The market is going to crash. This time it’s going to be even worse. Have you been seeing more doom and gloom housing headlines? I sure have. This week I’ve had quite a few articles emailed to me. What do you think of this one? What do stats actually show? What do I say to my buyer who feels concerned? Let’s chat about this.
This is me holding a shabby chic doom sign I made this past weekend.
UPCOMING PUBLIC SPEAKING GIGS:
- 2/25/2022 Placer Assn of Realtors market update (details)
- 3/15/2022 NARPM Luncheon (details)
- 3/22/2022 SAFE Credit Union market update (details)
- 4/28/2022 SAR Think Like an Appraiser (details)
TEENAGE BLOG: My blog turned thirteen years old on Sunday. I’m definitely going to be watching the car keys and liquor cabinet closely…
NOTE: This post focuses on breaking down what I tend to see in so many doom and gloom real estate articles (and YouTube videos). If you’re looking to read about market ups and downs, check out a piece I wrote a few months ago, “Is the housing market going to crash?”
THE ANATOMY OF DOOM & GLOOM ARTICLES
Sensational title: These posts start with a sensational title such as, “We’re going to see a massive implosion,” or “It’s going to be worse than 2008.” I get it. A great title helps people click.
Other: What did I miss?
CONCLUSION:
I’m not saying all housing articles predicting demise are bad, but the doom niche tends to be formulaic with much of what I mentioned above. The truth is we should be talking about the current housing market as well as the future. Let’s keep doing that. But be careful not to get swept away by weekly articles that don’t add substance to the conversation. Know what I’m saying?
TWO RECOMMENDATIONS:
1) Know the numbers: Pay attention to actual stats and let the numbers form your perspective and narrative. Ultimately, without a good sense of seasonal trends and current stats, it’s easy to get tossed around by each new sensational headline. Moreover, a quick way to lose credibility in real estate is to habitually share articles that lack merit. I know, that sounds so judgy, but it’s the truth. If you feel like you’re not in tune with stats in your market, maybe start pulling them yourself, find a few people who are doing a good job (and devour their stuff), or even check out what a source like Redfin puts out there.
2) Read mostly everything: I recommend reading from a variety of sources and following lots of different people who talk about housing. Having a well-rounded perspective is important as a system of checks and balances too. On a related note, if someone has a positive-only or negative-only housing outlook, don’t waste your time. All that said, I appreciate hearing what Ivy Zelman has to say lately because she’s been more contrarian than most other housing analysts (which piques my curiosity). Some of my favorite housing voices include Calculated Risk, Altos Research, Odeta Kushi, Jonathan Miller, Len Kiefer, Daryl Fairweather, Steven Thomas (SoCal), Patrick Carlisle (Bay Area), etc…
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
Thanks for being here.
Questions: What are you seeing out there in the market? What doom and gloom articles have you read lately? What housing sources are you listening to right now?
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My take-I think the 2008 crash was helped along with giant heaping shoves and cattle prods by an overactive media and people relying on that mainstream media for ALL (wrong) information and reacted to it.
I think/hope now there are too many sources so that not a single point source has a monopoly on it. I dont see a crash but my crystal ball broke 40 years ago….
I think/hope there will be an easing to prices as inventory comes up and construction catches up($8 for a $3 2×4 in TX) and rates rise slowing the gold rush of free money…
Also the amount of gross and massive PITA lender hoops currently in place mean its grossly harder for lenders and borrower to lie about income and get a risky loan approved.
But(ignore the politics of it) we can not ignore >200,000 people/month coming across the southern border.
Those people apply significant housing pressure wayyy over the birth rate.
They will live somewhere buy or rent-doesnt matter-it will displace current occupants who choose to move to another place or buy or whatever…
The point is 200,000/4 per house is 50,000 housing units needed EACH month since joe took office.
and its not restricted to Texas… with planes and trains and cars-that pressure gets distributed EVERYWHERE… or everywhere theres a vacancy.
in 2018 when i was buying multiplexes i had 30-40 to choose from.
current is 3 and they are NOT the same segment I was looking at.
Your market is the same-any market.
50,000 NEW roofs/month… for the past 13+ months….650,000 new front doors.
Lets not forget the northern border may have some new influx too given recent events.
I maintain the media of any kind saying its going to fail(true or not) is going to lead some precent(unknown) of the population to ‘pause’ thereby slowing things down.
Thank you Mark. I think it would be great to see an academic study of media narrative vs market activity. In other words, how much power does the media really have? On the local level at least I’d say the media is reflecting what the market is doing rather than driving it. I think you’re right there are so many sources for news today, so that is certainly something to consider. Though, here’s the question. In 2007 if national and local media said there wasn’t a crisis, would it have changed what happened? I’m guessing no.
