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Your take on where housing prices can go is not realistic. If you take a look at this chart you’ll see that corrections bring housing prices back to before the

Your take on where housing prices can go is not realistic. If you take a look at this chart you’ll see that corrections bring housing prices back to before the boom. Housing prices will fall way more than 35% in the coming recession and your house will be worth much less than it was 18 months ago. https://www.researchgate.net/figure/A-HISTORY-OF-HOME-VALUES_fig1_265409427 https://www.researchgate.net/figure/A-HISTORY-OF-HOME-VALUES...

xeromal 4y ago
Maybe I don't understand how things work, but if you plan on enjoying and living in the house, does the house value matter except for property taxes? I bought a house to have stable "rent"
- tablespoon 4y ago
  > Maybe I don't understand how things work, but if you plan on enjoying and living in the house, does the house value matter except for property taxes? I bought a house to have stable "rent" You could end up being underwater on your mortgage, which could be a bad thing if other aspects of your financial situation deteriorate.
  - cavisne 4y ago
    In California & Washington mortgages are non-recourse, ie they are secured by the property itself and nothing else. So if your financial situation deteriorates to the point where you are forced to foreclose, you lose the equity in the home, but your other assets are protected.
    - leereeves 4y ago
      But even a non-recourse foreclosure tanks your credit rating and makes it difficult to rent or buy another home, right?
      - dragonwriter 4y ago
        > But even a non-recourse foreclosure tanks your credit rating and makes it difficult to rent or buy another home, right? Been through essentially that (it was actually a short-sale in a non-recourse state, not a foreclosure, but in most effects the two are pretty similar.) So, yeah, because we didn’t rent the new place immediately when we realized that there was a problem but after some period of nonpayment (but before the short sale was finalized), we had to find an individual landlord who managed property directly rather than one managed through a management firm that ran applicants through a hands of screening process before even looking at them (who we found, before the apartment was publicly listed, through an real estate agent who we first contacted because they had listed their house for rent and it was at the high end of what we were looking at, and who we also ended up working with on the short sale.) Once financial circumstances turned and we were in the market to buy again – within the 3 year period of ineligiblity after a short sale for an FHA loan – we had relatively little problem finding acceptable financing, though we paid slightly higher (but still tolerable) rates, and were able to refinance into better rates a couple years later.
      - surfaceofthesun 4y ago
        Yes. This is anecdotal, but I saw relatives go through foreclosure in the GFC, then get approved for a different (larger) mortgage 5-6 years later.
  - chrononaut 4y ago
    Which is really influenced by how much you are financially leveraged, and less so about whether a home is underwater or not. In a case where capital is needed, if I "put 10% down on my primary residence with remaining capital in more liquid assets and the home becomes underwater" can often be a better situation than if I "put 40% down on my primary residence with little capital in liquid assets and the home decreases in value by 20%".
  - dragonwriter 4y ago
    > You could end up being underwater on your mortgage, which could be a bad thing if other aspects of your financial situation deteriorate. Being underwater on your mortgage is, in and of itself, not too bad. If you also can’t pay the mortgage, that’s bad, because being underwater means you can’t sell the house to get out of it. OTOH, in a non-recourse state, especailly in a bad economy where you are very far from being alone in that situation (which, statistically, is when it is most likely to happen), there’s a sense in which that is more of a bank problem than a you problem.
    - adam_arthur 4y ago
      It's terrible if you ever want to move and market rents don't cover the mortgage
- solveit 4y ago
  Well if house values go down it changes the size of the mortgage you can take out on it, and your stable "rent" will turn out to be stably high compared to market, but yeah, house prices going down shouldn't affect your plans too much if you'll just live in it.
