The Expert Podcast

The cruelest trick played on millennials and Gen Z-ers from the Great Recession might not have been the job prospects, it might not have been losing out on savings or investments. The cruelest and most evil painful factor from the Great Recession is tricking you as a millennial to believe that house prices will come down. If you were at all paying attention during the 2005-2006 to 2008 home price crisis and the Great Recession of 2009 and 2010, you saw home values spike up and then crash. So, as you're now seeing home prices go up, which you've been seeing since 2020 for at least two years, you might be thinking, "Oh, here I go. I'm just waiting for these prices to crash. I've seen this movie before. I saw it in 2009 when house prices crashed. I can't wait for these house prices to come back down."

And it's probably going to turn out to be a savage misleading event to compare the last crash to this one, because in reality, house prices won't come down. And here's why: Let's take a look. According to Insider, the Great Recession misled millennials. It made them think high home prices will eventually come down. And why wouldn't you think that? You saw it happen before, right? The end of these two hot cycles would be very different in nature. History often repeats itself, except when it doesn’t. But when it comes to the current housing market, don't hold your breath if you're a homebuyer in the mid-2000s. Today's hot market might look eerily familiar. And we've talked about this in prior videos. You might be looking to see when prices come back down to earth.

Certainly, we will have a recession in 2023—probably already having one—but home prices won't be part of that. The reason why is because there's still a housing shortage. That's the bottom line. It doesn't matter if people have less income, there are great job losses in the next 24 months, or if inflation, fuel prices, insurance prices, grocery prices, and automotive prices all go up. It doesn't matter. There's still a shortage of homes, so people are going to pay whatever they have to in order to get into a house.

Now, what will probably happen is there may be more homes available to buy, but the price won't be any less. There will be homes available now. Will the price be less than the original asking price? Maybe. If you have somebody that has a house that's worth $650,000 or $700,000 and they ask $850,000 and then they discount it down to $699,000, you might think, "Well, that house was discounted." But it's still inflated compared to a couple of years ago.

There's a very good quote from the analysts at NerdWallet. You've seen them advertise a lot. They're a really good financial analyst. Home prices will not fall anytime soon. Demand still exceeds supply of available homes, and that's not going to change. We've seen in our other videos, maybe on our other channel for homebuilders, they can't build houses fast enough. There's not the labor and materials to build houses fast enough. There's a five-million-house shortage of what's needed to fill the demand. Until that five million is absorbed, which may take a decade, there's still going to be enough pent-up demand to buy the houses that do come on the market.

There's another perspective: Normally, higher mortgage rates cause prices to cool. But don't expect home prices to drop in 2022. We'll see slower price appreciation, but not a price drop. This is with mortgage rates rising above five. You'll likely see mortgage rates rise above seven, and house prices go up. Right now, there's a little bit of a pause, where some of the sellers that were thinking about selling but waiting for the price to go up a little more now see the price leveling out, and the interest rate is at five. Boom! They're putting their houses on the market. Right now might be the absolute best time to buy a house because the price point will probably go up a little bit more, and the interest rate certainly will go up a little bit more.

Look, the Fed already announced it's going to go up 75 basis points in the next 60 to 90 days, so the interest rates are going to go up even more. Right now, there's some extra inventory in the market that's hanging around a little bit. Once that gets swallowed up and absorbed and people see that prices aren't going down, that market might get tight again. So, it might be the best time to buy if you need a house. You should buy one anyways. It's very likely that it's not going to go down according to all the experts.

And this also affects rent too. Because as house prices go up, landlords and property owners need to charge more for rent to pay for their higher mortgage rate, higher insurance cost, and higher price for the house. So, if you're at all thinking about getting into the market, waiting almost certainly isn't going to save you any money and very likely is going to cost you more money.

Tell us what you think in the comments. What are you seeing in your market? Are you still shopping for a house? Are you finding more availability? Are you seeing less bidding wars on homes? Are you a realtor? Are you seeing less volume? Are there more sellers in the market, or are sellers locked up because their interest rates are too low to sell? Because if you sell that house, you lose out on your lower interest rate. If you're a mortgage broker, I suspect that your volume of applications is off 20-30 percent. Tell us what you see there too. Put your message in the comments.