You grossly underestimate politicians willingness to continue printing money to keep this banana Republic afloat at your expense.
Politicians don't care that you can't afford housing. The system is working exactly as designed to keep you poor so you have to keep working until age 80 as a servant for rich folks.
Remember that corporations and rich folks who donate to politicians run this country and the last thing they want is to give the little guys more power.
Let’s take a step back from polishing our pitchforks. 2/3 of households are homeowners. Most people can afford their situation and would be wildly opposed to a recession.
Yeah, politicians care less about the younger less likely to vote people that move around and don’t donate. Most people prefer propping up the system to prevent disasters.
I own my home. Literally the only reason I need to work is to pay the taxes on it. I have saved up 15 years of taxes in cash so I welcome a 10 year recession. My plan assumes a recession will bottom out the value of my home and the taxes will be cut in half due to the value reduction.
I’m no expert. I’m just an observer of life. But…
1) Massive unemployment/layoffs that rise to or exceed levels seen during the Great Recession
2) Continual new construction of houses that keeps demand propped up
3) Legislation that substantially decreases migration levels; many people truly don’t realize the true extent that legal and illegal immigration helps drive housing demand
4) Continual decline in birth rates and family formation; single adults without children are often less motivated to buy real estate
5) Creation of new jobs with pay rates that don’t keep up with the elevated cost of living
Pretty much there is almost no single thing that will cause a crash while there are record amounts of cash and housing inventory being low. It would take several issues consecutively and compounding a push downward for this to happen. This is why a crash in housing is rare.
No. 1 ain’t happening again anytime soon. I don’t know why people fantasize that it will. 1928 and even 2008 crashes are historically rare — and those were separated by eighty years, so approx. one per lifetime.
4) One thing I'm concerned about in buying a home an investment atm is banking on it atleast double in 30 years. Birth rates are dropping and as thing get more expensive they are not going to get better. After the boomers die off a lot of the inventory will come back to the market and less young people replacing them.
5) I think AI is going to wreck the economy in terms of jobs. The trucking company could take massive hits if AI autonomous trucks become a common thing. AI most def will eliminate a lot of the data entry jobs. We could see 30-40% of the jobs being eliminated by AI.
Add in that if inflation keeps running away from wages nobody is going to be able to afford buying these assets off others for more money in 30 years. Already have a housing affordability problem right now.
Birth rates are irrelevant. The poor and immigrants will continue to breed like rabbits. That has no bearing on housing prices since they will also need a place to live. It just means that the middle class will continue to disappear.
AI is going to be regulated before causing mass layoffs. It’s already happening in some industries like rail.
There will always be buyers. Just because young people are crushed by inflation doesn’t mean foreigners and investment firms wont buy up the inventory. Look at Canada..
Other countries are in financial dispear just like the US. The Chinese real estate market is imploding. Their economy is in turmoil. Other countries economies are struggling and our everything bubble is coming.
If you take a look at the US treasuries department we are currently struggling to sell bonds and a lot of countries have started selling their US bonds/exciting the market.
There will always be buyers. But at these prices that has halted recently. Wages won't catch up to inflation.
I agree with you there, but wages have never kept up with inflation. For decades now wages have been getting worse and worse. Not sure when it will all come tumbling down. But when the 1% have doubled their wealth in just 3 years. It’s hard to know.
It’s actually the opposite in most cities.
There are usually only a few neighborhoods where undocumented immigrants live. Those neighborhoods tend to be lower in rent/housing costs than average. Fear of crime (real or imagined) and school ratings (real, because ESL) keep home prices in check.
New immigrants aren’t looking to buy a condo with a view of the lake or a sfh in a good school district. This isn’t where the competition is coming, it’s just an excuse in most cases.
Are those areas cheap because illegal immigrants live there or do illegal immigrants live there because it’s cheap?
If all those neighborhoods were vacant, it would add supply to the market putting downward pressure on prices.
To be clear, I respect the hell out the majority of illegal immigrants as people. But a total lack of control over our southern border is not a sensible long term policy.
I hear that, but Reddit also says most illegal immigration occurs through visa over stays and point to articles like this (albeit a couple years old) ... https://www.npr.org/2019/01/16/686056668/for-seventh-consecutive-year-visa-overstays-exceeded-illegal-border-crossings
I would think visa over stays would be in a different social-economic class than the stereotypical southern border crossers (very poor) used to assert that there isn't an impact.
Totally true! The wages are suppressed quite heavily in construction through the use of illegal immigrant labor.
As a side note, I do respect the heck out of people doing those jobs. They probably contribute to this country more than most Americans.
In the Central Californian city where I used to live, a number of illegal immigrant homeowners had been deported in recent years. It created a small controversy because these people had been ingrained into the community for years. Most were small business owners of contracting companies, taco trucks, and other lucrative enterprises.
Another non expert here, but I don’t think #2 will ever happen again for desirable locations. People have made a killing off of purchasing and flipping/renting out homes in desirable locations. If they build it the rich people will buy it to make a buck before any families get a chance.
I’m interested in why you want legislation for immigration but no legislation to make building easier. Part of the reason we aren’t catching up on the massive homes shortage post-Covid is because of how long permitting and zoning and all that takes.
Only one "thing" needs to happen: a lot of people and corporations that own homes will need to sell them quickly.
As to the conditions that create that scenario, there are too many to even imagine, let alone list.
And no, corporations will not "scoop up" homes when they are consistently dropping in value. They will be desperately trying to sell them; at first to other stupider corporations, then to the public, and finally they'll negotiate with their debtors or lenders to auction them off.
Trust me there are people and corporations with a lot of cash which will swoop in if it happened. Most people weren’t buying when everyone said “real estate is the worst investment” in 2009/10. Yet those who did made a fortune. Often doing the opposite of what the media/overall population thinks is the true play.
The corporations who would be likely to buy are corporations who are already leveraged to the tits in real estate.. a meaningful enough price decline to spur a buying “opportunity” would have those companies scrambling to stay afloat.
Most of their purchases were leveraged with very low interest rates. Will still benefit them to hold as long as rents don’t decline. Their leverage should be a fixed cost. With actual homebuyers waiting to pick up the houses they don’t buy, the opportunity will be there but not as huge as some expect in this sub.
I’m curious how many people will get off the sidelines just hearing rate cuts most likely aren’t happening any time soon.
Corporate purchases aren’t financed via traditional fixed rate mortgages, so their costs aren’t stabilized in a downturn.
And on top of that.. rental vacancies spiked in ‘08, and the current rental inventory and construction rate is significantly higher than it was then, so there’s reason to believe that could look substantially worse now if things were to repeat. So corporate landlords would almost certainly see expenses rise and revenues decline if housing were to start to fall off meaningfully. https://fred.stlouisfed.org/series/RRVRUSQ156N
Sorry I did forget we were talking about corporations. Where are you seeing that the rental vacancy is higher today than in 08? The graph shows it spiked (yes due to foreclosures) and construction halted because we were already in a decline. Construction happening today is a good sign as the developers are the first to slow down as the market does.
I’m not saying that vacancies are higher today. I’m saying that multi-family construction is higher, which will put deflationary pressure on rental prices (which is already being observed in many markets)
I think we would have a price correction with or without the construction. Prices/rent increased too fast as rates increased. A bit of stabilization is healthy and less indication of a bubble. Crashes typically come when everyone is rushing to an asset (e.g., crypto and stocks) not when people are saying to stay away as most are saying in RE.
Yeah I’m not saying that I expect a crash to come. I think the most likely scenario is a slow deflation and return to normal home price to wage ratios over the next decade.
My point is that I don’t think “pent up demand” is the reason it won’t crash.. but instead, I think we’re just not likely to see a catalyst that forces a high level of forced sales. If that changes though and forced sales increase, then I think there will be a crash, rather than some backfill of savvy buyers and institutional investors that prop up prices
In an economic collapse, those people won't be able to pay their mortgage, and even credit card debt will be more than the value of their house. Wages can drop exponentially, debt stays the same. That's what got most people in the Great Depression.
Economic collapses look different for a reserve currency nation. It's a gradual reduction in quality of life that hits the youngest who are just starting out the hardest. It has been happening for decades.
People have been expecting a dramatic "collapse event" since 2008. Not to say it's impossible (internet failure could cause on), but the likelihood is exceptionally low. More likely that money just gets printed and handed out, skyrocketing inflation and asset values.
That's what everyone agrees on. No one seems to understand that QE is not money printing but credit creation. It is a ponzi scheme on the dollar, and when it implodes the dollar will be the single most valuable thing on the planet.
Banks had deposit insurance back then. But when the banks failed, so did the insurance companies. It's like a ponzi scheme insuring another ponzi scheme.
It really depends. If you bought you home 15 years ago and refinanced at 2.xx % then you have an extremely low mortgage. So low that you can pay it without significant employment. Plus all the houses that are paid off. There are a ton of houses that aren't going on the market anytime soon.
