Real Estate Crash thread

Seeing some houses sit longer around here. But if the house is in a really good location, they usually go pending within a week. And a lot of the new construction and developments here in Bend, the houses are selling very quickly. ($750k starter homes with no yards and one car garage.)

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More than one in five home sellers dropped their price while several measures of homebuyer demand posted largest declines since spring 2020
May marked a turning point in the pandemic housing frenzy, as buyers regained some control over the market. This limited sense of control comes at a great cost, as 5% mortgage rates and record-high prices have edged many buyers out of the market. Pending sales posted their largest annual decline since spring 2020, while the Redfin Homebuyer Demand Index declined 9% during the four weeks ending May 29. The number of homes for sale climbed to a new high for this year, posting its smallest decline since April 2020. A growing share of sellers are recognizing the new limits to their power. More than one in five dropped their price, the highest rate since October 2019.

“The sudden surge in mortgage rates led to a sudden and significant cooldown in the housing market in May,” said Redfin Economics Research Lead Chen Zhao. “However, mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home-price growth rates to decline, we don’t expect prices to fall much at the national level. For homebuyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up.“

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Originally Posted by bennymac

Anyone have real estate info to share? Been following the local market for a couple years and for the first time am seeing multiple houses get relisted with lower prices (over the last month)

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This:

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Originally Posted by schuss

Ha, Boston/NH still moving the other direction.

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Originally Posted by dunfree

skiing, and skiing gear/ski body, can be a status symbol

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Absolutely. See Arnold's famous quote about his physique being a status symbol.* Climberevan's bonkers fitness level is a status symbol. I possess a couple of status symbols. My house isn't one of them, but it's a natural human inclination to want a status symbol of some type so I try not to begrudge people who choose a house for theirs even if it's not the most financially-wise decision. A house as a status symbol does make a lot of sense when viewed in the context of human evolution and mate acquisition/retention.


* - For those that don't know the quote:

"A well-built physique is a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it. You cannot hold onto it without constant work. It shows discipline, it shows self-respect, it shows patience, work ethic, and passion."

That's from the viewpoint of Dan the man. If you were Danni the woman, you'd feel differently. The RE sales industry has put a ton of research into what makes people buy what, how they prioritize needs, wants, and nice-to-haves, and dealbreakers. What they found is that women's lists of plusses/minuses are usually much longer than men's, and when all things are equal between two properties, women tend toward choosing the one with what they perceive to be better aesthetics/curb appeal.

So a man's status symbol house is ostentatious (or maybe just has a big garage), but a modest house that's cute, has a great feel, is cozy, or homey, is definitely a form of female status symbol.

"If a man could get laid in a cardboard box he wouldn't buy a house" - Dave Chappelle

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Originally Posted by Dantheman

<snip>

* - For those that don't know the quote:

"A well-built physique is a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it. You cannot hold onto it without constant work. It shows discipline, it shows self-respect, it shows patience, work ethic, and passion."

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Let's not to forget a fair dose of narcissism in a lot of cases...

:fmicon:

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Originally Posted by Ted Striker

That's from the viewpoint of Dan the man. If you were Danni the woman, you'd feel differently. The RE sales industry has put a ton of research into what makes people buy what, how they prioritize needs, wants, and nice-to-haves, and dealbreakers. What they found is that women's lists of plusses/minuses are usually much longer than men's, and when all things are equal between two properties, women tend toward choosing the one with what they perceive to be better aesthetics/curb appeal.

So a man's status symbol house is ostentatious (or maybe just has a big garage), but a modest house that's cute, has a great feel, is cozy, or homey, is definitely a form of female status symbol.

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I'm not arguing against any of that. The context was why people choose houses for their status symbol when acquiring it leads to them being house-poor. It makes a lot more sense when you consider that in basically all home-building animals the home itself is the primary or even the sole driver of reproductive success. It gets more complex in humans since we seek validation from a much wider group of individuals than just potential mates, but it still goes a long way towards explaining why people will sacrifice so much to own a home that they arguably can't afford.

