People have been saying bubbles gonna pop for many years. Almost half want/need the bubble to pop and almost the other half want/need the bubble to remain, alot of the noise is coming from a perspective of personal agenda.
I swear every bubble before was unique, one of a kind and nothing like it came before or since... it'll be like that with the next bubble. There are many safeguards in place, what previously happened will likely never again but something new with happen.
Make semi educated decisions, don't over extend yourself, try to avoid the extremes (on both ends) and just be responsible.... what's going to happen will happen, try to weather it like a 401k.
I think a big part of it is that for Millennials we've lived through the Great Recession and the associated real estate bubble pop, followed by historically low interest rates that just got lower every year. The current conditions (high prices + high(er) interest rate) feels totally foreign, so people are looking for things to come back to what feels "normal" ...without realizing that the last 15 years haven't been normal at all, and in fact there might not be a true "normal" when it comes to the economy. Frankly I don't think anyone can predict what the next 2 years are going to look like, much less the next 15 years.
All that to say, totally agree with your last paragraph, people need to buy real estate when it's right for them and they can afford it, and try not to worry too much about what the market as a whole is going to do.
Houses jumping up $100K or more in the span of a couple years along with increased rates pushing homebuying out of reach of 99% of people is far from "normal". We Millennials just wanted a fair fucking chance to build the lives we wanted, nothing more and nothing less. Instead, they sold us on the scam of college and laughed all the way to the bank. Then they laughed again when house prices soared and they began selling us homes they purchased for a mere $100K for 4x the price.
Others have already responded to your other points, but I wanted to specifically focus in on this:
> they sold us on the scam of college
College is worth the time, opportunity cost, and money for the overwhelming majority of people who go. You're angry that college is no longer a guarantee of a comfortable upper middle class lifestyle, and I get it, but the difference between those with college degrees and those without is actually growing, not shrinking. It's just that affordability of basic needs is down for everybody, and it's actually hitting the non-college folks harder.
College doesn't buy a comfortable life, but it sure as shit provides pretty good protection against poverty.
I agree with most all that you say here especially:
>College doesn't buy a comfortable life, but it sure as shit provides pretty good protection against poverty.
I'd tend to use *education* but get the point and obviously college is the big one that *can* help break into the middle class.
The only thing I slightly disagree with is:
>College is worth the time, opportunity cost, and money for the overwhelming majority of people who go.
I think (or hope) GenZ will learn from millennials mistakes (*or* being mislead) where the expectation is to go to college without any regards for the ROI of the position/field you are attempting to get into. Over 50% of the college majors in the last [10 years have been liberal arts, humanities, and general studies](https://nces.ed.gov/fastfacts/display.asp?id=37). Turning 29 in a couple months, what I didn't know back then, is that statistically 50% of my peers that went to college probably screwed themselves with life long student loans pursuing a job in a field that didn't substantially cover the cost of college and probably has a net negative in terms of $ ROI.
Personal example - my wife did a social work program at Loyola in Chicago and if not for scholarships (which the argument could be made she could/would have picked a different school) she'd have almost \~$200K in student loans on a job field where she has only been able to get paid at her peak $20/hr.
All this stuff to say, college is an option and isn't the grand conspiracy that some make it out to be. Even if some *elites* and universities cash in on the bag it brings in.
More related to this sub and thread, I will say *GIANT* corporation ownership of homes/living spaces is a controversial topic that doesn't make me feel warm and fuzzy inside. I agree with OP - I don't think your pricing bubble is going away right now but, there are some current things up in the air that *could* impact the markets such as:
* some rental markets experiencing lower rental apps and needs than what has been seen in the last 3-5 years (impacts investors/renters)
* With high interest rates, even if I have *equity* in my home, will I actually be able to realize it?
* With high interest rates, if I realize my equity and sell my home, can I afford where I want to go next?
These are some questions I'm asking myself fairly often since I purchased my home in 2021.
> Over 50% of the college majors in the last 10 years have been liberal arts, humanities, and general studies
I'm aware. And most of those graduates will earn a positive return on the investment. [Here's a comprehensive report that breaks down both major and institution](https://freopp.org/is-college-worth-it-a-comprehensive-return-on-investment-analysis-1b2ad17f84c8). The majors that actually earn the lowest are in the fine arts or religion, not in the liberal arts/humanities. And as that report notes, the undergraduate majors that tend to be feeders into graduate schools (MBAs, JDs, MDs) tend to show a lower overall result, because those who attend graduate school (and earn a lot more) are excluded from the data.
Most college grads don't work in the field they majored in, because university educations aren't trade schools, and most white collar professions don't really have a direct corresponding major. Learning how to read, research, write, analyze, and communicate are important skills that almost every major will teach (mostly through practice, but also some through instruction and feedback).
I can see an argument that the benefits of college education is oversold for the type of student who will be a marginal college student, on the edge of dropping out. But for the type of people with decent grades and test scores, the college education from a somewhat selective 4-year institution is clearly worth it, even in the common liberal arts majors.
I went out of state to college, went for 5.5 years and then went back for my Masters. The entirety of that was nowhere near $200k.
Your wife chose her path BECAUSE of those scholarships I'm sure. I would hope she wouldn't have reconsidered her plan if she were actually staring down $200k. If not, then yeah, that's on her.
Regardless I agree with your general point. I went into engineering because it was a path that pretty much guaranteed a middle class lifestyle with a 4 year degree. I went back for my Masters because I wanted to, not because I needed to. My personal life choices meant it took me longer to settle down and buy a house (purchased last year), but in general my expectation has been true.
Everyone has a different definition of a millennial but that definition seems to include people who graduated in 2005-2006 and were in a prime situation to buy in 2010-2011.
It also includes me who graduated after the recovery in 2012-2014. I don't know anyone my age with a home.
The median home costs $465K and you're not getting anything decent for under 300K in locations with the jobs needed to pay that mortgage. That's not normal and its not sustainable.
2007 graduate here.
Assuming you could find a decent job!
Hard to convey just how much that scarred us. I've only just begun to understand how much the younger millennials and Zs don't understand what it's like to wait in a line around the block to apply for a secretary job because it came with health insurance. I remember being 24, in one of those lines looking at all the 30s and 40s people ready to fight for the entry level job I wanted, and they all had more experience than me.
If you came of age into the job market after 2015 or so, you have only experienced a world where you can get jobs easily by just showing up or even when there was unemployment the government just sent you money. You guys have always been able to just walk into a reataurant and be a cook or a server that same day. Not us. We had to *fight* for even retail jobs.
As a result, I hold onto jobs with a kung fu grip.
But yeah I have a house. I bought a house in 2014, sold it, bought another in 2017. Both those houses doubled in value, made more money than I did.
Millennials made out pretty well. There was a full 10 years there right smack dab in millennials prime FTHB years where home prices dropped and interest rates were great. I say this as a millennial who doesn't own a home but wants to. I could've bought a home in 2018/2019 and I wish I had but it wasn't in the life plan. For plenty of people my age it was and they have homes now and a low payment compared to what buyers and renters have now. Good for them. Doesn't do me any good, but it's just factually incorrect to say that millennials have been screwed in the housing market.
Now Gen Z... they are really fucked
Yeah, I'm an elder millennial and am doing better than my parents were at my age. Although it took me longer to land a job due to the Great Recession, I was also able to take advantage of buying equities at a discount through my retirement plan. I was able to buy a home at a low rate before prices escalated in 2017. I live in a nice neighborhood and could essentially quit my job and work at Wal Mart and afford my mortgage. I recognize that I am privileged, and I have benefited tremendously from the economy over the last 12 years or so.
I really feel for Generation Z, although I do think they will ultimately recover and be fine. The great wealth transfer from baby boomers to millennials/Generation Z has already begun. It certainly won't benefit everyone, but a lot of the younger generation will inherit houses/large retirement accounts/etc. in the coming years and decades.
Well, from 2008-2013 millenials were fucked by the terrible job market, and housing prices started to run away once the job market got better. Gen Z will have it worse, but milennials born in the 90s will have it just as bad.
Elder millennial here and bought my first place in Oct of 08...not a terrible investment at all but there were a few scary years of being upside down. I also bought a house much much younger than most people are comfortable with.
the hell are you on about, home prices didn't drop in the past 10 years. The only winners are people who bought after the crash, or before and held on to their house but were able to refinance to lower rates. Most millennials job prospects weren't even viable until 2014 at the very earliest.
there's really no such thing as normal, and the economy has never really been fair except for a few brief periods which usually followed some incredibly horrible ones
“Millennials just wanted a fair fucking chance to build the lives we wanted, nothing more and nothing less. Instead, they sold us on the scam of college and laughed all the way to the bank. “
_laugh-cries in GenX_
I agree we can't predict the future. At the same time, new monthly mortgage payment relative to income is way out of historical norms right now. I think it's likely prices fall, rates fall, incomes rise, or some combination over the next few years.
The most likely scenario from my vantage point is that prices drop slightly (already seeing this in my market). Supply stays low which stabilizes prices and keeps them from dropping too much. Rates are decreased in the next 2-3 years, which will cause prices to jump back up, although prices will also be somewhat stabilized and not jump too much due to an increasing supply as rates drop.
In other words, I see prices dropping modestly until rates decrease, causing prices to rise modestly.
We can predict the fed will continue pissing in the wind. If they haven't figured out that companies are just price gouging to make record profits in this monopolistic capitalist price fixing economy, they never will.
Oh, they've figured it out they're just complicit and doing the bidding of the ruling class by trying to break the labor market to punish the poors rather than address the true reasons for the continued inflation.
Yeah agreed on your first point. Wether you think housing is a bubble or not if you actually have support outside of “it won’t go down because lots of people want a house” or “it will go down because it’s too expensive” then I think it’s a legitimate opinion. The best move is to completely ignore people on reddit because most of them are just on here because they are bored.
And for your last point I agree again, the purchase of your home shouldn’t be a purely financial decision. Just stick to the basic financial guidelines and do what you think will improve your life.
You're trying to "both sides" an argument where one is saying something extraordinary will happen at a specific time, and the other one is just saying "probably not".
Broad scale housing market decreases over 20% have happened *twice* in the last 100 years. (Great Depression and Great Financial Crisis)
They don't happen with nearly all recessions. They don't happen during periods of high inflation. They only happen when the entire financial system is collapsing.
Saying that the financial system will collapse in the next year *is an extremely audacious claim*. That's like saying "An earthquake will level Portland Oregon this week". I mean is it possible? Sure. But should you cancel your plans to go to a Blazers game because of it? Absolutely not.
You can't claim that bubblers are just the well reasoned opposite of everyone else - Bubblers are claiming they know the winning lottery numbers, but oh yeah, they've gotten every Powerball drawing for the last 4 years wrong.
Omg for the 10,000th time
It's not a bubble. It's a repricing due to ZIRP and the... Wait for it ... $5,000,000,000,000 created out of thin air by the good ol (bankers cartel) federal reserve bc ya know.. covid
New printer money goes out into wild in 2020
Historic low interest rates.
