Tuesday, April 13, 2021

"Housing Crash Is Coming! Supply And Demand Crisis Set The Stage For An Apocalyptic End Game"

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"Housing Crash Is Coming! Supply And Demand 
Crisis Set The Stage For An Apocalyptic End Game"
by Epic Economist

"The housing market madness is currently marking a clear shift in buyers' mood and sentiment as the health crisis drags on. Whereas the Fed plunged mortgage rates to record lows and the federal government delayed the foreclosure wave via forbearances, a mass exodus from major metro areas due to the growing socio-economic chaos resulted in an unprecedented demand for new homes and a fierce bidding war. According to several housing experts, homes are being snatched up right after being listed, and buyers' euphoria is quickly draining the market's supply and plunging inventory to ultra-low levels. A recent study shows the U.S. housing market is months away from completely running out of supply. Meanwhile, the Federal Reserve policies continue to take the market towards another enormous housing bubble as prices explode all across the nation. However, the threat of rising mortgage rates, inflationary spikes, and a complex affordability crisis can lead to a catastrophic housing market crash that would sharply collapse property values just as seen during the mid-2000s bubble burst. And that's what we're going to expose in this video.

The equation of low inventory plus low mortgage rates has resulted in skyrocketing home prices, making it increasingly harder for Americans to afford a home. Now, first-time buyers are facing extra pressure to enter the market, as the cited factors have set the stage for a speculative and extremely competitive market. Bidding wars are being reported all across the country, oftentimes with buyers making all-cash offers with no contingencies whatsoever. Daryl Fairweather, Redfin's chief economist, noted "new listings are getting snatched up right away," adding that nearly 50% of US homes are selling within a week of hitting the market.

In a fresh CNN Business report, a 40-year veteran of the real estate industry and the CEO of KB Home, Jeffrey Mezger, said homebuyers should be careful as this is the most highly leveraged housing market he has ever seen. "It's crazy. There is no inventory," exclaimed Mezger, noting that the rapid pace of home price appreciation is a clear evidence the housing bubble is nearing a dangerous bust. The same report features the story of Ellen Coleman, a real estate agent who works for RE/MAX Realty Centre. She recently listed a fixer-upper in suburban Washington, DC for $275,000, and within three days, she had 88 offers.

The 1,800 square-foot home was sold for $460,000, roughly a 70% surge from the asking price. As housing becomes unaffordable for larger swaths of the population and the market seems to be overheating, Redfin's chief economist Fairweather remembers that this scenario is something "we've seen before, and it never ends well". In essence, the US housing market is facing a tricky dilemma. Either home prices will hit a wall and drop from there, or demand will start waning and, as a result, it will deflate the housing bubble. In any of both cases, it means that a correction has to occur as the current valuations are out of the reality of most consumers. That's why experts say all signs are pointing to a fast-approaching housing market crash.

Every day it goes by, the inventory crisis worsens and, with builders unable to build fast enough while more and more potential homebuyers battle over a smaller share of listed homes, a new JPMorgan study suggested that it could take about two months to exhaust the entire supply of existing single-family homes and approximately five months of new single-family-homes at the current sales pace. According to a National Association of Home Builders survey, 96% of builders surveyed reported building materials as the top challenge in 2021, up from just 66% in 2020. The main culprit is lumber. The material has been so scarce, prices have soared almost 200%, adding over $25,000 to the cost of a new home.

At this point, there is no doubt current housing valuations are based on misconceptions that distort reality. The truth is that all asset bubbles artificially inflated by the Federal Reserve throughout the past year won't resist a sudden increase in interest rates. In other words, it will not only trigger a devastating housing market crash, and lead property values to experience a sharp drop, but create big risks to the economy too, as homeowners become delinquent while watching their main asset collapse."

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