Chris Vermeulen, the expert mind behind The Technical Traders, is ringing alarm bells over a potential crash that could reshape the U.S. property market.
He’s predicting a dramatic decline that could slash prices by 30% in both the home and commercial sectors over the next three years. Such a shift suggests a major upheaval ahead.
Housing Doomsday
One of the current issues the housing market is facing, which has been dubbed as a “housing doomsday” by real estate expert Kirsten Jordan, is the amount of housing available.
It is currently an issue of supply and demand, as there is a great demand for affordable housing, but there aren’t many houses available to meet this demand.
High Borrowing Costs
One of the main issues people are facing right now is the high borrowing costs for house loans, alongside rising house prices.
Both of these issues are making it practically impossible for Americans to get on the property ladder or even to sell their current homes to buy elsewhere.
Mortgage Rates Are Soaring
Alongside these issues, people also have to deal with soaring mortgage rates currently at a two-decade high.
Combine this with the fact that house prices are also at record highs, and moving anywhere on the property ladder has become practically impossible.
Selling at a Loss
One of the main issues in the current housing market for homeowners is that they have to sell their homes for less than the asking price. Sometimes, these prices are less than what they brought their homes for.
This makes homeowners reluctant to sell up because they want to make a profit on their current homes to move somewhere bigger, but that doesn’t seem to be happening right now.
Global Warming Is a Threat
One reason some homes are going down in price is global warming. Many areas across the US are more affected by global warming than previously thought, and it’s not just those living by the coast.
Issues such as tornados and storms are likely to damage properties, which means people who live in areas likely to be faced with these issues could see their property decrease in value should they try to sell it.
Global Warming on a Global Scale
Experts have predicted that global warming, at current rates, will cause the value of houses worldwide to drop by 9% by 2050.
While this might not seem like a lot, it amounts to $25 trillion, which is slightly less than America’s annual GDP.
A Surge in Home Sales on the Horizon
Vermeulen recently told Business Insider, “People are going to have to start to sell their homes,” signaling an expected rise in property sales.
Many homeowners might soon feel the pinch, forced to reconsider their living situations due to escalating mortgage costs and other financial pressures.
Economic Strain Deepens
“Many people are struggling financially, and this is really the tip of the iceberg,” Vermeulen asserts.
His outlook is dire: the biggest blows to the real estate market may still be a few years away, hinting at even deeper economic troubles brewing beneath the surface.
Early Warning Signs Appear
Stagnant retail sales over the past few months are a clear indicator of wider economic difficulties.
These sluggish figures are just one of many signs that could spell trouble across different economic sectors, not just real estate.
Domino Effect on the Economy Expected
Vermeulen warns of a possible domino effect that could sweep through the economy, resulting in corporate profit losses, layoffs, and shorter work hours.
This cascade of economic hardships could intensify the financial woes already facing many Americans.
Job Security Wanes
A sharp increase in layoffs, reported by Challenger, Gray & Christmas to have risen by 136% in January alone, underlining growing employment concerns.
Rising unemployment could severely affect many Americans’ ability to keep up with mortgage payments.
Unemployment Could Spike
Vermeulen predicts that unemployment rates could reach between 5% and 6%, a significant hike that may prevent many from fulfilling their mortgage responsibilities.
This uptick in unemployment is set to exacerbate the already strained economic landscape.
Crisis in Commercial Real Estate
The commercial property sector faces a critical situation with a staggering $900 billion in looming debts.
A 117% surge in foreclosures in March reveals the depth of the crisis, spelling major trouble for business properties.
The Pandemic Effect on Commercial Real Estate
One of the main reasons for the decline in commercial real estate is the pandemic. At this point people who would normally be working in the office began working at home.
But once the pandemic had ended, people realized that working from home was a much better option than commuting to the office every day. This has led to owners of these properties trying to sell them but being unable to, as not many people have a reason for an office anymore.
Trillions in Household Debts
Individual households are also facing debts that are making it hard for people to be able to move as they have to pay off their current debts first.
Household debts include mortgages, credit cards, and student loans. The overall amount for this across the US is now at $17 trillion and continues to rise.
A Long Road to Recovery
Recovering from this downturn could be a long haul—up to a decade, Vermeulen suggests.
However, he also notes that this could be a golden opportunity for savvy investors who can pinpoint the market’s lowest dips.
Economic Reasons Behind House Price Gains
There are several economic reasons behind house price gains, which are all partly to blame for the sharp rise in house prices.
These reasons include differences in disposable income, credit, and access, supply distributions, and rising labor and raw construction materials costs.
Housing Market Stuck Until 2026
Economists at Bank of America have predicted that the housing market will remain stuck in this position until 2026.
However, these economists have also warned that there is a high probability that Americans could be seeing high house prices like this far beyond 2026, and there is no way of knowing exactly when prices are going to go down.
Property Prices: The Recent Boom and Looming Correction
Reflecting on recent market trends, Vermeulen observed, “The price of real estate has doubled or tripled in the last couple of years. It’s pretty wild.”
Such rapid growth often precedes significant market corrections, which might be on the horizon.
California Housing Is Expensive
One of the worst states anyone could live in for high house prices is California. The median house price for homes in the Golden State has reached $900,000.
This is leaving many Californians feeling priced out of their state to wealthy buyers and is causing them to have to look at moving elsewhere for the first time in their lives.
High Prices Will Rise
Most people would assume that if prices are at an all-time high, they will surely start to go down again relatively quickly. However, experts predict that these high prices will only keep on rising.
This will continue even if the Federal Reserve delivers interest rate cuts. So, it seems very little can be done in the interim to get housing prices back down again.
Diverse Views Among Experts
While Vermeulen paints a bleak picture, opinions among real estate experts vary.
The National Association of Realtors, for example, contends that low housing inventory might stabilize prices despite the looming challenges.
Navigating Uncertain Waters
As America navigates these turbulent economic times, forecasts like those from Vermeulen shed light on the potential ups and downs ahead.
For homeowners and investors alike, staying informed will be key to navigating this uncertain market landscape.
