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The housing market is starting to crack – Sellers are cutting prices

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Re: The housing market is starting to crack – Sellers are cutting prices

#51

Post by glimshe »

ytdytvhxgydvhh wrote: post #35
glimshe wrote: post #26

Surprise, surprise. The historical housing bubble was caused by artificially low interest rates adopted worldwide. Ever-increasing housing prices is bad for people who own homes (higher property taxes, property tax distortions across cities, higher fees when changing houses) and those who don't own any. Low interest rates discourage saving and encourage unproductive speculation and house flipping. The people benefitt…

> The people benefitting from the status quo are only those who make money off trading and borrowing fees (banks, realtors), and the occasional person who left a high price area to a low price area. I think that second category should also include retirees who downsize from their empty nest SFH to a cheaper, smaller condo, which is something that I think happens way more than occasionally.

These people don't benefit so much from the high interest rates because they sell at high prices and buy at high prices too. Just check how much condos are going for in desirable areas in Florida.

Re: The housing market is starting to crack – Sellers are cutting prices

#52

Post by Tade0 »

jeffreyrogers wrote: post #33

Unless the housing supply increases this will just be a temporary thing. As long as people are able to make their mortgage payments they typically won't sell their homes at a loss (even if their equity is negative). Some people will always be forced to sell due to life events and that's what will set current market comps. Since mortgage rates have recently spiked upwards people who need a mortgage to buy a home can a…

Note that baby boomers are reaching an age at which they're starting to pass away.

What else to do with an inherited house than either live in it or sell it?

Re: The housing market is starting to crack – Sellers are cutting prices

#53

Post by rogerkirkness »

lenerdenator wrote: post #36

It won't matter for Millennials trying to buy their first homes. I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day. Typically they're flipped houses. If you were to bring down the value of every single-family home in the US, that means accepting about 2/3rds the value of each of these mortgages, along with all of the securitized derivatives of them. That's a 2…

As a Canadian, I am curious where I can buy this $310k overpriced house.

Re: The housing market is starting to crack – Sellers are cutting prices

#54

Post by lenerdenator »

lastofthemojito wrote: post #42
lenerdenator wrote: post #36

It won't matter for Millennials trying to buy their first homes. I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day. Typically they're flipped houses. If you were to bring down the value of every single-family home in the US, that means accepting about 2/3rds the value of each of these mortgages, along with all of the securitized derivatives of them. That's a 2…

> I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day. I've been hearing a lot of "should be" talk like that recently - like folks complaining that people are paying $50k for a normal SUV that "should be" $30k or whatever. What are we basing "should be" on? Some affordability metric? Our gut feeling about what a comparable thing cost a few years ago? If I sold m…

It's a 60+ year-old single-family, single-garage home within eye (and more importantly, ear) shot of a major interstate highway next to the home of a man who has a number of city code violations due to the state of his property (think rank weeds, cracked paint, tires in the yard, etc.) in a major Midwestern city where the average household income is ~$56,000.

When you consider who this kind of housing was built for - younger married couples with two children - the problem becomes apparent. You can't cover COL, costs of raising children, a mortgage on a $310k house at 7% interest, an auto loan note at the same, and student loan debt on $56k household income. Wages are stagnant, so something has to go. Typically, it's the idea of children or the idea of owning a house. This has implications for the economy 20 years from now. There won't be as many consumers and workers to participate in the market, and those that do exist are likely to have access to less generational wealth because their parents were more likely to rent than to own. Neither bodes well for economic growth or stability. That's what I mean by "should cost" - a value that allows for a seller to sell a home at a reasonable price to a party that wishes to carry out the life stage activities that provide for future economic growth.

Re: The housing market is starting to crack – Sellers are cutting prices

#55

Post by ThalesX »

Tade0 wrote: post #52
jeffreyrogers wrote: post #33

Unless the housing supply increases this will just be a temporary thing. As long as people are able to make their mortgage payments they typically won't sell their homes at a loss (even if their equity is negative). Some people will always be forced to sell due to life events and that's what will set current market comps. Since mortgage rates have recently spiked upwards people who need a mortgage to buy a home can a…

Note that baby boomers are reaching an age at which they're starting to pass away. What else to do with an inherited house than either live in it or sell it?

Rent it?

