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Housing data you need to see

My girlfriend Amanda and I have begun looking to purchase our first home together. I've been putting more screen time on my Zillow app than Instagram lately, and HGTV is flying up the ranks in my favorite streaming channels at the moment.

As we have begun to go through this process I've had conversations with other first-time buyers in this market, real estate agents, sellers, and lenders to get a sense for where they think its headed. I've heard a range of viewpoints and opinions, and I've come to my own conclusion on the outlook of this market that I think is important I share here on the blog for anyone else considering purchasing a home in the near future.

Home prices are not falling anytime soon. In fact, they will likely continue to rise.

I wrote a blog earlier this year, "The Force of Real-Estate, Awakens" covering the mania of the housing market, and some of the forces that are contributing to it. Check it out if you haven't yet-I'd like to think it was one of my better blogs from the early days of the blog!

When I wrote that piece in April of this year, we had been in this environment for some time already- considering the mania of home-buying started as the pandemic began to show its cards in the summer of 2020. Since then we have more recently started to see many home-buyers begin to walk away from the table. Largely in part to the reality that it can be incredibly frustrating and draining to go through the home-buying process over and over again only to have it not go in your favor.

However many homebuyers are pulling out of this market with the hope that home prices are going to go down to more "normal" levels. I am here to tell you that is not going to happen. In fact, I'm here to tell you the EXACT opposite will very likely happen.

The 3 main forces I cited in my original blog back in April were the pandemic behavioral changes, the demographic shift of millennials entering their family formation years, and the overall strong economic environment paired with low interest rates. All three of these forces are still largely in effect, and show no signs of reversing. I wanted to bring a new perspective to my argument, from the help of the first ever BonkerBeat Contributor and friend of mine Jarryd Boyle.

The Data

Jarryd pulled together data showing the monthly change in median housing prices throughout history, and how they reacted through recessionary and post recessionary periods. What is totally unique to the current housing market is that we are coming off of a recession, in which housing prices INCREASED in value. As you will see below in the data- generally, housing prices fall or at least decelerate during a recession.

The unique part of the Covid Recession is that housing prices accelerated in value during the recession at a record pace. That is a never-before seen feature when it comes to housing data. EVERY single recession in history saw housing prices DECLINE or DECELERATE, followed by a housing rally in the post-recession period. However here we are in what looks to be the beginning of a post-recession period, where we have already seen a tremendous rally in home prices. So if historical data were to prove to continue, we would see the beginning of a huge jump higher in prices, since that is how historically home prices have reacted post-recession.

Look at this table Jarryd put together that shows the largest increase in average median home value throughout each time period in history. The two highest jumps in monthly home value came DURING the Covid Recession and AFTER. And to make it even crazier, look at how drastically larger those monthly jumps in home value were compared to history- more than 3x the next closest periods! (inflation adjusted)

The next charts below are illustrating the moves in housing prices during each recession, and after. The black lines show the market performance in recessions, the blue lines show the market performance in post-recession environments.

Do you notice how almost every recession highlighted in the table shows decreased or flatlined changes in the median home price? But look at the Covid-19 Recession. It flew from 200k to 300k in just a year.

Check out the same chart showing each market period since 2000:

As you can see from the chart above, housing prices are roughly 2.4x their 2001 levels, compared to real wage growth from that same time period only at 1.1x. Essentially, median households are running away in affordability for the middle class at an alarming rate.

Many of you may read this and choose to disagree with me, and say we are due for a "correction" in the pricing of houses. I just ask you to think about what would cause such a correction. What underlying force would create that to happen?

As I have stated in this blog and previous blogs, the majority of the economic conditions provide tailwinds to home prices for the foreseeable future. My favorite economic writer and podcaster Ben Carlson from Animal Spirits Pod (my #1 Podcast of 2021) has planted this take into the ground that housing is primed to go up further in the future, and it is relatively underpriced compared to other countries around the world. I've always been #TeamBen and his conviction on his take of the housing market inspired me to write this post and share with my audience a similar sentiment.

If you are at a place where you have enough money saved up, but are waiting for the fat pitch to come down the middle on a housing market change-up, think again. The pitcher who is throwing you that pitch is likely not even in the bullpen warming up. So if you see a strike in today's game, I'd think about pulling the bat off your shoulder and taking a swing.





Be sure to follow me on all my socials, and listen to the first episode of the BonkerBeat pod!

Here is the Link to my original blog on the housing market from earlier this year:

Here is the Link to the Pilot Episode of the BonkerBeat Pod:



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