What Happens to You if the Housing Market Crashes?

In my area, the housing market has gone INSANE. I live in rural Nova Scotia, Canada, which is a paradise if the lifestyle suits you.

During the pandemic, a lot of people started working from home, and were able to realize their dreams of living in this little slice of heaven, where previously they had to stick close to cities and in more prosperous provinces. They had more money than locals, and outbid locals on home sales to the tune of tens and tens of thousands, even one hundrend thousand + over asking in some areas. This happened all over the world, not just here.

It seems nice for the people who made bank on those home sales, until a lot of them (first time sellers eapecially) clued in that now they would have to sink their profit into a new home. But WOOPS for them... there are no homes in their budget now. The people with higher incomes moving here can outbid them, despite their recent ROI.

So now a lot of them are either renting in a housing market with a 1% vacancy rate, slumlords a-plenty, and rising rents every time they need a new place. Or, they've moved to smaller towns that were the victims of previous housing crashes/economic depressions, and bought homes with big renovation costs to go along with higher commute costs, etc.

No many people "from here" got much further ahead, and the newcomers have snapped up lots of prime coastal real estate.

Personally, my partner and I weren't affected by the housing issues other than one of our tenants needing a few weeks extra to pay rent when their work shut down, and we were happy to extend that.

But, if the housing market CRASHED, and we really have an economic depression, I think we'd be in trouble with our rural rental homes. We own two homes free and clear, our personal home which we paid $85,000 CAD; and my first home, that I bought for $59,000 CAD in 2012.

We also have two homes with mortgages totalling only ~$1200.00/month. BUT, we have to kind of face the reality at this point that if the economy does take a dive, finding renters for these properties will be tough. One is very remote and with the price of gas and the spotty internet there, it could get expensive. It's our actual dream home that we'd like to move to when our kids switch out from elementary school, so I'd be willing to sit on the mortgage and energy expenses as long as we could in hard times.

My first home is basically a tiny house and attracts single male renters with big incomes and few expenses, it's never been empty. They can hunt there, fish there. If we had to, it could easily be sold for cash to a bachelor who wanted to bug out and live the homestead life. But it has solar, clean water access, land, a metal roof, some fruit trees, wood heat and a wood lot, and totally open zoning so there are no rules there really if we wanted to build/add on/run a business, etc. I want to keep it mostly so our kids might have a cheap place to set themselves up in the future (like I didn't 😂).

Our other place is the iffiest. It's closer to town, has the highest rent, really only attracts seniors, families waiting on home purchases, and that can be lovely/can be sketchy demographic of adults who need room for kids and pets but aren't ready for/can't secure a mortgage or don't want one. No one stays there for longer than 6 months really. We should have dumped it during the boom, but financially it would have cost a lot in taxes and we've only had it for 2.5 years. If the market really crashed, this house would be an annoyance and not worth the hassle, even though it was likely one of the last "cheap" homes in our area at $145,000 CAD with good bones and some land.

We don't make a ton of money, we just got lucky I think because I started out financially desperate and willing to be super frugal. My partner had solid parents who taught him old school financial literacy, so he always knew what he could afford and he isn't fancy, so didn't really want anything more than what was in his budget. He's in trades and I freelance from home.

I don't think anyone in our area would be able to pull off what we did back then. I was able to get a mortgage making $13.00 an hour managing a gas station, randomly freelancing, and working random shifts at group homes for seniors with mental health issues. Ten years later those jobs make about the same wage, and trailers on rental lots cost close to $200,000 CAD. Half acre plots of land are selling for as much as I paid for my first home. New build one bedroom senior living homes are $350,000 CAD +. Young people here are screwed unless everything crashes again. So what happens now?

What would happen in your area if things crashed/is happening in your area with your housing situation now? I feel like my age group (mid 30's) were really the last group where I am who could make housing work if they worked it. Is it the same in your area?

This was so long, 😂, but I just find this so crazy. My parents bought a home in '98, 4 bed/2 bath, 2 acres behind the house in town, double lot for under $80,000. We bought a home in the same town, 4/5 bedroom 2 bath, just under 2 acres double lot, on the river, just about 15 years later for about $85,000. Both were fixer uppers, but no crazy costs involved. My parents were able to sell their home for over $400,000 last year, and we could sell for just over that now if we wanted to sell, it's ridiculous. Our town also has zero amenities besides a nice elementary school. What comes next? I feel like we're all in for it, but especially the younger generation.

a reply to: Atsbhct

The market here is out of control, houses are selling in days with bidding wars. Just screwing around on Zillow it's showing a 50% increase for my home in the past year, which based on the comps, might be accurate.

a reply to: AugustusMasonicus

Would you sell? If I remember correctly you've got an antique Victorian (? Maybe) home that I imagine you paid pre "everyone figuring out these were cheap and fabulous if you had a heating budget" prices. We've got a 1920's bungalow and trying to even restore this place today would probably be impossible/impractical.

a reply to: Atsbhct

My friend sold his mother's house last week.
It was on the market for a day and he accepted an offer for $5k over asking price...

