Housing market's gonna crash

nooshinjohn

Another.75 hike announced just a few minutes ago…

VR3

Link?

They usually raise rates on Wednesday, third week of month or so

Jstas

I think he's talking about this that popped up today.

It's not that it happened already just that the conditions are met for the Fed to say the next hike is necessary. It will likely happen in November. It's behind a pay wall, though. I saw a summary on an aggregator site but it's not worth linking to because it doesn't say much more than what I just wrote.

https://www.wsj.com/articles/inflation-report-seals-case-for-0-75-point-fed-rate-rise-in-november-11665667815

If it does happen, the Fed may hold off until after EoY to determine the next hike.

VR3

I wouldn't be surprised if they raise every month until the beginning of the year and beyond.

Jstas

That's what their plan they released in June said was going to happen.

VR3

Talking about the same politicians that traded manufacturing and tech jobs for baristas and customer service jobs.

Jstas

US home sales fall for 8th month in a row in September, the longest slump since 2007

https://www.cnn.com/2022/10/20/homes/existing-home-sales-september/index.html

ken brydson

VR3

Honestly I would buy that house at 350k all day with 12% rates and then refinance when the fed drops it again, which they will eventually. The rate can be changed but what you signed the contract for at the purchase price can't.

That house around here is a 350k to 400k house. 600k is silly

Emlyn

It would be listed at $1.2 million near me with a price cut to sell at $1.1 million. And still sell within a week.

nooshinjohn

Emlyn wrote: »

It would be listed at $1.2 million near me with a price cut to sell at $1.1 million. And still sell within a week.

Mine has dropped 200k in three months according to zillow...

SIHAB

Elections have consequences.

As the rates go up, the price of houses will go down IF
you are a motivated seller. (as Ken pointed out)

tonyb

nooshinjohn wrote: »

Emlyn wrote: »

It would be listed at $1.2 million near me with a price cut to sell at $1.1 million. And still sell within a week.

Mine has dropped 200k in three months according to zillow...

the next earthquake should remedy the rest.
Ever hear the expression..."get out while the gettin' is good"?

Hows things in fairy tale land brother?

mhardy6647

nooshinjohn wrote: »

Emlyn wrote: »

It would be listed at $1.2 million near me with a price cut to sell at $1.1 million. And still sell within a week.

Mine has dropped 200k in three months according to zillow...

it's all paper... unless one's buyin', sellin', or refinancin'.

Kex

nooshinjohn wrote: »

Mine has dropped 200k in three months according to zillow...

In Woodland Hills? Assuming a 3BR home, you bought it for maybe $650K a bit over 10 years ago? 3 months ago it might have sold for $1.5M? So now, it’ll only sell for $1.3M? 🤷‍♂️

That said, Zillow doesn’t account for condition or curb appeal. Houses in good condition are still selling within 2 weeks in my area. Admittedly, there aren’t many to sell, so most buyers come in with all cash offers with no inspection or contingencies. Otherwise, you’ll get laughed off the premises.

Jstas

Well, the Feds didn't wait to raise rates. Voted yesterday to hike rates another .5%.

That puts the Fed's range at 4.25%-4.5%. Hasn't been that high since 2007 when the housing bubble started to pop.

This pretty much guarantees 5%+ rates by 2nd quarter next year unless the economy just suddenly gets extra healthy before February and inflation vanishes.

But with the way houses are stagnating around here now, I don't see this improving for another two years, at least. It's not going to be a crash like it was in 2007-2008 with massive bailouts everywhere but new construction has come to a standstill locally with a couple lots cleared and foundations poured on some and that's it. Now they're collecting water. It's not because of a lack of materials either. All my local yards are flush with building supplies, the prices are just too high for most to afford them. It's not as bad as last year was where $1000 in lumber in 2019 would cost you $2500 in 2021 but it's still up there 'cause that $1,000 2019 bundle of lumber is still going for $1500-$1750 in 2022. If the inflation keeps up, it'll get back to $2000 for 2023.

With all the mass layoffs happening around the country, the excessive inflation and lack of work available, there might be a market but there won't be any buyers in it. So if you're looking for a house, secured funding and can afford to wait a little bit, sit tight a while longer. We're no where near bottom yet.

pitdogg2

Yep the feds paint such a "rosey" picture about all of it. Then that Suze Orman comes in tears it all apart and calls major horse hockey on all of it. Basically says they're flat out lying about it all. It's far worse than their painted picture.
I don't need her brain to tell me the same, heck I see it everyday.

xschop

The Mockingbird rectangle box on the wall spouts everything is peachy, yet I see more gardens going in, and a Tesla on a repo truck in my hood.

skipshot12

Jstas wrote: »

Well, the Feds didn't wait to raise rates. Voted yesterday to hike rates another .5%.

