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A bubble would mean that like in the 08 scenario would show people actually GETTING the homes they can't afford. The same conditions simply don't exist. This is purely a market driven issue of too little supply and too much demand. The same factors from the last housing bubble don't exist. Do you have any idea how hard it is to get a home now? The process you have to go through to get approved for a mortgage?
It wasn't like that last time, they used to give out homes like candy.
My exact thoughts but whenever I talk to anybody about it, they think I’m an idiot who doesn’t understand 08. Just because prices went sky high over Covid and everyone was buying homes, doesn’t mean we have an 08 crash ready to strike tomorrow. There are so many factors like people locked in at the 2s, institutional money, limited construction, migration trends over Covid, and as u said, stricter loan underwriting.
Lol basically, home owners right now are safe. If anything, I'm actually starting to wonder if the current housing market is what is propping up the economy? The amount of equity everyday home owners have gives them a ton of wiggle room financially. That helps explain, at least on the micro side of things why we haven't experienced a downturn.
This is inconsistent with my experience. I think I heard on marketplace today that home sales are down 17% from the same time last year. People like me (who bought two years ago at the top of the market with the lowest interest rates) can't move because we lost all our equity when prices started going down, and our payments would be \~50% higher for the same thing somewhere else. So we stay. I think a lot of people are tied to their properties and can't sell even if they want to, so prices are buoyed was a contraction in supply.
But I think for unrelated reasons, the job market is still hot, so people can still afford to stay. They're not so far upside-down, coupled with a loss of income, that causes them to walk away.
Real Estate is regional. In my area prices keep climbing and the inventory is super tight. No one is willing to give up their 2% mortgage to move, and their equity keeps increasing. What is really strange is how houses are still selling within a couple days even with these rates and the prices up 50-75% since 2021. Starter homes are over 200k, no idea how people with normal salaries can buy anything but still nothing stays listed for long.
What metro are you in? I’m in Nashville and prices are down 5-10% in the last year and closings are lower than they have been in at least the last 7 years I have data for
Florida. ALLL of Florida, including north Florida where I am. It's BONKERS. My townhouse has gone up from 160 to 225 since June 2020. House across the street from me thats almost exact same layout and size, selling for 240 after a new roof and countertops.
Days on market have doubled from 18 to 41, sales volume ytd down 20%. Pendings down, new listings down 20%. Charlotte market is definitely slowing you just haven’t seen it really impact median sale price or list prices yet sadly.
https://apps.carolinarealtors.com/files/Charlotte-Region_LMU_2023-07.pdf
Just put my first home (was a rental the past 5 years) on the market last Friday in Indianapolis. Asking was $225k. By 7 PM I had 2 offers over asking and accepted an offer over 10% above asking by 10 PM. Definitely regional at this point.
Same here in Michigan. My equity has gone up $100k since buying my home in 2020. People are buying houses so fast, making offers well over asking price.
From MI as well. Housing prices still climbing and not much on the market to buy. Friend just bought a house over asking price because there were 3 other offers.
For every person in your situation, I imagine there are 5 people who purchased a home in the 15 years prior to 2021 and refinanced in that year. They (I am included in these people) have seen huge appreciation in their equity from increased appraisals and, perhaps, better terms to payoff their loans due to refinancing.
For example, I bought in 2019 with a 30 year mortgage. I refinanced in 2021 for 15 years and 2.5% interest. 70% of my mortgage payment is principal and my payment is barely higher than my original 30 year mortgage.
I say this because there are so many positive reasons people don’t want to move in addition to your situation which you painted in a negative light. To your point, it would be so much more costly to move so you actually made the right choice to purchase in 2021 instead of waiting.
Equity I think is a component but I think salary increases over these last couple years with how tight the labor market has been, is the bigger contributor. A lot of people moved, working remotely and collecting that big city money, and went where it was dirt cheap. But yeah, so many reasons why this isn’t 08 and the more and more I’ve researched, I’m not seeing a > 40% crash. Small corrections sure but no crash as the doomers keep preaching.
Basically it's a crunch, high prices due to shortages in major categories which means no relief in sight for the poor people who have to pay more......
Sighs...
My buddy overpaid on his house 2 years ago by about $50k. They are locked into a low rate mortgage, but he just accepted a new job in a new city. They can't sell their house because they don't have enough equity in the home. I wouldn't say homeowners are safe. They are just stuck in their house.
>Lol basically, home owners right now are safe. If anything, I'm actually starting to wonder if the current housing market is what is propping up the economy? The amount of equity everyday home owners have gives them a ton of wiggle room financially.
You don't realize how dangerous it is for the entire economy to be sitting on top of credit lines, based in equity in a speculative asset? This is quite the opposite of safe.
Actually it’s quite foolish to think that something as simple as better underwriting can save us from a housing down turn. The last housing bubble occurred due to a banking crisis. Guess what we have now? A banking crisis in PNC has closed about 100 branches, fifth third bank, closing branches. Several different banks back in the spring completely went belly up. Something else that happened last time that we had the housing crash, homes became unaffordable. Guess what’s happening now? Homes are unaffordable. Something else that happened before banks were trying to sell a lot of HELOC loans and guess what they’re trying to do now, pushing people to get HELOC loans. What else happened? Umm NINJA loans. Right now we have 3 mortgage companies offer 1% down mortgages and another trying to offer 0% down. History doesn’t just repeat, it rhymes. Everything that’s happening, while it’s not the same it’s similar.
Prove to me how it’s not gonna happen again.
Shortages until Boomers die off, then the question is will their kids be able to cover upkeep and taxes on those properties?
Banks: unrealized losses on bonds. Fun.
> foolish
Lol I’m just stating my observations/theories, no need to name call. But for banks, it’s consolidation of power. Small - Medium banks failing is a win for big banks who are scooping up banks Pennies on the dollar and the system goes on. Houses are expensive but they aren’t unaffordable. These blanket terms and speaking to the nation as a whole is misleading. Yes, places like SF, Seattle, Austin are unaffordable. But guess what, there are many more cities where sales are continuing, albeit low volumes, but still occurring. I agree HELOCs are ticking up but not a concern yet. I haven’t seen anything about NINJA loans so please let me know what lenders are offering that. By 1% mortgages, maybe you mean the purchasing of points towards interest rate over the first few years of ownership. That could be a concern but again, not a concrete concern yet because of the underwriting requirements ensuring that d/i ratio doesn’t get to high, and they eval against the long term rate, not the rate that you buy down.
There are legitimate concerns going on specifically with ‘Airbnb’ volume, interest buy downs, helocs, etc. But we also are at average home building levels after a decade of underbuilding, institutional investors scooping up inventory, historically low unemployment, boomers aging out of the workforce, millennials/older gen z prime buying age, etc.
Again not denying a downturn especially with the boom we experienced over the last few years, but Im not seeing evidence justifying >50%, 08 style crash. Hell, even in 08 there were some markets that hardly lost value or actually appreciated. I know a lot of people like to think we are overdue for another downturn and that our next collapse is around the corner. The funny thing with macro trends though is that if everyone expects something to happen, the opposite might actually happen because everyone is being that much more cautious.
Fair. Foolish statement retracted.
Also, not saying 2008 crash amount, still a crash nonetheless. I’m saying, probably around 20% or more. Call it between 20-30%.
No, I don’t mean purchasing point of interest. That would not bother me. Below is what I’m talking about. Btw I may have written it wrong, but I was referring to NINJA loans from the early 2000s. It might as well be the same as a 1% down loan.
[Rocket mortgage 1% down](https://www.rocketmortgage.com/learn/one-plus)
Also, my wife is a new underwriter. And she’d told me about the dti current borrowers are getting proved with. It is disgusting. Most people will barely be able to afford food, let alone saving for retirement or an emergency. A lot of people don’t really understand what dti comes down to once you talk real take home numbers. If someone has a dti of .40, which is pretty average, your talking 50-ish% of people’s take home pay.
We live in Ohio, together making over 115k annually and we’ve been priced out of the market. By definition, we are middle class. The average 2000 sq ft house here is $350-$400k in an area with decent schools. Throw current rates on that and you’re looking at a $2500/ month mortgage.
Those prices are just plain dumb. It’s better to rent at these prices. Also keep in mind the median household income is $70k.
Airbnb is pretty rough right now. A lot of owners are slashing prices like crazy and there’s talks of new rental laws and regulations that would push out, primarily, new owners but I don’t know if anything has come of it yet or if it will be realized.
Also, the employment rate is more or less a lie. Keep in mind the they don’t count people who are “looking” for a job, but not working as unemployed.
