- Real estate consultant Nicholas Gerli said the next home collapse is not “secondary.”
- Instead, it is largely driven by some overrated cities where annual housing costs are skyrocketing.
- Using this calculation, Gerli shared the top 15 cities in the United States that needed the most modifications.
The real estate market can finally reverse from its rapid growth and rise Bubble pop worries Get closer to the surface.
Median home prices have skyrocketed, according to data from the Federal Reserve Bank of St. Louis Almost 33% Partially promoted by the mass migration of wealthy remote workers from the spring of 2020 Deeper pocket Smaller and cheaper Metropolitan area.. But the real estate market is
Start raising interest rates in March.
Since then, mortgages have risen from last year’s record lows, and 30-year fixed rates are still at their highests. 10 years or more..Freddie Mac keeps current weekly average rates 5.3%There are many borrowers who are brushing up the 6% territory. After a large deficit for several months, Housing inventories have finally begun to rise again In March, and Price cuts for listed homes It may now indicate a softening of the market.
Still, given the more optimistic indicators in today’s housing market, especially the stricter underwriting standards after the subprime mortgage crisis. A more balanced self-to-rent ratio — Analysts are questioning whether today’s high real estate prices are still the cause of the plunge, as in 2008.
Are you ready to burst the housing bubble?
Nicholas Gerli, CEO of real estate data analytics firm Reventure Consulting, believes investors need to prepare for another housing bubble pop.
“The easiest way to think about it is that home prices are the highest in history today, both nominally and in inflation adjustments,” Gerli told insiders in a telephone interview. “For most of the last 130 years, inflation-adjusted home prices have been very stable. The housing market is basically related to inflation and wages, so it doesn’t really rise that much.”
But what if this balance seems out of place at first glance?
“Then, if there is a deviation in house prices above inflation and wages, it’s historically a sign of a bubble,” Gerli suggests.
That’s because wages and home prices must eventually converge again, whether wages have caught up or house prices have fallen.
According to Gerli, this is the second time in US history that home prices have risen sharply ahead of inflation and wages. The last time was 2006, just before the collapse of the house in 2008. And Gerli warned that today’s prices are even higher when compared.
But homebuyers don’t necessarily have to panic, Gerli suggests. This is because the current sharp rise in house prices is driven primarily by the housing market in some specific metropolitan areas. He warns buyers not to think of a crash in a “binary” way.
“When we do home price calculations for inflation and wages locally, there are certain regions of the country that are more fundamentally supported today, but there are certain regions of the country that are actually leading the bubble. “He explained. “I think it’s like 15-20 different markets that have been responsible for most of the growth over the last 3-4 years.”
For example, home prices in Las Vegas, Nevada fell 60% during the 2008 home collapse, but Gerli believes that lower housing activity and rising demand will further curb the recession this time around. Meanwhile, prices in Austin, Texas, fell only 4% in the last housing crash, but Gerli predicts it’s due to a far plunge from current highs.
Beware of cities that come into contact with technology
When considering a regional assessment, Gerli considers a combination of four factors. The first two are rising local home prices and wages and housing supplies, both in the market and under construction. He also looks at the existence of real estate investors who inherently take more risk because the loss of investor capital opens the door to demand in a particular market.
Gerli also analyzes the local economy. In particular, consider whether you are particularly focused on industries that could be hit by rising interest rates.
As an example, Gerli has listed areas that have particular contact with technology hubs, such as Spokane, Washington, Reno, Nevada, Seattle, Washington, and San Francisco, California. Gerli warned that these cities are at the highest risk of potential technology downturns, and many technology companies today are unprofitable and overvalued.
“Tech employs a relatively small number of people in the US economy compared to all other industries, but they dominate a tremendous amount of wealth and housing demand. Stock prices plummet and layoffs. Now that is beginning to be seen, it’s a big deal for these housing market economic risk factors. ” Robin hood, NetflixWhen Better.com have Announced headcount reduction In the last few months.
Austin leads the pack of housing bubbles
To estimate the current largest real estate bubble in the United States, Gerli used data from Zillow, the Federal Reserve Bank of St. Louis, and the US Census to investigate the surge in housing costs during a pandemic. Specifically, we focused on the increase in annual housing payments in the region, calculated by combining mortgage payments with increased property taxes.
Using this methodology, Gerli identified the top 15 markets with the highest annual cost growth from April 2020 to April 2022. Austin, Texas is at the forefront, and we find that annual housing costs have risen by 93.5% over the last two years.
According to Gerli, this nearly double growth in housing costs far outweighs Austin’s wage and rent growth, which rose only 7% and 24%, respectively, over the same period. For this reason, he believes Austin and other cities, which have achieved the highest growth in annual home payments, are now in a housing bubble.
Even more surprising is that annual housing payments in these small cities are as high as or even higher than in larger cities. IL. He also said that Salt Lake City, Utah (9th) costs more than Washington, DC, and Austin costs more than the entire New York metropolitan area.
The top 15 markets identified by Gerli, which had the highest annual cost growth between April 2020 and April 2022, are listed below in descending order. After Austin took the lead, the top three cities conclude with ID Boise and North Port, Florida.