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The global housing market is heading for a brutal downturn
- cntainer 4y agohttps://archive.ph/lthwZ https://archive.ph/lthwZ
- doix 4y agoI've been waiting for a downturn since I missed the one in 08 and it seems to never come. I've resigned to the fact that I'll probably never own property and eventually move into a camper van.
- baq 4y agoIt’ll happen slowly then all at once. Be ready to make a move in the next couple years. Be patient, but pounce quickly.
- Beaver117 4y agoIf the downturn is so short you need to "pounce quickly" it isn't much of a downturn. Some countries have had stagnant real estate markets for years. Anyway interest rates are not going down to 2% anytime soon so don't hold your breath. People who bought/refinanced in 2020-2021 will probably never sell.
- saiya-jin 4y agoPrices going up and down isn't symmetrical behavior in terms of speed. People love increase sale prices as soon as possible and detest lowering them down, many can afford to wait if they expect massive additional income within few years. US is more flexible than say Europe in this (and other aspects of society) but I have no doubt this applies there too.
- hyperbovine 4y agoThis. We refi’d in 2020 and our monthly payment is just stupendously cheap now, like < 1/7 my monthly take home pay. Even though we sort of need a bigger house at this point, the thought of giving this up makes entering the market again a complete non-starter. I feel bad for anyone trying to buy a house in the US right now, particularly their first.
- benj111 4y agoHigh inflation is good if you've just bought a house though. Yes it's hard to begin with but compound inflation soon erodes the value of the debt.
- cudgy 4y agoThis assumes housing moves with inflation, which will not be the case if real wages to pay high interest mortgages do not rise with inflation or prices for housing drop to compensate, which has already started. Buying at the peak even with low interest rates is not a panacea.
- benj111 4y ago>This assumes housing moves with inflation No it doesn't. When you buy a house your price is locked in. It assumes wages track inflation which is generally the case. I also made no assumption as to whether this is a peak or trough in the housing market. Obviously it's better to buy at the bottom but that requires market timing. But in either scenario, assuming wages track inflation, the value of your mortgage is eroded faster, the higher inflation is.
- cudgy 4y ago> People who bought/refinanced in 2020-2021 will probably never sell. They may not be able to sell for 10-12 years if prices move down like they did in the last real estate down cycle. There is a reasonable risk that this process has already started.
- baq 4y agoI see HN didn't take my horoscope well, so I'll leave this chart as an addendum ;) https://data.sca.isr.umich.edu/get-chart.php?y=2022&m=9&n=41h&d=ylch&f=pdf&k=4a8b738a9e6aff21fd7216fec0f0027a89d9a18b90f5b9ce88c7f85b1ebd2da0 https://data.sca.isr.umich.edu/get-chart.php?y=2022&m=9&n=41...
- jl6 4y ago> It’ll happen slowly then all at once. Be ready to make a move in the next couple years. Be patient, but pounce quickly. Also, a stranger will present an opportunity. Don’t keep your authentic self under wraps. If you can hold your nerve and invest in a friendship, you may realize gains while romance is favored by Mercury.
- boomskats 4y agoI too immediately pictured a middle-aged TV celebrity uplit by a crystal ball as I read this prophecy. Thank you for the chuckle.
- bamboozled 4y agoAmazing
- googlryas 4y agoDoubtful. It's not like the housing market will crash but everything else will remain the same. If it happens, it will drag many other sectors down with it. Okay - great, houses are 50% cheaper than they were in 2021, but now you got laid off your old job and are making only 60% of your previous pay check after 4 months of unemployment, and inflation and interest rates continues to rise
- d_t_w 4y ago“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”
- bbarn 4y agoI see you haven't looked at the camper van market lately.
- AaronLasseigne 4y agoThis is both funny and depressing.
- bamboozled 4y agoI think one of the issues is this, there are so, so many people waiting to buy in the downturn with money saved that it will create its own boom. I do wonder though, if all this cash in the bank people are hoarding for the downturn will have other effects on the economy, recession ? I'm in the same boat though, I've saved and invested a shirtload of cash waiting for a downturn.
- benj111 4y agoAre people hoarding cash/assets? From what I understand the savings rate has been dropping across the western world. In theory though, savings are countercyclical. People made unemployed can still maintain their spending. So it helps break the feedback loop of redundancies -> falling spending -> redundancies. Although we seem to be heading for recession, with high inflation and interest rates, so the normal mechanism of decreasing interest rates to get people spending isn't really available currently.
- bamboozled 4y agoI'm not spending my money until house prices come down basically, so maybe I'm the cause of the recession but bad luck I guess.
- benj111 4y agoIf you're refraining from spending you are suppressing inflation. Where high inflation looks like it is going to cause a recession. so I would say your actions are a net benefit.
- ChrisMarshallNY 4y ago> From what I understand the savings rate has been dropping across the western world. I’m not sure that’s the case. It may have just declined, but I think it was pretty high, during the COVID years.
- benj111 4y ago
- cm2187 4y agoThe problem is that it is kind of like the stock market. This year's Nasdaq's bear market has only reversed a couple of years worth of growth. If you have been waiting on the sideline in cash for a sell off to invest for the last 10 years, you are way worse off than having jumped in at the first opportunity and taken the ups and downs of the market.
- pharmakom 4y agoRetail housing investors are getting a rough lesson in risk correlation. Get a variable rate (or short term fixed) loan to leverage the purchase on an asset whose main price driver is interest rates and things can go south quickly.
