Is a huge real estate crash coming soon?

[Nate Armstrong]

Is a massive real estate crash on the horizon? Experts are divided, but what do you think—are there warning signs suggesting caution for potential buyers and investors?

[Chris Williams]

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

 Finally someone with sense. No inventory = no crash. 2008 was a flood of supply but no demand that followed which brought prices down. There is massive demand now and no supply due to the setback of 2008 and home builders taking a few steps back. Great points!

[Marcus Auerbach]

Quote from @Chris Williams:

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

 Finally someone with sense. No inventory = no crash. 2008 was a flood of supply but no demand that followed which brought prices down. There is massive demand now and no supply due to the setback of 2008 and home builders taking a few steps back. Great points!

TY. You summarized it even better. A great metric to watch and compare markets is MoS or MoI (Months Of Inventory) because it captures both supply and demand.

For example: Austin has currently 5.72 MoS and Milwaukee 1.17 

Also look at Sale/List ratio and median sale price!

[Chris Williams]

Quote from @Marcus Auerbach:

Quote from @Chris Williams:

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

 Finally someone with sense. No inventory = no crash. 2008 was a flood of supply but no demand that followed which brought prices down. There is massive demand now and no supply due to the setback of 2008 and home builders taking a few steps back. Great points!

 You summarized it even better. A great metric to watch and compare markets is MoS or MoI (Months Of Inventory) because it captures both supply and demand.

For example: Austin has currently 5.72 MoS and Milwaukee 1.17 

Also look at Sale/List ratio and median sale price!

Also even if there is a crash there is so much appreciation over the last 15 years prices dropping would still price most people out. Also if there is a massive recession like 2008 people will lose their job and lenders won’t give you a loan on any house at any price with a source of income 

[Jay Hinrichs]

Quote from @Marcus Auerbach:

Quote from @Chris Williams:

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

 Finally someone with sense. No inventory = no crash. 2008 was a flood of supply but no demand that followed which brought prices down. There is massive demand now and no supply due to the setback of 2008 and home builders taking a few steps back. Great points!

TY. You summarized it even better. A great metric to watch and compare markets is MoS or MoI (Months Of Inventory) because it captures both supply and demand.

For example: Austin has currently 5.72 MoS and Milwaukee 1.17 

Also look at Sale/List ratio and median sale price!

Marcus for context.. in 08 Ms. Lori and I went to Miami and we got to fly with one of my fellow cirrus owners.. he was in RE there as well.. at the time Miami had 11 YEARS of inventory :) Mainly condos of course but still 11 YEARS I was in shock.

[Brock Mogensen]

Those that didn't put the right debt on their properties and are bad asset managers will see some pain. Those that have conservative debt, liquidity, and are strong operators - will capitalize.

[Jay Hinrichs]

Quote from @Brock Mogensen:

Those that didn't put the right debt on their properties and are bad asset managers will see some pain. Those that have conservative debt, liquidity, and are strong operators - will capitalize.

that is playing out in the MF syndication world big time right now.

[Minna Reid]

Well I've been expecting the downturn for several years now, but seems they postponed it with super low rates and cheap Covid era money. I'm seeing the market turn here in Jacksonville FL now. Can be hard to tell whether its a true downturn or a seasonal slowdown though. 

It does feel like more than a summer slowdown. 

Also my calls for foreclosure help have finally been picking up. Nothing crazy but definitely an uptick. 

Covid mortgage workout programs are still in effect and not sunsetting until April 2025, unless they extend...again. Those are keeping some folks afloat still.

Not sure how much longer they can kick that can down the road, but I continue to be surprised lol. Also election years can swing things.

For what its worth these discussions feel a lot like the ones I saw here in 2006-2007 ish. We all know how that went down ( at least those of us old enough to have experienced it).

[Jay Hinrichs]

Quote from @Minna Reid:

Well I've been expecting the downturn for several years now, but seems they postponed it with super low rates and cheap Covid era money. I'm seeing the market turn here in Jacksonville FL now. Can be hard to tell whether its a true downturn or a seasonal slowdown though. 