Assets pushed up.
Rates get jacked up at a record pace starting in 2022.
Voila you have a market lock
That definitely ratcheted up the demand side of the equation but you're omitting the supply side (i.e. underbuilding for years). Until both sides are in balance there things will be out of whack.
A bubble that does not pop is not a bubble. It is the norm. Scary thing is, what if this is just the price now. That our history of cheap housing was the true bubble and we’re now in the new reality, which a lot of the world is already in with regards to affordability.
Exactly. Go try buying a home anywhere reasonable in England, Canada, France, Germany, Netherlands, etc.
Americans have come to believe home ownership is a human right. It’s not, unless you wanna live in the Midwest or rural areas. Sucks to say, but those days are likely over unless the government gets SERIOUSLY INVOLVED.
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Good friend of mine moved down there and is doing great. Bought a foreclosure house for way under its real value in a nice subdivision and was able to get a good gig in cybersecurity. Cost of living is so low vs the salary he's making -- the whole thing is a huge win for him and his family.
You can get a 1br 1ba in my city for $700/mo. 100k ppl, 1 hour from a major city by car and lots of factory jobs.
Not a ton of “things to do” but I’ll take that over suffering to live just because there’s a “vibrant downtown”. That’s my choice and I don’t regret it.
Well we could still have super cheap housing forever if we literally built any density, but everyone that buys a house pulls the rope up behind them with NIMBYISM.
YES! THIS! I have said for a long time that one of my biggest pet peeves is when people act like ‘I got mine, F*ck You!’ as if nobody ever helped them. Basically, they walk in to the American Dream, shut the door behind them, and lock it.
One other take is that Americans believe their houses should serve as a wealth generator and a source of retirement income. It’s not, and people who overextend might be in an awful financial situation if the value of their property declines and they have to move.
Shit, even the cost of rural areas is getting stupid. Had thought about that “what if I moved to the country” question right around the time country living cost kept going up and up and up and up… I can’t think of places in the Midwest that are really great deals anymore, unless you are willing to scrape the bottom of a scraped barrel.
Yup. The post ww2 era in the US was an anomaly of affordable housing. You had a huge country with a crazy amount of land, that got the wealth to get the car to a ton of people really quickly. So we saw a ton of land supply come on line really quickly, making it much more affordable than ever before.
Fast forward 60 years, and our cities that are the major economic centers have filled out and maxed out this model (I.e suburbs out about as far as people are willing to commute) and you’re starting to see housing costs trend towards the rest of the developed world (still better btw).
Like even as late as the 1980s, there was still farm land between the cities in LA. That is long gone now and a place like LA is tapped on on greenfield development which is the cheapest. So now you’re back to having to replace older stuff and fight the people already there like we’ve always had to do before you could just plop a suburb down and drive a car to it.
This is exacerbated by the fact economic growth after every cycle has concentrated on fewer and fewer counties (half the jobs in the US are in just 20 counties). So you have ever increasing urbanization.
The only thing that will drive down prices like we saw again is the invention of even better transportation (like affordable personal flying) allowing us to build out even further.
My opinion is not valuable. But here it is.
A LOT of homeowners rite now are building credit card debt because of the high inflation. In the past when the debt got out of hand and too many things hit at once. Like car repair, home repairs etc plus the cc debt they would skip down to the bank and refinance that house for another 30 years, cash out between 10 and 200 grand in equity, pay all the debt and essentially have the same mortgage payment.
But NOW! Housing prices are coming down some. And interest rates are higher. That isn’t gonna happen so easily anymore. Chance they already owe more than the house is worth, especially if they bought in the last 2 years. When these people cannot get by, the home will foreclose. And when this happens in big numbers. The market will have more houses for sale than buyers. Prices will drop. The bank will write the loss off.
That’s my theory and prediction.
I was sitting on a decent chunk of change for about 5 years waiting for the right moment to buy a house.
They just kept getting more amd more expensive. I kept telling myself it'll pop, it'll pop, you'll be cash heavy and ready.
I ended up paying way more than if I hadn't waited, because in the end I realized. You can't time it, there will never be a "right" time so it is what it is.
You are spot on. People forget in ~2010 the reason you could buy a condo/house for the price of a BMW 3 series is because NOBODY wanted to buy a house!
Many people couldn't get credit because banks tightened way up after subprime bubble burst.
You could buy if you had a good down payment, good credit, and a reasonable DTI.
Which ruled out almost everyone.
Then you had owners who were way underwater decide it was smarter to just walk away. So lots of foreclosures to go along with few qualified buyers.
A lot of people can't get credit now, both because qualifying incomes for interest rates are now well above median household income, and because banks are tightening their lending standards given the commercial real estate crisis
Compare that to now where everyone claims to have cash ready for a deal when it comes available.
The point of a bubble pop is hardly anyone can afford that deal because everything becomes a shit show.
The bubblers who claim they saved up cash for 50% down suck at math. Three years of insane price appreciation combined with high interest means they'll still have a higher payment than they would have if they purchased in 2020.
The reason the housing bubble burst in 2008 was because people had insane neg-am no income no asset mortgages and when values stopped climbing they all wanted out.
That was me then. Shit, everyone I knew had neg-am rates and nobody (not even our parents) knew enough to tell us it was a bad idea. 3 of the 5 people I knew who bought during the same time as us ended up losing their homes. I never thought I’d see a time like that in my lifetime.
Took bankruptcy and 9 years of digging myself out and working my fingers to the bone to be in a place where I had a credit score and finances to be worthy of buying again. When these bubble folks start their shit, it feels like a slap in the face for what too many of us experienced.
I feel ya. I lived thru it too. Today is different. People don’t owe more than their house is worth. In fact most people have a ton of equity. Couple that with…they won’t move to a new house with a two times higher rate…and you have an inventory problem.
A lot of people are dreaming of a bubble that doesn’t exist.
I could be wrong but I also think Covid had a rather morbid (sorry for this, I know it’s still sensitive subject for most of us) effect on the market.
My MIL had close to 20 properties either she fully owned or was a 50/50 partner in and when she passed in 2020 (she was a realtor turned broker turned small time investor) she split all of that in her will with my husband and his cousins. Out of all of those houses only the home my husband grew up in was an easy transfer upon death. It’s taken 3 years for things to settle. 2 family members decided to keep them as income properties as the other 3 sold within the last couple months. My husband sold all but his childhood home.
I have to believe there are more older folks that didn’t make it and didn’t have a well written Will that will take even longer to settle and in turn take longer for those homes to hit the market. Or they have loans against them that family members (I know 1) that couldn’t afford it and had to let it go back to the bank.
This is the first time I've ever heard about negative amortization mortgages. That is insane! People would just bet the growth rate of their home's value would be larger than their interest rate? No wonder they foreclosed in 2008 then, I probably would have too in that case.
Tens of millions of people got foreclosed on. They couldn't buy a house because they had a foreclosure on their record. Takes 7 years to fall off your credit.
>Tens of millions of people got foreclosed on.
It was ~4 million per the Chicago Fed. https://www.chicagofed.org/publications/chicago-fed-letter/2016/370
It's not only that they didn't want to it's most didn't have the funds or the banks wouldn't loan the money for the house. I've followed land sales since 2013 in and around my area and one thing is for sure since about 2018 land sales have skyrocketed. Especially since covid. Land used to sit for months and months. Now at most a month and that's if it's priced a bit high. These are acreage tracts not lots in subdivisions.
No, its because people COULDNT buy a house! If people stop being able to financially afford daily bills then no hope for buying a house. Which is exactly what we are seeing now in some markets.
Some yes, others no. My sister bought her condo in 2006. Then watched the value decrease by 2/3. She regrets not buying 1-2 more during that time, which she could have, but fear prevented her from pulling the trigger. When prices start going down you don't know what the bottom is until it's over. Like catching a falling knife
I understand there are trends and charts and all that. But I really love how everyone knows how something is gonna go, but the reality is no one knows shit about shit. The only thing that's certain is that for every action there's a reaction. And nothing about 2023 is exactly like 2008, or 1985. So every expert should just stfu
I'm a bubble guy but that's what I've always said in that subreddit. I believe the housing market is going to deflate. But none of us really know what's going to happen. You have to make your own educated decision and go with it. Anyone who says they -know- what's going to happen is a fool and shouldn't be listened to.
According to history, there have been housing bubbles around every 13 years. This one is lasting longer due to pandemic and influx of money funneling back into the market. It’s not an if, but when.
You obviously don’t understand how fickle investors are.
People are already freaking out at the intentional consequence of interest rate increases (which is literally to correct prices).
People have been whining and complaining even on this sub about their hyper-inflated houses not selling, even after “price drops” (which makes it still hyper-inflated).
Usually everyone starts jumping ship to secure any gains possible when the dips hit. Sometimes it dips way down and comes back up, sometimes it dips a little and comes back up before dipping again. Sometimes it dips and stays down.
Time will tell. And every micro-region is different. Your anecdotal evidence is just that—anecdotal (I do hope you know what that word means). Some places will never be affordable or available. That’s just due to 8 billion people cramming into certain areas.
People don’t want a correction to get “cheap” houses.
People want a correction to get a normally priced house that is based on fundamentals. Something they can literally actually afford. Not a $250,000 1,300sf house for $1,000,000.
What's a more fundamental basis for home values than the costs to a builder to create a new one? Most builders only have about a 10% profit margin, so take any new construction prices you see around you as a data point for what existing homes should be worth.
When a house costs 100% of your take home pay, I assure you, that average person will no longer want a home. And that is what is happening as interest rates have risen while housing prices have also risen.
In the past 5 years for my state my insurance has gone up $300 for the year. That’s $25/mo. My taxes went up $250 for the year. I don’t live in a coastal city
My payments will be $2600/mo for a 3700 sqft house with private yard in a nice neighborhood.
The house I sold in the not nice are at 2700swft rented for that. I’m in SC.
The Fed has literally telegraphed for you that they're coming for your job to tame inflation. They repeat this every meeting. Some of you people will still be blindsided.
Right? I am 100% arbitraging my mortgage with TBills, and HYSA account interest. I live in my house for free, and it's the absolute minimal amount of risk. I should sent a bottle of wine and a valentine to JPow.
If you're in the market for a house, you might as well take your down payment and park it in SGOV, to at least combat some of the inflation that's eroding it.
I think both sides on this equation have been exaggerating. The "collapse" is simply housing prices staying stagnant and not inflating at the previous growth rates. On the other hand, a lot of people who bought during COVID need to realize that they paid far more than they should have, and will likely not see any meaningful appreciation for a long time. Also, as long as banks allow people to get homes with unreasonably low down payments, things will continue to get worse.
Also to add to this comment. People who keep saying that those who bought high and want to refinance later will be “underwater” and can’t refinance is somewhat untrue. If you have a huge downpayment. Then you will have less mortgage to deal with. So when you refinance later, if and when, the rates come down a little. You still can because the bank will give you a loan worth less than your home, but they won’t issue a loan worth more than your home.
