Real Estate Crash thread

[californiagrown]

Can't be, numerous suburban Karens have assured me that increasing density reduces property values.

haha. Also, where will they all park?? On the street infront of Karen's house is where... How dare they!!!!

[BCMtnHound]

Can't be, numerous suburban Karens have assured me that increasing density reduces property values.

Ha! Well, those are the ones everyone should be respecting at the end of the conversation. Wonder what the Roman’s did about the Karens.

3 new lane way homes within a couple of blocks in the older residential area immediately next to commercial down town area near me, it seems to go OK in an older area where the housing is all different, it doesnt seem to reduce property values but I'm not sure how it would look in an area with new residential that was all the same style & vintage

the town has zoning byaws for laneway and one of them was built by a councilor

Smithers doesn’t hit the population thresholds of the new legs/regs though? Or have you guys finally exceeded the 5000 people within muni boundaries? I haven’t followed all the details of the changes, and some areas were targets heavier than others. Infrastructure (water, sewer, power, etc) seem to be the biggest impediments to implementation.

[XXX-er]

5000 ish maybe but not really sure

its the " Nelson of the north" so there is a rental shortage, the laneway homes are encouraged so people have somewhere to live

Also encouraged are residential spaces over the stores downtown which give the owner a 5 yr tax break in addition to the rents

[singlesline]

Some evidence of investors buying up property, at least in the Boston.

https://www.bostonglobe.com/2023/12/03/business/investor-boston-housing-real-estate/

But not of them sitting empty. As your quote mentions, they are flipping them quickly (it says within 2 years, which may also imply mom&pop flippers doing the rehab + 2 year residency to save on taxes) or jacking up rents...that's not great but it isn't letting the places sit empty and untouched for years and years hoping that price appreciation makes up for it.

It also notes in the opening "particularly smaller local operators scooping up two-families and triple-deckers"...those are not institutional buyers. Those are small time landlords buying homes as rental properties...so of course they aren't letting them sit vacant.

[californiagrown]

The conspiracy theory being proposed is not that institutional buyers are just relying on RE appreciation and are too lazy to manage the properties as rentals. The conspiracy theory is that institutional buyers are buying and holding RE to artificially manipulate the RE market. At what percentage of a regions housing stock would they need to control to actually be able to accomplish this?

[Hott Butt Mud]

The conspiracy theory being proposed is not that institutional buyers are just relying on RE appreciation and are too lazy to manage the properties as rentals. The conspiracy theory is that institutional buyers are buying and holding RE to artificially manipulate the RE market. At what percentage of a regions housing stock would they need to control to actually be able to accomplish this?

I don't think that's a conspiracy theory, but reality. It just depends on where the real estate market is.

[Foggy_Goggles]

I don't think that's a conspiracy theory, but reality. It just depends on where the real estate market is.

Seriously? Throw out a zip code or something. As mentioned, the transaction history is part of the public record. I how TGR is the bleeding edge, but I'd think this would get a bit more play.

[neufox47]

As someone who’s analyzed thousands of real estate companies I’ve never once seen a “buy and hold” strategy. Residential property has significant operating expenses even if unoccupied, taxes, interest, repairs, utilities, mothball and restart fees. These are going to be 3-10% of the purchase price depending on circumstances and financing. This idea makes 0 business sense unless you had inside information about an area and knew it was going to appreciate significantly due to an event. Even then you’d only hold for a short time.

How many people enter into highly speculative, negative cash flow investments, that will not offer significant returns?


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[neufox47]

As someone who’s analyzed thousands of real estate companies I’ve never once seen a “buy and hold” strategy. Residential property has significant operating expenses even if unoccupied, taxes, interest, repairs, utilities, mothball and restart fees. These are going to be 3-10% of the purchase price depending on circumstances and financing. This idea makes 0 business sense unless you had inside information about an area and knew it was going to appreciate significantly due to an event. Even then you’d only hold for a short time.

How many people enter into highly speculative, negative cash flow investments, that will not offer significant returns?


