$33 TRILLION Today's housing market value - How low will it go?

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$33 TRILLION Today's housing market value - How low will it go?

Shaun Martin
Investor · Denver, CO · Member since 2020 · 11 posts · 7 votes

We were at an all-time high - investors in Denver had been talking peak fo the past 5 years. Cycles suggest we will drop soon. CO-VID has shot unemployment through the roof. Alot of service jobs - do these people own property? What if the vaccine comes out tomorrow? Will we see drops like 2008?

Here are my two cents (please note this is my first post - I am coming from Facebook where people are necessarily tough) I'm just trying to get an idea of this community thoughts. 

Pro's for the housing market

$2 trillion dollar check - (can you imagine writing a check for 2 trillion and saying to the world - trust me - it won't bounce!) - community flow through hopefully keeping money changing hands and rents and mortgages paid. 

10K Loan SBA - for the smart people that use it as runway can buoy market - save there house

Default rate at historic lows before the crisis (always increases at the turn but still they were super low - 2-3% ish)

Houses still being bought and sold (we just sold one in port richer and one in Littleton) - both vacant though but a lot more activity than I expected. 

Interest Rates super low. 

So I predict that the market will drop 5% to 45% :-) HA HA HA - hmmm

Seriously though I believe it is different than 2008. I read a neat paper by Ted C Jones. Ph.D. who looked at recent major events and . 

I'm going optimistic with a 10% dip over this next cycle. I am optimistic that "average Joe" doesn't lose his shirt or feel unnecessarily stressed again. Not everyone has the luxuries this community has - seeing the amazing opportunities the bigger the dip. 

So 10% - by the end of the upcoming recession housing market will be valued at roughly $30 TRILLION. 

Love to hear thoughts and more importantly the WHY's. 

Excuse if this is long - new to BP. 

Sincerely

Shaun

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Erik W.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y

@Shaun Martin, hi and welcome to BP!

You probably already know this, but I'll lay it out just for anyone who maybe isn't thinking in these term.  "The housing market" is too broad a brush to paint with.  The impact will likely be spread out across the country, bringing some higher price markets down some, while raising up the attractiveness of lower cost markets elsewhere.  Too, consider that if the stock market starts plunging again, that money will flee...somewhere.  Hard assets like real estate generally do well, unless they are overbuilt.  Pre-covid, the indication was that some local markets were overbuilt on MF units, but others were still way behind demand built up from the 2009-2011 recession.

This is an unpredented crisis.  The economy was chugging along fairly well before the plunge.  Yes, stocks were flying high, but so were earnings.  It wasn't like the dot com bubble where P/E ratios were being bid up insanely high in spite of earnings.  Real estate prices were high, but not because of false "real estate values can never go down" hype.  We truly were in an era of prosperity and growth overall, and yet along comes this nasty bug and slams the door shut in our faces.  Very strange situation, and without a precedent it is hard to know for sure what the final fall out will be.

I think some businesses will close.  Mostly smaller mom 'n pop shops whose customer based won't return fast enough to bring them back to solvency and some other businesses who were teetering on the edge of going out of business will be knocked out by this blow.  But well run small businesses and the mid-size and larger businesses should rebound.  Their products and services are still in demand, and their competitors are just as affected as they are.  No one really is at a competative advantage or disadvantage, and rather than being scared, most people are bored and itching to get out and DO stuff.  If we can get most of the economy open back up by June, stocks will recover in about 3-4 months, and after a brief dip/lull in some higher price real estate markets, the upward trend will resume.

But my crystal balls hasn't been working lately, and like all advice, this is worth what you paid for it.

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  • Neil Goradia
    Developer · Indianapolis, IN · Member since 2012 · 259 posts · 129 votes
    6y

    I personally feel like the market will get hurt by job loss, but people that are looking to move to the suburbs for better schools for their kids, etc are still going to be in a position to do that and demand will remain high. Inner city, not so much due to the type of jobs available to lower income families. 

    1Reply
  • Anthony Bisignano
    Member since 2017 · 1 post · 1 vote
    6y

    20 percent drop within next 18 months  then all time highs till 2029 

    1Reply
  • Erik W.
    Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
    6y

    @Shaun Martin, hi and welcome to BP!

    You probably already know this, but I'll lay it out just for anyone who maybe isn't thinking in these term.  "The housing market" is too broad a brush to paint with.  The impact will likely be spread out across the country, bringing some higher price markets down some, while raising up the attractiveness of lower cost markets elsewhere.  Too, consider that if the stock market starts plunging again, that money will flee...somewhere.  Hard assets like real estate generally do well, unless they are overbuilt.  Pre-covid, the indication was that some local markets were overbuilt on MF units, but others were still way behind demand built up from the 2009-2011 recession.

    This is an unpredented crisis.  The economy was chugging along fairly well before the plunge.  Yes, stocks were flying high, but so were earnings.  It wasn't like the dot com bubble where P/E ratios were being bid up insanely high in spite of earnings.  Real estate prices were high, but not because of false "real estate values can never go down" hype.  We truly were in an era of prosperity and growth overall, and yet along comes this nasty bug and slams the door shut in our faces.  Very strange situation, and without a precedent it is hard to know for sure what the final fall out will be.

    I think some businesses will close.  Mostly smaller mom 'n pop shops whose customer based won't return fast enough to bring them back to solvency and some other businesses who were teetering on the edge of going out of business will be knocked out by this blow.  But well run small businesses and the mid-size and larger businesses should rebound.  Their products and services are still in demand, and their competitors are just as affected as they are.  No one really is at a competative advantage or disadvantage, and rather than being scared, most people are bored and itching to get out and DO stuff.  If we can get most of the economy open back up by June, stocks will recover in about 3-4 months, and after a brief dip/lull in some higher price real estate markets, the upward trend will resume.

    But my crystal balls hasn't been working lately, and like all advice, this is worth what you paid for it.

    2Reply
  • Shaun Martin
    OP
    Investor · Denver, CO · Member since 2020 · 11 posts · 7 votes
    6y

    Thank Erik for your thoughtful addition to the discussion. It sounds like you think that general "correction" was still a few years off. 

    I would agree that a number of small businesses will close or certainly find it very difficult to recover from. Whether that will leak into defaults and foreclosures is another story. 

    Again thanks for sharing your crystal ball. 

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