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Stock market bubble started slowly deflating. When is housing market bubble going to deflate?

by slaw 2y ago

ericmay 2y ago
Well the issue with housing doesn't seem to be a "bubble" in the same sense. It's moreso we aren't building enough housing so the supply is limited. With higher rates the monthly price is higher too which is contributing to un-affordability. But if rates go down then monthly payment prices would go down, which would cause prices to go up. If rates go down because there's a substantial recession home prices may go down but many people may be out of jobs or unwilling to sell.
- alfalfasprout 2y ago
  It becomes a bubble when suddenly people who paid a fortune for mortgages at sky high prices aren't able to pay them anymore. Or demand falls. The market is currently tight but on both supply and demand. No one with a 2% mortgage wants to move. No one wants to buy at 6% interest.
  - ericmay 2y ago
    I personally think of a bubble has having a significant speculation component which I don't think applies wholly to the housing market in the same way it does today's stock market. The reasons that housing prices are so high, in my opinion, is primarily because of structural problems. But certainly others may feel differently or define a bubble differently.
    - criddell 2y ago
      The reasons likely vary by region.
      - ericmay 2y ago
        I think that's true and even true at a zip code level for some locations. Broadly speaking though I think I stand by my assessment but always interested to hear other opinions on the topic because it is quite fascinating.
velcrovan 2y ago
When supply catches up to demand. https://www.realtor.com/research/us-housing-supply-gap-2025/ https://www.realtor.com/research/us-housing-supply-gap-2025/
riku_iki 2y ago
One speculation is that it will not deflate, because government has many T of debt -> need to service it -> need to print more money for that -> inflation and market gain.
bdcravens 2y ago
I can't see how housing prices can drop substantially without the economy being in a rough spot. Banks will have a hard time writing home equity loans, underwater investors will tighten their belts, and worker mobility will be challenged as home owners (who have purchased in the past few years) can't sell their homes. The better hope is for prices to stagnate and incomes to rise. (not a great prospect, but better)
kart23 2y ago
Not for at least 10 years because government is propping up house prices with their holdings of MBS, although market has definitely softened in some places. https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB
hnpolicestate 2y ago
I can tell you if you're talking about urban centers like NYC, Chicago, Washington etc. When the United States stops immigration from wealthy immigrants. Everyone buying in my area are Chinese, Arab or Indian immigrants with far more money than the native population. They are propping up home values. Would have popped by now.
r00fus 2y ago
Since 2009 banks have been able to ignore "mark to market" rules thus allowing them to keep unrealistically high valuations on deflating properties.

Stock market bubble started slowly deflating. When is housing market bubble going to deflate?

by slaw 2y ago

Stock market bubble started slowly deflating. When is housing market bubble going to deflate?

Well the issue with housing doesn't seem to be a "bubble" in the same sense. It's moreso we aren't building enough housing so the supply is limited. With higher rates the monthly price is higher too which is contributing to un-affordability. But if rates go down then monthly payment prices would go down, which would cause prices to go up. If rates go down because there's a substantial recession home prices may go down but many people may be out of jobs or unwilling to sell.

alfalfasprout 2y ago
It becomes a bubble when suddenly people who paid a fortune for mortgages at sky high prices aren't able to pay them anymore. Or demand falls. The market is currently tight but on both supply and demand. No one with a 2% mortgage wants to move. No one wants to buy at 6% interest.
- ericmay 2y ago
  I personally think of a bubble has having a significant speculation component which I don't think applies wholly to the housing market in the same way it does today's stock market. The reasons that housing prices are so high, in my opinion, is primarily because of structural problems. But certainly others may feel differently or define a bubble differently.
  - criddell 2y ago
    The reasons likely vary by region.
    - ericmay 2y ago
      I think that's true and even true at a zip code level for some locations. Broadly speaking though I think I stand by my assessment but always interested to hear other opinions on the topic because it is quite fascinating.

velcrovan 2y ago

When supply catches up to demand. https://www.realtor.com/research/us-housing-supply-gap-2025/ https://www.realtor.com/research/us-housing-supply-gap-2025/

riku_iki 2y ago

One speculation is that it will not deflate, because government has many T of debt -> need to service it -> need to print more money for that -> inflation and market gain.

bdcravens 2y ago

I can't see how housing prices can drop substantially without the economy being in a rough spot. Banks will have a hard time writing home equity loans, underwater investors will tighten their belts, and worker mobility will be challenged as home owners (who have purchased in the past few years) can't sell their homes. The better hope is for prices to stagnate and incomes to rise. (not a great prospect, but better)

kart23 2y ago

Not for at least 10 years because government is propping up house prices with their holdings of MBS, although market has definitely softened in some places. https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB

hnpolicestate 2y ago

I can tell you if you're talking about urban centers like NYC, Chicago, Washington etc. When the United States stops immigration from wealthy immigrants. Everyone buying in my area are Chinese, Arab or Indian immigrants with far more money than the native population. They are propping up home values. Would have popped by now.

r00fus 2y ago

Since 2009 banks have been able to ignore "mark to market" rules thus allowing them to keep unrealistically high valuations on deflating properties.