US Housing Market Crash

US Housing Market Crash

Will the Housing Market Crash in 2020?

A new Wall Street Journal report puts the odds of a recession at their highest level in 7 years, at 25%. Previously, economists forecasted 2020 as the year of the collapse.

But with a housing shortage, high employment, Millennial demand, and a good economy, the chances that the housing markets could crash is slim. But let’s take a look at the factors and signs in more detail below.

Should I Buy a House?

Should you buy a house now with the housing market forecast and economy sailing along so good, what could result in a housing market crash or stock market crash?




If the Democrat’s gambit of impeaching the President should happen, that could be the trigger for a housing market crash. Because without him, investment capital would flee and unemployment would rocket. Investors in US stocks would panic.

Other housing crash factors would be:

  • persistent push to raise interest rates
  • the Fed raises interest rates too quickly in 2nd half of 2020 and given the size of the loans, a 2% increase would create defaults and panic selling
  • global economic failing impacts US economy
  • home prices at peak
  • stock market at peak
  • housing bubbles in NY, Boston, Los Angeles, San Jose and San Francisco collapse
  • Trump loses election in 2020
  • “America First” dream dies followed by dramatic drop in purchases of China products
  • China’s debt ridden, export dependent economy topples
  • Democrat policy meddling does result in severe economic problems
  • single-family housing permits decline (which they have)
  • homeowners get scared and begin dumping overpriced homes and condos
  • student loan and personal debt defaults
  • investment tax breaks end
  • stimulus spending ceases
  • yield curve inverts again thus scaring the financial community




We’d have to agree there has been significant housing development, but never quite enough. Trump tried to end the regulation that has been and still does strangle housing construction in California, Texas, Florida, Arizona, Chicago, Atlanta, Phoenix and in Boston and New York,

However if the Dems won the 2020 election, and shipped jobs back to China, vast amounts of investment capital would flee the US. The job loss, defaults, and lack of lending would indeed be part of an epic type housing market crash and stock market crash.



The Dems are persistent in their media assaults on the President, believing that at some point they can haul him to the ground. But as next voters ready to vote, Trump will warn them about capital flight, government spending changes and limits, lost jobs, lower wages, and foreclosures. It will be very interesting to how US voters react in the Presidential election.




Moody’s recent report suggests a landslide win for President Trump in the 2020 presidential election.

The year “2020 is a real inflection point,” says Mark Zandi, chief economist at Moody’s Analytics.




US consumers are becoming less optimistic.  Given they and the housing market will have to support GDP, jobs, and housing demand, there is a real threat of a housing crash. Oil prices are rising and there’s no expectation IRAN will change its ways so sanctions won’t be lifted on their oil output. Bloomberg just reported auto sales dropped in March. The talk of trade wars with the Euro are a concern. Trade friction is an issue.

Which are the cities most likely to crash?

Since housing downturns usually precede economic recessions, but not cause recessions, and today’s housing market isn’t supported, you don’t have to be a genius to see the writing on the wall.

The big factor is whether President Trump can keep the US economy rolling as he get a grip on continuous trade deficits and debt records. With the population so emotional, they might not be thinking at all about 2021 when the curtain falls.

Number one threat now: A trade deal with China is very risky. It might push jobs back out of the US and devastate business investment here. Investors are confused about where to put their money and are simply holding on to it.

If President Trump accepts a poor trade agreement with the Chinese, it could crash US stock markets and push us into recession, even if multinational corporations breathe their own sigh of relief.  I don’t believe any trade deal would be signed and the two are miles further apart now. America First, means the Chinese are gone.

What could possibly cause a housing crash and will cause it to grow in 2019?  Consider these crash factors below and how they could affect the stock markets. Are the housing markets taken for granted such that big mistakes could result in a plunge?




Which are the cities most likely for a housing crash? Which cities should you buy property in 2019?

How Vulnerable is Your City?

Yet, investors and homebuyers should still be concerned about a housing bubble in their cities. Not all states have recovered from the last recession, nor benefited from any Obama era Federal government policies.  There really are cities at risk of crashing.

The key factors are discussed below. Know them before you buy a home.

Will Rising Interest Rates Lead a Downturn?

Right now, experts believe that unwarranted rising interest rates along with global trade wars could be enough to send US housing markets crashing.

Rates are rising fast (70% higher) and that alone can create inflation and prevent home buying given how high home prices are in places such as New York, California, Texas, and Florida.

President Trump is angry about the Fed’s desire to raise rates to cool the economy, which may not actually be that red hot until next spring.