Do you think the housing market across the country is being driven by immigration? Do stats support this idea? I haven’t read any academic research on the subject, but I’m open ears if you have something (not that you need to fish something out).
Thanks.
I like the drippy O font on the shabby chic sign. Nice touch.
The clickbait writers only care about clicks and scrolls. A dramatic headline is the only thing that matters to the hacks.
There are many indicators that a lot of RE markets are overvalued. The metric that triggered my prediction in Nov 2004 of the great real estate crash that began slowly here in mid 2005 and hit bottom in 2008-2010, was the gross rent multiplier of rental properties exceeding 200 on nasty fixers and GRM’s exceeding 300 on bread and butter rentals. We are close to that again now, but skyrocketing market rents have begun to lower those GRMs from the exosphere back down to the stratosphere.
Thanks Jim. Yes, it’s all about the ad revenue. That’s the disturbing part to me about clickbait articles and videos. But here’s the thing. People get to decide who they listen to, so they have a responsibility here to hold voices accountable if fake news is being perpetuated. I’m shocked at how many YouTube housing people constantly predict the demise of the market, yet such blatant support is found iun the comments section (despite failed prophecies).
Interesting perspective on GRMs. That’s fascinating to consider. I’ve noticed some real cash cow 4-unit properties lately. They seemed to sell at subdued levels in 2012 and 2013 (and way lower during 2009 and 2010), but now they’ve sort of broken away from a subdued level to show a much higher value. I might write about this eventually. My observation is some 4-unit properties really sold on par with other distressed duplexes, and now owners are sitting on a much more valuable property. In other words, value is being recognized more fully for the extra units.
On a related note, I think we’re in a surprising market. What I mean is we pull comps and say, “Wow, is that how high they’re selling for here?” Wild to see.
I don’t know about the crash in 2008, was due to the media. Now I will agree that it lasted longer than it had to base on media headlines day in and day out. I also agree that my crystal ball, not that I ever had one, seems to be a little foggy. As soon as I think the 10-year treasury (yes, I know I brought it up again) was off to the races, then along came Mr. Putin. Will see how that goes. I am concerned over the steep rise in Oil prices and the takeoff of gold. I see these two characters as being troublesome and if not curbed quickly could put a dent into the alleged wonderful economy, especially oil. When my cheap Diesel for my truck gets into the $5 range, Lucy we have a problem. So, it was a nice sign with good fonts but overall, we need some other things to happen in the next 4 to 6 months to put me over the edge officially and I am not talking about low inventory. I don’t think inventory in the case of Russia will be a factor. Think other items may cause a hiccup. But I don’t know much, as I didn’t hit the winning lotto numbers……….
Thanks Brad. I got asked about Ukraine today on a podcast. I suspect most buyers aren’t thinking about Russia when buying a home right now. Though if we experience financial and economic uncertainty as a result of what’s going on, then I suppose that’s where the conflict becomes a bigger deal. On a different note, I’m definitely concerned about the increase of goods across the board. I feel for consumers on a fixed-income especially. In housing we sometimes talk about home prices and rent as if they take place in a vacuum. For instance, we can easily quantify how much mortgage rates at 4.1% mean for a monthly mortgage payment. But what about inflation with other products at the same time? In my mind, we have to look to the bigger picture. All that said, for now buyers are on a rampage where they are gutting the market. They are on a tear. When looking at pending contracts over the past two weeks, they’re definitely even more aggressive than recent sales. This isn’t a shocker because that’s what typically happens around this time of year. But to be flirting with market stats for Q1 2021 today is mind-blowing since it was so aggressive last year.
I think MIND BLOWING is the appropriate phrase right now. I just got off a call on an estate situation, where they wanted to postpone the appointment. I said no problem, but I am out of the office on these dates. They thought and then said, well this market is so hot I don’t want to miss it, guess my other family member can meet you. YIKES. I guess that gives a whole new meaning to timing is everything and has to be done tomorrow.
Interesting to hear. Urgency is strong right now. Not easy to turn around appraisals quickly (for me at least).
I love your levelheaded approach to thinking about the market and your responses to the comment are great as well. Show me the data.
Thanks Gary. I always appreciate your support and kind words. I really didn’t intend to write this article, but I’ve just had so many questions over the past two weeks about doom articles. I suspect these types of articles will be more prominent as the housing market continues to flex this spring.
I love this article! I wish more people would look at the stats instead of the doom and gloom headlines. I appreciate you and your blog for keeping it real. ?
