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Real Estate Industry Should Assume Its Crash Position May 2, 2022

Posted by geoff in News.

A 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 applied pretty hard:

Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US, May 2, 2022.

Just as a for-instance, the principal/interest on a $450K house would have cost you around$1520 (@3% interest) during Biden’s first year. Now it’ll cost you $1940.

That’s a 28% bump that has to put a lot of properties out of people’s reaches. Especially when the price of everything else has gone up as well.

Real estate’s only hope is that investors abandon the stock market as an inflation hedge and put their money in more tangible assets. But real estate is not very liquid, and will be even less liquid with a dearth of buyers. And when everybody’s underwater, what then?

To us reg’lar type peoples, it’s time to get your housing situation nice and stable, and then hunker down until this passes over. [But as noted in my previous post, my track record on real estate advice is abysmal, so take my advice with plenty ‘o caution.]


1. Jimbro - May 2, 2022

Mortgage rates are climbing which is a disincentive to buy. Average home price is elevated which is yet another disincentive. But housing supply is depressed and with the supply and labor shortages not improving any time soon I think the people who need new houses will continue to purchase them and make sacrifices elsewhere. With all that considered I agree that home sales are headed for a decline. What a time to be alive

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