Housing markets are now set to 20%-25% home price declines, finds Moody’s | Hacker News Reader

Housing markets are now set to 20%-25% home price declines, finds Moody’s

fortune.com

51 pointsgamechangr36 comments

In Australia the Reserve Bank predicted a fair chance of 40% declines nationwide 2020.

Fast forward two years and house prices are up 30% due to their actions along with government intervention. Hundreds of billions pissed down the drain preventing recession at all costs, with absolutely nothing to show for it.

How long are Western societies willing to kick this can down the road? At some point the youth will riot. It's intergenerational theft plain amd simple.

https://www.bannerassetmanagement.com/rba-modeled-40-fall-in...

I sure hope so after the insane 50-100% bull run of the last two years

and the 100% mortgage rate hike of the past year

And maybe the 400% tech worker salary too

400% rise in tech salary? Where is this happening? In your dreams?

Uhhh... where do I apply for this?

I suspect anywhere there's substantial tourism/airbnb activity the prices have taken a bubble-like trajectory. And I don't see that abating, travel is only increasing. It'd require something like regulations reeling in the whole short-term rental business, or something else killing tourism.

So I'm inclined to ignore these numbers for anywhere having significant tourism.

I think this is not only wrong but exactly backwards. Airbnb was sucking supply out of the market because it made sense with cheap capital. It was essentially a capital capicator in real estate form.

Well now we head into a recession, airbnb demand falls, there is no cheap refi option, potentially concurrently with layoffs, so some people are going to be forced to dump airbnb inventory into a market with zero demand which os going to start creating supply bubbles.

I think these areas are most at risk in the bad recession scenario

In my city, there are 514 homes that you can rent "all to yourself" on Airbnb, meaning the owners aren't leasing out a guestroom or basement while living there. The city has more than 367,0000 housing units. I find it extremely difficult to buy into the narrative that Airbnb is causing housing to become expensive.

A few years ago my friend in a rent control Santa Monica apartment had multiple absentee neighbors illegally putting their units on airbnb. So I find it extremely difficult to buy into your numbers being anywhere near accurate.

My personal experience is in a low-density rural setting (near Joshua Tree National Park) where the park's tourism forms a substantial part of the local economy. But at least in my hood, which pre-airbnb was rife with dilapidated/abandoned ramshackle cabins and SFR homes low-income pensioners, artists, and tweakers would usually occupy, it's been completely transformative, displacing the locals and multiplying prices of anything with airbnb appeal.

But it's a hot-spot for tourism thanks to the national park. There's enough tourists getting stuck in the wash near my property to reach remote airbnbs in rentals via satnav I could open a towing business.

I don't think what I said applies to a run of the mill city where tourism contributes relatively little to the economy. You didn't mention anything in this vein about your city.

Most people don't live in Joshua Tree National Park, and people complaining about the housing crisis aren't talking about housing in hot spot tourist areas. They're talking about housing in cities with jobs and careers available.

Go to your nearest city and look up the number of units available on Airbnb and then google the total number of housing units in the city.

Recessions can hamper tourism and once they have difficulty covering the mortgage, things will snap wildly.

When most people are sitting on 2%-3% mortgage APR, it possibly won’t happen.

Yeah, companies can run for a long time with low income, and individuals really hate selling at a loss, even if they end up dumping tons of “good money after bad”.

I could see people just holding and waiting (which is what I think is going to be the main thing happening).

> It'd require something like regulations reeling in the whole short-term rental business, or something else killing tourism.

Why does solving this problem require killing or reeling things in? Why not make it easier to build cool hotels? I went to some city council meeting where building a hotel was discussed, and it all seemed very difficult to get a return on new construction at a reasonable price.

With expensive flight tickets and declining non-US-dollar currencies, tourism is bound to decline again.

I bought into a new community this year. When I signed late last year, most of the street was sold before the foundations were poured.

They're now building the next section, a few blocks away. Many of those houses are approaching completion and are still for sale.

