So I’ve been thinking about buying a house but I got recently faked out by the stock market. You see, I figured I might as well keep buying the S&P 500 because stonks only go up, right? JPow is bae and bears r f*k, right? Wrong.
As you know, from literally the first trading day of 2022 the stock market and bond market have been getting crushed. Suddenly, bears are having a field day and Jpow is suddenly hawkish and “f*ck your puts” has become “f*ck your calls”. What happened?! I still don’t know. The fed giveth and fed taketh away.
Anyway, so I’m thinking about buying a house right, but I’m like “nope, I’m not going to get faked out again by Mr. Market”. So I do a little bit of research and find the following:
In Q2 of 2020, the median sale price of a house in the U.S. was $332,600. Fast forward to Q1 of 2022 and the median sale price of a house in the U.S. is now $428,700. This represents a 28.9% increase in home sale prices in just under two years. That has never happened before. Chat below for those who like pictures:
This isn’t doom and gloom, but I sure as hell won’t be buying the top of the housing market like I did the stock market. Suddenly, I’m not feeling so bullish anymore, so this means it’s probably the bottom for the stock market…but housing will still see a correction. I’m not thinking housing prices collapse, but I see a 20% correction as highly likely.
Reasons: same as the stock market. Too much liquidity which is now being taken away. Demand destruction through higher interest rates. Sellers who were chasing the trend last year but are now like “oh f*ck how am I going to pay for this, I need to sell now”! Fewer qualified buyers because of higher costs of borrowing and lack of liquidity.
Again, I don’t see a credit crisis or a collapse of the housing system. Not gonna happen. But a 20% correction after a monumental 29% rally? Yeah, most likely gonna happen.
TL:DR don’t buy a house just yet unless you enjoy seeing red in your portfolio. Temporary correction in housing will be incoming soon, just like every other market that has taken it on the chin this year.
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