McBride is now predicting a 10% nominal decline in home prices

[PMJL34]

Does anyone know/guess why the stark difference between prices changes in East vs West (looking at paper chaser's map)??

[waltworks]

Does anyone know/guess why the stark difference between prices changes in East vs West (looking at paper chaser's map)??

No, but it's fascinating. I only really track markets in my immediate area (mostly) which is the intermountain west. There were some places that went totally bonkers out west (cough, Boise, cough, Salt Lake, ahem) and appreciated 70-100% in a couple of years. Did that also happen out east?

-W

[Paper Chaser]

Does anyone know/guess why the stark difference between prices changes in East vs West (looking at paper chaser's map)??

The map shown was from a WSJ article. The text can be read here without a paywall:

https://www.foxbusiness.com/real-estate/tale-two-housing-markets-prices-fall-in-west-while-east-booms

Quite a few of the Western cities are tech hubs (SF, San Jose, Seattle, Austin, etc). With the Tech industry starting layoffs in Q4 last year there's probably less demand in those places that is now showing in the data. No other industry was seeing layoffs to the same degree while mortgage rates were ~7%.

Lots of the most expensive cities had even worse affordability metrics when mortgage rates spiked. They were already rate sensitive thanks to higher average prices. This made renting more appealing for those who stay in those places, and probably drove some to relocate to less expensive locations (perhaps simultaneously explaining the cooling in the West and the strong markets in the East?)

[FIPurpose]

I also wonder if tech bubble layoffs might be affecting West Coast more than the East. The East is also more government work which is more stable in general. Multiple factors that seem to lead to the West's boom bust cycle in comparison to the East.

Recession is coming soon, so the East will see some price drops soon too. But I think rate cuts are coming late this year to stave some of it off.

[Steeze]

Does anyone know/guess why the stark difference between prices changes in East vs West (looking at paper chaser's map)??

No, but it's fascinating. I only really track markets in my immediate area (mostly) which is the intermountain west. There were some places that went totally bonkers out west (cough, Boise, cough, Salt Lake, ahem) and appreciated 70-100% in a couple of years. Did that also happen out east?

-W

Anecdotally, our place in NYC hasn't appreciated much, maybe 5%, since we bought it in 2018.

The place was originally listed for 20% more than we bought it for, had someone paid that, which wasn't entirely unreasonable at the time, they would be upside down right now.

Meanwhile the rest of the country saw housing prices up 50%-100%, and inflation has been skyrocketing.

When I bought in 2018 my family from MA & FL both thought I was nuts for paying what I paid since it was significantly more than the value of their homes. Now, their homes are about the same value, and mine has not changed.

Edit: should mention too that the neighborhood has improved, with a new park / playground / dog park going in, an entire avenue getting converted to a park / pedestrian only street,  and a new Target / Starbucks / Chick-fil-a / Chipotle going in displacing mostly abandoned / red-light district type shops. So it isn't like the area hasn't improved. Just hasn't been enough to overcome the migration out of the city, and now interest rate pressure.

[chemistk]

Where I live, we're starting to enter the hot time in market. As of just now, there are zero homes listed for sale in my municipality for under $350k. Very interesting, these times.

Still holds true, but added to this now is that Zillow is figuring our house is worth an additional $15k than just a month ago. There are 139 properties for sale in my "locality" (based on Zillow's boundary), and excluding the lots for sale (for $200k, on which a $400k house will be built) there are 5 properties under $350k - 3 townhomes and 2 auctions. Based on the trendline, it should be "worth" $400k in a month or two.

When we were shopping around at this very same time 2 years ago, there were a solid 15-20 very decent homes under $350k.

[LaineyAZ]

Miami up 12%?
I guess no one is worried about the ocean lapping at their door, or the property insurance costs?

[waltworks]

Oh, I see. Those are YOY numbers. From peak (May of last year or something like that) every city in the US is down, at least according to the Case-Schiller numbers that came out this week. The West is just leading the charge.