He has a list of over 50 people wanting to see the house...

The market is crazy

I look at the house market, crypto market, basically all markets like a magnetic field.

And therefor it is easy to derive that work is done by changes, not staying permanent. In other words, cycles. It's easy to freak out about loosing house value or be happy about gains.

As long as you don't sell or buy it, it means nothing. It just reflects what housing is worth to the market currently. What is it worth for you? How does it really impact you that prices rise or fall as long as you own it or are on the best way to own it.

The only factor is money here and since most do not have enough spared aside to buy a second one when it's cheap. Otherwhise you sell the only house you have and go gambling about the future, relying on the cycle to go on until you can buy and reap the benefits.

Until you do not get the same home for less money and still have more in the end, the question is, how long to live in above described locations and what money traps come with that. Speaking just from a monetary viewpoint because the house market is good for selling.

a reply to: ThatDamnDuckAgain

What about renters though? We're really picky and don't charge insane rental prices. We don't want to live off of rental income and constantly be wondering if people are going to bail on the rent because it's at the max for our area, we mostly bought other homes because we'd like our kids to have access to cheap housing/land if they stay in the area. That's a big leg up that we both had to struggle for. But the average rent here is about $1400 for a 1 bedroom apartment in the city, rural apartments are sparse/#ty and range from $500/month to $1200/month. Homes go from $1200/month to probably $4000/month, but more for luxury homes. The average income here is about $80,000 for families. People are pressed to just afford to have a place to sleep in.

Cary, NC...to the west of Raleigh

We bought our Townhome six years ago for $255k, 4br, 3full bath, detached two car garage, in a 20 year old subdivsion.

Recently we had it appraised at $425k...after six years.

it's crazy, but it can be explained because Apple is building a very large campus within 4 miles of our location.

But the downside is that it's attracting large investment groups, that come in and buy properties to then RENT.

Makes it harder for families to afford something to pay a mortgage on.

a reply to: Atsbhct

a reply to: Bluntone22

Honestly, I feel like he was likely restrained and could have had a bidding war with 50 buyers waiting. In my personal philosophy, I think that's great that he took the 5k over buyer, because affordable housing is good in my opinion; but I imagine that buyer will be able to sell the house for way more than that if they sell before a crash happens, if it happens.

a reply to: Atsbhct
I agree it's different for renters. I myself rent our home because that way we are flexible. I still own property and building what is always a wise investing (concrete gold).

But raising rent because house prices go up..that's on the landlord's greed mostly. Greed because house is more in value and still need to raise rents to get more. For most private landlords it's the greed of the mass and they follow the market.

Someone in my family came out red numbers after a renter didn't pay rent and destroyed most of the property, could do nothing against it. I understand that rents need to cover such circumstances too. But for a landlord that should have a calculated ROI anyways, every rise that isn't due to inflation is more in their pockets.

And sure, they would be called dumb to not ride the wave. It's a bit like swarm behavior I guess?



Add: Important! Renting our home only works because I rent out space in my other building. Otherwise it would be a loss obviously, owning a building but paying rent

a reply to: Atsbhct

He actually had three offers but the two higher ones were FHA loans and are more strict so he went with the conventional loan

a reply to: Elathan

The rental holdings companies are crazy here too! It's killing people financially. Personally, I wish it wasn't legal, but that also opens a big government can of worms that I'm not comfortable with. In my dream world, people would buck up and protest by shutting the holdings companies out of purchasing, but money runs everything and it's not really feasible.

North Carolina has really blown up though! I personally really enjoy the state, especially the smaller towns like Edenton, really reminds me of home. The whole state is one of those gems that will likely be quickly gentrified by out of state money, if it hasn't all ready.

originally posted by: AugustusMasonicus
a reply to: Atsbhct

The market here is out of control, houses are selling in days with bidding wars. Just screwing around on Zillow it's showing a 50% increase for my home in the past year, which based on the comps, might be accurate.

My home sold for double what I paid 7 years ago.
Current (Z)estimate on my new home is almost 100K more than what I paid 5 months ago.

a reply to: ThatDamnDuckAgain

I agree. The greed is insane, and at the same time I get it, because money makes people feel safe.

We've been told we're greedy for owning four properties, which I understand, but people couldn't get a cheaper mortgage on these properties than we charge in rent at this point, especially if we sell them at market value. Is that dumb of us? Sure, if only money matters, but we're more concerned with setting up the kids and having time to offset capital gains taxes in the transfers.

We also know a guy who has 10 rental homes close to us. And he's a modern day philanthropist, he's comfortable (very eccentric). He takes 30% of the rent from each tenant, invests it conservatively, and if the tenants stay in good standing for the year, he gives them back 10% of whatever it's worth at the end of the year. It's really secured him amazing tenants, he has fun investing it, he has no dream of being super wealthy even though I think he's likely coffee can rich if you know what I mean.

He's also the only person I know personally who has successfully completed a rent to own home sale with no issues. And he also invested their payments and gave them a cut of the return.

