Real Estate Crash thread

[dunfree]

Not directly. Part of rent inflation is the number of new first time leases at higher prices.

higher income renters renting higher quality properties drove demand before the pandemic and during its late pandemic resurgence.

real estate supply was dropping for years prepandemic

[summit]

I think the rent increase phenomena can be attributed to several different factors.

The eviction moratorium artificially reduced the supply of rental units for a year and a half. Many people moved during covid, which meant that demand was higher than normal for new rental contracts.

In addition, the labor shortage pushed up wages for the people who rent at the same time that the Fed was red lining the economy with record low rates and MBS purchases, leading to higher real estate prices and driving increased demand for real estate speculation. HIgher real estate prices also contributed to higher rent prices. The federal reserve was on a bond buying spree throughout this time period, which allowed institutional investors to issue billions of dollars worth of bonds at artificially low rates that they otherwise wouldn't have been able to realize. That bond capitol sought out rent and went on a RE buying spree.

This was all happening while the foreclosure moratorium was also in place, which meant that the supply of real estate was artificially reduced. COVID unemployment benefits caused many renters to have higher income on unemployment than they had in their previous jobs, which kept the number of total households high during a time that otherwise would have seen people moving in with family and friends to save money.

Increased demand and reduced supply lead to significant price increases, which formed a new baseline for rent.

TLDR- I propose that there were many contributing factors on both the supply and demand side of RE that artificially manipulated the market starting in Spring of 2020.

I think you hit the nail on the head

[rideit]

You mean it wasn’t Soros’ evil plan?

[Toadman]

House (SFH) down the street from us has been on the market for $1.5m for over a month. Nice place too, probably worth it, at least in this market. Funny, another condo in town that is on the market for $1.5 is half the square footage, has a crazy HOA, and is nowhere near as nice. But the location cannot be beat, at least on this side of the county. My friend used to rent in that building for like $500 per month a decade ago. Location location location.

Similar situation here in Bend. House went on the market for $1.9 million, and that normally would have sold above asking before rates went up. It closed after 2 months on the market for $1.7 million. Lots of that going on with price reductions, and sitting on the market longer. But, that's to be expected after 2 years of over heated growth in home prices and demand.

[Skistack]

I think you hit the nail on the head

Yeah, great analysis. Add to that a TON of covid rental assistance available.


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[Kevo]

[liv2ski]

Granted, I just woke up, but I don't understand why investors would be buying SFR. If paid for cash, after expenses, maybe they are getting a annual 4% return. Seems low for the capital being spent except for the hope of future appreciation.

[summit]

Granted, I just woke up, but I don't understand why investors would be buying SFR. If paid for cash, after expenses, maybe they are getting a annual 4% return. Seems low for the capital being spent except for the hope of future appreciation.

1. Tail enders coming after seeing RE returns the last few years while the markets are sideways now)
2. Relatively safe with some guaranteed cashflows while corporatized management of investor owned housing (STR and LTR) improve margins and reduce overhead
3. Speculation that prices and rents will rise
4. "Everyone else is doing it, I better get mine"
5. 4 will further drive 3

[Name Redacted]

I believe that real estate is the best object for investment. Because despite the crisis, real estate continues to rise in price.

Hey, I think this guy is really on to something!

[Core Shot]

Hey, I think this guy is really on to something!

Next up?

Timeshares. Always worth it.

[Toadman]

Fractional home ownership is the newest investment paradigm.

[sirbumpsalot]

1. Tail enders coming after seeing RE returns the last few years while the markets are sideways now)
2. Relatively safe with some guaranteed cashflows while corporatized management of investor owned housing (STR and LTR) improve margins and reduce overhead
3. Speculation that prices and rents will rise
4. "Everyone else is doing it, I better get mine"
5. 4 will further drive 3

1031 exchanges...

[Yukonrider]

Granted, I just woke up, but I don't understand why investors would be buying SFR. If paid for cash, after expenses, maybe they are getting a annual 4% return. Seems low for the capital being spent except for the hope of future appreciation.

If you're paying cash, or buying a place with a 4% return you're doing it all wrong.