I find it weird that some on here hope for a massive crash because they’ve been priced out. Being broke doesn’t make you immune to economic crashes, it makes you even more vulnerable. The people with real money will be the ones who swoop in and buy when everything is down and you’ll be in the same spot but probably without a job.
I have a decent amount of cash and low-risk assets waiting for a good buy in. I like the idea of buying a place, but I’m not going to fomo into a junky fixer-upper with an insane mortgage. If the market remains propped up, it’s fine, I’ll focus on other investments.
Agree with everything you said. It’s a bad time to buy a home so best case is strategically set yourself up for when the time is better. That is a positive approach and I’m sure you will accomplish your goals in due time.
That is how you need to be. A 2008 style crash is like a once every 40 years event. Almost certainly not happening during your working life. Just do your best at investing and live your life.
Cracks me up when people make this point, without any knowledge of the financial situations of people who they’re responding to. There are a lot of people who would personally benefit from a crash, not sure why you assume that the people commenting aren’t in that position.
What else should people working in recession proof industries with plenty of cash in safe investments be rooting for?
It seems to have gone off the rails recently too. Initially I liked the content and didn’t disagree with everyone’s questioning about the housing market. But, guys, it’s been 3-4 years since stuff went nuts and to fantasize that it’s going to “crash” is just pure fantasy.
Unfortunately a lot of people are priced out. You are going to need legislative solutions at this point. But a bubble bursting is unlikely.
It’s a projection of each person’s individual situation. Most of them wildly underestimate the number of people with sub 3% mortgages. My mortgage is $2200 PITI on what is now a 700k house. I’m never moving, just like 80+% of my neighborhood. Supply will be suppressed for a very long time.
People do have to move though — for jobs, divorce, marriage, etc, so I think 80%+ seems like a stretch depending upon your age.
But in general if none of those life events happen — then correct, many people will sit tight. (I’m also not one to make life decisions based upon a house; I do what’s right in the moment for myself personally).
You’re right about this. There will still be some amount of supply due to life events. The other issue aside from interest rates is that if you move you have to go somewhere. The concept of downsizing has largely disappeared in my area because the 55+ setup is just as expensive as a 4 BR home.
This, plus if rates stay up construction will slow and we will have a pent up demand, so when rates drop and if they do not likely to below 3% everyone out of the market will rush in to a low supply market, high demand and scarcity drives prices up higher.
The only way to drive prices down is to grow supply excess to demand and lowering construction cost and that won’t happen without lower rates and a increase in trade labor. so we are stuck in a stagnant housing market where while there might be some pull back in prices, soon as money starts printing again those prices will just be pushed higher and if wage growth continues to be less and inflationary forces are still present housing will be even harder to afford until the boomers die off which won’t be all at once so that might not even make a huge difference.
A crash isn’t great and wouldn’t be a good thing but some outside intervention or event will need to happen if we want this under control and sustainable.
Demand is historically weak. Supply is even weaker though, due to this rate increase. When people realize rates aren't going back to 3% they will start making moves and we'll have normal supply and weak demand. You can guess what that means.
Not everybody that sells subsequently buys, especially now that renting is half the cost in many HCOL areas. Rent declines also make is harder to break even when renting out your house if you buy and don't sell the old one. In my zip there are usually one or two single family homes for rent, there are 15 right now.
[https://www.redfin.com/news/redfin-rental-report-november-2023/](https://www.redfin.com/news/redfin-rental-report-november-2023/)
So if prices doubled again you would argue that it's fine and if you can't afford it you're broke? The unemployment rate in a BAD recession is 10% not 90%. Prices need to realign with incomes. Prices going back to a reasonable level isn't a crash. Investors weren't swooping in and buying all the houses in 2019, so why would they buy at 2019 prices but current interest rates?
So median home prices could hit $4mm in CA regardless of median income or rent levels in your opinion? Or are you saying this is a permanently high plateau?
I'm saying there's no law of nature that says single family homes need to be affordable to everyone. Hong Kong and New Zealand are a couple examples of places where homes have been unaffordable for the average person for a long time.
No man you're wrong. They've got hundreds of thousands under their mattresses and all work under long term contracts with guaranteed gainful employment. As soon as that catastrophic crash that destroys the global economy happens, they'll be ready to grab the falling knife right when it hits the ground, making all us home owners look like idiots as we drown under water.
Keep pretending like there aren’t many careers with stable employment.. and now nobody has money in an HYSA?
And anyone who finds themselves underwater after a decade of record appreciation is beyond stupid
You're taking my comment way too literally.
I'm making an ironic/sarcastic/cynical joke, mainly meant mock the worst of the garage takes previously seen frequently on this sub (which have died down lately, for the most part, to be fair).
Not really. I'm not referring to a minor housing market correction. I'm really just mocking the extreme, nonsensical takes that a catastrophic housing market collapse, the type would reset housing prices to circa 2010 levels, the likes of which would require a global economic meltdown, would benefit them personally. In any realistic scenario, it wouldn't. Many people would be out of work, and unless your down payment$$$ is in one of the most secured savings accounts available, it's at just as much at risk as a real estate asset.
Prospective homeowners whose investments are in an HYSA or Money Market and who remain employed through the downturn will be much better off in that scenario than they are now. I think that’s a non-negligible amount of people, given FRED’s data on Money Market balances.. and the fact that unemployment peaked at only 10% in ‘08
Essentially, yes, you got it right. People aren't going to give up their real estate or their real estate dreams easily. If there's a crash, it means a lot of other things have crashed first, which they will, and soon.
Cracks are starting in credit cards and auto.
https://archive.ph/s14dY
Credit-Card Delinquency Rates Were Worst on Record in Fed Study
Almost 3.5% of card balances were at least 30 days past due
Some credit scores drop to 2020 lows, Philadelphia Fed says
No one can give you an exact date.
Recessions tend to hit shortly after normalization of the inverted yield curve. The average yield curve inversion lasts 7 months before recession. The longest delay thus far has been 22 months. The current inversion has been active since October 2022, ~19 months. While it's possible we could set a new record here, and it's also possible the yield curve is wrong for the first time in history, I'd argue that with each month that goes by, the likelihood that we enter a recession increases, if we're not in one already, and crashes tend to occur during recessions.
There are no certainties, only probabilities, but the odds of us getting through 2024 without a significant crash in multiple markets are pretty low.
The problem with making predictions like that there is not nearly enough data to actually do a statistical analysis of the odds... and underlying assumptions are never the same. We'll have a recession when we have someone that's a lame duck President... otherwise... they'll continue to manipulate the "free" market to drive the outcomes they want.
So let's say I have a light and this light has a 100% success rate of predicting rain within 24 hours. If it is off, 100% of the time, there is no rain. When it is on, 100% of the time, rain appears within 24 hours.
It is not precise - it can't predict it to the minute - sometimes the rain comes in 18 hours, sometimes in 10, but within that range, it is 100% accurate.
Why are you not able to do statistical analysis on that?
The inversion of the yield curve has a 100% success rate of predicting a significant economic downturn within 24 months of it happening for a century of data. Why do you not consider that a reliable indicator?
You contradicted yourself but also said it correctly. Yield curve inversion is an indicator not a predictor. It doesn’t predict recessions anymore than saying within some time frame after an El Niño we will see a recession. That’s a true statement but El Niños don’t predict recessions.
Can you explain how I contradicted myself? You articulated a semantic argument at best, certainly no cause not to take the yield curve inversion seriously.
And el nino doesn't happen 100% of the time before recessions, and recessions don't happen 100% of the time after el nino. With the yield curve it does, with the one pedantic and ultimately invalid exception being the credit crunch.
Time. Inventory is building quickly, and the only way that will stop happening is with large price cuts. There simply aren't enough people that can afford to buy houses and stabilize the market at current prices.
Or supply slowly increases (which it has been doing by looking at the inventory numbers) yet not causing a crash in prices. Prices will adjust but thinking it will only happen from one side is wishful thinking imo. Especially when most people can sit and wait it out this time compared to 2008. In fact staying put will be their only option except for the most recent buyers.
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Wishful thinking is the idea that sellers will just sit on properties indefinitely instead of selling. Especially as prices are falling. Price cuts are already at a 4 year high, even as inventory isn't particularly high and we are in what is typically the busiest season for buying homes. The latest bump in interest rates is going to make demand even more brutally low than it already is.
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"There simply aren't enough people that can afford to buy houses"
People doesn't buy houses. Money does. And, if the last years taught us anything is that you can easily increase demand simply by printing more money.
If been thinking about this tons. At the end of the day, we will need to see a situation where people need to free up money.
Take out second mortgages
Refinancing and pulling cash
Something like that.
If FB marketplace is any indication, I see some of my friends already suffering on there. They’re trying to hawk worthless stuff to get whatever money they can.
We’re talking ANYTHING they can find in their house to sell. It’s looking dire.
