"Since April, we've been communicating to clients that the Fed's intentions were to throw housing demand under the bus, somewhat of a sacrificial lamb to help bring inflation under control," Palacios tells Fortune

"When I say reset, I'm not looking at a particular specific set of data. What I'm really saying is that we've had a time of a red-hot housing market all over the country, where famously houses were selling to the first buyer at 10% above the ask even before seeing the house. That kind of thing. So there was a big imbalance between supply and demand. Houses were going up at an unsustainable fast level. So the deceleration in housing prices that we're seeing should help to bring prices more closely in line with rents and other housing market fundamentals. That is a good thing. For the longer term what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level and at a reasonable pace and that people can afford houses again. We probably in the housing market have to go through a correction to get back to that place. There are also longer-run issues with the housing market. As you know, it is difficult to find lots now close enough to cities, so builders are having a hard time getting zoning and lots and workers and materials and things like that. But from a business cycle standpoint, this difficult [housing] correction should put the housing market back into better balance," Powell told reporters on Wednesday.

TLDNR Powell wants real estate cheap because there's not an inventory problem, there's a demand problem.

https://fortune.com/2022/09/22/housing-market-federal-reserve-reset-through-difficult-housing-correction-home-prices/?fbclid=IwAR1KnnR6B-SrI4vdFK78zj20gU2MLg6pU7L_gtzX9JTP3CB7j1BUJmC9Eng

Except there is a supply problem, this is not just a demand issue.

Builders have been building at lower levels since the GFC, costs are up, financing is harder to come by, deals can't pencil. Supply will be constrained for the foreseeable future.

Then you have the people that bought or refinanced in the last two years, why would they move?

Really the whole idea that houses need to appreciate more than 2-3% a year is the problem. Homeowners would already benefit significantly at modest home price growth because of the leverage they can get and it would have far less impact on people entering the workforce being able to afford a home. The idea that 10% appreciation is normal and sustainable without serious societal impact is lunacy.

And really the Fed impact on housing is collateral damage. They needed to raise interest rates and the housing market is just one place that impacts.

Home prices are the symptom not the cause.

I don't really care if prices go up 1% or 10%. But, I do expect them to at least keep up with inflation. Which is exactly what we've seen happening. Until now.

If I'm in BCS and planning to sell in the next ~9 months, do I need to change my plans and try to sell now?

The percent of foreign born Americans has been more than 14% many times. It was over that in 1870, 1890, 1910, etc. The bigger driver of housing prices going up is that we build far fewer houses than we used to even though the population is larger. The immigration is a blip when compared to that factor.

We wouldn't have enough doctors in this country if we weren't being supplemented by foreign born Americans
.

ElephantRider said:

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If I'm in BCS and planning to sell in the next ~9 months, do I need to change my plans and try to sell now?

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I think that's a tough call honestly for two reasons -

1. We are heading into the fall and winter which has historically been the weakest part of the market as schools in session and people typically aren't looking to move. House will still sell, just not as many buyers on the market. Where as if you were to list in May/June like your time frame of 9 months - that's always been the best/busiest.

2. Rates are really dampening ANY potential sale because it's costing wayyyy more finance the home. Average time to sell in BCS right now is about 70 days which would put us into at least December assuming you'd successfully get under contract today with a buyer.

Very tough call but I'm not so sure I'd be looking to panic sell today if you didn't have to because you're going to have to get the house show ready, get any issues fixed and paint touched up before photos. It's just a lot and tough if you have to bring a spouse and/or kids along as well.

That being said, you'd also need to realize that any further postponing into next year has the potential to reduce the amount you'll end up getting for the home and could take longer than expected to sell. I'm not sure where rates are going but markets expecting them to keep going up.

Good news for BCS is that we are a bit delayed by macro trends because of the university's influence on the local economy. If there's anywhere you might end up being very successful selling for just a bit less and less hassle - BCS has the best odds.

Alternatively - if you try to sell but don't get any offers, renting the home is a very real possibility that can still provide some Cashflow and hold the property till the market bounces back. Not sure when but it could. You'll still be cap gains exempt if it was a primary residence and you sell within 5 years after having lived in the house for at least 2 of those years.

Happy to talk more and run some additional numbers for you if you'd like.

pocketrockets06 said:

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The percent of foreign born Americans has been more than 14% many times. It was over that in 1870, 1890, 1910, etc. The bigger driver of housing prices going up is that we build far fewer houses than we used to even though the population is larger. The immigration is a blip when compared to that factor.

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Don't want to derail this thread any more so I deleted my response.