Housing market's gonna crash

heiney9

Yeah, the future is so uncertain right now that I've put a couple of major "fun" purchases on hold for awhile. I was going to revamp the main 2ch rig (new Pass amp and Polk mains), but I can't justify the outlay right now because the future of many things is so uncertain.

It's frustrating, but being as conservative as I am about spending "fun" money I can wait a bit. The "fun" money could easily turn into everyday expenses if **** really goes south. In a holding pattern I go......

H9

Jstas

There's a few bubbles in the works.

Car loans is the biggest one currently as there's tons of people out there with 0% interest loans that someone else, whether it's the manufacturer or the dealer, is paying the points on because banks don't lend for free. It's basically what's driven new car sales, though, because without them, half the buyers would be priced out of the market and there'd be no such thing as a "used car". Additionally, there's bad debt being transferred around as folks who bought in 2017-2019 and lost their employment in 2020 are defaulting or getting behind and those debt packages being sold off are going to bust. Many already have, and that's affecting lending. The numbers are significant enough that if enough packages bust, we're going to lose some banks. Especially the ones who fund the leases.

Bitcoin and other "coin" is another bubble that has been showing signs of weakness and if the laws get passed here to put government control over it, I have a feeling it's going to collapse completely.

The housing market is a bubble too because there is a shortage, not because population increased but because of all the people fleeing the rioting cities. With work stoppages on new homes being built because of pandemic restrictions, the on-hand inventory number plummeted as everyone looking to get out was getting out as fast as they could at any price. Now that the rioting is over, we're back to being cool with the cops again and costs of living are skyrocketing, people are slowing to leave the cities so demand is dropping which means houses stay on the market longer. But it's not the sales side that is worrying. We don't have the backed securities issues we had in 2007-2008 but we do have a bunch of borrowers that borrowed insane amounts of money to fund their flight and with the market values already dropping, anyone who bought in a bidding war in the last 10-11 months is already upside down on their mortgage. If they all start defaulting, banks are going to be left with foreclosed properties that are worth maybe half of what the bank has in unsecured funding tied up in the properties. That instantaneous devaluation and subsequent loss of mortgage income is what led to the crash in 2007.

So while all of the above doesn't seem like a big deal, if the housing market goes down it has a good chance of starting a domino effect that is going to take the "middle class" with it. This rampant inflation and the coming recession (if it isn't already here) is going to make it very difficult for anyone to recover. Everyone is going to hurt.

VR3

Don't forget all of the hospitality industry bond debt, essentially junk, kept liquid by the fed at stupid low rates... (due to covid)

With the fed no longer being a buyer... Will be interesting to see how that industry does. That's over 10% of the employment in America.

08 with construction was like 6%

SIHAB

... Will be interesting to see how that industry does.

It seems strong while others aren't at the moment...

Jstas

There's also been massive shifts in population. Florida, Texas, Arizona and Idaho top the lists for population expansion. They're all in the single digits for growth, though as there's a number of states that had growth as people migrated. Then again, some states with large cities had people just moving out of the city but staying in the state.

But there's been precipitous drops in population in California, New Jersey, New York and Massachusetts. New Jersey has lost 10% of it's pre-COVID population in the last two years. Pre-Murphy population was almost 12 million people. Murphy's first term saw almost 2 million leave after we went from about 8.7 million people in 2010 to the 11.7 million in like 2014 or whenever it was. In 2020, NJ's population was about 9.2 million people. Right now, NJ's population is about 8.5 million. To lose 3.2 million people in 6-7 years is insane. That's 27% of the population that left. Most of them went to Florida or the Carolinas.

But those population shifts from major economic centers of the country (CA, NJ, NY) to other states with less economic might is catastrophic on both ends. Florida is already struggling with the influx of residents. Texas and Arizona can't build houses fast enough and Idaho...yeah, not so quiet there anymore. Meanwhile the morons in Trenton can't figure out why the tax base is eroding. Maybe because they are hostile to everyone and everything that isn't a trendy cause to support and people are just done with it. New York is in the same way and run by an equally clueless pack of chuckleheads.

But yeah, the point is that these population shifts drive stuff like property values up in the places they are moving too and they kill values in the places they are leaving. The value loss makes the inflation pinch hurt more and the value increase in the other places hurts the folks already there because it means people are going there and leaning on resources more. So demand goes up which drives up prices which increases the cost of living across the board.

This is how things normally happen and you get ebbs and flows as certain areas get more popular because of whatever reason from favorable weather to favorable tax situations to a boom in some business market needing help and supplying tons of jobs. It usually takes 5-10 years, though. For it to happen in less than 2 is shocking to the whole system.

