Will the housing market crash?

2 Replies

a.  Covid- go with a 1% death rate across the board.  Assume 1/2 of these people live with others or in a rest home.  Thus only 1/2 of the houses will need to be sold.  So 1/100 die.  1/200 homes need to be sold.

Ask your local realtor what an influx of 1 out of 200 homes on the market will do.

b.  Currently our realtors are in their best year ever.  Can't get enough properties on the market.  No problem showing or closing home sales.  1/200 homes added would not impact the market at all.  If anything Covid, with people having time on their hands is having a favorable impact.

Larger impact to real estate normally:

1. Interest rates at say 3% today. I slow down investing at 7%. I stop investing at 9%. Your a Flipper/Rehabber, I would think you could go up to 20% interest if you can flip the house start to finish in 3 months. If it takes you 6 months then interest of around 15% might stop you. Don't see interest rates changing in the near term.

2.  Stock market implosion.  We are due.  As long as you have capital to ride out additional months till you sell or rent.  Lets say a house takes 1 month to sale today.  Can you go say 12 months from completion to sale or take a xx% price decrease to unload, in a down market.  Greater chance of a stock market drop, since we are in a long-term bull market and Price/Earning ratios are in neverland.

Plagues generally are a humanitarian AND financial disaster.  Folks who think that printing cash money exempts us from that are mistaken, it’s just deferring and altering the flavor the financial hardship.  And the global health crisis is getting worse, so I’m not sure why anyone would think we are out of the woods yet.

What happens when commercial real estate collapses and hundreds of millions of square feet of office space is converted to housing in cities? What happens when inventory increases as markets reopen in 2021 and 2022? What does that do to residential real estate prices?

The bubonic plague killed so many people in Europe centuries ago that there was a shortage of workers.  They were able to demand higher wages and the resulting overall boom in the average person’s wealth led to a powerful merchant clas that funded the Renaissance....which gave us the modern world.

Long term patterns and cycles have been disrupted and I think most people don’t fully appreciate the scale of the changes heading our way over the coming years and decades.

One thing is for certain: america is fully resolved to not have a liquidity crisis that causes market price collapses and both political parties are entirely on board no matter WHAT they say.  Given that my guess is we’re more like 1990s Japan than 2008 America......they’re going to keep dumping money into the system via low rates and stimulus. If I had to guess, prices will keep rising to extremes for a while yet and then suffer a decades permanent long decline aka mean reversion.