That puts the Fed's range at 4.25%-4.5%. Hasn't been that high since 2007 when the housing bubble started to pop.

This pretty much guarantees 5%+ rates by 2nd quarter next year unless the economy just suddenly gets extra healthy before February and inflation vanishes.

But with the way houses are stagnating around here now, I don't see this improving for another two years, at least. It's not going to be a crash like it was in 2007-2008 with massive bailouts everywhere but new construction has come to a standstill locally with a couple lots cleared and foundations poured on some and that's it. Now they're collecting water. It's not because of a lack of materials either. All my local yards are flush with building supplies, the prices are just too high for most to afford them. It's not as bad as last year was where $1000 in lumber in 2019 would cost you $2500 in 2021 but it's still up there 'cause that $1,000 2019 bundle of lumber is still going for $1500-$1750 in 2022. If the inflation keeps up, it'll get back to $2000 for 2023.

With all the mass layoffs happening around the country, the excessive inflation and lack of work available, there might be a market but there won't be any buyers in it. So if you're looking for a house, secured funding and can afford to wait a little bit, sit tight a while longer. We're no where near bottom yet.

I wonder how much lumber has to go up that it’s profitable, when tearing down an existing house, to reclaim the wood?

Why does crazy shite end up in my head…

Jstas

Saw this on LinkedIn this morning:

https://www.linkedin.com/news/story/rate-hikes-could-be-milder-6145762/

The rate hikes the feds are talking about here? They are all due to be in place before April 1. Even these milder rate hikes are still going to push to 5.5% - 6% by summer unless they decide inflation has cooled.


Other stuff I've read about since mid December:
- Housing inventory has swelled, not new stuff, building has slowed to a crawl which is why lumber prices are dropping, existing properties are on the market and staying on the market longer because of a lack of loans. There's buyers, there's money, just nobody willing to extend credit for a mortgage due to economic fluctuations and fed rate hikes. It's hard to secure funding right now. I've noticed this locally as several houses nearby keep going under contract and then back on the market in a month because the buyer couldn't secure a loan.

- Rental prices are on the rise which is basically painting the picture that you can't get a loan at $1500 a month for a mortgage but you can get a rental agreement at $2100 a month. The average rental rate across the country is about $1300 a month, YMMV depending on the area you live in. For instance, NJ's average rent is about $1700 a month but, say, Arkansas is about $900 a month on average. Additionally, rental costs have the highest rent to income ratio ever at 45.5% of income is going to rental costs alone. Also, rent prices have risen four times faster than income levels since 1985.

- Many of the investment companies that were snapping up properties last summer are now trying to liquidate them. This is adding to the inventory glut and driving prices down as well as property values. Especially if the properties are unoccupied. So while the investors basically squeezed first time home buyers out of the market, their jettisoning of the assets means there's plenty of stock available but due to the economic conditions and the sketchiness of the credit market, many of those first time home buyers are finding that funding isn't accessible to them to be able to purchase the houses that are being put on the market. With rental rates being what they are, it's near impossible for a first time home buyer to rent a property to live in while saving for a down payment on a house.

- The average time on market for a house has gone up something like 250% since June 2022

Emlyn

There is very little residential real estate on the market for sale around me and the places that are tend to be "as is" places. People seem to be biding their time and not moving. Rental prices are relatively high and the number of places available is low.

mhardy6647

Up here in northern New England, the buying market has cooled, but the inventory of houses on the market is very low.

https://www.vermontpublic.org/local-news/2023-01-11/were-not-out-of-the-woods-market-remains-tight-for-vermont-homebuyers-despite-rising-interest-rates

Jstas

When I go out to Zillow or Redfin here and look for houses for sale within a 20 mile radius, I have over 2200 active listings. My town alone has 12 listings active with 3 under contract. The newest listing is 14 days old, the oldest listing is 290 days old. That 290 is older than that, though, because it went off-market for 3 months in the spring last year while the property was assessed by the superfund people cleaning up the paint factory.

