America's housing market is raising a 'large red flag' for the economy

America’s housing market is raising a ‘large red flag’ for the economy

And Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a recent note: "It’s very hard to escape the conclusion that the market has peaked for this cycle, given the rise in mortgage rates since last fall and the gradual tightening of lending standards.”

What these four ingredients in this recipe for a housing slowdown are not telling us, however, is that Americans don’t see housing as a good investment.

manch’s action is an anecdotal evidence of above. He gave up buying 1 RE per year and go max margin buying stocks and calls.

How often is public opinion right? I’d be bearish if everyone thought RE was the best investment.

Prices going up despite higher rates and tighter lending standards is bullish. Housing won’t decline until job losses are greater than job gains.


Home ownership in 2018 still lower than average. Meaning it is still beyond bad quality buyers.


Or there are more low quality buyers in 2018 than the historical average due to wage stagnation and increasing concentration of wealth.

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Those people can’t qualify to buy.

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Rising yield on safe assets like treasury makes rentals less attractive as investment. I said it multiple times already. In many places here in core Bay Area it makes better sense to rent than buy. Spending 3M on a Sunnyvale shack is a pretty lousy investment.

Having said that I don’t think housing market is coming down. Not yet. Maybe in 3 to 5 years.

I think people mix up buying for primary and for investment.

You seem to think that the “primary house buyers” can absorb the reduced demand from investors. Well, at least, prices won’t gallop because of lesser demand from investors.

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There are already close to none investors in many Bay Area markets like PA and Cupertino. Because inventory is so thin price still goes up, but slowly. Won’t gallop up, but won’t collapse either. Just grinding higher.

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With low inventory the last sold house in the neighborhood sets the comp.

In Sunnyvale/SC:
Well updated houses that have fundamentals are still selling with one OH. Those that lack fundamentals and have some flaw are staying longer.
Still multiple offers

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@Ironduke, I am seeing the same thing in Fremont. Homes that are in move in conditions are selling really fast. The ones next to power lines, freeways, and at T-junctions are staying in the market longer and skewing the numbers.

These are staying longer than usual.

Reasonably priced, updated and good fundamentals (layout, lot size, quiet street) - one OH max. You can see the footfalls. We competed in a property that has 10 offers. (I believe it because I liked it from the get go, doesn’t happen to me often in SC)

Overall I see market slowing down in SC as lots of neighborhoods are pure crap for lack of better words. Bad schools, close to highways. tight streets. The look of a blue collar neighborhood with 1.5M+ price tag for 1100 Sq ft property. The gentrification will be slow. I have started appreciating flippers more now. They are crucial to attract white collar workers to these neighborhoods.

Santa Clara is mostly crappy and you rarely find good houses there. But it’s right in between the current tech center and the future expansion (downtown San Jose by Google and others). The area around Diridon station is looking more and more clean as months pass by.

How is this possible? Diridon was like a no-go zone. I’ve not been there in a few months to see for myself. I considered buying a duplex there last year but the homeless people and the druggies changed my mind.

You should go there early morning time. I see lot of people walking to the station to catch the train probably to SF. Valley Fair mall is going through a $1B (yes, billion) renovation. Also, I discovered the Rose Garden area fairly recently. I was amazed at the multi million dollar homes tucked in between the horrible Santa Clara and downtown San Jose.

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Rose garden is really nice. I don’t get the pricing given the schools though. The Zanatto’s grocery store there is awesome. Not many place cut meet onsite and will do custom cuts if you ask. Their deli side dishes are great too.

True, the schools are bad there. But the houses look like they are worth the millions unlike the ones in Santa Clara or even Palo Alto. :smile:

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I never understand Rose Garden and Willow Glen.

Not so good houses not selling or staying on the market for a long time(unless priced very attractively - so that it’s clearly profitable for flippers) is a phenomenon I have seen even 4 years back.

You don’t understand why it is cheap or don’t understand why there is a demand for it?