Reply to Wall Street thinks US homes are overvalued by as much as 30+%

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[quote=Anonymous][quote=Anonymous][b]The problem with forecasting a crash [/b]is that it's cheap to own a house right now for most homeowners. Between people with no mortgage and people with sub 5% mortgages (especially sub 3% mortgages), only a small number of current owners are struggling to afford their house. That's why there's no rush to list unaffordable houses/triggering foreclosures, but there's also no rush to list houses by people with cheap mortgages feeling the gilded cage effect and depressing the demand to move up, which also depresses the inventory.  And it's why rates may be high but prices are still high.

In many cities and countries, the average person cannot own a house. But house prices remain high and are in no danger of crashing. It's because the demand is met by the people who can afford to own. Two different populations. We see the same in NYC or DC or California.

Realistically, the only way out of this situation is to either flood the market with new housing (impossible in many places) or slow and gradual adjustment from rising incomes overtaking housing appreciation. The latter is much more likely but will take a long time. As long as a decade.[/quote]

The other problem with forecasting a crash is that the economic conditions of the housing market aren't unstable/speculative, which is what caused the last crash.

2008 was, to an extent, a collapse of the commercial banking system which had taken on too much risk. We bought our first house in 2002 with 3% down. USAA, which is a VERY conservative lender, was our mortgage holder. For our second home, bought in 2015 with 20% down, excellent credit, etc. they wouldn't even compete for the loan. It's unlikely we will see a 2008 style crash in the foreseeable future. The financial industry isn't going to take that risk and if they do start to, the collective head burying in the sand that happened in '07-'08 isn't going to occur again.

What is likely to happen over time, like PP said, is a slowing in the rate of value gains. The old rule before 2008 was you could expect 1%-3% appreciation on your home value per year.[/quote]

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