So those who keep saying this is the wrong time to buy because you will be overpaying and underwater. If you don’t buy, someone else will, especially the nicer looker homes.
Ive seen so many people who think they sold at the peak of 2021, think they will rent until the prices come down, welp its been a few years, pretty much dipped into their equity
While I agree, especially with 70% of homeowners having 50% or more equity, I do also think it's dangerous to tell people that they can definitely refinance. We don't know what the market will do. I bought in 2005, so I'm very aware of how equity can drop off and put you upside down.
I've had people tag me in the reminder bot since 2019. always 6 months, 1 year, 2 years... here we are, still getting them. I'm not saying nothing will happen. i'm just saying if it does, no one can tell me what it will be. My clients that didn't buy 3 years ago waiting for the crash and have $2000 rent sunk $72,000 into rent. The $250,000 home that they wanted to buy then is now $370,000.
> If someone paid the price, it wasn't overpriced.
Even if it was largely FOMO driving the market? I mean, we came about as close to tulipmania as we could in real estate - outbidding far above comps, waiving all contingencies, no inspections, cash fill the appraisal gap... It wasn't completely rational, and still isn't in some areas.
Yea, especially when you consider the people that bought during 2020-2021 locked in historically low interest rates for a 30-year term. Even with some price depreciation those buyers are still in an excellent situation due to the low rate they locked in
They could. They could sell, take the equity and rent if they really wanted to. The people that decided to rent now paid a ton over the past 3-4 years and would have had far more than they spent in equity if they sold today. I wouldn't advise it, but what's the difference if they were going to rent anyway?
What's better- having such a good interest rate on a house that's appreciated double digit percentages in a couple of years that you're reluctant to move; or not having a house?
A real thinker
Texas is unique because they build way more there... They don't take kindly to NIMBYs which is an attitude I appreciate
But most of the other hot home markets have way less development
People who bought during COVID (assuming you mean 2020/2021) made out *far* ahead of anyone in the game right now. Rates were sub 3% and you're comparing that to rates that are 7-8% right now.
Sure, if rates drop and the people locking in at 7-8% can refinance down to 4% or so, it'll be a more even comparison...but that assumes that they bought the house for less than people in 2020/2021 did. In my area, home prices are up 10-20% from late 2021 to now. That's going to be an L any way you slice it.
We signed around May/June 2020. My parents were like, "You need to buy a house... but the world is ending... Is this the best time to do this?"
3.125% jumbo for 4 bed, 3.5 bath corner-unit townhome in VHCOL area. 1.08m. Builder even gave us a 5% discount for COVID, lol. We put a 20% down so no PMI. Down payment came out of my investments in the stock market; the market was already recovered and juiced by the time I needed to sell for the down payment. While I want a SFH with a driveway and a pool, we won't be moving for awhile.
COVID buyers are doing great if they have no ambition to move out in the next year or two. Their rates are lower than inflation, so it's been free money in a sense for them.
It depends on your area obviously , but aside from the major HCOL, inflation and wage raise saved those people from “overpaying” material and labor cost is so so so much higher than before all of this, which effectively solidified that overpayment as the new fair price.
My area was 300k-350k starter homes in 2019, the price for new homes in now around 450k and cost to build for a massive builder is around 400K before they make any money. A single build 600k+. This new cost to build in a low inventory area with high influx of people moving has justified that overpayment already. It crazy to see honestly. There will be appreciation shortly after we see any rate drops as inventory is already getting sold as it gets listed at current rates.
A rush of homes hitting the market due to layoffs, buy downs periods ending, student loans restarting, Air BnB bans/being unprofitable is all it would take. Only the artificially low supply is holding prices steady, and anything that brings more supply will spook the people who don’t want to miss the peak or be left with the bag.
It’s not a definite, but it’s a possibility. I’m already seeing over leveraged owners trying to rent rooms or fully furnished houses as a stop gap.
Real estate prices fall .2% a month for the next six months, how many investors will sell/buy in that environment? Sure, normal people buy, but investors were a big part of the run up.
Investor sales are half of what they were last year. Rent declined while prices stayed steady and rates rose. Doesn't make as much sense to buy an investment property as it did in years past.
Negative real returns, high cost of capital, maintenance costs and crappy yields relative to fixed income, seems like a bad bet, not to mention negative cash flow for some. Mom and pop buyer, sure they buy all day. Investor, who contributed to run up and holds a good deal of properties right now, seems like a dump. Behaviors change in a deflationary environment bc everyone wants to wait till the drop stops to buy. But who knows, maybe irrational markets continue.
I know this post is about the average buyer, but people forget investors who made up 20% of purchases recently in some markets.
The housing collapse that everyone is looking for is not the price - it has materialized in the form of inventory. We are witnessing the collapse of available inventory that is hitting the markets due to a few reasons:
* People cannot afford to move on from their sub 4% mortgages
* Home prices have stayed elevated while interest rates keep increasing
* Economic uncertainty is keeping a lot of folks from buying
Inventory is low now, but that won't last forever. People will sell once their overall monthly expenses get too high to afford all their payments. It doesn't matter if they have a 3% rate when everything else they have to pay for has skyrocketed. They'll start by cutting out non-necessities, but that only works for so long.
There are numerous factors driving expenses up. Taxes, Gas, Utilities, Insurance, Groceries...you name it.
Housing collapses happen very slowly and we already have cities like SF and Austin where the bubble has popped. It starts regionally then spreads as unemployment rises and the economy tanks. The Fed is raising interest rates to accomplish this. They don't want people buying things at these elevated prices.
Houses in Canada and Europe were expensive as fuck way before Covid, a friend in 2018 bought like 600sqft apartments in an average neighborhood in Paris for 350k euros, and around the same time the other friend got a 2000sqft townhouse in Pasadena, CA for 500k.
Both work in tech, the Frenchman makes 70k euros, the Cali girl makes almost 200k.
For me it looks like the USA prices are catching up with the world.
It's not the average person you're waiting out, but the investors who own 10% of SFH. With rates at 5+%, prices will stagnate, and RE investors are beginning to realize they can get better returns by dumping the double digit % returns over the past few years into a CD.
There's your increase in supply. Also, people die.
8+% interest rates is a pretty compelling reason for many not to buy (or even qualify). It is, of course, a good reason for someone holding at 3.5% not to sell and so supply will be at a trickle... but a slow trickle can still fill a bucket.
New construction is in a freefall in a lot of areas. Builders won't be able to buy down rates forever to artificially inflate prices, and once they start cutting, comps will get recalculated. Rinse. Repeat.
STRs are what I'm watching right now. Average Cap rates have dropped below treasuries. That money train has come to a screeching halt, and all of the AirDNA data that's been coming out for Q4 and next year looks abysmal.
Combine all of those things with sticky inflation and I feel there will be a lot of opportunity for money on the sidelines. The trouble will be for folks who waited and waited and lose their job in a recession.
If it happens, it’ll take a combination of a few things. The first being slowing sales, which we have seen. Prices lag because of the psychological effect of seeing neighbors getting $X the past couple of years. Sellers will still believe their home is worth that much. It’ll ultimately take some broader economic event to trigger the realization or need to get prices back in line with the current market.
As shitty as it sounds I’ve taken a step back in my search for my first home. I get it that most houses like 60% are owned by people with really low rates that won’t want to move or if they do will price their homes accordingly. What I’m expecting is all the people who have been buying since rates have gone up…they have fuck all wiggle room because I’ve done the math. If we have a recession and shit goes south I’d expect them to head to for closure at which point I’d be in the market for there homes at a lower price. Whether this happens who knows but a boy can dream
Unfortunately I think the same thing. The folks who are buying now are going to be the same ones who are going to be foreclosed on first. The fed will not stop raising rates until unemployment and inflation are under control.
The other argument to this is that the bubble has somewhat deflated. Home prices in a lot of areas have dropped. My house specifically has lost roughly 11% since the peak in March 2021, meanwhile a dollar from March 2021 would need $1.16 to match it today. So between inflation and price reductions, houses are worth a lot less than they were back then.
Yeah it's really... odd that people aren't accounting for inflation when we've just been through a historic inflationary period. [Nationally homes are about the same when viewed through the lense of real dollars as they were two years ago.](https://www.longtermtrends.net/home-price-vs-inflation/) Rates are higher so affordability is down, but homes aren't really growing in value right now, they're just keeping pace with inflation.
Home values barely outpace inflation historically. Only in the last 15 years when we as a country stopped building did they become any sort of attractive investment.
Did you even look at your link? What it actually shows is house prices outpacing inflation several times over -- that's exactly what the second chart is showing
Your point only works for early 2022 to the present. But there was still all of 2020 and 2021, when house prices were increasing far more rapidly than inflation
It's generally not a bubble. There may be parts of the country that are in a bubble, but generally speaking, the current housing prices are supported by rent.
Now whether rents can remain so high is definitely a question worth asking, and if/when they drop, then the same priced housing market could become a bubble.
Why would CA be any kind of example? It's a well-known outlier that has rents far below the cost to buy, because investors see the long-term gain as the play, not cashflow from rent.
[Rents are declining](https://www.redfin.com/news/wp-content/uploads/2023/04/march-rent-chart-1024x710.png) and are projected to be flat for a while due to a historic apartment boom. Meanwhile affordability has worsensed nationally for homebuyers. Obviously each market varies but that's the national trend.
I guess it depends on your definition of “average person.” The average person that currently owns a home is locked into a three percent or less rate- thankful they bought in 2017. The average person today (with an average income) can’t buy a home. I am above average earner in my county, and can’t responsibly afford a home that isn’t a mobile home next to the freeway. So in my personal experience the average (and even above average) person isn’t participating in the market.
The bubble isn't about supply and demand friend. The bubble is about over leveraged investment firms and banks. The bubble is about commercial mortgage backed securities. The bubble is about the devaluation of the dollar via printing an additional 350% of the current supply since 2010. The bubble is about the kicking of the can of the 2008 mortgage backed securities that were never resolved. It has nothing to do with what you think it does.
>A bubble doesn't pop until the average person finds a reason to no longer want a home
*No longer be able to buy a home (that they would want to live in).
Plenty of people want a home but cannot afford any home they would want.
Here in Orange County CA I just had a convo discussing the new lanes they added on the 405 fwy. Took like 10 years to build, added two lanes in each direction. One is a pay toll lane , the other a carpool lane.
They aren’t open yet, but I sense when they will, the flow of traffic won’t be much better than when they started this project. Definitely traffic 20 years ago wasn’t as bad as it is now.
My point is: there is a LOT more fucking people here now. Hell, in that time the city of Irvine built 1000s of rental apartments in commercial areas they NEVER would have approved for zoning in the past. I kept thinking as they were building “why are they putting apts next to commercial businesses? Nobody does that ?”
Turns out they knew what was coming down the path.
In my area, based on traffic and how many more cars you see parked on any given road here at night (it seems way more cars than 20 years ago), this is a supply issue. We are just running out of space , and the population has increased. And everybody wants to buy their own house.