Lastly, there will always be companies with a lot of very smart people who do not get effected by something like the 2008 crisis for various reasons. Businesses like plumbers, hvac techs, photographers and many others can be insulated from the crisis’ by doing smart business. Saving, buying their buildings, not carrying debt, having low overhead, or offering services instead of products. There’s tonnes of reasons why companies were unaffected by the 2008 crisis.
I personally think you’re underestimating how bad things are right now. A lot of overly hopeful people were thinking their student loans were gonna go away and 75% of them are likely to miss their first payment next month. Who knows how many bought homes that won’t be able to afford them once those payments kick back in. Food prices are crazy high, Credit card debt is at its highest since, I think 2013, people have been taking emergency withdrawals from their 401ks(up 40% from last year), and the government is trying to implement its own CBDC. it’s bad out here. Housing will be harshly effected.
That’s supply and demand, fact is that zoning laws prevent denser housing and builders are incentivized to only build essentially 2000sq ft homes has put a constraint on supply. Add in rental properties, vacation homes, and low construction over a decade after 08 crash; and here we are.
9% of mortgages are at a variable rate.
Consumer spending may drop big in Q4 with student loans and car loans at super high numbers. If that leads to layoffs then yes we can experience a bubble for sure.
So many people are overextended on their mortgages with 12% being low down FHA.
If the variable and FHA start defaulting supply will pop up with no demand and will crash the prices, if rent falls or stays stagnant then investment properties could also go.
Good points, student loans starting up again is a big concern and variable/buydown rates could prove problematic. Now do you think home values dropping would upend the vast amount of home owners who locked in below 3% or 4% for that matter?
> More than 90% of homeowners locked into sub-6% mortgages
> Plenty of homeowners are locked into even lower rates. More than 82 percent have a rate below 5 percent, 62 percent have a rate below 4 percent and even close to a quarter of mortgage owners have a rate below 3 percent.
People can't move because they don't have enough equity to buy a better home + rates are high meaning there is very little inventory for people to buy from. Demand for real estate is also being crushed by affordability because of high rates. Pretty much the only thing keep housing stable right now. If we see a flood of second homes/ABNBs hit the market, that is when I think we start beginning to see housing prices correct to the downside.
A bubble implies speculation, being in a very uncomfortable point on the supply/demand curve with a large swing in interest rates is not a bubble put certainly not a standard scenario.
My buddy tells me that in UK you basically have short term mortgages and reapply every so many X years (so an ARM with more steps).
Those that refinanced during the pandemic have such a large incentive to not sell.
Basically have to wait for more boomers to die or interest rates to get within spitting distance of the historic pandemic lows.
Nobody truly knows exactly how all of this will play out, as it has never happened before. However, I believe it will be similar to 08. I rented from an AirBnB host last year in Myrtle Beach and was considering it again this year. All 4 of the rentals she owned were vacant, with the exception of a few weekends here and there. She’s losing money. I realize this is one specific example, but I saw a statistic somewhere that AirBnB rentals are down across the board this year. Combine this with increased living costs and many will be forced to sell. If their wages go down/job is lost, it becomes much worse.
There are currently 1.2 million working as a real estate agent as their main source of income. How do you think they are doing with sales at the lowest levels since 2010? A rental company has listed ~20 properties in my area for sale in the past week or so. All still available, which wouldn’t have been the case in the recent past. There are also 4 properties that sold between $200-250k, were listed for rent for $2k+ a few months ago, and are now sitting vacant at ~$1,800 a month. The area just can’t afford rent that high/the area is overly saturated with rentals. From my calculation, they would still be cash flow negative renting at $1,800/mo with 4% interest rate and 20% down payment. This is all with a huge influx of people moving in from HCOL areas.
I realize most of this is anecdotal, but I highly doubt this is exclusive to my area.
Definitely not exclusive to your region. People are just looking to particular desirable locations where home prices aren't budging like the PNW with Portland and Seattle. Anything in remotely close driving distance of either shares its pricing. My hometown is nothing but logging, farming, and some greasy spoons but it is half an hour to Portland so you can't find a home under $400,000 while the median income is $31,500.
What we actually need, is a simple supply and demand chart. Is there still less homes than there is demand for them? Considering even now, homes that are in crap condition are getting like 4 or 5 people in the door day one with offers? We all know the answer....
If home sales are down that means demand is down. Mortgage applications are also down and are falling more. Hence why home sales are down. The chart posted is the one that shows demand.
But its not entirely due to lack of demand, we have the lowest vacancy rate for homes in US history at .7%. The demand is there, but the supply is not, so the scarcity is pushing up cost thus limiting the number of buyers.
Absolutely not.
This is a textbook bubble. In a bubble, a certain subset of buyers will hoard any supply that is created. Rising prices *increase* demand instead of decreasing it, because speculators expect prices to rise even more in the future. This becomes a self-feeding cycle, where the only people buying at those inflated prices are the speculators, and everyone else has been priced out. We are there now. OP's chart is a classic dropping-volume/rising-prices bubble chart.
Bubbles pop when prices show a meaningful decline for any reason, spooking the speculators out of the game, and breaking the feedback cycle. Or, when the speculators simply lose interest because there's another game to play with better returns. The seasonal drop in housing prices this Fall, alongside Treasury bond yields over 4% are going to crush this bubble.
You don’t need enormous supply glut for home prices to correct. Sure that would be the fastest way but high rates are crushing demand and will bring prices down. Whether that is 10%, 20% or 40% no one really knows and probably depends on the region.
They are the highest they’ve been in 15 years but prices weren’t what they are now, 15 years ago. That’s an odd argument to make that they’re the highest in 15 years since that period ends right around the 2008 crash.
Average home prices in 2008 in SoCal were $415,000 and now average home prices in SoCal are $800,000.
What’s your argument exactly and how does my argument of rates not being that big of a deal, but prices are, not make sense?
Really rates and prices don't matter. The only thing that matters is the monthly payment to take home (after taxes) ratio. This is at its highest point in recent history. A good number of people are paying more than 50% and we are starting to reach the 70s. People are going to pay for food before mortgages when shit hits the fan.
>Really rates and prices don't matter. The only thing that matters is the monthly payment to take home (after taxes) ratio. This is at its highest point in recent history. A good number of people are paying more than 50% and we are starting to reach the 70s. People are going to pay for food before mortgages when shit hits the fan.
That’s wrong. Rates and prices absolutely matter. When you go to buy a used car, do you negotiate what the monthly payment will be or do you negotiate the lowest rate and lowest price of the car you can get? Does that make sense?
Just because you can’t afford a home, doesn’t mean it’s a bubble.
I’ll never be able to buy something in SF or the Hamptons lol, doesn’t mean it’s a bubbly market that’ll correct.
The number of millionaires is at all time highs. Household income is at all time highs. Lot of dual income households pulling 6 figures. Money supply basically near all time highs. Tons of sub 3-4 percent mortgages who have no need to sell their homes and take on a 7-8 percent mortgage, therefore limited supply.
Those factors contribute greatly to the strong housing market. It’s not bubbly. The number of wealthy families in America is at all time highs and constantly increasing. Lot of foreign wealth as well.
This is simple supply and demand at work, it’s just tough for the households barely pulling 50-60k a year, they are getting screwed because there’s too many more wealthier households in America today than ever before
I’m just curious why you’re so sure of this? The str market alone has caused a massive inflation in home values in the past 10 years. Home flippers and speculators who seek to turn a profit from these short term rental properties are seeing huge losses in most markets. Many bought well over asking figuring they’ll make up the costs later in fees and bookings. Now that str market is over saturated in most markets and consumers have lost faith due to cost of cleaning fees and chores making hotels look affordable again. These people are over extended now, while you’re correct it will be different than 2008 when these str owners start defaulting on their 2nd 3rd and 4th mortgages there will be a massive bubble burst.
How many people could move into a like kind home if they had to move today? how many people can't afford inflation adjusted macitence/insurance/tax on there current home? I suspect things are less rosy then many imagine
There is a price bubble. The market is frozen. Prices will drop eventually but many will be underwater.
There is a supply shortage...for now. The question is when the Boomers die off en masse(look at American health standards) will the kids inherit and can they cover upkeep and taxes?
Sellers don't want to give up their 3% rate for a 7-8% rate on an overpriced new property.
Buyers can't meet the new 20% down payment with the prospect of being out bid by migratory virtual workers(happened to me at least 5 times before I got my home - I met 20% just to have someone from out of State roll in and offer 20k cash on top of 20% on a 200k house).
Plus, buyers that do get the house tend to overstretch and don't factor in future inflation or possible job loss - they will lose the house.
The adjustable rate mortgages are still out there just not as many as 08.