-W

[Paper Chaser]

Similar story presented in a different way (pre pandemic to peak/peak to now):


There are a handful of cities that are basically seeing 0 decline in values from peak in this data set (Indianapolis, Miami, Orlando, Richmond, NYC, etc)

[Villanelle]

Similar story presented in a different way (pre pandemic to peak/peak to now):


There are a handful of cities that are basically seeing 0 decline in values from peak in this data set (Indianapolis, Miami, Orlando, Richmond, NYC, etc)

Super interesting graphic.  Thanks for sharing.

My observation in the greater DC area (I don't generally look at RE in the district proper, and I have no idea how tightly or loosely they define "Washington, DC" in data sets like this) is that since January, things have started to heat up again.  I can't speak to how that compares to national averages, but that graph has DC as pretty flat and barely below 0 in the current bust cycle, but I'm guessing a similar graph with an extra few months added would have DC shifting right.  San Diego, where we own our rental also seems to be climbing again, after significant drops. 

[waltworks]

I'll say that I have a fundamental problem with the idea that cities that appreciated 25-30% in 3 years did not have a "boom".

Everywhere had a boom, some places were just more insane than others.

-W

[nereo]

That graphic is very interesting, and indicates that many large cities are at or very near their peak following double-digit run ups since early 2020

Looking at the clustering on the 0% line I’m certain those points include positive (appreciation) but that can’t be captures with the calculation used (ie you cannot have a positive number if you ask “ how much has the value fallen since the most recent peak”).

[FIPurpose]

I'll say that I have a fundamental problem with the idea that cities that appreciated 25-30% in 3 years did not have a "boom".

Everywhere had a boom, some places were just more insane than others.

-W

considering that inflation for that 3 year period was around 16%, then the real return of the "boom" is closer to 9-14%.

So that comes out to 2.91 - 4.46% real CAGR

A little higher than normal, but not extreme to the point that I think DC is going to see a bust in the next recession.

[ChpBstrd]

A lot of metro areas are clustered around 0%. This suggests there is still lots of demand in those places even after mortgage rates have increased the effective cost of a home by double-digit percentages, and these homebuyers have a much higher willingness to pay than their local market suggests.

Similarly it suggests a lot of home sellers are anchoring on recent peaks and are unwilling to lose any of the paper gains from the recent boom. Low liquidity is perhaps driving the whole situation. We're at the point where anybody who wanted a house has had a great opportunity to lock in low rates for the past decade, last year excluded. So most people who'd ever want a house have already locked themselves in, taking themselves and their houses off the market long-term. Today's low-volume market is probably driven less by first-time homebuyers as it is by people who are down-sizing their expectations. E.g. buying a 2,000sf house instead of a 3,000sf house and expecting to refinance within the next 1-5 years.

An uptick in unemployment is going to upend this entire situation by dumping a lot of supply into the market (with a delay of maybe a year). But if rates go down too, we could maintain this equilibrium for a while.

[nereo]

A lot of metro areas are clustered around 0%. This suggests there is still lots of demand in those places even after mortgage rates have increased the effective cost of a home by double-digit percentages, and these homebuyers have a much higher willingness to pay than their local market suggests.

It also suggests some areas have kept increasing in value, but that is not captured in the way the data was presented.

[PMJL34]

Thanks paper chaser for the additional graphs. Those make much better sense to me. I also like your explanation for the much bigger decreases in the west coast. We’ll see if the east coast follows the same trajectory or not.

[Finances_With_Purpose]

Similar story presented in a different way (pre pandemic to peak/peak to now):


There are a handful of cities that are basically seeing 0 decline in values from peak in this data set (Indianapolis, Miami, Orlando, Richmond, NYC, etc)

Super interesting graphic.  Thanks for sharing.

My observation in the greater DC area (I don't generally look at RE in the district proper, and I have no idea how tightly or loosely they define "Washington, DC" in data sets like this) is that since January, things have started to heat up again.  I can't speak to how that compares to national averages, but that graph has DC as pretty flat and barely below 0 in the current bust cycle, but I'm guessing a similar graph with an extra few months added would have DC shifting right.  San Diego, where we own our rental also seems to be climbing again, after significant drops.

