[gknapp]

It's a very interesting time indeed for the housing market! These next 6-12 months are going to tell us something very big about the economy, crash or no crash. If anything, however, the Fed has built up an ability to drop rates if things go awry, so there's padding in the cushion if a fall does happen.

An interesting stat: We're almost back to our 2022 quantity of _new_ listings in October [1]. That's substantial because we've hovered around 20% below last year's number for just about every other month this year. One of the big stories of real estate is that sellers don't want to sell because they all locked in killer rates on their current homes, and buyers can't afford to buy with home prices AND mortgage rates what they are.

So, seeing even a slight increase in new listings (or the lack of a seasonal dropoff) is maybe an early indication of an easing of that stalemate. At the same time, time on market is still really low, which means that sellers are tapping into the high levels of demand that still exist. As a result, overall inventory isn't increasing.

All told though, even with those slight indicators, it's still a really tough time to be a buyer, and for the real estate market overall. The best hope that most have is that the dam leaks more, or even breaks on listings, and of course, if prices start to fall meaningfully, folks will want to cash out high, and you might get a proper "crash".

I personally don't really see it, but anything can happen, and we'll know soon enough!

[1]: https://www.redfin.com/news/data-center/

(Disclaimer, I work at Redfin)

[dehrmann]

> it's still a really tough time to be a buyer

The fact that I heard this exact same statement when interest rates were at 30-year lows really goes to show how constrained the supply is.

[roenxi]

I doubt low interest rates help buyers all that much. If there are 3 properties on the market and 4 buyers, it doesn't matter what interest rates are, the 3 highest-earning buyers are going to get the houses and one will miss out. The amount of money borrowed might go up and down, but there is a physical balance equation that must be satisfied which doesn't care about the financial situation.

In theory, low interest rates will reallocate resources from other sectors of the economy to housing, causing more to be built. In practice I don't know how big a factor this is though - I'm used to there being regulatory restrictions that prevent new housing being built in high-demand areas. But that might be an Australia thing. Regardless it'd lag interest rate changes by a few years because it takes time to organise new construction.

[surgical_fire]

Low interest rates don't help the buyer. It helps the seller.

Whatever benefits the buyer would have had are reaped by the seller with a higher price.

[MattPalmer1086]

But most sellers, unless downsizing, will also be paying more for their next house.

[thfuran]

Assuming that prices adjust to keep total payments constant, high interest rates actually help buyers* since the mortgage interest is tax deductible.

*As long as you ignore the value of equity

[bonton89]

You can also pay a house off early much faster if the payment component is more interest than principle.

[pharmakom]

Yeah people are constrained by how much they can pay off each month. Either that’s higher prices with lower interest or lower prices with higher interest.

[solumunus]

Low interest rates have been terrible for buyers.. Low interest rates are a huge part of why there is such a massive bubble in the first place.

[dehrmann]

The drove up prices, making the down payment side harder. Higher interest rates should bring down the sales price, making down payments go further, but we're only halfway seeing that. My thinking is because the shortage masks that, but people married to their underwater 3% fixed-rate mortgages also does (for now). Ironically, this seems to be driving homebuilders to build more.

[sfjailbird]

> sellers don't want to sell because they all locked in killer rates on their current homes

What happens is that house prices drop way below what they paid, and ends up equalizing their monthly payments with what someone who buys at the higher-rate-but-lower-price is paying. Except these people are locked into their current arrangement, since they cannot sell at a price that would cover the debt.

Some can ride this out over a number of years, some will end up taking a big hit because, for one reason or another (divorce, child birth, etc.) they have to sell and move. If you're old enough you will have seen this play out before.

[rubyn00bie]

I believe that many people are starting to fear that their lower rate mortgage exceeds the value of their house. While, in the long run, they’ll likely be fine but the near term may be 10-15 years of stagnant or declining home values. It’s also looking like the Fed is very intent on keeping rates higher for longer, and/or possibly hiking them again, further increasing the burden on buyers. It’s not looking good for sellers or buyers for at least the next 18 months. I suspect a crash in the housing market will occur but we haven’t had enough time to see foreclosures pick up to start the cascade downward.

[consp]

Looking at how homes are insanely overpriced (worse here than in the US) that is not a bad thing. The only sane market at this point is +1M houses which is simply rediculous.

[huytersd]

It’s a great time to be a buyer if you’re buying all cash

[saiya-jin]

... which almost nobody can afford not only due to prices growing to absurd levels

[keep_reading]

You're being overly optimistic because you work in real estate and people are blowing rainbows up your ass. If there's a crash, JPow lowering the rate would prevent the housing value correction from taking effect and nothing good would come of it.

There MUST be a crash. Look at all the people who are sitting in homes worth many times more than they bought it. Significantly higher value than a few years ago. Do you think these people are doing well as a result? No! They can barely afford their insurance!

People want the house values high and their insurance dirt cheap, but it's not possible. The housing values have to drop a good 80% for people to be able to afford their homes long term again and for the insurance companies to stop pulling out.