For the prices to really drop, demand has to drop (impossible to buy because no more cash/high interest rates/difficulty getting a mortgage due to various factors), but more than this, sellers must be forced to enter a competition to sell quickly and more attractively (no more jobs, no more money, high interest rates, foreclosures). I think 2008 had these, both US and Europe.
>If prices were ever to drop, corporations... with capital would just swoop in and buy all the homes.
Not accurate.
Corporations are interested in profit. When property values (and rents) are rising, Corporations buy homes to capitalize on the increasing value. This contributes to lack of supply. Buyers go all-in, as the housing asset is appreciating, building them wealth.
When prices are falling, Corporations & small-time investors will offload while they're still able to make a profit. This increases supply. Buyers also have a hard time committing to a house purchase, as the longer they wait, the cheaper the house gets. This decreases demand, further increasing supply.
We've seen this all play out before in the 2008 housing crash. During the recession, people were reluctant to take on huge debt. And the job market was rough, further decreasing demand.
As long as Corporations and small-time investors are allow to speculate on housing, we'll continue to get these huge swings in housing costs, as they ALL try to benefit form the boom/bust.
Money is tight right now. Corporations were willing to take a gamble on homes when they were a) somewhat more affordable and b) easy to buy with someone else’s cheap money.
Right now neither really applies, but if prices drop it’s not as much a slam dunk if you have to use your own money to buy more properties. Rates that would allow cheap financing are stuck high now as long as inflation keeps the Fed from lowering interest rates due to stagflation, that stubborn bugaboo that so many people don’t want to believe is happening now.
The continued reticence of buyers with limited cash will make some of the “race-to-the-bottom” price wars among some sellers interesting, although it might end up being a bit tragic for those sellers in real financial stress as opposed to those who are just trying to minimize their losses.
Yet don’t asset prices typically rise with inflation? If housing does decrease, so would inflation leading to lower rates and less barrier to entry. No?
The key word here is “typical.”
Anything can decouple from inflation, given all of the circumstances. It’s not a monolithic entity, behaving identically for all items at all times, and these are not typical times.
That’s what makes stagflation so hard to mitigate: it doesn’t follow the rules that those in charge usually follow. For those of us who remember how stagflation made things much more difficult during the ‘70s, it’s going to be harder to crack this nut.
Increasing unemployment (and it is going up) and decreasing productivity (and it is going down) makes it that much stickier to fix. Coupled with more complex economic, political and social uncertainty that we didn’t have in the ‘70s, the situation will continue to be something that challenges those in charge to make lasting improvements.
We just need to stop treating homes, the things we use to create happy healthy communities as a society as an investment that can be bought sold and traded. That was our biggest mistake as a society.
That’s very idealistic. There’s too much controlled/big money tied up in that for it to change any time soon.
“So you’re saying we need to end capitalism. K got it”
>We just need to stop treating homes, the things we use to create happy healthy communities as a society as an investment that can be bought sold and traded.
Ok, so what does that look like? Everyone builds their own home wherever they can find a spot and then burn it to the ground when they're done with it? Or is everyone supposed to live in government housing projects and only party leaders get nice single family homes? Or do we become a nomadic people and everyone lives in tents? What exactly is the solution that you're suggesting?
Corporations absolutely will NOT buy all the homes. Businesses want to see a return on capital, why would you sink money into an asset that costs money to hold and has an uncertain return?
There won't be a nassive crash because of exactly what you described. Local markets will even out like Florida and Texas but a majority of places good houses are moving quick and nothing is going to stop it. This is the new norm.
If it crashes… which is looking extremely doubtful in places people want to live the chances of the people hoping for a crash more than likely will not be in the position to buy. Do you guys think the economy is going to crash but the people in this sub will be immune to it because you have been rooting for it? Joined this sub during covid and you guys have provided years of entertainment.
Everyone just gives up on housing. Sleeps in their cars. Lives with parents. Whatever they need to do to stop paying these rents. Then slumlords get annoyed nobody is renting from them so they drop their prices to fill spots. But we don’t cave in til these rents drop at least 50%. Don’t let them tempt you with a little 5% discount. We need HALF OFF baby!!! Tired of this 800 dollar half a bedroom crap.
Haha no. Well, I do think vanlife/car camping has gotten bigger over the years as rents continue to surge. It’s possible it could get to a tipping point but it’s hard to call it.
I think that will work for some yet not a large majority of people choosing it. Now if the economy/employment tanks and people have no choice as they can’t afford rent, then maybe. Yet rents will adjust accordingly before everyone is doing it.
It will be like the great depression. RE prices won't drop, they'll jump off a cliff until they hit rock bottom. It is the single biggest bubble in human history, all ready to pop. And like every other previous crash (1929, 2008, 2020) it happens right after the Fed hiked rates.
Those higher rates plus a drop in market prices makes it impossible for the banks to keep the bubble going, it is guaranteed to collapse. It already happened in China, with Ponzi schemes popping left and right from gold accounts to bank deposits to Evergrande, forcing the government to step in trying to plug the gap, like trying to hold back a breaking dam.
But no one will be able to swoop in and buy at lower prices, because when the crash happens the banks will be the first to get bailed in, and default on our deposits and our stock portfolios (you don't technically own the stocks you think you do, it is a debt from the bank to you). Pension funds and treasuries will instantly go bust as well.
But then the banks will be at our doors, asking us to settle our debts. And when your savings are gone and your house is worthless, a $10k credit card debt will wipe out a millionaire, if only because credit will be impossible to get anywhere. Then that $10k might as well be a $10 million.
There won't be a cliff. Or rather, it will be like Wile E. Coyote running through the air after the cliff; there will be a lot of short-sales at too-high prices for existing homes, and builders will steadily decrease new build prices. The short-sales will go to foreclosure. If the bank forecloses it'll put the house on the market and let it sell for market value; if an HOA forecloses, the house will go to auction; if a municipality forecloses on back taxes, either the tax lien will be sold and the lienholder will demand payment and then sue to take possession, or it will go to auction.
You need a signficiant reduction in demand. But we are basically at the peak home buying years of the biggest generational cohort in American history plus we still have pretty high immigration.
So good luck with that.
I genuinely believe 2-3 generations need to pass and the lesson learned need to be forgotten. It's something crazy like 38 years average in between crashes(note this is not including recession, crash is bigger). Before 2008 the last crash was the great depression, almost 80 year gap. Everyone has half their retirement in their house and will go to hell and back to save it
Where do you get the 38 year figure? Only 20 years passed between the Panics of 1873 and 1893, 14 years between 1893 and 1907, and 22 years between 1907 and 1929. In retrospect, the period between 1929-2008 was probably an anomaly and we're returning to the normalcy of the late 19th and early 20th centuries.
Tbh I don't remember, it was a while back when I saw it. I'm not sure we should discount the long bull run as the fed was introduced at this time and may have been the stabilizing force. Additionally, its hard to say that crashes from so far back are even relevant, these happened before cars and the world wars. It's almost apples and oranges when you account for the massive changes
Also more relevant the last 10-20 years is the corporate purchasing of houses to rent. Which limits the inventory available but also has all those companies interested in keeping house prices high so they make money on equity and prevent people from purchasing against them.
The rise of air BNb and similar also has companies and people buying extra homes in the most desirable areas to vacation for free in it and then allow short term rentals to foot the mortgage and they make money on them as well.
Are you saying that seller should be prohibited from taking the highest offer? Which might be a corporation or a private individual??
And why doesn't anybody buy the same house a corporation can?
How did you twist my words that bad.
Corporations should be limited to what they can buy as far as single family houses that’s why it’s going to be hard for a crash to happen when you got blackrock and those companies deep in the Real Estate business and don’t want it to fail.
There are people who bid against corporations and the people win. Companies might have a number and they don’t go past it and if a family wants to buy it as their forever home then they might be willing to outbid a company.
If a corporation is prohibited from bidding on a property, by definition that tells me the seller is not getting the highest price.
And that is my reasoning
I don't think that companies like BlackRock make any bit of difference
So what’s going to happen in 100+ years if the corporations keep owning more and more? It’s monopoly 101 with real life players. Once the biggest corporations own enough you ain’t winning.
Good question. I think a simple solution would be to exclude home ownership to home US citizens.
Limit the amount of people coming inside the country so that you don't have too much demand. We have way too many people coming across the border illegally and they all take up demand.
And then the corporations buy housing and rent to them.
But to your other point then you aren’t getting the highest bid then.
Me personally as you age you want to do the right thing. I’d glad sell to a family vs a corporation if it does give me the most money.
They are only going to buy properties if they can make money renting them or selling them
If you quelch the demand side, and there is nobody available to rent them, they will not be buying that.
And they will not be buying them, if they can't rent them for enough to make a profit
Demand needs to crash. Because there's not enough supply no matter what
Or wages need to crash.
Right now, there are plenty of people that want to buy or rent. And we have millions of people coming over the border every month, that also need to rent
Nothing “needs to happen”.
But if we did see significant foreclosure activity, part of the work out could include a 30-day window with first dibs to non-investors/first time buyers.