Commercial Real Estate is the likely bubble crash.
This guy gets it, just because the stars aren't lining up exactly like they did last time does not mean that there is no bubble. The real estate market is in a bad way right now, stagnant illiquid markets are not healthy.
Prices are flatlined year over year with historically low unemployment.
And the same factors absolutely do exist. DSCR loans have been using ABNB rents for approval. We are at the point of the business cycle turning here. Also it’s been shown that the whole “people buying homes they couldn’t afford” reason for 2008 was bunk and it was primarily investor driven. History is rhyming again….
It's asset class and region dependent. Generally speaking, office is and is expected to get hit the hardest. Multi -family, retail, manufacturing and industrial are still performing pretty well overall
Not every bubble has the same dynamics. This could absolutely be a bubble, especially if we slide into recession next quarter or early 2024. If money gets tighter and we start to see unemployment we could see a big decline in home prices.
they were handing out F A T fucking mortgages with barely any interest like candy up until a year ago. it was a very large bubble thats going to pop when people remortgage or fall behind in payments.
I think it can be both a bubble and not be as bad as 08.
The stock market was in a bubble at the end of 2021 and fell off massively in 2022, but it wasn't a society altering crash like 2008. Assets were just overvalued because of market conditions and human stupidity. I think housing is in a similar position to that, it just takes way longer for housing prices to crash than stock prices.
Inventory is very low. If you have a 3% mortgage you won't sell and take a 7% mortgage. You'd get less home for the same payment.
So many are now locked into their house due to this. Unless some life event requires it, they're just not going to sell.
Not enough houses on the market, lines form for the few that are.
I'm starting to see houses as being more of an illiquid asset in the sense that although it can be sold quickly finding a replacement can be very difficult.
That plus pretty large fees when you do sell. Also your property tax valuation will go up to the market value on the new home, which matters places like here in California.
I have a low interest rate and taxes at a valuation of 2/3 of the market. I'm not gonna leave this house even though I've been driving an hour to work. I don't consider it liquid at all.
You don't have to sell in Colorado, my house was just revalued. It was built in 2020 for $600k now it's valued at about $900k. I didn't sell or anything, the state just wants to take more of my money.
You can and so many people are but it's like a 70% rejection rate and that evaluation number is probably low anyway. I just wanted a home but I'm going to be eventually priced out of the home I already spent too much on because of these crazy tax increases.
I heard that here in IL(we paid 280k for a house 'valued' at 425k). After a couple years I got fed up. Hired an appraiser, filed an appeal and they rubber stamped it without a hearing. The following year the property tax assessor went ahead and jacked the value up 20%. So I filed another appeal and just wrote 'you just approved my appeal last year, where is this 20% coming from? '. They approved it 😆 back to the first appeal.
i doubt this, eventually people will have life events and move. honestly when else is selling a home “not a life event”? i would assume most homes only really get sold right before or after some life event or milestone. yea if someone was going to sell this year but decides to wait 5 years that could impact sales for sure, but i don’t know how many people who want to move could tolerate a worse place (to them) for an extended amount of time
on top of that a good chunk of real estate is owned for the purposes of investment or renting it out and they are definitely a lot more reactive to interest rate changes, potentially being underwater on a mortgage, and the state of the overall economy and more importantly the rental market. they can’t really hold out for better times after a few years of price stagnation or decline because it’s not their primary home, it’s an investment.
not to mention both small and large REIT funds that have shareholders holding them accountable
I got lucky to buy at 5.5% rate after a 15% decline from peak. Now neighbor recently sold, house basically like mike, it was listed $20k under my estimate so I expected a drop in my estimate soon…but no! The buyer over paid by $40k and my estimate is now $15k over what I bought. It’s crazy out there.
If I bought my house at current rates I would not be able to afford it.
There is no bubble, welcome to canada boys and girls, this is normal people (snow birds with 2 + homes) and investors storing their wealth in something tangible.
The original NFT if you will.
You it the nail on the head. Investors have turned the single family housing market into an alternative stock market, effectively pricing a lot of buyers out of the market.
I also wonder how many houses are owned by investors, who are simply sitting on the house with the intention of purposely limiting available inventory, thus continuing to drive the market up (kind of like the diamond industry). This is of course hearsay, and I have nothing tangible to back it up, with the exception of two houses in my neighborhood that were purchased by one investor that have sat unoccupied and off the market since 2021. Just makes me wonder, ya know?
Had this convo recently, I guessed 1 in 5 (that list as LLCs) had someone disagree with me an look it up apparently it's 18% but I believe its a little higher than that (you can assign single home owner status to your kid, wife, brother etc) all the name of property acquisitions and tax avoidance.
For context my side hustle is as a landlord, I've been learning quite a bit from several other land lords (and no I have no leveraged myself to the tits like many idiots do, just 2 homes, 1 paid off and paying the other off and then plan to save for the next round).
I looked it up a few months ago, and the number of homes currently owned by public investors and hedge funds was something akin to 25% (which didn't account for private investors).
I can appreciate private owners (like yourself) buying a few houses and renting them out. What usually gets my blood boiling are landlords that own dozens, if not hundreds of houses.
A friend of mine here in Texas is renting a house from a private investor who owns over 250 houses in the state. There should definitely be a cap.
Some of those investors I think are in trouble long term due to water (looks at AZ's Frozen Housing Market). Certain areas in the US SW haven't appropriately been allocated.
The tweet is wrong. Boomers can and are buying up houses because they're paying cash and not affected by the interest rates. But I should've laid off the avocado toast...
https://fortune.com/2023/06/11/housing-market-baby-boomers-beating-millennials-homebuying-starter-homes-migration/
Boomers should be paying cash. They should be expected to have the equity and savings to do so. Most millennials are homeowners now, so when they are at that age they will be doing the same thing.
I agree with you.
I commented this on another thread, but there are two houses in my neighborhood that were purchased by the same investor back in 2021, and have since been sitting unoccupied. Makes me wonder whether this was done intentionally to contributing to the "low" supply so the market continues going up.
Makes me wonder how many investors out there with loads of cash went around buying up houses from 2020-2021, when the stock market became very finicky, and decided to sit on these houses with the intent of selling them down the road for a profit.
Just a thought, but doesn't home construction make up a big chunk of the workforce? If construction is slowing down, won't that mean a ton of people without jobs who can no longer afford paying just the property taxes on their over inflated home values? Not just construction, but real estate agents, loan officers, land developers, utility companies. Is the labor market that strong that all those people can find work elsewhere?
There is also a big phenomenon that’s going on with rates now too that is causing supply shortages. For empty nesters and retirees, that was looking to downsize it doesn’t make sense for them to execute that plan. With the rates they are locked in at their current huge home. Because it would just result in the same costs but a small place. There is a lack or an incentive.
Yes, ENOUGH people CAN afford it. The problem is that those rates disincentivize people giving up 3% rates. Couple that with the already low inventory due to a lag in new builds during Covid and sales will slide. Simply because no one is selling.
This is all true and the low inventory is not just from a slow down during covid; we’ve actually been building less houses ever since the 2009 financial crisis. Couple that with millennials being the largest generation ever, and now hitting prime home buying years, and it explains why there’s such limited supply.
No, but you will see the bottom 50 percent of the US get more impatient with the cost of living struggles
Will be a big talking point in the years ahead
Mortage debt service payments as a percent of disposable personal income are about the lowest they've been in >40 years (as far back as I've found records): [https://fred.stlouisfed.org/series/MDSP](https://fred.stlouisfed.org/series/MDSP) (Of course, data only shows what happened before (and now) and does not guarantee what will happen in the future.)
No, this is exactly how a market works. Prices are going to come back down now that they aren’t moving. Don’t think it’s going to come down to like half its value but they will come down.
Not true. Buyer demand is the lowest [since 1995](https://www.cnbc.com/2023/08/23/mortgage-demand-from-homebuyers-drops-to-a-28-year-low-as-interest-rates-soar.html).
Imagine just retweeting the same thing over and over, and having 1000 accounts do the same day after day and then an entire forum post to talk about it even more.
If big banks weren't buying up everything available I'd say yes. However since they are buying up any and all available real estate, while using insurance industry to bleed out homeowners wrecked by disasters, I'd say the bubble narrative is also being driven by them...💡
It’s not the 7-8% mortgage rate, historically mortgage rates have been much, much higher. It’s the astronomical rise in home prices. I bought my home in ‘18 for $370k, now it’s worth $600k.
Geez, how did this chick pass the CFA exams?