- imoverclocked 4y ago
  Some people don't have "stable rent" as they may have something akin to an ARM. Besides that, some people purchase homes to fixup/sell as a way of personal/business income. Others may have purchased just barely in their means and now inflation going up on necessities has pushed them out of their means ... and they need to sell but also can't afford the loss in a declining market. Others may be relying on the value of their home for retirement related expenses. My point: there are a lot of situations that a declining market makes worse. Depending on how far down it goes, you can see a lot of people hit hard times which can lead to real economic pain for everyone.
  - xeromal 4y ago
    I honestly didn't know ARMs were still a thing since 2008. Wow.
    - WillPostForFood 4y ago
      It is only about 5% of loans.
- adra 4y ago
  I'm not sure where you live, but where I'm from, the hip leverage of.choice was to take HELOCs (home equity line of credit), which a lot of people use to extract the "value" they have in their homes to help fund their lavish unsustainable lifestyles. The sh*t hits the bricks and their houses are underwater, they're now basically double screwed because the home is worth way less and they can no longer extract money from the home (possibly being unrecoverable crippled in debt)... It'll get real bad really fast if we're in for a notable correction.
  - xeromal 4y ago
    Got ya. I keep it pretty smart I think. Got a house for 270k and I make 150k a year. Mortgage isn't high at all. (1300) after all the add-ons. Don't plan on extracting value from the house less something terrible happens like a tree falls on my roof or something. fixed interest rate at 2.7%
- hnuser847 4y ago
  It matters if you intend to sell and you’re underwater on your mortgage.
streetcat1 4y ago
Housing cannot fall without unemployment. So far the economy has lost workers not jobs. Unemployment is 3.6 % and going down. Real min wage is 22$. In addition, there is a big wave of onshoring coming into the US due to supply chain issues. Housing price will not fall due to 25% inventory levels from 2008. Also High mortgage locks sellers into their current homes. I predict another 20% rise in house prices (At least nominal rise).
- shostack 4y ago
  Sounds like the Fed expects unemployment to rise and are ok with it if it means cooling off rate of inflation. https://www.bloomberg.com/news/articles/2022-05-10/williams-says-fed-to-curb-inflation-without-raising-unemployment https://www.bloomberg.com/news/articles/2022-05-10/williams-...
  - streetcat1 4y ago
    How, Where are they are going to find the employees? Remember that half of the baby boomer retired. I think that the US is facing 20 years of tight label market. Especially if globalization is on its way out.
    - adam_arthur 4y ago
      Look at unemployment pre and post GFC. To save you the time, 4% to 10% in a matter of months. Unemployment is almost always lowest prior to a recession. It's exactly an overheated labor market that drives the Fed to tighten and induce a recession to cool off inflation. Inflation cannot be defeated without driving unemployment up, when labor market is this tight. Wages rising at 6%+ is not conducive to 2% inflation
- coliveira 4y ago
  Don't worry: the job of the Fed is exactly to increase unemployment! This is how they manage to create recessions in order to keep monetary policy under control.
tootie 4y ago
Saying it will crash because it's risen so high is not logical. Japan is obvious counterpoint. Housing prices rose, growth stagnated and they kept rising. Why? Supply and demand. Demand is still strong and new construction has slowed. We still have many years of pent up demand and no looming construction boom and not much desirable land to build on.
dcolkitt 4y ago
The chart you’re posting ends in 2007 at the height of the housing bubble. Housing prices already corrected from this reference point 15 years ago. Given the vast supply-demand mismatch, housing today is generationally underpriced. The simple fact of the matter is that new home construction plummeted after the GFC to levels not seems since the 1930s and it has never recovered. We’ve spent a decade drastically underbuilding housing, while enshrining NIMBY policies making it near impossible to ever pick even get back to pace let alone make up for lost time. Against that we have the largest generation in history aging into prime home buying age.

