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.
I already have a home. I don’t need 20 of them. I’m not going to get mad about something that benefits the majority of the control. It just sucks because a market crash just means that people who already have multiple homes are going to be able to buy even more.
Hey, newer homeowner here. If the housing market crashes, does that actually affect me at all? Or is it just like, I can’t profit if I wanted to sell my house or some shit
good, fuck em. Seeing houses as an equity Builder was retarded in the first place. It’s literally not sustainable, if it’s supposed to constantly appreciate value no matter what it means that there is an ultimate threshold where it becomes unaffordable for everyone.
A house is a place to live, not a fucking financial asset to make money with.
Everything can be an asset to make money with. Before money it was bartering and you can bet your ass the home was an asset back then too. Humans value the creation of things. Assets of created thing will always exist.
This is very region dependent. But here in Canada we have 25-30 year mortgages broken up into 5 year terms, every 5 years we renegotiate our interest rate and have the option to switch lenders.
If your house value were to drop 75%, it might make it harder to switch lenders (does a bank want to lend you more than what the house is now worth).
I think there is an escape hatch here where if you stay with the same lender they will still accept you, but I honestly don’t know much about the specifics.
Things would need to get pretty bad for this to actually matter (and I suspect the government might step in if it became widespread)
It can. The housing market doesn’t impact all properties across the board, and some neighborhoods get away unscathed while others are devastated.
In the worst case scenario, having a downturn can cause a “buyer’s market”, where there are more people trying to sell their house than there are prospective buyers, so they have the power to negotiate much better deals. If you purchased your house 10 years ago for 200k, and in that time it appreciated to 400k, and then there was a sudden market downturn and it lost 50% of it’s value, your house would be worth about what you paid for it, but all your equity is gone, so you don’t profit but you are also not totally screwed.
If you bought your house for 400k right before the market downturn, you will be “underwater”, and own a property that is worth less than what you paid for it, meaning that if you tried to sell you wouldn’t get enough to cover the mortgage you owe to the lender. Forget about profit at that point.
If you plan to live in the house you are in now until you die, then none of that matters at all, really. In fact, having market downturns benefits you in that scenario because if your property is worth less money (relative to all the properties around you) you pay less in taxes and insurance. But most people don’t plan on living in the same house forever. They might want to move to a nicer house, or one in a better location, or downsize when their kids move out, etc. so it’s usually seen as a bad thing when the market crashes because you have to spend years building equity and loan amortization means that for the initial few years of your mortgage payment, you are basically paying off the interest only and barely denting the principal.
My grandparents bought their house back in the 1950s for the equivalent of 35,000 dollars adjusted for inflation and now that house is worth over half a million. The house I live in now was bought for around 150k back in the early 2,000s and it too would sell for about half a million. And of course, last year housing prices increased by 30% in one year. There is no way in hell this is sustainable. It is not a question of if the housing market collapses but when and it will thoroughly deserve it.
My grandmother bought a new house on top of Mt Soledad in La Jolla, CA for 0 down with a decent mortgage in 1960. I can’t even imagine what that house is worth today.
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 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.
Because when an entire generation cannot afford housing, and an older generation starts dying, the houses have nowhere to go. Right now, houses are just changing hands and climbing a wealth generation ladder, but the last buyer at the high prices holds the bag when it all falls apart.
This is exactly the reason why corporations are the fasted growing group buying residential property. Once a Ponzi scheme exhausts a buyer base it needs to find a new one to keep going.
Can’t wait. If it could happen in isolation and not involve a lot of people losing their jobs, I would love to see prices come down. No downside for homeowners really, the house is the same house independent of market value but taxes will decrease so monthly cost will decrease.
I’m old and know prices don’t go up forever. As soon as those “we will buy your house” signs and phone calls start, it’s near the end.
but taxes will decrease so monthly cost will decrease.
Doubt. Your local government isn’t going to cut spending just because revenue went down. And why should they? It isn’t like the workload changed. When housing collapses it isn’t like there will be less crime and less homeless and less school age students. All that stuff is going to continue to happen independently. You will either see raised rates or suddenly a lot of homes will be marked as worth more.
I mean, a crash is usually used and abused by the big players to gobble stuff up if they survived and didn’t go bankrupt (hell even if they do another whale usually swallows them) yet I don’t see another way for most people to afford a home. But then again, the area I’m in isn’t crashing even if the rest of the country does. If it resulted in lower rates would love to refinance tho, 5% isn’t great.
Wouldn’t mind some new neighbors, not planning on selling, not going to contribute to the landlord crisis, I say let it burn.
My house is like 25% paid off, I don’t care if it loses 90% of it’s “value” I’ll keep paying the bills. Rather everyone have affordable housing than some extra cash in my bank account.
The reason everything went to shit in the 00s (I think? Time has no meaning) is because of banks and predatory lending. We are increasingly seeing that with the current interest rates and house prices but there is a big difference.
When the market crashed then? The banks were stuck with a shit ton of houses nobody wanted.
Now? Plenty of people have been saving up and will gladly buy the houses at a slight discount. And real estate firms and increasingly corporate hellscapes will buy them at slightly lower discounts.
That is more or less what we saw over the few years of “the good old days”. House prices kept exploding and pricing more and more people out. But those people continued to save and would then start trying to buy a smaller house or take advantage of a better interest rate and so forth.
As for those interest rates:
Yeah, it is fucking insane right now and I am REAL glad I got in while the getting was good. And this is a big issue in me waiting to get an EV.
But… the real insanity was the past few years. Check any website that tracks rates over time. The late 10s and early 20s were an anomaly. The current rates are a lot closer to the historic rates.
Which just gets back to pricing and… again, companies and people with inheritances will keep paying that.
Agree, there won’t be any crash due to financial reasons. But in certain parts of the world it will become very difficult to keep living due to the climate and those areas will have their value decreased. I am from the South of Europe and here in some cities (even historically densely populated ones) the heat is unbearable for a quarter of the year or more.
I can’t speak for the european market, but in the US we are already seeing how this plays out.
Insurance and mortgage companies increasingly are not interacting with Florida (and to a lesser extent California). Which means the people with houses there are just fucked if there is a disaster. Maybe they can sell for a massive loss to someone even dumber than them but… yeah
And when it all goes to shit? The banks will bleed them for every penny and then move on.
What's your opinion of the fall out of the commercial real estate crash due to more WFH and the other effects? Certainly there is more commercial real estate than ever before to the point some is being rezoned due to lack of demand.
Mostly just a matter of stalling until the housing crisis gets bad enough that people want to remove those pesky laws about living spaces needing windows and proper insulation and so forth. Then we’ll see retrofitting
The building codes are written in blood. Most things that are required in construction are the basic amount of safety required. They are not that restrictive.
I wouldn’t hold my breath waiting for any sort of epic crash.
I expect that home ownership is going to become solely for the upper-middle class and up, and that home prices won’t make any serious downward movement.
I expect the housing crisis will eventually start to ease as areas become more accepting of high-density housing development, and that will become the sole province of people with finances beneath the home ownership class.
Essentially, the establishment of a much more distinct and explicit two-tier system. Prices in one will have minimal impact on the other, much like how any swing in prices for small passenger boats has no impact on the price of yachts.
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