The Real Estate Crash Has Started (How Bad Will It Get?)

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Cameron Long

  • KosmonautOfficial says:

    I really hope that this ends up being the case that home prices drop 20%. I have been slowly saving for about 5 years and it is so depressing seeing what I could have bought before 2020.

  • Reswobian Dreaming says:

    If George is correct, I think that the rental scene in Australia will become even tougher for the remainder of the 2020’s. If all the investment property owners decided to get out of the market and sell their investments but prices are going to plateau like they did in the 1970’s that leaves a lot of people under the age of 40 years unable to afford housing. The homelessness crisis is getting worse here Young families are finding themselves living in vehicles. Then the government swoops in and steals the children.

    • dilligaf woftam says:

      Add to that local Councils are allowing what were rental properties to be ‘rezoned’ into short term AirBnB’s. Instead of a $400 p/w renter it’s now a $200 per night AirBnB. The stupid Council where I live, top of the Sunshine Coast, allows this, effectively rezoning urban to commercial … and they can’t understand why there are no workers for local shops and clubs.

    • SkiIngdog says:

      That is scary AF, referring to your last sentence and doesn’t feel coincidental

    • We are The remnants says:

      That’s the idea.. you will own nothing and be happy

  • UltimateBargains says:

    “There’s nothing ‘stable’ about prices constantly going up.” — George Gammon
    “If your home buys less stuff when you sell it than when you bought it, you lost purchasing power regardless of whether or not the price went up.” — George Gammon

  • Triot says:

    My Grandparents are in this position. The problem is the neighborhood is not what it was 40 years ago and has not grown in value like the rest of the housing market. My family is having to sell their house to get them through the last years of retirement living with family. And before people ask, it’s the only option because most of my family also has most of their wealth tied up in there house and is counting on it for their retirement too.

    • Darius Moon says:

      reverse mortgage. yea, similar here as I have some family doing the same. I understand the why and hope it works out for them.

    • We are The remnants says:

      Bad position to be in..

    • david worsnop says:

      Doesn’t seem unfortunate to me, seems rather nice. Being close to one another to return the favour in nursing them as they did us. Many cultures still do this and I think it’s how we were meant to be.

    • Jericho cultry says:

      @david worsnop yeah losing your retirement is awesome…what the hell are you smking

    • Darius Moon says:

      @david worsnop it’s not always possible for old people to take care of yet older people. (Even if they are retired and can be there 24/7)

  • Q says:

    For some markets, the current prices is 25% to 35% over 2019. So dropping 20% in those specific markets is like going back to 2019.

  • Deak Deagen says:

    Couple of things: 1) Home mortgage rates have more than doubled over the last 6 months. Result: The house you paid $400,000 for a year ago is now only worth about $250,000. Why? Because at current mortgage rates, if a potential buyer has roughly the same budget ($1,600 per month mortgage payment) $250,000 is the max they could pay for your house. That’s a 37.5% decrease in value. This is where we are at the present. 2) The last time home values dropped 30% – 40% (in 2008-2010) the term “strategic default” was coined whereby homeowners walked away from their homes (defaulted on their loans) when they found out they owed substantially more on their house than it was worth. I think we will see this happen again soon.

    • Ekul M. says:

      I have come to very similar conclusions.

    • MJB says:

      That is but one cause of the price decreases coming. You also need to factor in discretionary goods inflation on top of this, which reduces the potential buyer’s budget by another approximately 10%. And then you also need to factor the loss of confidence in the real estate market (both in general and relative to other investments) which will further depress prices (due to lower demand) to an as yet unknown degree.

    • Financial F.I.R.E Fighter says:

      In your scenario though if you bought a year ago chances are you have a low interest rate and fixed payment. It’s only a loss if you have to sell at a loss. It would make no sense to sell at 250k to become homeless. If you sell to then buy that doesn’t help inventory like he suggests. Seller becomes a buyer your inventory increase is a wash.

    • Financial F.I.R.E Fighter says:

      Yes some people may have to sell unfortunately but many more are in better financial positions to keep their homes. You don’t just sell to become homeless.

  • Mopar Chris says:

    I think the forced sales are already happening in my rural area of east Texas. Not a lot of work out here. During 2021 I had a hard time find a home but eventually did. Now there are so many properties for sale. Went from 10 properties to 200 plus in a few months. Great area for retirement, cheap living.

    • T P says:

      I purchased 45 acres in east Texas (Big Sandy). I haven’t started building yet, I keep watching to see if a developed property comes available for a good price.
      There have been a lot of properties come up for sale beginning in September, however, the prices are still super elevated. It will take owners a little while longer to realize that the housing prices of yesterday and over. If big layoffs occur I think owners who have to sell will adjust for the new real estate climate.

