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]The headline is more alarming than the content. Most of the people surveyed say a 10-20% drop in housing prices. I would say we’ve already seen about a 10% drop in prices in the DMV, uneven across areas but if you look at all the price cuts prices even in desirable areas seem to me to be about 10% lower than they were say six months ago.[/quote]

This, and for people who bought before 2019, this will basically only wipe out the steep increase in prices over the last couple years but will not touch the equity they built before that. Meaning you can still sell a house for a profit after owning it for 5-7 years at a minimum. The housing market can never sustain steep price increases for long.

The only people who should be freaking out right now are people who bought within the last two years and want or have to sell in the immediate future -- they may take a bath.[b] Also, people who have been waiting for prices to return to 2010-2011 levels are in for a rude awakening -- even with rate increases, that is unlikely to happen because of inventory. [/b]Unlike in 2008/2009, this housing "crash" is not fueled by overbuilding housing stock in hot markets (back then, it was places like Las Vegas and Florida, where developers built thousands of new houses knowing they could sell them to people for little to no money down). We also aren't seeing rippling economic effects leading to mass layoffs. A slowdown in hiring, yes, and some targeted layoffs in some industries, but not the domino effect of the last time. [/quote]

Yeah, like the poster on here who constantly talks about “reverting to the mean”.  Gonna be waiting for that “revert to mean” forever, buddy.  It’s not going to go down that low in this area.  Unless they’re posting from Austin, TX or Boise, ID. Too many folks not wanting to sell and give up their 2.5-3.5% interest rate. [/quote]
Blah Blah Blah...

Your friendly (non-conforming) realer here. Miss me guys? Sorry, was on the islands with the family.

It IS going to be a bloodbath. EVERYWHERE. Not just DC, NY, SF, LA or...name your favorite locale. It's gonna be everywhere. Why?

The current economy (including housing) is BUILT on low interest rates. It's a house of cards. If interest rates start going up (Holy shit! They did!) the entire house of cards comes down. EVERY single person here who says "nah...not in my neighborhood or...not in the DMV...or whatever" is in denial. However, there is no way to convince a person who is in denial that they are wrong.

Read between the lines, be smart, be prudent, and do NOT listen to the BS posted here (or in some of the similar online boards). 40 year trend lines don't break because Powell says so. They break because there's a seismic shift underway.

Decide accordingly.

[img]https://i.kym-cdn.com/entries/icons/original/000/000/554/picard-facepalm.jpg[/img][/quote]

Do you own a home?

I do, and the reason I think you're wrong is not because I think my neighborhood is special or something. It's because I own a home that I bought when interest rates are low, we can comfortably afford the mortgage with our current HHI, and that HHI is fairly recession proof because 70% of it is a mid-career government position that will never be laid off. Ever. Worst case scenario, we lose the 30% private sector income for some period of time, in which case we know we could still swing the market (again, low rate locked in) and we'd just buckle down in other areas to ride it out.

We were contemplating selling when rates went up, but now won't because prices are weird plus we don't want to have to buy at the higher rates now. So we'll sit tight and keep paying our mortgage. And so will all the many, many people like me. Will some people be forced to sell because they are moving or getting divorced or hate their schools or something? Sure (though at least some percentage of those people will just rent out their homes, which is something you see a lot of now). And there are others who will be forced to sell because they are over leveraged even at their low rates, and if they lose their jobs or their business takes a dive, they won't be able to afford their mortgage.

But if you actually think that's going to be the majority of the DMV, you are crazy. The vast majority of homeowners in this area look like me -- low rate, affordable mortgage, could move but don't have to, lots of job security, can stick it out for anywhere from 2 to 20 years.

You won't get a free fall in prices without either tons of people defaulting on mortgages or a massive sell off. Which won't happen unless the job market collapses. Which is next to impossible in this area because the market is built around an enormous amount of government employment, and buttressed by a ton of government contracting.

And you know what? If the feds start laying people off or the big government contracts, especially in defense, start drying up, it's an indication of a different kind of social/national collapse. The housing market would be the least of our worries in that situation. If you want to root for that, go ahead , I guess.[/quote]

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