The US Housing Market is in a big BUBBLE here in mid-2021. Home prices are at sky-high levels relative to wages, and many home buyers and real estate investors feel priced out of the market. A potential crash could wipe 20-25% off home prices across the country.
But the impending crash likely won’t all cities in the same way. Some areas of the country could get hit hard, facing up to 40% price declines. But others are likely much more secure and could continue to see appreciation, even during a broader US Housing Market Crash.
Home buyers, renters, and real estate investors who want to find out the risk factors for a Housing Crash in their city should track the following 3 metrics for insight into the future of their local housing market.
1) Appreciation Acceleration: how much home price appreciation has increased in the last year compared to the previous year. Markets like Boise, Austin, and Phoenix have seen big surges in appreciation. This is worrisome given historical data from the 2008 Housing Crash which suggests markets with rapid appreciation could face big price declines in the future.
2) Sales Velocity: how many homes are sold in a market each year. The more homes are sold relative to the existing housing stock (aka the higher the sales velocity), the more likely prices in market are being influenced by speculation. Cities across Florida (Cape Coral, Tampa, Orlando, Jacksonville) have the highest sales velocity.
3) Economic Weakness: cities with high levels of job losses will likely face greater risk of declines in home prices and rents, especially with the foreclosure and eviction moratoriums expiring. New York, Los Angeles, San Francisco, Las Vegas, and Orlando have job losses nearing -10% over the last 15 months. Meanwhile, states like Idaho and Utah actually have job gains.
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0:00 Your City: to Crash or Not to Crash?
1:39 Appreciation Acceleration in the US
4:14 What’s Better: Accelerating or Stable?
5:17 Lessons from the 2006 Housing Bubble
7:31 Accelerating Appreciation = Bad News
10:13 2nd Data Point: Sales Velocity
12:34 Low Sales Velo = More Stability
14:18 Fundamental v. Skeptical Markets
16:08 LONG-TERM Investor? One Caveat
18:08 Best v. Worst Job Loss Markets
20:30 3 Metrics to Track!
#HousingCrash #HousingBubble #RealEstate