Changes in housing prices are localized. What one part of the country sees may be different from another region. However, some economic indicators show the overall market sets up for a decrease in demand with an increase in supply.
| +48 | Being asked to stay behind and train my replacement | 14 | 2d | |
| +36 | New Comp Database - Google Form (Now with Data Validation) | 24 | 11h | |
| +33 | Best CRE brokerage firms | 24 | 14h | |
| +30 | What does REPE actually do? | 12 | 16h | |
| +26 | Starting University LP Fund | 6 | 12h | |
| +24 | Public Homebuilders | 9 | 16h | |
| +23 | Leave brokerage to be GP | 1 | 5h | |
| +22 | REPE/Development GPA | 15 | 1d | |
| +17 | Seeking Career Guidance in Real Estate Development Post-Graduation | 2 | 1h | |
| +17 | MSRE/MSRED with no RE experience; Naive to think I’ll land a job afterwards? | 4 | 2d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Well you will find out in 15 minutes at 9 when the FHFA House Price Index prints.
There will be disinflation in housing prices, not deflation. House prices will begin to rise more slowly than before, but they’re not going to fall. We MIGHT see a slight “correction” in prices in some of the more overvalued markets like parts of Florida and the Southwest. Overall, house prices aren’t going down, but we’re probably gonna ease off the gas a little bit on real estate appreciation.
Source: Sat in a long conversation with some colleagues and a bunch of Moody’s economists recently
Yeah probs
Source: Me
Yes most definitely
You'll see a slight correction as the rapid rise in rates creates a shock to the housing boom. A much needed shock. However, here is my thinking, even if rates stay at 7% - 30yr fixed, housing prices will still rise. The reasoning is simple. New household formation in the US well exceeds new development and is likely to be the case for the foreseeable future. Simply put, not enough places for people to live. People that were on the sidelines (which is a large % of the future buyers) are still waiting. They are hoping rates fall, but unlikely to happen anytime soon because the Fed has learned that was a fatal policy blunder that helped ignite inflation. Eventually these buyers on the sidelines will say screw it and come back into the market out of desperation even at these rates. One key piece of information everyone is missing is that I believe 70% of current homeowners have a rate of less than 3.75%. My rate 30 yr fixed is 2.65%. Unless someone is really desperate to free up equity or really needs to move, I believe inventory may be thin going forward. Many of these homeowners will likely hold to their rate forever and I believe we will see a phenomenon called "The forever home". Why sell your home when your rate is locked in so cheap. Hell, savings rates are hitting 2% and will likely be higher than most of these owners interest rates in 12-24 months.
So as the saying goes the best time to buy real estate is yesterday?
beach house in the northeast just got MUCH cheaper...but more expensive to finance.
Short answer: Absolutely yes they will be going down in nominal terms.
As interest rates rise, the cost to borrow goes up, thus eroding purchasing power. This will be compounded by the fact that for most people finding the down-payment is the most difficult part of the home buying process. Part of the run-up in prices over the last few years was due to the fact that people had a ton of equity in their homes. They could use that chunk of equity as a down-payment on a larger/another home. When home prices start moving the other direction, that equity disappears and the drop in overall prices is exasperated.
Take a look at any home affordability chart out there. Without substantial wage growth to offset higher interest rates, buying a home will become more and more difficult for the average person. The fix for this? Home prices come down
But don’t you need mass unemployment for prices to drop dramatically? Unless that happens, fewer people will sell because theyre locked in at lower rates. Won’t the low inventory hold prices up to an extent? And even if people get laid off, most have equity in their homes so they won’t be selling in distress like in 2008. Not arguing, curious on your thoughts.
I am basing this argument on sought after southeastern towns with strong job growth. I fully believe places like Boise that went nuts in covid will drop.
Magnam rerum voluptates dolores quas. Magni suscipit magni qui voluptas earum vero. Rerum ea exercitationem neque est. Et sint voluptatum autem expedita velit voluptatum earum. Aspernatur iure provident libero sit non.
Ea omnis nihil iste non nihil non consequatur. A quaerat quisquam corrupti autem. Et ea laborum debitis ad eveniet. Dolores id consequatur odio reprehenderit doloremque ipsam. Quod nesciunt dolor omnis ea eum dolor deleniti. Dolore est perferendis iure praesentium numquam aut. Tenetur illo quasi eveniet aut repudiandae qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...