Buckle in for a brutal free-fall in home prices and US housing is in a massive bubble

[RKP5637]

Everyone should have seen this coming, these outrageous prices for houses with way way over inflated prices. A lot of people IMO are going to be left owning some piss-poor real estate.

https://news.yahoo.com/buckle-brutal-free-fall-home-090000513.html

- The US housing market is cratering, as the Fed's rapid interest rate hikes send mortgage costs soaring.

- Home sales have fallen for 8 months, and prices are dropping. But economists say worse is to come.

- Here's what Jeremy Siegel, Paul Krugman and 5 other top experts say about how painful things will get.

The alarm bell is already ringing for American homeowners, as surging mortgage rates scare away buyers — and the slump in the US housing market is only going to get worse, experts say.

The signs of stress have become blatant. Recent data showed that in September, existing home sales dropped 24% — the eighth straight monthly decline, marking the longest slide since 2007. Homebuilding starts slumped, and the number of new home listings fell 22%.

Behind the deteriorating housing market is the Federal Reserve, which is aggressively raising interest rates to fight 40-year high inflation. That has sent mortgage rates soaring to 20-year highs.

That has made buying a home more expensive, prompting buyers to back off — mortgage applications are at their lowest since 1997. Meanwhile, growing concerns about a coming economic recession have dampened demand.

[Demsrule86]

1. My neighbor just sold his house for a good amount despite the interest rates so I don't think so.

This is Mark Zandy...bullshit then.

[Trenzalore]

2. Maybe it will wipe out some of those people who bought houses as investments

Hoping to flip them or use them as short term rentals.

[Demsrule86]

3. The entire post is a rightwing talking point. First of all no inflation...greedfation.

Secondly, Zany is never right about shit.

[Scrivener7]

6. My sister is looking to move. Around me prices are falling like stones.

Price reductions of 20 percent are not unusual in properties we have been watching, and the drops seem to be accelerating. It's not a talking point.

For her it doesn't matter. She'll sell low and buy low. But for people looking to get into the market, this is an opportunity.

[BlueWaveNeverEnd]

28. nearby townhouse listed for $750k, got offer, when all was done, buy got it for 600K

this as 2 months ago as prices started to fall.

amazing deal for the buyer.. $150K off.

[Scrivener7]

40. A really big apartment in my neighborhood sold for $625K over the summer.

Another one in the same line (so the same configuration) went on the market for $500K a couple of months later. A few weeks later they reduced the price to $450K. And it's just sitting there. And it's in better shape than the $625 one was.

Of course my own (MUCH smaller and cheaper) apartment has lost a ton of value too. But I'm not going anywhere, so it doesn't matter.

[Bayard]

4. Wonder if that might affect undeveloped land

It would follow, that if people can't afford to buy a house, they can't afford to buy land and build a house on it.

We were really disappointed when a developer swooped in and bought the 200 acres next to us for an outrageous price. We managed to snag a couple acres that were bordering our property before the auction, and paid far more than we should have. We just want the privacy and pasture.

[oioioi]

22. It will affect the developer especially hard.

Developer has almost certainly taken out a loan against the land - very likely NOT a fixed rate. So their current interest costs are rising every month which is pressuring them to develop or sell the land as quickly as possible.

They'll need to borrow even more to finance the construction - rising interest rates and falling real estate prices will require more collateral and more risk from the bank's perspective.

Their original calculus for the development was likely based on lower interest rates and higher selling prices for the development than the markets are offering today. Adding to this, the costs of construction labor and material have escalated rapidly in the past couple of years. If they are housing developers they are probably upside down on this deal by now. If they are building something commercial, it's a little less volatile but a recession will dampen that market as well.

Depending on when they bought the land, they are going to have a hard time making the kind of money they expected to when they did their original numbers because they are being squeezed from all sides. Depending on the depth of their pockets and the patience of their financiers, they may have a hard time getting the project to break ground in this economic environment.

You might even be able to eventually pick up a few more acres at a much better price if this plays out. The longer they are sitting on the land, the less viable a development will become, at least until the money and real estate markets reverse course - and that will be years, not months.

[Bayard]

51. My understanding,

Is that he just planned on selling the undeveloped lots. I've ridden all up in there, and they did clear some beautiful sites.

I'd love to buy more of it, especially the woods that comes up close right behind us, that's being marketed as, "hunting land." We're just afraid to spend much right now, but who knows? It could sit there forever.

I'm glad to not be hearing the constant chainsaws and logging trucks anymore of the Amish guy that bought it first.

[Dysfunctional]

5. My son and his wife bought a 1/2 a duplex in Jacksonville NC for $74,000 2 years ago.

Last week, after being on the market for 1 week a neighbor sold his for $132,000.