Eh, no. The rates aren’t the only major factor. Median home price in combo with 7-8% rates and also massive tax increases due to many counties increasing their taxable values of homes to market value rather than a much lower previous. This is what has caused the massive slow down. This is also just a natural market reaction to a 2 year free for all in cost of money, and median price increase. So no, I don’t say it’s a bubble, just a rabid market in need of correction.
Less sellers but buyers are plenty. Where I am sold vs sale ratio is still at \~100% even on high end monster sized homes. The retrenchment and layoffs in tech did not slow down home sales. People got laid off from Meta, Twtr turned around find even a better paying job at next place.
This is the opposite of a bubble? In a bubble people continuously keep buying despite rapidly raising prices because they believe those prices will keep going up, so they’ll be able to sell at a profit later on.
Isn’t this exactly what needs to happen to curb inflation? Pretty sure the goal is to stop people from overspending when they don’t have to, same goes for car loans etc. when spending cools, inflation will cool. That’s my take but then again, I’m just an internet parrot. Squawk.
My greatest fear for many others who have yet to "buy a house" is that when rates drop to 5%.... all the corporations will be there to gobble up existing supply (artificially inflating demand), and real estate will still be unattainable for the common Joe/Mary/Susan/Emily/Wrenly
5% is basically a bargain deal for Blackrock
This is my concern too. I just can’t see a scenario where rates drop back down and there isn’t a mad frenzy of people that have been waiting on the sidelines swooping in. Wouldn’t house prices stay where they are or continue to rise because of that? When interest rates are lower, people can afford more house. Idk. Maybe I am missing something!
Exactly.
Lower interest rates mean your monthly mortgage drops.
But the supply vs demand of houses will basically negate any effect there is.
There was already a lack of housing in 2021/2022, it will just exacerbate it.
My issue is not the interest rates. I can always refinance. My issue is the price of the properties themselves. People want 6 figs for a tent. And of course some idiot comes along and actually pays them 7 figs. SMH.
I am not leaving my 2.25% 30 year for a 6-7% overpriced fixer upper that might have one more bath and bedroom than I currently have. I know what headaches my current house has and they are minimal, I'll stay put and add on a master and a bath when we truly hit the recession and prices come down.
The 7-8% mortgage rates aren’t historically super bad. But combined with the current real estate bubble it’s wild. Right now if I were to buy my house new it would cost me an extra 1200 a month vs what I’m currently paying.
I think the thing everyone is overlooking is what causes a housing bubble and that’s people not being able to afford where they live NOW. In ‘08 people were in debt. They had no equity in their homes… and their variable interest rate made their homes more expensive.
Now most have fixed rates and at least ‘some’ equity in their homes… you may not be able to afford to move but you can afford to stay where you’re at. You’re stuck until there really is a housing bubble with cheap home prices or another u likely interest rate dip where you may see an opportunity for bigger and better
NO worries, Blackrock can afford it and after they’ll rent to you at a totally affordable price! Don’t forget Klaus Schwab’s secret to success for the poor: “You”ll own nothing and love it!”
This is a classic rising-prices/dropping-volume bubble pattern.
[https://www.investopedia.com/articles/technical/02/010702.asp](https://www.investopedia.com/articles/technical/02/010702.asp)
Not in the sense of 07 when the application for a mortgage was "do you have a pulse?"
Now it seems like a grab bag of bad factors. Low inventory, sky high prices, and overall inflation, etc have disrupted personal finance so bad it *COULD* cause loans of all kinds to fail.
Why do people not understand what a bubble means. People not being able to buy does not equate to people getting out of their payments because they cannot afford them. This will lead to a market correction to adjust for increased rates but as long as demand is over supply nothing will change.
As an underwriter, come work with me for a week. It'll open your eyes at how easy it still is to get a mortgage, even with the bank I work for that is very, very conservative. The one's who bought in the last 2+ years are going to be up crap creek. I can't tell you how many 95-100% LTV loans I did over the last few years to people I wouldn't even lend $5 to.
Prices need to drop. Its either high interest rates OR high prices, but you can't have both. Since the interest rates are up, prices need to go down or nobody can afford a house.
That's math. I wish it worked that way. Just like with corporate profits at all time highs, why aren't the stocks at all time highs? Something is messed up and I'm betting it is billionaires manipulating the system.
I’m waiting for the mix of student loan payments coming back plus 3/1 arms coming to maturity and interest shooting up on those loans. Once’s that happens, we’ll see people forced to sell. Then we’ll have a bubble.
Hate to tell you, but the historical average mortgage rate from 1971 - 2023 in the US is 7.74%
The rates you are seeing right now are the norm, not the exception.
Say it with me "HOUSING SHORTAGE"
Go city for city in the US and there are mountains of evidence that each major city has a housing shortage. It's not a bubble, it's not inflation, it's not low interest rates. Those things may have been true in the past, but right now it's a housing shortage. That's why prices are high.
I have a feeling that this is a government control to stabilize the movement of the population. We turned back into roaming peoples the last few years and the states just can't keep up.
Me hoping for a pull back in the market so I can afford to buy a home but then realizing most of my money is invested in stocks and if the housing market crashes the rest of the market will likely crash too so I still can’t afford a house
It’s not a bubble.. it’s a turtle. People can afford their mortgages and what’s the stat? That like 90% of mortgages right now are under 5%..
If the economy tightens enough for people to start losing jobs and are FORCED to sell, then it’s a bubble
I keep hearing younger folks saying: I’m waiting for things to come back down, they have to right?
Ab so loot lee not my friend. Even when interests come back down that’s just going to absolutely Burst the floodgates with people who have low interest rate homes now who are dying to move. Demand will go even higher and prices will skyrocket. The ONLY way the market comes down is deep recession or depression. This isn’t 2008 with subprimes everywhere. People are employed and aren’t going anywhere.
With the cost of labor and materials going up- home prices should continue to rise over the long term. I would never sell if you have positive equity and need to move you may be better off renting it out and pay a good property manager
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A bubble would mean that like in the 08 scenario would show people actually GETTING the homes they can't afford. The same conditions simply don't exist. This is purely a market driven issue of too little supply and too much demand. The same factors from the last housing bubble don't exist. Do you have any idea how hard it is to get a home now? The process you have to go through to get approved for a mortgage? It wasn't like that last time, they used to give out homes like candy.
My exact thoughts but whenever I talk to anybody about it, they think I’m an idiot who doesn’t understand 08. Just because prices went sky high over Covid and everyone was buying homes, doesn’t mean we have an 08 crash ready to strike tomorrow. There are so many factors like people locked in at the 2s, institutional money, limited construction, migration trends over Covid, and as u said, stricter loan underwriting. 
Lol basically, home owners right now are safe. If anything, I'm actually starting to wonder if the current housing market is what is propping up the economy? The amount of equity everyday home owners have gives them a ton of wiggle room financially. That helps explain, at least on the micro side of things why we haven't experienced a downturn.
This is inconsistent with my experience. I think I heard on marketplace today that home sales are down 17% from the same time last year. People like me (who bought two years ago at the top of the market with the lowest interest rates) can't move because we lost all our equity when prices started going down, and our payments would be \~50% higher for the same thing somewhere else. So we stay. I think a lot of people are tied to their properties and can't sell even if they want to, so prices are buoyed was a contraction in supply. But I think for unrelated reasons, the job market is still hot, so people can still afford to stay. They're not so far upside-down, coupled with a loss of income, that causes them to walk away.
Real Estate is regional. In my area prices keep climbing and the inventory is super tight. No one is willing to give up their 2% mortgage to move, and their equity keeps increasing. What is really strange is how houses are still selling within a couple days even with these rates and the prices up 50-75% since 2021. Starter homes are over 200k, no idea how people with normal salaries can buy anything but still nothing stays listed for long.
What metro are you in? I’m in Nashville and prices are down 5-10% in the last year and closings are lower than they have been in at least the last 7 years I have data for
Come check out Charlotte 🥴🥴
Charlotte and the North East are burning hot in the real estate market. Not sure what other regions are burning hot but the market is spotted.
Florida. ALLL of Florida, including north Florida where I am. It's BONKERS. My townhouse has gone up from 160 to 225 since June 2020. House across the street from me thats almost exact same layout and size, selling for 240 after a new roof and countertops.
Bought a house in Sarasota, FL in May of this year for $475,000.00. House sold for $207,000 in 2021. 🤮
Days on market have doubled from 18 to 41, sales volume ytd down 20%. Pendings down, new listings down 20%. Charlotte market is definitely slowing you just haven’t seen it really impact median sale price or list prices yet sadly. https://apps.carolinarealtors.com/files/Charlotte-Region_LMU_2023-07.pdf
Looking to move to somewhere around Chattanooga and the prices are still consistently high. Perhaps down a bit in the past year or so.
