Is there a percentage drop that qualifies for a crash? A bear market in stocks is a 20% decline.
Like most of the folks I respect on this topic, you preface it with "I don't have a crystal ball" but I'm on the more conservative side, I felt strongly the market was doomed when covid hit but I didn't anticipate such aggressive moves from the FED. "Don't fight the FED" I've learned is something to pay attention to. So this time around, with the FED not being on board to kick this can down the road (so far) I think we are about to feel some pain and some are going to feel a lot of pain.
Areas of concern and weakness in housing.
1. AirBnb Hosts should bookings drop due to lack of disposable income for travel / Govt regulation / Needing to refinance and not cash flowing at new interest rates. Do they sell or rent long term? Can they cash flow on long term renters? Will they want to hold and ride it out.
2. Florida homeowners or other hurricane states should homeowners insurance continue to be less and less available affordably.
3. Brrr investor who didn't get their refi complete in time to cash flow with current rates.
4. Syndicator investor who cannot cash flow with current rates
5. House flipper who purchased an objectively inferior home (busy road, power lines, bad layout) and expected it to sell near better comps.
6. Markets where development is prevalent, builders will cut prices and sell creating new low comps.
7. Investors/flippers in any market where sales comps start to trend downward. The low interest rate home owner might cancel listing and rent, but the flipper, the person who inherited Dad's old dirty house, couples separating and unable to agree on how to keep one person in the home, the remote worker who can't find remote work anymore. Most of them are going to sell creating new lower sales comps.
8. The 10x investor who didn't keep enough safety net to ride out the storm. They will have to unload some deals to save others.
All of these people could be forced to sell real estate at a loss. I can't see how a 20% decline isn't possible, we're already seeing 5% price cuts in my market of San Diego. Everything will happen within a range, some markets worse, some better, some houses worse, some better. Buyer sentiment is not improving and with 2008 being the only memory of a housing crash to a good portion of the population, their behavior is likely to lead them to sit and wait further eroding buyer sentiment.
I've felt sad and stressed about the market shifting, and folks seem super quiet on the topic right now. I think buyers are not going to participate and it will bring prices down, how many people participate in the selling side is a mystery to me.