I wish I knew how his taxes worked.

We're thinking of doing something similar if we can figure it out. Good tenants are priceless and the system is only getting harder for young families.

a reply to: Bluntone22

Some of the loans are really tricky to work with in the States it seems. We have less options for mortgage loans here in Canada.

originally posted by: IAMTAT

originally posted by: AugustusMasonicus
a reply to: Atsbhct

The market here is out of control, houses are selling in days with bidding wars. Just screwing around on Zillow it's showing a 50% increase for my home in the past year, which based on the comps, might be accurate.

My home sold for double what I paid 7 years ago.
Current (Z)estimate on my new home is almost 100K more than what I paid 5 months ago.

Do you think Zillow is messing with home estimates and inflating the housing market?? It's not a thing here, but I've seen that mentioned.

a reply to: Atsbhct

In 2020 and 2021, our situation in rural west Texas has mirrored yours. Housing and property values soared, especially in the small towns that are one or more counties removed from large Urban areas. As you mentioned, this was due in large part to several factors, one being soaring crime rates and the near collapse of the public schooling systems in the Cities but also because more and more people learned they could work remotely and live wherever they wanted to.

This year, 2022, we've seen a near stoppage of any real estate transactions and I honestly don't know why that is. I can speculate that it's due to the fact that there simply isn't any inventory of existing homes left to buy.

Talking to friends and neighbors, I have also learned that the market for fixer-uppers has collapsed as well due to the dramatic increase in materials costs combined with a profound shortage of many materials which makes remodeling impossible. That same situation, (lack of materials) has also slowed the sale of unimproved, raw land because there's no expectation that a new home can be built in a reasonable amount of time.

There are quite a few vacant homes in the area that could be bought due to covid deaths of the elderly, but again, they aren't even listed for sale because heirs and relatives just haven't had the time to recover their senses sufficiently to figure out what exactly they want to do with those houses. That's because it has been the case, for example, because when the elderly parent dies, often times one or more of the "children" heirs, may be ill with Covid as well so it's not clear to the sibling group who may be in line to inherit the property. Folks out here tend to have large families.

I am probably wrong, but I don't see any imminent collapse in the residential housing market in the Exurban/Rural areas. As to the US cities, I do expect to see stagnant residential real property markets and honestly, with this level of inflation, "stagnant" means "declining" values. The reason for that is that this work from home business model is gaining significant traction and if I were an employer, I'd be looking to go that route in terms of future hiring. One thing this gasoline crises has shown is that it's likely the case that the worker who choses to work remotely is probably a tad bit brainier than the one who wants to come into an office everyday. The talent is moving OUT of the cities as they come to more resemble miniture versions of Haiti than functioning and thriving urban areas.

a reply to: Atsbhct

That's a great question. Does anyone know just how Zillow comes up with the estimates? Can they access recent sales data over the internet? I don't think that's really possible here in Texas.

originally posted by: Atsbhct

originally posted by: IAMTAT

originally posted by: AugustusMasonicus
a reply to: Atsbhct

The market here is out of control, houses are selling in days with bidding wars. Just screwing around on Zillow it's showing a 50% increase for my home in the past year, which based on the comps, might be accurate.

My home sold for double what I paid 7 years ago.
Current (Z)estimate on my new home is almost 100K more than what I paid 5 months ago.

Do you think Zillow is messing with home estimates and inflating the housing market?? It's not a thing here, but I've seen that mentioned.

Possible.
...but people are paying the prices.

I've been in mortgage business for 20 years.

Nothing happens to me if the housing market crashed. In fact, I live in probably the worst market in the US (Chicago). We are barely keeping up with inflation. The Democrats here keep raising property taxes to almost the highest in the country, so any equity gains get offset by ridiculous property taxes. I have a very modest house that we could payoff right now if we wanted to, so we aren't stretched financially.

Unless you are selling, house prices fluctuating up and down doesn't really have an impact. The biggest issue is if people lose their ability to earn a living and can't pay their mortgages. Then the sh!t really hits the fan.

This market is a little different from the 05-08 market crash in that we don't really have the funny financing available, so borrower quality is a lot higher. However, people are still stretching to buy expensive properties.

Right now, there is a lack of inventory which is what is driving prices up. There are also some demographic and geographic changes happening due to people being able to work remotely. You see a shift out of some larger cities to smaller mid sized cities.

It is a good time to sell, but the trick is that it sucks to be buying.

If mortgage rates keep rising, it will hurt housing. Gas prices could also be a catalyst to cool off housing as well.

originally posted by: Atsbhct
Would you sell? If I remember correctly you've got an antique Victorian (? Maybe) home that I imagine you paid pre "everyone figuring out these were cheap and fabulous if you had a heating budget" prices. We've got a 1920's bungalow and trying to even restore this place today would probably be impossible/impractical.

I was thinking about it, with the revised pricing I would easily make back everything I put into it and then some. It's just where to move at that point, maybe South Carolina where I can buy a county.