    • kipps guitar says:

      But many people work from home since covid so it’s less relevant

    • Mopar Chris says:

      Working from home won’t be much of a thing soon.

    • Paul Enzo says:

      I was considering buying a home in Texas for early retirement but was shocked at the high Property taxes there. It seemed like most places were 2-3%.

    • Seth Q says:

      Shhhh we don’t need more people here! Already too many people in the tyler area

  • JMoneyMillionaire says:

    Just wait until opendoor, offerpad and other ibuyers hit bankruptcy. This will be the spark that starts the fear forest fire and expedited price declines. Remember, 75% of homes are purchased with a mortgage, so they need to appraise. Appraisals are based on comps from recent local sales. Every year people must sell due to divorce, death, job loss, so as longs as rates are above 6%, the prices will continue to come down as they are too highly priced at these interest rates for the buyers left in the market.

  • Matt C says:

    I work in a hospital. Grandpa Joe only sells when he dies. Selling at the top makes the most sense to Grandpa Joe, but for that demographic, it is about the feeling of security that he gets from aging in the house that he knows. They will do anything to not move into a condo. They know that they are only one fall away from a nursing home. It is a lot easier to navigate in a house thay they have memorized. And it is all about decreasing anxiety for them. I do agree that prices will come down though, I think George is exactly right about blackstone. Nick is brilliant.

    • Scott Andrews says:

      Depends on whether they have a ranch house or bigger. If they have a 2 story house, they might want to downsize to avoid having to use the stairs (my parents have been talking about doing this).

    • Matt C says:

      @Scott Andrews that’s a valid point. I work in a middle class retirement city. But I swear, you bring up selling the house to these people and it’s like you dug up ol yeller just to shoot him again.

  • Netherblood says:

    I think it’s normal for real home prices to adjust down and underperform inflation for a few years. It’s still a good inflation-adjusted performer the only thing is it’s laggy and volatile – eg we had a few years of massive appreciation front run due to low rates and mania, and now that the authorities are raising the main thing that helped with these prices (rates) to fight the very inflation we’re trying to outperform, it makes sense there’d be a few years of a slump/underperformance.

    In fact if you go deeper into this, you could reason that the real estate decline is the first domino to slow CPI growth, giving the fed more time for the other baskets in CPI to self regulate (and have rates propagate to them). Eventually, the Fed may lower interest rates causing upward pressure on real estate prices and their effect on CPI, but at the same time the lagging downfall (deflation) of the other baskets keeps CPI flat

  • matt75hooper says:

    14 months ago my son’s lease was up. He and his wife and my grandson moved into a 900 squ foot “InLaw” apartment behind my home. It has a kitchen, bath, bedroom and small living room. Private entrance out back. I charge them 1/2 market rate rent. Utilities included. Every penny goes into the bank to buy a home some day. I see my grandson every day. We have a great time. My son and his wife have increased their credit rating to 700+……and wiped out all credit card debt. Anyone that can do this – I recommend it highly. It has been a Win-Win. They come home a little tired ? They know the wife & I always have a great meal ‘to go’. They grab the meal and head back to their apt. You can never do enough for your kids. It’s a crazy world out there.

  • Aberger789 says:

    The other part, arguably “harmful” to some, is wage growth. If home prices don’t drop steep enough in nominal terms, and wage growth remains unchanged (one scenario that I think many of us can relate to), it’s just going to suck. Eh— lot of variables here, I suppose we shall see how it plays out. If bond yields are strong enough, I definitely agree we will see something wild (only after it has happened, though, right?)

  • Sweaney says:

    The problem I have with this theory is that there is so much more money out in the economy then ever before. We are at lows for new homes built and we already were struggling with building enough homes for the demand of the market. I think that the homes will definitely continue to fall but the demand will keep prices appropriate.

    • Ni6ht Owl says:

      People don’t want to move if they have a 3% rate also keeping inventory low

    • Sweaney says:

      @Ni6ht Owl That is a great point. I do think specifically for my area, people are moving here to get out of really crappy places such as parts of California. Many of them can sell their home for much more than the price of a home here that is larger and newer. Then these people can pay cash for the home and not have to worry about the interest anyways. Though this may seem like a select few people who do this, you’d be surprised how often this happens here.

    • CoffeeBuzz33 says:

      Maybe. I say that because prices can only go as high as people can afford them. So if Tom Brady wanted to sell his $20 million home for $18 million, there must be someone on the other end, who could afford to buy it and also wants to buy it. If the economy goes down the toilet, there must be enough renters that can make payment. If not, landlords sell. And when they sell, demand for new homes decreases.