- lpapez 4y agoSummary of this article is that we can expect from 0 to 5% year-on-year GROWTH in asset prices, compared to 15% we saw last year. Hardly a brutal downturn in my opinion.
- chewz 4y agoNominal price growth below inflation rate. So prices drop in real terms. If your assets/income grows above inflation rate you win...
- pharmakom 4y agoYeah in a high inflation environment nominal growth means little.
- randomdata 4y agoAlso, seems like it will also be short-lived so long as food remains scarce. Last time we had food troubles (2007) we saw the housing market crash as investment dollars started gambling on futures contracts, but it wasn't long before people started paying big bucks for the farmland around settlements to try and profit on the production side, making it more costly to build new housing, thereby impacting housing supply and soon bringing all housing back up in price. We're already starting to see insane farmland offers showing up. Maybe this time, especially with increased WFH, we'll start to see more growth away from historical settlements built on prime farmland, but with the high cost of fuel and shipping in general that isn't going to be the easiest transition either.
- rmbyrro 4y agoNo wonder why these people are having a hard time convincing others to pay for their writing.
- bamboozled 4y agoI guess this does give people a chance to catch up to save and buy, at some point, it was a rocket ship, now it seems more like a broken old bus.
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- rkagerer 4y agoIs it me or does the first graph in that article look a bit wonky? The "forecast" shading starts at the beginning of 2022, and today's date on the X axis would have just about already hit the bottom of the big trough (which isn't what I gather they intend to convey).
- inglor_cz 4y agoIf the nominal prices stagnate or even go down, but mortgage interest rates go significantly up, there is no positive change in affordability for the average buyer. The monthly mortgage installment will stay high, only the principal/interest balance within it will change. The sellers are the ones who will get less money, but the buyers, unless they have huge savings, won't benefit much.
- ReptileMan 4y agoThey will since they always can renegotiate their mortgage once interest rates go down.
- inglor_cz 4y agoThis is a good observation. Nevertheless, the worst obstacle in owning a home is actually buying it. Ten or fifteen years downstream, your principal payment likely represents a much smaller fraction of your income than it did when you bought the property, and you can renegotiate the mortgage in better times, as you say - so even the interest can be kept under control. But the first years of your first mortgage are a real challenge. You need to cough up the downpayment, you might have young kids to take care of, you might still be relatively low on the career ladder etc.
- rightbyte 4y agoThe buyer do benefit from lower prices. How is this even a talking point. It is as silly as counterintuitive. If there is less loan to pay back for the same asset, the loan taker benefits.
- rmbyrro 4y agoUn-pay-walled: https://archive.is/lthwZ https://archive.is/lthwZ
- ThrowawayTestr 4y agoContrary to the wording of the title, this is a good thing for people that treat housing as a place to live instead of an ever appreciating asset.
- charlieyu1 4y agoHousing downturn in an environment of rising interest rates doesn’t help affordability
- bboygravity 4y agoIt does for those with savings in things that the government can't print.
- charlieyu1 4y agoHigh interest means high mortgage payments. Unless you already saved enough to buy without mortgage
- deleted 4y ago[deleted]
- pavlov 4y agoSeems like it’s the other way around? Real estate is a thing the government can’t print. When its value goes down, it becomes more affordable to people with savings in fiat.
- candiodari 4y agoExcept for most people monthly cost is the metric that matters. So let's compare housing going up 10% per year with 0.5% interest rates to housing going down 10% per year with 5% interest rates: Least extreme loans: Euro style mortgages (fixed monthly payment, capital repaid over loan duration) 300k house, 0.5% interest rates, 10y: monthly payment of 2563$ 270k house, 5% interest rates, 10y: monthly payment of 2865$ Most extreme loans: Interest only loans (note: duration doesn't matter): 300k house, 0.5% interest rates: monthly payment of 125$ 270k house, 5% interest rates: monthly payment of 1125$ The whole point of inflation AND of the measures the central bank takes to combat inflation is to reduce usage of goods relative to labor. Meaning the same work will buy less Big Macs, less education, less housing. More work less pay. Not less pay in money. Less pay in housing, medical care, pizza, ... I hope you do see WHY the central bank interferes. It does not fundamentally change the situation, that's done by people, the international situation (more COVID in China, which is not over yet, than the situation in Ukraine. Although the situation in Ukraine definitely doesn't help), ... the central bank is protecting the currency, NOT your living standard. You see the way to win in this system: if there is a housing (or X) downturn ... and you buy with high interest rates, DURING the crisis (which will be scary, of course), is the way to win big. That's the point. We want to limit the damage done to everything backed by loans. That is fully intentional. The point is to stimulate loaning money to use productively. We want people to buy houses, start new restaurants, build new shopping malls, hospitals, bridges, ...
- switch007 4y agoI’ll believe it when I see it in the UK
- fredgrott 4y agoObvious question since corp debt uses the same financial black magic as housing loans, will corp debt crash the same way? In the USA there was a law passed past 2008 to deal with CDOs, but banks have found a loop-hole to go around it.
- cudgy 4y agoExisting corp debt has already crashed due to a rise in the bond yields to match the higher interest rate environment.
- ReptileMan 4y agoOne can only hope. I would really enjoy one but I don't see the prices going down until a lot of money are syphoned off the system.