How do you think an upcoming recession may affect home prices?

[Bum]

In 2008 the fed was able to cut rates from 5.25% down to 0.25%.

That helped the housing market.

This time it isn't going to be so easy. Not much room to cut rates.

Going from 1.5% back down to 0.25% isn't going to help much.

And with rates so low, that's why I don't think housing drops much with a recession.
Condo returns of 5-15% look better than 2% in the bank.

 

[farmerjohn1324]

IMO, cutting rates from the low levels they're at now won't do much good for the economy.
If rates go lower and the economy isn't falling apart, that's just more incentive to move money into housing. Cutting too much is probably a sign the economy isn't looking so hot so housing may take a hit too depending upon severity of the recession.
I'm looking to buy 1 now then may wait to see how the virus situation ends.

Like pushing a wet noodle.

Best thing would be increase exports, but that's not as easy to do as altering monetary policy.

I think the economic theory of mercantilism should make a comeback.

 

[farmerjohn1324]

And with rates so low, that's why I don't think housing drops much with a recession.
Condo returns of 5-15% look better than 2% in the bank.

What is the 5-15% return on?

Is this return with buying with mortgage, then renting.

 

[hafez50]

The difference is there's a big shortage of supply this time vs 2008 were there was massive supply. I've talked to tons of people waiting for a crash so they can load up . i don't think it happens . With rates so low and if stks crack money has to go somewhere .

 

[Bum]

What is the 5-15% return on?

Is this return with buying with mortgage, then renting.

Cash purchase then renting.

If mortgage rates get low enough, it could make sense to purchase with a mortgage then rent but I won't do it. Lender will require a larger down payment.

 

[farmerjohn1324]

The difference is there's a big shortage of supply this time vs 2008 were there was massive supply. I've talked to tons of people waiting for a crash so they can load up . i don't think it happens . With rates so low and if stks crack money has to go somewhere .

Good thing I'm a spec home builder then!

 

[Bum]

Good thing I'm a spec home builder then!

Perfect!
Build your own rental property.

 

[farmerjohn1324]

Perfect!
Build your own rental property.

No.

Build and sell immediately.

 

[gaussian]

It won't. NIRP/ZIRP will keep home prices skyrocketing. As of now the banks have only just begun to package mortgages into CDOs again. We have a good decade before the next housing crisis.

Currently there is very little supply and tons of demand. For the last 8 years I've heard people calling tops and it keeps improving locally at about 4-5% per year as expected. I see no shortage of people wanting to buy houses and with all of the Californians moving to other places and flush with cash they will spend almost any dollar amount because it will always be cheaper than CA.



You should be more concerned about the cause of the recession. 2007-2009 was special. This one will be special too. 2007-2009 was housing, this one will be supply chain. Globalization does not effect housing prices directly - however materials may become more expensive depending on where we import lumber/etc from.

No.

Build and sell immediately.

Stick to building homes and not giving advice on rentals. Rentals are an excellent form of cash in an economy where housing shortages are everywhere. People are clamoring for reasonable rent and long contracts. Find good renters, give them a 2 year contract, and you'll be rolling in cash. I'd be doing that now if I could afford the start up costs (locally you have to put up an 85% down payment on any rental property in order to secure a mortgage). There are fewer rentals and tons of rentees. You have the pick of litter in terms of who you want living in your house.

 

[farmerjohn1324]

It won't. NIRP/ZIRP will keep home prices skyrocketing. As of now the banks have only just begun to package mortgages into CDOs again. We have a good decade before the next housing crisis.

Currently there is very little supply and tons of demand. For the last 8 years I've heard people calling tops and it keeps improving locally at about 4-5% per year as expected. I see no shortage of people wanting to buy houses and with all of the Californians moving to other places and flush with cash they will spend almost any dollar amount because it will always be cheaper than CA.



You should be more concerned about the cause of the recession. 2007-2009 was special. This one will be special too. 2007-2009 was housing, this one will be supply chain. Globalization does not effect housing prices directly - however materials may become more expensive depending on where we import lumber/etc from.



Stick to building homes and not giving advice on rentals. Rentals are an excellent form of cash in an economy where housing shortages are everywhere. People are clamoring for reasonable rent and long contracts. Find good renters, give them a 2 year contract, and you'll be rolling in cash. I'd be doing that now if I could afford the start up costs (locally you have to put up an 85% down payment on any rental property in order to secure a mortgage).

It's a little too early to say a recession will be caused by supply chain due to this panic and 1 death so far in the USA.