April 27, 2023 | Two Experts Agree: Home Prices Are Headed Down Hard

Wealthion’s Adam Taggart tried something different today. Instead of interviewing an expert, he had one expert interview another. It worked perfectly, producing a great discussion with chilling conclusions: If you’re in real estate as either a buyer or seller, the tenor of the market is about to change dramatically. If you’re a landlord, expect a “painful, slow bleed.”

Here are three of the charts they flashed, followed by the video itself:

Unnaturally-low interest rates allowed Home prices to far outpace homebuyer incomes, setting up a secular, not just a cyclical, correction. Put another way, home prices have to drop by more than 50% over a period of years to get back to late 20th-century norms.

When a homeowner’s mortgage costs 40% of their income, there’s not enough disposable income left over to fuel economic growth. Today’s level of home-related debt to income typically marks the beginning of a grinding decline in home prices.

Right now, the inventory of houses for sale is very low, as owners refuse to sell at suddenly-declining prices. It will take more supply to really push prices down. Where would that supply come from? Vacant houses, which outnumber homes for sale by 20:1.

John Rubino April 27th, 2023

Posted In: John Rubino Substack

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