Real Estate Crash thread

[Foggy_Goggles]

Kevo, there are a lot of moving parts to your assumptions. You argument may support higher profits for institution owners of SFHs but adding transactional volume and liquidity to a market does not, alone, lead to higher prices. It seems like the utopian view of home ownership goes something like, "I should be able to buy a nice house with stainless appliances in nice town near the mountains or the beach. I should be able to comfortably afford it, a $60K SUV, a couple of kids, 3-4 vacations (plus visiting family 'cause that isn't a vacation), and build equity at 5-10% annual. If the prices goes down, that is someonelse's fault. And everyone should be able to live this dream....but not near mean. That would make it too crowded and fuck with my dream. But yeah, the wage slaves need to live somewhere else to keep my cost of living down cause $150/hr. for a plumber is outrageous. I took econ in college but the realities of both supply and demand and risk reward just don't work for my paradigm."

The people that drive up prices complain about prices begin driven up, "I can't believe I had to pay $75K over asking for this house, that's outrageous".

[Foggy_Goggles]

I get that, I just don’t understand why a delinquent owner in my market wouldn’t just sell and walk away with their equity and instead wait to get foreclosed on.

a. They are delusional. They think that some additional bailout is coming.
b. They are most likely unemployed so they are having a hard time refi-ing or getting a second.
c. They have no where to move to.

[char_]

The people that drive up prices complain about prices begin driven up, "I can't believe I had to pay $75K over asking for this house, that's outrageous".

I certainly have found myself in the odd position of saying “this house isn’t worth that much, offering way over ask and then being out bid because a) I can fit it in my budget, b) comparable rentals are 150%+ of the escrow payment on homes for sale and c) the market continues to rise.

To your other point, I think as a country we are not smart to continue to increase financial inequality regardless of what vehicle you want to discuss. For some reason this issue keeps getting framed as some sort of upper middle class mountain town whiny thing when the reality is that housing is a issue in small, medium and large cities and towns across the west and is driving real, visible social problems like increases in families living in cars, homeless kids, etc.

[Skistack]

a. They are delusional. They think that some additional bailout is coming.
b. They are most likely unemployed so they are having a hard time refi-ing or getting a second.
c. They have no where to move to.

Good points. But unlike the last rodeo prices have not collapsed. So there should not be a ton of folks underwater that are going to stay put until the sheriff comes.


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[Kevo]

Kevo, there are a lot of moving parts to your assumptions. You argument may support higher profits for institution owners of SFHs but adding transactional volume and liquidity to a market does not, alone, lead to higher prices. It seems like the utopian view of home ownership goes something like, "I should be able to buy a nice house with stainless appliances in nice town near the mountains or the beach. I should be able to comfortably afford it, a $60K SUV, a couple of kids, 3-4 vacations (plus visiting family 'cause that isn't a vacation), and build equity at 5-10% annual. If the prices goes down, that is someonelse's fault. And everyone should be able to live this dream....but not near mean. That would make it too crowded and fuck with my dream. But yeah, the wage slaves need to live somewhere else to keep my cost of living down cause $150/hr. for a plumber is outrageous. I took econ in college but the realities of both supply and demand and risk reward just don't work for my paradigm."

The people that drive up prices complain about prices begin driven up, "I can't believe I had to pay $75K over asking for this house, that's outrageous".

My hypothesis is that adding to the monetary supply and restricting the supply of housing is causing prices to increase. The forbearance programs are limiting supply.

I am a homeowner who thinks prices are rising too rapidly.

@char- the delinquent homeowners have nowhere to go and people don't act rationally. They lost thier job, if they sell they won't be able to go get a new mortgage somewhere else and the idea of renting without income is also pretty shitty.

[char_]

My hypothesis is that adding to the monetary supply and restricting the supply of housing is causing prices to increase. The forbearance programs are limiting supply.

I am a homeowner who thinks prices are rising too rapidly.

@char- the delinquent homeowners have nowhere to go and people don't act rationally. They lost thier job, if they sell they won't be able to go get a new mortgage somewhere else and the idea of renting without income is also pretty shitty.

Yeah, but in this market they are likely to walk with a year plus worth of rent on top of their asking price versus loosing all of it.

[Foggy_Goggles]

Yeah, but what part of institutional investors foreclosing of loans they bought and bringing them to market restricts supply? People can't decide if the residential realestate market is supposed to be a free market or a controlled market managed for the greater good.

Look at both the demand side drivers and true build costs and then ask yourself if any of this is subject to change. $50K water and sewer taps, $30 sheet OSB, work from home and AirBnB is all baked in the cake. Combine that with wage stagnation for the middle class and the model is what it is.

[goldenboy]

Yeah, but in this market they are likely to walk with a year plus worth of rent on top of their asking price versus loosing all of it.

Exactly. They can rent, move in with mom and dad again, camp out in their sprinter van, whatever. But a coming wave of foreclosures? Nope, not happening in most markets.

[shroom]

there are few mistakes for the owning class anymore, who needs risk?

[Foggy_Goggles]

Exactly. They can rent, move in with mom and dad again, camp out in their sprinter van, whatever. But a coming wave of foreclosures? Nope, not happening in most markets.