It does feel like more than a summer slowdown. 

Also my calls for foreclosure help have finally been picking up. Nothing crazy but definitely an uptick. 

Covid mortgage workout programs are still in effect and not sunsetting until April 2025, unless they extend...again. Those are keeping some folks afloat still.

Not sure how much longer they can kick that can down the road, but I continue to be surprised lol. Also election years can swing things.

For what its worth these discussions feel a lot like the ones I saw here in 2006-2007 ish. We all know how that went down ( at least those of us old enough to have experienced it).

Difference though is there simply is not the million sub prime loans out there like there was then. But you will always have foreclosures no matter what the market is doing..

[Pradeep Patel]

Don’t time the market! Buy it when you are ready. Who cares if it’s going to crash or not if you are going to rent it out&or live in it?

[Minna Reid]

Quote from @Jay Hinrichs:

Quote from @Minna Reid:

Well I've been expecting the downturn for several years now, but seems they postponed it with super low rates and cheap Covid era money. I'm seeing the market turn here in Jacksonville FL now. Can be hard to tell whether its a true downturn or a seasonal slowdown though. 

It does feel like more than a summer slowdown. 

Also my calls for foreclosure help have finally been picking up. Nothing crazy but definitely an uptick. 

Covid mortgage workout programs are still in effect and not sunsetting until April 2025, unless they extend...again. Those are keeping some folks afloat still.

Not sure how much longer they can kick that can down the road, but I continue to be surprised lol. Also election years can swing things.

For what its worth these discussions feel a lot like the ones I saw here in 2006-2007 ish. We all know how that went down ( at least those of us old enough to have experienced it).

Difference though is there simply is not the million sub prime loans out there like there was then. But you will always have foreclosures no matter what the market is doing..

But there are - they are just now government backed. And in fact even last crash 75%+ of the notes I shorted were FHA/VA/Fannie/Freddie, not fly by night private guys. Those private guys have all but disappeared since.

Also -the covid workout programs offered by all - especially FHA - have absolutely horrific terms. Predatory at best. Not sure how many they have written over the last 4 years but they have been pushed like crazy. No docs required/mods to higher interest rates/huge silent seconds. When those folks need to sell and discover their equity is long gone, it will make an impact on the market. I'm already working a few of these. But again - no way to know the size of the fallout until it happens. 

However -  since I work mainly the default market, I likely have at least a slightly biased view, which I acknowledge. 

[Jay Hinrichs]

Quote from @Minna Reid:

Quote from @Jay Hinrichs:

Quote from @Minna Reid:

Well I've been expecting the downturn for several years now, but seems they postponed it with super low rates and cheap Covid era money. I'm seeing the market turn here in Jacksonville FL now. Can be hard to tell whether its a true downturn or a seasonal slowdown though. 

It does feel like more than a summer slowdown. 

Also my calls for foreclosure help have finally been picking up. Nothing crazy but definitely an uptick. 

Covid mortgage workout programs are still in effect and not sunsetting until April 2025, unless they extend...again. Those are keeping some folks afloat still.

Not sure how much longer they can kick that can down the road, but I continue to be surprised lol. Also election years can swing things.

For what its worth these discussions feel a lot like the ones I saw here in 2006-2007 ish. We all know how that went down ( at least those of us old enough to have experienced it).

Difference though is there simply is not the million sub prime loans out there like there was then. But you will always have foreclosures no matter what the market is doing..

But there are - they are just now government backed. And in fact even last crash 75%+ of the notes I shorted were FHA/VA/Fannie/Freddie, not fly by night private guys. Those private guys have all but disappeared since.

Also -the covid workout programs offered by all - especially FHA - have absolutely horrific terms. Predatory at best. Not sure how many they have written over the last 4 years but they have been pushed like crazy. No docs required/mods to higher interest rates/huge silent seconds. When those folks need to sell and discover their equity is long gone, it will make an impact on the market. I'm already working a few of these. But again - no way to know the size of the fallout until it happens. 

