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Is the Next Housing Crash Coming in 2020?

By Patrick following x   2018 Mar 1, 12:37pm 1,066 views   9 comments   watch   sfw   quote     share    


https://chicagoagentmagazine.com/2013/03/12/is-the-next-housing-crash-coming-in-2020/

The Great Senior Sell-Off and the Housing Crash of 2020
Nelson’s argument is a straightforward one:

In the last 20 years, 77 percent of new housing construction demand came from baby boomers, who sought large-lot, single-family homes in suburban locations.
And that disproportionate demand, Nelson says, has created an imbalance of supply. Very few starter homes were constructed in that time period, and sans a few of the nation’s growing metro areas (Atlanta and Dallas, for instance), many of the U.S.’ housing markets will face what Nelson calls “the great senior sell-off,” where 1.5 to 2 million senior-owned properties will hit the market every year at the end of the decade – and there will not be enough buyers to absorb that supply.
The reason for that is two-fold: one, 74 percent of new housing demand will come from baby boomers looking to downsize; and two, though there are plenty of Echo Boomers looking to buy large single-family homes, a quarter of that generation wants to buy condos or urban townhouses, which represents a radical shift in homebuyer interest. “[That demand] used to be almost zero percent, and if it’s now 25 percent, that’s a small share of the market, but a huge shift in the market,” Nelson told Atlantic Cities. “Even if the numbers matched, the preferences don’t.”


The article is from 2013, but here we are approaching 2020 and they might be right.
1   Malcolm   ignore (1)   2018 Mar 1, 2:04pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

The only houses that I am seeing sell from my most recent neighborhood are large houses that are literally selling at what a new one would cost to build, 200-300 dollars a square foot. That includes land, which in San Diego is usually 50-70% of the price.
2   Patrick   ignore (0)   2018 Mar 1, 2:28pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

I get the strong impression that sales are very slow in the SF Bay Area as well, but don't have any good source of true sales volume data. Realtors fuck with the data all the time. I need something more objective, like the Case-Shiller Index.

Interesting that Case-Shiller shows that the SF Bay Area housing market has had pretty shitty returns on average over the last decade, only 2.93%:

https://us.spindices.com/indices/real-estate/sp-corelogic-case-shiller-san-francisco-home-price-nsa-index



While the rate of return for the stock market has been 8.21% over the last 10 years.

http://moneychimp.com/features/market_cagr.htm

3   HEYYOU   ignore (17)   2018 Mar 1, 4:22pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
Realtors fuck with the data all the time.


Please! Say it ain't so!
4   jvolstad   ignore (1)   2018 Mar 1, 5:37pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

The San Antonio, Texas housing market is getting very high priced. The typical wages here in Taco Town do not support the high prices. The Realtors of course disagree.

The big push is to get people in the military to purchase a house when they PCS to San Antonio. The problem with that is that these same people are going to be moving 3-4 years later. Doubtful if they will break even.
5   Heraclitusstudent   ignore (1)   2018 Mar 1, 6:06pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

jvolstad says
The typical wages here in Taco Town do not support the high prices.

Who says it has to?
As long as only the richest people buy, it can stay like this for a long time.
6   Tenpoundbass   ignore (11)   2018 Mar 1, 6:17pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

We'll probably see the gentrification of neighborhoods situated near the Interstate corridor. Developers squeezing people on 10K sqft lots with 1100 sqft houses out. Then building 8 unit Town Houses on the lot. The city planners during that time didn't plan on running out of space. The property near the noise and the interstate highways were less valuable. The valuable RE was out in the Suburbs further out in gated developments with houses built right up next to one another with zero yard. Those are all full now out west they have ran out of dry land to build on. They can't keep building out into the Swamp. They are looking back East at those huge lots with shit shacks on them and they want them.
7   Hircus   ignore (0)   2018 Mar 4, 5:31pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says



Interesting that Case-Shiller shows that the SF Bay Area housing market has had pretty shitty returns on average over the last decade, only 2.93%...

While the rate of return for the stock market has been 8.21% over the last 10 years.

I'm gonna guess a lot of that is because the stock market bottomed about 2 years before the real estate market did, and so going back 10 years captures unequal amounts of each's respective dips.
8   Hircus   ignore (0)   2018 Mar 4, 5:51pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I've been wondering for a long time now how this boomer housing situation will play out.

Logan always had lots of data that suggested demographics indicated increased housing demand from young people in the 2020-2025'ish years. But, I think I read that was the same range that boomers are supposed to start shedding houses, and so you have opposing dynamics - one adding supply, one consuming it. And of course, all thse things aren't on-off switches - they're gradual and will ramp up and down a bit each year, and so I think providing an answer to the question of what will net housing demand be like in those years will take a lot of data and analysis (what else is new?).

Pundits have also said many times how young generations are shifting towards the small - condos / townhomes / apartments, and they usually word it as as "preference", and so they suggest a mismatch between the large homes that boomers will jettison, and the small units young people "desire". I wonder how many young people really desire small, and how many just desire cheap out of necessity.

Further, I think true self-driving cars will begin to affect housing markets in 5-10 years. Many people commute long distances to their job in the urban city so that they can save money by buying a suburban home. There comes a practical ceiling with how far one can commute, due to time. But, give people the ability to sleep and/or work while their car drives them, and all of a sudden you have a lot more people who're wiling to commute long distances to work. I think this will somewhat reduce housing demand in urban areas, shifting it to the suburbs.
9   mell   ignore (2)   2018 Mar 4, 5:53pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Feux Follets says
Among the 100 largest cities in the US, where did home prices soar the fastest over the past five years since 2012? No, it wasn’t San Francisco or any of the other housing markets where you need to have a top-notch income to buy a starter shack. And in five of these cities, home prices surged over 100% since the fourth quarter of 2012:


To be fair, San Francisco didn't drop as much as other cities either, so it's logical it won't be among the top gainers.Patrick says
I get the strong impression that sales are very slow in the SF Bay Area as well, but don't have any good source of true sales volume data. Realtors fuck with the data all the time. I need something more objective, like the Case-Shiller Index.


They have extremely slowed, but inventory has been tighter than ever as well. You need a couple of foreclosures and motivated sellers for prices to drop.




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