Housing market's gonna crash

txcoastal1

I keep my end of month CC balances on my CC's at $50-100 each...to keep my score up
I play my CC's for bonus pts like the old coupon cutters. I'm fortunate to not need the CCs but my annual rewards it $3500-10K a year free money.

The only .5-2% the CCs make of me is on the merchant end

audioluvr

Home Depot hates me they keep giving me discounts and no interest until... specials. I always pay them off right before they start to change interest.

txcoastal1

audioluvr wrote: »

Home Depot hates me they keep giving me discounts and no interest until... specials. I always pay them off right before they start to change interest.

Ditto with many vendors including best buy...purchase, divide, and setup auto pay. If it's a 12month set up autopay payments at 10, 24months divide into 20 autopay etc for some cushion

DaveHo

Living within your means has become uncool. Many folks seem to think they are owed the same lifestyle regardless of their financial situation. It's the millennial way. Participation trophies don't exist in the real world.

aprazer402

Rates made it below 5% this week.

Kex

Yup. That’s somewhat counterintuitive, but if rates manage to stay lower than expected, then the Federal Reserve could be more aggressive in raising rates than anticipated. Their objective is to slow overall demand and borrowing (beyond housing) to bring down inflation.

Kex

I totally disagree with the viewpoint expressed that it is always better to pay off debt as fast as possible, or pay for purchases in cash whenever possible. This completely ignores the “opportunity cost” of what could otherwise be achieved with the funds that were used, instead of borrowing.

A good example is the spring of 2009. As the market crashed again following the financial collapse that began in the summer of 2007, I panicked. I freely admit it. I was young and stupid. So what did I do?

I paid off two car loans because I had the money to do so. The rates at the time were 6.25% and 4.5%. I spent $40K to pay them off. What are those cars worth today? One I sold for $3,500 several years ago. The other I kept. It is probably worth about $5K today. So from $40K to $8.5K, but I saved some interest. Not a great investment. In fact, not an investment at all. 😬

Another $40K I kept, but I could have used it to pay off part of my mortgage, which was subject to an interest rate of just under 6% at the time. Had I done so, That 40K share of the property today would be worth about three times what it was then, given the nature of the local housing market. So maybe 80K extra for 40K invested. Much better than paying off the car loans. 😊

However, instead I invested that extra 40K. What is it worth today? Over $1M. Far more than the interest on the mortgage that I would have saved. Especially since I refinanced the mortgage later at a much lower rate.

In this case, the opportunity missed would have been a very costly decision. Careful borrowing is a very useful tool for creating additional wealth.

mhardy6647

Most cars depreciate. Car debt is good debt if the interest rates are microscopic, as they were for... quite a while.
Houses. Houses are worth paying off early. LOTS and lots of interest money not spent -- and, when bought even halfway carefully, houses do tend to appreciate.

That said: the "future value of a present sum" calculation that @kex tried to represent in his post is in fact really important. I like to posit that no one would buy a cup of Starbucks coffee today if they thought about the future value (say, in 30 years) of that five bucks a day blown on a cuppa coffee.

As I like to say: I had the choice of driving Fords and retiring early, or driving nice cars and working my whole life.
I went the former route. I do drive a pretty cheap, boring car, though.

mhardy6647

While I am on my soapbox, I'll share two bon mots (bons mot? ) that I would suggest are pretty useful perspectives on money/personal finances.

1) "You'll never get rich on a salary."
2) "The first thing to do [with any money that comes one's way] is to pay yourself." (i.e., to invest in one's own future state, first and foremost)

With these principles in mind, the rest becomes fairly straightforward.

scubalab

Kex wrote: »

I totally disagree with the viewpoint expressed that it is always better to pay off debt as fast as possible, or pay for purchases in cash whenever possible. This completely ignores the “opportunity cost” of what could otherwise be achieved with the funds that were used, instead of borrowing.

A good example is the spring of 2009. As the market crashed again following the financial collapse that began in the summer of 2007, I panicked. I freely admit it. I was young and stupid. So what did I do?

I paid off two car loans because I had the money to do so. The rates at the time were 6.25% and 4.5%. I spent $40K to pay them off. What are those cars worth today? One I sold for $3,500 several years ago. The other I kept. It is probably worth about $5K today. So from $40K to $8.5K, but I saved some interest. Not a great investment. In fact, not an investment at all. 😬

Another $40K I kept, but I could have used it to pay off part of my mortgage, which was subject to an interest rate of just under 6% at the time. Had I done so, That 40K share of the property today would be worth about three times what it was then, given the nature of the local housing market. So maybe 80K extra for 40K invested. Much better than paying off the car loans. 😊

However, instead I invested that extra 40K. What is it worth today? Over $1M. Far more than the interest on the mortgage that I would have saved. Especially since I refinanced the mortgage later at a much lower rate.

