Fellow home owners, are you ready for the housing market to crash?
I know I’m supposed to want it to keep going up as a wealth generator or whatever.
But like… I wouldn’t be able to afford the monthly payments if I bought my house right now and it’s scary. Also none of my friends are buying homes, none of them are even renting full places. Just like renting rooms.
The house I live in is paid off and it’s supposed to be our forever home, so market value doesn’t matter much. For my two apartments I rent out it is more relevant. On those I have a fixed interest for another 5+ years still ahead of me. After that I‘m hoping that I’ll still be able to afford the higher interest rates on the by then lower balance.
i bought my house at the top (two years ago) and no regrets. less about it being an investment and more about having a stable place to call my own that gives me safety and not at the whims of a landlord. i’d quite like it if house prices became more affordable for everyone, the counter intuitive thing to say. 🤷♂️ i was supposed to become a nimby and vote conservative but now i’m more left wing than ever.
Pretty much this. I’m quite content with losing some of my net worth if it means other people don’t have to struggle as much to have their own place to live.
I bought at the peak myself to have stable housing while raising kids.
If house prices just stayed flat until wages caught up and then only increased similar to match wage increases (not inflation) that might be a reasonable compromise between the middle class who have a house and don’t. Those who own will still be paying down a mortgage so increasing your equity that way without being decimated if you have to move. Unfortunately at this point, that could take awhile before wages caught up.
I agree with you. I think property is theft; in an ideal world everyone would have the right to shelter and no one would own land privately. And I also think fear of housing insecurity - including the fear of a landlord extorting or evicting you - is the biggest reason America is obsessed with home ownership and I can’t criticize anybody for pursuing it. The only way to have secure housing in the US today is to own your home, and everyone has a right to secure housing.
I play around with mortgage calculators every so often and look at houses in my area. One of them at current rates would have someone paying well over $10k per month at 20% down, not including utilities, food, water, gas, etc. (it is a 1.4 million home). My wife and I were speculating on the type of person who could even afford that, if you follow the rule of don’t spend more than 50% of your monthly on rent.
I don’t really know what people are expecting to happen?
It’s true that the housing market does not represent real value of the asset at all. You pay double or triple ‘real’ value, and it seems that OP is suggesting a market correction is due.
Whilst that may be true in some areas that are actively collapsing with major population drain due to crime, lack of work etc (I’m certainly not familiar with the USA or its cities) - overall the supply of houses is still vastly outstripped by the demand of people that would like to own one. The population continues to grow via immigration and births to prop up the never ending shell game of annual GDP growth.
Whilst there may be regional blips, unless there are massive social housing programs that flood the market with cheap, desirable dwellings then I’m not sure why anyone would expect the housing market to crash. Until the shell game and the table they play on is flipped and burned, the housing market will not crash. It’s the most basic supply/demand equation out there.
I mean we had those same situations, and we still had the collapse of the housing market in 2008 in the US, because everyone defaulted on loans at once on overinflated houses, then houses shot back to proper value. Losing an estimated 25% value.
So it just feels like that might happen, because housing prices are soaring and interest rate is so high. So I mean, if it happened once in similar situation, it doesn’t seem unreasonable to say it might happen again.
In what way did the housing market collapse? The only thing that changed was the availability of irresponsible loans to people that can’t afford them. Tighter regulation of lending.
The effect on housing prices was a mere blip, and banks are back to their old tricks again. You’re right about the same crisis repeating: there’s more packages of bad debt that have been sold and re-sold as if they have any value, this will almost certainly come home to roost again but on a longer timeline it’s not something that will ‘fix’ the global housing crisis because supply:demand has not changed in any meaningful way.
If you are a private investment company with wads of cash, you’ll take advantage of the temporary instability and buy up massive amounts of private land and housing. Problem just gets worse in the long run because we keep propping up the system that rewards this behaviour.
One of the major things that is different is that loans are a lot different from what kicked off the '08 crash. We didn’t see a flood of interest only, 5/1ARM or other exotic lending setups. Yes, there are some out there but they aren’t as large of a slice of the market. Banks have to keep more capital than when WaMU crashed and we even saw some larger regional banks fail this year with only a rather minor impact outside of SV angel investor lending.
This isn’t going to be like '08, There would need to be a major situation to cause house pricing to fall like a depression level downturn or industrial level of house construction destabilizes the market.
It seems like the build-to-rent market is growing too, so even if there is more supply being constructed you might not actually be able to buy them. That should be outlawed, imo.
When you buy a house, you’re essentially locking in your housing costs, which can be especially advantageous if you have a fixed-rate mortgage. Rent, on the other hand, can increase over time. My monthly mortgage payment for a house is already several hundreds less than what my friends are paying for their tiny rental apartments. In about 17 years, my house will be paid off, and then I’ll only have maintenance and utility bills remaining, while my friends will still be paying rent, which probably has increased by quite a lot by that time. I don’t need to sell my house to benefit from investing into it.
This exactly. The 2 things that affect my fixed rate mortgage are property tax, and homeowners insurance. Even those don’t affect the payment much in either direction.
No, that’s just being frugal. Not spending money on something is not investing. Grocery example would be buying in bulk; you pay more for something upfront because it’s going to be cheaper on the long run.
I have no issues with that. I’m not living here to make a fortune on speculation. I am living here because it is my home, and I leave selling this to our kids once we are dead, hopefully many decades in the future.
I’m not planning on moving so it doesn’t really matter what my house is worth. It was relatively cheap to begin with; 105k€. My monthly payment for the mortage is 520€ while the rent my friends are paying is usually 700€/month or more. That would cover my water and electricity bill aswell and I’d still have money left over.
