Housing market in context of recent volatility

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Bwlonge
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Joined: Wed Nov 22, 2017 6:36 am

Housing market in context of recent volatility

Post by Bwlonge »

No one has a crystal ball, no one knows if the current market conditions will flip tomorrow, next week, or next year. But I've been shopping for a house, and now with the market tanking, it's a big question mark. I wasn't financially aware in 2007/2008, but my understanding is that that housing market crash was related to people being over extended on their loans.

In theory, there were protections put in place after that to prevent over extension. However, I've been getting approved for mortgages I have no business taking. The appraisals I've had done on my investment properties have been rubber stamps, in my opinion. I wonder just how much of that protection has actually worked, and if people are over extended on low interest, high price properties.

I just need to figure out if it's now wise for me to buy a house or if it's better to wait a year to see if next year becomes another 2008. Surely, not every recession has a housing market crash tethered to it?
SouthernFIRE
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Re: Housing market in context of recent volatility

Post by SouthernFIRE »

My crystal ball is cloudy but the real estate market remains generally strong in my area (large SE city). There doesn't seem to be a direct connection between the coronavirus and real estate sales, but no one knows. If you're ready to buy a house, then buy one you like. Timing the real estate market is about like timing the stock market: can't really be done. I would try to use the market upheaval as negotiating leverage but that's about it.
playtothebeat
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Location: southern california

Re: Housing market in context of recent volatility

Post by playtothebeat »

When you say the marker is tanking, are you talking about your local housing market or the stock market? If you’re talking about the stock market, why do you think that will impact your local housing marker negatively? Interest rates are at an all time low and the 10-year treasury just hit below 1.2%. It’s a great time to be a borrower, and if this continues into the summer buying season, I suspect it will lead to higher, not lower, housing pricing.
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Bwlonge
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Re: Housing market in context of recent volatility

Post by Bwlonge »

playtothebeat wrote: Fri Feb 28, 2020 9:39 am When you say the marker is tanking, are you talking about your local housing market or the stock market? If you’re talking about the stock market, why do you think that will impact your local housing marker negatively? Interest rates are at an all time low and the 10-year treasury just hit below 1.2%. It’s a great time to be a borrower, and if this continues into the summer buying season, I suspect it will lead to higher, not lower, housing pricing.
Right. I meant the stock market. I just want to check my assumption that stock and housing market aren't always linked, and 2007/2008 were linked because people were overextended then lost money and jobs. In theory people are less overextended and can absorb the stock market losses. It's hard for me to imagine a significant number of people losing their job to a disease they don't have.
KlangFool
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Re: Housing market in context of recent volatility

Post by KlangFool »

Bwlonge wrote: Fri Feb 28, 2020 9:44 am
playtothebeat wrote: Fri Feb 28, 2020 9:39 am When you say the marker is tanking, are you talking about your local housing market or the stock market? If you’re talking about the stock market, why do you think that will impact your local housing marker negatively? Interest rates are at an all time low and the 10-year treasury just hit below 1.2%. It’s a great time to be a borrower, and if this continues into the summer buying season, I suspect it will lead to higher, not lower, housing pricing.
Right. I meant the stock market. I just want to check my assumption that stock and housing market aren't always linked, and 2007/2008 were linked because people were overextended then lost money and jobs. In theory people are less overextended and can absorb the stock market losses. It's hard for me to imagine a significant number of people losing their job to a disease they don't have.
Bwlonge,

If you are in a real estate market where many people use their stock compensation to pay the mortgage, that assumption may not be correct.

KlangFool
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Sandtrap
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Re: Housing market in context of recent volatility

Post by Sandtrap »

Bwlonge wrote: Fri Feb 28, 2020 8:50 am No one has a crystal ball, no one knows if the current market conditions will flip tomorrow, next week, or next year. But I've been shopping for a house, and now with the market tanking, it's a big question mark. I wasn't financially aware in 2007/2008, but my understanding is that that housing market crash was related to people being over extended on their loans.

In theory, there were protections put in place after that to prevent over extension. However, I've been getting approved for mortgages I have no business taking. The appraisals I've had done on my investment properties have been rubber stamps, in my opinion. I wonder just how much of that protection has actually worked, and if people are over extended on low interest, high price properties.

I just need to figure out if it's now wise for me to buy a house or if it's better to wait a year to see if next year becomes another 2008. Surely, not every recession has a housing market crash tethered to it?
Very correct.
R/E valuations are not directly correlated to market movements.
Overall, R/E valuations are very high and somewhat over-valued in many areas. Whether this is a bubble ready to pop is anyone's guess. I would venture that as long as the economy is booming and economic policies to favor such growth are in place and not altered, things will continue to at least remain stable if not rise proportionally.

IMHO: R/E valuations move very slowly, seemingly sluggishly, compared to market movements and economy changes. Which is both and advantage and disadvantage to those choosing to invest in R/E.

j :happy
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leeks
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Re: Housing market in context of recent volatility

Post by leeks »

Will you still be able to save money if you purchase this home?
Do you have an adequate emergency fund (not tied up in your investment properties)?
If you lose your job, are you fairly confident you can find another one before running out of your emergency funds?

If so, then it doesn't matter what happens to the housing market.
aristotelian
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Re: Housing market in context of recent volatility

Post by aristotelian »

Who knows? Housing prices may crash and yet you could be missing out on record low mortgage rates.
GeoffD
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Re: Housing market in context of recent volatility

Post by GeoffD »

I think that US markets where single family homes aren't affordable on W2 money are likely to see large corrections if the market corrects another 10% and stays there for a couple of years. You can't cash in your company stock to buy that $1.25 million starter home on a postage stamp lot in Sunnyvale to be close to work. The Chinese already tightened capital outflows. That combined with the Chinese markets getting hit hard should hit the high profile cities: NYC, Boston, SFO, LA, Seattle, the fancy part of Chicago, Miami, etc. I'd expect to see the same sort of thing in the high end resort towns and high end retirement communities. It will be tough to get millions for that little mining shack in Aspen. Of course, the stock markets could bottom out and bounce back long before those real estate markets correct much. Real estate prices don't drop until a number of people absolutely have to sell. That takes a few years.

I don't think traditional middle/upper middle class housing where people put 20% down and carry a mortgage they pay from salary will be impacted by the market. It certainly would be impacted by a recession but that's another thread.
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Tamarind
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Re: Housing market in context of recent volatility

Post by Tamarind »

The likeliest outcome of a large market correction or crash is that you don't have to worry as much about interest rates going up while you shop.

I would not suggest you delay. I would suggest that, regardless of whether the market is up, down, or sideways, you purchase a house for use value rather than speculation and don't buy more than you can afford.
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