However -  since I work mainly the default market, I likely have at least a slightly biased view, which I acknowledge. 

I will defer I have not chased court house steps personally in years .. I fund a few folks that buy them though ( I am the Money) and a few states activity is back up.  

[Minna Reid]

Quote from @Jay Hinrichs:

Quote from @Minna Reid:

Quote from @Jay Hinrichs:

Quote from @Minna Reid:

Well I've been expecting the downturn for several years now, but seems they postponed it with super low rates and cheap Covid era money. I'm seeing the market turn here in Jacksonville FL now. Can be hard to tell whether its a true downturn or a seasonal slowdown though. 

It does feel like more than a summer slowdown. 

Also my calls for foreclosure help have finally been picking up. Nothing crazy but definitely an uptick. 

Covid mortgage workout programs are still in effect and not sunsetting until April 2025, unless they extend...again. Those are keeping some folks afloat still.

Not sure how much longer they can kick that can down the road, but I continue to be surprised lol. Also election years can swing things.

For what its worth these discussions feel a lot like the ones I saw here in 2006-2007 ish. We all know how that went down ( at least those of us old enough to have experienced it).

Difference though is there simply is not the million sub prime loans out there like there was then. But you will always have foreclosures no matter what the market is doing..

But there are - they are just now government backed. And in fact even last crash 75%+ of the notes I shorted were FHA/VA/Fannie/Freddie, not fly by night private guys. Those private guys have all but disappeared since.

Also -the covid workout programs offered by all - especially FHA - have absolutely horrific terms. Predatory at best. Not sure how many they have written over the last 4 years but they have been pushed like crazy. No docs required/mods to higher interest rates/huge silent seconds. When those folks need to sell and discover their equity is long gone, it will make an impact on the market. I'm already working a few of these. But again - no way to know the size of the fallout until it happens. 

However -  since I work mainly the default market, I likely have at least a slightly biased view, which I acknowledge. 

I will defer I have not chased court house steps personally in years .. I fund a few folks that buy them though ( I am the Money) and a few states activity is back up.  

 Which states are those?

[Jeffrey McKee]

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

As an agent we encourage buying over renting and buying what you can a afford when you can afford it.  

[Jay Hinrichs]

Quote from @Minna Reid:

Quote from @Jay Hinrichs:

Quote from @Minna Reid:

Quote from @Jay Hinrichs:

Quote from @Minna Reid:

Well I've been expecting the downturn for several years now, but seems they postponed it with super low rates and cheap Covid era money. I'm seeing the market turn here in Jacksonville FL now. Can be hard to tell whether its a true downturn or a seasonal slowdown though. 

It does feel like more than a summer slowdown. 

Also my calls for foreclosure help have finally been picking up. Nothing crazy but definitely an uptick. 

Covid mortgage workout programs are still in effect and not sunsetting until April 2025, unless they extend...again. Those are keeping some folks afloat still.

Not sure how much longer they can kick that can down the road, but I continue to be surprised lol. Also election years can swing things.

For what its worth these discussions feel a lot like the ones I saw here in 2006-2007 ish. We all know how that went down ( at least those of us old enough to have experienced it).

Difference though is there simply is not the million sub prime loans out there like there was then. But you will always have foreclosures no matter what the market is doing..

But there are - they are just now government backed. And in fact even last crash 75%+ of the notes I shorted were FHA/VA/Fannie/Freddie, not fly by night private guys. Those private guys have all but disappeared since.

Also -the covid workout programs offered by all - especially FHA - have absolutely horrific terms. Predatory at best. Not sure how many they have written over the last 4 years but they have been pushed like crazy. No docs required/mods to higher interest rates/huge silent seconds. When those folks need to sell and discover their equity is long gone, it will make an impact on the market. I'm already working a few of these. But again - no way to know the size of the fallout until it happens. 

However -  since I work mainly the default market, I likely have at least a slightly biased view, which I acknowledge. 

I will defer I have not chased court house steps personally in years .. I fund a few folks that buy them though ( I am the Money) and a few states activity is back up.  

