Real Estate Crash thread

**Toadman** · 02-27-2023, 02:39 PM

Originally Posted by Mazderati

It's a housing desert. A theme consistent since the end of 2020 and one that has only gotten worse.

Still early in the scheme of things. The finance markets haven't capitulated yet. Consumers are still loading up on debt. Inflation hasn't been tamed. Plenty of time for the other shoe to drop.

**Mazderati** · 02-27-2023, 03:22 PM

Maybe it isn't a desert. Maybe it's more like all the rooms are rented. Hard to tell with second home owners, STRs, and institutional ownership.

**jackstraw** · 02-28-2023, 01:11 PM

Santa Cruz has addressed STR's. Non-hosted permits will no longer be issued. Hosted- the owner needs to live there for 6 months. And no new ADU STR permits will be issued.

So again, it always comes down to the town getting its shit together and addressing an issue. May not be perfect and people will try to cheat, but addressing is key in every tourist town

**dunfree** · 02-28-2023, 01:23 PM

Originally Posted by jackstraw

Santa Cruz has addressed STR's. Non-hosted permits will no longer be issued. Hosted- the owner needs to live there for 6 months. And no new ADU STR permits will be issued.

So again, it always comes down to the town getting its shit together and addressing an issue. May not be perfect and people will try to cheat, but addressing is key in every tourist town

lol. Compliance and enforcement has always been a joke, and the array of truly shitty substandard dwellings was astounding.

**jackstraw** · 02-28-2023, 02:58 PM

Originally Posted by dunfree

lol. Compliance and enforcement has always been a joke, and the array of truly shitty substandard dwellings was astounding.

No doubt, but needs to start somewhere. Enforcement would be difficult. Neighbors would have to rat you out. And the array of dwellings in SC is interesting, to say the least. Teardowns are 1m+

**goldenboy** · 02-28-2023, 05:25 PM

Enforcement is easy. They have someone looking on VRBO and Airbnb all the time around here, and her salary is paid by the ST rental permits that you have to have. People get busted all the time.

**Name Redacted** · 02-28-2023, 05:28 PM

Yeah, the data is out there. Airbnb sells it. AirDNA is a good source that congregates a lot of it. I imagine that they work out access to that and go off what they see. I swear that I got "Secret Shopper" called a few times by the town when I had an STR. So they do that stuff too.

**schuss** · 02-28-2023, 05:36 PM

Originally Posted by goldenboy

Enforcement is easy. They have someone looking on VRBO and Airbnb all the time around here, and her salary is paid by the ST rental permits that you have to have. People get busted all the time.

Don't even need that, could probably get a direct feed from AirBnB/VRBO. They both have partner apis so you could demand that or just get flat files cut.

**dunfree** · 02-28-2023, 05:48 PM

Originally Posted by goldenboy

Enforcement is easy. They have someone looking on VRBO and Airbnb all the time around here, and her salary is paid by the ST rental permits that you have to have. People get busted all the time.

the political will for enforcement was never there. I knew someone who was offered a driveway sleeping spot and bathroom access for a couple hundred $

**goldenboy** · 02-28-2023, 05:48 PM

Originally Posted by schuss

Don't even need that, could probably get a direct feed from AirBnB/VRBO. They both have partner apis so you could demand that or just get flat files cut.

Yeah, but I think they check so they can also bust people that try to rent out rooms with no egress that were told they couldn't, etc.

I have heard of owners that keep email lists (friends, friends of friends, etc) and get all their rentals that way. But there can't be more than a handful like that.

**dunfree** · 02-28-2023, 06:01 PM

Originally Posted by goldenboy

Yeah, but I think they check so they can also bust people that try to rent out rooms with no egress that were told they couldn't, etc.

I have heard of owners that keep email lists (friends, friends of friends, etc) and get all their rentals that way. But there can't be more than a handful like that.

depends on the community. Bunch of people off market there

**Yukonrider** · 02-28-2023, 07:46 PM

My city got on this early, a few years ago they capped the total number of permits at 225, with limits to how many per block etc. It works well, and they enforce. Google had the picture wrong for an address, and they sent me a very scary no-no letter claiming one of my rentals was illegal. I was all good, but never thought again about pushing that law.