Yeah, but don't underestimate stupid. Low down + bought house recently + didn't maintain it + overpaid + cash out refi + haven't made a payment since Covid started and they went all QANON = eat up your equity pretty quickly.

I think the difference it that a foreclosed house for sale will just look like everyother house for sale. I think this is where the investors could do the market a favor but taking the banks out of the transaction as a counter party. Bank sellers were just a pain in the ass for everyone last rodeo.

[FussyDutchman]

Finally have a closing date on my house sale and purchase. My house had a ton of activity but no offers for a while, then we got 4 offers in a week. The house we are buying needs a new roof and has been on the market for months, then suddenly got 3 offers at once. This is in The foothills of CA off 80.


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Good to hear R, hope all is well with you guys and the sale/purchase go smoothly. We are just starting a refi, 2.125% no points on a 15yr, almost free $!

[Foggy_Goggles]

there are few mistakes for the owning class anymore, who needs risk?

Well that is both the question and the answer. There has been so much dumb money made in residential real estate over the last couple decades that people under appreciate the risk entailed in a very expensive leverage investment. If it worked out it must have been a good decision right?

[Kevo]

Yeah, but what part of institutional investors foreclosing of loans they bought and bringing them to market restricts supply? People can't decide if the residential realestate market is supposed to be a free market or a controlled market managed for the greater good.

Look at both the demand side drivers and true build costs and then ask yourself if any of this is subject to change. $50K water and sewer taps, $30 sheet OSB, work from home and AirBnB is all baked in the cake. Combine that with wage stagnation for the middle class and the model is what it is.

Foreclosures aren't happening right now, which is restricting supply. When foreclosures are allowed, it appears that there is a good chance that institutional investors will foreclose and turn not-insignificant percentages of their holdings into rentals instead of releasing them into the market, which further reduces supply.

My concern is that we are picking winners and losers. I also understand that real estate in the US was never a free market. The government subsidizes loans here...

IMHO, I think we are picking the wrong winners. Our current policies are driving prices up to a point that is unattainable to people trying to enter the market. People who have been living fast and loose for an entire generation are getting another bailout while millenials who don't yet own are left holding the bag and being turned into perpetual renters.

We could protect the interests of the middle class by restricting institutional investment into SFHs.

Believe me, I know that building costs are through the roof. That is also adding to the craziness.

[Benny Profane]

I'm guessing some are confusing distressed commercial loans with residential.

[char_]

Yeah, but what part of institutional investors foreclosing of loans they bought and bringing them to market restricts supply? People can't decide if the residential realestate market is supposed to be a free market or a controlled market managed for the greater good.

Look at both the demand side drivers and true build costs and then ask yourself if any of this is subject to change. $50K water and sewer taps, $30 sheet OSB, work from home and AirBnB is all baked in the cake. Combine that with wage stagnation for the middle class and the model is what it is.

This one is simple for me. Affordable housing, SFH, multi unit or otherwise should be a focus of government. It currently is in most western states, but they aren’t exactly hitting it out of the park. Every market in this country is regulated, often in someone’s favor.

Wealth inequality in all its forms should be a focus of government. The government is currently picking winners in this regard and it isn’t the populace at large at the moment.

The housing market broadly is a symptom of IMO bad tax policy and bad monetary policy.

[Foggy_Goggles]

This one is simple for me. Affordable housing, SFH, multi unit or otherwise should be a focus of government. It currently is in most western states, but they aren’t exactly hitting it out of the park. Every market in this country is regulated, often in someone’s favor.

Wealth inequality in all its forms should be a focus of government. The government is currently picking winners in this regard and it isn’t the populace at large at the moment.

The housing market broadly is a symptom of IMO bad tax policy and bad monetary policy.

I agree with all of that as long as "affordable housing" does not mean home ownership with no downside risk. That's entitlement. If that's the game let's just make a leveraged savings account that returns +/-5% available for everyone that meets the income requirements. Think about it.

Honestly, I'm more of a fan of wage reform and affordable health care and affordable higher education and legal reform for drug crimes and addiction and mental health as a path to financial stability that the whole "everyone needs to own a home" thing which is a yard spun by the exact institutions that most people are rallying againt.

[Foggy_Goggles]

There is also a distinction between "fuck this real estate game" and "I can't afford this real estate game". If you think an asset is over priced, don't buy it. If you can't afford the buy in, go downtown to the 4 Queens.

Get roomates, buy a condo in Aurora, be a landlord in town you can afford, buy residential real estate stocks. I get that it is really expensive and that sucks but is has been that way for a long time.

Take your annual earnings and divide it by 5. That's what your car should cost.

Multiply is by 5. That's house much house you can buy. Now cut out almost all luxuries like eating out or going to the bar more than twice a month, all foreign travel, new skis and the like.

That's what people used to do to buy a house. You don't get leather seats, a beach trip and a ski trip, blue apron, eating out 5 times a week and a yoga membership and get to bitch that real estate is too expensive.

