Why I know there is no crash

[Marcus Auerbach]

Yes I know, but hear me out. Being an agent and investor has it's perks - I see what's going on in the rental space (much more demand than I have ever seen in my 15 years) and I don't need to tell you what the housing market looks like. The housing market does not move as fast as the stock market, it takes time to change direction and there are signs to look for.

Here is what we (I have 4 agents on my team) would see long before the public would know:

1.) Some of our buyer clients would drop out or make comments about giving up (we have about 60 active buyers at the moment)

2.) Number of showings on new listings would start to go down (from currently 30 per day..)

3.) Number of offers on a new hot listing would start to go down, from 10-20 to 3-5, then 1-2,..

These 3 things are leading indicators and would happen BEFORE the public would notice any changes in the market, but for a buyers agent this makes a night and day difference when you are competing for a house. It will also not happen over night, but gradually over several months.

4.) Fewer listings will sell on the first weekend (active investors and buyers will notice that whatich their MLS feed)

5.) DOM - days on market will start to trend up, thats the first KPI to watch

6.) Inventory will start to increase. We measure inventory in months it would take to sell. Currently less than half a month. Six months of inventory is a neutral market. Over six month is a buyer's market.

7.) Expired listings will increase on MLS

8.) List prices will no longer be higher than previous - appreciation will slow down

9.) If inventory builds up more sellers will rather hold off selling their house and wait for a better time than dropping their price. This reduces new supply and helps to maintain balance. Only sellers who HAVE to sell or are foced by an external factor will be motivated enough to negotiate.

Now we basically have arrived at a market that goes sideways - prices flatline. Still not a crash, at least not the type people are concerned about. The luxury segement may take a dip, certain local markets may go down. But nothing like a nation wide -30% sell out.

In order for a 2008 type of sell off to happen we would need a something that forces homeowners to sell. For example if they could not make their mortgage payments anymore, because wages are going down. We don't have the type of teaser rate mortgages anymore that would suddently jump in cost and put owners in a situation where they no longer can afford their payments. 

Another factor could be envirnmental - if an area runs out of water and essentially becomes uninhabitable people would be forced to sell and there were no buyers. Rising sea levels would do the same (think FL) but while that would destroy local markets it will send surrounding communitoes in a panic mode, because they know they are next - however, this will also benefit markets on higher ground.

The housing market is like an oil tanker when it comes to slowing down or changing direction - it takes a long time and the signs are pretty obvious if you know what to look for.