 Which states are those?

dropped you a note on the PM system.

[Jay Hinrichs]

Quote from @Jeffrey McKee:

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

As an agent we encourage buying over renting and buying what you can a afford when you can afford it.  

ESPECIALLY in a market with historic better than average appreciation.. I dont think first time buyers usually even know that after owing the home and living in it for 2 years any profit up to 250k for single and 500k for married is tax FREE. the absolute best tax treatment we have in the US.

in Markets that dont move as much might not be the same benefit.. Folks will know which market they live in .. u live in a home for 5 years sell it and make 500k tax free it can be life changing.

[Alan F.]

Quote from @Jay Hinrichs:

Quote from @Jeffrey McKee:

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

As an agent we encourage buying over renting and buying what you can a afford when you can afford it.  

ESPECIALLY in a market with historic better than average appreciation.. I dont think first time buyers usually even know that after owing the home and living in it for 2 years any profit up to 250k for single and 500k for married is tax FREE. the absolute best tax treatment we have in the US.

in Markets that dont move as much might not be the same benefit.. Folks will know which market they live in .. u live in a home for 5 years sell it and make 500k tax free it can be life changing.

 While fixing it up and forcing more equity ;)

[Eric James]

Quote from @Jay Hinrichs:

Quote from @Jeffrey McKee:

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

As an agent we encourage buying over renting and buying what you can a afford when you can afford it.  

ESPECIALLY in a market with historic better than average appreciation.. I dont think first time buyers usually even know that after owing the home and living in it for 2 years any profit up to 250k for single and 500k for married is tax FREE. the absolute best tax treatment we have in the US.

in Markets that dont move as much might not be the same benefit.. Folks will know which market they live in .. u live in a home for 5 years sell it and make 500k tax free it can be life changing.

 If you're going to be buying your next house in another area. If that person needs to buy another house in the same area all those houses have gone up just as much.

[Jay Hinrichs]

Quote from @Eric James:

Quote from @Jay Hinrichs:

Quote from @Jeffrey McKee:

Quote from @Bill B.:

I seriously thought the op date would be 2019, or 2015. 

There’s already been one residential crash in the last 200 years. It was almost 20 years ago so just about time for another one. Sometime in the next 180 years at least. 

Just think. If they crashed 20% tomorrow we’d be back to what 2020 prices? Oh the horror!  Just keep waiting. I’m sure if rates ever drop that will lead to a massive price drop. SMH. 

I wonder how many people’s financial futures have been destroyed by “experts” predicting a housing crash. Do they feel any pity for the live’s they’ve ruined? Do they get a thrill thinking about the power they wielded over strangers? 

Any guesses if 10,000 people or 100,000 were talked out of buying houses from 2015 to 2022. When houses were 25% cheaper and rates were half? If 50,000 people lost out on $100,000 in appreciation we’re talking we’re talking $5BILLION. 

As an agent we encourage buying over renting and buying what you can a afford when you can afford it.  

ESPECIALLY in a market with historic better than average appreciation.. I dont think first time buyers usually even know that after owing the home and living in it for 2 years any profit up to 250k for single and 500k for married is tax FREE. the absolute best tax treatment we have in the US.

in Markets that dont move as much might not be the same benefit.. Folks will know which market they live in .. u live in a home for 5 years sell it and make 500k tax free it can be life changing.

 If you're going to be buying your next house in another area. If that person needs to buy another house in the same area all those houses have gone up just as much.

that's True Eric however many people move  being born and raised in the SF bay area this has played out thousands of times  get your appreciation.. go to Portland pay cash.. go to Dallas pay cash 

and most peeps that retire usually go someplace cheaper.. really works well for those that can build their own homes live  in them two years and sell profit is now tax free.. more than a few builders do this if they can talk the wife into it :)

[Todd Dexheimer]

Quote from @Eric James:

Real estate has always gone up and down in cycles. Something like 10 year cycles. We're overdue for a downturn. It seems naive to think these cycles will somehow end.

