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Looming Real Estate Crash? And geoff’s Folly. February 17, 2022

Posted by geoff in News.
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The Federalist had a depressing article today depressingly entitled, “Key Indicator Hints America Is Headed For Its Worst Real Estate Crash In History.” The author says we’re caught between the Scylla of a real estate bubble and the Charybdis of rampant inflation:

Whatever the final numbers end up being, the evidence is clear: based on data reported over the past six decades, America appears to be on the verge of an epic real estate crash.

As painful as such a correction would be, it is likely necessary. The price increases we’ve been seeing in recent years are primarily the result of inflation and reckless monetary policy, not real economic growth.

However, there is a chance that housing prices will not drop, or only drop minimally. If the Fed decides to continue to keep interest rates low, despite the ongoing inflation crisis, it might prevent a real estate crash the size and scale of the one discussed above. It will come at a cost, though — more inflation, even bigger market distortions, and perhaps the collapse of the dollar.

This is all well known, of course. We’ve been worrying about this for several years. It’s why I sold my house back in 2018. But how bad is it?

There are two obvious takeways from this chart. First, the price increases in 2020 and 2021 have been insane. Second, never take real estate advice from me.

In my feeble defense, you can see that there had been a 35% price increase from 2012 to 2018, and that prices leveled off in 2018. So selling then wasn’t ridiculous, I tell myself as I cry myself to sleep.

But as you can see, we have a long, long way we can fall from today’s prices. That doesn’t even factor in the bank crash that could happen with inflation being 2X higher than interest rates. Dark times could indeed be coming soon.

I’d try to give you advice on how to weather this situation, but . . .

Comments»

1. Jimbro - February 17, 2022

I know a few things about real estate

1. Location
2. Location
3. Location

-fin-

2. Jimbro - February 17, 2022

I’ve actually lucked out as far as mortgage rates in my lifetime of house buying. I forget the mortgage rate when I bought my first duplex but after owning it for 4 years with roommates paying me rent I broke even when selling it. I’ve owned my current house since ’99 with the only hiccup being a divorce that took half my equity in it after 8 years. When I refinanced it was at a negligible rate and I was able to pay it off a few years ago.

3. jam2 - February 17, 2022

I sold and then turned around and bought last year.
Worst case scenario is I work till I drop dead of a stroke or heart attack.
Best case scenario it’s massive and quick.

4. jam2 - February 17, 2022

The upside is I got a decent deal on the new place and the poor farquars that bought the old place sadly WAY overpaid for it.

5. geoff - February 17, 2022

I ended up buying a condo that was about 75% the size of my old house, but less than half the selling price of the house, so I’ll survive. But if I had held onto the old house until I bought the condo, I’d be $200K ahead.

Sigh.

At least I got a good enough deal with the condo that I don’t think the value will dip much even if the market crashes.

6. lumps - February 20, 2022

Whenever a Dem comes into office, we are thoroughly fucked. The Obama economy took my business, I retooled my brain and got a new career, and now Biden’s idiotic insistence that we all take a useless and dangerous injection has taken that away from me. The fucking thing doesn’t even work. But we all have to have it just to live our lives.

Awake again early, ruminating. I just can’t really believe this is happening.

7. lumps - February 20, 2022
8. geoff - February 20, 2022

Cool charts. A couple of them compare cumulative stuff for COVID-19 vaccines vs. all other and unknown – you have to be careful because the COVID-19 data goes the right-hand axis and the other go with the left. But the right-hand scale is huge compared to the left, meaning that the situation is far, far worse than your first impression.

…or at least my first impression.

9. retiredgeezer - February 23, 2022

The Geek in Pictures is a ‘weekly’ collection on PowerLine.
Here’s a good one:
https://www.powerlineblog.com/archives/2022/02/the-geek-in-pictures-biden-excuses-edition.php

10. geoff - February 24, 2022

Made the mistake of checking the old house’s price out on Zillow. I sold it for $430K, and they’re now estimating that it’d go for $693K.

*whimpers*

11. Real Estate Industry Should Assume Their Crash Positions | Innocent Bystanders - May 2, 2022

[…] couple of months ago we had a post on the prospects for a real estate market crash. Just looking at the interest rate situation, it’s looking like the brakes are going to be […]


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