After mortgage rates went over 6% again yesterday, the doomers will be burying the real estate market over the next few months. You can see why – rates have been dropping for a generation; for them to now go up from 3% to 6% in a few months is unprecedented for today’s buyers:
But having the majority of buyers paying over the list price (especially those paying $100,000+ over list) was unprecedented too. Those who haven’t bought a house yet must be suffering from real estate whiplash today!
Where is it going to go now?
Is there any sort of precedent to reflect on? When this blog was in its infancy, I made the now-infamous Grand Poobah of Predictions on September 16, 2006 on how I thought the market was going to unravel. It was contested by many, and Rob Dawg issued his challenge which evolved into the Coffee Bet.
If you’d like to revisit history, scroll down to the bottom here and read the comments too:
https://www.bubbleinfo.com/category/coffee-bet/
Yesterday, I told Rob that I will post my latest thoughts on Monday, and asked him to do the same – or at least critique what I had to say. It will give me a couple of days to think of all the variables – which there are several now that have never been in play before!
Come back next week with your thoughts too!
I’m going to start with how long this current malaise is going to last. My knee-jerk response is not too long.
I don’t think we have run out of buyers. If we did, then we’ll have a long, arduous decline of around 1% to 5% appreciation per year as the boomer liquidations roll out over the next 10-20 years.
But I think the buyers are there, and just on a real estate vacation while they grab popcorn and wait-and-see what happens.
Jay Powell only has a couple of more bumps in him before he sets off a recession. The minute he lowers rates again, we’ll be back in business – especially if prices are a little lower too. (A recession will sound like an opportunity to affluent home buyers).
So our current malaise/feeling-out program should only last about two years max.
There are two markets. The national and the high end. They’re likely to diverge quite a bit in the near term.
Bill’s take:
https://calculatedrisk.substack.com/p/will-house-prices-decline-nationally?
any discussion of the future would be severely lacking if one doesnt take into account the number of houses that have been bought as investments (airbnb, vrbo) and have been in dire straits since covid.
We didnt have this in the runup to 2008 and it must be balanced against stricter lending requirements post 2012.
There’s a bifurcation going on. There’s also a near decade of unmet housing demand that doesn’t stop going unmet.
Watching Padres v Dodgers but will check in Monday to add my opinions. Kona vs. Jamaica sounds like a rugby match. I’ll mention the time I played against the Jamaican National Rugby team and how we beat them if it comes up.