Thanks for sharing!  Any idea what the dot is just to the right of Raleigh, NC?  It's a lone dot up in the heavy boom area. 

[waltworks]

https://calculatedrisk.substack.com/p/freddie-mac-house-price-index-declines-d86

Boise down 13% nominal!

-W

[FINate]

https://calculatedrisk.substack.com/p/freddie-mac-house-price-index-declines-d86

Boise down 13% nominal!

-W

Boise median prices peaked in May 2022 at around 65% higher compared to the start of the pandemic. So a 13% decline is a good start, but not nearly enough, and certainly not the doom-and-gloom some predicted. Hopefully home builders pick up the pace again as the market normalizes and prices decline further, or at least stay flat for a few years. Not sure if this will happen... not that I put much stock on these, but online estimates for my house are increasing again. To be clear, I don't think this is desirable.

It's good for society for prices to moderate. We are good friends with a couple in their early 20s that just bought a new construction townhome for around $300k. We're still in a housing shortage here and rents remain elevated, so in total their monthly costs are relatively unchanged. I think this will likely be a good move on their part. Housing inventory hit a recent "high" of 2.4 months in 2022Q4 (anything below 3 is traditionally considered a seller's market), yet as of March '23 inventory has declined again to just 1 month (https://www.repomandan.com/Pages/MarketMonitor.aspx). And there are still zero short-sells or foreclosures in all Ada county (Boise, Eagle, Meridian, Kuna).

Overall, it's more of the same weird market. Modest price declines in technically a seller's market with very low inventory. I suspect (though don't have good data on this) that high rents (again, housing shortage) means owners aren't in a hurry to sell and will convert to a rental if they don't get the price they want. Appropriately priced homes in nice locations sell quickly, but gone are the days (thankfully) when sellers could put a pile of crap on the market and have it sell in a few days for over asking. So in some way's it's a weird market, but in many ways it's more of a normal market with a semblance of balance that hasn't been seen here in 5+ years. What we desperately need is a *lot* more inventory. I don't mean more sellers of existing homes trading up, but rather a lot more new units, ideally multifamily in closer-in neighborhoods.

[waltworks]

13% in 8 months is about as fast as prices could drop in the environment you're describing. In fact in that environment I'm pretty impressed they have dropped at all.

Remember that in real terms that's probably a 25% annual rate of decline. We're still nowhere near the monthly decline rates of the 2009 era, though.

There were plenty of folks here a year ago from Austin and Salt Lake and Boise who said the exact same things and that prices couldn't fall.

If we get an actual recession, look out below...

-W

[FINate]

13% in 8 months is about as fast as prices could drop in the environment you're describing. In fact in that environment I'm pretty impressed they have dropped at all.

Remember that in real terms that's probably a 25% annual rate of decline.

There were plenty of folks here a year ago from Austin and Salt Lake and Boise who said the exact same things and that prices couldn't fall.

If we get an actual recession, look out below...

-W

To be clear, I never claimed prices couldn't fall. And I'm happy prices are softening, would rather people stop expecting RE values to only ever increase. But all the hand-wringing about an impending crash and a replay of 2009 is overdone. Boise prices spiked 65% and have since declined 13%, will perhaps go a bit lower. That's not a crash. Builders haven't overbuilt. People didn't finance with liar loans. We've essentially had no distressed sales over the past several years, and I don't see that changing near term. People are still moving from VHCOL areas to the Intermountain West and while that trend has slowed, it's still a good value in relative terms. Agreed, if we get a recession prices will further decline... but this will be an everything decline (except cash... unless it's another stagflation). But if we don't get a recession prices will likely start increasing again.

The US -- especially the western half -- hasn't built enough housing. Higher mortgage rates have reduced prices, yet this hasn't improved affordability. This is one of my frustrations with real estate reporting. Housing is treated like a mutual fund or other fungible asset, so the focus is almost always on short term price fluctuations. It's a stupid way to view what is really a question of urban planning and development.

[halfling]

Similar story presented in a different way (pre pandemic to peak/peak to now):


There are a handful of cities that are basically seeing 0 decline in values from peak in this data set (Indianapolis, Miami, Orlando, Richmond, NYC, etc)

Link? According to Redfin data Richmond peaked around $360k last spring and was down  to $300k in January, not inflation adjusted or anything.

