Hmm, wait for a couple of months and see how the value of the homes fall !!
The assumption is, since almost no one can afford a house, prices MUST fall. Here's the thing no one gets: the "almost" part is very important. If, in a city of 100,000 people, only the richest 100 can afford (less than 1% of the population) a house but there's only 10 houses on the market, then prices can still continue to skyrocket.
Overall demand does not need to be super high for prices to go up. It's Demand relative to supply that matters. And in markets where supply is really really tiny then demand doesn't need to be very high in order to outstrip supply.
Edit: At least this has been my experience. Have people found otherwise themselves?
We delayed buying a house to have a bit more in savings? House prices skyrocket, our friends who leveraged the crap out of themselves look genius.
We wait to buy a car to have a bit more in savings / wait for the used market to come down? The used market goes up, our friends who bought new cars look like geniuses.
There's part of me that keeps waiting for a correction, esp. in the housing market, both so that houses come back into our budget range, but also maybe because there's part of me that feels vindictive about the fact that everyone who, to my sensibilities, seems to be acting recklessly are making out better than we are.
Some of that is reasonable, I suspect: we're very financially conservative relative to our peer group, which means we're going to miss out on some opportunities, and I don't want to be "proven right" in saving for a rainy day by everyone else having economic hardship, but I do feel rather confused about how we're "supposed" to behave in this market.
We're also remarkably well off, as is our peer group, which will obviously skew the data radically, but it also scares the crap out of me: if these are the thoughts we're having with a household income just barely under $200k this young, what is everyone else thinking?
Financial decisions are not so black and white. IMO only basic rules apply: live below your means, save more than you spend, avoid debt, etc. Any advice beyond that is a crapshoot.
It's okay to save every penny but you can't keep it in cash. You've got to buy some real asset: either real estate, gold, equities or bitcoin.
But the normal buyers will get more and more priced out, and the affluent area will end up with less and less volume as sellers start waiting it out because the volume of available buyers gets thinner and selling gets riskier.
In 08, the poor labor market meant that many people had to sell. That caused prices to drop.
We aren't at that point yet this time, and I don't think anyone knows whether or not we are headed for a seriously rocky job market.
Sellers now with a 2.75% fixed-30 mortgage could trade down a significant amount in housing cost and end up with worse cashflow if they take on a new mortgage at 5+%.
> 2019 it has to crash sometime
> 2022 ok now is the time for home prices to call
> 2027 it must crash!
The reality is that home prices are buoyed by a number of systemic factors that cause supply to be constrained. Prices will go down in total value due to interest rate rises. Homes will not be more affordable.
As somebody with the cash, I'd settle for even seeing this much. So far it's been high interest rates with the same high prices (in much if the Northeast).
Supply: low and expensive new builds, heavy rate lockin.
Demand: muted due to higher rates, but sometimes people gotta move. So a slight haircut, but in many areas most likely less haircut than supply constraint.
We are seeing some sifting in the market but I personally believe sales volume is driven by supply lockin, meaning its still a seller's market.
Move rates are roughly 9-10% a year. I bet we see that a lot lower for this quarter and next few quarters.
That’s why short sales, foreclosures, ‘mailing the keys in’, etc. were a thing.
With housing, it’s NEVER a thing that someone just sells at a loss just because.
They sell at a loss because they don’t have a choice, and the bigger the loss, usually because the less choice they have.
If labor market is still doing well, then there is little pressure. Usually that happens a bit later anyway - construction workers out of work because housing isn’t being built, or folks employed by tech workers get laid off because tech isn’t so sure about those bonuses, etc.
We’ll see though - maybe the fed will pull off a soft landing this time.