Is a real estate crash/dip due?

[jackg]

This is one of those weird things where etfs seem to have dropped 60% initially and recovered a bit while actual housing hasn't. A lot of the current market is a bit unsustainable since current rent in most places in the UK is double the monthly cost of a 26-30 year mortgage (though I accept the landlord has other bills and they're taking a risk with their investment somewhat)...

With a lot of jobs being cut in many countries, we may see a slump in prices but I don't know if demand is still going to be there or not still (because housing was already unplayable for a lot of people so a lot of it is propped up by investments anyway here).

So do you think a crash is coming and would you predict when it would be? Last time it was 18 months (back in 2006) afaik.

[exstasie]

This is one of those weird things where etfs seem to have dropped 60% initially and recovered a bit while actual housing hasn't. A lot of the current market is a bit unsustainable since current rent in most places in the UK is double the monthly cost of a 26-30 year mortgage (though I accept the landlord has other bills and they're taking a risk with their investment somewhat)...

With a lot of jobs being cut in many countries, we may see a slump in prices but I don't know if demand is still going to be there or not still (because housing was already unplayable for a lot of people so a lot of it is propped up by investments anyway here).

So do you think a crash is coming and would you predict when it would be? Last time it was 18 months (back in 2006) afaik.

There's been some fearmongering about the collapse of Airbnb rentals, which has been a quickly growing mortgage-backed sector: Experts Say Struggling Airbnb Hosts May Be Forced to Sell Their Properties

Austin Hankwitz, a Nashville native and financial analyst, believes that the outbreak has caused a housing bubble effect for Airbnb, which could potentially give millennials and younger homebuyers an opportunity to purchase a home at an affordable price sooner than they thought.

Probably too small of a sector to singlehandedly cause a crash though.

I would set my sights a couple years out. With the last US housing bubble, prices peaked in Q1 2007 and bottomed out in Q1 2009, and later went back near the lows in late 2011. It takes a while for economic shocks like this to truly sink in.

[DoublerHunter]

^ Let me express my own opinion about this. It probably crashes but the predictions of when will not be precise because during this crisis a lot of changes are happening even the least that we expect got affected especially on the global economy. Real estate will not be exempted from it for investors may prioritize other important things after the pandemic that may cause a bad affect on them. However, probably after recovering from the crisis then that will be the time people will go back into real estate and their market may start to recover as well. Nevertheless, this might only be my presumption everything are always subject to change depending on how people will deal with them.

[The Cryptovator]

All we know the reason of this crash. Worldwide global economy has been crashing and real estate isn't out of global economies. Since lots of peoples lost their real life job and other businesses crashed as well so people have lack of hand cash. So usually they wouldn't interested to invest on real estate business. Most likely when global epidemic will end then real estate business would start recover slowly. But we can't expect sudden recover on that field. The world need time to recover these crisis, at least probably need a year to become normal situation IMO. Before that we have to wait to overcome from epidemic and we don't know exactly when it would happen.

[jackg]

All we know the reason of this crash. Worldwide global economy has been crashing and real estate isn't out of global economies. Since lots of peoples lost their real life job and other businesses crashed as well so people have lack of hand cash. So usually they wouldn't interested to invest on real estate business. Most likely when global epidemic will end then real estate business would start recover slowly.

My point was that I don't think physical real estate has crashed yet... But it may be due to soon. I think real estate is normally given to take a hit when the market looks as if it is recovering and then interest rates go up and mortgages don't look as good to a lot of investors.

There's been some fearmongering about the collapse of Airbnb rentals, which has been a quickly growing mortgage-backed sector: Experts Say Struggling Airbnb Hosts May Be Forced to Sell Their Properties

Airbnb is always a risky investment choice and I don't think many people who care about their returns/risk have it as a main investment option - there's always loads of additional stuff that comes up now and then about licensing and other things that may hit the sector at some point. Afaik, they're not currently needing a licence in most places as it's peer to peer.

I would set my sights a couple years out. With the last US housing bubble, prices peaked in Q1 2007 and bottomed out in Q1 2009, and later went back near the lows in late 2011. It takes a while for economic shocks like this to truly sink in.

Yeah people put faith into real estate afaik when stuff like this happens because people are still going to want housing...

[gentlemand]

Totally ridiculous property prices have become sacred to many people despite the fact that it damages society at every level. They'll do anything to keep it propped up so I would expect all types of weirdness to keep plates spinning.

Look what they've done in the UK with shared ownership, help to buy, first time buyer savings products etc. All they've done is made it harder for the people at the bottom while giving them the illusion that they're getting ahead. The people at the top are still golden. No way will they let that change without a fight.

