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Thread: Real Estate Crash thread
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03-28-2022, 05:44 PM #20901
I was impressed when our roofers came back to clean up 2 errant nail strips that fell into a tree next to the house 6 days after the job. I had just been to lazy to fish them out and one of the crew drove by with a stepladder to grab em.
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03-28-2022, 06:14 PM #20902
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03-28-2022, 06:27 PM #20903
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03-28-2022, 06:29 PM #20904
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03-28-2022, 06:46 PM #20905
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03-28-2022, 07:22 PM #20906Registered User
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the bottom really needs to fall out to see construction prices drop like black hole bottom fall out
I mean in some places there will be shitty trades people "looking for work" you get what you pay for
lumber may come down but hey it was around 25 for osb in sept oct now it's 50 a sheet they are going to squeeze what they can and make people pay so it'll be 80 by july
manufactured lumber products like I joists lvl glu lams windows etc will never come down unless a black hole occurs
steel? let me know how bringing back those real tough guy american jobs is working out for everyone country music may sing about bailing hey and working on the farm but white men don't want to do hard work
labor will never drop where I live labor is so fucked no one with any basic skills will lower their rates but hey the guys driving over an hour from some sorry far away mess of town might drop their rates
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03-28-2022, 08:40 PM #20907
How much of mortgage rare rises are due to the federal funds rate going up and how much are due to the federal reserve stopping the purchase of MBS?
I think there may be scenarios where the funds rate is at or below 2.5 percent and mortgage rates are north of 6%. In particular, I'd expect that a purely public MBS bond market during times of high inflation to diverge significantly from a historical correlation to a 10 year Treasury rate, even more so if the federal reserve starts to sell MBS that they currently hold on the balance shee. E.g. Fed funds rate recently went to 25 basis points while mortgage rates have almost doubled and the Fed hasn't even begun to sell MBS.
There's a lot I don't know though. I have a casual interest in the bond market and I probably have a lot of blind spots in my understanding.
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03-28-2022, 09:24 PM #20908
Kevo, my memory sucks for stuff I really am not paying attention to, but I remember the 10 year T Bond at .50% and doing a 30 Year fixed at 2.50% with a rebate to the client for all costs, so likely was closer to 2.25% at par? Now the yield is about 2.50% and the 30 year fixed is about 4.75%, so the spread has widen from where it was. Maybe that is due to the slow down in MBS purchases? Bottom line, I do see a recession for a variety of reasons, so typically rates would go down, but we will see.
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03-28-2022, 09:26 PM #20909
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03-28-2022, 09:31 PM #20910man of ice
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The builders I know here could get a lot more work if they could get more people but there aren't any.
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03-28-2022, 09:57 PM #20911
Real Estate Crash thread
As long as the ARM rate stays below 4 it won’t affect housing much. Currently at 3.75 or so APR.
New homes could get a boost with builder rate incentives later this year.
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03-29-2022, 08:31 AM #20912Registered User
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this in only my uneducated opinion and I could be really wrong but
never will see that happen again people now have self worth that they didn't have ten years ago some monkey makes 6 figures a year hitting enter on the computer and clicking a mouse all day yet the poor sap working at the quikie mart makes 10 bucks an hour people aren't getting out of bed anymore for that shit and I don't blame them people are seeing this every day and they don't understand the difference in wages and they want good money too
the trades have been decimated no immigration (legal or illegal) boomers jumping ship or retiring kids don't want to work hard deal with the hazing so they rather rack up student loan debt with no path to a solid job to pay them off just rather complain about all their student loan debt I can teach a kid skills for life that will pay well in a few years but they don't want that it's too hard and whats left are people like me once things slow down I'm out the door too not interested in lowering my rates not interested in making ends meet I have penty of other things I need to accomplish in life and even the most dirt bag inbred trades person is saying the same thing so good luck
if all the people waiting in the wings for things to come crashing down to they can snap up prime property on the cheep and get the new house built for a lower price are just waiting around that means there is demand still and as long as there is demand prices won't adjust even alittle
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03-29-2022, 08:40 AM #20913
I’ll go down the street and tell the crew of illegals that the stoned poseur says they don’t exist and labor costs are never going down
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03-29-2022, 09:13 AM #20914Registered User
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how do you know they are illegal? just making assumptions?
my point is we need a constant flow of illegal and legal immigration to help keep labor costs down for the consumer immigration is at an all time low for this country so the consumer is paying for those policies
two guys I have known for twenty years now one just finished building his house in summit county and the other is building a house in texas right now they aren't big players or running crews just carpenters who goto work maybe you should check their immigration status if that makes you feel better
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03-29-2022, 09:20 AM #20915
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03-29-2022, 09:32 AM #20916
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03-29-2022, 09:44 AM #20917one of those sickos
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I think we can all guess how he knows they are "illegal".