xeromal 4y ago

Maybe I don't understand how things work, but if you plan on enjoying and living in the house, does the house value matter except for property taxes? I bought a house to have stable "rent"

tablespoon 4y ago
> Maybe I don't understand how things work, but if you plan on enjoying and living in the house, does the house value matter except for property taxes? I bought a house to have stable "rent" You could end up being underwater on your mortgage, which could be a bad thing if other aspects of your financial situation deteriorate.
- cavisne 4y ago
  In California & Washington mortgages are non-recourse, ie they are secured by the property itself and nothing else. So if your financial situation deteriorates to the point where you are forced to foreclose, you lose the equity in the home, but your other assets are protected.
  - leereeves 4y ago
    But even a non-recourse foreclosure tanks your credit rating and makes it difficult to rent or buy another home, right?
    - dragonwriter 4y ago
      > But even a non-recourse foreclosure tanks your credit rating and makes it difficult to rent or buy another home, right? Been through essentially that (it was actually a short-sale in a non-recourse state, not a foreclosure, but in most effects the two are pretty similar.) So, yeah, because we didn’t rent the new place immediately when we realized that there was a problem but after some period of nonpayment (but before the short sale was finalized), we had to find an individual landlord who managed property directly rather than one managed through a management firm that ran applicants through a hands of screening process before even looking at them (who we found, before the apartment was publicly listed, through an real estate agent who we first contacted because they had listed their house for rent and it was at the high end of what we were looking at, and who we also ended up working with on the short sale.) Once financial circumstances turned and we were in the market to buy again – within the 3 year period of ineligiblity after a short sale for an FHA loan – we had relatively little problem finding acceptable financing, though we paid slightly higher (but still tolerable) rates, and were able to refinance into better rates a couple years later.
    - surfaceofthesun 4y ago
      Yes. This is anecdotal, but I saw relatives go through foreclosure in the GFC, then get approved for a different (larger) mortgage 5-6 years later.
- chrononaut 4y ago
  Which is really influenced by how much you are financially leveraged, and less so about whether a home is underwater or not. In a case where capital is needed, if I "put 10% down on my primary residence with remaining capital in more liquid assets and the home becomes underwater" can often be a better situation than if I "put 40% down on my primary residence with little capital in liquid assets and the home decreases in value by 20%".
- dragonwriter 4y ago
  > You could end up being underwater on your mortgage, which could be a bad thing if other aspects of your financial situation deteriorate. Being underwater on your mortgage is, in and of itself, not too bad. If you also can’t pay the mortgage, that’s bad, because being underwater means you can’t sell the house to get out of it. OTOH, in a non-recourse state, especailly in a bad economy where you are very far from being alone in that situation (which, statistically, is when it is most likely to happen), there’s a sense in which that is more of a bank problem than a you problem.
  - adam_arthur 4y ago
    It's terrible if you ever want to move and market rents don't cover the mortgage
solveit 4y ago
Well if house values go down it changes the size of the mortgage you can take out on it, and your stable "rent" will turn out to be stably high compared to market, but yeah, house prices going down shouldn't affect your plans too much if you'll just live in it.
imoverclocked 4y ago
Some people don't have "stable rent" as they may have something akin to an ARM. Besides that, some people purchase homes to fixup/sell as a way of personal/business income. Others may have purchased just barely in their means and now inflation going up on necessities has pushed them out of their means ... and they need to sell but also can't afford the loss in a declining market. Others may be relying on the value of their home for retirement related expenses. My point: there are a lot of situations that a declining market makes worse. Depending on how far down it goes, you can see a lot of people hit hard times which can lead to real economic pain for everyone.
- xeromal 4y ago
  I honestly didn't know ARMs were still a thing since 2008. Wow.
  - WillPostForFood 4y ago
    It is only about 5% of loans.
adra 4y ago
I'm not sure where you live, but where I'm from, the hip leverage of.choice was to take HELOCs (home equity line of credit), which a lot of people use to extract the "value" they have in their homes to help fund their lavish unsustainable lifestyles. The sh*t hits the bricks and their houses are underwater, they're now basically double screwed because the home is worth way less and they can no longer extract money from the home (possibly being unrecoverable crippled in debt)... It'll get real bad really fast if we're in for a notable correction.
- xeromal 4y ago
  Got ya. I keep it pretty smart I think. Got a house for 270k and I make 150k a year. Mortgage isn't high at all. (1300) after all the add-ons. Don't plan on extracting value from the house less something terrible happens like a tree falls on my roof or something. fixed interest rate at 2.7%
hnuser847 4y ago
It matters if you intend to sell and you’re underwater on your mortgage.

streetcat1 4y ago

Housing cannot fall without unemployment. So far the economy has lost workers not jobs. Unemployment is 3.6 % and going down. Real min wage is 22$. In addition, there is a big wave of onshoring coming into the US due to supply chain issues. Housing price will not fall due to 25% inventory levels from 2008. Also High mortgage locks sellers into their current homes. I predict another 20% rise in house prices (At least nominal rise).

shostack 4y ago
Sounds like the Fed expects unemployment to rise and are ok with it if it means cooling off rate of inflation. https://www.bloomberg.com/news/articles/2022-05-10/williams-says-fed-to-curb-inflation-without-raising-unemployment https://www.bloomberg.com/news/articles/2022-05-10/williams-...
- streetcat1 4y ago
  How, Where are they are going to find the employees? Remember that half of the baby boomer retired. I think that the US is facing 20 years of tight label market. Especially if globalization is on its way out.
  - adam_arthur 4y ago
    Look at unemployment pre and post GFC. To save you the time, 4% to 10% in a matter of months. Unemployment is almost always lowest prior to a recession. It's exactly an overheated labor market that drives the Fed to tighten and induce a recession to cool off inflation. Inflation cannot be defeated without driving unemployment up, when labor market is this tight. Wages rising at 6%+ is not conducive to 2% inflation
coliveira 4y ago
Don't worry: the job of the Fed is exactly to increase unemployment! This is how they manage to create recessions in order to keep monetary policy under control.

tootie 4y ago

Saying it will crash because it's risen so high is not logical. Japan is obvious counterpoint. Housing prices rose, growth stagnated and they kept rising. Why? Supply and demand. Demand is still strong and new construction has slowed. We still have many years of pent up demand and no looming construction boom and not much desirable land to build on.

dcolkitt 4y ago

The chart you’re posting ends in 2007 at the height of the housing bubble. Housing prices already corrected from this reference point 15 years ago. Given the vast supply-demand mismatch, housing today is generationally underpriced. The simple fact of the matter is that new home construction plummeted after the GFC to levels not seems since the 1930s and it has never recovered. We’ve spent a decade drastically underbuilding housing, while enshrining NIMBY policies making it near impossible to ever pick even get back to pace let alone make up for lost time. Against that we have the largest generation in history aging into prime home buying age.