[shield132]

Of course real estate prices will fall a lot including commercial parts.
As for now a lot of people are left without job like OP mentioned. When there high supply / low demand = price fall. See what happened on grid oil, a thing that history has never seen. Of course no one will pay you to rent their house/apartment but prices will fall a lot. Also there is another bonus factor too: Some people were depend on income from rents. If you set high prices, there will be zero demand. You need money to survive too, so this kind of people will lower their rent prices to get customers and earn some money for themselves.

Serious crash will come and it may last for some years. That's great at some point: Products and life is expensive because of these rental prices, on long term if there are low rental prices and normal prices on products, that will have a good impact on people's life. Money won't be easily made from service offers but from regular work.

[Harlot]

This is one of the big possibilities out there but the real estate market could be just one part of a bigger problem, I'm talking about the potential recession we will be having due to pandemic. You already pointed out that a lot of jobs have been lost and the whole point about that is a lot of businesses are doing retrenchment or downsizing due to lack of revenue coming in. Other than the job losses we are experiencing we also have seen the stocks took a hit earlier compared to other markets add all of that together we can see that some economists are right that the recession is within reach. Of course the real estate market will be hit as well all of the assets people can liquidate for cash will always be vulnerable in these kinds of situation.

[countryfree]

I would not talk about a crash, but of a correction, but I shall add it was much expected.
If you own a large house in the country, I don't think its value will be lowered. The big change will be in places where prices are just stupid. That's San Francisco, Vancouver or Venice. In Venice (Italy), there's only one third of the people compared to 50 years ago. Because most houses and apartments have been turned into B&B, or are on Airbnb.

It's all tourism related, real estate prices will only change in places where tourism is high.

[The Sceptical Chymist]

I would not talk about a crash, but of a correction, but I shall add it was much expected.

I have to confess that I don't closely follow or really understand how booms and busts happen in the real estate market.  On the other hand, I did learn a lot by reading a few books about the 2006-2008 mortgage/banking meltdown--in particular how mortgages are packaged into securities which are then sold to bank and other high net worth investors and the effect of giving mortgages to people who never stood a chance of paying them.  It was pure craziness back then.

Hopefully some lessons were learned since then, and I know the US government regulating agencies were keeping a close eye on the banks and so forth--but who knows.

I guess my partially informed opinion is that there might be a downturn in the real estate market, but it would be nothing like the 2008 debacle.  Anyway, I've never owned property so I'm not personally fretting about it.

[Paycoinzzz]

I am also thinking about real estate. Because according to the economic philosophy of some people with experience in the real estate market, the value of real estate will be the same as the stock market in the next 6 months. Currently, the real estate services in my country are frozen, the demand for land is not much due to disease. The price of land is too high compared to its value, so the price adjustment will take place early this year.

[mycryptocoin]

Of course I belive. The US -China trade war is still ongoing. It is still in balance and it is unknown who will win. The world is facing with coping/dealing with the Covid 19 pandemic - which is plunging the economy. All economic indicators are bad, debt of governments increases, FED continuously prints money to promote stock market to recover ... But all are only temporary solutions. According to history, 10 years is the cycle of an economic crisis and the latest economic crisis is 2008. Therefore, I believe that economic crisis is coming sooner or later. The United States is weakening due to the declining strength of the PetroDollar, China and its allies such as North Korea and Russia. This war, whoever wins, will lose a lot and our job is to observe, watch and take appropriate steps.

Do you think so?

[exstasie]

I did learn a lot by reading a few books about the 2006-2008 mortgage/banking meltdown--in particular how mortgages are packaged into securities which are then sold to bank and other high net worth investors and the effect of giving mortgages to people who never stood a chance of paying them.  It was pure craziness back then.

Hopefully some lessons were learned since then, and I know the US government regulating agencies were keeping a close eye on the banks and so forth--but who knows.

I guess my partially informed opinion is that there might be a downturn in the real estate market, but it would be nothing like the 2008 debacle.  

We have a different problem this time: many millions of people and businesses who could previously pay their mortgages no longer can. Some jobs and business will surely be recovered but there are emerging signs of lasting damage to come, whether you look at crashing commodity prices or bankruptcies and permanent layoffs. Whether that spills into a banking crisis is also a whole other question. That's also possible, but what I'm interested in here is whether this recession will flood the housing market with supply and pressure prices down.

Beyond the typical backdrop of high unemployment and expected resulting delinquencies, there are other elements to consider too. The economic crunch and normalization of work from home schemes could facilitate an overall shift towards commercial downsizing and remote working. That could pressure commercial real estate downwards as companies close offices, and also residential prices in surrounding areas. Really expensive markets like Silicon Valley come to mind.