[roamer65]

7. The Second Great Recession.

[Scrivener7]

8. Nah. This just happens cyclically. I got into the housing market during the

1989-90 "Great Recession."

[roamer65]

10. Let's see.

Another year.

2007 right now.

[Scrivener7]

12. I don't understand what that means.

[roamer65]

18. I see a lot of parallels to 2007.

Higher interest rates and a housing bubble.

In 2008, it popped and thus started the Great Recession.

2023, anyone?

[Scrivener7]

20. Yes. And housing bubbles popped in 1989-90. And 1974. And 29. And 1897.

And 1873.

As you can see, it's very roughly every 25ish years. We missed one that should have come around 1950, but I think that was the hot post-war economy.

This one is coming early. But tfg wrecks everything, so there's that.

[roamer65]

25. Everything Trump touches dies.

[grantcart]

52. In 2007 there was a lot of excessive inventory. Is that true now?

[OrlandoDem2]

9. I'm not seeing dramatic price reductions in Central FL, although sales have slowed down.

[oioioi]

24. May not be dramatic - but rising interest rates will absolutely affect prices

The monthly cost of a mortgage has almost doubled. That will inevitably show up in the real estate market. Take it to the bank.

[zipplewrath]

56. Likewise

I live in a very desirable neighborhood (they built a new school). Prices have flattened, but not really falling. But it does take longer to sell a place, and you're not going to get 10 offers over asking either.

I think the article overstates the severity. Some trends have stopped. People aren't relocating because of "work from home". Mortgage rates are increasing. National investment companies aren't buying as much to use as rental property. So you will see prices drop in some markets, flatten in others. The other thing that may happen is a slow down in new construction. None of that is a bubble bursting.

[maxsolomon]

11. I thought there was a company called "Buckle" that was in for a brutal free-fall.

Commas; they're helpful!

[bucolic_frolic]

13. Puh-leeze. Financial press drama every time they raise interest rates

It's part of the business cycle. It will turn, given enough time.

[mahina]

36. Pick a problem. Two breaths ago it was hair on fire "housing costs increasing so fast"

I still think housing cost way too high so I pick problem #2.

[70sEraVet]

14. Depends, in part, where you are.

If you're in a fast-growing area with a lot of demand, the houses are still going to sell.
I just wish the government would put the brakes on corporate investors buying up large swaths of housing and leaving little left over for private home buyers.

[RKP5637]

15. Yep, same thoughts here. n/t

[mahina]

37. ⬆️

[PSPS]

16. LOL. Is this a re-purposed press release from the NAR?

[RKP5637]

21. Hmmmm, NAR, No Action Required. LOL n/t

[Chainfire]

17. Not to worry, big investors will come in and remove them from private ownership forevermore.

Working people should not own houses anyway, it is above their stations in life.

[RKP5637]

19. Yep, I'm sure that's on someones agenda. Around here china was buying up properties and

then renting them back to serfs.

[BWdem4life]

23. So, lower housing prices is bad. Got it.

[RKP5637]

26. Houses used to be a place to live, now it's an investment tool for many. It really sucks as

far as affordable housing.

[oioioi]

27. It's not that lower prices are bad.

But a deflating housing market will very probably have significant knock on effects on the broader economy as construction and development slows and there is less homeowner wealth and liquidity. It's a very strong recessionary indicator - when housing prices fall, a lot of jobs are lost.

[bigtree]

39. new home sales increased in October

https://www.census.gov/construction/nrs/pdf/newressales.pdf

Sales of new single‐family houses in October 2022 were at a seasonally adjusted annual rate of 632,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.5 percent above the revised September rate of 588,000, but is 5.8 percent below the October 2021 estimate of 671,000.

[oioioi]

43. yes, for the short term...

"This is 7.5 percent above the revised September rate of 588,000, but is 5.8 percent below the October 2021 estimate of 671,000." That's a recession indicator.

It is extremely unlikely that new housing will expand over a period of higher interest rates. Rising rates have a chilling effect on real estate investment and speculation. Housing prices will almost certainly fall.

[Bucky]

29. Might be a good time to renegotiate your rent

[BlueWaveNeverEnd]

30. prices need to come down. local one bedroom condos were reaching near $400k. ridiculous

[RKP5637]

32. It is. I've seen some properties I've owned now priced over $1M. They absolutely are not

worth that. Paying $1M for a track house. Absolutely ridiculous.

[Scrivener7]

42. My first apartment was in NYC. I bought it in 1990 for almost nothing. Really. The cost

of a loaded SUV today. Because that was a really bad housing crash and you could basically name your price.

Today, that apartment is worth ten times what I bought it for. It's a big studio but a studio nevertheless. The price is totally crazy.

If only I had known.