[FIPurpose]

Similar story presented in a different way (pre pandemic to peak/peak to now):

There are a handful of cities that are basically seeing 0 decline in values from peak in this data set (Indianapolis, Miami, Orlando, Richmond, NYC, etc)

Link? According to Redfin data Richmond peaked around $360k last spring and was down  to $300k in January, not inflation adjusted or anything.

Could be that they did some seasonal adjustment.

[ChpBstrd]

Americans are mostly locked into low-rate 30-year mortgages. What if the next housing crash occurs overseas where short-duration and variable-rate ratios are the norm?

https://www.millennial-revolution.com/rent/can-the-bank-take-your-house-even-if-you-pay-your-mortgage/

Blog posts like these make me realize it's a very American assumption that buying a home locks in your housing expenses forever, or at least until the house is paid off. For most of the world, you can lock in 5 years at most, and then if you can't refinance you'll literally lose the home.

If you've watched RE prices in Europe, Australia, or Canada, you'll note that they're sky-high just like the trendiest places in the US. The difference is these homeowners are facing an interest rate reset they may or may not be able to afford. In unemployment bumps up at the same time mortgage rates have doubled, it could set off an economic crisis in ex-US countries.

[Paper Chaser]

Similar story presented in a different way (pre pandemic to peak/peak to now):


There are a handful of cities that are basically seeing 0 decline in values from peak in this data set (Indianapolis, Miami, Orlando, Richmond, NYC, etc)

Link? According to Redfin data Richmond peaked around $360k last spring and was down  to $300k in January, not inflation adjusted or anything.

It was just a tweet from somebody that works with the data set at First American. You can google the "source" shown on the chart to do some digging, but a quick search didn't uncover any associated article or anything.
Feel free to look through the poster's timeline here, and ask any questions you might have if you have a Twitter account:

https://twitter.com/odetakushi

[clarkfan1979]

13% in 8 months is about as fast as prices could drop in the environment you're describing. In fact in that environment I'm pretty impressed they have dropped at all.

Remember that in real terms that's probably a 25% annual rate of decline.

There were plenty of folks here a year ago from Austin and Salt Lake and Boise who said the exact same things and that prices couldn't fall.

If we get an actual recession, look out below...

-W

To be clear, I never claimed prices couldn't fall. And I'm happy prices are softening, would rather people stop expecting RE values to only ever increase. But all the hand-wringing about an impending crash and a replay of 2009 is overdone. Boise prices spiked 65% and have since declined 13%, will perhaps go a bit lower. That's not a crash. Builders haven't overbuilt. People didn't finance with liar loans. We've essentially had no distressed sales over the past several years, and I don't see that changing near term. People are still moving from VHCOL areas to the Intermountain West and while that trend has slowed, it's still a good value in relative terms. Agreed, if we get a recession prices will further decline... but this will be an everything decline (except cash... unless it's another stagflation). But if we don't get a recession prices will likely start increasing again.

The US -- especially the western half -- hasn't built enough housing. Higher mortgage rates have reduced prices, yet this hasn't improved affordability. This is one of my frustrations with real estate reporting. Housing is treated like a mutual fund or other fungible asset, so the focus is almost always on short term price fluctuations. It's a stupid way to view what is really a question of urban planning and development.

[/b]

It is kind of interesting that lower sales price is not associated with more affordability in the YOY data. Price might have declined by 5%, but when mortgage rates went from 4% to 6.5%, the mortgage payment is much higher, even with the slightly lower sales price.

During the last housing recession, prices went down and rates went down. As a result, housing became more affordable. There was an oversupply of sellers and not enough buyers.

[ChpBstrd]

Looks like McBride was right.

The median house price is down -8% since last May.

Another economist is predicting a -10% decline in the next 12 months.
https://finance.yahoo.com/news/housing-economist-predicts-home-prices-will-drop-by-10-this-year-175352953.html

My thought is... only 10%? Higher mortgage rates have increased payments by more than these cumulative declines would help.

