bostonbubble.com

[Optimus4]

People are holding onto their properties forever waiting for it to appreciate. No one is willing to sell. We are barely building any new houses. What do you think it will take to get the inventory up? I don't want to see the region hit with a bad recession but it is looking like that is what it will take.

[Guest]

A nice recession would do the trick. After 6 years of bull market bullshit brought about by rates at or near 0, I'd say we're due.

[admin]

[Guest]

I believe mortgage interest rate needs to go up and back to 6% or 7%, before the home price trending down quickly. And you will see a lot more homes come into to the market when home price trending down quickly. That is call panic selling.
Property is a lot like bond. Given the fact that general public's bring home income is pretty flat for past 5 years, as well as for the coming 5 years, then your monthly mortgage payment is the yield that will mostly be constant, and when interest rate goes up, price goes down; and vise versa.
A recession by itself is not necessary going to do the trick, if someone in the government and/or FED decide to keep the rate super low, and use similar method like QE to flood market with liquidity. Home affordability in that case will only get worse, or stay flat, since the monthly mortgage is relatively lower in low rate environment. existing home owners will stay put, re-finance, and enjoy super low monthly payment while hedging inflation in the same time.
Also lower rate with abundant liquidity will trigger inflation, or even worse, stagflation(we are currently in one). That add into fear factor to push liquidity into hard assets form other than cash. And real estates is one of these hard assets form. We also need to put in consideration of inflation in global form. When inflation is bad on other part of the world, US hard asset could be considered as good hedge, therefore become highly demanded goods.
price goes up on highly demanded goods as always, especially when the monthly payment of it is relatively cheap due to low rate.
People are greedy, and less willing to sell things that is appreciating in value. That goes for home, stock, gold etc.
To predict when and how interest rate will go up drastically, is the key to predict when home price goes down, and home inventory goes up.
I believe there will be a greater strategic need for our government to raise rate down the road, it could related to suppress foreign economies to retain our global supremacy, or necessary step to calm down finance troubles. Whatever the reason, it has to be more important to the rulers of our country than maintaining the housing market stability. As soon as you sense that, you know the wind for housing market is turning.
Good luck spotting that everyone. Whoever smart enough to sense it early, and act accordingly, will be handsomely rewarded on other's lost in this coming housing market down turn.