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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

#91

Post by lenerdenator »

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.

Kansas City, MO.

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

#92

Post by carlosjobim »

lotsofpulp wrote: post #83
carlosjobim wrote: post #62

Earlier quoted context omitted.

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?

Most of the planet has below-replacement birth rates currently in a rapidly declining trend. These declining birth rates are not only leading to rapidly declining population, but to exponentially declining population. Right now, most homes that should be for families are inhabited by one or two elderly persons, while almost all real estate worldwide is owned by the elderly or abstractions they control, such as funds etc.

Unless you invent an elixir that makes people live 200 years or if the elderly start burning down their houses out of spite, there will be no housing shortage.

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

#94

Post by poulsbohemian »

jrumbut wrote: post #86
Tade0 wrote: post #52

Earlier quoted context omitted.

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.

I live in a place that has received awards as a retirement destination, IE: we have people in the scenario you describe... I don't really see a difference in these outcomes in terms of inventory. One observation I'd make is that many people who stay in their homes to the end often don't have the means (money, health, etc) to maintain their homes, meaning those homes are often in worse shape and thus a lower valuation. Often too if you think of a "last home" it is either going to be a "downsize" or it's a "dream home" neither of which may be appropriate for all segments of the market. This segmentation is something that gets overlooked when we talk about supply side problems. I have lots of houses available in my market, but they may not be the square footage or condition that all buyers are willing to accept.

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

#95

Post by smcin »

jeffreyrogers wrote: post #61
jfengel wrote: post #48

Earlier quoted context omitted.

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…

I think "inventory" = "supply of houses available for purchase [or sale being processed]".

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

#96

Post by analyte123 »

Almost all folk discussion of the recent housing boom will include the words "Blackrock" or "Wall Street", but investors with less than 100 units own the overwhelming majority of the 24% of houses purchased by investors [1]. The 2017 tax cuts introduced several provisions favorable to real estate investors that in my opinion accelerated the blow-up when mortgage rates were cut to well below the inflation rate during the pandemic, already a massive stimulus. Bonus depreciation allowed you to buy a used, already depreciated rental property and deduct its entire value from your taxable income in the first year [2]. Theoretically you have to pay this back when you sell, but not if you exchange it for another property (1031). This is being phased down and will be only 60% starting in January. Second, pass-through deduction allowed buyers of rental property to deduct the rent from their W2 income up to 20% of their gross income, as long as you declare that you spent a certain amount of time managing the property [3]. This is due to expire in 2025. Third, large parts of the US were designated as "opportunity zones" where gains are tax free if held for 10 years and improvements are made [4].

All this, combined with consumer stimulus, increased remote work, major swings in domestic migration and household composition [5], and you have red-hot housing prices.

[1] https://scrippsnews.com/stories/corporate-investors-are-purc... [2] https://tax.thomsonreuters.com/en/glossary/bonus-depreciatio... [3] https://www.bakertilly.com/insights/new-regulations-provide-... [4] https://www.nar.realtor/qualified-opportunity-zones [5] https://www.federalreserve.gov/econres/notes/feds-notes/the-...

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

#97

Post by [deleted] »

carlosjobim wrote: post #92
lotsofpulp wrote: post #83

Earlier quoted context omitted.

Which country has a rapidly declining population?

Most of the planet has below-replacement birth rates currently in a rapidly declining trend. These declining birth rates are not only leading to rapidly declining population, but to exponentially declining population. Right now, most homes that should be for families are inhabited by one or two elderly persons, while almost all real estate worldwide is owned by the elderly or abstractions they control, such as funds…

[deleted]

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

#98

Post by gosub100 »

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.

My vote is to tax/regulate corporate and out-of-state owners. I think landlording should still be an option for everyday middle or lower class people to start a business. But you get cut off after your 2nd or 3rd property, or if you don't reside in the state. Most importantly, though, Blackstone capital should not be able to buy $4bn-worth of single-family homes. If they want to build new urban housing that costs that much, fine. but not allow them to compete at scale with everyday people because they have a tremendous advantage. I think many places would also benefit from a hefty vacancy tax as well.

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

#99

Post by jackbravo »

exabrial wrote: post #27
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.

I disagree. It suffers from overregulation. How is a person possible able to sell their own house without doing some bullshit thing wrong and making an illegal sale?

regulation for buyers. Prove that you are going to live here and not just use it for financial speculation and gain.

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

#100

Post by danaris »

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…

Ultimately, while it is certainly a problem that housing is this expensive, the deeper, more structural problem is that incomes are still this low. It's been 40 years now since incomes started stagnating compared to productivity; anyone who thinks this wasn't going to have serious negative effects on society and the economy had really better wake up, because we're already seeing those effects.
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