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Originally Posted by AdironRider

"If a man could get laid in a cardboard box he wouldn't buy a house" - Dave Chappelle

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Exactly, and just as true for a Bower bird.

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Originally Posted by skaredshtles

Let's not to forget a fair dose of narcissism in a lot of cases...

:fmicon:

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Anyone who devotes their life to flexing on stage in their underwear has some degree of narcissism. But, that quote applies just as well to any skill or attribute that cannot be acquired solely with money.

Dropped ceilings in expensive homes should be illegal.

I know, right? I just wince at some of the shit I see in listings.

There are good reasons to go house poor that have nothing to do with status symbol. Traditionally, the conventional wisdom was to buy at the upper limit because a) your income will go up but the mortgage will not and b) your needs will go up and in the long run better to be in a house that will work for you for a longer period of time than outgrow a house quickly.

Chappelle nails it, as usual.

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Originally Posted by Dantheman

I'm not arguing against any of that.

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I wasn't arguing either, just adding data points. Another is that people over-buy / over-extend in a rising market due to fear of being left behind. And shitty agents push that narrative.

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Originally Posted by Danno

There are good reasons to go house poor that have nothing to do with status symbol. Traditionally, the conventional wisdom was to buy at the upper limit because a) your income will go up but the mortgage will not and b) your needs will go up and in the long run better to be in a house that will work for you for a longer period of time than outgrow a house quickly.

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It's also a good long term investment. Yeah, RE prices may fluctuate, but I think generally in the long term you're going to make money from owning real estate, and if that's the case you should probably try to maximize your investment by spending as much as possible.

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Originally Posted by Danno

There are good reasons to go house poor that have nothing to do with status symbol. Traditionally, the conventional wisdom was to buy at the upper limit because a) your income will go up but the mortgage will not and b) your needs will go up and in the long run better to be in a house that will work for you for a longer period of time than outgrow a house quickly.

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Agree with b), but a) carries significant risk--as a rule expenses rise to meet income.

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Originally Posted by Ted Striker

Another is that people over-buy / over-extend in a rising market due to fear of being left behind. And shitty agents push that narrative.

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Definitely.

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Originally Posted by Dantheman

Agree with b), but a) carries significant risk--as a rule expenses rise to meet income.

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Sure, expenses can go up. But what I said is the conventional wisdom, and it is correct, generally. Because true expenses, the ones you can't control, don't go up nearly as fast as income (again, generally speaking). My income about doubled in the 16 years I owned my house. My utility bills and taxes and insurance, as well as all other things that could be considered "expenses", didn't go up by that multiplier, not by a long shot. I did, however, have a kid, and that was the killer expense.

I feel like the "buy as much house as you can afford" narrative has gotten a lot of people in trouble during past market cycles.

I had some very lean years at the start of my career that caused me to be overly cautious with personal finance. I bought a lot less house than I was approved for both times I've purchased a house.

Sometimes I wish I had paid a little more to get more house or be on the right side of a state line when prices were cheaper, but as long as I've been a homeowner I've never lost sleep over keeping a roof over my head. Peace of mind is somewhat priceless.

"Buy as much house as you can afford" is certainly not the same as "buy as much house as you are approved for"!

What you can afford is a very personal decision, two people with the same finances may come up with very different numbers. But what the bank will lend you is an entirely different calculation that most would be well advised to ignore (beyond the question of "will the bank lend me enough money to buy the house I feel like I can afford").

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Originally Posted by Danno

Sure, expenses can go up. But what I said is the conventional wisdom, and it is correct, generally. Because true expenses, the ones you can't control, don't go up nearly as fast as income (again, generally speaking). My income about doubled in the 16 years I owned my house. My utility bills and taxes and insurance, as well as all other things that could be considered "expenses", didn't go up by that multiplier, not by a long shot. I did, however, have a kid, and that was the killer expense.