[clifp]

Looks like McBride was right.

The median house price is down -8% since last May.

Another economist is predicting a -10% decline in the next 12 months.
https://finance.yahoo.com/news/housing-economist-predicts-home-prices-will-drop-by-10-this-year-175352953.html

My thought is... only 10%? Higher mortgage rates have increased payments by more than these cumulative declines would help.

Rents aren't dropping, although they aren't going up at double digit rate anymore either. As long as rents are flat to up, that will keep housing prices from fall too much.

There are also two future expectations that are cushioning the fall. First the expectation, that rates have/will soon peak and we will see cuts later in the year.  In the 1980s, when inflation was in double digits,you bought everything cars, houses, furniture clothes, TODAY on the expectation that they would be more expensive tomorrow.  Now we are there yet, but I'm sure there are plenty of folks cursing themself for missing out on low mortgage, who are eager to jump back in the house market as soon as it becomes more affordable.

[PMJL34]

It appears that the bay area is on the way up again. As in, we already bottomed out several months ago.

[eddy20]

I could easily see a 10% decrease in RE prices or more. But, I also can easily see a 20% increase in RE prices in the next to 2-5 years just based on inflation alone. So buy now and re-fi when rates come down as it's a buyers market if somebody needs to sell during a high interest rate time period. I have owned my own home since I was 21 and my tenants have bought me a few rentals so I think the ups and downs with pricing are just something that the government creates through it's lowering and raising of interest rates. Now I don't understand why the government does that but that's what our elected officials do and it must benefit somebody so way.

[Paper Chaser]

Looks like McBride was right.

The median house price is down -8% since last May.

Another economist is predicting a -10% decline in the next 12 months.
https://finance.yahoo.com/news/housing-economist-predicts-home-prices-will-drop-by-10-this-year-175352953.html

My thought is... only 10%? Higher mortgage rates have increased payments by more than these cumulative declines would help.

Rents aren't dropping, although they aren't going up at double digit rate anymore either. As long as rents are flat to up, that will keep housing prices from fall too much.

There are also two future expectations that are cushioning the fall. First the expectation, that rates have/will soon peak and we will see cuts later in the year.  In the 1980s, when inflation was in double digits,you bought everything cars, houses, furniture clothes, TODAY on the expectation that they would be more expensive tomorrow.  Now we are there yet, but I'm sure there are plenty of folks cursing themself for missing out on low mortgage, who are eager to jump back in the house market as soon as it becomes more affordable.

It obviously varies by market, but on a national level rents have now seen declines (not just slowing growth) for the first time in years:

https://www.rent.com/research/average-rent-price-report/

https://www.redfin.com/news/redfin-rental-report-march-2023/

[clarkfan1979]

Looks like McBride was right.

The median house price is down -8% since last May.

Another economist is predicting a -10% decline in the next 12 months.
https://finance.yahoo.com/news/housing-economist-predicts-home-prices-will-drop-by-10-this-year-175352953.html

My thought is... only 10%? Higher mortgage rates have increased payments by more than these cumulative declines would help.

Rents aren't dropping, although they aren't going up at double digit rate anymore either. As long as rents are flat to up, that will keep housing prices from fall too much.

There are also two future expectations that are cushioning the fall. First the expectation, that rates have/will soon peak and we will see cuts later in the year.  In the 1980s, when inflation was in double digits,you bought everything cars, houses, furniture clothes, TODAY on the expectation that they would be more expensive tomorrow.  Now we are there yet, but I'm sure there are plenty of folks cursing themself for missing out on low mortgage, who are eager to jump back in the house market as soon as it becomes more affordable.

It obviously varies by market, but on a national level rents have now seen declines (not just slowing growth) for the first time in years:

https://www.rent.com/research/average-rent-price-report/

https://www.redfin.com/news/redfin-rental-report-march-2023/

According to both articles rent is down YOY from March 2022 ($1944) to March 2023 ($1937), which is .4%.

It looks like rent peaked in August 2022 at $2053. Will it make it back to $2053 by August 2023? My bet is that it will.