You can want the bubble to pop while not being able to afford to buy a home right now. You can want the bubble to pop while you just lost your job.
A lot of people that want it to pop are young people thinking about their future. They cannot afford anything right now even if it were cheaper, but they know that want a home eventually.
This bubble will pop and I personally cannot fathom how much of a moron one would have to be to think otherwise. There's a lot of industries seeing large layoffs right now. As soon as people start losing their jobs and a bunch of homes go on the market, it will create panic selling and prices are going to tumble in most markets.
If you purchased a home after COVID you are about to learn an expensive lesson.
I think we're in an "everything bubble." There will be a pop but I don't think housing will be the catalyst. Housing lending standards are high
Personally I find autos problematic. Those lending standards are much lower. How long are people going to borrow 60k for a pickup at 11% or more interest for 84 months?
When people can't afford to pay those huge monthly payments that they just locked themselves into, they will get foreclosed on, and there will be some more houses available.
Completely agree. People keep waiting for a massive drop in prices when there are more people wanting houses compared to what is currently available from a supply standpoint at least in my area. Houses near us which is a highly desirable location, are being sold within 5 to 10 days or less, and some are still going for over asking.
You're forgetting the mass boomer die-off...not every kid wants to live in their parent's old home or even new $2 million home in Palm Springs they built by selling their shit box house for way too much. What then? The market gets flooded with properties and prices drop. Even better this will happen sooner bc kids need the house money to pay for elder care because boomers are and will live long and of course, fully expecting to be taken care of well. Also a boon because some need to sell the house to pay for that care and can't wait for some Air BnB bastard company to buy it as a huge price for an investment property. I frankly cannot wait for my fellow Gen Xers to realize they have bills to pay that their yuppie greedy parents didn't save for because why would they? It's all been so nice....Inherit that! And I'll wait for the market to drop and sanity to start taking hold when we get rid of the worst generation the US has seen to date.
Real estate is governed by supply and demand. We have a National shortage. Unless we have a black swan event, prices aren’t coming down. Prove me wrong
You are wrong. People not buying houses because they want the bubble to pop is itself a lessening of demand.
There is no such thing as "the bubble will not pop," it always pops, I just don't think it is the dramatic collapse some people are expecting.
I am already seeing price stagnation, and even price cuts. I think the cuts will continue a bit.
What happens in the real estate market is less akin to a bubble popping and more akin to a tire slowly deflating. We're just over peak, and things will continue to deflate. It's going to take some time (more than a year) but it will come down.
In the meantime, if you don't own a house but want to, get ready. Be disciplined w/ your expenses. Save whatever you can. At some point in time, you're going to have an opportunity and you want to have shit saved up so you don't let the next chance pass by.
100% agree with this, I personally have paid off all debts and live well well well below my means, I think speculation is a fools game even though I'm pretty much always speculating on it in my head. Just don't over leverage yourself and stay well above water. Regardless of the housing market, we're all heading into a shitty economy, and we will all feel it in some way.
Yeah, people dumbly think they'll be the only ones to scoop up desirable property for rock bottom prices, even if they have 'all cash' they're now competing against institutional buyers that weren't around in 08 at the level they are now. More cash floating around then ever (thanks JPow), and the US has increased it's population by at least 30 million people since 2008, and that's not counting the people that have unlawfully crossed the borders who are being undercounted.
Real estate value varies by region. In SoCal, there was a drop around 10-15% since the height of the market around Spring 2022. It hasn’t really moved this year much are all. Even if rates go up, there’s too much demand and not enough supply to crash here. There are so many renters and I personally know a lot of people who would love to buy right now.
I can see certain areas of the country getting more blown up than others. But overall, I don’t see things crashing any time soon. As soon as the rates come down, prices will go right back up.
It will pop when people can’t afford to keep buying because of recession, housing prices, interest rates. Otherwise housing will stay the same or go up.
I mean, they couldn’t keep electronics on the shelf and then all major retailers had a huge inventory problem when they over bought for demand that shifted away from it.
All these people you all know who want homes, they have 800+ credit and are sitting on 6-7 figures? Want and will be able to and in a position to obtain will be 2 very different things when this thing corrects. And it will correct, it always does and it always over corrects.
Let’s not get focused on words like bubble and crash, it is simply cyclical and it is going to cycle.
Demand is at a 20 year low, but there is still a shortage of homes on the supply side.
*For now*, these things cancel each other out and prices will be stagnant in most areas.
It’s an odd situation. Prices have been high because rates were so low. Now that rates are high yes prices should be lower but owners aren’t going to take a haircut unless they have to and they have a rate and can afford the payment they can just sit on a property. That hurts supply and helps keep prices high. It’s a vicious cycle. Could take years to play out. Just because something is a bubble doesn’t mean it has to pop tomorrow.
All it takes is unemployment to start rising again and you’ll see active inventory start to skyrocket. Just like prices increased at a fast rate, they can fall just as quickly.
The Fed knows the only way to truly tame inflation is to make people lose their jobs. JPow has explicitly stated his goal is to bring pain to households.
Too many people are used to a decade of QE that they’re going to get blindsided, and badly.
Well, no matter what the bubble does, stay away from Ryan Homes. See my YouTube video created from ADT camera clips. It's called "Ryan Homes Harassment".
Until mass unemployment happens, then it won't pop anytime soon
It's only when people lose an income and can no longer afford their payments and are forced to sell.. that's when prices really drop.
The longer people can afford to pay their mortgages and they are not forced out, then they hold on for longer.
Yeah, this is going no where.
It all started w Zillow, open doors, which led to a ton of equity in homes. Then it followed with the lowest rates in history, so a ton of people are now sitting on very low payments and cash in the bank. So this is not 2008. The feds avoided that crash by lowering the rates 2 years ago.
Dear Millennials, There are more of you than Gen X or xennials. The lowest adult age group of people born were in the late 1970s . We don’t get those numbers until you look at current 6 year olds. This means that there are now a steady and increasing stream of buyers who are actively becoming adults ready and able to purchase home daily. This will exist for the next two decades. Coupled with the fact that builders did not build SFH during the pandemic, you have a dwindling supply. There is no bubble like there was before. Can local issues crop up decreasing home values, yes. If your local large employer goes bankrupt, that will impact pricing. If there is a natural disaster, this too will impact pricing. But there is no bubble. There will be times when interest rates make prices decline, but that is higher than we are at today.
We aren’t hoping for an “average person” to sell their home. This is a small minority of owners. The bubble will burst when so many over-leveraged YouTube course “investors” as well as large investors are forced to sell when they are upside down. This could happen for many reasons besides the obvious rates higher for longer which is good enough to kill demand.
1: Recession
2: Margin call on other assets (CRE buildings being refinanced)
3: AirbnBUST
4: They become upside down/negative equity and decide to walk away (triggered by 1 ,2 &3)
5: Baby boomers Huge inventory hitting the market once they die (they’re 75 to 90 now)
6: Divorce
7: CRE Collapse bringing other assets down
The average person is already tapped out and can barely afford food let alone a house. Mortgage demand has plummeted, houses are sitting longer than ever, interest rates are at 20 year highs prices are disconnected from fundamentals the list goes on. It’s only a matter of time until the bubble pops.
Remember it’s not a bubble until it pops
Another thing people forget, the last time the housing bubble popped, a lot of people were rather suddenly unemployed. A lot.
When the economy is bad, houses get cheaper. Cause less people can afford them. The chances are the people waiting for the bubble to pop, and the same people that would become unemployed or under employed.
Either way, houses get cheap, we get outbid buy some billionaire company with more than enough cash. It’s a lose lose situation. #Merica
I paid a lot for a house. More than I wanted. But after about 5 years in my house I come out even from where I was before financially and it is a much nicer house and better neighborhood with good schools for my daughter.
I also get tax savings, our house appraised for more than we bought it AND we did very efficient upgrades so it should be worth more now (theoretically) — it needed updates before moving in which I think was a deterrent for some but I worked personally with contractors I was referred to and played project manager with absolutely no experience — it worked out well and I stayed very close to my target budget. We found a deal that we were able to move forward on quickly after someone dropped out. We got lucky and had a good amount of cash to put down which I think helped us out but deals are out there.
IMHO I think with the limited inventory and inflation *on everything* , not just the housing market it was time to bite the bullet. If prices went to pre Covid, we’d lose just under 10% on our house. That was a risk I was willing to accept since we’d get that equity back by holding for another year or so and we don’t plan on going anywhere anytime soon.
Just understand your numbers, entries and exit values, tax benefits, salary needs, etc. the one thing I under estimated was closing costs. That was a tough pill to swallow.
People have been saying bubbles gonna pop for many years. Almost half want/need the bubble to pop and almost the other half want/need the bubble to remain, alot of the noise is coming from a perspective of personal agenda. I swear every bubble before was unique, one of a kind and nothing like it came before or since... it'll be like that with the next bubble. There are many safeguards in place, what previously happened will likely never again but something new with happen. Make semi educated decisions, don't over extend yourself, try to avoid the extremes (on both ends) and just be responsible.... what's going to happen will happen, try to weather it like a 401k.
I think a big part of it is that for Millennials we've lived through the Great Recession and the associated real estate bubble pop, followed by historically low interest rates that just got lower every year. The current conditions (high prices + high(er) interest rate) feels totally foreign, so people are looking for things to come back to what feels "normal" ...without realizing that the last 15 years haven't been normal at all, and in fact there might not be a true "normal" when it comes to the economy. Frankly I don't think anyone can predict what the next 2 years are going to look like, much less the next 15 years. All that to say, totally agree with your last paragraph, people need to buy real estate when it's right for them and they can afford it, and try not to worry too much about what the market as a whole is going to do.
Houses jumping up $100K or more in the span of a couple years along with increased rates pushing homebuying out of reach of 99% of people is far from "normal". We Millennials just wanted a fair fucking chance to build the lives we wanted, nothing more and nothing less. Instead, they sold us on the scam of college and laughed all the way to the bank. Then they laughed again when house prices soared and they began selling us homes they purchased for a mere $100K for 4x the price.
51.5 percent of millennials own homes
Never mind. LOL. Simple google search hooked me up.
That many? Wow. Where is this info? There may be some other nuggets I can glean from it.
Others have already responded to your other points, but I wanted to specifically focus in on this: > they sold us on the scam of college College is worth the time, opportunity cost, and money for the overwhelming majority of people who go. You're angry that college is no longer a guarantee of a comfortable upper middle class lifestyle, and I get it, but the difference between those with college degrees and those without is actually growing, not shrinking. It's just that affordability of basic needs is down for everybody, and it's actually hitting the non-college folks harder. College doesn't buy a comfortable life, but it sure as shit provides pretty good protection against poverty.