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Good thing most people don't have kids ;)

Your mandatory expenses may not have doubled, but IME being frugal with discretionary income is progressively more difficult the older you get (even before crotchfruit are factored in). Timing matters a lot, too. You say your income doubled in a 16 years, so that's what, late-20s to early-40s? That's a different risk than stretching to buy at 40 when your income is unlikely to double again over the same 16 years.

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Originally Posted by Dantheman

Good thing most people don't have kids ;)

Your mandatory expenses may not have doubled, but IME being frugal with discretionary income is progressively more difficult the older you get (even before crotchfruit are factored in). Timing matters a lot, too. You say your income doubled in a 16 years, so that's what, late-20s to early-40s? That's a different risk than stretching to buy at 40 when your income is unlikely to double again over the same 16 years.

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It was actually 37-53. But admittedly, it was at the start of my current career, I was only 2 years in at that point.

And you're probably right, the kinds of shit we put up with in the name of frugality definitely changes as we age.

So a garage that comes with a house ?

I always looked for the good rental suite

it would be nice to have a garage

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Originally Posted by Danno

It was actually 37-53. But admittedly, it was at the start of my current career, I was only 2 years in at that point.
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We're in the process of a very similar situation -- just 15 years behind ya.

About to start making offers at what we're approved for. That may sound high but my rationale is: 1) approval includes our existing mortgage as we're buying first, then selling and 2) approval is based on salary alone -- which in my wife's case is only about 55% of her total comp. (Yes, you can't count on bonuses and stock grants...but it's at a very top-end company -- and if she leaves she can make a higher salary in short order.) She's early in this career path and will probably be up 50% in 3-4 years.

So we'll be in that "house poor" camp for a while. But at the end of the day -- we want more space as needs have changed (WFH) and are planning more changes soon (crotchfruit). We can't put life on hold and try to time markets.

My fire insurance went up 50%. I knew it was dire after the Caldor fire, increased values, and re-rating in all of California. Add that to higher mortgage rates.

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Originally Posted by Dantheman

I'm not arguing against any of that. The context was why people choose houses for their status symbol when acquiring it leads to them being house-poor. It makes a lot more sense when you consider that in basically all home-building animals the home itself is the primary or even the sole driver of reproductive success. It gets more complex in humans since we seek validation from a much wider group of individuals than just potential mates, but it still goes a long way towards explaining why people will sacrifice so much to own a home that they arguably can't afford.



Exactly, and just as true for a Bower bird.



Anyone who devotes their life to flexing on stage in their underwear has some degree of narcissism. But, that quote applies just as well to any skill or attribute that cannot be acquired solely with money.

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Not everyone is house poor that has a nice house. Sure there's a certain set of people that over-extended and bought more than they needed but I think they are in the minority. The house poor is your middle class, living in a house that they can barely keep the lights on, gas in the 15 year old beater, and food on the table.

...or no apparent signs of trouble brewing but living on credit. Well the look of desperation in their eyes is a sign but pretty easy to miss behind the big smiles and bluster.

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Originally Posted by doebedoe

We're in the process of a very similar situation -- just 15 years behind ya.

About to start making offers at what we're approved for. That may sound high but my rationale is: 1) approval includes our existing mortgage as we're buying first, then selling and 2) approval is based on salary alone -- which in my wife's case is only about 55% of her total comp. (Yes, you can't count on bonuses and stock grants...but it's at a very top-end company -- and if she leaves she can make a higher salary in short order.) She's early in this career path and will probably be up 50% in 3-4 years.

So we'll be in that "house poor" camp for a while. But at the end of the day -- we want more space as needs have changed (WFH) and are planning more changes soon (crotchfruit). We can't put life on hold and try to time markets.

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Makes sense. Good luck w the purchase, sale, and crotchfruit

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Originally Posted by Brock Landers

Makes sense. Good luck w the purchase, sale, and crotchfruit

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Agreed!

And here's hoping that doebedoe is not in a similar situation to me 15 years from now.