[Dicey]

Got this in my feed today and I was glad I wasn't drinking hot coffee.

"Price Improvement" - OMG ROFLMAO!

https://www.redfin.com/CA/Palm-Desert/78217-Willowrich-Dr-92211/home/5815022

Truth is, it's a very unpopular floor plan, so the price is going to have to "improve" some more.

This one is still on the market. I think it looks quite nice, but they don't have the floorplan map . . . maybe I would hate that?

And the asking price has "improved" again. Here's the floor plan:

https://www.jelmbergteam.com/resources/solitaire-floor-plan/

It's unpopular because the kitchen is too small and closed off and there's no cost effective way to improve it.

Just checked to see what that property with the "improved price" sold for. It seems as I predicted: they had to "improve" that price a lot more to unload it.

Apr 13, 2023      Sold (MLS) (Closed)    $435,000

Mar 14, 2023       Price Changed           $463,000

Feb 3, 2023         Price Changed           $488,000

Dec 16, 2022       Price Changed           $499,000

Dec 3, 2022         Listed (Active)           $523,000

The owner paid $300,000 five years earlier, so they didn't lose anything but time and carrying costs, I suppose.

Meanwhile, where our primary home is, shit is flying off the shelves. Crazy!

Apparently I forgot to hit "Post" when I wrote this a few days ago. I've figured out since that this was the lowest price/sf of anything that's sold on the open market in this development in the last year. Moral: I you're buying in a large development of homes, consider buying one of the most popular models.

[Dicey]

... and the same model condo we paid $425k for in April, 2022, is now on the market for $385k. They have five more to sell. It's going to be interesting to see where they land.

...and the most recent one closed for $381.5k.

Today, Redfin informed me that the place is now worth $416.5k. The most recent one (not the one mentioned above) sold for $400k, so I have no idea how they came up with that number, but prices are creeping up again. Meh.

[Ladychips]

Here's my random story. I live in LCOL, flyover, rural America.  A friend of mine is planning to move back here and has been house shopping this last week. On Monday a house was listed at noon.  Another friend used to own this house...sold it (over one year ago, way less than two).  So anyway, house was listed at noon on Monday; had multiple offers on Tuesday; and the current owner selected one of the offers on Wednesday morning. The house sold in less than 48 hours for $80,000 over the last purchase price. That's more than a 30% increase over its last purchase price (and that doesn't even factor the change in interest rates!!!).  I am so grateful I am not trying to buy a house in this environment.

[FINate]

Prices in here in Boise have been going up month over month since about Feb. We're in the spring selling season with 1.7 months of inventory. Our neighborhood has a handful of listings, but some areas have nothing on the market.  The online sites all show price appreciation for our house, though I don't trust their estimates. We had a big price spike in the first half of '22 so YoY prices are down. As the 12 month window moves beyond the spike into fall I expect we'll start seeing YoY increases again.

Anecdotally, someone in our area recently listed. They priced it higher than I thought the house was worth, yet it's been a mad rush of people to come see the place. We'll have to wait and see if/what it actually sells for.

[Dicey]

... and the same model condo we paid $425k for in April, 2022, is now on the market for $385k. They have five more to sell. It's going to be interesting to see where they land.

...and the most recent one closed for $381.5k.

Today, Redfin informed me that the place is now worth $416.5k. The most recent one (not the one mentioned above) sold for $400k, so I have no idea how they came up with that number, but prices are creeping up again. Meh.

Two days later, Redfin pings me again, to say that based on recent sales in the general area, this property is now worth between $408,500 and $450,000. Ho-hum.

Yesterday, I stopped by an Open House being held by a team that I know. We chatted about multiple recent sales and they thought it hilarious that I was familiar with every one of them. We all agreed that everything is flying off the shelves for insane prices. Who knows where the insanity will end?

[Cassie]

Prices in Reno went down for about a year and now rising again. When I sold my house 2 years ago I knew that I needed to buy my condo soon because otherwise I would be priced out of the market and I wanted to stay here. 2 years ago I got into a bidding war and paid 20 over asking and 40 over the appraisal. I put 20k into it and if I wanted to sell I could get all my money back out plus expenses. I plan to leave here feet first.