Thanks Diana. We have so much access to data these days, though it’s not always easy to keep that at the forefront.
Hi. Good to read you again. Momentum is slowing but inventory is still paltry. Days on Market is equal to Cumulative Days on Market. (Buyers don’t cancel.)
When the cumulative momentum “swing” makes a multi-month move, I’ll think we’re at a top. But the demand is incredible.
Thanks Jay. Let’s definitely stay in touch about this. The momentum of the past two years has been quite unexpected. The market was legitimately slowing down prior to 2020, but then it sped way up.
It’s been a long time since I’ve posted on here since reading about nothing but soaring home prices and crazy buyers makes me feel sick to my stomach (ever since I got priced out of the market years ago).
So naturally, when I saw a doom and gloom article like this one, the naysayer inside if me came roaring back to life.
Anyway, my folks and I were looking into buying a house recently and after seeing how far interest rates have fallen, it became obvious that rates are probably the main driving factor for this crazy price growth.
My parents, who make a decent working class income and have a decent amount of savings were almost priced out of the market completely. It was only their high credit score and the ultra low interest rates that allowed them to qualify for a monthly payment that barely squeezed into the “yellow zone” of their debt to income ratio.
Unless EVERY home buyer is making $150k+ per year, I don’t see any way for this ridiculous market to sustain itself. If interest rates really do start shooting up this year due to Fed policy, I just don’t see how enough buyers could remain to keep prices increasing. Something has to give. Even irrational exuberance has it’s limits I would imagine.
Brandon, it’s great to hear from you. I always appreciate your perspective, so please pitch in whenever you’d like. I think mortgage rates have been a massive factor in helping to create the market we’ve had over the past two years, though their role has maybe been downplayed by many. I get the idea of strong demand due to demographics, but there is no mistaking a massive change in the market in mid-summer 2020 when rates dipped below 3% (we’ve had less than one month of supply ever since that time in the Sacramento region). In other words, there is no way the market would have done what it did had mortgage rates not dipped below 3%. I recall writing a piece last year stating mortgage rates need to go up. I still stand by that, and I think what’s happening right now is necessary because they’ve been too artificially low. Yes, it’s nice when people can lock in a low rate, but it’s not a benefit to have prices skyrocket either (for buyers anyway). So far mortgage rates increasing lately has had only a small impact on purchase mortgage applications. Let’s keep watching this though. Refinances are understandably seeing a massive change as consumers appear to have pumped the brakes.
Some fresh visuals from Len Kiefer this morning regarding mortgage rate activity: https://twitter.com/lenkiefer/status/1496482040107220992
Thanks Ryan. As always, I appreciate your take on things =)
Thanks amigo.
Great article. I totally agree. This is a different market than pre great recession.
Thanks Mary. We do have different dynamics for sure and we’ve had sincerely strict underwriting in today’s market. It’s very easy to start talking about foreclosures and mortgage delinquencies, but the stats for now just aren’t there to support a doom narrative. Though to be fair, there is no way prices would have gone this high had mortgage rates not dipped so low. In that sense the market has an inflated feel. I think both things can be true at once – we’ve had strict underwriting and prices have really gotten up there. Thanks again. I appreciate your commentary so much. Please keep it coming.
Hi Ryan,
I agree that the low interest rates had a lot to do with the market increase in the past 18 months. But let’s not forget about the work from home dynamic that allowed people to escape the city for suburbs and typical second home areas. These two dynamics combined are responsible for a majority of the growth during that time frame.
It’s reasonable to say that interest rates are going to climb, which will have an impact on affordability. What we don’t know is if the work from home dynamic will change. We are starting to see some companies and the state government go in the other direction. It will be interesting to see what happens in the next year or two on that front and if that will affect the market.
Also, as real estate professionals, we must be very careful on advising our clients of future market predictions. Having been in the industry during the past crash, I see a lot of similarities, but there are also many differences. For us to focus on either the similarities or differences rather than the market overall is a disservice to our clients. We need to be just as careful to not expound long lasting exuberance in a market as we are to downplay doom and gloom. As you have said many times, markets will change. When, and to what extent, is always the unknown. It is our duty to discuss the possibility of those scenarios with our clients. For us to say that the market will never go down is just as irresponsible as saying it will crash for sure.