 Real estate traditionally is on a 16-18 year cycle, so we are arriving now. There have been 4 crashes in US history - 1837, 1873, 1929, 2008. The rest of the time the market corrected by less than 10%. 

It's not out of the question, but a crash of greater than 10% is highly unlikely. 

[Marcus Auerbach]

What mechanism would be driving such "cycles"? 

The moon? Solar spots? 30-year mortgages?

A cycle is something that is driven by a mechanism and has a repeating cause and effect that brings you back to where you started on a predictable pattern.

2008 was a unique set of circumstances and I hope everyone can rattle them off by now. 1929 was also unique but VERY different than 2008. 

No cycle: just circumstances like supply, demand, economy, population, demographics, lifestyle etc. It will take us at least half a decade to get new construction caught up nationwide, maybe longer if we loose more houses to fires and storms.

[Nick Robinson]

It depends on what you're looking at. In general, we are seeing CRE not just office, but MF be foreclosed on and prices come down dramatically. It is especially evident when these properties go to auction there is very little demand. The issues in CRE are just getting started and if you're in areas where there was a lot of speculation, Sunbelt, Southeast, PHX etc. there is more downward pressure on prices. In those areas specifically a lot of units were built when everyone was moving to these areas now, we are seeing units come to the market as demand for housing units is falling. We know demand is falling b/c in a lot of these areas rents are flat to down YoY and vacancies are ticking up.

In terms of residential I know there are people that overextended to get in the homes they are in so the big risk to SFH is going to be a recession and a credit event, like most assets. To predict a "crash" 20% or more drop in houses is probably low but it is never 0. We saw the first AAA CLO lose money since the GFC 2-3 weeks ago, and as there are more defaults in CLOs from CRE the odds of a credit event become higher. Then you look at Japanese banks searching for yield b/c their carry trade is losing money are moving further out on the risk curve purchasing these CLOs. We have seen banks doing extend and pretend with CRE owners and moving to get a lot of this debt off of their books. Add in this is happening when the economy is weakening /in a recession is not good. The NBER will let us know if we are in a recession in a year so that helps(sarcasm).

The big issue with this is no one knows the contagion risk this has. Obviously if credit markets blow up and we already have companies firing and expressing concerns in the economy we are likely to see more firings. 

[Marcus Auerbach]

Quote from @Jay Hinrichs:

Quote from @Marcus Auerbach:

Quote from @Chris Williams:

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

 Finally someone with sense. No inventory = no crash. 2008 was a flood of supply but no demand that followed which brought prices down. There is massive demand now and no supply due to the setback of 2008 and home builders taking a few steps back. Great points!

TY. You summarized it even better. A great metric to watch and compare markets is MoS or MoI (Months Of Inventory) because it captures both supply and demand.

For example: Austin has currently 5.72 MoS and Milwaukee 1.17 

Also look at Sale/List ratio and median sale price!

Marcus for context.. in 08 Ms. Lori and I went to Miami and we got to fly with one of my fellow cirrus owners.. he was in RE there as well.. at the time Miami had 11 YEARS of inventory :) Mainly condos of course but still 11 YEARS I was in shock.

 That is crazy!! At 11 worth of years of supply, a condo is practically un-sellable!? As an agent I wish we would go back to at least 2-3 months of supply, everyone thinks this market is great for agents, but it is brutal. My team is doing good, we are gaining market share, even though our volume is 35% down and we have to work so much harder for every deal. 

As an investor I would love to go back buying BRRRR deals, but that is next to impossible right now, junk sells for full ARV. So I basically buy move in ready deals that fell through on financing, frustrated seller, make them a quick no-contingency offer and close at their original date (or close to) - best I can do right now.

[Andrew Syrios]

Quote from @Todd Dexheimer:

Quote from @Eric James:

Real estate has always gone up and down in cycles. Something like 10 year cycles. We're overdue for a downturn. It seems naive to think these cycles will somehow end.

 Real estate traditionally is on a 16-18 year cycle, so we are arriving now. There have been 4 crashes in US history - 1837, 1873, 1929, 2008. The rest of the time the market corrected by less than 10%. 

