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Everyone has that pipe dream: The bubble will burst soon, and we'll buy a nice house much cheaper. Keep dreaming. Barring the deep dive of 2008 and another in 1990s, the RE prices tend to stabilize after a steel runup rather than decline.
It's the same thing as imagining that you will buy stocks at the bottom -- good luck with that, too.
Well I'd say it a little differently, and that is we all have confirmation bias. We are more likely to believe the data that supports our position and discount the data that doesn't. So yes if you're wanting to buy a house but priced out of the market right now you almost have to believe that prices are going to come down. What is the alternative? To decide that prices will keep rocketing up and your dreams of owning a home are dead and gone? That's a tough pill to swallow. Likewise, someone who just bought a home almost has to believe there won't be a major correction. Otherwise you're basically saying I just did a really dumb thing, I bought this house and expect it to be worth 30% less in a few years!
Being that this is a RE forum I'm guessing most of us have some "skin in the game" (in the market to buy, already own, investors and landlords, RE agents). That's going to play a part in what we think the future holds, whether we realize it or not.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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It's pretty funny to read that in 2006 someone wanted to buy a house for $50k, that's what we paid for our first, in 1978. Also, that the Seattle metro was hitting $400k then, now it's over a million. Will there be a big correction? I don't think so, just a slowdown in the increases. Instead of 40.7% in a year (here in Sammamish WA 2020-21) it may go back to 10-12%.
What we are seeing is the result of FoMO (Fear of Missing Out).
Everybody knows that you shouldn't buy when prices are high. And yet, they do it anyway. We see this all the time with other things in life, like stocks. Everybody knows that you're suppose to buy low sell high to make any money. And yet, the history of stock tells us that a large number of people always buy high sell low. The reason is simple, they wait until the stock has proven that it is going up so they buy high hoping to sell higher. Then as soon as the first dip occurs they panic sell.
People are panic buying houses because everyone else is doing it. This is causing the spike in home prices. If everyone just calm down, home prices will naturally fall back to normal. But since there are too many people with the FoMO mentality, home prices will continue to be artificially inflated.
As a professional investor, I am sitting this one out. Not doing a thing. Good luck everyone else!
It's educational to refer back to post #6. Nearly everything written there - in 2006 - could be re-written today, in 2022... and it would be just as accurate.
It boggles the mind, why it would NOT be the case, that just as the horror of 2008 followed 2006, 2024 would follow 2022.
"educational"?? Nothing written in 2006 applies to today. None of what caused the 2006 housing crash exists today. You should educate yourself by doing a simple google search on what caused the 2006 crash.
Well I'd say it a little differently, and that is we all have confirmation bias. We are more likely to believe the data that supports our position and discount the data that doesn't. So yes if you're wanting to buy a house but priced out of the market right now you almost have to believe that prices are going to come down. What is the alternative? To decide that prices will keep rocketing up and your dreams of owning a home are dead and gone? That's a tough pill to swallow. Likewise, someone who just bought a home almost has to believe there won't be a major correction. Otherwise you're basically saying I just did a really dumb thing, I bought this house and expect it to be worth 30% less in a few years!
Being that this is a RE forum I'm guessing most of us have some "skin in the game" (in the market to buy, already own, investors and landlords, RE agents). That's going to play a part in what we think the future holds, whether we realize it or not.
Agree to a point but I am in the This Time It's Different Camp. The reason housing (and other asset prices) have skyrocketed is because of all the money flooding into the system and all the Covid stimulus. That's is what's driving it all. I don't see inflation curbing anytime soon. Money is just worth less now than before. It sucks for people on the low end whose salary isn't going up in a commensurate way. The fact is, our standard of living is generally going to go down due to higher energy costs. And the low income will feel it the worst. Sadly.
What we are seeing is the result of FoMO (Fear of Missing Out).
Everybody knows that you shouldn't buy when prices are high. And yet, they do it anyway. We see this all the time with other things in life, like stocks. Everybody knows that you're suppose to buy low sell high to make any money. And yet, the history of stock tells us that a large number of people always buy high sell low. The reason is simple, they wait until the stock has proven that it is going up so they buy high hoping to sell higher. Then as soon as the first dip occurs they panic sell.
People are panic buying houses because everyone else is doing it. This is causing the spike in home prices. If everyone just calm down, home prices will naturally fall back to normal. But since there are too many people with the FoMO mentality, home prices will continue to be artificially inflated.
As a professional investor, I am sitting this one out. Not doing a thing. Good luck everyone else!
Are they (panic buying?) I know two recently married couples that have made a conscious decision to continue to rent, since they've come to the realization that buying will mean writing an offer basically sight unseen. It isn't the price run up, it's that they refuse to make that commitment sight unseen.
Are they (panic buying?) I know two recently married couples that have made a conscious decision to continue to rent, since they've come to the realization that buying will mean writing an offer basically sight unseen. It isn't the price run up, it's that they refuse to make that commitment sight unseen.
I know couples that are holding off buying. But for every couple I know that are holding off buying, there are 3-4 couples I know that can't wait to buy a house RIGHT NOW due to fear that inventory might not hold.
There is one couple in particular. They have even admitted to me out loud that they know houses are overpriced right now but they are buying anyway because there might not be any place left to buy next year. Who am I to tell them to hold off, right?
At this point, the lack of supply might keep prices high, in spite of higher interest rates. I don't think 6% or 7% can tank this market.
Mathematically, though, prices eventually have to level off. Homes prices cannot forever increase their share of income, as eventually, incomes would be entirely consumed by housing.
However, an external shock could bring the market down. E.g. a major recession. I would never try to time that, or otherwise predict it. But millions of job losses are typical in a major recession. Job losses would force a lot folks to sell, while simultaneously gutting the available buyers.
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