[rcarr]

I want the market to crash and correct as much as the next guy but thinking house prices are going to drop 80% is pure fantasy land. What's more likely to happen:

- Big corporations and billionaires hoover up the properties forcing more and more people to rent in the long term (you will own nothing and be happy)

- Companies are finally forced to raise worker wages which, through a variety of means, they have managed to suppress for decades.

The latter is what should happen but the former is what is more likely to happen, with all the evil that entails.

[rickydroll]

I lost my house to foreclosure in 2008. I track the price according to Zillow and if memory serves, it dropped from roughly 600K to 520K. If we do have a correction will probably be on that order of magnitude. If the correction is much greater, a lot of people will thrown into poverty and onto the street. I suspect however there would be enough political will to make the banks take a haircut instead of everyone else.

[keep_reading]

> If the correction is much greater, a lot of people will thrown into poverty and onto the street. I suspect however there would be enough political will to make the banks take a haircut instead of everyone else.

Both are gonna happen. Yes, a lot of people will be thrown onto the street. A lot of banks will go under.

[HDThoreaun]

Institutional investors have largely gotten out of residential properties in the last year. Homes aren't good investments unless expanding supply is illegal, which it has been, but they could change.

[keep_reading]

> 80% is pure fantasy land

This hotel in SF just dropped 50% since 2016. Billionaires are over their heads on real estate; how are they gonna hoover it up when they can't afford their existing loan payments? It can and will happen.

https://sfstandard.com/2023/10/19/downtown-san-francisco-lux...

[rcarr]

A 50% reduction for one luxury apartment tower in the city most affected by remote work in the entire world and one that also has a notorious crime problem. What is your reasoning that this can be extrapolated to an 80% housing market crash on the national or global level?

[keep_reading]

Companies would not be able to raise wages fast enough to keep people in their homes

[rcarr]

Exactly. They've been getting away with it for close to 50 years at this point so the pain of getting them to where they should be if the profits had been shared fairly and not routed to investors and the C-Suite is absolutely massive. It would take a good few years (probably a decade) to get there, and a lot of companies that only exist because of that worker exploitation would go under, but overall it would end up being a good thing. If wage growth had kept pace like it should all these years, I'd wager the current property prices would actually make sense.

[gknapp]

I can tell you honestly that I am personally hoping for a crash, and that's in part because I work on real estate. Home prices are unsustainably high by such a margin that it's absolutely killed transaction volume. Sure, earnings per transaction will go down, but we desperately need an increase in volume.

Plus, I want housing to be affordable despite my economic incentives.

When I say that I don't see it happening, I just don't quite see all of the indicators just yet. If we start seeing a sharper increase in new listings coming on market, or new construction prices significantly dropping, then I'd certainly change my outlook.

[taylodl]

The problem is the Fed is using the only tool they have, the federal funds rate, to control the housing market. Yes, it has the effect of cooling the market but it doesn't solve the actual problem, actually it exacerbates it: there aren't enough housing units where they're needed. That's a supply problem. It's the insufficient supply that's the root cause of housing prices rising. The irony is raising the federal funds rate makes it more expensive to build housing so it tends to cool down construction and thus further constraining supply.

What have we actually accomplished? Locking people out of home ownership. But the Fed only has one tool and they're using it to the best of their ability.

[dragonwriter]

> The problem is the Fed is using the only tool they have, the federal funds rate, to control the housing market.

No, they aren't, they are using it to control aggregate consumer prices and employment, their actual mission.

There are institutions with finer grained powers whose job is to manage the economy on a more fine-grained level (Congress at the federal level, plus states generally more locally), and the problem, insofar as there is one, with the management of the housing market is their (in)action, not the Fed.

[mcny]

This is why we the millennials and more importantly gen z must vote and actively and loudly participate in the political process.

Right now, the government is preventing wages from going up in a (futile) attempt to keep prices low for retirees and soon to be retirees who are on fixed income. This is NOT what we want. We want wages to go up as corporate profits go up.

[nojvek]

I want prices to come down, I want affordability to go up . Who cares if wages go up and prices go up even faster.

The question is not what is the price of a house, but how many hours does a median wage worker need to work to afford their house, their car, their utilities, education, healthcare e.t.c

US is slowly becoming a zero sum game as the growth shrinks to ~1%. We need to increase the pie.

[taylodl]

> US is slowly becoming a zero sum game as the growth shrinks to ~1%. We need to increase the pie.

That's what happens in a consumer-driven economy. The idiots never once stopped to ask themselves where the consumers get their money.

[omgwtfbyobbq]

I'm guessing we'll see a weird mix of the following with the fed adjusting policy to keep everything together.

-80s inflation (higher interest rates hurting real property value, especially in higher value coastal metros)

-90s stagflation (a significant decline in national real property values masked by some inflation)

-50s postwar economic expansion (economics/warfare in EMEA keeping demand for US energy, agriculture, and products high even with higher inflation hurting asset valuations)

[jeo123]

I don't it will crash. Democratic party tends to go socialism...in this case they are bailout-ish them Rep. In this case they will quietly bail large properties and banks to ensure it wont crash...just drag and stagnant like Evergrande and others in China. It seems to work over there. As long as people willing to go thru a wasted decade like Japanese did, it won't crash.