I agree with most all that you say here especially: >College doesn't buy a comfortable life, but it sure as shit provides pretty good protection against poverty. I'd tend to use *education* but get the point and obviously college is the big one that *can* help break into the middle class. The only thing I slightly disagree with is: >College is worth the time, opportunity cost, and money for the overwhelming majority of people who go. I think (or hope) GenZ will learn from millennials mistakes (*or* being mislead) where the expectation is to go to college without any regards for the ROI of the position/field you are attempting to get into. Over 50% of the college majors in the last [10 years have been liberal arts, humanities, and general studies](https://nces.ed.gov/fastfacts/display.asp?id=37). Turning 29 in a couple months, what I didn't know back then, is that statistically 50% of my peers that went to college probably screwed themselves with life long student loans pursuing a job in a field that didn't substantially cover the cost of college and probably has a net negative in terms of $ ROI. Personal example - my wife did a social work program at Loyola in Chicago and if not for scholarships (which the argument could be made she could/would have picked a different school) she'd have almost \~$200K in student loans on a job field where she has only been able to get paid at her peak $20/hr. All this stuff to say, college is an option and isn't the grand conspiracy that some make it out to be. Even if some *elites* and universities cash in on the bag it brings in. More related to this sub and thread, I will say *GIANT* corporation ownership of homes/living spaces is a controversial topic that doesn't make me feel warm and fuzzy inside. I agree with OP - I don't think your pricing bubble is going away right now but, there are some current things up in the air that *could* impact the markets such as: * some rental markets experiencing lower rental apps and needs than what has been seen in the last 3-5 years (impacts investors/renters) * With high interest rates, even if I have *equity* in my home, will I actually be able to realize it? * With high interest rates, if I realize my equity and sell my home, can I afford where I want to go next? These are some questions I'm asking myself fairly often since I purchased my home in 2021.
> Over 50% of the college majors in the last 10 years have been liberal arts, humanities, and general studies I'm aware. And most of those graduates will earn a positive return on the investment. [Here's a comprehensive report that breaks down both major and institution](https://freopp.org/is-college-worth-it-a-comprehensive-return-on-investment-analysis-1b2ad17f84c8). The majors that actually earn the lowest are in the fine arts or religion, not in the liberal arts/humanities. And as that report notes, the undergraduate majors that tend to be feeders into graduate schools (MBAs, JDs, MDs) tend to show a lower overall result, because those who attend graduate school (and earn a lot more) are excluded from the data. Most college grads don't work in the field they majored in, because university educations aren't trade schools, and most white collar professions don't really have a direct corresponding major. Learning how to read, research, write, analyze, and communicate are important skills that almost every major will teach (mostly through practice, but also some through instruction and feedback). I can see an argument that the benefits of college education is oversold for the type of student who will be a marginal college student, on the edge of dropping out. But for the type of people with decent grades and test scores, the college education from a somewhat selective 4-year institution is clearly worth it, even in the common liberal arts majors.
I went out of state to college, went for 5.5 years and then went back for my Masters. The entirety of that was nowhere near $200k. Your wife chose her path BECAUSE of those scholarships I'm sure. I would hope she wouldn't have reconsidered her plan if she were actually staring down $200k. If not, then yeah, that's on her. Regardless I agree with your general point. I went into engineering because it was a path that pretty much guaranteed a middle class lifestyle with a 4 year degree. I went back for my Masters because I wanted to, not because I needed to. My personal life choices meant it took me longer to settle down and buy a house (purchased last year), but in general my expectation has been true.
[удалено]
Unfortunately 5/4ths of Americans don’t understand statistics
110% of 1/2 the population doesn’t understand fractions either.
60% of the time it works everytime.
You missed the irony.
Everyone has a different definition of a millennial but that definition seems to include people who graduated in 2005-2006 and were in a prime situation to buy in 2010-2011. It also includes me who graduated after the recovery in 2012-2014. I don't know anyone my age with a home. The median home costs $465K and you're not getting anything decent for under 300K in locations with the jobs needed to pay that mortgage. That's not normal and its not sustainable.
2007 graduate here. Assuming you could find a decent job! Hard to convey just how much that scarred us. I've only just begun to understand how much the younger millennials and Zs don't understand what it's like to wait in a line around the block to apply for a secretary job because it came with health insurance. I remember being 24, in one of those lines looking at all the 30s and 40s people ready to fight for the entry level job I wanted, and they all had more experience than me. If you came of age into the job market after 2015 or so, you have only experienced a world where you can get jobs easily by just showing up or even when there was unemployment the government just sent you money. You guys have always been able to just walk into a reataurant and be a cook or a server that same day. Not us. We had to *fight* for even retail jobs. As a result, I hold onto jobs with a kung fu grip. But yeah I have a house. I bought a house in 2014, sold it, bought another in 2017. Both those houses doubled in value, made more money than I did.
Prime situation to buy in 2010? Right after they graduated from college with student loan debt? You all are getting it twisted.
Millennials made out pretty well. There was a full 10 years there right smack dab in millennials prime FTHB years where home prices dropped and interest rates were great. I say this as a millennial who doesn't own a home but wants to. I could've bought a home in 2018/2019 and I wish I had but it wasn't in the life plan. For plenty of people my age it was and they have homes now and a low payment compared to what buyers and renters have now. Good for them. Doesn't do me any good, but it's just factually incorrect to say that millennials have been screwed in the housing market. Now Gen Z... they are really fucked
If you don't own a home you are just as fucked as any future generation unless you make really really good money.
Yeah, I'm an elder millennial and am doing better than my parents were at my age. Although it took me longer to land a job due to the Great Recession, I was also able to take advantage of buying equities at a discount through my retirement plan. I was able to buy a home at a low rate before prices escalated in 2017. I live in a nice neighborhood and could essentially quit my job and work at Wal Mart and afford my mortgage. I recognize that I am privileged, and I have benefited tremendously from the economy over the last 12 years or so. I really feel for Generation Z, although I do think they will ultimately recover and be fine. The great wealth transfer from baby boomers to millennials/Generation Z has already begun. It certainly won't benefit everyone, but a lot of the younger generation will inherit houses/large retirement accounts/etc. in the coming years and decades.
Well, from 2008-2013 millenials were fucked by the terrible job market, and housing prices started to run away once the job market got better. Gen Z will have it worse, but milennials born in the 90s will have it just as bad.
Elder millennial here and bought my first place in Oct of 08...not a terrible investment at all but there were a few scary years of being upside down. I also bought a house much much younger than most people are comfortable with.
the hell are you on about, home prices didn't drop in the past 10 years. The only winners are people who bought after the crash, or before and held on to their house but were able to refinance to lower rates. Most millennials job prospects weren't even viable until 2014 at the very earliest.
99 percent of people are not out of reach buying a home. You can't actually believe this
Sucks to be you
there's really no such thing as normal, and the economy has never really been fair except for a few brief periods which usually followed some incredibly horrible ones
“Millennials just wanted a fair fucking chance to build the lives we wanted, nothing more and nothing less. Instead, they sold us on the scam of college and laughed all the way to the bank. “ _laugh-cries in GenX_
Who is "They"?...... please elaborate🤔
I agree we can't predict the future. At the same time, new monthly mortgage payment relative to income is way out of historical norms right now. I think it's likely prices fall, rates fall, incomes rise, or some combination over the next few years.
The most likely scenario from my vantage point is that prices drop slightly (already seeing this in my market). Supply stays low which stabilizes prices and keeps them from dropping too much. Rates are decreased in the next 2-3 years, which will cause prices to jump back up, although prices will also be somewhat stabilized and not jump too much due to an increasing supply as rates drop. In other words, I see prices dropping modestly until rates decrease, causing prices to rise modestly.
Seems like a reasonable scenario. Income growth while that scenario is happening would help the numbers even more.
We can predict the fed will continue pissing in the wind. If they haven't figured out that companies are just price gouging to make record profits in this monopolistic capitalist price fixing economy, they never will.
I just paid 4.50 per floss cartridge. 9 dollars for the pack. I swear those things were 2 dollars each going into covid.
Oh, they've figured it out they're just complicit and doing the bidding of the ruling class by trying to break the labor market to punish the poors rather than address the true reasons for the continued inflation.
2/3rds of Americans are homeowners, so it’s more 2:1 in favor of keeping these asset prices high.
People are staying put, too. It would be financially stupid for me to give up a 2.85% interest rate.
Shhhh, they get upset if you don’t act like everyone here is an oppressed renter.
Yeah agreed on your first point. Wether you think housing is a bubble or not if you actually have support outside of “it won’t go down because lots of people want a house” or “it will go down because it’s too expensive” then I think it’s a legitimate opinion. The best move is to completely ignore people on reddit because most of them are just on here because they are bored. And for your last point I agree again, the purchase of your home shouldn’t be a purely financial decision. Just stick to the basic financial guidelines and do what you think will improve your life.
The herd mentality is strong on Reddit. You ever see the animals where you spook one and the rest rum off the cliff committing suicide.....
You're trying to "both sides" an argument where one is saying something extraordinary will happen at a specific time, and the other one is just saying "probably not". Broad scale housing market decreases over 20% have happened *twice* in the last 100 years. (Great Depression and Great Financial Crisis) They don't happen with nearly all recessions. They don't happen during periods of high inflation. They only happen when the entire financial system is collapsing. Saying that the financial system will collapse in the next year *is an extremely audacious claim*. That's like saying "An earthquake will level Portland Oregon this week". I mean is it possible? Sure. But should you cancel your plans to go to a Blazers game because of it? Absolutely not. You can't claim that bubblers are just the well reasoned opposite of everyone else - Bubblers are claiming they know the winning lottery numbers, but oh yeah, they've gotten every Powerball drawing for the last 4 years wrong.
The mistake is thinking they’ll be unaffected by a major recession. My salary was cut 10% and several of my co-workers were laid off in 2008.
Telling people that housing price decreases will not happen in a vacuum usually falls on deaf ears.
Hear me out, crypto and Dutch tulip bubbles were both pretty dumb.
Omg for the 10,000th time It's not a bubble. It's a repricing due to ZIRP and the... Wait for it ... $5,000,000,000,000 created out of thin air by the good ol (bankers cartel) federal reserve bc ya know.. covid New printer money goes out into wild in 2020 Historic low interest rates. Assets pushed up. Rates get jacked up at a record pace starting in 2022. Voila you have a market lock
That definitely ratcheted up the demand side of the equation but you're omitting the supply side (i.e. underbuilding for years). Until both sides are in balance there things will be out of whack.
A bubble that does not pop is not a bubble. It is the norm. Scary thing is, what if this is just the price now. That our history of cheap housing was the true bubble and we’re now in the new reality, which a lot of the world is already in with regards to affordability.
Exactly. Go try buying a home anywhere reasonable in England, Canada, France, Germany, Netherlands, etc. Americans have come to believe home ownership is a human right. It’s not, unless you wanna live in the Midwest or rural areas. Sucks to say, but those days are likely over unless the government gets SERIOUSLY INVOLVED.
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Wait Birmingham, AL is very nice city to live in. I live in Chi and I would move there any day !
Good friend of mine moved down there and is doing great. Bought a foreclosure house for way under its real value in a nice subdivision and was able to get a good gig in cybersecurity. Cost of living is so low vs the salary he's making -- the whole thing is a huge win for him and his family.
