The U.S. housing market might be hit by a price correction comparable to the one that took place during the Great Recession of 2008, according to one rental investor.
“My take away from spending way too much time on Zillow scouring different markets is, it would not surprise me if there was a Great Recession sized price correction,” Rohin Dhar, vacation rental investor and the owner of several Airbnbs in the U.S, wrote on X, formerly known as Twitter, on Sunday.
“For large condo buildings with high HOA [Homeowners’ Association] fees across the entire country. So expensive to maintain, such poor governance,” he added. Dhar described the U.S. housing market as “just a ticking time bomb of expenses waiting to explode.”
Newsweek contacted Dhar for comment by direct message on X on Monday.
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The U.S. housing market boomed during the pandemic, as high demand, relatively low mortgage rates and historically low inventory sparked bidding wars between aspiring homebuyers and brought prices to skyrocketing heights.
But as mortgage rates climbed in 2022 following the Federal Reserve’s attempts to tamper inflation, demand suddenly faltered and the housing market experienced a slight correction. From late summer 2022 to spring 2023 prices across the country finally cooled down, though at different paces across the country.
For many experts, the housing market correction is already over. After consistently dropping for months, the average price of homes in the U.S. has been on the rise since March. According to Zillow, the average U.S. home value was $346,653 at the end of October, 1.8 percent higher than the same period the year before.
Dhar’s analysis of the market has been based on the fact that prices have dropped significantly in many American cities. On X, he brought up the example of a condo in San Francisco that lost significant value in recent years.
“San Francisco six unit apartment building in Hayes Valley neighborhood,” he wrote on the social media platform, sharing a listing. “Purchased in 2016 for $6MM. Sold this week for $3.75MM.”
San Francisco was one of the most overvalued cities in the U.S. and has been undergoing one of the most significant price corrections in the country. The price of condos in downtown San Francisco has dropped to levels unseen since 10 years ago.
But major companies disagree with Dhar. In a recent report, Morgan Stanley—one of the world’s most important investment banks—wrote that it expects the price correction to continue next year but remain manageable.
“We expect home prices to fall modestly as housing activity picks up versus 2023, with new home sales outpacing existing sales, but think the strong fundamentals of existing homeowners will prevent sizable corrections,” Morgan Stanley wrote in a report shared with investors, as mentioned by ResiClub.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.