30-year mortgage rates are near 8% with excellent credit. Interest rates have climbed for the past three months straight. The Fed is considering another interest rate increase for November and December, possibly pushing rates up to 8.5% or even 9%. The reasoning is that higher interest rates will "slow down inflation".
Home sales are at a 13-year low. Factor in the higher cost of insurance and the fact that property taxes are going up to unaffordable levels and the very high cost of labor and materials for home construction... and you have a real estate market that's going to crater.
I personally know several homeowners that had their homes listed for sale, but have removed them from the market in the past 2 months. They will wait and hold on to what they have for now. One real estate agent mentioned to a couple that they should keep their house off the market until at least middle of next year and then decide based on market conditions.
I'm suggesting that the U.S. economy is a three legged stool... and one of those legs is housing and private & commercial real estate. If it fails, the economy goes into a deep recession at best.
We need a real estate crash.
Young American families need homes and they are currently unable to afford them.
Home prices need to come down 30% or more.
We've been fed a lie that there is not enough housing. This just is not true; what we've had is a misallocation of capital where investors/Airbnb were eating up the homes keeping them off market for families that want to own. We need a return to normal home ownership.
Here’s the problem though: a real estate market crash would be a repeat of 2008. That recession would cause many of those young, new homeowners to lose their jobs, then their house now that they can’t afford the payments. Then the banks start hurting because they’re not getting their money back. Our banking system, because of its fractional reserve nature, counts on people paying back their loans so that the money can be reloaned to others. Other home buyers, other businesses, etc.
It causes a chain reaction that puts the entire economy into a recession at best. In 2009 the govt avoided a deeper recession by bailing out the banks. That of course is just putting a bandaid over the true problem.
The real problem is our fiat currency and Federal Reserve coupled with fractional reserve banking practices. Those two combined are a house of cards that is a pain to keep up, but must be kept up or everyone wakes up tomorrow with no money. Except for the preppers who stacked gold, silver, and bullets.
How do you dismantle such a system while keeping the economy running smoothly? You can’t. The smoothest way would be to create a metal-backed alternate currency and make everyone switch over to it simultaneously. Even that wouldn’t solve every problem, not immediately, and there would still be mass confusion and chaos.
And to add...
We've lived the roaring 20s for the last 10 years or so. People made money out of thin air instead of hard productive work. That cannot go on.
And after the roaring 20s we had a great depression. History does not always repeat but it rhymes. There will be panic. It will be scary for some. It will not be smooth. Our entire system is corrupt and it must be destroyed to be rebuilt anew.
That is just my opinion. Gloomy though it is, I do believe that it will create happier times for our children and grandchildren.
thankful for people like you who understand how insane it is for young people right now. Prices are completely out of control and basic starter homes are out of reach for a large swathe of the population. When you try to explain it to your parents or others who grew up in the 50s-70s, they just refuse to see.
what starter homes?? they dont build them any more any new construction i see is all big high end stuff...