Why are home prices still set to keep falling?

Where is the break point for real estate? A lot of people say it’s national policy—if the country wants to pull it up, there’s no way it can’t be pulled up. Others say it’s “money printing,” that if they keep printing money, home prices will eventually rise. Both are wrong. First, about policy: if the country really could pull it up just because it wanted to, then why hasn’t it done so all these years? The tools are almost used up and it’s still falling—do they want you to lose even more money?

Then printing money: all the money printed in the past went into real estate in the first place—precisely because home prices were rising. So this entirely inverts cause and effect: home prices rise, so the printed money—regardless of whose hands it ends up in—goes first into real estate, driving home prices higher. Is the game still like that now? Where does the printed money go out? And when people receive it, is there always a priority order?

For ordinary people, by the time the money reaches them, people’s livelihoods can no longer be sustained. Do you think they’re just printing toilet paper—print whenever they want?

For housing in a given area to rise, the simplest indicator is that local residents’ incomes must rise. And for residents’ incomes to rise, industries must first be kept alive. But with the current unemployment rate, even stable income is not guaranteed—so you can’t just use your coffin money to buy a home, right? And later on, is life going to get better?

If industries are to be kept alive, people have to consume. If everyone isn’t consuming, how can all sectors thrive? Then where is everyone’s money? The answer is: it’s not there. Our domestic demand is a curse—you don’t see ordinary people actually having any real needs. Why? Because all our domestic demand has run into housing.

Do you know what a 30-year mortgage means? It means that most consumption scenarios over the next 30 years are already spent all at once—where does the money go? Into this apartment/house. When everyone is willing to mortgage their future for 30 years’ worth of the majority of consumption scenarios and spend it right now on this property, where is any domestic demand left? It’s all already been spent—right here.

So you’ll find that aside from real estate and real-estate-related industries doing better, most other industries don’t really do well. Why? Because ordinary people’s spending has gone into housing—how could other industries do well?

Many experts reverse cause and effect: they say real estate is a pillar industry; the boost to GDP is enormous; it must never be allowed to decline, and the government will definitely rescue it—blah blah blah. Please, stay clear-headed: it drives some industries at the cost of sucking the lifeblood from others. The later stage has already turned into hostage-taking—it’s no longer a positive push. In that pile of GDP built from steel bars and cement no one lives in, how much “water” is there? Don’t you know how to think?

China’s economy has prospered thanks to real estate, and it also will fail thanks to real estate. And this failure, which originally wouldn’t be this severe, happened because the government, instead of letting it make a normal pullback according to规律, gave it a “heart-stimulant shot,” refusing to let it pull back and instead letting it go mad—leading to today’s situation.

So why don’t people consume? Why is there no domestic demand? Because it’s all locked into housing—six wallets all go to pay the down payment, and every month 70% of income is used to repay loans. What other consumption is there to do?

Where does that money go? It goes into the government’s pockets, into Xu Jiayin’s pockets, and into the banks’ pockets. Now that Xu Jiayin is locked up in prison, the banks have both eyes shut, waiting for the country to rescue them. As for the money the government collects—part of it goes to real, legitimate affairs. The other part gets carved into decorative flourishes in “ineffective infrastructure,” leaving only ordinary people’s money evaporating into thin air.

So for homes to rise, the 30-year consumption-debt ordinary people have accumulated by over-borrowing must first be paid off. Once that money is about used up, when you start to feel there’s a bit of money in your pocket and you’re itchy for spending, demand will come out. When demand comes out, all kinds of industries then get a chance to meet it, and the economy can be pulled up. When the economy pulls up—at least into a virtuous cycle—ordinary people’s income growth can also enter a virtuous cycle. Then homes have a chance to be bought again; otherwise, don’t even think about it.

A lot of people told me a few months ago: Shanghai rebounded, Beijing rebounded, and there are also forecasts from places like Goldman Sachs about when real estate will stop falling. What do I think?

I said I don’t even need to look. If you want to go catch a falling knife, sure—if you don’t want to, then just stay put. With consumption borrowed for 20 to 30 years already squandered, you want it to stop falling so fast? You’re underestimating economic laws. People writing research reports at Goldman Sachs don’t know a thing.

Don’t be fooled by anything like “land king” deals, and don’t be misled by “rebound” narratives. That’s just a statistical illusion.

The reality is: right now, only people who have a little money left can still continue consuming. Then let that group go catch the falling knife—build the kind of houses they like, luxury homes, let them improve. Once their money also gets used up and the homes they bought in these past couple of years fall again by half, everyone gets sent back into poverty together. Then you can stretch it out another four or five years without a blow-up. At that point, the debt will be more or less repaid.

As for whether you should buy, let’s talk then.