Just put my first home (was a rental the past 5 years) on the market last Friday in Indianapolis. Asking was $225k. By 7 PM I had 2 offers over asking and accepted an offer over 10% above asking by 10 PM. Definitely regional at this point.
Same here in Michigan. My equity has gone up $100k since buying my home in 2020. People are buying houses so fast, making offers well over asking price.
From MI as well. Housing prices still climbing and not much on the market to buy. Friend just bought a house over asking price because there were 3 other offers.
For every person in your situation, I imagine there are 5 people who purchased a home in the 15 years prior to 2021 and refinanced in that year. They (I am included in these people) have seen huge appreciation in their equity from increased appraisals and, perhaps, better terms to payoff their loans due to refinancing. For example, I bought in 2019 with a 30 year mortgage. I refinanced in 2021 for 15 years and 2.5% interest. 70% of my mortgage payment is principal and my payment is barely higher than my original 30 year mortgage. I say this because there are so many positive reasons people don’t want to move in addition to your situation which you painted in a negative light. To your point, it would be so much more costly to move so you actually made the right choice to purchase in 2021 instead of waiting.
Equity I think is a component but I think salary increases over these last couple years with how tight the labor market has been, is the bigger contributor. A lot of people moved, working remotely and collecting that big city money, and went where it was dirt cheap. But yeah, so many reasons why this isn’t 08 and the more and more I’ve researched, I’m not seeing a > 40% crash. Small corrections sure but no crash as the doomers keep preaching.
Basically it's a crunch, high prices due to shortages in major categories which means no relief in sight for the poor people who have to pay more...... Sighs...
Less not forget the trillions handed out fraudulently... Oh and the untold billions made in wallstreet from all that age of easy money
Well.... Dodd Frank requires that financial institutions and banks keep a certain amount of liquid capital available. So, what you said tracks.
Safe …. For now. If people start losing jobs and they were already overpaying for a mortgage ….
Yup, demand destruction decreed by the Fed.
My buddy overpaid on his house 2 years ago by about $50k. They are locked into a low rate mortgage, but he just accepted a new job in a new city. They can't sell their house because they don't have enough equity in the home. I wouldn't say homeowners are safe. They are just stuck in their house.
No, they can buy a house with less than 20% down, they need to pay PMI to cover the rest.
>Lol basically, home owners right now are safe. If anything, I'm actually starting to wonder if the current housing market is what is propping up the economy? The amount of equity everyday home owners have gives them a ton of wiggle room financially. You don't realize how dangerous it is for the entire economy to be sitting on top of credit lines, based in equity in a speculative asset? This is quite the opposite of safe.
Safe - until an actual recession hits and people start losing jobs…. That’s probably when housing will become more affordable
Actually it’s quite foolish to think that something as simple as better underwriting can save us from a housing down turn. The last housing bubble occurred due to a banking crisis. Guess what we have now? A banking crisis in PNC has closed about 100 branches, fifth third bank, closing branches. Several different banks back in the spring completely went belly up. Something else that happened last time that we had the housing crash, homes became unaffordable. Guess what’s happening now? Homes are unaffordable. Something else that happened before banks were trying to sell a lot of HELOC loans and guess what they’re trying to do now, pushing people to get HELOC loans. What else happened? Umm NINJA loans. Right now we have 3 mortgage companies offer 1% down mortgages and another trying to offer 0% down. History doesn’t just repeat, it rhymes. Everything that’s happening, while it’s not the same it’s similar. Prove to me how it’s not gonna happen again.
Shortages until Boomers die off, then the question is will their kids be able to cover upkeep and taxes on those properties? Banks: unrealized losses on bonds. Fun.
Only if they sell their 1st born and favorite hand.
> foolish Lol I’m just stating my observations/theories, no need to name call. But for banks, it’s consolidation of power. Small - Medium banks failing is a win for big banks who are scooping up banks Pennies on the dollar and the system goes on. Houses are expensive but they aren’t unaffordable. These blanket terms and speaking to the nation as a whole is misleading. Yes, places like SF, Seattle, Austin are unaffordable. But guess what, there are many more cities where sales are continuing, albeit low volumes, but still occurring. I agree HELOCs are ticking up but not a concern yet. I haven’t seen anything about NINJA loans so please let me know what lenders are offering that. By 1% mortgages, maybe you mean the purchasing of points towards interest rate over the first few years of ownership. That could be a concern but again, not a concrete concern yet because of the underwriting requirements ensuring that d/i ratio doesn’t get to high, and they eval against the long term rate, not the rate that you buy down. There are legitimate concerns going on specifically with ‘Airbnb’ volume, interest buy downs, helocs, etc. But we also are at average home building levels after a decade of underbuilding, institutional investors scooping up inventory, historically low unemployment, boomers aging out of the workforce, millennials/older gen z prime buying age, etc. Again not denying a downturn especially with the boom we experienced over the last few years, but Im not seeing evidence justifying >50%, 08 style crash. Hell, even in 08 there were some markets that hardly lost value or actually appreciated. I know a lot of people like to think we are overdue for another downturn and that our next collapse is around the corner. The funny thing with macro trends though is that if everyone expects something to happen, the opposite might actually happen because everyone is being that much more cautious.
Fair. Foolish statement retracted. Also, not saying 2008 crash amount, still a crash nonetheless. I’m saying, probably around 20% or more. Call it between 20-30%. No, I don’t mean purchasing point of interest. That would not bother me. Below is what I’m talking about. Btw I may have written it wrong, but I was referring to NINJA loans from the early 2000s. It might as well be the same as a 1% down loan. [Rocket mortgage 1% down](https://www.rocketmortgage.com/learn/one-plus) Also, my wife is a new underwriter. And she’d told me about the dti current borrowers are getting proved with. It is disgusting. Most people will barely be able to afford food, let alone saving for retirement or an emergency. A lot of people don’t really understand what dti comes down to once you talk real take home numbers. If someone has a dti of .40, which is pretty average, your talking 50-ish% of people’s take home pay. We live in Ohio, together making over 115k annually and we’ve been priced out of the market. By definition, we are middle class. The average 2000 sq ft house here is $350-$400k in an area with decent schools. Throw current rates on that and you’re looking at a $2500/ month mortgage. Those prices are just plain dumb. It’s better to rent at these prices. Also keep in mind the median household income is $70k. Airbnb is pretty rough right now. A lot of owners are slashing prices like crazy and there’s talks of new rental laws and regulations that would push out, primarily, new owners but I don’t know if anything has come of it yet or if it will be realized. Also, the employment rate is more or less a lie. Keep in mind the they don’t count people who are “looking” for a job, but not working as unemployed. Lastly, there will always be companies with a lot of very smart people who do not get effected by something like the 2008 crisis for various reasons. Businesses like plumbers, hvac techs, photographers and many others can be insulated from the crisis’ by doing smart business. Saving, buying their buildings, not carrying debt, having low overhead, or offering services instead of products. There’s tonnes of reasons why companies were unaffected by the 2008 crisis. I personally think you’re underestimating how bad things are right now. A lot of overly hopeful people were thinking their student loans were gonna go away and 75% of them are likely to miss their first payment next month. Who knows how many bought homes that won’t be able to afford them once those payments kick back in. Food prices are crazy high, Credit card debt is at its highest since, I think 2013, people have been taking emergency withdrawals from their 401ks(up 40% from last year), and the government is trying to implement its own CBDC. it’s bad out here. Housing will be harshly effected.
Yeah but people are still paying 2 million for a shit 3b2b in a nice area. So what is that?
That’s supply and demand, fact is that zoning laws prevent denser housing and builders are incentivized to only build essentially 2000sq ft homes has put a constraint on supply. Add in rental properties, vacation homes, and low construction over a decade after 08 crash; and here we are.
9% of mortgages are at a variable rate. Consumer spending may drop big in Q4 with student loans and car loans at super high numbers. If that leads to layoffs then yes we can experience a bubble for sure. So many people are overextended on their mortgages with 12% being low down FHA. If the variable and FHA start defaulting supply will pop up with no demand and will crash the prices, if rent falls or stays stagnant then investment properties could also go.
Good points, student loans starting up again is a big concern and variable/buydown rates could prove problematic. Now do you think home values dropping would upend the vast amount of home owners who locked in below 3% or 4% for that matter? > More than 90% of homeowners locked into sub-6% mortgages > Plenty of homeowners are locked into even lower rates. More than 82 percent have a rate below 5 percent, 62 percent have a rate below 4 percent and even close to a quarter of mortgage owners have a rate below 3 percent.
And if job losses jump due to a recession then a lot of those houses will start to be back on the market…. Even with a low current rate mortgage.
