Learning, Sharing, and Teaching > Real Estate and Landlording

How will housing crash?

(1/17) > >>

poxpower:
So everywhere I look, people agree: Housing right now is out of whack.

The main culprit (IMO): Historically low interest rates combined with long term fixed mortgages and rapidly deflating currencies exposed by 2020-2021 stimulus bonanzas.

I'm trying to figure out how this affects the economy.

Who will benefit most from this?
Who will get screwed by this?
Did people get a good deal or did the price they pay basically even out with the low interest rates?

What will a price correction ( if any ) look like?

I think what mainly might have happened is a lot of people locked a good portion of their life savings into overpriced housing. They will miss out on huge market returns as their house stagnates in value. That is my guess. My guess is stocks are currently undervalued as compared to housing, despite the crazy run of the last 10 years.
I've seen a few people sell their real estate to invest in other things, surely they feel the same.

What's everyone's feeling about this on here?

I just retired last year btw and was looking into buying, but the current inflated prices make renting much better, especially if you adjust house appreciation downward and stocks upward, which is my prediction for the next 5 years. Then it makes buying catastrophically most costly than investing.

Eco_eco:
Housing is definitely having another moment to shine. Here in New Zealand we've seen several years of double digit house price growth that has to end eventually. Usually in the other recent market cycles housing has stagnated rather than drop significantly in value, so I expect that sometime soon we could revert to very low, or no growth. This would probably be driven by inflation, if it finally starts to rise rapidly, given the stimulus response to COVID-19, which would see interest rates rising, making housing less desirable for investment.

Personally, we are looking to rebalance out of rental property as it has grown too high as an asset allocation for our portfolio. We will borrow to release equity and rebalance into broadly diverse index funds.

ender:
Who says it will crash?

Personally I would not be overly surprised if it doesn't crash much at all. There are a lot of factors keeping pressure on it at this point.

Sibley:
In the US, unless we have another plague that manages to wipe out a significant chunk of the Boomers, we have a housing crunch. Basically too many people want too few houses. I'm very glad I bought my house a few years ago, and I'm not budging.

If there's an economic crunch that causes a bunch of foreclosures or if interest rates rise then that might help cool things. Otherwise, we'll have to build out of the shortage. (Barring plague of course, but we just had one so doubt we'll have another so quickly)

Paper Chaser:
In the US, there's been a large deficit of new construction building from 2008-2017-ish. We're talking record low home construction for a record length of time. So supply is vastly restricted.

Add a large number of Millenials reaching home buying age/family rearing/prime working years, all time low interest rates, general population growth, more people living longer and wanting to "age in place" and demand is super high.

Tons of demand and a limited supply are all you need for outrageous prices of any good/service. But the only way that housing "crashes" is if supply suddenly outpaces demand. Since it takes a long time to build a home, and there's currently a huge shortfall I don't see a housing surplus happening anytime soon. So that leaves a sudden drop in demand as the more likely cause of a "crash". It would take something like a massive spike in interest rates, or lending to stop completely in order to cause demand to suddenly dry up, and prices to fall. The general housing/lending market seems much stronger and more stable now than it was 15 years ago, so those seem unlikely to me as well. Demand for jobs is very high, so it's not like a large part of home buyers are without incomes.

I think it's much more likely that supply will slowly rise to meet demand that gradually wanes. This will take years. The slope of the curve in growth will be flattened, but I'm not expecting any price drops across the board.

Navigation

[0] Message Index

[#] Next page