Screen Capture courtesy of The Economist

Some experts believe the US Fed launches recessions with unreasonable rate increases. In fact, every recession or major catastrophe has been aided by fast rising interest rates. These rate spikes kill off business and put extreme pressures on mortgage holders. Markets crash quickly then interest rates are quickly lowered.

The transition to a US centered economy puts the country into a vulnerable period of uncertainty and GDP risk. Companies are hoarding products from China right now while the tariff is 10%, but on January 1st 2019, it will be 25% and that should stop imports completely, especially if the US dollar should weaken. Will companies build factories here or instead hold off and hope for a Trump loss in 2020?

Unfortunately, “soft landings” after rate hike cycles are as rare as unicorns and virtually all modern rate hike cycles have resulted in a recession, financial, or banking crisis. There is no reason to believe that this time will be any different — Forbes report.

 





But what happens when Malinvestments in Europe and Asia become visible and crashes begin to happen there?

Markets crash when you least expect them to. After reading this post, you’ll see how easy it could happen from California to Texas and New York to Chicago. What will stop the dominoes from falling?

Don’t we learn from history?” Perhaps history can only tell us whether the housing market 2019 is headed for a correction, but can’t really say when or how it will happen, which cities might crash. You’ll read about the likely factors below.

This recent chart from Case Shiller shows the volcano like shape of the last collapse. What’s different about this new rise is the unsteady, less steep climb, upward.  Those halting steps could show the fear of investors and homeowners and how panic might be bigger factor this time.  Alternatively, it could show housing market resilience.

Subprime mortgage default started it last time, but will something else launch the avalanche for the next one? Will a global recessionary tsunami rocket to US shores?

Zillow polled 100 economic experts about the economy and they believe a recession is coming in 2020.

Graphic courtesy of Zillow

Housing crash warnings have been sounding for many years both here and in China, which means the pressure for a big crash has been building.  China is in trouble and so is Canada. With pressure, the human element, the human reaction, built on expectations built up by obsessively negative anti-Trump propaganda, could be sufficient to launch a panic-induced collapse.  A panic meter might be the most significant crash signal.

A small statistical event then might only be needed to spark a crash event (like an ember at a California summer campfire).

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What Are the Key Housing Crash Factors to Watch?

There are numerous housing crash factors discussed below from geopolitical events to trade related to rising interest rates, the end of stimulus spending, and excessively high home prices.  A trade war with China could be crash factor #1.  Will debt, deficits, and tariff barriers be the issues that start bursting housing bubbles? Will it be political opposition by the democrats and meddling within the US?

See the local metro housing markets: Chicago,  San Francisco, PhiladelphiaSan DiegoLos Angeles, Miami, Houston, Seattle, New York, Sacramento and Boston and for all of Florida.

Trump Volatility: America First policies are working for US economic health, but trade wars can fester quickly like a wild fire and cause much pain in the short term.

Certainly the recent comments of the President that “Trade Wars are Good” don’t help settle the panic. Trade tariffs, strong inflation and cost of living rises, along with high mortgage rates and the adjustment to new protected market economies are serious threats.

Even Trump supporters are worried about the transition ahead to 2020.

In this post we try to take an objective look at the unthinkable. At least, it’s unthinkable for some that booming markets in Los Angeles, San Fransisco, Sacramento, San Jose, Seattle, Denver, Las Vegas, Dallas, Charlotte, Boston and Miami could possibly collapse.

Others can’t wait for the bubbles to burst so they can finally buy a home. Irrational thinking that can create strange events.

Is the Toronto housing bubble (worst in world now) the future for US cities?  If the China housing market crashes, will the reverberations hit the US markets? What an interesting but scary phase of US history this is.

When Will Local Market Bubbles Burst?

If you look at the forecasts for all the bubbled up city markets such as San Francisco, San Jose, Los Angeles, Miami, Houston, Seattle, New York and Boston you’ll likely think back to prices before the last crash.

Are you spooked about the real estate market in 2019 or 2020? Leave a comment below and please do share this post on Linkedin.

 

Check the state of the US housing market forecast  

The recent stock market correction gives us pause for thought about how volatility can factor into a housing crash. However, the housing market is healthy with home construction rising and it will be a long time before demand is satisfied.

Mathematicians have studied housing bubbles, such as The University of Pennsylvania, and their HOUSING BUBBLE STRUCTURAL MODEL AND HYPOTHESES models couldn’t figure it out. The factors they studied do play a role, but housing bubbles and crashes are likely a cultural phenomenon (outside of major recessions).  It comes down to values, attitudes, dreams and panic emotions.

