July 12, 2024

Real estate market bust!  (Note -published June 2021)

Real estate market bust! - San Diego Residential Property Outlook
Real estate market bust!

 

For well over 18 months now the number one question when talking about the real estate market has been when is the market going to turn down? Naturally, there’s been lots of speculation, but until now there have not been any conclusive signs of out in our way overheated real estate market.

Two days ago I wrote a post, ( https://brokerforyou.com/brokerforyou/real-estate-market-downturn/ ) where I speculated that because of the large number of price reductions occurring in just one very hot residential real estate market in Arizona, it was my opinion that the entire U.S. market had topped out and is now ready for a downward move of the substantial magnitude.

Well, for the last couple days I’ve been looking for other indicators to confirm my theory. I’ve now found those indicators, and must say, without hesitation are now in the topping out phase of one of the craziest residential real estate markets that I’ve ever seen!

Real estate market bust!

Real estate market bust!

 

 

One of the most talked about inflation indicators has been how crazy the price of lumber has gone up. Just yesterday, I noted a Wall Street Journal article, where they pointed out that the lumber price in the last six weeks has taken a 41% decrease! The magnitude of this decrease, in just the last couple of weeks would indicate to me that the lumber market has much further to go on the downside. Even at today’s prices the cost of lumber is still many times what it was in a normal market.

There were quite a few proponents of the theory that real estate prices would continue to escalate for at least another year or two who use the price of lumber as the basis for their argument. Now, with the dramatic decline in the lumber price their theory of continued escalation in new home prices has been or soon will be totally obliterated!

building permits

Now, if we look at building permits, we see that they hit their height back in January, they’ve come down slightly from their in each preceding month. On building a new residential property, it’s usually about six months after the issuance of the permit that the property would be completed so, basically in the next few weeks were going to see more properties hitting the market.

monthly supply of homes
monthly supply of homes

When you look at the graph of homes on the market you’ll see that even though we are experiencing a terrific supply imbalance, the amount of housing inventory has been steadily increasing since January.

If you look at all these factors, at least in my humble opinion, there can be no doubt that the residential real estate market has put in a top, and the new pricing trend is going to be down! As I said in my prior post a couple of days ago, pointing out the number of price reductions in properties in the Prescott Valley Arizona area, this was just one indicator of trouble for our overheated residential real estate market. Looking at the other indicators that I pointed out here, in combination with the real-time beginning of price reductions for existing homes on the market, I can confidently say that what has been the greatest appreciation cycle in the residential real estate market, that any of us has ever seen in their lifetime, is over!

Sure, we’re still going to see some minor continued appreciation because where in the froth or culmination of this megatrend. I believe very shortly the main topic of any real estate conversation, will not be whether or not the market has headed down, but how quick and to what extent housing prices will fall! Looking at the huge humble that I pointed out above in the lumber market, I think any of those that will soon be predicting just the normal or mild correction to the residential real estate markets will be proven totally out of touch with reality.

Keep in mind that I have not even touched upon when, and if, the moratorium on rental evictions expires the huge amount of properties that are surely going to be put on the market, or forced into foreclosure.

Naturally, this is just my opinion, and before making any decision of whether to buy sell or invest in real estate you should always consult your legal and financial advisors.

Be sure to tighten your seatbelt, because a crash is just ahead!

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9 thoughts on “Real estate market bust!

  1. Again, in agreement, and wish I could short the housing market, much like you can with stocks. Did you happen to take note of HD and Lowes stock prices in the last week? pretty sharp decline which might be another indicator.’
    zapp

  2. I’ve been a realtor for 23 years. You are crazy to buy now! I can’t believe the insanity brought on by Covid. If you can hold off until mid 2022- you’ll see deals in my opinion.

  3. The market prices is really crazy right now and wouldn’t dare go in but i’d advise investors to diversify their investments beyond the housing market and invest in different streams of income. As an investor the worst investment you can have is cash because it’s going to become worth less over time but good investments are going to become worth more over time❗

  4. Housing market will crash as soon as government allows the forbearance to explore they just approved 3 more months till June now and said they may push to September. But after that game on . I don’t see them pushing it past that

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