When housing prices will stabilize

Question

Hey! I was listening to a podcast and read an article released by ATTOM and wanted some feedback from other investors.

According to ATTOM's Q2 2023 U.S. Home Sales Report, profit margins on, "median-priced single-family home and condo sales" have increased to 47.7 percent in Q2; whereas, in Q1 we saw profit margins at 43.9 percent. ATTOM recorded Q2 as the first gain we have seen in home sales in a year. This data goes in hand with a podcast I was listening to from Housingwire Daily, where Selma Hepp explained that home prices have gone up around 40% since the pandemic, and were at a 60% increase at its peak.

As an investor myself, I'm curious whether others think housing prices will continue to go down, or, if this recent increase will be the first of many?

https://www.attomdata.com/news...

https://www.housingwire.com/po...

Trevor Richardson · Answer

I feel that most people and story lines want to define real estate trends like when is the “Boom” or “Bust” coming, like there isint anything else.

I think it’s going to be stable with slight increases or declines. This isn't the stock market where stuff can tank in a week. There is nothing wrong with stability but it’s not exciting.

Jay Hinrichs · Answer

to my way of thinking this is highly regional in nature and even city by city and could be neighborhood by neighborhood with many factors at play which include jobs  social issues

availability of product or lack thereof etc etc.

Bill B. · Answer

If interest rates don’t go down, who’s selling? Only the very desperate, the dead and the divorcing. But I think you have as many getting married, having kids, escaping certain local governments. But if any of them ar sellers, they are also buyers, zero inventory creation. Selling to buy an equal house would cost many sellers more than a thousand a month in andditional interest/payments.

If interest rates go down then one of two things happen. Sellers agree to start selling, and of course buying replacements so not much inventory is created and prices go up 5-10%? Or… Seller’s decide they like their house, they’ve upgraded it, they don’t want the hassle of moving, price are going up why sell now, or prices are going up why buy something that used to be cheaper. Then prices skyrocket probably 10-20% yoy.

How do prices stabilize? I guess they fix inflation. Because we know they fear deflation they won’t let that happen. They crush the economy right before an election and then refuse to lower rates? Maybe.

Konstantin Ginzburg · Answer

@Ethan Gidcumb

While macro trends may be helpful, I think real estate is a very regional based market where prices can fluctuate a lot when comparing state to state or even neighborhoods within states. There previous events in US history where national home prices all decreased at once such as the 2008 financial crisis that caused the flooding of properties to the market from foreclosures. While it seems many people are anticipating this type of event, it is important to remember that events like those are not common and can not be expected to occur on a ten year time scale. Prices all went down in 2008 as the foreclosures all entering the market at once caused a rapid spike in supply, putting major downward pressure on prices. In the current market, I do not see an upcoming event that will cause a sudden rush of inventory to the market at once. There is an opposite situation occurring with a severe lack of inventory currently being available on the market. The high interest rates may have decreased the demand side of housing as more people are priced out of the market but the same interest rates have made sellers also pull out since they would not want to sell a house at a low interest rate to be given another mortgage at a higher interest rate instead. One potential source of supply I have seen brought up is a potential flood of former vacation rental properties as the saturation of market and regulation in regional markets have caused many STRs to no longer be profitable. While this is possible, it would also be a regional event rather than a national one. There may be unforeseen events in the future that could trigger change but those are hard to predict. One possible event I am personally keeping an eye out on is lender financing of commercial properties and what happens as these adjustable rate mortgages cycle to higher rates. This does have the potential to trigger mass short sales in the coming few years. Similar to how forced foreclosures in 2008 affected financing and led to a recession; there is a potential for a repeat of that occurring depending on what interest rates do over the next few years. Again, this is all conjecture and speculation. There are simply too many factors that go into housing prices to effectively predict "price stabilization".

When housing prices will stabilize

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