[albacore]

31. Gosh.... what a great opportunity for the Big Money Boys...

..to step in and buy underwater-mortgaged homes on the cheap and further turn the country into renters.
"A decade after the housing bust upended the lives of millions of Americans, more U.S. households are headed by renters than at any point since at least 1965, according to a Pew Research Center analysis of Census Bureau housing data."

https://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/

(5 year old data... if anybody has anything more up-to-date, please show #s)

[dembotoz]

33. this might be true

my neighbor bought her condo as exactly the worst time when the last market crashed.
So she has been sorta stuck here while she waits for her condo to be worth what she thinks it should be.

She has recently started talking about putting her unit on the market...
If the value goes splat again she may be here for a number of more years.

She is a wonderful neighbor....her being stuck here would be great for me.....

[RKP5637]

34. I often wish we had reliable crystal balls to see the future. Yep, good neighbors are great!!! n/t

[Samrob]

35. Thank all those who regulations of any kind. They are the same as tax evaders, cheaters, fraudsters

Just so you know.

[bigtree]

38. lower house prices means a buyers market

...more affordable homes.

Link to tweet

[Hekate]

41. Same as last time

I’m sorry for folks who get caught in the trap

[Amishman]

44. Mild drop or flattening? Probably. Crash? Not happening

Why? We just spent a decade under building, supply is short - especially for single family homes.

Small stand alone 'starter homes' are nearly impossible to build profitably in most areas - so they aren't. Land,labor, and materials are too high. Not to mention the costs of permitting, environmental, erosion and sedimentation controls, storm water management, and other indirect costs.

There is unsatisfied demand for single family homes in a lot of places. Prices dropping will cause buyers to quickly enter. Not to mention those buying homes as rental properties.

[NickB79]

45. Good. I'm tired of watching farmland and forests paved for suburban sprawl and strip malls

Literally thousands of homes have gobbled up hundreds of acres near me over the past decade.

[tenderfoot]

46. Free-fall in prices: $1,000,000 down to $999,999

FREE FALL!!!!

[madinmaryland]

47. What about the folks bought in the last 3 to 4 years with ridiculously low mortgage rates?

[brooklynite]

48. Aggregate price changes say nothing about local markets.

I get a call from real estate agents every 3-4 months saying they have buyers with cash if we want to sell our Brooklyn townhouse.

Lots of jobs going in wanting in Seattle because workers can’t afford housing.

[progree]

49. Mortgage rates are coming down....

Mortgage rates plunge, largest weekly drop since 1981, CNN, 11/17/22

Editor’s Note: Freddie Mac, which has tracked weekly average mortgage rates since 1971 and has periodically made changes to its Primary Mortgage Market Survey, changed the source of its data as of November 17, 2022. Instead of surveying lenders, the weekly results will be based on applications received by lenders that are submitted to Freddie Mac. Find more about Freddie Mac’s change here.

The 30-year fixed-rate mortgage averaged 6.61% in the week ending November 17, down from 7.08% the week before, according to Freddie Mac, the largest weekly drop since 1981. A year ago, the 30-year fixed rate stood at 3.10%.
More: https://www.cnn.com/2022/11/17/homes/mortgage-rates-november-17

The methodology change may be some of that, but the 10 year Treasury note, which mortgage rates tend to follow closely, are also down considerably.

Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they make moves which send yields higher and mortgage rates rise.

“The 10-year Treasury dropped from 4.15% last Wednesday to 3.68%, as capital markets seemed to cheer the slowdown in inflation as a sign that the Federal Reserve’s monetary tightening is having its intended effect,” Ratiu said.

They went down a tiny bit more, from 6.61% to 6.58% in the latest week

https://www.freddiemac.com/pmms
(nice graph too)

They are still way way high by the standards of the past decade and a half (that wonderful graph shows mortgage rates (30y, 15y) all the way back to 1971 if you click the "All" button).

[we can do it]

50. Not happening.

[DemocraticPatriot]

53. I bought a "HUD house" in late 2020,

which was actually not in such bad shape as stereotypes would presume a 'HUD House' to be-- all I have had to do is some paint...

very soon after I bought it, sundry websites presumed the house to be worth nearly twice what I paid for it--- and even now the "zillow price" has only dropped a few thousand dollars from the high...

so I feel very lucky!


For anyone not as lucky as me, my condolences... I shopped a few months for a bargain, and found one.

[newdayneeded]

54. the article says a 24% drop in September,

and 22% less houses on the market...........

IT'S. FUCKING. WINTER!!


Plus I'll add, my house has been rising on zillow for the last 3 months despite interest rates.

[Mopar151]

55. Material costs got anything to do with this?

Serious housing shortage in this area, due in no small part to plywood prices! Everything else is up, of course, but it hurts single family starter homes the most. They were scarce already......