When The Housing Crash Will Happen

Here's an update of the 2024 Housing Market, what experts believe will happen in terms of price / values over the next few years, and what you can do to potentially save money - Enjoy! Add me on Instagram: GPStephan | PROMOTIONAL OFFER: Get Free Fractional Stocks when you sign up and make a deposit using my paid affiliate link for WeBull: https://a.webull.com/i/GrahamStephan

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Why The 2024 Housing Market Is So Expensive:

-A Shortage of Homes For Sale.
Goldman Sachs reported that 99% of homeowners have an interest rate below what’s currently being offered on the market (85% of those rates are well below 5%.and 63% are between 2.5% to 4%.) To put that into perspective, if a homeowner currently has a 3% mortgage - prices would have to drop by 36% for that identical home to have the same monthly payment as today’s current rates of 7%.

-Home Values Hit A Low About A Year Ago.
Home growth almost slowed to a complete standstill at the end of 2022 over the fear of higher rates which is also, in part, why we saw such a dramatic increase over that following year.

-Homes Are Being Built - but not fast enough.
New constructions now make up one-third of the total market inventory, compared to just 13% in the years from 2000 to 2019.

Warren Buffett Sells His Housing Market Stock:
In August of 2023, Warren Buffett announced that he made a substantial investment in three Major US Homebuilders: DR Horton, Lennar, and NVR (Worth ~$800 Million). Since his purchase, DR Horton increased by 35%, Lennar is up by 30%, and NVR is up 20% - all in just 7 months. This means Warren Buffet was able to cash out about $250 million in profit from one investment in less than a year. In terms of why he cashed out, some people argue that homebuilder stocks have rallied WAY faster than expected, so it makes sense that he’s locking in his profits - but other people think that he’s now bearish on the housing market, and that’s a red flag for the future.

Bear Case For Home Prices:
AWealthOfCommonSenseBlog: https://awealthofcommonsense.com/2024/02/whats-the-bear-case-for-housing-prices/
As Ben Carlson points out - if there’s a recession, people are already locked-in to low-rate mortgages, so they’d be unlikely to sell. On top of that, 40% of homeowners don’t even have a mortgage, which means there probably wouldn’t be a bunch of panicked sellers listing their homes at the exact same time.

I think one of the best analyses was posted back in 2023 by Mark Woodworth, who noted that - for housing to fall - there either must be a reduction in demand or a surplus of inventory. In that case, demand would need to fall by 50% for housing to be in-line with historic averages, although he says this is unlikely, given how “transaction volume hasn’t fallen below 2M since the early 1980s.”

The 2024 and 2025 Housing Market Analysis:
Morgan Stanley says their “Bull Case” is that housing prices rise another 5%, saying that "With so many housing statistics at levels we have rarely seen over the past several decades, it isn't hard to envision housing activity and home prices evolving differently from what we have laid out above.” Which, for anyone wondering, is that that they “expect the U.S. economy to avoid a recession next year and the housing market to pick up as incomes rise and mortgage rates continue to fall slightly.”

However, in a more “realistic” forecast, they’re a bit more pessimistic with the belief that overall prices will fall 3% by the end of 2024. In their words, “We expect home prices to fall modestly as housing activity picks up versus 2023, with new home sales outpacing existing sales, but think the strong fundamentals of existing homeowners will prevent sizable corrections.”

In the worst case SCENARIO, they think housing could fall by as much as 8% if everything goes absolutely wrong: “mortgage rates would need to remain elevated, the economy slips into a recession, and demand for housing continues to soften”

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