As much as I love the free market, I am all for capping STRs. Good for everyone honestly, STRs in my town are still booked out, STRs in Phoenix for example are struggling to get bookings because the market is wayyy over saturated. The other shoe will drop on the STR thing, and it won't be pretty, but I assume very hot tourist destinations will be somewhat insulated.

**lowsparkco** · 03-02-2023, 11:58 PM

Originally Posted by Yukonrider

My city got on this early, a few years ago they capped the total number of permits at 225, with limits to how many per block etc. It works well, and they enforce. Google had the picture wrong for an address, and they sent me a very scary no-no letter claiming one of my rentals was illegal. I was all good, but never thought again about pushing that law.

As much as I love the free market, I am all for capping STRs. Good for everyone honestly, STRs in my town are still booked out, STRs in Phoenix for example are struggling to get bookings because the market is wayyy over saturated. The other shoe will drop on the STR thing, and it won't be pretty, but I assume very hot tourist destinations will be somewhat insulated.

I think most everyone agrees that some regulation of STR’s is necessary. It is a commercial activity in residential zoning, so IMO a variance should be necessary to pull the permit. That being said, a lot of STR regulation is “king making” and it’s being determined by pretty esoteric rules. First come first serve isn’t necessarily the best way to allow for the most appropriate land use.

Average rates for a 30 year fixed mortgage in central Oregon up to 7.1 percent this morning. Folks are going to really start to do anything possible not to change housing. I have clients that are renting their homes and renting a place in a new town waiting out rate changes.

**altasnob** · 03-03-2023, 08:03 AM

Originally Posted by lowsparkco

STR regulation is “king making” and it’s being determined by pretty esoteric rules. First come first serve isn’t necessarily the best way to allow for the most appropriate land use.

It's just another version of "those who get there first will build the biggest fence." It rewards the old, and the wealthy, at the expense of the new comers. Also, you know how many people run their small "commercial" business out of their house these days? The purpose of no commercial in residential zoning was to prevent things like traffic, pollution, and noise, from residential areas. No one wants to live next to a renter. No one wants to live next to a short term renter. But how is that remarkably different than if someone who actually owns the house was living there? You could live next to a long term owner who parties every night and invites all of their friends and there would be nothing you could do (save noise complaints).

Also, what happens when the governments sends someone who is violating the STR rules a nastygram, and that person crumples it up and wipes their ass with it? In that Aspen article, the STRer forced the government to sue them, they took it to a hearing examiner, lost, and are now appealing. They still own the STR through all of this process. There will always be ways for people to get around the STR rules and it is a major expense for the government to have to litigate all the violators.

Originally Posted by lowsparkco

Average rates for a 30 year fixed mortgage in central Oregon up to 7.1 percent this morning. Folks are going to really start to do anything possible not to change housing. I have clients that are renting their homes and renting a place in a new town waiting out rate changes.

They better not rent their primary residence for more than 2 years becuase if they do, they will have permanently converted the property to a rental property and have to pay capital gains tax (typically 15%) on the appreciation, plus depreciation recapture tax when they sell. And what do they expect rates to go down to? I could see rates dipping below 5 in the next two years, but not much lower than that. And when rates do dip down and they want to buy, they will have to break their rental lease, and boot out their renters, which all adds costs to them. At some point, they might as well just buy at the higher rate with the expectation they will refinance when rates come down.

**AdironRider** · 03-03-2023, 08:14 AM

No one is forcing them to depreciate the property, and they only have to claim residency 2 of the prior 5 years to selling.

https://www.irs.gov/taxtopics/tc701

**liv2ski** · 03-03-2023, 08:53 AM

AR, I thought my accountant told me a N/O/O property HAD to be depreciated? And if you do and there is some recapture for what you took, big deal. But I oddly agree with AS, just buy now and refi down the road if the price of the home works for you.

**Kevo** · 03-03-2023, 10:27 AM

Originally Posted by liv2ski

just buy now and refi down the road if the price of the home works for you.

I feel like so many people are going to get burned by this train of thought. Many of my gf's grad school friend group decided to buy houses in the fall. Everyone is at 7% APR on houses in DC. They're locked into $8k to $9k per month mortgages for 30 years when those same houses had a $4k-$5k payment had they bought just a year earlier.