It's not out of the question, but a crash of greater than 10% is highly unlikely. 

That's really interesting to know. A good bit of historical knowledge there, thanks for the insight!

[Andrew Syrios]

People have been talking about the impending real estate crash from back even before Covid. Here's an example on these forums from four years ago: https://www.biggerpockets.com/forums/888/topics/829466-housi...

I still stick with what I said in mid 2022: Given that lending standards were much, much stronger than in 2008 and that most homeowners have long term fixed rates instead of Teasers, the real estate market won't collapse even if demand is down because supply is down (less inventory because people don't want to sell off properties with those great loans). The only way real estate will get pulled down more than a small correction (which effectively happened between Q3 of 2022 and Q4 of 2023 as RE appreciation was behind inflation) is with a general recession. 

And even if that happens (which is fairly likely IMO) real estate should be affected less than the rest of the economy. At least those are my two cents. 

https://www.biggerpockets.com/blog/this-housing-market-isnt-...

[Andrew Syrios]

Quote from @Jay Hinrichs:

Quote from @Marcus Auerbach:

Quote from @Chris Williams:

Quote from @Marcus Auerbach:

Sorry, I am reading a bunch of internet-nonsense here mixed with a few half-true statements that makes them sound semi-realistic. The data does not support a crash.

We do have an absolute inventory shortage in the US of about 3-5 million units (depending on who's research you want to trust: Goldman Sachs, Attom, Altos CoStar etc) because we have underbuilt for 14 straight years following 2008. So we have a net deficit on housing stock that coincided with the millennials changing their mind on renting forever. Now you have the largest generation in their late 30s early 40s buying their first home. It is called household formation. Once they made up their mind to buy, they may delay, but they are not going back to being content renting.

All other points I am reading here have the potential to impact the market to a certain degree, but nothing can produce enough inventory to change the direction (up). A housing stock shortage is not the same as owners not selling due to rate lock. If and when they sell, they have to move somewhere (about 72%, the rest rents, goes into assisted living or moves in with family), so inventory-wise wise it's for the most part a wash.

The only way you can see the supply/demand situation change is if a market (the US or a metro area) loses a significant percentage of the population (like a pandemic or nuclear incident) or we catch up building 3-5 million homes (surplus of normal), with tales the better part of a decade if we can even find the labor. Everything else is just background noise.

And one more point: residential real estate prices are "downward sticky". They share this trait with W2 labor cost. Once a salary is increased it is very hard to bring it down. If the market is not good to sell a house, the majority of homeowners will just not sell and wait for a better time rather than lowering their price.

2008 was very predictable already in 2005. All you have to do and look at inventory and DOM. Until we see 6 month of inventory, 25+% of listings expire without a sale and the average sale taking 150 days or more you don't have the ingredients for a market crash defined as more than a 5% correction.

Will we see corrections like in Austin, where an exuberance of appreciation sorts itself out? Yes, absolutely. But my market Milwaukee has never seen more than 8% appreciation and we are well to trend to hit this again in 2024. And we don't even have much net-migration, our 6 buyers to 1 seller ratio is 90% based on a demographic shift and household-formation.

 Finally someone with sense. No inventory = no crash. 2008 was a flood of supply but no demand that followed which brought prices down. There is massive demand now and no supply due to the setback of 2008 and home builders taking a few steps back. Great points!

TY. You summarized it even better. A great metric to watch and compare markets is MoS or MoI (Months Of Inventory) because it captures both supply and demand.

For example: Austin has currently 5.72 MoS and Milwaukee 1.17 

Also look at Sale/List ratio and median sale price!

Marcus for context.. in 08 Ms. Lori and I went to Miami and we got to fly with one of my fellow cirrus owners.. he was in RE there as well.. at the time Miami had 11 YEARS of inventory :) Mainly condos of course but still 11 YEARS I was in shock.

 11 years! Geez, I saw some nasty gluts in Oregon and KC but nothing like that. Yikes...