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I don't think this analysis tells the whole story because it doesn't explain where the crash would come from. Demand is high (and likely to remain high) because

I don't think this analysis tells the whole story because it doesn't explain where the crash would come from. Demand is high (and likely to remain high) because good land is scarce. Developers can't create large amounts of new housing because of zoning and also because if they create too much they won't be able to make a profit (they take out loans to finance their projects too). So supply is likely to be less than demand for the foreseeable future in most locations. Supply could increase rapidly if the mortgage delinquency rate rises rapidly. There aren't signs of this happening soon that I'm aware of, although mortgage lending standards have lowered a bit. I don't see good evidence for an imminent crash, and saying prices will decline if a crash occurs is tautological.

ra1n85 8y ago
House prices are the most expensive they have ever been relative to average income in 41% of markets [1]. Further, in 83% of markets the ratio of home price to income is growing. For the majority of US counties, we are seeing prices increase in both absolute and relative terms. At the same time, wage growth is nil and household debt has now exceeded 2008 levels [2]. We can argue about the implications of the trends, but the gist of my point is that an increasingly smaller pool of individuals is capable of affording houses in the majority of US markets. If the demand of that small pool of individuals, which is strongly tied to the health of the industry providing their wages, declines then we are in for a significant correction in home prices. [1] https://www.attomdata.com/news/market-trends/home-sales-prices/home-affordability-report-q1-2018/ https://www.attomdata.com/news/market-trends/home-sales-pric... [2] https://qz.com/1280927/us-household-debt-has-hit-an-all-time-high-of-13-2-trillion/ https://qz.com/1280927/us-household-debt-has-hit-an-all-time...

ra1n85 8y ago

House prices are the most expensive they have ever been relative to average income in 41% of markets [1]. Further, in 83% of markets the ratio of home price to income is growing. For the majority of US counties, we are seeing prices increase in both absolute and relative terms. At the same time, wage growth is nil and household debt has now exceeded 2008 levels [2]. We can argue about the implications of the trends, but the gist of my point is that an increasingly smaller pool of individuals is capable of affording houses in the majority of US markets. If the demand of that small pool of individuals, which is strongly tied to the health of the industry providing their wages, declines then we are in for a significant correction in home prices. [1] https://www.attomdata.com/news/market-trends/home-sales-prices/home-affordability-report-q1-2018/ https://www.attomdata.com/news/market-trends/home-sales-pric... [2] https://qz.com/1280927/us-household-debt-has-hit-an-all-time-high-of-13-2-trillion/ https://qz.com/1280927/us-household-debt-has-hit-an-all-time...