[spanky]

Fed's Powell: U.S. housing market headed for 'correction'

https://www.reuters.com/markets/us/f...on-2022-09-21/

[rideit]

Fed's Powell: U.S. housing market headed for 'correction'

https://www.reuters.com/markets/us/f...on-2022-09-21/

How incredibly prescient.

[Name Redacted]

So nobody thought that "Money printer go BRRRRR!" thing wasn't going to catch up to us? I mean, yeah, it avoided a double whammy of global shutdown/pandemic and a recession at the same time, which was nice. But it just delayed the inevitable, and now here we are, the inevitable.

[rideit]

Oh, don’t be fooled, ‘the inevitable’ will be FAR more cataclysmic!

[Name Redacted]

Oh, don’t be fooled, ‘the inevitable’ will be FAR more cataclysmic!

OK Bunny

[rideit]

zErO hEdGe sAyS sO!


(Actually, I am referring to earth being enveloped by the sun becoming a super-nova, but whatevs)

[Name Redacted]

zErO hEdGe sAyS sO!


(Actually, I am referring to earth being enveloped by the sun becoming a super-nova, but whatevs)

Can't wait! Wouldn't that be nice? I mean, knowing that you aren't going to suffer with some shitty illness or die like some dumbass Darwin Award candidate? Just everyone goes out at the same time in the same way? Something strangely comforting about that. Only thing that would make it better would be knowing that it was coming for a while, not. too far, but like a year or less. I think I'd be kinda proud knowing that in the thousands of years that humans have been around and worrying about the end of the world happening any minute, I was one of the lucky ones who actually got to witness the apocalypse. How cool would that be?

It would probably tank the housing market though....

[Core Shot]

If you know it’s coming, it’s “on the beach”
I love that novel. It makes you ask the question what do you do once you know it’s all about to end.

On the Beach is a 1959 American post-apocalyptic science fiction drama film from United Artists, produced and directed by Stanley Kramer, that stars Gregory Peck, Ava Gardner, Fred Astaire, and Anthony Perkins.[2] This black-and-white film is based on Nevil Shute's 1957 novel of the same name depicting the aftermath of a nuclear war.

All star cast. But as usual the novel is better.
The car racing is amazing. Hell bent for leather knowing you have nothing to lose.

[fastfred]

So nobody thought that "Money printer go BRRRRR!" thing wasn't going to catch up to us? I mean, yeah, it avoided a double whammy of global shutdown/pandemic and a recession at the same time, which was nice. But it just delayed the inevitable, and now here we are, the inevitable.

you can still get a 2 million dollar shit box with no garage in breckenridge wait I think the price dropped and we are now at a more comfortable 1.8m
keeping an eye on small town middle of nowhere property and its still way over priced double what it was three years ago lots of open houses and 10k price drops as if that means anything

[liv2ski]

If you're paying cash, or buying a place with a 4% return you're doing it all wrong.

Right? But if you buy a SFR, good luck getting a 5% return after expenses, at least initially. 30 years down the road, your return can be ridiculous. O and the house that sold across the street 2 years ago was never built on (great lot but a tear down for $3M), so it was but on the market for $400k more and was under contract in 10 days. Unbelievable.

[Supermoon]

Fed's Powell: U.S. housing market headed for 'correction'

https://www.reuters.com/markets/us/f...on-2022-09-21/

At some point it feels like the Fed has decided we need a recession and is just pushing us into it for no reason.

I just don’t understand why they think spiking interest rates like this is going to solve the inflationary pressure we see right now.

[fastfred]

At some point it feels like the Fed has decided we need a recession and is just pushing us into it for no reason.

I just don’t understand why they think spiking interest rates like this is going to solve the inflationary pressure we see right now.

we need a recession we are overdue long overdue
raising rates slows the flow of cheap easy money to buy stupid shit and that free eazy money has been out of control the past three years now
everyone thinks they are a millionaire right now
ask any colorado homeowner we have the highest rate of helocs in the country cause people are using their home as an atm

what we need is an slow down not necessarily fall off the cliff recession
but since we need to prop up the boomers lifestyle as much as we can on their way out the door this is the shit we eat

the labor market is shit storm at least I have plenty of opportunities for wfh laid off tech workers