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[californiagrown]

As someone who’s analyzed thousands of real estate companies I’ve never once seen a “buy and hold” strategy. Residential property has significant operating expenses even if unoccupied, taxes, interest, repairs, utilities, mothball and restart fees. These are going to be 3-10% of the purchase price depending on circumstances and financing. This idea makes 0 business sense unless you had inside information about an area and knew it was going to appreciate significantly due to an event. Even then you’d only hold for a short time.

How many people enter into highly speculative, negative cash flow investments, that will not offer significant returns?


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Buying and holding, instead of buying and renting is like buying stock and voluntarily turning down a 5% dividend because... reasons?

[neckdeep]

Buying and holding, instead of buying and renting is like buying stock and voluntarily turning down a 5% dividend because... reasons?

And yet , individuals buying and holding is pretty much what drives the market in the top tier ski towns. For example, half of Jackson's homes are empty, are visited by owners maybe 4 weeks a year and are excluded from STR zoning. Theres no rental income coming in but these homes are some of the most expensive per square foot in the country and among the fastest to appreciate.

Not all stocks pay dividends, btw, especially growth stocks.

[J. Barron DeJong]

And yet , individuals buying and holding is pretty much what drives the market in the top tier ski towns. For example, half of Jackson's homes are empty, are visited by owners maybe 4 weeks a year and are excluded from STR zoning. Theres no rental income coming in but these homes are some of the most expensive per square foot in the country and among the fastest to appreciate.

Rich people not wanting the riff raff hanging out in their vacation home, playing with all their personal belongings, is a much different scenario than an investment company buying up large numbers of houses to leave completely empty.

[californiagrown]

And yet , individuals buying and holding is pretty much what drives the market in the top tier ski towns. For example, half of Jackson's homes are empty, are visited by owners maybe 4 weeks a year and are excluded from STR zoning. Theres no rental income coming in but these homes are some of the most expensive per square foot in the country and among the fastest to appreciate.

Not all stocks pay dividends, btw, especially growth stocks.

Those jackson homes are toys, with a secondary benefit of also being good investments. If the owners were purely focused on profit, they would be trying to STR those places at 10k/night. Institutional investors are focused on profit when they invest. Most likely those owners live and die on the tenths of percentages for the day job that made them rich.

If you had a stock you thought would double in the next 10 years, and it also had a 5% dividend, would you voluntarily check a box to decline the dividend knowing the stockprice at the end of 10 years would double regardless? Sitting on empty housing in this rental market is the same thing as voluntarily checking that box.

[up an down]

Buying and holding, instead of buying and renting is like buying stock and voluntarily turning down a 5% dividend because... reasons?

If they buy a house and have so much $ that there is no need for a return on investment..

[skaredshtles]

If they buy a house and have so much $ that there is no need for a return on investment..

But they're buying property that would *not* otherwise be useful to "normal" people. This scenario exists, but is kind of a red herring in the conversation.

[californiagrown]

If they buy a house and have so much $ that there is no need for a return on investment..

Totally. But we were discussing why/how/if institutional investment buy and hold without renting, not what the handful of uber wealthy individuals do with their personal houses.

[MontuckyFried]

As someone who’s analyzed thousands of real estate companies I’ve never once seen a “buy and hold” strategy. Residential property has significant operating expenses even if unoccupied, taxes, interest, repairs, utilities, mothball and restart fees. These are going to be 3-10% of the purchase price depending on circumstances and financing. This idea makes 0 business sense unless you had inside information about an area and knew it was going to appreciate significantly due to an event. Even then you’d only hold for a short time.

Buying and holding, instead of buying and renting is like buying stock and voluntarily turning down a 5% dividend because... reasons?

Perhaps what we're missing in this conversation is how perhaps these investors are being quite surgical in their approach. They're not just buying up everything across the entire country willy nilly. They're going for particular homes in particular markets. With THAT approach, it is quite plausible they could have a dramatic effect on markets. Think micro-, not macro-.

