The Truth About This Housing Market Crash
I wanted to reach out because everyone has been freaking out, sending me this LA Times article saying housing is down 18%, the median price of homes in the Southland is up, however it's the slowest rise in over three years. I received an economic analysis from Goldman Sachs which I'm going to start referencing now, I think it kind of grounds things.
"Housing has been hurting this year, construction has slowed, sales have dropped, home prices have decelerated and sentiment in the sector has deteriorated. The sharp underperformance of home builder stocks suggest that investors expect that the sector to continue to struggle..."
The most likely drivers of the slowdown are what I’ve been saying for a year now: our high interest rates and tax reform. They estimate that higher interest rates explain roughly two-thirds of the deceleration in residential investments since 2017, in provisions in the tax reform that reduced the value of the home mortgage interest deduction have also likely had a modest negative impact on home prices and might have contributed to the slowdown. They expect that higher interest rates and tax reform to remain headwinds but see, now this is key here, the low level of homebuilding relative to demographic trends as a medium run tailwind. So what that means is they feel that yes, although high interest rates tend to create a housing slowdown as the housing market is the most interest rate-sensitive, low inventory should keep things pretty stable and ultimately at the end of this article which I’m going to link to for you, they're saying we're going to see a national growth pace of negative 1.5%, so not really a big drop.
So, everyone up in fear of a huge tanking of the housing sector probably not going to happen, I personally feel that it's going to be bigger than that in LA because we're already seeing that and the gap between affordability and what things cost is probably the widest it has ever been in the history of Los Angeles real estate. So is now a good time to sell? I don't know that risk is for you but we're certainly not seeing the growth that we saw in 2014, 2015 and 2016.
If you or your friends or colleagues want to sit down and have a casual conversation about how this may or may not affect your asset class of home or not, please don't hesitate to call me we can have a very casual conversation about things.
Ben Belack, your favorite realtor