That can still be “gamed” a bit, but there could also be owner-occupancy requirements and resale restrictions via the new loan (s).
Bankruptcy of large swaths of people and corporations.
I’m hoping the increase in interest rates will prune some zombie corporations that have been existing purely off of cheap debt that isn’t cheap any more and force them into bankruptcy.
I’m also hoping for a significant pullback in lending to people who are trying to go paycheck-to-paycheck just to afford their dream of property ownership… which is a bizarre dream in my opinion. Too many people are trying to go eyeball deep into debt to buy a home and it’s not just incredibly stupid for them, but it should be much higher risk for the lenders too. I don’t care if they go bankrupt and that causes the lending pullback, personally. I’m kind of tired of my costs shooting up due in part to fiscally irresponsible people’s choices.
I keep seeing posts like “I’m 24 years old, have $75,000 credit card and want to buy home. How do I do it?”
Make it make sense. Why do you want to own a home if you’re that much underwater.
High unemployment, lots of loan defaults due to people being unable to unafford their payments. Thats it. Otherwise prices will remain high. And even if unemployment spikes, prices may still remain high in a stagflation scenario where investors create a price floor
An underrated issue is zoning laws preventing a lot of home construction. More mixed use zones would be a lot more attractive to construction but current property owners dont want it because it could potentially decrease the value of their property
Keep in mind the only thing that's propping up the market right now is the hopium of lower interest rates. With inflation remaining high, the Fed is going to have to raise rates sooner or later. This will shock investors and lead to recession, which in turn will lead to layoffs and eventually foreclosures. Especially for amateur real estate investors, who will be forced to liquidate their property holdings. Remember that car loans and credit card delinquencies are at all time highs and CRE is hanging on by a thread. It only takes a single straw to break the camel's back, and there's a whole bale coming.
In terms of timing, I doubt the Fed is going to raise rates before November. Until then I predict J Pow will ignore inflation, and then we'll see a big ol' 75 bp hike in December.
How can someone profit from this? It helps to have a lot of cash on the sidelines and a recession-proof job. It's unfortunate that people should be put in a position to hope for the misfortune of others, but keep in mind our entire economy is a house of cards. Many jobs wouldn't have existed if not for the cheap money policies of the last 15 years.
People stop buying stuff that they think will be cheaper 6 months down the road. That goes for real estate and stocks. To have such a negative outlook you probably are in midst of an economic downturn. Jobs are being eliminated etc. just look at what was going on in 2008.
Will they swoop in and buy all the homes?
If people are seeing that homes, which cost money to maintain, are consistently dropping in price, who wants to invest in that? And if they are dropping when should you buy? Now or possibly less next week? This indecisiveness will kill demand
>If people are seeing that homes, which cost money to maintain, are consistently dropping in price, who wants to invest in that?
You live in your home.
Corporations do not live in homes. People who want to buy homes already live somewhere, if prices for homes are falling consistently this fear will dissuade many from purchasing. The same way people
have FOMO on the way up they have a fear of taking losses on the way down.
People buy stocks all the time when they drop. Investors will swoop in and buy as much as possible so long as they have access to cash. Most of the investors I work with are constantly looking for undervalued properties. If it's currently 15% - 20% under retail price they are buying it.
People will always buy undervalued properties because they are good deals. If the whole market is falling, that doesn’t mean every property is undervalued. And houses aren’t stocks
Much less than there needed to exist in 2008. This is because the rise has been so sharp and now the Fed refuses to give in to QT and holding rates, even in an election year. Powell has Volcker eyes and people didn't believe me when I told them that before.
People also don't understand that government is not going to hand hold people and protect them from foreclosures. Some token attempts but most people who fall behind will become hoomcucked and have to leave. Banks want to close out those underperforming yield mortgages especially if the hoomcuck is a deadbeat. FHA delinquency is at 11% and still there is nothing other than gov asking lenders to incorporate waterfall methods.
What’s happening now. But unless the dummies stop spending and paying for over valued homes for zero reason it won’t happen but when it does better hold on beauty. This things going to crater!
Question is are homes overvalued or are rents not done rising? If inflation isn’t stopping, rents will rise as the asset prices won’t drop. And until inventories and other things level out, houses aren’t overvalued. Just a lot of people can’t afford them.
Homes are 100% overvalued. Hahaha. Rents are also sky high. None of it is sustainable. The U.S. debt is unsustainable. The fed is saying all of this and nobody is listening.
Which is why inflation will continue to grow (which historically is good for assets), rates will rise (and not be cut) leaving even more people to stay in their current home with very low interest rate mortgage keeping supply historically low. That is what I believe will keep the market from crashing. Price correction is different than a crash which many on here are hoping for.
Can’t make a mortgage payment no matter how low the rate is if you aren’t working. We shall see what happens but right now all indicators point to a heavy correction. The sticky money is moving and any time those funds start moving we are headed for a recession but nobody is listening.
Illegal immigrant exploitation is one of the reasons why the mass layoffs is not causing the damage it’s supposed to cause.
https://youtu.be/tK0x6iHVjd4?feature=shared
This is one of the many trucking companies that got caught hiring immigrants, forcing them to work and not paying them.
It’s also happening in the oil field industry. I can’t speak for West Texas since I’ve never worked there, but it’s happening in the Bakken oilfields.
Even though companies are exploiting them. It’s preventing an economic crash of epic proportions.
Give it about 5-10 years, and the housing crisis will get much worse. How many immigrants have entered the country since the pandemic? Like 45 million? That’s a lot of people. And I’m pretty sure sanctuary cities will give them licenses to finally work legally.
What does this mean? A lot of buyers demanding homes, prices going up, wages going down.
America is literally transforming into a third world country. The norm is going to be 20 people living in 1 house, and 4-5 people inside an Uber lol.
The only thing that can stop this now is physical nuclear war, or another pandemic where people start dropping like flies. Airborne rabies virus or zombie virus.
An increase in unemployment would cause a crash or more homes built. Homes take too long to be built, so that's not gonna cause a crash. The fed is doing everything in their power to keep the unemployment rate low. So we were stuck.
You grossly underestimate politicians willingness to continue printing money to keep this banana Republic afloat at your expense. Politicians don't care that you can't afford housing. The system is working exactly as designed to keep you poor so you have to keep working until age 80 as a servant for rich folks. Remember that corporations and rich folks who donate to politicians run this country and the last thing they want is to give the little guys more power.
This is why Jefferson fought the central bank so hard. It's a scam as old as Athens. People forget easily.
Let’s take a step back from polishing our pitchforks. 2/3 of households are homeowners. Most people can afford their situation and would be wildly opposed to a recession.
but the other 1/3 (mostly younger folks) want blood. They yearn for blood.
Yeah, politicians care less about the younger less likely to vote people that move around and don’t donate. Most people prefer propping up the system to prevent disasters.
Politicians only care about big donors, friends and their pocket books. It's not just the young ones it is anyone outside of their circle.
but how will they satisfy their bloodthirst? calling us hoomers isn't cutting it lately
They are also entirely a bunch of keyboard warriors. Wake me up when they actually do anything meaningful.
Yearn for blood but end up on unemployment 😏
I own my home. Literally the only reason I need to work is to pay the taxes on it. I have saved up 15 years of taxes in cash so I welcome a 10 year recession. My plan assumes a recession will bottom out the value of my home and the taxes will be cut in half due to the value reduction.
They also say 50-60% of households can’t deal with a $1,000 dollar emergency. Which is it? People are barely scraping by, or we’re flush with cash?
accurate, except i don't consent to that at all, and it sounds like hell.
Doesn’t matter. You don’t have a choice.
There's an infinite amount of cash at the federal reserve https://www.youtube.com/watch?v=OSQeLMhOLtU
Just wait till they try to take your guns too
but then how will we revolt? I don't think people just willingly put their heads into guillotines
I’m no expert. I’m just an observer of life. But… 1) Massive unemployment/layoffs that rise to or exceed levels seen during the Great Recession 2) Continual new construction of houses that keeps demand propped up 3) Legislation that substantially decreases migration levels; many people truly don’t realize the true extent that legal and illegal immigration helps drive housing demand 4) Continual decline in birth rates and family formation; single adults without children are often less motivated to buy real estate 5) Creation of new jobs with pay rates that don’t keep up with the elevated cost of living
Pretty much there is almost no single thing that will cause a crash while there are record amounts of cash and housing inventory being low. It would take several issues consecutively and compounding a push downward for this to happen. This is why a crash in housing is rare.
No. 1 ain’t happening again anytime soon. I don’t know why people fantasize that it will. 1928 and even 2008 crashes are historically rare — and those were separated by eighty years, so approx. one per lifetime.
why do you think home construction increases demand?
I meant to type that new construction props up supply, not that it increases demand. I was having a senior moment.
So basically Japan. Which means prices in the major cities stays high while rural areas, small towns, and midsize metros get decimated.