[PMJL34]

Cassie,

I have a close friend in Reno who owns a handful of properties. Reno is a super interesting city/market to me. It also got hit reaaaaaaly hard with price decreases recently. Keeping an eye on the city for sure to see how it performs in the near future.

[Paper Chaser]

[Paper Chaser]

[Dicey]

Supply and demand rules. In my market, anything decently priced is still flying off the shelves. High end homes (2.5m+) are taking a bit longer to sell. I think people are leveraging as much as they can, counting on interest rates falling in the future. I'm not so sure it will happen again for a very long time. I still remember being thrilled to get 7% in 1996.

[Cassie]

Cassie,

I have a close friend in Reno who owns a handful of properties. Reno is a super interesting city/market to me. It also got hit reaaaaaaly hard with price decreases recently. Keeping an eye on the city for sure to see how it performs in the near future.

Reno has been growing the 26 years that I have lived here. Our prices are more expensive than Sacramento. Local wages don’t support the cost of housing or rents. We do have some technology companies that have moved in paying good wages. The COL has been driven up mainly by California retirees selling their homes for huge profits and buying here. It’s a beautiful, desirable place to live with 4 seasons and quick access to the mountains. As a retiree I couldn’t afford to rent but luckily I bought as soon as I moved here.

[FINate]

Anecdotally, someone in our area recently listed. They priced it higher than I thought the house was worth, yet it's been a mad rush of people to come see the place. We'll have to wait and see if/what it actually sells for.

This house went pending in less than a week. It's not sold until it's sold, so we'll see. And Idaho doesn't require disclosure of sales price, so not sure if we'll ever find out what it went for.

Here's an interesting thing I'm noticing about housing stats here in Boise: The median price, of course, is the middle point of all sales in an area. During 2022Q4 and 2023Q1 there were a lot of houses under $400k selling very quickly. These were decent size homes (3/2, 1500+ sqft) but a little further out. This price range has all but dried up (12 total at this price point in the entire city), and homes at this price are now much smaller (often sub 1000 sqft, 2/1, etc.). MoM median is already increasing (though negative YoY due to a price spike last year) and I expect the median will continue increasing as the mix of homes shifts.

[FIPurpose]

Supply and demand rules. In my market, anything decently priced is still flying off the shelves. High end homes (2.5m+) are taking a bit longer to sell. I think people are leveraging as much as they can, counting on interest rates falling in the future. I'm not so sure it will happen again for a very long time. I still remember being thrilled to get 7% in 1996.

Inflation has been falling. It won't be 3% rates anytime soon. But I think we'll be back at around 6% mortgages by the end of the year.

[MrGreen]

The lack of supply is absolutely driving the market right now. There are enough people who can westher the higher interest costs and have the money and desire to move that they're buying up what little inventory there is, even at near record high or record high prices.

If you think about the simple economics of it, prices may not significantly decline at all. If mortgage rates stay high for a long time, people will want to hang on to those low rates they already have and housing supply will stay at record lows. If rates come back down, supply will rise but so will affordability and people who have been on the sidelines may be back in the game. It's a wild situation.

New home builders should be capitalizing on the stabilizing costs of building houses and cranking out as many units as they can. There's a real opportunity here for them in the face of low inventory.

[bmjohnson35]

The lack of supply is absolutely driving the market right now. There are enough people who can westher the higher interest costs and have the money and desire to move that they're buying up what little inventory there is, even at near record high or record high prices.

If you think about the simple economics of it, prices may not significantly decline at all. If mortgage rates stay high for a long time, people will want to hang on to those low rates they already have and housing supply will stay at record lows. If rates come back down, supply will rise but so will affordability and people who have been on the sidelines may be back in the game. It's a wild situation.

New home builders should be capitalizing on the stabilizing costs of building houses and cranking out as many units as they can. There's a real opportunity here for them in the face of low inventory.