It just feels like a perfect storm of failure and the more you look in to it the more you see how it's all interconnected and then the weak links start to get scarily obvious because you can see them well on their way to failing. If enough of those weak links fail, the whole thing's gonna come crashing down.

VR3

SIHAB wrote: »

... Will be interesting to see how that industry does.

It seems strong while others aren't at the moment...

So was construction brother. Also don't forget how percentages work and how the media uses big numbers to their advantage.

If your business experiences a 90% drop in business. You go from 100 to 10. A 50% increase from 10 is 15. That's still substantially less than 100.

tonyb

Dang Trey, you have a pretty good handle on things for a dude your age. Count me impressed.

Now lets talk if your still pulling out tree stumps with your pickup. lol

treitz3

We now have the lowest mortgage demand in 22 years.

Tom

Joey_V

All this talk about Illinois and I’m looking to move back there before long haha

And yeah, mortgage and housing situation sucks.

pitdogg2

Joey_V wrote: »

All this talk about Illinois and I’m looking to move back.

Joey step away from the ether......
No one in their right mind moves TO Illinois.

tonyb

Ivan does have a point Joey. lol

smglbrth

pitdogg2 wrote: »

Joey_V wrote: »

All this talk about Illinois and I’m looking to move back.

Joey step away from the ether......
No one in their right mind moves TO Illinois.

Yup, I was raised there (in the sticks, not Xhitcago) and wouldn't move back on a bet. Unfortunately, like most states, the big cities ruin the rest...

ZLTFUL

smglbrth wrote: »

pitdogg2 wrote: »

Joey_V wrote: »

All this talk about Illinois and I’m looking to move back.

Joey step away from the ether......
No one in their right mind moves TO Illinois.

Yup, I was raised there (in the sticks, not Xhitcago) and wouldn't move back on a bet. Unfortunately, like most states, the big cities ruin the rest...

How do you know that Chicago actually *identifies* as an X? Or are you just assuming that its pronouns are Mx, X, Xh?!?

(I am kidding folks...)

charley96

About 2 more years and I'm out of Illinois after living here all my life. I cannot wait!

Jstas

Sooo...interesting news today.

Heard from my local town council, well one of the members, that a real estate development group that owns a significant amount of property in town that is either undeveloped or dilapidated has been dragging their feet for at least 3 years now. They have been squabbling with the town over middling details and at this point, I'm positive that they are doing it purposefully because of market projections in 2020 and values going sky high. They were waiting for costs to drop.

But now that they are dropping, they are citing a severe market slow down as a reason not to continue building the housing they were on the hook for via adjudicated agreement with the town. The town had dumped millions into the projects since about 2017 and so far, the only things done have been the construction of low-income housing to meet the federal guidelines implemented and walkway improvement throughout the town which was one of the things the development company said was necessary to make it "walkable" and thereby enticing to new residents in the proposed rental unit blocks. That low-income housing is only 1/5th of what was agreed on.

Well, found out today that the development company, citing rapidly changing housing markets across the country, applied for an indefinite extension to table the plans until a time when the projects make more financial sense (i.e.: profitable).

The town is rightfully ticked off at this because we've had this eyesore of a dilapidated former manufacturing facility in the center of the town that is the subject of a Superfund project and now, because of the developing housing market, the development company is reneging on the deal and trying to back out.

So the town applied for a temporary injunction against the development company so they can file the court case to compel them to finish the project in a timely fashion.

Additionally, we saw, on the way back home last night, that there was a new development sign staked out in a wooded location across the street from a golf course not too far away from us. So I went online a few minutes ago after hearing my town's news to see what the status was there. The builder's site makes no mention of the buying resources but the "news" section says that they scored an agreement and permit to build 100 new high end homes in that location staring at $550K back in January and gave a link for the buying resources which now just goes back to the developer's home page.

Things are afoot.

Jstas

Just saw a report, U.s> 1st quarter growth for 2022?

-1.5%

Folks, we're in a recessions and have been for months.

muncybob

Yes we are and have been. Let's hope it doesn't develop into that D word.

VR3

mhardy6647

on the bright side: you don't hear the words transitory inflation comin' out of DC any more...

Gardenstater

It's a freight train that was years late passing through the station. I'm sooooo shocked that MMT is a fallacy.

Jstas

You're getting off topic, folks.

mrbigbluelight

I kind of think we're pretty much on topic
The reasons for a coming housing crash are many with many father's.

Gardestater mentioned MMT which, I'll admit, I had to look up.