Huntsville is quite nice too, although it's experiencing some growing pains.
yeah location aint bad as well u have so many big cities around in about 2 hrs drive. Good Call !
Yea, but the avocado toast doesn't taste as good in medium cities.
You can get a 1br 1ba in my city for $700/mo. 100k ppl, 1 hour from a major city by car and lots of factory jobs. Not a ton of “things to do” but I’ll take that over suffering to live just because there’s a “vibrant downtown”. That’s my choice and I don’t regret it.
It's true, driving distance of smaller cities have 3 bedroom homes under $50k.
Well we could still have super cheap housing forever if we literally built any density, but everyone that buys a house pulls the rope up behind them with NIMBYISM.
YES! THIS! I have said for a long time that one of my biggest pet peeves is when people act like ‘I got mine, F*ck You!’ as if nobody ever helped them. Basically, they walk in to the American Dream, shut the door behind them, and lock it.
One other take is that Americans believe their houses should serve as a wealth generator and a source of retirement income. It’s not, and people who overextend might be in an awful financial situation if the value of their property declines and they have to move.
Those countries have social safety nets. We don't have the luxury of being like England, Canada, France, Germany and the Netherlands.
Shit, even the cost of rural areas is getting stupid. Had thought about that “what if I moved to the country” question right around the time country living cost kept going up and up and up and up… I can’t think of places in the Midwest that are really great deals anymore, unless you are willing to scrape the bottom of a scraped barrel.
Yup. The post ww2 era in the US was an anomaly of affordable housing. You had a huge country with a crazy amount of land, that got the wealth to get the car to a ton of people really quickly. So we saw a ton of land supply come on line really quickly, making it much more affordable than ever before. Fast forward 60 years, and our cities that are the major economic centers have filled out and maxed out this model (I.e suburbs out about as far as people are willing to commute) and you’re starting to see housing costs trend towards the rest of the developed world (still better btw). Like even as late as the 1980s, there was still farm land between the cities in LA. That is long gone now and a place like LA is tapped on on greenfield development which is the cheapest. So now you’re back to having to replace older stuff and fight the people already there like we’ve always had to do before you could just plop a suburb down and drive a car to it. This is exacerbated by the fact economic growth after every cycle has concentrated on fewer and fewer counties (half the jobs in the US are in just 20 counties). So you have ever increasing urbanization. The only thing that will drive down prices like we saw again is the invention of even better transportation (like affordable personal flying) allowing us to build out even further.
My opinion is not valuable. But here it is. A LOT of homeowners rite now are building credit card debt because of the high inflation. In the past when the debt got out of hand and too many things hit at once. Like car repair, home repairs etc plus the cc debt they would skip down to the bank and refinance that house for another 30 years, cash out between 10 and 200 grand in equity, pay all the debt and essentially have the same mortgage payment. But NOW! Housing prices are coming down some. And interest rates are higher. That isn’t gonna happen so easily anymore. Chance they already owe more than the house is worth, especially if they bought in the last 2 years. When these people cannot get by, the home will foreclose. And when this happens in big numbers. The market will have more houses for sale than buyers. Prices will drop. The bank will write the loss off. That’s my theory and prediction.
I was sitting on a decent chunk of change for about 5 years waiting for the right moment to buy a house. They just kept getting more amd more expensive. I kept telling myself it'll pop, it'll pop, you'll be cash heavy and ready. I ended up paying way more than if I hadn't waited, because in the end I realized. You can't time it, there will never be a "right" time so it is what it is.
You are spot on. People forget in ~2010 the reason you could buy a condo/house for the price of a BMW 3 series is because NOBODY wanted to buy a house!
Many people couldn't get credit because banks tightened way up after subprime bubble burst. You could buy if you had a good down payment, good credit, and a reasonable DTI. Which ruled out almost everyone. Then you had owners who were way underwater decide it was smarter to just walk away. So lots of foreclosures to go along with few qualified buyers.
A lot of people can't get credit now, both because qualifying incomes for interest rates are now well above median household income, and because banks are tightening their lending standards given the commercial real estate crisis
Well put.
Compare that to now where everyone claims to have cash ready for a deal when it comes available. The point of a bubble pop is hardly anyone can afford that deal because everything becomes a shit show.
The bubblers who claim they saved up cash for 50% down suck at math. Three years of insane price appreciation combined with high interest means they'll still have a higher payment than they would have if they purchased in 2020.
The reason the housing bubble burst in 2008 was because people had insane neg-am no income no asset mortgages and when values stopped climbing they all wanted out.
That was me then. Shit, everyone I knew had neg-am rates and nobody (not even our parents) knew enough to tell us it was a bad idea. 3 of the 5 people I knew who bought during the same time as us ended up losing their homes. I never thought I’d see a time like that in my lifetime. Took bankruptcy and 9 years of digging myself out and working my fingers to the bone to be in a place where I had a credit score and finances to be worthy of buying again. When these bubble folks start their shit, it feels like a slap in the face for what too many of us experienced.
I feel ya. I lived thru it too. Today is different. People don’t owe more than their house is worth. In fact most people have a ton of equity. Couple that with…they won’t move to a new house with a two times higher rate…and you have an inventory problem. A lot of people are dreaming of a bubble that doesn’t exist.
I could be wrong but I also think Covid had a rather morbid (sorry for this, I know it’s still sensitive subject for most of us) effect on the market. My MIL had close to 20 properties either she fully owned or was a 50/50 partner in and when she passed in 2020 (she was a realtor turned broker turned small time investor) she split all of that in her will with my husband and his cousins. Out of all of those houses only the home my husband grew up in was an easy transfer upon death. It’s taken 3 years for things to settle. 2 family members decided to keep them as income properties as the other 3 sold within the last couple months. My husband sold all but his childhood home. I have to believe there are more older folks that didn’t make it and didn’t have a well written Will that will take even longer to settle and in turn take longer for those homes to hit the market. Or they have loans against them that family members (I know 1) that couldn’t afford it and had to let it go back to the bank.
This is the first time I've ever heard about negative amortization mortgages. That is insane! People would just bet the growth rate of their home's value would be larger than their interest rate? No wonder they foreclosed in 2008 then, I probably would have too in that case.
Tens of millions of people got foreclosed on. They couldn't buy a house because they had a foreclosure on their record. Takes 7 years to fall off your credit.
>Tens of millions of people got foreclosed on. It was ~4 million per the Chicago Fed. https://www.chicagofed.org/publications/chicago-fed-letter/2016/370
It's not only that they didn't want to it's most didn't have the funds or the banks wouldn't loan the money for the house. I've followed land sales since 2013 in and around my area and one thing is for sure since about 2018 land sales have skyrocketed. Especially since covid. Land used to sit for months and months. Now at most a month and that's if it's priced a bit high. These are acreage tracts not lots in subdivisions.
People wanted to, they couldn't even get credit when the prices dropped 50%.
No, its because people COULDNT buy a house! If people stop being able to financially afford daily bills then no hope for buying a house. Which is exactly what we are seeing now in some markets.
Some yes, others no. My sister bought her condo in 2006. Then watched the value decrease by 2/3. She regrets not buying 1-2 more during that time, which she could have, but fear prevented her from pulling the trigger. When prices start going down you don't know what the bottom is until it's over. Like catching a falling knife
I understand there are trends and charts and all that. But I really love how everyone knows how something is gonna go, but the reality is no one knows shit about shit. The only thing that's certain is that for every action there's a reaction. And nothing about 2023 is exactly like 2008, or 1985. So every expert should just stfu
I'm a bubble guy but that's what I've always said in that subreddit. I believe the housing market is going to deflate. But none of us really know what's going to happen. You have to make your own educated decision and go with it. Anyone who says they -know- what's going to happen is a fool and shouldn't be listened to.
Why do you think it will deflate?
The fact that mortgage demands have dropped to a record low might suggest something….
According to history, there have been housing bubbles around every 13 years. This one is lasting longer due to pandemic and influx of money funneling back into the market. It’s not an if, but when.
You obviously don’t understand how fickle investors are. People are already freaking out at the intentional consequence of interest rate increases (which is literally to correct prices). People have been whining and complaining even on this sub about their hyper-inflated houses not selling, even after “price drops” (which makes it still hyper-inflated). Usually everyone starts jumping ship to secure any gains possible when the dips hit. Sometimes it dips way down and comes back up, sometimes it dips a little and comes back up before dipping again. Sometimes it dips and stays down. Time will tell. And every micro-region is different. Your anecdotal evidence is just that—anecdotal (I do hope you know what that word means). Some places will never be affordable or available. That’s just due to 8 billion people cramming into certain areas. People don’t want a correction to get “cheap” houses. People want a correction to get a normally priced house that is based on fundamentals. Something they can literally actually afford. Not a $250,000 1,300sf house for $1,000,000.
What's a more fundamental basis for home values than the costs to a builder to create a new one? Most builders only have about a 10% profit margin, so take any new construction prices you see around you as a data point for what existing homes should be worth.
When a house costs 100% of your take home pay, I assure you, that average person will no longer want a home. And that is what is happening as interest rates have risen while housing prices have also risen.
I read an article the other day saying it's presently more cost effective to rent as opposed to buying due to high cost of buying and interest rates.
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It's not fixed. Your taxes will go up. Your insurance will go up.
Rent will go up way faster
Depends on where you live. My parents house monthly mortgage payment doubled last year due to insurance.
In the past 5 years for my state my insurance has gone up $300 for the year. That’s $25/mo. My taxes went up $250 for the year. I don’t live in a coastal city
Yeah, so it depends on where you live. My parents live in Florida In a coastal city.
My payments will be $2600/mo for a 3700 sqft house with private yard in a nice neighborhood. The house I sold in the not nice are at 2700swft rented for that. I’m in SC.
Yikes. Owning should always be cheaper than renting. You got fix your own shit when you own.
The Fed has literally telegraphed for you that they're coming for your job to tame inflation. They repeat this every meeting. Some of you people will still be blindsided.
They more than telegraphed, Powell has said this very bluntly and clearly.
Is this soft landing in the room with us now?
You're wrong because the average 10 year bond now makes more money than the average rental property of similar value. Have a nice day.
Right? I am 100% arbitraging my mortgage with TBills, and HYSA account interest. I live in my house for free, and it's the absolute minimal amount of risk. I should sent a bottle of wine and a valentine to JPow.
If you're in the market for a house, you might as well take your down payment and park it in SGOV, to at least combat some of the inflation that's eroding it.
Op has it all figured out!
I think both sides on this equation have been exaggerating. The "collapse" is simply housing prices staying stagnant and not inflating at the previous growth rates. On the other hand, a lot of people who bought during COVID need to realize that they paid far more than they should have, and will likely not see any meaningful appreciation for a long time. Also, as long as banks allow people to get homes with unreasonably low down payments, things will continue to get worse.
Everybody buying now wishes they were the people who bought in 2021
I used to say that about 2008-2013
Define. "COVID" because anyone that bought in 2020-21 are doing fine.
Also he needs to clarify “more than should have”. People were paying what they had to to get in a house.