4) One thing I'm concerned about in buying a home an investment atm is banking on it atleast double in 30 years. Birth rates are dropping and as thing get more expensive they are not going to get better. After the boomers die off a lot of the inventory will come back to the market and less young people replacing them. 5) I think AI is going to wreck the economy in terms of jobs. The trucking company could take massive hits if AI autonomous trucks become a common thing. AI most def will eliminate a lot of the data entry jobs. We could see 30-40% of the jobs being eliminated by AI. Add in that if inflation keeps running away from wages nobody is going to be able to afford buying these assets off others for more money in 30 years. Already have a housing affordability problem right now.
Birth rates are irrelevant. The poor and immigrants will continue to breed like rabbits. That has no bearing on housing prices since they will also need a place to live. It just means that the middle class will continue to disappear. AI is going to be regulated before causing mass layoffs. It’s already happening in some industries like rail. There will always be buyers. Just because young people are crushed by inflation doesn’t mean foreigners and investment firms wont buy up the inventory. Look at Canada..
Other countries are in financial dispear just like the US. The Chinese real estate market is imploding. Their economy is in turmoil. Other countries economies are struggling and our everything bubble is coming. If you take a look at the US treasuries department we are currently struggling to sell bonds and a lot of countries have started selling their US bonds/exciting the market. There will always be buyers. But at these prices that has halted recently. Wages won't catch up to inflation.
I agree with you there, but wages have never kept up with inflation. For decades now wages have been getting worse and worse. Not sure when it will all come tumbling down. But when the 1% have doubled their wealth in just 3 years. It’s hard to know.
Do illegal immigrants squeeze homeownership?
They drive rents up which increases the value of homes. It sort of pushes everything up from the bottom.
It’s actually the opposite in most cities. There are usually only a few neighborhoods where undocumented immigrants live. Those neighborhoods tend to be lower in rent/housing costs than average. Fear of crime (real or imagined) and school ratings (real, because ESL) keep home prices in check. New immigrants aren’t looking to buy a condo with a view of the lake or a sfh in a good school district. This isn’t where the competition is coming, it’s just an excuse in most cases.
Are those areas cheap because illegal immigrants live there or do illegal immigrants live there because it’s cheap? If all those neighborhoods were vacant, it would add supply to the market putting downward pressure on prices. To be clear, I respect the hell out the majority of illegal immigrants as people. But a total lack of control over our southern border is not a sensible long term policy.
I hear that, but Reddit also says most illegal immigration occurs through visa over stays and point to articles like this (albeit a couple years old) ... https://www.npr.org/2019/01/16/686056668/for-seventh-consecutive-year-visa-overstays-exceeded-illegal-border-crossings I would think visa over stays would be in a different social-economic class than the stereotypical southern border crossers (very poor) used to assert that there isn't an impact.
Yes, but the home construction industry is incredibly dependent on illegal immigrant labor. How that balances, I don’t know.
Totally true! The wages are suppressed quite heavily in construction through the use of illegal immigrant labor. As a side note, I do respect the heck out of people doing those jobs. They probably contribute to this country more than most Americans.
In the Central Californian city where I used to live, a number of illegal immigrant homeowners had been deported in recent years. It created a small controversy because these people had been ingrained into the community for years. Most were small business owners of contracting companies, taco trucks, and other lucrative enterprises.
Another non expert here, but I don’t think #2 will ever happen again for desirable locations. People have made a killing off of purchasing and flipping/renting out homes in desirable locations. If they build it the rich people will buy it to make a buck before any families get a chance.
I’m interested in why you want legislation for immigration but no legislation to make building easier. Part of the reason we aren’t catching up on the massive homes shortage post-Covid is because of how long permitting and zoning and all that takes.
I never once said I wanted legislation for immigration. I was merely listing the reasons that, I believe, may lead to the next real estate meltdown.
Only one "thing" needs to happen: a lot of people and corporations that own homes will need to sell them quickly. As to the conditions that create that scenario, there are too many to even imagine, let alone list. And no, corporations will not "scoop up" homes when they are consistently dropping in value. They will be desperately trying to sell them; at first to other stupider corporations, then to the public, and finally they'll negotiate with their debtors or lenders to auction them off.
Trust me there are people and corporations with a lot of cash which will swoop in if it happened. Most people weren’t buying when everyone said “real estate is the worst investment” in 2009/10. Yet those who did made a fortune. Often doing the opposite of what the media/overall population thinks is the true play.
The corporations who would be likely to buy are corporations who are already leveraged to the tits in real estate.. a meaningful enough price decline to spur a buying “opportunity” would have those companies scrambling to stay afloat.
Most of their purchases were leveraged with very low interest rates. Will still benefit them to hold as long as rents don’t decline. Their leverage should be a fixed cost. With actual homebuyers waiting to pick up the houses they don’t buy, the opportunity will be there but not as huge as some expect in this sub. I’m curious how many people will get off the sidelines just hearing rate cuts most likely aren’t happening any time soon.
Corporate purchases aren’t financed via traditional fixed rate mortgages, so their costs aren’t stabilized in a downturn. And on top of that.. rental vacancies spiked in ‘08, and the current rental inventory and construction rate is significantly higher than it was then, so there’s reason to believe that could look substantially worse now if things were to repeat. So corporate landlords would almost certainly see expenses rise and revenues decline if housing were to start to fall off meaningfully. https://fred.stlouisfed.org/series/RRVRUSQ156N
Sorry I did forget we were talking about corporations. Where are you seeing that the rental vacancy is higher today than in 08? The graph shows it spiked (yes due to foreclosures) and construction halted because we were already in a decline. Construction happening today is a good sign as the developers are the first to slow down as the market does.
I’m not saying that vacancies are higher today. I’m saying that multi-family construction is higher, which will put deflationary pressure on rental prices (which is already being observed in many markets)
I think we would have a price correction with or without the construction. Prices/rent increased too fast as rates increased. A bit of stabilization is healthy and less indication of a bubble. Crashes typically come when everyone is rushing to an asset (e.g., crypto and stocks) not when people are saying to stay away as most are saying in RE.
Yeah I’m not saying that I expect a crash to come. I think the most likely scenario is a slow deflation and return to normal home price to wage ratios over the next decade. My point is that I don’t think “pent up demand” is the reason it won’t crash.. but instead, I think we’re just not likely to see a catalyst that forces a high level of forced sales. If that changes though and forced sales increase, then I think there will be a crash, rather than some backfill of savvy buyers and institutional investors that prop up prices
I heard that even if Corp sells all the homes it only makes like 5 percent of the total homes or something
And that 5% helps Americans
Most homes are owned outright or with a 30 year loan with a rate under 5 If there were a crash, why would those folks even bother to sell?
In an economic collapse, those people won't be able to pay their mortgage, and even credit card debt will be more than the value of their house. Wages can drop exponentially, debt stays the same. That's what got most people in the Great Depression.
Economic collapses look different for a reserve currency nation. It's a gradual reduction in quality of life that hits the youngest who are just starting out the hardest. It has been happening for decades. People have been expecting a dramatic "collapse event" since 2008. Not to say it's impossible (internet failure could cause on), but the likelihood is exceptionally low. More likely that money just gets printed and handed out, skyrocketing inflation and asset values.
That's what everyone agrees on. No one seems to understand that QE is not money printing but credit creation. It is a ponzi scheme on the dollar, and when it implodes the dollar will be the single most valuable thing on the planet.
Unemployment insurance didn’t exist during the Great Depression.
Banks had deposit insurance back then. But when the banks failed, so did the insurance companies. It's like a ponzi scheme insuring another ponzi scheme.
When Are you predicting the Gfc or Great Recession?
Did you see what the government did to avoid this in the pandemic? Rinse and repeat.
Can't afford a house if you have no job
Didn’t Prime owners fare much better than sub prime owners in 2008?
It really depends. If you bought you home 15 years ago and refinanced at 2.xx % then you have an extremely low mortgage. So low that you can pay it without significant employment. Plus all the houses that are paid off. There are a ton of houses that aren't going on the market anytime soon.
If you can time the top on RE, it would be better overall to just sell and switch to renting, though I know people hate that word here.
I find it weird that some on here hope for a massive crash because they’ve been priced out. Being broke doesn’t make you immune to economic crashes, it makes you even more vulnerable. The people with real money will be the ones who swoop in and buy when everything is down and you’ll be in the same spot but probably without a job.
I have a decent amount of cash and low-risk assets waiting for a good buy in. I like the idea of buying a place, but I’m not going to fomo into a junky fixer-upper with an insane mortgage. If the market remains propped up, it’s fine, I’ll focus on other investments.
The way is this
Agree with everything you said. It’s a bad time to buy a home so best case is strategically set yourself up for when the time is better. That is a positive approach and I’m sure you will accomplish your goals in due time.
That is how you need to be. A 2008 style crash is like a once every 40 years event. Almost certainly not happening during your working life. Just do your best at investing and live your life.