As I understand this is mostly because mortgages in the US are usually 30 year fixed rate. Why buy a house today with 6%+ interest, when in the past couple of years, although prices were higher, you could have got a mortgage with 3% or even 2%? Plus everyone is expecting a crash, nobody wants to be the sucker who bought at the peak in 2007, better to wait it out and see.

In Europe it's the opposite where almost all mortgages track the 6 month Euribor (or equivalent central bank rate). In my country the maximum fixed term you can get is 5 years, after which it reverts back to variable rate. I'm in the process of buying a house now, and although prices may drop a little and the interest rate may get higher in the short term, in the grand scheme of things that doesn't really affect it much - the monthly payments on a mortgage are still much cheaper than what you would pay to rent.

Even with a 30 year mortgage, you can refinance (take out a new mortgage and pay the old one off early) at any point. So even if you take out a mortgage with a 6% interest rate, you’re not stuck with it if the rates go down.

The US does have mortgages like you described (called a 5/1 ARM), but they're typically advised against since lower-risk options exist.

This can be largely explained by the increase in mortgage rates.

Moody's is corrupt to the core, so I take anything they say with a grain of salt.

You should explain such a strong assertion about Moody's.

They were selling ratings on bonds instead of doing what they're actually supposed to do, which is evaluate the bond on it's merits and then assign it a rating.

It was pay-for-ratings instead of pay-for-evaluation.

This is documented pretty well in Michael Lewis' and Matt Taibbi's books about the 2008 financial crash.

Their involvement in the 2008 crash certainly didn't win them any admirers. Not sure if gp has something else in mind though.

I'd be careful about putting too much stock in these predictions. If you look at Moody's chart from 2019, in the article, it shows counties like San Diego as being "overvalued" by 5%, when in fact prices skyrocketed in the double-digits since then. Similar story in other counties. I'd want to see a per-county comparison of Moody's 2019 prediction vs actual +/- increase in three years following, before determining their validity.

Any chance this will touch the bay area prices?

> Any chance this will touch the bay area prices

The interactive map in the articles shows SF to be "overvalued" (but not "significantly overvalued") and it states SF home values are down 7.8% between May and August of this year.

I'm not sure what map you're looking at, but the first map (for 2022) shows that "san francisco-oakland-berkeley, ca" has a value of -10.17, which means it's undervalued. From the caption:

> IF A HOUSING MARKET HAS A NEGATIVE PERCENTAGE, IT MEANS HOME PRICES THERE ARE LOWER THAN EXPECTED WHEN FACTORING IN LOCAL INCOMES. DATA FOR THE Second QUARTER OF 2022.

I think you’ve misinterpreted the map. The yellow regions in the map are the ones that are actually undervalued relative to local incomes. SF/Bay Area is one of the few regions on the map that is yellow.

It does point out, however, that tech hubs are still struggling due to reasons other than local affordability:

1) higher cost homes are more rate sensitive

2) tech companies and their corresponding stock compensation are experiencing a downturn

3) tech companies have leaned in to remote work more than in other industries, which means employees don’t need to stay in expensive tech hubs for their career opportunities. (this is from my own understanding of the market, not the article. Also, I personally think there’s still some career networking benefits being located near a tech hub)

probably not because nobody wants to sell now. they're all hanging on. the Bay Area isn't going to see much of a crash because there's still tight inventory and it's desirable real estate.

it's great for the all cash investors though.

the rest of us are still screwed.

It'll be interesting to see what happens to inventory-for-sale numbers. Presumably the market won't be flooded with forced sales and foreclosures like 2009. One also wonders if the big corporate investors who have been hoovering up properties will choose to wait for the market to bottom.

Inventory will climb, probably to pre covid or earlier numbers.

Time on market is the one I’ll be keeping an eye on, because that should be around 2-3 months. Longer indicates prices need to fall, shorter indicates that they have room to rise.

My area is one of the more extremely overvalued ones; we’ve been looking at relocating but if we actually correct anywhere near as much as this indicates we will happily be in the market.

Wonder if this will crush overlevereged REITs

Fortune has been reposting this over and over fwiw

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