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PaperclipPerfector  5mo ago (text post)   4066 thread views

Small-Scale Question Sunday for November 19, 2023

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Housing market predictions anyone?

As a couple we are at a point where we would be given a mortgage of a small size house in the city or a somewhat larger one in a suburb (this is a very expensive Western European capital and collectively we earn upper middle class salary). But the prices are so crazy that whatever we buy would definitely not be enough to raise a decent size family as long as we stay in range for our jobs.

The obvious plan would be to get a mid sized place now and then sell and upgrade to a larger house in 5-10 years.

I am very paranoid that the current prices are a massive bubble and if we get a loan today we will be left holding a massive bag when the prices crash and we won’t be able to meaningfully upgrade to a larger house. But on the other hand throwing a large fraction of our income down the toilet with the rent feels ridiculous when we can afford not to.

I felt this way around 10 years ago. I bought a condo thinking I'd lose money on it. I sold it a few years later for a massive profit with shockingly little tax liability.

Then I bought another place and sold it for another huge financial windfall. Now I'm in another place with enormous unrealized gains that someday I'll sell with much less tax owed than you'd think.

Past performance is not necessarily an indication of future success. But I had your mindset long ago and good thing the woman in my life demanded we buy a place.

We keep importing more people. We keep not building nearly enough to house said people in and around major metro areas. I'd say look at Canada for a glimpse of America's future. Housing prices ain't coming down, except for minor short term crashes here and there that hardly slow down the relentless trend upwards.

I think the catalyst for lower home prices is going to be rising unemployment rates. As the higher for longer interest rate strategy by the Fed plays out we could start to see increasing unemployment. This is because higher interest rates mean that less business endeavors are profitable so less employees are needed. Rising unemployment results in defaults/forced sales in a time where there are less people that can afford to buy homes.

I don't have any confidence in predicting if unemployment rates will significantly rise. The fed might pull off a soft landing and if that is the case there wouldn't be much of a catalyst for lower housing prices.

I'm not sure it's possible to make general housing market predictions at all. Even at the height of the 2008 mortgage crisis in the US, the housing market was actually pretty okay in the great majority of the country, the real issue with housing prices only actually happened in 5 specific counties. Someone would have to be familiar with the local market where you are to take a guess at whether your local housing market is actually in a bubble.

the real issue with housing prices only actually happened in 5 specific counties

Do you have a source for this? I couldn't find anything on Google.

Man, I definitely remember reading about this at the time, but I can't seem to find anything solid on it now easily. I'm pretty sure that the severe real estate price swings were limited to a few counties in IIRC South Florida, Southern California, and around Vegas. Everyone else was mostly okay, at least as far as real estate investments, provided they didn't take out a crazy mortgage for something that they couldn't actually afford. Most of the nationwide and worldwide pain was from the knock-on effects of the banks' investment instruments collapsing.

Although the phenomenon might have been more severe in those places, it happened in Chicago, Washington, DC, the SF Bay Area, and Phoenix. But not in Pittsburgh or Houston

What do you consider small vs medium vs large? How many bedrooms/bathrooms?

Small is about 50m2 with 2 small bedrooms or one larger. Medium would be 80ish with 3 bedrooms. Houses are small here

Don't you live in Turkey? It seems to me that considerations would be a bit different there, the crash isn't going to be that the nominal price drops but the real price drops.

Besides, my guess is that this is true for most places, only more so in Turkey. The drop isn't going to be so much in nominal value as in real terms.

No I don’t. I haven’t lived there for almost a decade

My prediction is that there is no giant bubble waiting to pop, that the 40% runup in money supply had to go somewhere, and that housing was a logical place for people to put money. The high interest rates might turn back the highest of the prices, but I would not generally expect a return to 2019 pricing.

If I knew I intended to stay in a given area for 5+ years, I would just deal with the pricing being what it is and hope to refi for lower rates in a few years.

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