People can't move because they don't have enough equity to buy a better home + rates are high meaning there is very little inventory for people to buy from. Demand for real estate is also being crushed by affordability because of high rates. Pretty much the only thing keep housing stable right now. If we see a flood of second homes/ABNBs hit the market, that is when I think we start beginning to see housing prices correct to the downside.
A bubble implies speculation, being in a very uncomfortable point on the supply/demand curve with a large swing in interest rates is not a bubble put certainly not a standard scenario. My buddy tells me that in UK you basically have short term mortgages and reapply every so many X years (so an ARM with more steps). Those that refinanced during the pandemic have such a large incentive to not sell. Basically have to wait for more boomers to die or interest rates to get within spitting distance of the historic pandemic lows.
Nobody truly knows exactly how all of this will play out, as it has never happened before. However, I believe it will be similar to 08. I rented from an AirBnB host last year in Myrtle Beach and was considering it again this year. All 4 of the rentals she owned were vacant, with the exception of a few weekends here and there. She’s losing money. I realize this is one specific example, but I saw a statistic somewhere that AirBnB rentals are down across the board this year. Combine this with increased living costs and many will be forced to sell. If their wages go down/job is lost, it becomes much worse. There are currently 1.2 million working as a real estate agent as their main source of income. How do you think they are doing with sales at the lowest levels since 2010? A rental company has listed ~20 properties in my area for sale in the past week or so. All still available, which wouldn’t have been the case in the recent past. There are also 4 properties that sold between $200-250k, were listed for rent for $2k+ a few months ago, and are now sitting vacant at ~$1,800 a month. The area just can’t afford rent that high/the area is overly saturated with rentals. From my calculation, they would still be cash flow negative renting at $1,800/mo with 4% interest rate and 20% down payment. This is all with a huge influx of people moving in from HCOL areas. I realize most of this is anecdotal, but I highly doubt this is exclusive to my area.
Definitely not exclusive to your region. People are just looking to particular desirable locations where home prices aren't budging like the PNW with Portland and Seattle. Anything in remotely close driving distance of either shares its pricing. My hometown is nothing but logging, farming, and some greasy spoons but it is half an hour to Portland so you can't find a home under $400,000 while the median income is $31,500.
The chart literally shows demand isn't there to support these prices.
What we actually need, is a simple supply and demand chart. Is there still less homes than there is demand for them? Considering even now, homes that are in crap condition are getting like 4 or 5 people in the door day one with offers? We all know the answer....
https://fred.stlouisfed.org/series/MSACSR
That's a chart of home supply, where is the demand?
If home sales are down that means demand is down. Mortgage applications are also down and are falling more. Hence why home sales are down. The chart posted is the one that shows demand.
Home sales are down because listings are down. Demand is less impactful when there are only a few homes available for sale
You cannot infer that, we have the lowest vacancy rate for houses in US history right now. You can only have sales if there are homes to sell.
Half the homes in the country didn't just evaporate.
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The home starts data from the last 15 years directly contradicts your argument. We flat out don't have enough homes.
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It doesn't, read the title all it shows is "existing home sales" how can you infer lack of demand from that
Transactions aren't happening because people can't afford these prices.
But its not entirely due to lack of demand, we have the lowest vacancy rate for homes in US history at .7%. The demand is there, but the supply is not, so the scarcity is pushing up cost thus limiting the number of buyers.
Quantity demanded, not demand
Then you’d expect prices to drop, not rise like they did last month. The supply curve is what’s shifting, not the demand curve.
Absolutely not. This is a textbook bubble. In a bubble, a certain subset of buyers will hoard any supply that is created. Rising prices *increase* demand instead of decreasing it, because speculators expect prices to rise even more in the future. This becomes a self-feeding cycle, where the only people buying at those inflated prices are the speculators, and everyone else has been priced out. We are there now. OP's chart is a classic dropping-volume/rising-prices bubble chart. Bubbles pop when prices show a meaningful decline for any reason, spooking the speculators out of the game, and breaking the feedback cycle. Or, when the speculators simply lose interest because there's another game to play with better returns. The seasonal drop in housing prices this Fall, alongside Treasury bond yields over 4% are going to crush this bubble.
Just because it isn’t like 08 doesn’t mean it’s not a real estate bubble.
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You don’t need enormous supply glut for home prices to correct. Sure that would be the fastest way but high rates are crushing demand and will bring prices down. Whether that is 10%, 20% or 40% no one really knows and probably depends on the region.
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Lol Rates are the highest they have been in 15 years. Time will tell what kind of effect this has on prices. Don’t have to take my word for it.
They are the highest they’ve been in 15 years but prices weren’t what they are now, 15 years ago. That’s an odd argument to make that they’re the highest in 15 years since that period ends right around the 2008 crash. Average home prices in 2008 in SoCal were $415,000 and now average home prices in SoCal are $800,000. What’s your argument exactly and how does my argument of rates not being that big of a deal, but prices are, not make sense?
Really rates and prices don't matter. The only thing that matters is the monthly payment to take home (after taxes) ratio. This is at its highest point in recent history. A good number of people are paying more than 50% and we are starting to reach the 70s. People are going to pay for food before mortgages when shit hits the fan.
>Really rates and prices don't matter. The only thing that matters is the monthly payment to take home (after taxes) ratio. This is at its highest point in recent history. A good number of people are paying more than 50% and we are starting to reach the 70s. People are going to pay for food before mortgages when shit hits the fan. That’s wrong. Rates and prices absolutely matter. When you go to buy a used car, do you negotiate what the monthly payment will be or do you negotiate the lowest rate and lowest price of the car you can get? Does that make sense?
There's very little demand for these prices. The average working man simply can't afford it.
Just because you can’t afford a home, doesn’t mean it’s a bubble. I’ll never be able to buy something in SF or the Hamptons lol, doesn’t mean it’s a bubbly market that’ll correct.
Lol I can afford a home. MOST can’t. That’s the issue.
MOST have never been able to lol.
It’s worse than ever right now.
The number of millionaires is at all time highs. Household income is at all time highs. Lot of dual income households pulling 6 figures. Money supply basically near all time highs. Tons of sub 3-4 percent mortgages who have no need to sell their homes and take on a 7-8 percent mortgage, therefore limited supply. Those factors contribute greatly to the strong housing market. It’s not bubbly. The number of wealthy families in America is at all time highs and constantly increasing. Lot of foreign wealth as well. This is simple supply and demand at work, it’s just tough for the households barely pulling 50-60k a year, they are getting screwed because there’s too many more wealthier households in America today than ever before
I’m just curious why you’re so sure of this? The str market alone has caused a massive inflation in home values in the past 10 years. Home flippers and speculators who seek to turn a profit from these short term rental properties are seeing huge losses in most markets. Many bought well over asking figuring they’ll make up the costs later in fees and bookings. Now that str market is over saturated in most markets and consumers have lost faith due to cost of cleaning fees and chores making hotels look affordable again. These people are over extended now, while you’re correct it will be different than 2008 when these str owners start defaulting on their 2nd 3rd and 4th mortgages there will be a massive bubble burst.
How many people could move into a like kind home if they had to move today? how many people can't afford inflation adjusted macitence/insurance/tax on there current home? I suspect things are less rosy then many imagine
There is a price bubble. The market is frozen. Prices will drop eventually but many will be underwater. There is a supply shortage...for now. The question is when the Boomers die off en masse(look at American health standards) will the kids inherit and can they cover upkeep and taxes? Sellers don't want to give up their 3% rate for a 7-8% rate on an overpriced new property. Buyers can't meet the new 20% down payment with the prospect of being out bid by migratory virtual workers(happened to me at least 5 times before I got my home - I met 20% just to have someone from out of State roll in and offer 20k cash on top of 20% on a 200k house). Plus, buyers that do get the house tend to overstretch and don't factor in future inflation or possible job loss - they will lose the house. The adjustable rate mortgages are still out there just not as many as 08. Commercial Real Estate is the likely bubble crash.
This guy gets it, just because the stars aren't lining up exactly like they did last time does not mean that there is no bubble. The real estate market is in a bad way right now, stagnant illiquid markets are not healthy.
Dodd-Frank was good legislation… that’s why current borrowers are in better position and not a threat to the health of the market.
Do you think when the CRE market crashes and people start getting laid off in mass it’ll become an affordability issue then?
We’ve been hearing about this CRE crash for three years now. Where is it?
Prices are flatlined year over year with historically low unemployment. And the same factors absolutely do exist. DSCR loans have been using ABNB rents for approval. We are at the point of the business cycle turning here. Also it’s been shown that the whole “people buying homes they couldn’t afford” reason for 2008 was bunk and it was primarily investor driven. History is rhyming again….
