How is everyone feeling about the market?

Question

So whats the general thought on the housing market? How much longer do you all see these prices continuing to go up.  It is getting more difficult as time passes to support some of these values buyers are paying.  Yes, yes I know their is limited inventory.  At some point prices will out pace incomes.   I have seen Fred Foldvarys predictions on the market cycle, with growth being from 2012 to 2022. As investors do you all see this lasting that long.  As an appraiser, I have my doubts.  What is your opinion?

Andrew Johnson · Answer

@Troy Forney Whew, @Christopher Phillips is right on the money.  Search the forums and you'll get 100 forum topics around it.  Usually it boils down to one group of people thinking "this is unsustainable" and "I saw this happening in 2006" with the thesis that the housing market is about to crater.  The second group of people argue that it's impossible to time to the market, you can lock in low interest rates, and over the long term you'll be fine if you can hold onto the property.  And then towards the end it goes into the "it's market/sub-market dependent" and the forum post kinda closes itself out.

Troy Forney · Answer

Yes, I do understand supply and demand, and supply is short and demand high.  I remember people saying in 2006 this is unsustainable and 18 to 24 months later it took a dive.  With many reporting the stock market is due for a big correction soon, don't you think that housing would see a small correction also?  Hypothetical of course.  Just playing devils advocate to those who say the market is artificially stimulated and many real estate buyers are foreign investors and hedge funds looking for yield.

Christopher Phillips · Answer

@Troy Forney

Common topic on BP.

Prices are relative. Driven by supply and demand and the local jobs economy.

If the local economy is strong, interest rates low, lenders lending, and low housing inventory, expect the prices to continue to rise.

If new housing starts catch up then that will take pressure off of the inventory issue. but, that can't happen overnight due to the lack of construction labor.

If interest rates start to rise in earnest, then that will cool off things, but rates are so low it will need to rise 1% or more to cool things off.

yes, real estate works on an 18 year cycle, lagging and leading with the general economy. But the lack of housing starts and the high availability of cash is going to keep prices rising. This assumes no major "shocks" to the economy.