Will Home Prices Drop in 2023 or 2024?

Remember how no one wanted to hear or laughed at people saying crypto is a big ponzi scheme. Same is happening again for real estate.

This is a warning to anyone thinking of buying a home in the bay area now. Don’t listen to the home owners telling you home is always a good buy (it was for them, it won’t be for you buying at these all time highs prices). Hold off until 2024 and buy a better home.

As a guy that’s been around the dotcom and the housing crash, it’s the same pattern.

People bragging at BBQs and giving investment advice only for a crash to follow.

This is the same face as someone buying $TSLA at $1000 saying it’s the future.
or the face of someone buying Doge Coin at $0.75.

Companies are announcing hiring freezes and stocks are starting to fall over.

Homes are still near all time highs, but once people start exiting, people will start dumping their extra rental / airbnb homes.

Of course, some will have no choice but to sell or foreclose because they were laid off.

When the crash comes, all the people that gave you investment advice will become quiet and you will be left to your own regrets just like 2000 and 2008.

Homes will hit lows in 2 years, 2024 March. You can start your shopping in mid 2023 for the home that you like and aim to close in early 2024. The rule of the thumb is to buy when there is blood on the streets.

Rates are higher so people can afford less

It’s insane that people are willing to pay ATH (all time high) prices when Jerome Powell is raising rates every month. Banks were paying 1% just a few months ago, now banks are seen paying out 2-3%. People can loan less, they can afford less of a home. THIS REASON ALONE should drop the home prices significantly.

Let’s look at a $700,000 loan on a $1.5m house.

That’s used to be $4900/month payment which is now $5900/month for the same house just a few months later!

The amount of loan people are able to pay monthly has dropped by ~20%!

The crash naysayers are correct. There is a supply and demand is being met right now. Let the people that were waiting to buy a house buy the homes at the ridiculous prices.

When will the housing market crash again?

The housing market already lost it’s footing. The rates are starting to hike up and loaning money will be more expensive. On top of this, layoffs have begun. Housing will hit it’s bottom in 2024.

Slow Hiring -> Hiring Freezes -> Layoffs

Once people start getting laid off, they won’t be able to pay for the exorbitant monthly payments

and yes, layoffs are coming. Demand slows, stocks fall, company needs to get leaner so they layoff.

Let’s not forget many companies are allowing their workers to work at home or in other offices now.

Was the massive buying caused by foreign investors or tech folks? Doesn’t matter, both have taken a significant hit in the last year. Let’s also not forget how strong the USD is.

Tech Layoff Chart
Tech Layoff Chart

Should I rent or buy now?

Be patient, rent is expensive, but it’s a small fraction of what you’ll lose from buying now.

Who should be buying a home?

Please do go ahead and buy a house if…

  • You have the mentality that your $2m home is going to be worth $20m in 30 years so who cares if it falls to $1.5m. No realized losses correct? When 2009 came, my friends that bought a condo for $400k dropped to $300k… now it’s $800k.
  • You found a home you love and you can afford it.

Conclusion on when to buy a home

Homes were only worth the exorbitant prices because home values only went up. Get a nice big loan at low interest rates. See your home grow in value while you live in it.

Now you are loaning money at high interest rates for a losing asset.

Yes, at the very minimum, let the homes get down to reflect the high interest rates.

I’d say as soon as home prices drop, investors will head for the exit, so give it a good 2 years before pulling the trigger.