Only 10 houses in my town have sold in the past 4 months. So not even half of what has been on the market has sold. More like 30% and the average time on market, when you get rid of the 290 day and the 14 day properties, is 138 days. So most of these listings were put on the market in mid to late summer of 2022. The 10 or so that did sell between the end of September and now were originally listed between April and June of 2022.

So there's lots of properties on the market here.

cincycat13

Interesting how this issue has evolved in just the last 6 months. I am risk averse so I am glad I have my bowl of popcorn watching from the couch. With the average rate of inflation being greater than 3% for the last 60 years, the loan rates below this number just baffled me.

I took what my house was worth on paper, cashed out and consolidated loans. Got a 2.375 rate which reduced my cash flow by like $260 per month and increased my principal portion amount by $160 per month. Refi costs were recovered in less than a year. Zillow claims either of my houses would rent for more than my total mortgage, taxes, and insurance.

My first mortgage in 1995 was at 7.5% and rates in the 1980s were way above that so it is not crazy yet. I have seen a few residential listings offer a lower price, but visible inventory is still low and demand is still up. My opinion of the panic buyers bringing cash to the table to bridge apraised value and loan value is over. Seeing reports of hedge fund investors unloading inventory would be a game changer as I think those actions added to this market situation.

sucks2beme

Things are still moving around here. A couple of houses were aggressively
priced, and they had to reduce the asking price. But in my neighborhood
as well as some other suburbs around me are still going strong.
The spring season will be the true test of the market.

Jstas

cincycat13 wrote: »

Interesting how this issue has evolved in just the last 6 months. I am risk averse so I am glad I have my bowl of popcorn watching from the couch. With the average rate of inflation being greater than 3% for the last 60 years, the loan rates below this number just baffled me.

I took what my house was worth on paper, cashed out and consolidated loans. Got a 2.375 rate which reduced my cash flow by like $260 per month and increased my principal portion amount by $160 per month. Refi costs were recovered in less than a year. Zillow claims either of my houses would rent for more than my total mortgage, taxes, and insurance.

My first mortgage in 1995 was at 7.5% and rates in the 1980s were way above that so it is not crazy yet. I have seen a few residential listings offer a lower price, but visible inventory is still low and demand is still up. My opinion of the panic buyers bringing cash to the table to bridge apraised value and loan value is over. Seeing reports of hedge fund investors unloading inventory would be a game changer as I think those actions added to this market situation.

There's a few investment companies who snapped up a bunch of houses to flip in my area. They didn't flip them fast enough and now they are trying to rent them out. There's tons on the market that are owned my property management and/or holdings companies though. You can usually see it on tax records for the address for sale. But someone here in NJ made this really useful site called NJ Parcels and they are basically taking the entirety of the paper property records, putting them online and then linking them to their location on maps. So it's easy to see who holds what as property owners are cross-referenced and you can click on a property owner and see how much property they actually own. There's a house around the corner from, it was flipped and it's been for sale and vacant since July. The property owner is something like J.W.H. Property and Holdings, LLC and when I click on that name, two dozen properties come up. When I look up those properties, they were all bought in the last 2 years and at least half are currently for sale. Some of the properties are not listed as residential but rather a commercial group of rental properties. So they don't show up for sale on places like Zillow or Redfin. You have to go to a commercial realtor site.

So it's happening, it's just not evident.

And no the rates aren't as high as the 80's but there's a good chance they will get there. However, due to inflation, the interest rates may not be as high but the real cost due to the devaluation of the dollar makes the impact similar to the 80's rates.

Jstas

sucks2beme wrote: »

Things are still moving around here. A couple of houses were aggressively
priced, and they had to reduce the asking price. But in my neighborhood
as well as some other suburbs around me are still going strong.
The spring season will be the true test of the market.

The few that moved here in the past few months were priced under what the market was looking for. Only one went for over asking price. A couple others only sold because a business is looking to plow them down and build a new structure on a re-zoning.

Every other property that's been up for sale for longer than 2 weeks has had a price reduction listed. Some have had multiple.

It'll be interesting to see what the spring time brings as that's the hot part of the year for house sales. But the feds will have likely added a point and a half to the rates by then and that might stymie sales and interest.

audioluvr

I saw a Chevy conversion van for sale for $30,000. I mean I paid $29,500 for 13 acres in 1994. Not sure where I was going with that. Dry January ended early

engtaz

In Florida housing market still high. Transplants from other states keeping it high.

Keiko

Might be even worse than just the housing market.

https://www.youtube.com/watch?v=etO8RH4JCV0

Just putting it out there to think upon.