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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

#61

Post by jeffreyrogers »

jfengel wrote: post #48
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…

I'm afraid I don't follow that. House-sellers are generally also house-buyers. They move out of one place into another. It's neutral with respect to supply. If there's a glut of people owning houses but not living in them and not successfully renting them, then that does reduce supply, but they're also suffering opportunity cost. If they're willing to throw away money like that I don't think increasing supply would h…

If someone sells a house for less than they purchased it their equity available to purchase another house decreases. Since mortgage rates have increased that means they can only afford a smaller/worse house (because they have less money to make a down payment with). So why would they sell in that situation unless they need to? People sell when their homes have appreciated because they have positive equity and can get a new mortgage, so they can buy a better home by rolling their existing equity into the new home as a down payment (they also don't pay capital gains when doing this and the interest on the new mortgage is deductible, making it attractive from a tax perspective).

Edit: I think I see where the confusion is. You are right that the literal supply of houses doesn't increase or decrease unless people stop/start renting or new homes are built. But the supply of houses available for purchase depends on whether people want to list them right now or not. Which is influenced by current prices because most people won't sell at a loss unless they have to.

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

#62

Post by carlosjobim »

derekp7 wrote: post #8
lastofthemojito wrote: post #4

I've noticed this anecdotally over the past few weeks in my town. After a couple of years of houses being listed on Thursday, shown over the weekend, in-contract for above asking price the following Tuesday, houses have finally begun to sit on the market for several weeks. And I've seen gasp a couple of asking price reductions. Too soon to tell if this is the beginning of a minor correction or a major bubble burst, b…

I think that was the main reason for higher interest rates -- it makes the monthly payments higher, which pushes down the total home price. But it only works if there is inventory. And inventory only happens when people are in a "forced sell" position, such as needing to relocate for their job (back to office push for example). A lack of inventory typically will also spur on new construction, but even in areas where…

The main "forced sell" event is that people die. Yet prices are not coming down even in countries with stable or rapidly declining populations. So shortage it isn't.

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

#63

Post by adversaryIdiot »

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…

its all about affordability. I'm a 26 year old a software developer but have to live with my parents for the foreseeable future....

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

#64

Post by stetrain »

Lucasoato wrote: post #19

I've thought a lot about this, without finding any comprehensive solution. The housing market suffers from inadequate regulation, allowing speculation and profit-making through the mass purchase of properties and subsequent rental hikes. We need safeguards against such practices; perhaps home ownership shouldn't just be a right but a condition actively safeguarded and championed.

There is also over-regulation of the supply. Zoning that makes it difficult to build any thing other than single family homes and corporate apartment buildings surrounded by parking lots. HOA's that require proof of 3x rental as income for each tenant or don't allow multiple tenants per house at all.

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

#66

Post by metamet »

ramesh31 wrote: post #20

Bring it on. I can't wait to buy a house in the next 6 months. People with money who want desperately out of the renting game don't care at all about 8% interest rates. But the investors and second home buyers sure do. This has been the biggest thing keeping me out of the market since 2020; the time pressure, not the prices. I just refuse to make a massive financial decision on the spot based on a 15 minute open hous…

> But the investors and second home buyers sure do.

I'm curious about this, because from what I've heard, a lot of investors are incredibly happy with the higher interest rates as they're paying cash for a lot of homes, which has been squeezing real homeowners out of the market since they are able to shortcut by making offers on houses without requiring financing.

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

#67

Post by cynicauliflower »

Etheryte wrote: post #32
cynicauliflower wrote: post #23

Earlier quoted context omitted.

I don’t know, none of the houses I want to buy are in neighborhoods where any substantial portion of the stock is available to rent. Is there evidence of this kind of “profit-making”? (Not disputing just no experience personally).

In many first world capitals, it's actually a common investment to buy real estate and not rent it out at all. The running costs are lower, there's no maintenance costs and no one pesters you about miscellaneous issues. All these people do is sit on the homes and wait for them to go up in price while everyone else struggles to find a place to live. Them not renting out reduces supply which further drives up prices. Y…

I could also believe this, but it’s not the claim OP made, which was about rental hikes.

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

#68

Post by swsdsailor »

Lucasoato wrote: post #19

I've thought a lot about this, without finding any comprehensive solution. The housing market suffers from inadequate regulation, allowing speculation and profit-making through the mass purchase of properties and subsequent rental hikes. We need safeguards against such practices; perhaps home ownership shouldn't just be a right but a condition actively safeguarded and championed.

It's well established that in high demand areas like CA regulations are excessively burdensome. But go ahead and increase regulations, maybe I can retire earlier as a result!

More likely scenario to solve the affordability issue is 40-50y mortgages, and socialistic handouts by states (like CA is doing).

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

#69

Post by kasey_junk »

m3kw9 wrote: post #45

How many times have I heard that, but they keep calling it till it really collapses. What you should look for is if a certain mid sized bank gets into deep shit because they are left holding a big bag of failed mortgages

Banks don’t typically hold mortgages. They sell them off. Mostly to Fannie and Freddie but also as securities.

Those securities defaulting are a trailing indicator of price as you need a mortgage to be underwater (or mass economic failure) for a mortgage to fail.

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

#70

Post by cma »

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.

Many other states have similar provisions too, capping increases.
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