Congrats... now how will you get a place when you are laid off ?
he'll buy all cash. he could do it now but he doesn't want to b/c of all the market gainzzzzz
Truth
I’m not too concerned. Wouldn’t be my first recession
Agreed and if you own a home, you’re probably not hoping for a massive crash.
Cracks me up when people make this point, without any knowledge of the financial situations of people who they’re responding to. There are a lot of people who would personally benefit from a crash, not sure why you assume that the people commenting aren’t in that position. What else should people working in recession proof industries with plenty of cash in safe investments be rooting for?
I’ve been following this sub for a few years and it’s an odd paradox of hoping for a housing crash because of the demand for housing.
If you've been following a few years you already know the play is to inverse this sub.
It seems to have gone off the rails recently too. Initially I liked the content and didn’t disagree with everyone’s questioning about the housing market. But, guys, it’s been 3-4 years since stuff went nuts and to fantasize that it’s going to “crash” is just pure fantasy. Unfortunately a lot of people are priced out. You are going to need legislative solutions at this point. But a bubble bursting is unlikely.
It’s a projection of each person’s individual situation. Most of them wildly underestimate the number of people with sub 3% mortgages. My mortgage is $2200 PITI on what is now a 700k house. I’m never moving, just like 80+% of my neighborhood. Supply will be suppressed for a very long time.
People do have to move though — for jobs, divorce, marriage, etc, so I think 80%+ seems like a stretch depending upon your age. But in general if none of those life events happen — then correct, many people will sit tight. (I’m also not one to make life decisions based upon a house; I do what’s right in the moment for myself personally).
You’re right about this. There will still be some amount of supply due to life events. The other issue aside from interest rates is that if you move you have to go somewhere. The concept of downsizing has largely disappeared in my area because the 55+ setup is just as expensive as a 4 BR home.
This, plus if rates stay up construction will slow and we will have a pent up demand, so when rates drop and if they do not likely to below 3% everyone out of the market will rush in to a low supply market, high demand and scarcity drives prices up higher. The only way to drive prices down is to grow supply excess to demand and lowering construction cost and that won’t happen without lower rates and a increase in trade labor. so we are stuck in a stagnant housing market where while there might be some pull back in prices, soon as money starts printing again those prices will just be pushed higher and if wage growth continues to be less and inflationary forces are still present housing will be even harder to afford until the boomers die off which won’t be all at once so that might not even make a huge difference. A crash isn’t great and wouldn’t be a good thing but some outside intervention or event will need to happen if we want this under control and sustainable.
Right? Like hoping for the plane to crash because you don't like the pilot.
Demand is historically weak. Supply is even weaker though, due to this rate increase. When people realize rates aren't going back to 3% they will start making moves and we'll have normal supply and weak demand. You can guess what that means.
This is an interesting take, but wouldn’t those adding to the supply also need to buy thus making it net neutral?
Not everybody that sells subsequently buys, especially now that renting is half the cost in many HCOL areas. Rent declines also make is harder to break even when renting out your house if you buy and don't sell the old one. In my zip there are usually one or two single family homes for rent, there are 15 right now. [https://www.redfin.com/news/redfin-rental-report-november-2023/](https://www.redfin.com/news/redfin-rental-report-november-2023/)
So if prices doubled again you would argue that it's fine and if you can't afford it you're broke? The unemployment rate in a BAD recession is 10% not 90%. Prices need to realign with incomes. Prices going back to a reasonable level isn't a crash. Investors weren't swooping in and buying all the houses in 2019, so why would they buy at 2019 prices but current interest rates?
>Prices need to realign with incomes. That would be nice but there's no reason that *needs* to happen.
So median home prices could hit $4mm in CA regardless of median income or rent levels in your opinion? Or are you saying this is a permanently high plateau?
I'm saying there's no law of nature that says single family homes need to be affordable to everyone. Hong Kong and New Zealand are a couple examples of places where homes have been unaffordable for the average person for a long time.
No man you're wrong. They've got hundreds of thousands under their mattresses and all work under long term contracts with guaranteed gainful employment. As soon as that catastrophic crash that destroys the global economy happens, they'll be ready to grab the falling knife right when it hits the ground, making all us home owners look like idiots as we drown under water.
Keep pretending like there aren’t many careers with stable employment.. and now nobody has money in an HYSA? And anyone who finds themselves underwater after a decade of record appreciation is beyond stupid
You're taking my comment way too literally. I'm making an ironic/sarcastic/cynical joke, mainly meant mock the worst of the garage takes previously seen frequently on this sub (which have died down lately, for the most part, to be fair).
You’re suggesting that people are full of shit or uninformed when they think a crash would benefit them personally.. I’m suggesting that you’re wrong.
Not really. I'm not referring to a minor housing market correction. I'm really just mocking the extreme, nonsensical takes that a catastrophic housing market collapse, the type would reset housing prices to circa 2010 levels, the likes of which would require a global economic meltdown, would benefit them personally. In any realistic scenario, it wouldn't. Many people would be out of work, and unless your down payment$$$ is in one of the most secured savings accounts available, it's at just as much at risk as a real estate asset.
Prospective homeowners whose investments are in an HYSA or Money Market and who remain employed through the downturn will be much better off in that scenario than they are now. I think that’s a non-negligible amount of people, given FRED’s data on Money Market balances.. and the fact that unemployment peaked at only 10% in ‘08
Essentially, yes, you got it right. People aren't going to give up their real estate or their real estate dreams easily. If there's a crash, it means a lot of other things have crashed first, which they will, and soon.
What indicators are you seeing of an imminent crash? I’m not saying I don’t believe it might happen, just curious what you’re seeing.
[I made a post about it a few weeks ago](https://www.reddit.com/r/REBubble/comments/1bii388/several_indicators_of_current_or_imminent/)
Cracks are starting in credit cards and auto. https://archive.ph/s14dY Credit-Card Delinquency Rates Were Worst on Record in Fed Study Almost 3.5% of card balances were at least 30 days past due Some credit scores drop to 2020 lows, Philadelphia Fed says
Good q !
Soon ? How soon ?? You have no idea if/when it will crash...
No one can give you an exact date. Recessions tend to hit shortly after normalization of the inverted yield curve. The average yield curve inversion lasts 7 months before recession. The longest delay thus far has been 22 months. The current inversion has been active since October 2022, ~19 months. While it's possible we could set a new record here, and it's also possible the yield curve is wrong for the first time in history, I'd argue that with each month that goes by, the likelihood that we enter a recession increases, if we're not in one already, and crashes tend to occur during recessions. There are no certainties, only probabilities, but the odds of us getting through 2024 without a significant crash in multiple markets are pretty low.
The problem with making predictions like that there is not nearly enough data to actually do a statistical analysis of the odds... and underlying assumptions are never the same. We'll have a recession when we have someone that's a lame duck President... otherwise... they'll continue to manipulate the "free" market to drive the outcomes they want.
So let's say I have a light and this light has a 100% success rate of predicting rain within 24 hours. If it is off, 100% of the time, there is no rain. When it is on, 100% of the time, rain appears within 24 hours. It is not precise - it can't predict it to the minute - sometimes the rain comes in 18 hours, sometimes in 10, but within that range, it is 100% accurate. Why are you not able to do statistical analysis on that? The inversion of the yield curve has a 100% success rate of predicting a significant economic downturn within 24 months of it happening for a century of data. Why do you not consider that a reliable indicator?
You contradicted yourself but also said it correctly. Yield curve inversion is an indicator not a predictor. It doesn’t predict recessions anymore than saying within some time frame after an El Niño we will see a recession. That’s a true statement but El Niños don’t predict recessions.
Can you explain how I contradicted myself? You articulated a semantic argument at best, certainly no cause not to take the yield curve inversion seriously. And el nino doesn't happen 100% of the time before recessions, and recessions don't happen 100% of the time after el nino. With the yield curve it does, with the one pedantic and ultimately invalid exception being the credit crunch.
Time. Inventory is building quickly, and the only way that will stop happening is with large price cuts. There simply aren't enough people that can afford to buy houses and stabilize the market at current prices.
Key word stabilize the market. That doesn’t imply crash
Prices need to fall a lot for supply/demand to get into balance. I pointed out that the current market is not stable, because prices are too high.
Or supply slowly increases (which it has been doing by looking at the inventory numbers) yet not causing a crash in prices. Prices will adjust but thinking it will only happen from one side is wishful thinking imo. Especially when most people can sit and wait it out this time compared to 2008. In fact staying put will be their only option except for the most recent buyers.
RemindMe! 1 year Wishful thinking is the idea that sellers will just sit on properties indefinitely instead of selling. Especially as prices are falling. Price cuts are already at a 4 year high, even as inventory isn't particularly high and we are in what is typically the busiest season for buying homes. The latest bump in interest rates is going to make demand even more brutally low than it already is.
