Reply to Why do expert say: Buckle in for a brutal free-fall in home prices

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Prices are going to continue to fall because of interest rates. It’s a mathematical certainty.

No one knows exactly how far they will fall, but the prices will fall.

You really want to look to economists regarding this, not realtors. A lot of people think realtors have strong, economic backgrounds, or that they are experts in predicting markets. They are not.  [/quote]

I wouldn't trust economists either. (Of course no one should trust real estate agents on this.) But so far prices are not "falling" in the sense that sales prices are markedly lower than last year. They just seem to be going up less and taking longer to sell, and maybe with the usual contingencies in place on the contracts. Maybe things will change next year. I hope so. But given the overall strength of the economy in this area and the lack of supply, I don't see a big decline absent a severe recession.[/quote]

Prices are going to go down because housing is an overvalued asset and the affordability is a huge issue that the Fed is determined to address. If prices don't come down through other pressures, the Fed will continue to increase rates until the bubble bursts. The Fed is trying to control inflation by devaluing overvalued assets, and housing is the most inflated sector of the economy. The Fed is determined to force a housing correction as a mechanism to control inflation in other sectors of the economy. It hasn't hit the tipping point yet, but it will. [/quote]

No way.  The Fed was trying to calm down the market and stop the rapid price increases. [b] That has stopped. [/b]

Powell even referred to the bubble in past tense.  [/quote]

It has stopped for now.  I'm afraid if they lower rates (which no one has said they are doing) - that the frenzy will ramp up again.  There are a ton of buyers on the side lines.  [/quote]

Could be the opposite, it may keep the buyers on teh sidelines for longer waiting for the rates to go even lower if they are shown as little as a possibility of this being a reversal of direction.  Just like initial hikes in rates fueled the frenzy of those on the sidelines rushing in before rates got even higher.   You have to maintain the direction and keep rates stable for long enough time for prices to come down and stabilize and for buyer/seller activity to be normalized.

We finally entered this equilibrium where rates are high enough for prices to go down and homes to stay on the market longer if overpriced and to deter frenzy of buyers.    If we cause housing prices to plummet too much (like be cut in half, like some people wish for and speculate) then it will ripple through the economy causing a lot more issues that it would solve.  It would effectively make people a lot poorer overnight and underwater, because most middle class people have most of their NW in their homes or modest RE investments.  This will curb all sort of spending significantly enough to fuel mass unemployment in many industries.  Even if this reduces inflation, it obviously would cause a lot more unrest and unfavorable wealth re-distribution.

It can't be good for homes to be overvalued, but it also cant' be good for prices to plummet across the board.  [/quote]

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