, no parking, no central AC or heat, and no outdoor space. Most people who've never lived in the city would probably turn their noses at that, but it will fetch more than a SFH 3x the size in the nicest parts of some cities.
You can get into some neighborhoods with prices in-line to what you're stating, but those are going to be in a grittier area, less walkable, or an inconvenient commute into downtown.
So back to my original thread. When will the market crash?? Hahahah
March 26, 2032
A comet will come super close to the earth, causing mass panic and market plunges. Bunker homes will soar in price, as well as people paying obscene money for a ride on Space X off to the moon or mars.
Then a team of brave astronauts will fly on a Space X shuttle to the asteroid, set off a nuclear explosion and blow the comet off course and save the world.
I'm also not convinced it wouldn't create a chasm between the lowest-cost housing and luxury housing where the homes in the middle have a lack of qualified and interested buyers.
I think this is kinda what I was getting at. If the middle class and even upper middle class get effected, then the prices of their homes could take a hit. And when the gap between prices in the city and outside it get wider, demand may ease a bit in the city as you'll probably see people that do eventually take the plunge to the suburbs. Honestly to one of your points earlier, I feel like Boston is one place where that may happen since it does actually have walkable suburbs and as you pointed out walkability is a key feature of living in the city.
A market crash has been predicted for a couple years now. It's long overdue. I've been waiting a couple years for prices to come down, and I might have to continue waiting a few more years. As long as investors think prices are still going up, they will keep going up.
On the other hand, the current pandemic is taking a toll on the nation's economy. People who lose their jobs may also lose their homes, if they can't keep up the mortgage payments. Plus the homes of the people who die will also go on the market. So we could see an increase in homes on the market in the near future, especially in states hard-hit by the virus.
It's a morbid thought, but I've decided to wait a few more months before putting any serious offers on over-priced houses, and am encouraging my mom to sell the house she's renting out before a crash drops the amount of money she can get for selling it.
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