Thank you Brad. I appreciate your take here. The WFH (work from home) dynamic is huge. This is absolutely a factor. Though I suspect low mortgage rates have helped further this trend too because people at higher price points have absolutely been taking advantage of low rates. Ultimately the truth is we don’t know the future regarding working from home, but there are still so many remote jobs being advertised. I watch stats from Indeed as support for this (and having a pulse and brain helps me see this trend just by having conversations with people who are participating in the market). 🙂 https://www.hiringlab.org/2022/02/08/job-postings-tracker-through-february-4/
I firmly agree with you regarding your last paragraph. The truth is nobody knows the future. I think promising future trends or value is dangerous. I recall a YouTube Q&A I did last year when bitcoin was at $69K. When asked to predict the housing market, I first asked people to predict bitcoin value in one year. A couple of people said $100K because at the time it looked like it would simply keep going up. But as of late bitcoin has been hovering just under $40K. I realize this is not real estate, but at some point we have to concede we don’t know the future. Really. We don’t. Case-in-point. Economists get it wrong ALL.THE.TIME. And so does everyone else (mostly everyone).
So what do we do? I think the best bet is to talk about where the market is at right now, and then discuss yellow or red flags as needed. The danger here is being given over to sensationalism though instead of stats, and I’ve seen lots of colleagues over the years do that. But there is also the real danger of being so ultra-positive that we don’t see what the market is doing either. I just remember this. The market doesn’t need real estate professionals to use positive adjectives in order to be vibrant. The market is much bigger than our words. I cannot lose ten pounds by thinking positively or imagining being at my goal weight. And I cannot make the market go up or down based on the words I use to describe it…. Okay, I’m maybe getting off topic.
Thanks Ryan. I wasn’t implying that what we say will make the market change. None of us are that important. But as real estate professionals, clients look to us for advice. We must be careful not to dismiss one theory or the other, simply because we don’t know what will happen. If I were to say that the market will never crash, it would be just as irresponsible as saying that it absolutely will. There will always be sensationalists, it is our job to be the measured advisors. As you stated, what we should do is discuss all scenarios to the best of our ability, based on current conditions, expected changes (i.e.,rate increases), and past experience. If we do this, we have done our clients a favor by not exasperating the sensationalism.
Thanks for your thoughts, love your blog, and especially your research. I appreciate that you inspire me to put some thoughts into writing.
I didn’t think you were saying that at all. Sorry if I implied that. That was a tangent thought on my part that simply came out as a part of conversation. I suspect though that some people in real estate do buy into the idea that the market is so fragile that it cannot handle any hint of negativity.
I think we’re on the same page here. Please pitch in your two cents any time. And thanks for the kinds words.
I love your blog Ryan! You are the best!
Thanks so much Charlotte.
There are a lot of different levels of journalistic integrity these days. It’s important to know that there are some media outlets that just want clicks to sell ads and these types of doom and gloom topics are proven to do that. If you want articles and news that are based on facts you need to do research to find the outlets that do this and that write articles based on market facts, such as yours. Keep up the great work, Ryan.
Thanks for the kind words, Tom. I completely agree too. We have to be discerning about what we take in these days. It’s almost like facts don’t even matter to some people, but I’d like to think they matter to me.
Great info Ryan. It’s too bad that the public is constantly fed sensational headlines. Sizzle sells ads and clicks equal cash. Markets go up and down, so does Bitcoin. I have a broken clock in my office that sits next to my broken crystal ball. The crystal ball was retired in the late ‘90s. The clock is correct twice a day. Appraisers can’t opine value with crystal balls, we have to look back at what actually happened. I wonder if Nostradamus ever won the lottery?
So good. I’m guessing Nostradamus did not win the lottery. Haha. I’m also guessing most psychics haven’t been able to make massive financial decisions based upon their powers. It is fascinating here to really tackle the question though. Why are we so obsessed with doom in our society? What is that all about?
At the end of the day we have to be aware of headlines, and I also believe we are responsible for what we consume. On a personal note, a couple of years ago I noticed I was coming to the dinner table every night angry about politics. This is very unlike me, but I was just seeing too much daily drama on Twitter, and it was affecting my mood and frankly how I showed up with my family. So I basically blocked certain politicians and most political words on the platform at the time, and that helped solve the issue. In other words, I had to take responsibility for what I was letting into my life. I realize this connection to housing predictions may be weak, but on some level we still need to watch what we consume and not become victims to it… Ultimately people who create content have a responsibility, but so do those who consume it.
The old saying, You are what you eat, applies even in what we choose to consume from the media. Years ago I ran into Nostradamus at the mall in the Sharper Image store. We were both looking at the crystal balls. He revealed that he had never used his powers on the lottery-which I thought to be a very noble gesture. Keep up the good work. A wise man once sang “Once in a while ya get shown the light-in the strangest of places if you look at it right.”
You are such a wordsmith, Mark. Seriously.