  • unpataunpata says:

    George your editor is a gem. Simple editing and great transitions

  • Steven Burton says:

    The housing prices will likely go back to the prices they were before the recent housing bubble. That will likely end some of the speculative buying of housing to increase its price into far higher than they were worth. Spikes in prices have always, and I do mean always, come with a price crash in the future. I am sad that we don’t have safeguards against artificial price increases that affect the market as a whole

  • Bikini Assassin says:

    I love these “classes” very useful! <3 Can we just take a moment to appreciate how George always has some goofy drawing and when he looks at it starts laughing super genuinely lol

  • joesph cu says:

    This was well detailed and put together. Using your recommendations, I have narrowed my choices down to Stocks, Real Estate and cryptocurrencies. Can’t seem to find the most appropriate one out of the three. I would also want to know the least time intensive option because I’m usually very busy.

    • alex young says:

      Why not at least two of them? Given the present economy, you should never forget to diversify. Do not put all your eggs in one basket. As one who has been into Real Estates for as long as I can remember, I made my first million earlier this year from stocks alone (got the assistance of a pro because I also have time constraints). I also experiment with a couple of other things. Hard to imagine that I had initially refused to try out new possibilities.

    • liam richard says:

      I have also been into stock market for sometime now and though I won’t say I have lost a fortune, I have squandered quite a lot… You mentioned using Financial Advisor, if its not a problem. do you mind telling who you used one or recommending a good one? I could definitely use th

    • alex young says:

      Funny enough, I can honestly relate. I don’t know if I am permitted to go into details here, but mine is “EILEEN RUTH SPARKS” and you could look him up . I’m not so sure he takes on new people right now, i doubt she works with non residents, but you could try

    • Ruth spense says:

      I did check her out, I see why she’s booked up, her creds/resumé is topnotch. I booked a consultation with her regardless.

    • lawerence miller says:

      This right here is the second time I am coming across this name in a week. Came to my workplace for a program and it was lit. found nothing funny bout her accent though

  • alexis lefortune says:

    I love how you explain everything. Very clear and simple to follow. Thank You so much, George!

  • Elvis mark says:

    The stock market rally run is gone, but I’m not sure if equities will swiftly recover, keep falling or swing in a narrow range for a few weeks, or if things will quickly get worse. I’m under pressure to increase my $250k reserve.

    • Belgin Berk says:

      Despite my confidence in your advice, my recent stock purchases, and the fact that I am an AMC shareholder, I haven’t been able to accumulate anything. I had already been in the hole for too long prior to the downturn. What’s the investing procedure?

    • Matt Andersen says:

      Because their entire skill set is built around trading long and short at the same time, employing profit-oriented methods and minimizing risk as a hedge against inevitable downtrends, this is one of the key reasons I have a portfolio coach oversee my daily investing decisions. It’s very hard to underperform when combined with insider knowledge and analysis. The return on investment has surpassed one million five hundred thousand dollars since hiring a coach for roughly two years.

    • Alexander James says:

      @Matt Andersen
      Can you provide me the name of this coach? I’ve been researching advisers because I really need some guidance.

    • Patrick Perez says:

      @Matt Andersen Ruth appears to be very knowledgeable. I discovered her online profile and read through her resume, educational background, and qualifications, which were all very impressive. She is a fiduciary, which means she will act in my best interests. So I scheduled a session with her.

  • Raynold Grey says:

    In spite of how everyone is frightened and calling the crash, there is already an excessive amount of demand waiting to absorb it, which is another reason it’s less likely to happen that way. This forecast was not made in 2008, at least not by the general public, as I will explain below. The ownership rate peaked in 2004, according to the other comment. We reached a peak in the second quarter of 2020 and are currently at the median level. From 2008 to 2012, it fell by 3%, and in the second quarter of 2020, it dropped from 68 to 65.

    • Andrew logan says:

      Most people find it difficult to handle a fall since they are used to bull markets, but if you know where to look and how to maneuver, you can make a sizeable profit. Depending on how you intend to enter and exit, yes.

    • Daniel jackson says:

      Given that we are not accustomed to such uncertain markets, the fact that the US stock market has been on its longest bull run ever makes the widespread anxiety and excitement comprehensible. There are opportunities if you know where to go, as you noted that it wasn’t difficult for me to earn more than $780k in the previous 10 months. Since I was aware that I would need a reliable and strong plan to get through these tough times, I engaged a portfolio advisor.

    • Michael Renner says:

      @Daniel jackson My portfolio has been in the gutter for the entire year, so I started researching new ways to profit in the market, but everything I tried just seemed to miss the mark. Please let us know the name of your financial advisor.

    • Daniel jackson says:

      @Michael Renner It was run by Julie Anne Hoover, who I learned about and got in touch with thanks to a CNBC interview. Since then, it has served as the point of entry and departure for the games we have emphasized. A search on the internet can be done if tracking is necessary.

    • Mike Harry says:

      @Daniel jackson I just copied and pasted Julie’s whole name into my browser, and her website appeared right away. You’ve saved me several hours of arduous research, therefore I appreciate it.

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