4 ms·

I had people telling me nonsense back when I bought in 2009 as well, that houses would be had for pennies on the dollar. I put my money where my mouth was and

I had people telling me nonsense back when I bought in 2009 as well, that houses would be had for pennies on the dollar. I put my money where my mouth was and they're poor and still renting. In the real estate crash of 2008, how much do you think houses went down? And you think house prices will crash more this time than in 2008?

hadtocreateacct 4y ago
Anecdotal data point here. During the 2008 crash, I purchased a 2 bedroom / 1 bath home for $68k in foreclosure. It previously had a mortgage for $239k. Its current “Zestimate” is $286k.
UncleEntity 4y ago
Probably depends on the market. My sister bought a McMansion in ‘02, before things got crazy, and it took years for it to regain enough value post- recession to be able to sell it at a profit. At the peak houses in the neighborhood were going for over half a million and they got theirs for ~200k. A lot of of the problem was the government didn’t let house prices fall and bought up tons of mortgages to keep them off the market for years for political reasons. Really depends on how the government decides to prop up the housing market this time, probably not as much since the whole bubble isn’t based upon it. Looking back two recessions you have tech stocks going to the moon and basically no bailouts for the people playing the stock market slot machine. IIRC only really Chrysler got bailed out and that was on shaky political ground. So you have a crash and the government’s response to speculators was “meh” or a crash where the majority of people were bound to lose a whole bunch of money out of their biggest asset and they turned on the money spout to save their jobs. You have to decide on your own which one the current environment more closely resembles to have an idea what the government’s response might be.
- gedy 4y ago
  A sibling bought a tract home in Sacramento right before bubble popped in 2006, and it did not get back over purchase price until 2020 or 2021.
  - anotherhue 4y ago
    What was the break even point when you factor in the rent they were no longer paying?
    - UncleEntity 4y ago
      Ironically[0], my sister’s house was rented out for less than the mortgage payment for a few years after sitting empty for a couple years before that because she’s a slacker. Paying rent (because they moved out of the state for school/job) and a mortgage for a house you can’t sell had to suck pretty bad methinks. [0] perhaps according to Alanis Morissette‘s definition of irony.
filoeleven 4y ago
It’s unclear to me what you mean here. Are “people” and “they” the same group?
wesleywt 4y ago
The bail out tools available during the 2008 crisis is not available today. The 2008 can was kicked down the road with few safe guards to prevent what happened, happening again. You are in for a rough time. I recommend EconTalk Podcast to find out what I am talking about.
- VirusNewbie 4y ago
  oh man, another one who thinks this crash will be worse than last time. Just articulate why you think cascading failure will happen in the real estate market at this point. You predict that people who are underwater are going to be forced to sell because...why? And you don't think the people who are renting will want to buy houses?
- dcolkitt 4y ago
  Literally all of the bailout tools from 2008, plus many more are available today. In fact the Fed is much more willing to quickly deploy QE because it has experience and has seen it work. This isn’t hypothetical, because it’s exactly what happened in March 2020, and why the Covid recession was a V-shaped recovery.
  - throwawaylinux 4y ago
    You think the Fed is more inclined to print money when inflation is running above 8% than when it was 2.something? What's the reasoning there?
    - dcolkitt 4y ago
      Inflation is a function of an overheated economy running with a tight labor and commodity market. If you're positing a 2008-like crisis followed by a deep recession, it's virtually certain that the economy will become deflationary, as people hoard cash. You don't have to take my word for it. From 2007 to 2008 inflation crashed from nearly 5% to 0.1%.
      - throwawaylinux 4y ago
FollowingTheDao 4y ago
Honestly, that’s not something I would’ve said in 2009. I would’ve said it in 2007 but definitely not in 2009 after the market crash. I’m not saying they will crash more, they will crash the same amount, back to the price before the boom began.

hadtocreateacct 4y ago

Anecdotal data point here. During the 2008 crash, I purchased a 2 bedroom / 1 bath home for $68k in foreclosure. It previously had a mortgage for $239k. Its current “Zestimate” is $286k.

UncleEntity 4y ago

Probably depends on the market. My sister bought a McMansion in ‘02, before things got crazy, and it took years for it to regain enough value post- recession to be able to sell it at a profit. At the peak houses in the neighborhood were going for over half a million and they got theirs for ~200k. A lot of of the problem was the government didn’t let house prices fall and bought up tons of mortgages to keep them off the market for years for political reasons. Really depends on how the government decides to prop up the housing market this time, probably not as much since the whole bubble isn’t based upon it. Looking back two recessions you have tech stocks going to the moon and basically no bailouts for the people playing the stock market slot machine. IIRC only really Chrysler got bailed out and that was on shaky political ground. So you have a crash and the government’s response to speculators was “meh” or a crash where the majority of people were bound to lose a whole bunch of money out of their biggest asset and they turned on the money spout to save their jobs. You have to decide on your own which one the current environment more closely resembles to have an idea what the government’s response might be.

gedy 4y ago
A sibling bought a tract home in Sacramento right before bubble popped in 2006, and it did not get back over purchase price until 2020 or 2021.
- anotherhue 4y ago
  What was the break even point when you factor in the rent they were no longer paying?
  - UncleEntity 4y ago
    Ironically[0], my sister’s house was rented out for less than the mortgage payment for a few years after sitting empty for a couple years before that because she’s a slacker. Paying rent (because they moved out of the state for school/job) and a mortgage for a house you can’t sell had to suck pretty bad methinks. [0] perhaps according to Alanis Morissette‘s definition of irony.

filoeleven 4y ago

It’s unclear to me what you mean here. Are “people” and “they” the same group?

wesleywt 4y ago

The bail out tools available during the 2008 crisis is not available today. The 2008 can was kicked down the road with few safe guards to prevent what happened, happening again. You are in for a rough time. I recommend EconTalk Podcast to find out what I am talking about.

VirusNewbie 4y ago
oh man, another one who thinks this crash will be worse than last time. Just articulate why you think cascading failure will happen in the real estate market at this point. You predict that people who are underwater are going to be forced to sell because...why? And you don't think the people who are renting will want to buy houses?
dcolkitt 4y ago
Literally all of the bailout tools from 2008, plus many more are available today. In fact the Fed is much more willing to quickly deploy QE because it has experience and has seen it work. This isn’t hypothetical, because it’s exactly what happened in March 2020, and why the Covid recession was a V-shaped recovery.
- throwawaylinux 4y ago
  You think the Fed is more inclined to print money when inflation is running above 8% than when it was 2.something? What's the reasoning there?
  - dcolkitt 4y ago
    Inflation is a function of an overheated economy running with a tight labor and commodity market. If you're positing a 2008-like crisis followed by a deep recession, it's virtually certain that the economy will become deflationary, as people hoard cash. You don't have to take my word for it. From 2007 to 2008 inflation crashed from nearly 5% to 0.1%.
    - throwawaylinux 4y ago

FollowingTheDao 4y ago

Honestly, that’s not something I would’ve said in 2009. I would’ve said it in 2007 but definitely not in 2009 after the market crash. I’m not saying they will crash more, they will crash the same amount, back to the price before the boom began.