Fred has it right: we need more people to do work more than anything. The bottleneck in the system is skilled people, and we're simply not increasing their ranks. I'm routinely the youngest person on a jobsite at 45. We need to allow people who want to work to do so, whether they come from Georgia or Guatemala. Why the fuck wouldn't we? Why is where someone is born such a big deal?
Oh, and for those who might chime in with the chant of "People need to go through the proper channels / immigrate the right way / do it legally / etc" . Let me say this clearly: THERE IS NO PATH FOR THOSE PEOPLE. There simply is no way for a carpenter from Guatemala to gain a work perrmit in the US, even if I or Fred would happily hire him in a second for $25/hr. Asylum is a joke that requires such an unbelievable burden of proof that it's incredibly rare. If you want there to be a legit path to residency/work for immigrants in the US, call your congressperson.
He also has it right WRT demand. There are so many people "waiting for things to calm down". These people (and I'm one of them, to some extent), are poised to invest in properties or projects once they perceive the costs to decline a bit, but the only way costs will decline is if all of the "whatever it takes" people let off of the gas for a while and the "waiting" people stay out of the market long enough for us to all get hungry. If the second group just rushes to fill the vacuum, costs won't decline, and material shortages will continue. This is a problem we've been building for decades.
I'm not sure that I agree that everyone will hold their rates high no matter what. I and many others were making really good money in 2007, and we found our way to doing baseboard or whatever for less in 2010 once we really got hungry. Unfortunately there has to be a lot of pain for that to happen again, and it would do significant long term damage to the industry, just like it did then.
Boom-and-bust isn't a sustainable pattern for any industry. But rather than really changing the system we always want to go right back to fantasy land as quickly as possible. It happened in 2008-10 and it happened recently with CV, which could have been an opportunity to rethink some things.ride bikes, climb, ski, travel, cook, work to fund former, repeat.
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03-29-2022, 10:12 AM #20918
^^ Good post. If you were around here, I'd hire you to do my remodel for sure.
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03-29-2022, 10:28 AM #20919
Thanks. My understanding is that the fed recently stopped purchasing MBS but that they hold nearly 3 trillion dollars worth of MBS on their books, with a plan to offload those MBS in the future.
Details here- https://fred.stlouisfed.org/series/WSHOMCB
So, my hypothesis (admittedly, based on a casual interest and no real expertise) is that there is room for more divergence between the federal funds rate and the 10 year treasury rate and the 30 year fixed rate mortgage rate. Should the fed actually start selling MBS, bond prices would be further suppressed and mortgage rates would further rise.
My understanding is that the fed started buying MBS after 2008 as a way to prop up the real estate market and prevent a free market apocalypse. Money was tight and private investors would have demanded a much high premium for MBS, which would have spiked mortgage rates and further tanked the real estate market.
I honestly don't understand the reasoning behind the fed more than doubling their position in MBS starting in March 2020. They went from holding $1.3 trillion in MBS at that time to $2.8 trillion today. That buying frenzy is how we got such drastically low mortgage rates and also a major driving factor in the real estate boom of the past two years that no one seems to be talking about.
It's exceptionally bad public policy IMHO. Deferral programs made it so no one needed to sell their homes for two years, artificially reducing the supply of housing. At the same time, the federal reserve injected $1.5 trillion directly into the mortgage market and hundreds of billions more indirectly into the housing market through the purchase of corporate bonds and equities that turned into real estate purchases for institutional investors. So, you had actual home buyers (who mostly were qualified) being incentivized to take huge risks with cheap money, competing against institutional investors being incentivized to become corporate landlords all at a time with artificially reduced supply.
Average, middle class people got fucked because they either couldn't compete with the big money institutional investors or they are about to get fucked because they took too much risk and the tide very much seems to be going out.
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03-29-2022, 10:37 AM #20920
If you look at duration Fed can simply not rollover maturing proceeds (return to Treasury) and the balance sheet will gradually decline. Active QT will be very gradual unless they decide to get aggressive. That doesn't mean that the bond market won't have a fit regardless.
The balance sheet is still increasing as of last week.
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03-29-2022, 10:40 AM #20921
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03-29-2022, 11:37 AM #20922
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03-29-2022, 12:21 PM #20923Registered User
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Went through 2001 dot com bustn no problem had plenty of people stopping by the houses I was framing looking for work but I kept busy 2008 was a shock like the start of covid was work didn't start running real dry till fall of 2009 by spring of 2010 it was balls to the wall
It's been like that for 12 years already looking at 2023 projects no end in site
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03-29-2022, 12:35 PM #20924Registered User
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There is now a way to take out a loan before you buy a property so that you can make what looks like a cash offer. When it closes, the amount is just rolled into a mortgage. It is basically the only way some people can even come close to being competitive in this market. What could go wrong? Ugh.
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03-29-2022, 12:45 PM #20925
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