So we have warned our readers and clients since 2020 that this crisis is about to hit the market.
The feds pushing money into the system and creating inflation and the CDC taking the messures that saw millions of people living for Texas and Florida was not so easy to foresee.
But here we are in January 2023 and we warned you back in January of 2022 that this was goanna happen with higher interest rates and lower inventory.
We have seen already big drops in prices in San José, Los Angeles, New york, Phoenix, Austin and San Diego.
But the 25% drop in prices we have already seen in these markets will not be the floor this time around!.
We expect as much as 30-40% drop in prices of houses and a 20-28% drop in apartments in these areas.
With the tech job layoffs in these areas there wont be much of a buying pool left for this overpriced real-estate, that is currently out on MLS at this moment.
We still believe that Florida and Texas in general will do much better since people still want too move there from crime ridden democratic states like California and NYC.
The last numbers we have seen is a 4% price drop in Florida and then we have to take into consideration that the prices have gone up 41% on an average on smaller family homes in the past 2 year time.
With the interest rates being at 6-7% at the moment and we still see them going to an even 10% later this year, we can foresee a bigger crisis with homes not moving at all in certain areas.
The rents in NYC has gone up 32% in the last 9 months time and this has to do with several companies not allowing remote working any longer.
There is still a huge problem with unsold luxury projects across the city and the latest data shows 92.000 empty luxury apartments in all 5 burrows of the city.
When the interest rates have hiked up to 6-7% from as low as 3% a year ago, the buyer can only afford half the property they did a year ago.
This means that a lot of inventory does not come out onto the market and the inventory that comes out has to be sold at a much lower number than last year.
Also heating costs going up makes it even more difficult to sell homes who have expensive heating system’s that require heating oil or direct electricity.
We have said all along that we believe that if you are a cash buyer then your perfect time to buy a property will be between August and November of 2023 when we expect the FED to have raised the interest rate at least 1% more ,from todays levels.
This would mean that a 1.5 million dollar home will sell for 950.000 in many markets.
Is there any light at the end of the tunnel for home owners in 2024?, we do believe so.
The reason we believe that the home prices will stabilize in 2024 is that we expect the inflation to come down to under 5% in January of 2024.
And with the current lack of material like lumber, and a huge lack of skilled workers we believe that there will not be enough of new construction coming out on the market anytime soon!.
This does not mean that the interest rates will go back down to 3-4% again , we expect them to hoover around the 6% mark by March/May 2024 and stay there for the next decade or so.
This will be the new normal so to speak!.
The housing boom and frenzy is over for the next decade and will not see these huge increases or dips in the market any longer.
The bidding wars days are over and the housing crisis will slowly fade away with more new builds for a lower price point than we have seen in the past two decades.
The sad part of this housing default that we like to call it, is that many families will have to go true the foreclosure process in 2023 and in 2024.
The type of families we will see will be much more middle class compared to the subprime loan crisis of 2005-2008 that had some middle class buyers in the pool.
But where the big part was working-class and first time homebuyers.
These will be families where one or both parent work tech jobs or other jobs where there is massive layoffs coming in 2023.
So they will not be able to afford the monthly payments on a 2-3 million dollar home mortgage any-longer and that home will sell for as low as 50% of the original purchase price.
You have to remember that many new high paying jobs where created in 2020 and 2021 in tech, and the interest rates where 2.5.3-5% back then so if your household income was 300.000 dollars or so, you could afford a 2-3 million dollar home
So the best advice we can give you today, is to buckle down and try and survive the onslaughter of the real-estate market of 2023.
If you dont need to sell, dont do it!.
If you need to sell try and sell NOW!, when the rates are still at 6-7%.
Usually also the first or second offer are the best you are goanna get on a property, the longer you wait the more likely it is that the price goes down on your property true price cuts.
Take care everybody.
P.S. You find our consulting packages in our shop see the link here below, and if you do not find a package that is to your liking contact us and we will tailor make one for you.
https://mrlifeadvise.com/shop/
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