I had an interesting conversation with a guy I know in a dink couple.
He said he believes in holding stocks for the long term and not selling despite the prospect of a down turn. “In the long-term the stock market always goes up.”
He also said he’s not planning to buy a primary home (they rent) until prices drop 40%. He feels housing market is overvalued.
As far as he is typical (and lots of people have told me, oh no don’t sell stock and keep investing even if there will be a recession! It sounds like how people talked about holding Bitcoin…and look what happened there) then some common thinking in 2018 is:
- In long-term the stock market will always go up. So hodl!
- In long-term or medium term housing won’t go up. Hesitate!
I’m pretty sure the thinking around real estate before the bust was similar to how people feel about stocks now - in long-term it will always always go up! Buy regardless of price! Temporary dips are going to be just temporary.
The reality is that when/if the stock market does fall 40 percent people aren’t going to feel good about it.
Based on what I’m seeing, the stock market is overvalued. I’m not sure about real estate as there are conflicting indicators. When the stock market falls it will have an impact on real estate but I think it will be softened by people who have low interest rates not wanting to sell, and the “winners” from ipos like uber walking away with enough money to still buy a home.
I’m predicting 20-30 percent fall in Bay Area real estate prices and 60% drop in stock market in next 2 years.