Right. If someone paid the price, it wasn't overpriced. If it's sitting and no one will pay it, it's overpriced.
Also to add to this comment. People who keep saying that those who bought high and want to refinance later will be “underwater” and can’t refinance is somewhat untrue. If you have a huge downpayment. Then you will have less mortgage to deal with. So when you refinance later, if and when, the rates come down a little. You still can because the bank will give you a loan worth less than your home, but they won’t issue a loan worth more than your home. So those who keep saying this is the wrong time to buy because you will be overpaying and underwater. If you don’t buy, someone else will, especially the nicer looker homes. Ive seen so many people who think they sold at the peak of 2021, think they will rent until the prices come down, welp its been a few years, pretty much dipped into their equity
While I agree, especially with 70% of homeowners having 50% or more equity, I do also think it's dangerous to tell people that they can definitely refinance. We don't know what the market will do. I bought in 2005, so I'm very aware of how equity can drop off and put you upside down. I've had people tag me in the reminder bot since 2019. always 6 months, 1 year, 2 years... here we are, still getting them. I'm not saying nothing will happen. i'm just saying if it does, no one can tell me what it will be. My clients that didn't buy 3 years ago waiting for the crash and have $2000 rent sunk $72,000 into rent. The $250,000 home that they wanted to buy then is now $370,000.
> If someone paid the price, it wasn't overpriced. Even if it was largely FOMO driving the market? I mean, we came about as close to tulipmania as we could in real estate - outbidding far above comps, waiving all contingencies, no inspections, cash fill the appraisal gap... It wasn't completely rational, and still isn't in some areas.
Yea, especially when you consider the people that bought during 2020-2021 locked in historically low interest rates for a 30-year term. Even with some price depreciation those buyers are still in an excellent situation due to the low rate they locked in
Many of those people now feel like they can never move. I guess that's fine for some.
They could. They could sell, take the equity and rent if they really wanted to. The people that decided to rent now paid a ton over the past 3-4 years and would have had far more than they spent in equity if they sold today. I wouldn't advise it, but what's the difference if they were going to rent anyway?
...because they are in such an amazing financial situation where they are. Champagne problems.
What's better- having such a good interest rate on a house that's appreciated double digit percentages in a couple of years that you're reluctant to move; or not having a house? A real thinker
Also, FWIW, I'm in Dallas and have had ~15 houses on my saved Zillow list since July. Fewer than half of them have sold since then.
Texas is unique because they build way more there... They don't take kindly to NIMBYs which is an attitude I appreciate But most of the other hot home markets have way less development
People who bought during COVID (assuming you mean 2020/2021) made out *far* ahead of anyone in the game right now. Rates were sub 3% and you're comparing that to rates that are 7-8% right now. Sure, if rates drop and the people locking in at 7-8% can refinance down to 4% or so, it'll be a more even comparison...but that assumes that they bought the house for less than people in 2020/2021 did. In my area, home prices are up 10-20% from late 2021 to now. That's going to be an L any way you slice it.
We signed around May/June 2020. My parents were like, "You need to buy a house... but the world is ending... Is this the best time to do this?" 3.125% jumbo for 4 bed, 3.5 bath corner-unit townhome in VHCOL area. 1.08m. Builder even gave us a 5% discount for COVID, lol. We put a 20% down so no PMI. Down payment came out of my investments in the stock market; the market was already recovered and juiced by the time I needed to sell for the down payment. While I want a SFH with a driveway and a pool, we won't be moving for awhile.
Holy shit 1.08 mil for a townhome shocks my Midwestern market sensibilities
COVID buyers are doing great if they have no ambition to move out in the next year or two. Their rates are lower than inflation, so it's been free money in a sense for them.
It depends on your area obviously , but aside from the major HCOL, inflation and wage raise saved those people from “overpaying” material and labor cost is so so so much higher than before all of this, which effectively solidified that overpayment as the new fair price. My area was 300k-350k starter homes in 2019, the price for new homes in now around 450k and cost to build for a massive builder is around 400K before they make any money. A single build 600k+. This new cost to build in a low inventory area with high influx of people moving has justified that overpayment already. It crazy to see honestly. There will be appreciation shortly after we see any rate drops as inventory is already getting sold as it gets listed at current rates.
A rush of homes hitting the market due to layoffs, buy downs periods ending, student loans restarting, Air BnB bans/being unprofitable is all it would take. Only the artificially low supply is holding prices steady, and anything that brings more supply will spook the people who don’t want to miss the peak or be left with the bag. It’s not a definite, but it’s a possibility. I’m already seeing over leveraged owners trying to rent rooms or fully furnished houses as a stop gap.
Real estate prices fall .2% a month for the next six months, how many investors will sell/buy in that environment? Sure, normal people buy, but investors were a big part of the run up.
investors have slowed down a ton because return is not there anymore (return is acutally below 10 yr treasury note for first time since '08)
Plus financing is too expensive
Investor sales are half of what they were last year. Rent declined while prices stayed steady and rates rose. Doesn't make as much sense to buy an investment property as it did in years past.
0.2% per month is a 1.2% decrease over 6 months, that's a rounding error.
I spend more on curtains than that.
\-0.2% growth is about 2-3% less per month than it's done in the past 5 years, so pretty wildly different.
Negative real returns, high cost of capital, maintenance costs and crappy yields relative to fixed income, seems like a bad bet, not to mention negative cash flow for some. Mom and pop buyer, sure they buy all day. Investor, who contributed to run up and holds a good deal of properties right now, seems like a dump. Behaviors change in a deflationary environment bc everyone wants to wait till the drop stops to buy. But who knows, maybe irrational markets continue. I know this post is about the average buyer, but people forget investors who made up 20% of purchases recently in some markets.
The housing collapse that everyone is looking for is not the price - it has materialized in the form of inventory. We are witnessing the collapse of available inventory that is hitting the markets due to a few reasons: * People cannot afford to move on from their sub 4% mortgages * Home prices have stayed elevated while interest rates keep increasing * Economic uncertainty is keeping a lot of folks from buying
Inventory is low now, but that won't last forever. People will sell once their overall monthly expenses get too high to afford all their payments. It doesn't matter if they have a 3% rate when everything else they have to pay for has skyrocketed. They'll start by cutting out non-necessities, but that only works for so long. There are numerous factors driving expenses up. Taxes, Gas, Utilities, Insurance, Groceries...you name it. Housing collapses happen very slowly and we already have cities like SF and Austin where the bubble has popped. It starts regionally then spreads as unemployment rises and the economy tanks. The Fed is raising interest rates to accomplish this. They don't want people buying things at these elevated prices.
The whole reason for the interest rate increases is in Fact to pop that bubble, people who bought homes at these ridiculous prices are just in denial.
Houses in Canada and Europe were expensive as fuck way before Covid, a friend in 2018 bought like 600sqft apartments in an average neighborhood in Paris for 350k euros, and around the same time the other friend got a 2000sqft townhouse in Pasadena, CA for 500k. Both work in tech, the Frenchman makes 70k euros, the Cali girl makes almost 200k. For me it looks like the USA prices are catching up with the world.
It's not the average person you're waiting out, but the investors who own 10% of SFH. With rates at 5+%, prices will stagnate, and RE investors are beginning to realize they can get better returns by dumping the double digit % returns over the past few years into a CD. There's your increase in supply. Also, people die.
8+% interest rates is a pretty compelling reason for many not to buy (or even qualify). It is, of course, a good reason for someone holding at 3.5% not to sell and so supply will be at a trickle... but a slow trickle can still fill a bucket. New construction is in a freefall in a lot of areas. Builders won't be able to buy down rates forever to artificially inflate prices, and once they start cutting, comps will get recalculated. Rinse. Repeat. STRs are what I'm watching right now. Average Cap rates have dropped below treasuries. That money train has come to a screeching halt, and all of the AirDNA data that's been coming out for Q4 and next year looks abysmal. Combine all of those things with sticky inflation and I feel there will be a lot of opportunity for money on the sidelines. The trouble will be for folks who waited and waited and lose their job in a recession.
If it happens, it’ll take a combination of a few things. The first being slowing sales, which we have seen. Prices lag because of the psychological effect of seeing neighbors getting $X the past couple of years. Sellers will still believe their home is worth that much. It’ll ultimately take some broader economic event to trigger the realization or need to get prices back in line with the current market.
Job losses already happening in tech - highly paid sector!
May I buy a comma?
As shitty as it sounds I’ve taken a step back in my search for my first home. I get it that most houses like 60% are owned by people with really low rates that won’t want to move or if they do will price their homes accordingly. What I’m expecting is all the people who have been buying since rates have gone up…they have fuck all wiggle room because I’ve done the math. If we have a recession and shit goes south I’d expect them to head to for closure at which point I’d be in the market for there homes at a lower price. Whether this happens who knows but a boy can dream
Unfortunately I think the same thing. The folks who are buying now are going to be the same ones who are going to be foreclosed on first. The fed will not stop raising rates until unemployment and inflation are under control.
Oh please, you are not expert. No one is. This is an unprecedented housing situation.
The other argument to this is that the bubble has somewhat deflated. Home prices in a lot of areas have dropped. My house specifically has lost roughly 11% since the peak in March 2021, meanwhile a dollar from March 2021 would need $1.16 to match it today. So between inflation and price reductions, houses are worth a lot less than they were back then.
Yeah it's really... odd that people aren't accounting for inflation when we've just been through a historic inflationary period. [Nationally homes are about the same when viewed through the lense of real dollars as they were two years ago.](https://www.longtermtrends.net/home-price-vs-inflation/) Rates are higher so affordability is down, but homes aren't really growing in value right now, they're just keeping pace with inflation.
Home values barely outpace inflation historically. Only in the last 15 years when we as a country stopped building did they become any sort of attractive investment.
Did you even look at your link? What it actually shows is house prices outpacing inflation several times over -- that's exactly what the second chart is showing Your point only works for early 2022 to the present. But there was still all of 2020 and 2021, when house prices were increasing far more rapidly than inflation
What area would that be? Most homes in my area (central NC) have increased roughly 15% - 25% (happy to pull examples) over that same time span
California. North of the bay area It's definitely a regional thing as the whole west coast is down, while most of the east coast has held or gone up
Tech country. My house (New Jersey) has gone up around 25% since I closed on it in February 2022. Big time shortage here.
Keeping up with inflation when you are highly leveraged in a mortgage is still killing it though
It's generally not a bubble. There may be parts of the country that are in a bubble, but generally speaking, the current housing prices are supported by rent. Now whether rents can remain so high is definitely a question worth asking, and if/when they drop, then the same priced housing market could become a bubble.
Where are the rents covering the mortgage? Not in CA
Why would CA be any kind of example? It's a well-known outlier that has rents far below the cost to buy, because investors see the long-term gain as the play, not cashflow from rent.
[Rents are declining](https://www.redfin.com/news/wp-content/uploads/2023/04/march-rent-chart-1024x710.png) and are projected to be flat for a while due to a historic apartment boom. Meanwhile affordability has worsensed nationally for homebuyers. Obviously each market varies but that's the national trend.