In this case, the opportunity missed would have been a very costly decision. Careful borrowing is a very useful tool for creating additional wealth.

OK, I'll start with "hindsight is 20/20".

Apples and Oranges here. In one example, you paid off a debt to eliminate interest with $40k and did nothing further investment-wise. In the other example you invested the $40k (did not pay off the debt) but were STILL making payments. Totally different examples. If you continued investing the "car payments" over the theoretical life of the loan(s) as an investment, you would have quite a chunk of change assuming the same return as the $40k initial investment in the other example. A little deceiving saying that one scenario is $1M better... I understand that a $40k initial investment is going to yield a better future value than making 40 $1000 monthly payments in the same 'fund'. It would just be a couple years behind the other with the LS investment at time zero.

Paying interest is bad... period. If we all had a crystal ball, we could all take a low interest loan, invest said money in something earning MORE interest, and boom, we're all millionaires! Unfortunately, there is risk, and in your case, it paid off.

Advice - Invest wisely. Start early. Pay off higher interest debts faster than lower interest debts. Most folks do not have the luxury of having enough cash to pay off debts all at once. And, we cannot choose where to put said cash (pay off debt, or gamble with an investment that may yield higher interest than the interest on the debt). Planning and a smart, well thought out plan is critical.

Glad it worked out for you, but people should understand that there was risk and it might not have.

mrloren

My wife and I are on a goal to be debt free by 2030, just in time to retire in 2033.

We don't want any new bills or debt.

Kex

Story from Business Insider: ⤵️

New home supply spikes while sale prices plunge. But don't expect a crash.

It looks as if there's a perfect storm brewing in the US housing market. But looks can be deceiving.
A long-expected drop in the average selling price of new homes is finally here, according to data from the Federal Reserve, even though home prices broadly stubbornly refuse to roll over.

The decline in new home prices comes as the supply of freshly built homes hits 9.3 months of availability — a level that was last seen in 2010 and is seldom seen outside of a recession. If the supply of new homes rises any further, it will reach the highest level since the peak of the last great financial crisis.

However, Rick Sharga, the executive vice president of Market Intelligence at real estate data provider ATTOM, isn't concerned about a market crash, even as new home prices start to slide.

"The likelihood of another housing crash, as we saw in the Great Recession, is very, very slight," Sharga told Insider in a recent interview. "There's always a chance, but absent some economic catastrophe, it seems very unlikely that'll happen."

There are six reasons why Sharga, who has studied the US real estate market for over two decades, said it's "extraordinarily unlikely" that home prices will suffer from a financial crisis-style drop of 20-30% anytime soon.

Housing market collapses come when there's a far greater supply of homes than demand for them. In a normal market, there's about six months of available supply, Sharga noted. After the housing bubble burst in the financial crisis of the previous decade, there was over 12 months of supply for new homes.

Although new home inventory has risen to 9.3 months, Sharga noted that there's still a relative shortage of existing homes since supply is about half of a normal period at three months. That's because many current homeowners don't want to move unless they're forced to, Sharga said, given that rapidly rising mortgage rates have made getting a new house more expensive.

Though observers could infer that the slight pullback in new home prices will continue to worsen because supply is abnormally high, Sharga said that such a decline wouldn't seriously harm the housing market because new home sales make up only about 10% of total home sales.

And while the supply of new homes is elevated, it isn't a cause for concern, in Sharga's view. The uptick in new home supply is the result of a backlog of building projects coming online — not overeagerness from homebuilders, Sharga said. In fact, he noted that homebuilders are cutting back on the number of housing starts as rising interest rates weigh on demand.

"If you look at the combination of homes completed and homes under construction, you're not really looking at an oversupply situation at the moment," Sharga said.

Sharga added: "If the builders had kept their pedal to the metal and we continued to see single-family residential housing starts increase, that would be more of a cause for concern. But really, what they're doing right now is moving through the inventory that they started on a year ago and has taken them a long time to complete because of supply-chain disruptions and lack of available labor."

Indeed, commodities and building materials had experienced their own boom and bust during the pandemic as the price of lumber, roofing materials, and appliances spiked due to supply chain disruptions. But as builders and contractors finally secure materials for new construction, and paid handsomely for them, the picture has started to look a bit different. If anything, the market is increasingly looking like it's finally going back to normal. 

Additionally, while Sharga said that there's been a "significant uptick" in listings with reduced prices, he said that the number of marked-down homes isn't much higher than usual. That's because for years, very few homeowners had to lower their asking price, so even a sudden spike in the number of homes with price cuts brought the total just higher than average.

However, new home builders are more eager now than they were just six months ago to get houses under contract, presenting an opportunity to buyers and finally shifting bargaining power back towards buyers who may have experienced bidding wars and lost opportunities. And buyers who went under contract on new construction a few months back are more likely to back out as prices drop and builders offer more concessions to sweeten the deal. 