There are some financial market players who make their fortune on crashes and if consumers are miffed about the direction of the market, it would be fertile ground for crash talk.

As long as Americans are employed with rising wages and growing GDP, housing crashes aren’t likely. Yet, a few experts such as Harry Dent are convinced a housing market disaster looms in the next few years. Even Anthony Robbins is speaking up about it in a video below.




A growing number of homeowners and buyers are talking housing bubble. With prices stable, economy strong, and demand persistent, why would so many feel the market could crash? Is buyer and seller pessimism enough to launch a sudden collapse?




Neil Kashkari talks extensively about false prophets (Alan Greenspan) and the sources of market bubbles such as $100 barrel oil, and other uncontrollable situations.  He says market bubbles and crashes are very complex and the source is often completely unexpected. Could the oil sheiks take the US economy down again? Could China do it? Is the $20 Trillion debt a threat? Or is just the end of a bull run in the stock market?

However, in those cases where debt is fueling the asset value increase, a correction could trigger financial instability, because banks might take huge losses and potentially fail.” — Neil Kashkari.

Check the stats and 2020 forecasts for the Denver housing market, Chicago housing market, Boston housing market, Los Angeles housing market, San Francisco housing market, Philadelphia housing market, and New York housing market.

Top 10 Cities Most Likely to Experience a Housing Crash

From a report in AOL.com here are the top ten US Cities most likely to experience a crash:

  1. Portland, Oregon
  2. Charleston, SC
  3. Buffalo, NY
  4. Fresno, CA
  5. Los Angeles, CA
  6. Dallas, TX
  7. Salt Lake City, UT
  8. Austin, TX
  9. San Jose, CA
  10. San Francisco, CA

Best Cities to Invest in Real Estate

Are you looking for the best cities to invest in real estate or to avoid those metros most likely to crash? The top 80 cities to buy rental properties gives you a peak at the potential of rental property investment.

Is this the right year to buy a rental income property?   Or is the the best time to sell your home?

 

Housing Market Predictions | When Will Housing Prices Fall? | Should I Buy a House Now?Housing Market Crash 2020 | Weather Forecast |  Mortgage Rates | Mortgage RefinanceWill Mortgage Rates Drop? |  Sacramento Housing MarketFlorida Housing Market Predictions | California Housing Market Forecast | Stock Market Predictions for 2020 | San Diego Housing MarketPhiladelphia Housing Market Forecat | Miami FL Housing Market | Tampa Housing Market Forecast | Atlanta Georgia Housing Market | Houston Home Prices | Los Angeles Home Prices | Bay Area Housing Market |  Best Cities to BuyHousing Market Toronto | Auto InsuranceAI Marketing Agency Toronto San Diego San Francisco

Disclaimer: this post/information is meant as a discussion of housing and investing issues, ideas and trends, not as advice for investment. Please use good judgement and professional advice if you’re investing in any market.

There are 6 comments for this article
  1. Kera at 12:53 pm

    A real estate agent recently told me, if everyone is sitting on cash waiting to buy house in 2020, what do you think is going to happen? Too many people are waiting in sideline, as soon as we have semi dip, everyone will run to buy house and price will go back up. I am guessing Q1 to be the dip and price to be up by summer when normal people buy anyway

  2. Kyler at 8:58 pm

    I’m waiting for the federal reserve to roll back interest rates before I buy a home. It’s an outrage that every recession or financial crisis was assisted by rate hike cycles. The federal reserve should be audited heavily if not abolished altogether. How can we allow one single entity, a privately owned entity, that type of control over our economy.

  3. Aln at 12:05 pm

    Are you waiting for the house prices going down again in the bay area? Just hold your breath and keep dreaming. It won’t likely happen until 2035.

  4. Michael Gallacher at 8:06 pm

    Hi Gord, I really liked your article. I am happy to see Salt Lake City as one of the top ten cities likely to get experience a crash. My wife and I are saving up cash for our first home. We are both 33 and have one daughter. We can’t believe how ridiculous the asking prices are for the crumbling shed 1950’s homes are here in SLC. The contractors out here only build huge $300k+ homes or high density housing which is nothing we want. The wages here have not kept up with the increase in home prices. Any idea when Utah might see a price crash? We can hardly wait!

  5. Mark at 12:09 am

    Hi Gordon, great article. Like others I have the money to purchase a home now but I’m wondering if I’d be better off waiting till 2020 to do so given the potential volatility and uncertainty ahead in the next year or two. My current market is the Salt Lake City Utah area, would love to hear your thoughts!

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