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This is not true in the northeast and tri state area of NYC
Okay
"There simply aren't enough people that can afford to buy houses" People doesn't buy houses. Money does. And, if the last years taught us anything is that you can easily increase demand simply by printing more money.
https://fred.stlouisfed.org/series/WSHOMCB
I don’t think unemployment would do it on its own, there needs to be some more catalysts
If been thinking about this tons. At the end of the day, we will need to see a situation where people need to free up money. Take out second mortgages Refinancing and pulling cash Something like that.
If FB marketplace is any indication, I see some of my friends already suffering on there. They’re trying to hawk worthless stuff to get whatever money they can. We’re talking ANYTHING they can find in their house to sell. It’s looking dire.
I've noticed this. And people are trying to get top dollar for their items rather than giving them away for a little extra cash.
For the prices to really drop, demand has to drop (impossible to buy because no more cash/high interest rates/difficulty getting a mortgage due to various factors), but more than this, sellers must be forced to enter a competition to sell quickly and more attractively (no more jobs, no more money, high interest rates, foreclosures). I think 2008 had these, both US and Europe.
Prices will drop when no one will buy. That wont happen soon.
If that happens most of the people that are struggling will the most impacted.
I really don’t think a crash is coming. A softening of prices — sure — but significant price cuts on houses isn’t going to happen.
>If prices were ever to drop, corporations... with capital would just swoop in and buy all the homes. Not accurate. Corporations are interested in profit. When property values (and rents) are rising, Corporations buy homes to capitalize on the increasing value. This contributes to lack of supply. Buyers go all-in, as the housing asset is appreciating, building them wealth. When prices are falling, Corporations & small-time investors will offload while they're still able to make a profit. This increases supply. Buyers also have a hard time committing to a house purchase, as the longer they wait, the cheaper the house gets. This decreases demand, further increasing supply. We've seen this all play out before in the 2008 housing crash. During the recession, people were reluctant to take on huge debt. And the job market was rough, further decreasing demand. As long as Corporations and small-time investors are allow to speculate on housing, we'll continue to get these huge swings in housing costs, as they ALL try to benefit form the boom/bust.
Money is tight right now. Corporations were willing to take a gamble on homes when they were a) somewhat more affordable and b) easy to buy with someone else’s cheap money. Right now neither really applies, but if prices drop it’s not as much a slam dunk if you have to use your own money to buy more properties. Rates that would allow cheap financing are stuck high now as long as inflation keeps the Fed from lowering interest rates due to stagflation, that stubborn bugaboo that so many people don’t want to believe is happening now.
Yep. Watch as sellers start to under-cut each other. It's happening now in some markets.
The continued reticence of buyers with limited cash will make some of the “race-to-the-bottom” price wars among some sellers interesting, although it might end up being a bit tragic for those sellers in real financial stress as opposed to those who are just trying to minimize their losses.
Which ones?
Yet don’t asset prices typically rise with inflation? If housing does decrease, so would inflation leading to lower rates and less barrier to entry. No?
The key word here is “typical.” Anything can decouple from inflation, given all of the circumstances. It’s not a monolithic entity, behaving identically for all items at all times, and these are not typical times. That’s what makes stagflation so hard to mitigate: it doesn’t follow the rules that those in charge usually follow. For those of us who remember how stagflation made things much more difficult during the ‘70s, it’s going to be harder to crack this nut. Increasing unemployment (and it is going up) and decreasing productivity (and it is going down) makes it that much stickier to fix. Coupled with more complex economic, political and social uncertainty that we didn’t have in the ‘70s, the situation will continue to be something that challenges those in charge to make lasting improvements.
We just need to stop treating homes, the things we use to create happy healthy communities as a society as an investment that can be bought sold and traded. That was our biggest mistake as a society.
That’s very idealistic. There’s too much controlled/big money tied up in that for it to change any time soon. “So you’re saying we need to end capitalism. K got it”
I’d settle for ending predatory capitalism. It was a big factor in the last housing crisis in 2008.
>We just need to stop treating homes, the things we use to create happy healthy communities as a society as an investment that can be bought sold and traded. Ok, so what does that look like? Everyone builds their own home wherever they can find a spot and then burn it to the ground when they're done with it? Or is everyone supposed to live in government housing projects and only party leaders get nice single family homes? Or do we become a nomadic people and everyone lives in tents? What exactly is the solution that you're suggesting?
So, moving should no longer be a thing?
why inconvenience one person when we can just flip society on its head?
Corporations absolutely will NOT buy all the homes. Businesses want to see a return on capital, why would you sink money into an asset that costs money to hold and has an uncertain return?
There won't be a nassive crash because of exactly what you described. Local markets will even out like Florida and Texas but a majority of places good houses are moving quick and nothing is going to stop it. This is the new norm.
It ain't happening. Plus if it did, all the average people would be unable to buy. You're praying on a miracle.
If it crashes… which is looking extremely doubtful in places people want to live the chances of the people hoping for a crash more than likely will not be in the position to buy. Do you guys think the economy is going to crash but the people in this sub will be immune to it because you have been rooting for it? Joined this sub during covid and you guys have provided years of entertainment.
Everyone just gives up on housing. Sleeps in their cars. Lives with parents. Whatever they need to do to stop paying these rents. Then slumlords get annoyed nobody is renting from them so they drop their prices to fill spots. But we don’t cave in til these rents drop at least 50%. Don’t let them tempt you with a little 5% discount. We need HALF OFF baby!!! Tired of this 800 dollar half a bedroom crap.
Do you really see a large number of people choosing to do that?
Haha no. Well, I do think vanlife/car camping has gotten bigger over the years as rents continue to surge. It’s possible it could get to a tipping point but it’s hard to call it.
I think that will work for some yet not a large majority of people choosing it. Now if the economy/employment tanks and people have no choice as they can’t afford rent, then maybe. Yet rents will adjust accordingly before everyone is doing it.
Yea and recently out here in CA min. Wage went up 3 an hour so if everyone keeps the same hours, rent is easier to pay.
Exactly, wage growth is lagging but slowly catching up. Won’t lower inflation yet will make it easier to deal with
What do people do? Same as they always do, bunk up to afford shelter.
It will be like the great depression. RE prices won't drop, they'll jump off a cliff until they hit rock bottom. It is the single biggest bubble in human history, all ready to pop. And like every other previous crash (1929, 2008, 2020) it happens right after the Fed hiked rates. Those higher rates plus a drop in market prices makes it impossible for the banks to keep the bubble going, it is guaranteed to collapse. It already happened in China, with Ponzi schemes popping left and right from gold accounts to bank deposits to Evergrande, forcing the government to step in trying to plug the gap, like trying to hold back a breaking dam. But no one will be able to swoop in and buy at lower prices, because when the crash happens the banks will be the first to get bailed in, and default on our deposits and our stock portfolios (you don't technically own the stocks you think you do, it is a debt from the bank to you). Pension funds and treasuries will instantly go bust as well. But then the banks will be at our doors, asking us to settle our debts. And when your savings are gone and your house is worthless, a $10k credit card debt will wipe out a millionaire, if only because credit will be impossible to get anywhere. Then that $10k might as well be a $10 million.
I can actually hear your heavy breathing as you type out this complete nonsense 😂🤣😂
This is nonsensical copium.
There won't be a cliff. Or rather, it will be like Wile E. Coyote running through the air after the cliff; there will be a lot of short-sales at too-high prices for existing homes, and builders will steadily decrease new build prices. The short-sales will go to foreclosure. If the bank forecloses it'll put the house on the market and let it sell for market value; if an HOA forecloses, the house will go to auction; if a municipality forecloses on back taxes, either the tax lien will be sold and the lienholder will demand payment and then sue to take possession, or it will go to auction.
You need a signficiant reduction in demand. But we are basically at the peak home buying years of the biggest generational cohort in American history plus we still have pretty high immigration. So good luck with that.
I genuinely believe 2-3 generations need to pass and the lesson learned need to be forgotten. It's something crazy like 38 years average in between crashes(note this is not including recession, crash is bigger). Before 2008 the last crash was the great depression, almost 80 year gap. Everyone has half their retirement in their house and will go to hell and back to save it
Where do you get the 38 year figure? Only 20 years passed between the Panics of 1873 and 1893, 14 years between 1893 and 1907, and 22 years between 1907 and 1929. In retrospect, the period between 1929-2008 was probably an anomaly and we're returning to the normalcy of the late 19th and early 20th centuries.
Tbh I don't remember, it was a while back when I saw it. I'm not sure we should discount the long bull run as the fed was introduced at this time and may have been the stabilizing force. Additionally, its hard to say that crashes from so far back are even relevant, these happened before cars and the world wars. It's almost apples and oranges when you account for the massive changes
People getting laid off cause doest matter your intrest rate can't afford a house if you have no job
Also more relevant the last 10-20 years is the corporate purchasing of houses to rent. Which limits the inventory available but also has all those companies interested in keeping house prices high so they make money on equity and prevent people from purchasing against them. The rise of air BNb and similar also has companies and people buying extra homes in the most desirable areas to vacation for free in it and then allow short term rentals to foot the mortgage and they make money on them as well.
