I know it seems quite unlikely to people who have been struggling to buy a home that a real estate crash is possible, but I assure you that one is not only possible but has already started.
How do I arrive at this conclusion? It’s partly from data, part deductive and part inductive.
Also, this isn’t my first rodeo. I was front and center in the 2007/08 real estate crash and was one of the earliest analysts calling for a housing bust. It was just too obvious. NINJA loans, Vegas hairdressers with 19 homes bought with extreme leverage, and the pervasive attitude that real estate could never go down again were all factors.
This time it’s price-to-income ratios that are more extreme than 2007/08, slowing sales, and sudden price corrections that have already begun from “the outside in.” Canada, New Zealand, Australia and multiple small city locations in the U.S. have already experienced steep price corrections very quickly.
Certainly, a part of this is the quick rise in mortgage rates which, truthfully, have a long way to go yet before they will be done rising.
So, my advice is to build cash and wait for better prices if you are in the hunt. They will come.
However, the crash will not be contained to real estate alone. The Federal Reserve is now very publicly committed to reducing its balance sheet by an astonishing $95 billion per month. The data says they have already stopped growing the balance sheet.
by snydeman