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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

#81

Post by a_wild_dandan »

bobthepanda wrote: post #29
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.

the root cause is lack of supply, on an incredible scale. To put in perspective what a program to bring prices down would actually look like, Sweden launched a program in the '70s to build a million homes in ten years, when its population was 8 million. We have not seen homebuilding on that scale in the United States for decades, if ever.

This is the correct answer, full stop. Every other factor is peanuts in comparison. The sheer magnitude of our housing shortage is astonishing: Pre-pandemic, there was something like a ~5 million home deficit. Post-pandemic it grew to ~7 million. This deficit is likely even bigger today.

It's simple supply & demand. We can't reduce demand -- people need shelter. The solution is providing supply. No amount of fiddling with interest rates, corporate real estate investment, or whatever else, will alleviate the housing crisis. (# of houses available) / (# of needy families) << 1. Fix the ratio, or live with the crisis. Everything else is lipstick on a pig.

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

#82

Post by deathanatos »

eweise wrote: post #56
hemloc_io wrote: post #30

Earlier quoted context omitted.

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.

You're obtusely ignoring the commenter's point, and I suspect you know it.

You've got the mechanics a bit wrong, but the point is that your property tax, in real dollars, goes down YoY, as it cannot do anything but that due to Prop 13. In particular, it cannot even track the real dollar (let alone increase).

This is a well-known issue and underlying cause of a number of CA's political problems, biggest of which being the housing crisis. It's further well-reported how two identical homes, in the same neighborhood, can have vastly different property tax rates, with one paying very little, and one paying a lot, because the latter is owned by someone younger such as a millennial. These are the simple mechanics of Prop 13.

I'm glad you were able to raise your kids, but my generation is being screwed out of that, as we cannot break into the housing market, cannot get affordable healthcare, and cannot get meaningful real wage growth. My affordability limit as a SWE is something like $4k/mo, and homes in my market are ~$6k/mo. Either I do like the OP suggests — pay way above affordable and take on the huge risks that come with that — or I continue to rent and cannot get into a starter home from which I might start a family.

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

#83

Post by lotsofpulp »

carlosjobim wrote: post #62
derekp7 wrote: post #8

Earlier quoted context omitted.

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.

Which country has a rapidly declining population?

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

#84

Post by lenerdenator »

poulsbohemian wrote: post #74
lenerdenator wrote: post #54

Earlier quoted context omitted.

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 -…

I'm looking out the window of my real estate office toward a neighborhood a lot like what you are describing - except our median income is abut $20K less and we aren't in the midwest. Those houses here would be within the same range you are talking about, and it's just basic supply+demand, plus the replacement cost. What does that same house cost today to build? It may not seem fair, but that's why even the "affordab…

I wouldn't describe it as a matter of fairness, thinking deeper about it.

We're really just mortgaging quarterly earnings for those with major residential real estate holdings (like pension funds paying out to those born during the Baby Boom) with future economic growth at this point. When asked if they'd rather have sustainable growth that will see them able to put food on their tables 20 years from now or make the line go up over the next 90 days, capital has chosen the latter. That _will_ have a consequence down the line, and it won't be a good one.

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

#85

Post by lotsofpulp »

fragmede wrote: post #28
vkou wrote: post #14

Earlier quoted context omitted.

You can refi your low-principal, high-interest mortgage later, if interest rates ever come down. You can't renegotiate your high-principal, low-interest mortgage later. (Well, you can, if rates go up, but why would you want to?)

look into mortgage recasting.

That is just paying extra to lower the principal. How does that help if you have a high principal? You are still paying it.

With a low principal, high interest rate mortgage, refinancing to a lower interest rate reduces the amount you were going to pay, without you having to spend any money.

For example, lots of people that bought in 2015 to 2019 at higher interest rates made out great, they paid a lower price for their house, then refinanced in 2020 to lower their interest costs (and sometimes even got paid to refinance).

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

#86

Post by jrumbut »

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?

I wonder if there is a difference, as far as housing market fluctuations go, between an aging person who passes away and leaves their home to their heirs and one who sells their home before they pass away in order to fund their retirement/healthcare.

Obviously the outcome for the family is very different and worth examining, but for the moment I'm considering the broader impact on the housing market.

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

#87

Post by comte7092 »

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…

Selling at a loss is dependent on your cost basis, and fortunately most owners didn’t buy within the last few years of dramatically overinflated prices.

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

#88

Post by gosub100 »

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.

1300 sq. ft, $99k

https://www.zillow.com/homedetails/36-1st-St-Mc-Gill-NV-8931...

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

#89

Post by lenerdenator »

AnimalMuppet wrote: post #50
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…

But see, the thing about flipped houses is that the people who own them don't actually want them. They want to sell them. For as much as they can get, sure, but also to sell them in a timely fashion. So I don't see flippers as being the big deterrent to prices falling. If they haven't caved yet, they will in a few months. > If you were to bring down the value of every single-family home in the US, that means acceptin…

They want to sell them _at a profit_ and if the market doesn't cool enough, they'll be able to do that no matter what, at the expense of the future economic activity of the people who can afford it.

As for the second point, simple. They just refuse to renegotiate loans. Same as 2007-2009. They've gotten far pickier about who it is they loan out to, too, so it's less likely to result in the foreclosure of the home than it was during that time period. The flip side of that is that there's a shrinking pool of families that can afford to take that sort of cost on.

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

#90

Post by poulsbohemian »

wing-_-nuts wrote: post #60
lastofthemojito wrote: post #42

Earlier quoted context omitted.

> 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 f…

These are popular ideas in many places, but here are just some things to consider:

1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much.

1b) Highest and best use is a really important concept. There are properties that make for not great permanent dwellings but are great short-term rentals. When you put artificial restrictions in place, it doesn't actually help supply.

2) There is so much money here in the US that even banning foreign ownership doesn't matter much. I live in a tourist / second-home market and it's people from the region who are buying up the investments.

3a) My community went to relaxed zoning years ahead of the state. Helped a little, but not as much as everyone hoped. Turns out that it is still expensive to build multi-family, ADUs, etc and not a fit for every life need.

3b) While zoning changes are good, I continue to hammer on income / jobs as a bigger factor in many markets. Don't come at me with SFO or some other example - every market is going to be different. But in places like mine, the make up of the economy is a bigger factor to affordability than zoning or these other changes. Fixing the whole regional economy is not a simple problem and it doesn't campaign well in political stump speeches like "fix zoning" does.

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