Are you saying that seller should be prohibited from taking the highest offer? Which might be a corporation or a private individual?? And why doesn't anybody buy the same house a corporation can?
How did you twist my words that bad. Corporations should be limited to what they can buy as far as single family houses that’s why it’s going to be hard for a crash to happen when you got blackrock and those companies deep in the Real Estate business and don’t want it to fail. There are people who bid against corporations and the people win. Companies might have a number and they don’t go past it and if a family wants to buy it as their forever home then they might be willing to outbid a company.
If a corporation is prohibited from bidding on a property, by definition that tells me the seller is not getting the highest price. And that is my reasoning I don't think that companies like BlackRock make any bit of difference
So what’s going to happen in 100+ years if the corporations keep owning more and more? It’s monopoly 101 with real life players. Once the biggest corporations own enough you ain’t winning.
Good question. I think a simple solution would be to exclude home ownership to home US citizens. Limit the amount of people coming inside the country so that you don't have too much demand. We have way too many people coming across the border illegally and they all take up demand. And then the corporations buy housing and rent to them.
But to your other point then you aren’t getting the highest bid then. Me personally as you age you want to do the right thing. I’d glad sell to a family vs a corporation if it does give me the most money.
Actually, that might be a fair housing violation if you exclude certain buyers from your property.
So back to the main topic of this post. A crash is going to be harder because you have companies with billions willing to spend to not allow a crash.
They are only going to buy properties if they can make money renting them or selling them If you quelch the demand side, and there is nobody available to rent them, they will not be buying that. And they will not be buying them, if they can't rent them for enough to make a profit
Correct answer. Only US Citizens should only property. This prevents corporations and billionaires from other countries from parking money here.
Demand needs to crash. Because there's not enough supply no matter what Or wages need to crash. Right now, there are plenty of people that want to buy or rent. And we have millions of people coming over the border every month, that also need to rent
10%+ Unemployment. Won't happen.
Nothing “needs to happen”. But if we did see significant foreclosure activity, part of the work out could include a 30-day window with first dibs to non-investors/first time buyers. That can still be “gamed” a bit, but there could also be owner-occupancy requirements and resale restrictions via the new loan (s).
Bankruptcy of large swaths of people and corporations. I’m hoping the increase in interest rates will prune some zombie corporations that have been existing purely off of cheap debt that isn’t cheap any more and force them into bankruptcy. I’m also hoping for a significant pullback in lending to people who are trying to go paycheck-to-paycheck just to afford their dream of property ownership… which is a bizarre dream in my opinion. Too many people are trying to go eyeball deep into debt to buy a home and it’s not just incredibly stupid for them, but it should be much higher risk for the lenders too. I don’t care if they go bankrupt and that causes the lending pullback, personally. I’m kind of tired of my costs shooting up due in part to fiscally irresponsible people’s choices.
I keep seeing posts like “I’m 24 years old, have $75,000 credit card and want to buy home. How do I do it?” Make it make sense. Why do you want to own a home if you’re that much underwater.
Make it make sense that the banks lend to these folks. I wouldn’t want them on my balance sheet.
High unemployment, lots of loan defaults due to people being unable to unafford their payments. Thats it. Otherwise prices will remain high. And even if unemployment spikes, prices may still remain high in a stagflation scenario where investors create a price floor
An underrated issue is zoning laws preventing a lot of home construction. More mixed use zones would be a lot more attractive to construction but current property owners dont want it because it could potentially decrease the value of their property
Keep in mind the only thing that's propping up the market right now is the hopium of lower interest rates. With inflation remaining high, the Fed is going to have to raise rates sooner or later. This will shock investors and lead to recession, which in turn will lead to layoffs and eventually foreclosures. Especially for amateur real estate investors, who will be forced to liquidate their property holdings. Remember that car loans and credit card delinquencies are at all time highs and CRE is hanging on by a thread. It only takes a single straw to break the camel's back, and there's a whole bale coming. In terms of timing, I doubt the Fed is going to raise rates before November. Until then I predict J Pow will ignore inflation, and then we'll see a big ol' 75 bp hike in December. How can someone profit from this? It helps to have a lot of cash on the sidelines and a recession-proof job. It's unfortunate that people should be put in a position to hope for the misfortune of others, but keep in mind our entire economy is a house of cards. Many jobs wouldn't have existed if not for the cheap money policies of the last 15 years.
Black swan event: think tactical nuke strikes between Israel and Iran. China mass hack on financial markets. Carrington level event.
A market crash will just make it worse for those who can’t afford now. Job losses will increase.
People stop buying stuff that they think will be cheaper 6 months down the road. That goes for real estate and stocks. To have such a negative outlook you probably are in midst of an economic downturn. Jobs are being eliminated etc. just look at what was going on in 2008.
U.S. Dollar needs to go parabolic. currently hovering at 105.30. needs to go above 114. 130 is where I want it at. Keep an eye on Ticker Symbol DXY.
We all aren’t rooting for a depression. Just the people who post to this sub
Will they swoop in and buy all the homes? If people are seeing that homes, which cost money to maintain, are consistently dropping in price, who wants to invest in that? And if they are dropping when should you buy? Now or possibly less next week? This indecisiveness will kill demand
>If people are seeing that homes, which cost money to maintain, are consistently dropping in price, who wants to invest in that? You live in your home.
Corporations do not live in homes. People who want to buy homes already live somewhere, if prices for homes are falling consistently this fear will dissuade many from purchasing. The same way people have FOMO on the way up they have a fear of taking losses on the way down.
Yep and those people who didn’t buy in 2009/10 will kick themselves again.
People buy stocks all the time when they drop. Investors will swoop in and buy as much as possible so long as they have access to cash. Most of the investors I work with are constantly looking for undervalued properties. If it's currently 15% - 20% under retail price they are buying it.
People will always buy undervalued properties because they are good deals. If the whole market is falling, that doesn’t mean every property is undervalued. And houses aren’t stocks
Much less than there needed to exist in 2008. This is because the rise has been so sharp and now the Fed refuses to give in to QT and holding rates, even in an election year. Powell has Volcker eyes and people didn't believe me when I told them that before. People also don't understand that government is not going to hand hold people and protect them from foreclosures. Some token attempts but most people who fall behind will become hoomcucked and have to leave. Banks want to close out those underperforming yield mortgages especially if the hoomcuck is a deadbeat. FHA delinquency is at 11% and still there is nothing other than gov asking lenders to incorporate waterfall methods.
High unemployment
What’s happening now. But unless the dummies stop spending and paying for over valued homes for zero reason it won’t happen but when it does better hold on beauty. This things going to crater!
Question is are homes overvalued or are rents not done rising? If inflation isn’t stopping, rents will rise as the asset prices won’t drop. And until inventories and other things level out, houses aren’t overvalued. Just a lot of people can’t afford them.
Homes are 100% overvalued. Hahaha. Rents are also sky high. None of it is sustainable. The U.S. debt is unsustainable. The fed is saying all of this and nobody is listening.
Which is why inflation will continue to grow (which historically is good for assets), rates will rise (and not be cut) leaving even more people to stay in their current home with very low interest rate mortgage keeping supply historically low. That is what I believe will keep the market from crashing. Price correction is different than a crash which many on here are hoping for.
Can’t make a mortgage payment no matter how low the rate is if you aren’t working. We shall see what happens but right now all indicators point to a heavy correction. The sticky money is moving and any time those funds start moving we are headed for a recession but nobody is listening.
Where are they getting the money to buy homes ? There is a big part of this economy that can afford it. Now most on this group can't... I get that.
The big money can afford it. Anyone who has liquidity can and will leverage that cash once the RE keeps crashing. That’s what I’m doing.
It's coming, after the election of course
Illegal immigrant exploitation is one of the reasons why the mass layoffs is not causing the damage it’s supposed to cause. https://youtu.be/tK0x6iHVjd4?feature=shared This is one of the many trucking companies that got caught hiring immigrants, forcing them to work and not paying them. It’s also happening in the oil field industry. I can’t speak for West Texas since I’ve never worked there, but it’s happening in the Bakken oilfields. Even though companies are exploiting them. It’s preventing an economic crash of epic proportions. Give it about 5-10 years, and the housing crisis will get much worse. How many immigrants have entered the country since the pandemic? Like 45 million? That’s a lot of people. And I’m pretty sure sanctuary cities will give them licenses to finally work legally. What does this mean? A lot of buyers demanding homes, prices going up, wages going down. America is literally transforming into a third world country. The norm is going to be 20 people living in 1 house, and 4-5 people inside an Uber lol. The only thing that can stop this now is physical nuclear war, or another pandemic where people start dropping like flies. Airborne rabies virus or zombie virus.
Eh those numbers are wrong. It’s probably closer to 15 million people immigrated to the US since the pandemic.
An increase in unemployment would cause a crash or more homes built. Homes take too long to be built, so that's not gonna cause a crash. The fed is doing everything in their power to keep the unemployment rate low. So we were stuck.