Real Estate Price Cuts Follow the Slowdown in Stocks

What’s different about this image? (hint: I put yellow arrows to help you)

Real Estate Price Cuts

Real Estate Price Cuts Piling Up (Zillow)

I haven’t seen this many price reductions on one real estate search screen in a long time! My personal belief is that we are way overdue for a slowdown. As any of you who have been reading my newsletter know. You know that I personally believe that central bank stimulus can not have a lasting impact.

Time for the Hangover

Typically I am harping on the magical performance of the stock market. 2014 and 2015 have been just reflexive buying in my opinion. As the Fed has taught people to just keep buying. And companies have used low interest rates to borrow money and buy back stock. Instead of investing in their businesses.

We haven’t had much real growth. It’s been mostly financial engineering.

And we are finally seeing that not work anymore.

Real Estate Price Cuts Overdue

Real Estate Price Cuts / Reduction

Real Estate Price Cuts / Reduction (via futureatlas)

Stocks have been overpriced but I haven’t mentioned real estate too much. With rich Chinese people desperately trying to hide money from the grasp of their government. And low interest rates. And large US investors turning homes into an asset class just like large cap and small cap stocks, I wasn’t sure when real estate would slow down.

Now it appears to be decelerating a bit. Small price cuts on occasionally outrageous asking prices isn’t a huge deal. But any real estate price cuts, especially in the Boston area, are news.

Real Estate Price Cuts are Good for the Economy

They’re not good for retirees trying to use the housing ATM or to downsize. Though the targeted downsize home would theoretically change prices in step with the home being sold.

But they are good for young people trying to start a darned life. Something the Federal Reserve has no interest in. We seem to cheer nationwide as house prices increase. but this only helps the large investors and existing owners. Millennials trapped in a permanent rent cycle or in moms basement see no benefit. Unless they’re getting a piece of mom’s sale price.

What’s the Plan

if you’re a young buyer, keep hope alive. Maybe we get a price implosion. I have a theory that a large chunk of boomers will downsize at the same time. Downsizing has been accelerating. Boomers are herd animals. As soon as they think they won’t get “full value” on the sale of their home, they will try to sell. or when they see many of their friends selling, they’ll copy them. And when they all compete, we’ll see price cuts.

Maybe those price cuts will be big enough to make it affordable for you. Don’t rush into real estate right now. Become a sniper. Wait for a good opportunity. Let this market get messy. Then consider striking when you find the place you like at a price that works.

Do you want to think intelligently about your next major money move? Tell me more.