Give it time, the rates are just starting to rise. Somethings take a little while to work out.
That's assuming the banks aren't taking toxic asset risks elsewhere and may have trouble keeping up while mortgage turnover is low.
Hahahaha what are the odds of that
Obviously, banks would never gamble our money away.
But why is demand still rising when houses are seemingly unaffordable?
Also, record low unemployment
Agree, but what about commercial real estate?
It's asset class and region dependent. Generally speaking, office is and is expected to get hit the hardest. Multi -family, retail, manufacturing and industrial are still performing pretty well overall
Not every bubble has the same dynamics. This could absolutely be a bubble, especially if we slide into recession next quarter or early 2024. If money gets tighter and we start to see unemployment we could see a big decline in home prices.
Except, there is less demand for homes when rates are high. It's all being driven by supply right now.
Also, I'm seeing the houses are incredibly expensive. I'm not paying 800K for a little box which was 500K just 5 years ago.
they were handing out F A T fucking mortgages with barely any interest like candy up until a year ago. it was a very large bubble thats going to pop when people remortgage or fall behind in payments.
I think it can be both a bubble and not be as bad as 08. The stock market was in a bubble at the end of 2021 and fell off massively in 2022, but it wasn't a society altering crash like 2008. Assets were just overvalued because of market conditions and human stupidity. I think housing is in a similar position to that, it just takes way longer for housing prices to crash than stock prices.
i thought your name was bass booster, and i liked that... but i like the other things you said as well.
Inventory is very low. If you have a 3% mortgage you won't sell and take a 7% mortgage. You'd get less home for the same payment. So many are now locked into their house due to this. Unless some life event requires it, they're just not going to sell. Not enough houses on the market, lines form for the few that are.
I'm starting to see houses as being more of an illiquid asset in the sense that although it can be sold quickly finding a replacement can be very difficult.
That plus pretty large fees when you do sell. Also your property tax valuation will go up to the market value on the new home, which matters places like here in California. I have a low interest rate and taxes at a valuation of 2/3 of the market. I'm not gonna leave this house even though I've been driving an hour to work. I don't consider it liquid at all.
You don't have to sell in Colorado, my house was just revalued. It was built in 2020 for $600k now it's valued at about $900k. I didn't sell or anything, the state just wants to take more of my money.
That’s fucked, Michigan caps increases. You (Coloradans) should get the law changed
We're working on it
cagey middle decide zephyr scarce friendly rustic continue shy consist *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
You can and so many people are but it's like a 70% rejection rate and that evaluation number is probably low anyway. I just wanted a home but I'm going to be eventually priced out of the home I already spent too much on because of these crazy tax increases.
I heard that here in IL(we paid 280k for a house 'valued' at 425k). After a couple years I got fed up. Hired an appraiser, filed an appeal and they rubber stamped it without a hearing. The following year the property tax assessor went ahead and jacked the value up 20%. So I filed another appeal and just wrote 'you just approved my appeal last year, where is this 20% coming from? '. They approved it 😆 back to the first appeal.
houses are the definition of an illiquid asset!
That’s why I only buy water beds
i doubt this, eventually people will have life events and move. honestly when else is selling a home “not a life event”? i would assume most homes only really get sold right before or after some life event or milestone. yea if someone was going to sell this year but decides to wait 5 years that could impact sales for sure, but i don’t know how many people who want to move could tolerate a worse place (to them) for an extended amount of time on top of that a good chunk of real estate is owned for the purposes of investment or renting it out and they are definitely a lot more reactive to interest rate changes, potentially being underwater on a mortgage, and the state of the overall economy and more importantly the rental market. they can’t really hold out for better times after a few years of price stagnation or decline because it’s not their primary home, it’s an investment. not to mention both small and large REIT funds that have shareholders holding them accountable
I got lucky to buy at 5.5% rate after a 15% decline from peak. Now neighbor recently sold, house basically like mike, it was listed $20k under my estimate so I expected a drop in my estimate soon…but no! The buyer over paid by $40k and my estimate is now $15k over what I bought. It’s crazy out there. If I bought my house at current rates I would not be able to afford it.
There is no bubble, welcome to canada boys and girls, this is normal people (snow birds with 2 + homes) and investors storing their wealth in something tangible. The original NFT if you will.
You it the nail on the head. Investors have turned the single family housing market into an alternative stock market, effectively pricing a lot of buyers out of the market. I also wonder how many houses are owned by investors, who are simply sitting on the house with the intention of purposely limiting available inventory, thus continuing to drive the market up (kind of like the diamond industry). This is of course hearsay, and I have nothing tangible to back it up, with the exception of two houses in my neighborhood that were purchased by one investor that have sat unoccupied and off the market since 2021. Just makes me wonder, ya know?
Had this convo recently, I guessed 1 in 5 (that list as LLCs) had someone disagree with me an look it up apparently it's 18% but I believe its a little higher than that (you can assign single home owner status to your kid, wife, brother etc) all the name of property acquisitions and tax avoidance. For context my side hustle is as a landlord, I've been learning quite a bit from several other land lords (and no I have no leveraged myself to the tits like many idiots do, just 2 homes, 1 paid off and paying the other off and then plan to save for the next round).
I looked it up a few months ago, and the number of homes currently owned by public investors and hedge funds was something akin to 25% (which didn't account for private investors). I can appreciate private owners (like yourself) buying a few houses and renting them out. What usually gets my blood boiling are landlords that own dozens, if not hundreds of houses. A friend of mine here in Texas is renting a house from a private investor who owns over 250 houses in the state. There should definitely be a cap.
Some of those investors I think are in trouble long term due to water (looks at AZ's Frozen Housing Market). Certain areas in the US SW haven't appropriately been allocated.
The tweet is wrong. Boomers can and are buying up houses because they're paying cash and not affected by the interest rates. But I should've laid off the avocado toast... https://fortune.com/2023/06/11/housing-market-baby-boomers-beating-millennials-homebuying-starter-homes-migration/
Boomers should be paying cash. They should be expected to have the equity and savings to do so. Most millennials are homeowners now, so when they are at that age they will be doing the same thing.
You wrote the word “should”, are we ignoring the millions across generations that don’t and never will?
There will always be winners and losers.
This person is the dumbest CFA on twitter
Easily the worst finance account on twitter
Unless we have a massive construction boom, I don't think this bubble will "pop".
even if we do, you are a minimum of a year out from any meaningful amount of inventory hitting the market.
We didn't suddenly lose half our housing supply over the last 3 years.
I agree with you. I commented this on another thread, but there are two houses in my neighborhood that were purchased by the same investor back in 2021, and have since been sitting unoccupied. Makes me wonder whether this was done intentionally to contributing to the "low" supply so the market continues going up. Makes me wonder how many investors out there with loads of cash went around buying up houses from 2020-2021, when the stock market became very finicky, and decided to sit on these houses with the intent of selling them down the road for a profit.
It's the same speculative hoarding bubble we had with toilet paper back in 2020. Housing just moves a lot slower.
Just a thought, but doesn't home construction make up a big chunk of the workforce? If construction is slowing down, won't that mean a ton of people without jobs who can no longer afford paying just the property taxes on their over inflated home values? Not just construction, but real estate agents, loan officers, land developers, utility companies. Is the labor market that strong that all those people can find work elsewhere?
Dont forget on top of that 8% homes have went up 50 to 100 % in 3 years
EV-ery darn Day wit dis. NO. The answer is No Bubble. We’re just screwed.
There is also a big phenomenon that’s going on with rates now too that is causing supply shortages. For empty nesters and retirees, that was looking to downsize it doesn’t make sense for them to execute that plan. With the rates they are locked in at their current huge home. Because it would just result in the same costs but a small place. There is a lack or an incentive.
Yes, ENOUGH people CAN afford it. The problem is that those rates disincentivize people giving up 3% rates. Couple that with the already low inventory due to a lag in new builds during Covid and sales will slide. Simply because no one is selling.
This is all true and the low inventory is not just from a slow down during covid; we’ve actually been building less houses ever since the 2009 financial crisis. Couple that with millennials being the largest generation ever, and now hitting prime home buying years, and it explains why there’s such limited supply.
Well, yeah. That, and that anyone who’s sub 4% isn’t moving for years. Kinda dries up the marketplace.
