Market Crash?

Some media outlets just want your attention so that they can make money from your views / clicks. The scariest news gets attention, but it does not mean their clams are valid. For instance a popular you tuber just released a video entitled “Home prices are dropping 50%”, but as you watch the video his source is a report that shows seasonality changes in small and midsize cities and is showing the change over 2015 to 2019. Not even current info! Beware of what you hear/read and it’s context. Text without context is a CON.

What is real? Let’s see what the Fed is saying (source: October 7, 2022 Fortune)

Fed Chair Jerome Powell was asked at the FOMC press conference in September to clarify what he meant when he said a few months earlier the U.S. housing market would “reset.” His response? We’ve entered into a “dificult correction” that will see the U.S. housing market transition to a more “balanced” market for buyers and sellers alike.

Last week: Fed Governor Christopher Waller told an audience at the Univesity of Kentucky that it’s possible we could see a “material” drop in U.S. home prices. He went on to say “Despite the risk of a material correction in house prices, several factors help reduce my concern that such a correction would trigger a wave of mortgage defaults and potentially destabilize the financial system,” Waller said. “One is that because of relatively tight mortgage underwriting in the 2010s, the credit scores of mortgage borrowers today are generally higher than they were prior to that last housing correction. Also, the experience of the last correction taught us that most borrowers only default when they experience a negative shock to their incomes in addition to being underwater on their mortgage.”

What does the article say about home prices?

Of course, the Fed acknowledging that home prices could fall comes after, well, home prices in many markets have already started to fall. Amoung the 148 major regional housing markets tracked by John Burns Real Estate Consulting, 98 markets have seen home values fall from their 2022 peaks. In 11 markets, the Burns Home Value Index has already dropped by more than 5%.

Where are these changes happening (according to Zillow home price shift since peak report within the fortune article)?

High Tech hubs: Francisco (down 7.8% from its 2022 peak), San Jose (down 9%), and Seattle (down 6.2%)

Bubbly Markets: Austin (down 6.2%), Boise (down 5.3%), and Phoenix (down 4.4%).

Atlanta is at – .6% according to the same report.

So the bottom line is the market is not crashing and will not.

Key points are to make sure you understand context and/or go to the right sources of information. Additionally, national statistics do not truly show what is happening in our market.