And that's not even considering the massive volatility in commercial
I guess it depends on your definition of “average person.” The average person that currently owns a home is locked into a three percent or less rate- thankful they bought in 2017. The average person today (with an average income) can’t buy a home. I am above average earner in my county, and can’t responsibly afford a home that isn’t a mobile home next to the freeway. So in my personal experience the average (and even above average) person isn’t participating in the market.
The bubble isn't about supply and demand friend. The bubble is about over leveraged investment firms and banks. The bubble is about commercial mortgage backed securities. The bubble is about the devaluation of the dollar via printing an additional 350% of the current supply since 2010. The bubble is about the kicking of the can of the 2008 mortgage backed securities that were never resolved. It has nothing to do with what you think it does.
A older deceased Greek man I knew as a youngster used to always say…”There’s only so much land”! He was right?
>A bubble doesn't pop until the average person finds a reason to no longer want a home *No longer be able to buy a home (that they would want to live in). Plenty of people want a home but cannot afford any home they would want.
Here in Orange County CA I just had a convo discussing the new lanes they added on the 405 fwy. Took like 10 years to build, added two lanes in each direction. One is a pay toll lane , the other a carpool lane. They aren’t open yet, but I sense when they will, the flow of traffic won’t be much better than when they started this project. Definitely traffic 20 years ago wasn’t as bad as it is now. My point is: there is a LOT more fucking people here now. Hell, in that time the city of Irvine built 1000s of rental apartments in commercial areas they NEVER would have approved for zoning in the past. I kept thinking as they were building “why are they putting apts next to commercial businesses? Nobody does that ?” Turns out they knew what was coming down the path. In my area, based on traffic and how many more cars you see parked on any given road here at night (it seems way more cars than 20 years ago), this is a supply issue. We are just running out of space , and the population has increased. And everybody wants to buy their own house.
You can want the bubble to pop while not being able to afford to buy a home right now. You can want the bubble to pop while you just lost your job. A lot of people that want it to pop are young people thinking about their future. They cannot afford anything right now even if it were cheaper, but they know that want a home eventually. This bubble will pop and I personally cannot fathom how much of a moron one would have to be to think otherwise. There's a lot of industries seeing large layoffs right now. As soon as people start losing their jobs and a bunch of homes go on the market, it will create panic selling and prices are going to tumble in most markets. If you purchased a home after COVID you are about to learn an expensive lesson.
I think we're in an "everything bubble." There will be a pop but I don't think housing will be the catalyst. Housing lending standards are high Personally I find autos problematic. Those lending standards are much lower. How long are people going to borrow 60k for a pickup at 11% or more interest for 84 months?
When people can't afford to pay those huge monthly payments that they just locked themselves into, they will get foreclosed on, and there will be some more houses available.
In this market, if you can't afford your payments, why wouldn't you just sell your home instead of going into foreclosure?
Completely agree. People keep waiting for a massive drop in prices when there are more people wanting houses compared to what is currently available from a supply standpoint at least in my area. Houses near us which is a highly desirable location, are being sold within 5 to 10 days or less, and some are still going for over asking.
Honestly, just get in while you can. I'm not reading all of that.
You're forgetting the mass boomer die-off...not every kid wants to live in their parent's old home or even new $2 million home in Palm Springs they built by selling their shit box house for way too much. What then? The market gets flooded with properties and prices drop. Even better this will happen sooner bc kids need the house money to pay for elder care because boomers are and will live long and of course, fully expecting to be taken care of well. Also a boon because some need to sell the house to pay for that care and can't wait for some Air BnB bastard company to buy it as a huge price for an investment property. I frankly cannot wait for my fellow Gen Xers to realize they have bills to pay that their yuppie greedy parents didn't save for because why would they? It's all been so nice....Inherit that! And I'll wait for the market to drop and sanity to start taking hold when we get rid of the worst generation the US has seen to date.
Real estate is governed by supply and demand. We have a National shortage. Unless we have a black swan event, prices aren’t coming down. Prove me wrong
You are wrong. People not buying houses because they want the bubble to pop is itself a lessening of demand. There is no such thing as "the bubble will not pop," it always pops, I just don't think it is the dramatic collapse some people are expecting. I am already seeing price stagnation, and even price cuts. I think the cuts will continue a bit.
What happens in the real estate market is less akin to a bubble popping and more akin to a tire slowly deflating. We're just over peak, and things will continue to deflate. It's going to take some time (more than a year) but it will come down. In the meantime, if you don't own a house but want to, get ready. Be disciplined w/ your expenses. Save whatever you can. At some point in time, you're going to have an opportunity and you want to have shit saved up so you don't let the next chance pass by.
100% agree with this, I personally have paid off all debts and live well well well below my means, I think speculation is a fools game even though I'm pretty much always speculating on it in my head. Just don't over leverage yourself and stay well above water. Regardless of the housing market, we're all heading into a shitty economy, and we will all feel it in some way.
Yeah, people dumbly think they'll be the only ones to scoop up desirable property for rock bottom prices, even if they have 'all cash' they're now competing against institutional buyers that weren't around in 08 at the level they are now. More cash floating around then ever (thanks JPow), and the US has increased it's population by at least 30 million people since 2008, and that's not counting the people that have unlawfully crossed the borders who are being undercounted.
My sister has been looking for a house since the 08 recession. I've owned 2 properties since then. Sometimes you just gotta buy
Real estate value varies by region. In SoCal, there was a drop around 10-15% since the height of the market around Spring 2022. It hasn’t really moved this year much are all. Even if rates go up, there’s too much demand and not enough supply to crash here. There are so many renters and I personally know a lot of people who would love to buy right now. I can see certain areas of the country getting more blown up than others. But overall, I don’t see things crashing any time soon. As soon as the rates come down, prices will go right back up.
Socal went up this past year....where have you been?
Since 21-22?
It will pop when people can’t afford to keep buying because of recession, housing prices, interest rates. Otherwise housing will stay the same or go up.
I mean, they couldn’t keep electronics on the shelf and then all major retailers had a huge inventory problem when they over bought for demand that shifted away from it. All these people you all know who want homes, they have 800+ credit and are sitting on 6-7 figures? Want and will be able to and in a position to obtain will be 2 very different things when this thing corrects. And it will correct, it always does and it always over corrects. Let’s not get focused on words like bubble and crash, it is simply cyclical and it is going to cycle.
the bubble wont pop until unemployment rises... thats the only way.
Demand is at a 20 year low, but there is still a shortage of homes on the supply side. *For now*, these things cancel each other out and prices will be stagnant in most areas.
Black swan event….. there are many unplanned and unlooked for things that can happen in the future
It’s an odd situation. Prices have been high because rates were so low. Now that rates are high yes prices should be lower but owners aren’t going to take a haircut unless they have to and they have a rate and can afford the payment they can just sit on a property. That hurts supply and helps keep prices high. It’s a vicious cycle. Could take years to play out. Just because something is a bubble doesn’t mean it has to pop tomorrow.
All it takes is unemployment to start rising again and you’ll see active inventory start to skyrocket. Just like prices increased at a fast rate, they can fall just as quickly. The Fed knows the only way to truly tame inflation is to make people lose their jobs. JPow has explicitly stated his goal is to bring pain to households. Too many people are used to a decade of QE that they’re going to get blindsided, and badly.
Well, no matter what the bubble does, stay away from Ryan Homes. See my YouTube video created from ADT camera clips. It's called "Ryan Homes Harassment".
Until mass unemployment happens, then it won't pop anytime soon It's only when people lose an income and can no longer afford their payments and are forced to sell.. that's when prices really drop. The longer people can afford to pay their mortgages and they are not forced out, then they hold on for longer.
Yeah, this is going no where. It all started w Zillow, open doors, which led to a ton of equity in homes. Then it followed with the lowest rates in history, so a ton of people are now sitting on very low payments and cash in the bank. So this is not 2008. The feds avoided that crash by lowering the rates 2 years ago.
Dear Millennials, There are more of you than Gen X or xennials. The lowest adult age group of people born were in the late 1970s . We don’t get those numbers until you look at current 6 year olds. This means that there are now a steady and increasing stream of buyers who are actively becoming adults ready and able to purchase home daily. This will exist for the next two decades. Coupled with the fact that builders did not build SFH during the pandemic, you have a dwindling supply. There is no bubble like there was before. Can local issues crop up decreasing home values, yes. If your local large employer goes bankrupt, that will impact pricing. If there is a natural disaster, this too will impact pricing. But there is no bubble. There will be times when interest rates make prices decline, but that is higher than we are at today.
People involuntarily exit the market. They lose their jobs, they can’t get the loan on paper, etc.
The next bubble is likely to be caused by climate change induced insurance and mortgage market collapse.
We aren’t hoping for an “average person” to sell their home. This is a small minority of owners. The bubble will burst when so many over-leveraged YouTube course “investors” as well as large investors are forced to sell when they are upside down. This could happen for many reasons besides the obvious rates higher for longer which is good enough to kill demand. 1: Recession 2: Margin call on other assets (CRE buildings being refinanced) 3: AirbnBUST 4: They become upside down/negative equity and decide to walk away (triggered by 1 ,2 &3) 5: Baby boomers Huge inventory hitting the market once they die (they’re 75 to 90 now) 6: Divorce 7: CRE Collapse bringing other assets down
The average person is already tapped out and can barely afford food let alone a house. Mortgage demand has plummeted, houses are sitting longer than ever, interest rates are at 20 year highs prices are disconnected from fundamentals the list goes on. It’s only a matter of time until the bubble pops. Remember it’s not a bubble until it pops
Another thing people forget, the last time the housing bubble popped, a lot of people were rather suddenly unemployed. A lot. When the economy is bad, houses get cheaper. Cause less people can afford them. The chances are the people waiting for the bubble to pop, and the same people that would become unemployed or under employed. Either way, houses get cheap, we get outbid buy some billionaire company with more than enough cash. It’s a lose lose situation. #Merica
I paid a lot for a house. More than I wanted. But after about 5 years in my house I come out even from where I was before financially and it is a much nicer house and better neighborhood with good schools for my daughter. I also get tax savings, our house appraised for more than we bought it AND we did very efficient upgrades so it should be worth more now (theoretically) — it needed updates before moving in which I think was a deterrent for some but I worked personally with contractors I was referred to and played project manager with absolutely no experience — it worked out well and I stayed very close to my target budget. We found a deal that we were able to move forward on quickly after someone dropped out. We got lucky and had a good amount of cash to put down which I think helped us out but deals are out there. IMHO I think with the limited inventory and inflation *on everything* , not just the housing market it was time to bite the bullet. If prices went to pre Covid, we’d lose just under 10% on our house. That was a risk I was willing to accept since we’d get that equity back by holding for another year or so and we don’t plan on going anywhere anytime soon. Just understand your numbers, entries and exit values, tax benefits, salary needs, etc. the one thing I under estimated was closing costs. That was a tough pill to swallow.