Yes, and it will cost me some money as I’m getting ready to put mine on the market in the coming months.
But I don’t give a shit, the current conditions are unsustainable and I have great empathy for the generations behind me that are excluded from what is a fucking FOUNDATION of getting a stable life going. The shit has to come tumbling down at some point, otherwise our social structure will continue to degrade. The people who will bitch and moan about it are so out of touch they should be ignored anyway. Bring on the crash.
Colorado. I’m not going to really lose money over what I paid because I’ve owned it for almost 20 years. But it will be way down from the market high here and I think that’s peachy. I’d guess I’ll make 20% less than if I had sold 1-2 years ago. If the market really does crash like 2008 then 30% or more. But Housing prices have got to come down still, a lot. Banning corporations from owning single family residences would help a ton.
I care more about houses being affordable for everyone than I do about turning a profit. Greed is a huge sickness in our world. Hell I don’t think houses should be an investment vehicle in the first place. It’s a place to live not a goddamn wealth generator.
Yes, owning a house shouldn’t had ever been the end goal for 90% of the population. We should’ve solved housing for all people on earth a hundred years ago FFS! But we were too busy industrializing war and sending kids to die.
Usually things crash when enough people capitulate and think it won’t crash. Gotta maximize the pain so that those with money can swoop in and gobble up all the assets. Most likely the crash will be combined with mass unemployment so that even people who have bought into a home risk losing it by not being able to make mortgage payments.
I mean things can get way worse. Look at Canada and Australia. No sign of a crash in either yet, prices just keep climbing. Homeless encampments and the like were alien to us up until recently. The median Aussie household income is ~$65,000. Homes start at about $600,000 and at that price a lot of them are teardowns, you’d be spending at least $200,000 in repairs.
Banks want 20% down.
It is scary, definitely.
I rent a nice house, I’m lucky. I’ve also not had a holiday in over a decade…
I don’t know why you think that’s going to happen. Supply is down and demand is as strong as ever. Policy to make housing more plentiful is woefully lacking.
Just the fact that no one can afford housing any more, and lots of folks bought property to rent out at this super high rate, so to not lose money they have to rent out homes for like 2k+ for small rentals.
So the most likely way, if it all, is all the rental properties are forced to go on market at the same time, and then they don’t get sold so get foreclosed on.
Legislation could also force a lot of homes on the market.
Houses and condos should only be available to be owned by individuals. Ban corporate / hedge fund ownership of everything except high density apartments (that aren’t individually owned).
Ban / cap short term rentals.
Add a tax penalty for individuals after X properties. Ex: if you own more than 3 residential properties, you pay extra taxes.
All of these encourage houses to be occupant owned, while still enabling small scale landlords, because we need both.
I personally would love a crash. I sold my small condo last year in an attempt to upgrade to a house due to getting married and needing more room. I was hoping to time the market, but houses are still out of reach for two middle aged professionals with strong careers, if we ever want to retire.
Edit - to illustrate the problem. In San Diego, where I live, depending on the source, the median home is about $1m.
If you take the estimated monthly cost of leading real estate cites, that’s around $7200/mo.
The median household income in San Diego is $83500.
Legislation could also force a lot of homes on the market.
Gonna stop you right there because the rest of your response is fantasy, if legislation can’t be passed.
Whose gonna propose those bills? Who is going to vote on them? Where are they going to pass? Give me reasonable answers to those questions and we can proceed.
I bought in Honolulu in 2020 after owning in Oregon for 6 years. The average sale price is 1.5 million, median is 1.1 million, and the houses are straight up rotten garbage (I grew up in North County San Diego in a construction family, SD has much higher build quality).
There are basically no homes for sale in Honolulu county right now. Just scanned the numbers this AM. Tear downs are going for 600-800k.
A crash wouldnt bother me, but its basically unbelievable to me. Ultimately all that money printed is going to find its way into inflated durable goods, and (ding ding ding) residential property.
Sorry to let you know this brother (or sister or non-gender conforming individual), but selling that condo might have been a fatal mistake. Its not clear to me based on macro economic and ongoing political conditions that housing prices will ever materially go down. Honolulu has a ban and cap on short term rentals. Didn’t do shit. We’ve got more homeless than ever and rents have gone up 30% since. Add onto that losses of structures due to climate related disasters. California had the Tubbs fire (1k homes?) and then the Paradise fire (11k homes). We just had the Lahaina fire. Those homes aren’t getting rebuilt into affordable housing, I promise.
I’ve done the math. There is no reasonable scenario I can see where housing prices go down substantially over the next 20 years. We’re going to be supply side constrained with ever increasing demand. This is a hold/ buy and hold time.
The math shows that a median income cannot even pay a median mortgage, at 100% of income going to mortgage. Mortgage prices translate to rent prices. Not 1:1, but are directly correlated.
Anyone locked into the before times intetest rates is going to sit pretty if at all possible, because they can’t afford to sell and buy elsewhere without a major downgrade.
And returning to the low interest rates will just kick the can down the road, because it was a large cause of the runaway borrowing that led to real estate inflation.
The only way to really fix this is to force the properties out of the greedy corporate / hedge fund hands that are hoarding property that should be in occupier hands. That’s how a healthy society and economy works.
The pain of this crisis is being felt by many. The more discontent there is, the more pressure there is on politicians to pass legislature to address the problem.
I don’t have an A --> B plan on how to push the legislation through, but social unrest generates pressure to do so.
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