For example, my area's still pretty hot. It's a great location for a variety of reasons. Zoom in closer to my neighborhood and homes rarely come up for sell, but when they do, the 1-story homes always fetch a huge premium per/sq ft over the 2-story versions (which also sit in the market a bit longer). These 1-stories in particular are the ones I've been seeing get snatched up in the first hour on the market at WAY over asking, and then sitting empty for months on end. I pay attention because I see these homes when I walk the dog, see the activity, have gone to the open houses, and then follow up a bit online. These are nice homes that don't need any refurb whatsoever. They're absolutely move-in ready for renters, but here they sit still very much empty. Haven't seen the lights on or a single vehicle the entire time. All purchased and shuffled around by various LLCs. We're near a hospital district so it's a popular area for renters who are doctors. Since rental inventory is impossibly low here, seems to me that it wouldn't be hard for investors to buy/hold to (A) artificially drive up rents, and/or (B) artificially drive up localized RE prices. They could also easily lease them out for top dollar in about 2 seconds if they so chose to.

Before the days of AI and sophisticated algorithms, it was not realistic for investment firms to key-in so efficiently on particular small areas or neighborhoods, but now? It is 100% possible thanks to such data-driven technology, and perhaps how they're flying under the radar with what they're (possibly) doing. Across the nation? Yeah, that'd get an investigation underway (unless your name is Blackrock - corrupt sacks of crap they are), BUT a neighborhood here and there? Nobody's going to even notice except for people like me walking their dogs wondering WTF is going on with these homes?

[nickwm21]

Buying property…. to hold, not rent…. to drive up prices… on property you are renting…



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[I Skied Bandini Mountain]

and we're back to square one.

[TAFKALVS]

Man, my post really got some legs.

Yeah, buy and hold, but not hold it all, and not all the time. And sell it or rent it. At scale. Some units rented, some units not. Some units sold, some units not. Sales from one REIT to another.

Driven by algorithms and smart sciency math kids backed with big $$.

“Here’s 100 million, go buy me a portfolio of x homes that maximize value. Do what you need to do.”

[MontuckyFried]

and we're back to square one.

Not entirely. Again, thanks to such sophisticated software these days, I'm thinking an investment firm can really get dialed into smaller sub-markets. Would this strategy work on an entire city? Probably not. You'd have to have billions of expendable cash to do so. But zoom in further on the map to a micro-market and ABSOLUTELY this seems more and more plausible. Like I pointed out in my case. You find a prime neighborhood with a real need, you key in on a specific type of home at that, and wouldn't take but a few million bucks to take over the very localized market. Now take that same approach (again, figured out by AI, algorithms or [insert trendy tech buzzword here] and apply that formula to the entire country, nay, the world, and you're on to something!

Like I pointed out, there are lots of doctors here who want to live near the hospitals and looking to rent. It's the PERFECT place to pull some good ol' fashioned market manipulation!!!

I'm not saying my theory is fool-proof, but it isn't it at least plausible? I dunno. Again, it's just what I'm seeing in my own little neighborhood. All investor bought. All empty. My sample size is admittedly tiny and anecdotal, but it still strikes me as freaking weird.

[I Skied Bandini Mountain]

No, it's not plausible.

[Mofro261]

I'm thinking

We can hear the clicking and whirring sounds. You may wanna get the box fan checked.

[MontuckyFried]

Man, my post really got some legs.

Yeah, buy and hold, but not hold it all, and not all the time. And sell it or rent it. At scale. Some units rented, some units not. Some units sold, some units not. Sales from one REIT to another.

Driven by algorithms and smart sciency math kids backed with big $$.

“Here’s 100 million, go buy me a portfolio of x homes that maximize value. Do what you need to do.”

You seem to be one of the few here who understand this possibility. I suppose if most people aren't thinking this is possible, that would then REALLY give a hudge advantage to the companies who are instituting such algos, yeah?

Such things have even invaded my world (energy) with data companies tripping all over each other to sell their products to various investors and hopeful producers. And mineral rights are WAY the hell more complicated than surface, so I don't see why institutional RE investors couldn't have some pretty sweet (expensive) tools at their disposal to exactly as you say. It's complicated, it's sophisticated, and it goes WAY over the heads of the common lay-investor.

[MontuckyFried]

No, it's not plausible.

Please elaborate.