Interesting comment in this recent segment about US home prices having less downside risk and being more affordable relative to income today than in 2008. That is true in many cities. Not that several ‘hot’ markets are not set up for correction again, but risk is a function of price, so less overvalued this cycle should mean less far to fall than in 2008.And despite the rebound enabled by rising debt over the past 5 years again, many US markets have still not seen home prices recover their 2006-07 peaks–a decade+ of negative and stagnant prices is typical after secular realty bubbles burst.
Unfortunately, the opposite trends are true of Canada. Here the median price for homes sold in February was $494k (versus a 232K median US home price sold in March) and Canada’s credit bust and decade+ mean reversion in asset valuations is just barely started.
Scott Minerd, who warned clients in a recent note that the market is on a “collision course with disaster,” expects the worst of the damage to start in late 2019 and into 2020.
Along with the decline in equities, a rise in corporate bond defaults is likely as the Federal Reserve raises interest rates and companies struggle to pay off record debt levels.
Guggenheim’s Scott Minerd’s dire forecast for financial markets from CNBC.