Furthermore, housing market fundamentals seem to be solid, unlike 15 years ago. Loan quality is far better today because there are fewer "ticking time bombs" in the form of unqualified buyers, Sharga said. Less loan speculation has led to lower delinquency levels, the real estate veteran noted. High homeowner equity and a low unemployment rate are also signs of strength.

Finally, home prices aren't going to crash because there's still more demand than supply, Sharga said. People might not be scrambling to relocate to trendy Sun Belt cities as often as they were early in the pandemic, Sharga said, but he still believes the trend of moving has legs.

Jstas

So the U.S. and Europe aren't the only ones seeing a housing market slow down.

https://slashdot.org/story/22/08/17/1536244/as-chinas-economy-stumbles-homeowners-boycott-mortgage-payments

For decades, buying property was considered a safe investment in China. Now, instead of building a foundation of wealth for the country's middle class, real estate has become a source of discontent and anger.

From a report:
In more than 100 cities across China, hundreds of thousands of Chinese homeowners are banding together and refusing to repay loans on unfinished properties, one of the most widespread acts of public defiance in a country where even minor protests are quelled. The boycotts are part of the fallout from a worsening Chinese economy, slowed by Covid lockdowns, travel restrictions and wavering confidence in the government. The country's economy is on a path for its slowest growth in decades. Its factories are selling less to the world, and its consumers are spending less at home. On Monday, the government said youth unemployment had reached a record high.

Compounding these financial setbacks are the troubles of a particularly vulnerable sector: real estate. "Life is extremely difficult, and we can no longer afford the monthly mortgage," homeowners in China's central Hunan Province wrote in a letter to local officials in July. "We have to take risks out of desperation and follow the path of a mortgage strike." The mortgage rebellions have roiled a property market facing the fallout from a decades-long housing bubble. It has also created unwanted complication for President Xi Jinping, who is expected to coast to a third term as party leader later this year on a message of social stability and continued prosperity in China.

So far, the government has scrambled to limit the attention garnered by the boycotts. After an initial flurry of mortgage strike notices went viral on social media, the government's internet censors kicked into action. But the influence of the strikes has already begun to spread. The number of properties where collectives of homeowners have started or threatened to boycott has reached 326 nationwide, according to a crowdsourced list titled "WeNeedHome" on GitHub, an online repository. ANZ Research estimates that the boycotts could affect about $222 billion of home loans sitting on bank balance sheets, or roughly 4 percent of outstanding mortgages.

Emlyn

I recall seeing stories from China a few years ago about city sized building developments consisting of hundreds of new high rise apartment buildings thrown up using shoddy construction standards and never occupied. Haven't seen much on that since Covid lockdowns began but there was talk at the time that the building and finance schemes there could crash the world's economy again if it wasn't managed.

Milito

Yes, there have been numerous articles about how China's economy is in trouble in regards to real estate.

pitdogg2

China one word.

Evergrande

Jstas

Emlyn wrote: »

I recall seeing stories from China a few years ago about city sized building developments consisting of hundreds of new high rise apartment buildings thrown up using shoddy construction standards and never occupied. Haven't seen much on that since Covid lockdowns began but there was talk at the time that the building and finance schemes there could crash the world's economy again if it wasn't managed.

Yeah, the issue there is that all those housing developments, they "count" towards domestic "growth" which in turn strengthens the Yuan.

But the thing is, if those housing developments never get occupied then the "growth" that they were built to support never actually happens. So the cash flow behind that strengthened Yuan never materializes. So the government has to print more money for the cost of the exchange of goods to be covered. Either that or subsidize. When they do either, they erode that growth of the Yuan which devalues it. That means it takes more Yuan to buy the same amount of stuff.

That's called inflation.

But when your economy is propped up by government subsidies and price fixing on things like energy, you're teetering at the edge of a slippery slope. That's why China is clamoring for more energy reserves and doing predatory lending in places like Africa to gain control of natural resources. Otherwise, if they can't supply their own energy at a cost they can afford, they will have to go to the world market. When they do that, their demand alone is going to double energy costs. It will also mean there's less resources available which drives costs even higher.

When China can't prop up their economy with cheap energy, they will have to subsidize more to maintain the standard they currently enjoy. They more they subsidize, the more things cost the more inflation rises. They can't offer the cheap manufacturing they do without the government subsidized energy.

That runaway inflation from government subsidized energy what happened to Venezuela. The Venezuela government owns all the oil companies. That's the reason 7-Eleven severed their contracts with Citgo and either got rid of the gas stations at their locations or they changed suppliers.