Re: The housing market is starting to crack – Sellers are cutting prices

#56

Post by eweise »

hemloc_io wrote: post #30
glimshe wrote: post #26

Surprise, surprise. The historical housing bubble was caused by artificially low interest rates adopted worldwide. Ever-increasing housing prices is bad for people who own homes (higher property taxes, property tax distortions across cities, higher fees when changing houses) and those who don't own any. Low interest rates discourage saving and encourage unproductive speculation and house flipping. The people benefitt…

You're missing one more demographic that's a pretty big deal. California homeowners insulated from property tax due to prop 13.

California homeowners pay property tax and the rate goes up either with inflation or 2%. I'm guessing you think it should go up with the market value of the home. Thank god it doesn't or I would have had to sell instead of being able to give my kids a stable home for the past 18 years.

Re: The housing market is starting to crack – Sellers are cutting prices

#57

Post by deathanatos »

rogerkirkness wrote: post #53
lenerdenator wrote: post #36

It won't matter for Millennials trying to buy their first homes. I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day. Typically they're flipped houses. If you were to bring down the value of every single-family home in the US, that means accepting about 2/3rds the value of each of these mortgages, along with all of the securitized derivatives of them. That's a 2…

As a Canadian, I am curious where I can buy this $310k overpriced house.

My mother recently sent me a listing at about that price. Middle of the desert, New Mexico. ($350k, 1.5k sq ft., 3bd, 1.1ba. Quemado, NM.)

Re: The housing market is starting to crack – Sellers are cutting prices

#58

Post by fragmede »

ytdytvhxgydvhh wrote: post #35
glimshe wrote: post #26

Surprise, surprise. The historical housing bubble was caused by artificially low interest rates adopted worldwide. Ever-increasing housing prices is bad for people who own homes (higher property taxes, property tax distortions across cities, higher fees when changing houses) and those who don't own any. Low interest rates discourage saving and encourage unproductive speculation and house flipping. The people benefitt…

> The people benefitting from the status quo are only those who make money off trading and borrowing fees (banks, realtors), and the occasional person who left a high price area to a low price area. I think that second category should also include retirees who downsize from their empty nest SFH to a cheaper, smaller condo, which is something that I think happens way more than occasionally.

A retiree with an empty nest SFH, looking at inflation and the rising cost of goods, and the future of living on a fixed income, might choose to cash out their equity with a HELC, use that to buy the smaller cheaper condo, and rent out their SFH instead. More work, but more money, and hey, you're retired, what else are you going to do?

End result is, no new SFH on the market.

Re: The housing market is starting to crack – Sellers are cutting prices

#59

Post by TheSoftwareGuy »

jeffreyrogers wrote: post #33

Unless the housing supply increases this will just be a temporary thing. As long as people are able to make their mortgage payments they typically won't sell their homes at a loss (even if their equity is negative). Some people will always be forced to sell due to life events and that's what will set current market comps. Since mortgage rates have recently spiked upwards people who need a mortgage to buy a home can a…

> Unless the housing supply increases this will just be a temporary thing

I'll go a half-step further and say that unless this is a result of broad actions that have made home-building less costly, it will be temporary. Whenever house prices go down, home-builders become less incentivized to build new homes, and so less homes get built, and prices go up again. This will happen unless the price drop was a result of houses becoming easier to build

Re: The housing market is starting to crack – Sellers are cutting prices

#60

Post by wing-_-nuts »

lastofthemojito wrote: post #42
lenerdenator wrote: post #36

It won't matter for Millennials trying to buy their first homes. I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day. Typically they're flipped houses. If you were to bring down the value of every single-family home in the US, that means accepting about 2/3rds the value of each of these mortgages, along with all of the securitized derivatives of them. That's a 2…

> I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day. I've been hearing a lot of "should be" talk like that recently - like folks complaining that people are paying $50k for a normal SUV that "should be" $30k or whatever. What are we basing "should be" on? Some affordability metric? Our gut feeling about what a comparable thing cost a few years ago? If I sold m…

Homes 'should' be affordable to the people who live there. I.e. I would hope the median housing costs are no more than a third of the median take home pay for the average resident. Now, I'm not going to sit here and advocate for price fixing, but you can do a few things.

1. Ban AirBnB short term rentals by people who do not own and live in the house.

2. Ban foreign ownership of real estate. A nations laws are there for the benefit of its people, not some random billionaire from china looking for a place to park his money.

3. Much more relaxed zoning, preferably at a national level, or at the very least, at state level. Something akin to Japan where multi-tenant residential housing is permitted in all but a few zones.

If all of the above were in place, I'd have no problem with houses going for 'whatever the market will bear'. Sadly our housing market is captured by people with vested interests in making home ownership unaffordable for most.

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