" What Is Modern Monetary Theory (MMT)?

Modern Monetary Theory (MMT) is a heterodox macroeconomic framework that says....". yadda yadda.

Longs story short: Sovereign countries with a FIAT
Currency can spend money like a drunken sailor on shore leave, no problems.
That's why we can spend more than our GDP and Japan can spend Twice their GDP according to that theory with no consequences..

Which is wrong and will soon IMO be displayed when the housing market crashes
Recession ? ONLY a recession if we're lucky. 🤞🍀🙏🛐

VR3

I mean really you don't have to look far to see how this all plays out...

Shinzo Abe, abenomics, quantative easing... Stagflation.... Heck I think Japan is at like 300% debt to gdp? They just pump money like water and the japan central bank just buys it...

It's all well and good until it's not right? 😜

xschop

Is that why Onkyo is out the door?

Jstas

I'm tellin' ya, we're heading off a cliff

https://www.attomdata.com/news/market-trends/attom-q1-2022-housing-risk-report/

Jstas

From January through June, 0.24 percent of all housing units in New Jersey entered foreclosure filings, the report says. That's twice the national rate of 0.12 percent and behind only Illinois (0.26 percent) during that span. Foreclosure filings in the state increased 245 percent from the first half of last year, with 9,177 housing units entering the foreclosure process from January through June.

The spike in New Jersey foreclosures comes as the state's housing-market vulnerability, the nation's worst inflation since 1981 and the end of many pandemic-assistance programs compound economic difficulties in a state that consistently has among the highest costs of living.

"Foreclosure activity across the United States continued its slow, steady climb back to pre-pandemic levels in the first half of 2022," said Rick Sharga, executive vice president of market intelligence at ATTOM. "While overall foreclosure activity is still running significantly below historic averages, the dramatic increase in foreclosure starts suggests that we may be back to normal levels by sometime in early 2023."

Many of the foreclosure filings around the nation in the past six months stem from issues that preceded COVID-19, ATTOM notes.

"It's important to note that many of the foreclosure starts we're seeing today — in fact, much of the overall foreclosure activity we're seeing right now — is on loans that were either already in foreclosure or were more than 120 days delinquent prior to the pandemic," Sharga said. "Many of these loans were protected by the government's foreclosure moratorium, or they would have already been foreclosed on two years ago. There's very little delinquency or default activity that's truly new in the numbers we're tracking."

All that is well and good but I feel like ATTOM isn't looking far enough at the future. They are claiming that foreclosure rates will be at "normal" levels by 2023 but the problem is that all of these houses being sold at 10-50% over asking/market value are going to end up with many home owners upside down on mortgages. Especially if they have variable rate loans and inflation keeps increasing at the steady rate it has been.

There's a bubble that's already showing signs of weakening as the fed keeps pushing the inflation busting interest pin into it ever so slowly. It's gonna pop and things are gonna get real bad then.

https://patch.com/new-jersey/gloucestertownship/s/ibsxw/foreclosure-surge-hits-nj-hard-2nd-highest-rate-u-s-report

sucks2beme

You sure don't see it in my neighborhood.
Houses still moving quickly and realtors call, text,email and
mail me offers. Of course, the property in my subdivision
was undervalued for years. The house I'm in was built in
1998 and was foreclosed on twice. The previous owner
got it for next to nothing. Value has doubled in 5 years
I've lived here.
I am thinking about moving back to North Texas to be closer
to my kids. The trick will be in the timing. When to sell here
and when to buy in Texas. North Texas is booming in a big way.
Even looking out 50 miles from Dallas is $$$.
And my utilities and taxes are far lower than North Texas.

mhardy6647

Be interesting to see the trend line for the NJ foreclosures from, say, 2000 to present.

Milito

Jstas wrote: »

There's a few bubbles in the works.

That instantaneous devaluation and subsequent loss of mortgage income is what led to the crash in 2007.

The crash in 2007 was also the result of a certain President and political party in the early 90's thinking everyone should be able to buy a home even though they didn't have the income to afford one. They passed legislation requiring banks to make questionable loans to people who really couldn't afford the houses they were buying.

My wife worked for a financial company and they got sued by the Feds because they weren't making those kind of loans and were then forced to make them.

Jstas

mhardy6647 wrote: »

Be interesting to see the trend line for the NJ foreclosures from, say, 2000 to present.

You know what? I've seen that statistic and I think I know where I can get it but it'll have to wait until after summer camp week.

But it was not a good trend and I can point to each spike and tell you what crap fiscal policy out of Trenton caused it.