Additionally, China has money to lend and they are going to start stepping up their interest rates to help cover the gap. That's going to mean every other economy that has borrowed from China is going to see a devaluation of their currency on the world market. That means that the exchange rates that make borrowing favorable for places like Canada, Germany and the U.S. are going to put most countries borrowing upside down on their debts. Only the big ones like the U.S., Germany and Canada will be able to weather that. That's real bad. Especially if China made loans to do stuff like build infrastructure. They already own several ports in Africa as well as rich mineral reserves that they have taken in exchange for debt repayment from the countries they lent to. But if you look at some of the actual terms of the lending and leasing agreements, the borrowing country never had a chance because the terms are dependent on growth rates within those countries in double digits and that will never happen.

China's economy is a paper tiger and a giant Ponzi scheme. If it crashes the whole world is going to feel it. Right now, they are losing their balance and teetering towards that slippery slope edge. Given what they did to themselves with the lockdowns and draconian measures, if they fall over the edge towards that slope any time in the next 5 years, they aren't going to recover. They will crash and burn and then there's another decade, at least, of rebuilding. Probably after a civil war as the people are becoming increasingly dissatisfied with the current regime of Winnie the Pooh.

xschop

The Great Reset is just a re-branded Great Leap Forward.

Emlyn

Agree. It's showing in recent years that China is not the least expensive place to manufacture all things anymore. There's a sort of long term leveling out process taking place where China's living standards have shot upwards but the cost of doing business there has as well. Those things are inseparable in the long term. The growth of cities in China's transformation is amazing, at least for the parts that are allowed to be seen.

ken brydson

@aprazer402 can probably relate with me...

aprazer402

ken brydson wrote: »

@aprazer402 can probably relate with me...

Absolutely I can.

treitz3

I can tell you with complete certainty that this house is gonna crash (in value)











I have been in the housing industry for quite some time and this one I walked into today? It was the absolute worst I have seen to date. I feel like puking just looking at the photos again.

I walked in, held my breath as much as I could, snapped some photos. Walked out after about 5 minutes and had to get some fresh air. Went back in for another 3 minutes, snapped the rest of the photos and that was it. I had to rest outside breathing fresh air for the next 35 minutes just to make sure I could drive without crashing my truck.

Sorry if I end up derailing your thread here, John.....but it may give it more exposure as well.

Excuse me while I go barf.

Tom

VR3

gas and a match tom!!

pitdogg2

VR3 wrote: »

gas and a match tom!!

Diesel, that way you don't blow yourself up....

Hypothetically speaking of course

treitz3

I have mentioned on this forum many moons ago that water is THE most destructive thing to a house. The photos above prove it.

This is a Cape Cod. 1600sf. Every bit of 3/4 of the cost of the house (if you were to build it new) would go into the rehab. The main floor splashed as I walked across it. Absolutely disgusting and a biohazard at this point. I could smell the mold 20' away from the front door.

The sad thing is, this property will be reoccupied. Probably at an extreme cost to the new tenant/owner too.

Tom

xschop

Stachybotris?

newbie308

treitz3 wrote: »

I can tell you with complete certainty that this house is gonna crash (in value)











I have been in the housing industry for quite some time and this one I walked into today? It was the absolute worst I have seen to date. I feel like puking just looking at the photos again.

I walked in, held my breath as much as I could, snapped some photos. Walked out after about 5 minutes and had to get some fresh air. Went back in for another 3 minutes, snapped the rest of the photos and that was it. I had to rest outside breathing fresh air for the next 35 minutes just to make sure I could drive without crashing my truck.

Sorry if I end up derailing your thread here, John.....but it may give it more exposure as well.

Excuse me while I go barf.

Tom

Looks better than my first house! After bombing it for infestation, I removed the roach carcasses with a snow shovel and contractor bags. The house had to be completely gutted and rebuilt and that's exactly what I did. My dad suggested dynamite and starting over.

VR3

You can buy a house cheap if it's in poor enough condition 😂

sucks2beme

Younger son used to work for an outfit managing vacant houses for HUD.
A lot of properties in some markets sat vacant for years. Most turned into
these type of horror stories. Copper was stripped, plumbing damaged,
and homeless addicts moved in. They'd get repairs done partially
but the same things would happen before the house could be finished
and sold. I'm sure we'll see a repeat of this mess again.

Tony M

Saw it here in Wilm. NC.. The Gov. did step in after a year or so and made Recycling Centers pass rules and regulations on Copper wire intake.

I heard about Copper wire theft throughout the South East when I traveled for 6 years for the construction trade deliveries side of things.

I saw a TV series about "Great Train rides" the other night.
It was on a New Zealand or Austrailan RR line were it's elevated electric power lines are being stolen. Now that takes some knowledge on how to turn the power off to steal them. They do have a sofisticated control Center that a lot of people monitor the whole Country but it's so large, it takes a day for reaction to police to get out there.

I saw carpet thefts and cabinet thefts from new homes too. Scum opportunists.