Housing Crash - When?

So this is by far the number one question I get asked daily, even more than what are mortgage rates doing. It is also trending on google frequently.

While this article is just my professional opinion; I highly recommend anybody thinking about buying a home or that currently owns a home take some time to read this. I know it's not a video, might make one but feel reading is good for the mind and I like to write lol

Below are the last 12 months and 5 years of the phrase "will the housing market crash"

You can see that the biggest spike was back in march of 2020... To keep it real, I think everybody was worried about everything from stock markets to housing markets. since I was heavily in the mix of mortgage I can say this is a time in my 10+ year career I will never forget. Mortgage rates fell, then spiked causing massive margin calls for lenders almost imploding the mortgage industry (in my opinion) as nobody was prepared nor could they even forecast what was about to happen. See chart below and look right before April..

What you are looking at is the 10 year treasury note (red and green candlesticks) the the 2.0 & 2.5 UMBS (uniform mortgage backed securities) yields

The 10 year treasury note is, in my opinion, the easiest way to track what mortgage rates are doing as they set the tone for Mortgage Backed Securities but as you can see above they are inverted. Meaning the lower the 10 year yield, the higher the MBS yield.

Simple terms- if you want a low mortgage rate- You want the MBS yield to be going up and 10 year treasury to be going down. They are not always perfectly inverted but that is why you work with a lending pro like myself as I watch these like a hawk and ALWAYS have my finger on the pulse. (unless I am camping with no cell service because we all need a break)

Enough about rates let's talk housing.

Why are home values going up so much?

1) People were stuck in their homes on lockdown and realized they needed something new and the majority could now work remote Plus if they already owned a home they had the equity to MOVE UP.. (pro-tip Easiest way to get a large down payment is to just get in the market, anywhere you can afford at the time and let time work for you through appreciation and inflation)

2) Supply and Demand - now you have a bunch of buyers moving to different markets that were not prepared for the massive influx

3) Historically low Mortgage Rates

I could go into large detail about those 3 points but it's irrelevant to the main point I am trying to get across which is... "You need a roof over your head no matter the market"

The majority of homebuyers and homeowner alike still have 2008 engraved into their brains even though that was 13 years ago. The Great Recession of 2008 was absolutely one of the largest housing crashes of all time. This is also why it is referred to as the "housing crash of 2008"

Something to keep in mind is not all recessions = housing collapse. It just happened to be the most recent one in everyone's mind. Here's why..

This happened due to loose lending regulations - by loose I mean (from what I have been told I started in the mortgage space in 2009) "if you have a pulse you can get a loan." The scary part is people even without a pulse were getting loans if you peel the onion all the way back. Below is the credit availability index. This measures how easy it is to get a loan and qualification to obtain credit. Please look at 2004-2008

Now let's look at the last 10 years, we have not even come close to lending like before. (although I do wish most days it was easier but understand cause an effect so when your lender asks for too much info or is being difficult we are actually helping your investment)

Nobody can fully predict when and how the next housing crash with full certainty since there are way to many compensating factors out of our control that could happen at any given time but based on the items I am discussing housing is extremely healthy in our market currently.

This doesn't mean that other markets could be experiencing issues, real estate markets are more micro driven than ever! Think hyper local..

Since I am in the San Francisco Bay Area one of the most competitive and expensive markets in the nation I will focus on this area for my next points.

While we are experiencing a "slow down" this has a lot to do with buyer fatigue. Buyers have been competing in as much as 50+ offers with no contingencies well over the asking price. So now we are still seeing over asking but only 5+ offers.

With rents increasing (even in San Francisco) when there was a "mass exodus" last year housing is in high demand.

You can't control your rent going up year after year but you can control your mortgage payment. Let's look at buying a $500k, $750k and $1M home over 7 years.

This is where you need to zoom out with your thinking. Homeownership is long-term not short term. There will be market "corrections" as with all things but when you use Time + Appreciation + Inflation as a strategy, owning can lead you to places renting never could.

Everyone reading this has their own unique situation when it comes to buying a home. When I ask people what's holding them back they say 3 things

Down Payment, Credit/income issues, & Waiting for the market to "correct"

Mortgage lending doesn't weight the down payment as much as one might think. Lenders care more about the ability to repay (income) than a large down payment. The hosing market crashed before because borrowers had high interest rates and payments that they could not afford.

The only way to fix your credit or income issues is to map out a plan. I don't care if you are 5 years away from buying a home, until you speak with a lender you are never going to know what area of your finances to focus on to actually achieve your goals. You could be wasting your energy focusing on the wrong thing just because you were embarrassed to discuss.. This is a judge free zone and most likely I have seen it, lived it and overcame it.

Hopefully this data dump gave you something to think about when it comes to "waiting for the market to correct" because waiting to time the market just might get you a "lower" purchase price but you just threw away good money on rent and with inflation usually comes higher mortgage rates.

When purchasing a home think payment, not price...

If you ever want to have a confidential chat about home loans or real estate markets you can always schedule a time to chat by clicking here

Thank you for taking your time to read this.

I should have definitely done a video, took much longer than expected and now I don't like writing.....

Have a wonderful day!

Chris