The economy will dictate what will happen.  If rates remain high and economy doesn't crash hard, prices will remain sticky.  If rates stay high and the recession kicks into high gear and unemployment rises, I think prices will start to drop more consistently across the market.  Unlike the stock market, real estate crashes take years to bottom out, so even if we see them drop like they did after 2008 crash, it will probably take 3-5 years to get to the bottom.  My gut tells me the fed will raise rates again in June, even so most expect a pause. Even if they do just pause, it will take a while for inflation to drop closer to their target.  The Home value growth (YoY) has already dropped significantly in my local county........3/21 to 3/22 was 23% increase and while 3/22 to 3/23 was an increase of 5%.  Our for sale inventory has tripled in that same timeframe.  Based on this data, a 10% decline over the next year doesn't sound unreasonable.

[Paper Chaser]

The lack of supply is absolutely driving the market right now. There are enough people who can westher the higher interest costs and have the money and desire to move that they're buying up what little inventory there is, even at near record high or record high prices.

If you think about the simple economics of it, prices may not significantly decline at all. If mortgage rates stay high for a long time, people will want to hang on to those low rates they already have and housing supply will stay at record lows. If rates come back down, supply will rise but so will affordability and people who have been on the sidelines may be back in the game. It's a wild situation.

New home builders should be capitalizing on the stabilizing costs of building houses and cranking out as many units as they can. There's a real opportunity here for them in the face of low inventory.

I think it's telling that prices declined 3% in March and 4% in April (per Redfin above) even with super low inventory. It was the spring selling season, and interest rates briefly dropped a little, which should've supported pricing somewhat and we still saw declines (nationally). With rates currently at 7% instead of 6ish, and the seasonal bump waning, things could start to really decline in the next few months.

New builders are absolutely taking advantage, but it's requiring price drops, eliminating features, downsizing floorplans, rate buydowns, etc.

[ChpBstrd]

Some interesting statistics:

Roughly 86% of US homeowners with mortgages have an interest rate of 5% or lower, while half of all mortgages have an interest rate of 3.5% or lower...

...roughly three in five homeowners have moved just within the past four years, meaning that even if rates do come down, many mortgage holders will be in no hurry to move.

For those who missed out on the past several years of wealth building, the long-term effects could be devastating.

https://www.businessinsider.com/housing-market-ice-age-higher-home-prices-fewer-sales-inventory-2023-5

The article's conclusion is that a lack of supply means housing affordability will remain low for the foreseeable future, and that anyone who didn't buy when they had a chance will be locked out of the market. The implication is maybe they'll be locked out for life and subject to rents rising faster than their salaries forever - an extrapolation of the 2021-2022 trend.

I'm not so sure about all that gloom, because - logically and obviously - for every home that is not on the market because its owner has hunkered down for the next 30 years with a 3.25% mortgage, there is also a buyer removed from the market for the next 30 years. Yes, the real estate bubble sucked much of the supply out of the market, but it also sucked out most of the demand. The ratio of these things is approximately 1:1.

Now the market is much smaller. Why not just leave our conclusions at that? Besides, it may turn out that the people who overextended to buy during the mania are the ones who will feel "devastating" effects as they lose their homes in the next recession.

Deaths, divorces, bankruptcies, foreclosures, and unemployment will always force some baseline supply of homes into the market. If prices stay above the cost of construction for long enough, it will stimulate new development wherever it is allowed. The inverse of the irrational rent/mortgage gap is the owners of apartment buildings looking at the units with a NPV of $X as a rental suddenly being worth $2X if converted to condos. Recall that a boom in condos was the market's response to 1970s and 1980s inflation and 10%+ mortgage rates. Also recall that we've just exited a massive building boom in apartments.

[Paper Chaser]

The above may be true for lots of individual home owners that hunker down to hang onto a low mortgage rate. But you also have home builders that need to sell new houses to survive. Those guys are going to be the ones making concessions to improve affordability. They'll drop prices more aggressively than SFH owners may be willing to. The larger builders have their own financing arms that can offer rate buy downs. And when designing or planning new communities they'll downsize and decontent to get prices down to affordable levels while remaining profitable.

That leads comps down even in a tight market. Perhaps not into a full on crash, but any SFH owner that might want or need to sell will have to compete with brand new homes that are increasingly affordable.