What could possibly go wrong?

**Danno** · 03-03-2023, 10:30 AM

Originally Posted by Kevo

I feel like so many people are going to get burned by this train of thought. Many of my gf's grad school friend group decided to buy houses in the fall. Everyone is at 7% APR on houses in DC. They're locked into $8k to $9k per month mortgages for 30 years when those same houses had a $4k-$5k payment had they bought just a year earlier.

What could possibly go wrong?

Are they able to make the $8-9k payment? I assume so, since that is what they signed up for. Unless those are 3 year ARMs, where is the hudge problem?

**Kevo** · 03-03-2023, 10:42 AM

Originally Posted by Danno

Are they able to make the $8-9k payment? I assume so, since that is what they signed up for. Unless those are 3 year ARMs, where is the hudge problem?

They are able to make the payment now using both of their incomes, but the idea that they'll just be able to refi to a lower rate only pencils out if the value of the house doesn't go down in value and if you meet the income requirements for the refi, which means both sides of the dual income household need to keep their jobs.

I believe that any time someone pays way more for the same thing compared to what people in their same demographic cohort have in recent history there is a major risk of correction. Then consequences of holding the bag and being stuck with a $9k mortgage when the market figures out that $5k per month is really the max the market will bear is devastating. That kind of delta has the power to destroy someone's financial life for a very long period of time if they live in a recourse state.

**skaredshtles** · 03-03-2023, 10:44 AM

Originally Posted by Kevo

They are able to make the payment now using both of their incomes, but the idea that they'll just be able to refi to a lower rate only pencils out if the value of the house doesn't go down in value and if you meet the income requirements for the refi, which means both sides of the dual income household need to keep their jobs.

I believe that any time someone pays way more for the same thing compared to what people in their same demographic cohort have in recent history there is a major risk of correction. Then consequences of holding the bag and being stuck with a $9k mortgage when the market figures out that $5k per month is really the max the market will bear is devastating. That kind of delta has the power to destroy someone's financial life for a very long period of time if they live in a recourse state.

They probably should have purchased a smaller house.

**fastfred** · 03-03-2023, 10:55 AM

8k a month mortgage?

is that typo come on seriously why you making shit up

my mort on a 800k valuation house $700
a friends mort on a 1.8 million dollar house valuation house $1,100

shit that is crazy shit guess buying twenty years ago pay s off?

**Danno** · 03-03-2023, 10:57 AM

Originally Posted by Kevo

They are able to make the payment now using both of their incomes, but the idea that they'll just be able to refi to a lower rate only pencils out if the value of the house doesn't go down in value and if you meet the income requirements for the refi, which means both sides of the dual income household need to keep their jobs.

I believe that any time someone pays way more for the same thing compared to what people in their same demographic cohort have in recent history there is a major risk of correction. Then consequences of holding the bag and being stuck with a $9k mortgage when the market figures out that $5k per month is really the max the market will bear is devastating. That kind of delta has the power to destroy someone's financial life for a very long period of time if they live in a recourse state.

Of course, any mortgage that requires your income is a risk, and if it requires 2 incomes even more risk, but getting mortgages based on 2 incomes is hardly uncommon. I will grant you that there is definitely risk in that.

But if rates go down significantly, I don't think it likely that house will also go down significantly in value, assuming they bought in a good place (location, location, location).

I think all you are really pointing out is the risk of being house poor, with people making that choice assuming that the landscape will change such that they won't always be house poor. It's a valid point, but I don't see the hudge risk you do. But then, I'm also a renter now sitting on the sidelines because I don't think it's a good time to buy and I don't want to be house poor.

**liv2ski** · 03-03-2023, 11:01 AM

Originally Posted by fastfred

8k a month mortgage?

is that typo come on seriously why you making shit up

my mort on a 800k valuation house $700
a friends mort on a 1.8 million dollar house valuation house $1,100

shit that is crazy shit guess buying twenty years ago pay s off?

FF, valuation has 0 to do with a mortgage payment. It is loan balance, term and rate. 7% over 30 years and a $8k PITI payment is about a $950k loan amount which is for realz in D.C.