I think we just need to wait and see what the recovery (or lack thereof) looks like. It was in late 2007 that housing prices peaked, and it wasn't until the final Obama stimulus ("the Recovery Act") passed in 2009 that prices bottomed out. I'm optimistic for recovery but my lenses are set for years, not months.

[LeGaulois]

We can expect a correction, I won't be surprised about, but with the current situation, the market will recover by the end of the year I guess. We're not in a so "critical phase". Not really a problem knowing that this industry is a long-term investment over 20 years and/or if you're already an owner of several apartments for example and /or pay everything cash.

I admit if someone borrowed money from bank to buy an apartment and monetize it with Airbnb it's not the same story, but it was a risk to consider before
In my country, we are in one of the most active periods in terms of transactions usually, and currently, it's dead. But I'm not worried about the market at all. In fact, you can make good deals.

If the confinement lasts longer, it will lead to higher unemployment, a drop in household income, and in this case, it will be different maybe. More if the banks stop their low-interest rates

Of course I belive. The US -China trade war is still ongoing.

What's the point with real estate? I don't get it

[mu_enrico]

My point was that I don't think physical real estate has crashed yet... But it may be due to soon.

I agree this real estate business has not crashed (yet). That doesn't make sense since many people lost their job, or at least experiencing significant income reduction. Perhaps partially because the gov pouring lots of money so that people still can survive without selling/mortgaging their houses, and banks soften its NPL policy.

Obviously, this situation cannot stay for a long time. People must return to normal before everything collapses.

[gentlemand]

It's all tourism related, real estate prices will only change in places where tourism is high.

It's a factor but not the main driver in the most deranged places. Look at places like Vancouver. That's Chinese money that's been driving things. It's not tourism, it may be citizenship tourism.

Of course real estate prices will fall a lot including commercial parts.

Commercial stuff has been much more wobbly than residential in the UK for a long time. It's been closely following the decline of town centre shopping. They're very separate markets and no doubt it's going to be absolutely mangled by the lack of shopping, crippling of hospitality and increased home working.

In way it could be worse for economies than residential because the heavyweight investors go for that, or did in the past. In the UK local councils have been left so broke a lot have been buying up commercial property in a desperate search for returns. They ain't gonna get them and us lot will have to eat the pain.

[boyptc]

My point was that I don't think physical real estate has crashed yet... But it may be due to soon.

Agree.

It hasn't yet come but if the pandemic keeps going on and it will eat most of the landlords' money, they have no choice but the resorting to selling their real estate assets just to sustain themselves.

And those who will be badly affected and nearly doing this are those landlords who haven't paid in full or those who don't have savings left.

[Twentyonepaylots]

It hasn't crashed yet but we can see it declining obviously because of the global problem that we have. People are pulling out their investments every where like in stock market, oil industry even in crypto market whose category will fall into the economic side on which real estate is also belong. I guess property owners have stopped asking for their client's payment of course every one is suffering during these times. I am living in an apartment, luckily my landlady is very considerate although they haven't receive my rental fee as well as my neighbors for 2 months and a half.

[carter34]

Real estate is not collapsing but is just a situation new to the world, the covid-19 pandemic that is causing hardship because countries are losing focus or rather channeling resources to covid-19 issues. Also some land owners are cutting off their hodlings as there are no new investment on the area or real estate. It will come up when this problem is gone.

It hasn't crashed yet but we can see it declining obviously because of the global problem that we have. People are pulling out their investments every where like in stock market, oil industry even in crypto market whose category will fall into the economic side on which real estate is also belong. I guess property owners have stopped asking for their client's payment of course every one is suffering during these times. I am living in an apartment, luckily my landlady is very considerate although they haven't receive my rental fee as well as my neighbors for 2 months and a half.

Mortgages, landlords are a little human this time around and I guess that is because of the reality in the faces of people. The situation of difficult to cope with this time.

[davinchi]

Well, considering there is a renting problem right now, real estate should be dropping in value for a while right now, I don't know why it hasn't. Think about it if you owned a bunch of buildings and people are denying to pay for the rent, you are making no profit at all and you are basically going broke as well.

I understand that as a leftist myself the ownership of many buildings sounds capitalist and I should not support that, however in this situation the trouble is with the system and not with the people that own the buildings, if the system gives them that right, they should own that many buildings, there is nothing against it, and these are not the people who make you work for minimum salary or even hire illegal immigrants to lower the cost and fire you instead, no these are people who worked all their lives and made money and bought a house, that is barely rich honestly.