[Supermoon]

All that bullshit is great if you have a job, no surprise healthcare bills, a degree that was cheap and helps you earn wages, no family members that you have to take care of. The dream of the white 1950s middle class doesn’t really exist for anyone anymore.

I’m 37. Got laid off from my first job during the last recession. Last in first out and all that. Left a big city, moved home and had to take a job for half what I made before. My wife and I both have degrees with little student debt, always worked full time jobs, but between wage stagnation, some unexpected financial shit that hit all at once, and rents rising it’s taken us ten years to get back to a reasonable financial situation.

Lots of friends lecture about shit like you posted above who’ve had parents buy them houses or gift them businesses. Generational wealth is the only reliable way to get ahead anymore.

[Foggy_Goggles]

That sucks. No silverspoon here. I'm a carpenter and my wife works for the county in an admin job. I put on a suit in the city for 5 years to get on the property ladder. That sucked also. The reality of the lack of financial security is a major societal issue. I like to joke that I feel like I made it because I'm two disasters away from losing everything. The high cost of real estate in desirable locations is just one part of the problem.

[Benny Profane]

We lead the world in single family houses by far. Amazing to hear so many Americans whine they can't get into the game. It's a horrible waste of resources and contributes directly and indirectly to world wide pollution much more than industry. Most of us should be living in multi unit buildings, sharing prescious resources. But, no, we all want "affordable housing", whatever that may mean to most.

[Supermoon]

I’m 100% in agreement with you about wage reform and free healthcare solving most of the systemic financial issues

[shroom]

That sucks. No silverspoon here. I'm a carpenter and my wife works for the county in an admin job. I put on a suit in the city for 5 years to get on the property ladder. That sucked also. The reality of the lack of financial security is a major societal issue. I like to joke that I feel like I made it because I'm two disasters away from losing everything. The high cost of real estate in desirable locations is just one part of the problem.

we’re just scared or too old to acknowledge insane inflation/reduction in quality of life because it generally happens slower

those that made it dgaf

[fastfred]

the cost of building is helping drive the prices in real estate
to build new in the mountains is no less than 400 a sq ft these days
it was 350 two years ago and that 400 sq ft cost gets you some nice touches but isn't over the top anyone who says it's less is full of shit
building materials are being controlled by three companies the whole supply and demand things is mostly bullshit these hedge funds private equity groups are all squeezing as much money as they can just like anything in the us today they give lots of bullshit stories so why not get 30 bucks a sheet when it was only 15 bucks 14 months ago
I always laugh becuase joe programer who works for big computer company thinks he has special skills and deserves his 150k a year salary
people thumb their nose at trades people but my lead guys make 60k a year as employees guys who are skilled know their value and demand as much as the market will bear joe programer doesn't get it and thinks we are all monkeys working for minimum wage

so to build the cheapest linolium floored two piece fiberglass tub surround house costs tons of money these days so that helps drive the overall real estate cost

[Skidog]

the cost of building is helping drive the prices in real estate
to build new in the mountains is no less than 400 a sq ft these days
it was 350 two years ago and that 400 sq ft cost gets you some nice touches but isn't over the top anyone who says it's less is full of shit
building materials are being controlled by three companies the whole supply and demand things is mostly bullshit these hedge funds private equity groups are all squeezing as much money as they can just like anything in the us today they give lots of bullshit stories so why not get 30 bucks a sheet when it was only 15 bucks 14 months ago
I always laugh becuase joe programer who works for big computer company thinks he has special skills and deserves his 150k a year salary
people thumb their nose at trades people but my lead guys make 60k a year as employees guys who are skilled know their value and demand as much as the market will bear joe programer doesn't get it and thinks we are all monkeys working for minimum wage

so to build the cheapest linolium floored two piece fiberglass tub surround house costs tons of money these days so that helps drive the overall real estate cost

Fuck I'm that computer need but hardly thumb my nose. My brother in law the contractor makes way more than me. I also swung a brush for 10+ years. Trades are important and are being left behind sad really.

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[Dromond]

That's what people used to do to buy a house. You don't get leather seats, a beach trip and a ski trip, blue apron, eating out 5 times a week and a yoga membership and get to bitch that real estate is too expensive.

I'm not sure that is true. It appears that the cost of purchasing a home compared to income has skyrocketed over the last 70 years. I'm suspicious of the argument that people's loose discretionary spending is the true cause of people not being able to afford housing. How many avocado toasts does it take to purchase a dwelling?

https://archive.curbed.com/2018/4/10...rnment-gi-bill


That said - I totally do think required home ownership is stupid as a wealth-building tool. Why make people live in a bank account that's hard to buy/sell? Why not make renting more affordable and enjoyable so that people can move more easily for jobs, education, etc?

I know a couple with one kid living in the US - one is from WA state and one is from Germany. They are moving to Germany because the family life and work/life balance is so much less stressful and more stable with available childcare, free education, free healthcare and the ability to somewhat affordably rent in a city without the panic of trying to buy an overpriced house to hedge against rising rents. They make a pretty damned good argument for it, and make us look like a bunch of fools trying to tell the world we have it dialed when so many here are just trying to keep their heads above water.