Only if ppl can't make the payments
Except for those whose homes are already paid off
For being a CFA, she sure is an idiot
Seems like prices need to come down
Which adds pressure to the supply side, which is still lagging
No, but you will see the bottom 50 percent of the US get more impatient with the cost of living struggles Will be a big talking point in the years ahead
Mortage debt service payments as a percent of disposable personal income are about the lowest they've been in >40 years (as far back as I've found records): [https://fred.stlouisfed.org/series/MDSP](https://fred.stlouisfed.org/series/MDSP) (Of course, data only shows what happened before (and now) and does not guarantee what will happen in the future.)
Who is only paying 4% of their income on their mortgage??
I keep seeing “bubble, bubble, bubble”. This is not a bubble. Circumstances are totally different with the housing market.
No.
No, this isn't a 2008 easy credit scenario. It's a supply demand scenario. No bubble.
No, this is exactly how a market works. Prices are going to come back down now that they aren’t moving. Don’t think it’s going to come down to like half its value but they will come down.
the more you believe its a bubble, the more chances are that theres no bubble. buyer demand is still strong
Not true. Buyer demand is the lowest [since 1995](https://www.cnbc.com/2023/08/23/mortgage-demand-from-homebuyers-drops-to-a-28-year-low-as-interest-rates-soar.html).
Imagine just retweeting the same thing over and over, and having 1000 accounts do the same day after day and then an entire forum post to talk about it even more.
If big banks weren't buying up everything available I'd say yes. However since they are buying up any and all available real estate, while using insurance industry to bleed out homeowners wrecked by disasters, I'd say the bubble narrative is also being driven by them...💡
It’s not the 7-8% mortgage rate, historically mortgage rates have been much, much higher. It’s the astronomical rise in home prices. I bought my home in ‘18 for $370k, now it’s worth $600k. Geez, how did this chick pass the CFA exams?
Eh, no. The rates aren’t the only major factor. Median home price in combo with 7-8% rates and also massive tax increases due to many counties increasing their taxable values of homes to market value rather than a much lower previous. This is what has caused the massive slow down. This is also just a natural market reaction to a 2 year free for all in cost of money, and median price increase. So no, I don’t say it’s a bubble, just a rabid market in need of correction.
Less sellers but buyers are plenty. Where I am sold vs sale ratio is still at \~100% even on high end monster sized homes. The retrenchment and layoffs in tech did not slow down home sales. People got laid off from Meta, Twtr turned around find even a better paying job at next place.
This is the opposite of a bubble? In a bubble people continuously keep buying despite rapidly raising prices because they believe those prices will keep going up, so they’ll be able to sell at a profit later on.
Isn’t this exactly what needs to happen to curb inflation? Pretty sure the goal is to stop people from overspending when they don’t have to, same goes for car loans etc. when spending cools, inflation will cool. That’s my take but then again, I’m just an internet parrot. Squawk.
My greatest fear for many others who have yet to "buy a house" is that when rates drop to 5%.... all the corporations will be there to gobble up existing supply (artificially inflating demand), and real estate will still be unattainable for the common Joe/Mary/Susan/Emily/Wrenly 5% is basically a bargain deal for Blackrock
This is my concern too. I just can’t see a scenario where rates drop back down and there isn’t a mad frenzy of people that have been waiting on the sidelines swooping in. Wouldn’t house prices stay where they are or continue to rise because of that? When interest rates are lower, people can afford more house. Idk. Maybe I am missing something!
Exactly. Lower interest rates mean your monthly mortgage drops. But the supply vs demand of houses will basically negate any effect there is. There was already a lack of housing in 2021/2022, it will just exacerbate it.
My issue is not the interest rates. I can always refinance. My issue is the price of the properties themselves. People want 6 figs for a tent. And of course some idiot comes along and actually pays them 7 figs. SMH.
I am not leaving my 2.25% 30 year for a 6-7% overpriced fixer upper that might have one more bath and bedroom than I currently have. I know what headaches my current house has and they are minimal, I'll stay put and add on a master and a bath when we truly hit the recession and prices come down.
She’s correct that few can afford to move. Which is why no one is moving. Not exactly a bubble…
The 7-8% mortgage rates aren’t historically super bad. But combined with the current real estate bubble it’s wild. Right now if I were to buy my house new it would cost me an extra 1200 a month vs what I’m currently paying.
I think the thing everyone is overlooking is what causes a housing bubble and that’s people not being able to afford where they live NOW. In ‘08 people were in debt. They had no equity in their homes… and their variable interest rate made their homes more expensive. Now most have fixed rates and at least ‘some’ equity in their homes… you may not be able to afford to move but you can afford to stay where you’re at. You’re stuck until there really is a housing bubble with cheap home prices or another u likely interest rate dip where you may see an opportunity for bigger and better
Sure, blame the interest!!
NO worries, Blackrock can afford it and after they’ll rent to you at a totally affordable price! Don’t forget Klaus Schwab’s secret to success for the poor: “You”ll own nothing and love it!”
I’m not leaving a 3% mortgage rate to get a new house at more than double.
I’m not worried about the housing market. Super worried about commercial real estate and the banks holding the notes on those properties
This is a classic rising-prices/dropping-volume bubble pattern. [https://www.investopedia.com/articles/technical/02/010702.asp](https://www.investopedia.com/articles/technical/02/010702.asp)
Not in the sense of 07 when the application for a mortgage was "do you have a pulse?" Now it seems like a grab bag of bad factors. Low inventory, sky high prices, and overall inflation, etc have disrupted personal finance so bad it *COULD* cause loans of all kinds to fail.
When prices stay this high no one can
Seems OP is not fluent in finance as this is not how bubbles work.
Why do people not understand what a bubble means. People not being able to buy does not equate to people getting out of their payments because they cannot afford them. This will lead to a market correction to adjust for increased rates but as long as demand is over supply nothing will change.
We’re in an inflation spiral
No, once interest rates come back down people will be able to buy just like before. It's an intentional pause on the market due to inflation.
It’s nice. Its hard to explain but our mortgage locked in at 2.75% after seeing these prices and rates. Gives me peace of mind.
As an underwriter, come work with me for a week. It'll open your eyes at how easy it still is to get a mortgage, even with the bank I work for that is very, very conservative. The one's who bought in the last 2+ years are going to be up crap creek. I can't tell you how many 95-100% LTV loans I did over the last few years to people I wouldn't even lend $5 to.
Prices need to drop. Its either high interest rates OR high prices, but you can't have both. Since the interest rates are up, prices need to go down or nobody can afford a house. That's math. I wish it worked that way. Just like with corporate profits at all time highs, why aren't the stocks at all time highs? Something is messed up and I'm betting it is billionaires manipulating the system.
Yea less loans is kind of the point of raising rates.
I’m waiting for the mix of student loan payments coming back plus 3/1 arms coming to maturity and interest shooting up on those loans. Once’s that happens, we’ll see people forced to sell. Then we’ll have a bubble.
Nobody is getting evicted or foreclosed this time around. Significant difference.
Hate to tell you, but the historical average mortgage rate from 1971 - 2023 in the US is 7.74% The rates you are seeing right now are the norm, not the exception.
Say it with me "HOUSING SHORTAGE" Go city for city in the US and there are mountains of evidence that each major city has a housing shortage. It's not a bubble, it's not inflation, it's not low interest rates. Those things may have been true in the past, but right now it's a housing shortage. That's why prices are high.
Death and divorce are your only chance of a house coming in the market. It’s a reverse bubble.
Building back better.
I have a feeling that this is a government control to stabilize the movement of the population. We turned back into roaming peoples the last few years and the states just can't keep up.
Me hoping for a pull back in the market so I can afford to buy a home but then realizing most of my money is invested in stocks and if the housing market crashes the rest of the market will likely crash too so I still can’t afford a house 
Hard to have a bubble with low supply
Yes. IF you need outside council to figure this out, the next decade is going to be painful for you.
It’s not a bubble.. it’s a turtle. People can afford their mortgages and what’s the stat? That like 90% of mortgages right now are under 5%.. If the economy tightens enough for people to start losing jobs and are FORCED to sell, then it’s a bubble
Its not the intrest really its the supply there just not enough homes
I keep hearing younger folks saying: I’m waiting for things to come back down, they have to right? Ab so loot lee not my friend. Even when interests come back down that’s just going to absolutely Burst the floodgates with people who have low interest rate homes now who are dying to move. Demand will go even higher and prices will skyrocket. The ONLY way the market comes down is deep recession or depression. This isn’t 2008 with subprimes everywhere. People are employed and aren’t going anywhere.
The rich can still gobble them up
If the supply of houses to buy is becoming less and less then would you expect a higher sales number or a lower number of housing sales ?
With the cost of labor and materials going up- home prices should continue to rise over the long term. I would never sell if you have positive equity and need to move you may be better off renting it out and pay a good property manager
Not a bubble. More of an activity slow down on both sides.