Artificially inflated prices

[Jonatan Cris]

Hi all, I just wanted to share my thoughts and start a conversation on this subject.

In Hudson County New Jersey the average appreciation for the last 5 years has been around 3%, you could see houses for around 350k to 400k fully remodeled. But since January 2020 it has gone up to an insane 30% or more and now it is very hard to find properties in my area for under 450k, and they are to be fixed up.

It is my believe that this is only due to Covid and might even cause a crash since people are overleveraging themselves to be able to take advantage of the amazing interest rates that are also unprecedented.

I think that the market will correct back to the normal prices soon and that is the point when people will start having trouble with their properties.

[Taylor L.]

It's hard to say from the outside whether people are overleveraging. Many of the lenders I've talked with have seen many appraisals come back low, so buyers are having to bring more money to the table for these properties. Rates are low now, but lending standards are tighter than they were prior to the Great Recession.

I think if we do start seeing falling real estate prices across the board the Federal Reserve will go even crazier with money printing. That's a negative interest rate situation right there. The Fed was already cutting rates prior to Covid. As it stands they've said no rate hikes for the next 3 years.

If they start seeing signs of Great Recession 2.0 (namely falling housing prices) rates will have to go lower to avoid another financial system crisis. For better or worse, our system is built on the assumption that deflation can't happen.