Reply to Federal Reserve: signs abound that housing market is entering bubble territory

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Why are people forgetting that there is a housing shortage, especially for single family homes. Construction of new hosing has not picked up. Rent prices in some places are almost as high as mortgages. People still have kids and need more space.

Home prices will not go down. But they will not grow at the same rate as they have the past few years. We’re likely to see a steady growth over a ten year period. By that time there will be more single family housing available. Things will balance out. [/quote]

1) the “surge” isn’t close to the peak of 2005. 
[img]https://i.ibb.co/92CGRyb/DB3-E46-D6-05-CA-43-E6-8-EA0-383-B1-ED7-C27-B.jpg[/img]

2) and the supply is still trailing demand. 
https://www.npr.org/2022/03/29/1089174630/housing-shortage-new-home-construction-supply-chain

The market will soften. If you have an undesirable property it might sit longer or take a small price hit. But overall homes in desirable areas will stagnate at most.

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Facts (again) for the obsessed poster. 
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DP. Maybe. But it isn’t clear what data chart #1 is even showing, and #2 assumes that demand is not influenced by interest rates, inflation, reduction in WFH (or one of many other factors that can influence those currently in the market). Supply doesn’t always catch up with demand. Demand destruction is a thing.

I’m not the “investment banker,” but as someone who is older and been through more of these cycles (anyone else here remember the S&L crises?), I think the warning signs are flashing and you ignore them at your peril. No one knows how bad it will be, and maybe(!) the Fed will figure out how to navigate out of this without a major crash. On the other hand, I saw one investment bank note today that flatly said the only question now was whether we’ll see a recession or stagflation.

I honestly don’t care whether you agree or not. I bought a house in DC in 1999, and saw it’s value rise and fall and rise again through 2007 & beyond. We bought our current house in 2017 in a place that has benefited from Covid migration and it has doubled in value on paper. I’d be happy for it to stay that way, but I have a very low mortgage and when the inevitable happens and the market cools, we’ll be fine. I’m not saying anyone who is buying now is wrong.  However, you do need to be prepared for the worst case scenario.  It is concerning when I see so many people on this board who are so wrapped up in current bidding wars & seem to be completely unaware or in denial about the impact of the larger economic picture. If you can wait out a dip, or have the cash to buy out an underwater mortgage, and understand the risk, good for you. But I had friends in 2007 (in the DC area!) who had to damage their credit with a short sale to get out of houses that were underwater, and it’s not a happy thing, especially when they thought they were doing a “smart” thing by buying in the “hot” DC real estate market. Maybe the current market is really strong. Or maybe we’re just seeing the last gasp of people trying to catch the last of the low interest rates.

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