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US Housing Market to Much Better (for buyers) in Near Future

By Patrick following x   2019 Jan 5, 8:31pm 606 views   8 comments   watch   nsfw   quote     share    


https://wolfstreet.com/2018/12/28/us-housing-market-to-get-uglier-in-near-future/

All four regions got whacked by year-over-year declines:

Northeast : -3.5%
Midwest: -7.0%
South: -7.4%
West: -12.2%

The plunge in pending home sales in the West, a vast and diverse region, will prolong the plunge in closed sales for the region. Particularly on the West Coast, the largest and very expensive markets — Seattle metro, Portland metro, Bay Area, and Los Angeles area — have been experiencing sharp sales declines, a surge in inventory for sale, and starting this summer, declining prices.

Today’s pending home sales data confirms that these trends are intact and will likely continue. ...

At some point, the market is going to run out of people with median incomes who are willing to stretch to the limit to buy a starter shack; and the market is going to run out of people with high incomes who are willing to stretch to the limit to buy a median house.

For example, at the peak, the median house price in San Francisco was over $1.7 million. That median house is nothing fancy. And the market has run out of high-income people blowing so much money on a modest house. Hence prices have come down sharply over the past six months. ...

And these potential buyers are now also confronting the fear that prices will decline, or further decline, after they buy. This is a scary thought, given the amount of leverage and the large dollar figures involved in a home purchase. Potential buyers now see that after the purchase, those fears could translate into some real and long-lasting headaches.

In Seattle, house prices dropped 4.4% in four months, the biggest four-month drop since Housing Bust 1, according to the Case-Shiller Home Price Index. Prices also deflated in the San Francisco Bay Area, San Diego, Denver, and Portland.


1   clambo   ignore (4)   2019 Jan 6, 1:33am   ↑ like (0)   ↓ dislike (0)   quote   flag        

The median house in San Francisco is so expensive that it boggles the mind.

It also is interesting that although you make money in stocks, people love to turn the proceeds into houses which don't really provide as much capital gain and certainly are hard to turn into income, if ever.

My friend who didn't go to college makes a fortune selling houses in Santa Cruz. When she started to have extra money to save she asked me about investing for her retirement. Her mind was skeptical about the whole thing at first.

I asked her how the people she sold houses to got the money, was it perhaps their stock options from working in high tech? She thought so in many cases. So, if they got the big money from stocks to buy houses, do you think owning stocks be a good idea also?
2   Strategist   ignore (2)   2019 Jan 6, 9:07am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
For example, at the peak, the median house price in San Francisco was over $1.7 million. That median house is nothing fancy. And the market has run out of high-income people blowing so much money on a modest house. Hence prices have come down sharply over the past six months. ...


clambo says
The median house in San Francisco is so expensive that it boggles the mind.


The reason why median home prices are so high is really very simple:
When the the average person could not buy the median priced homes in the past, they bought cheaper homes and ended up making the cheaper homes the new median. The cycle continued. No reason why they won't buy still cheaper homes, again pushing up the low end homes to the median. Thus the cycle will continue.
This phenomenon is why there are no single family houses with half acre lots in Manhattan anymore. It boils down to increasing populations in regions where land has become scarce. As the American population is expected to continue it's growth, and even more people flocking to the most desired regions of the country like coastal California, the long term trend in home prices can only show an upward projectory. The price dips are just buying opportunities as always.
3   Tenpoundbass   ignore (15)   2019 Jan 6, 9:19am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Strategist says
they bought cheaper homes and ended up making the cheaper homes the new median.


Yup the American people lost scope of the value of the dollar. They like to claim economic policy wiped out the dollar value. But the truth is, there were things people used to didn't go for. Or the value of the dollar would have been destroyed decades long before it did. People weren't willing to pay one penny more for something than it was worth. And if they had to, they did so very sparingly.
Especially when you consider Bush and Obama showed us inflation is a man made concept. Those Reagan years inflationary cycles was just the Oligarchs feeling the waters for higher prices on many things. People just didn't go for it, so inflation always reeled back down.
In early 2000's we were like Mullets we bit what every they put on the hook. Hook line and sinker.
We haven't backed off one single inflationary point since then. Other than gas and Oil. And that's purely because there's no where to store unused unwanted Oil and Petroleum for long.
4   BayArea   ignore (1)   2019 Jan 6, 9:55am   ↑ like (0)   ↓ dislike (0)   quote   flag        

How does a decrease in YoY #sales eventually translate to a decline in prices?
5   mell   ignore (2)   2019 Jan 6, 10:42am   ↑ like (0)   ↓ dislike (0)   quote   flag        

The prices have already declined 25% in the bay area. An acquaintance moved away and put their home up for sale for 1.5MM and ended up selling for 1MM after getting many lowballs very much below 1MM. That's a 33% reduction. The more people less land theory sounds good until you realize that population density in many European countries is a multiplier of the population density in the US yet prices have not appreciated like in the US. I predict housing to underperform for many years to come. The coming generations don't have the money and inclination to pay for a massively overpriced shack.
6   mell   ignore (2)   2019 Jan 6, 10:48am   ↑ like (0)   ↓ dislike (0)   quote   flag        

You can still semi or fully retire for 1.7MM in many parts of the world. Plus a mix of increasing socialist and trump protecting the impoverished middle class pressure plus rising if not spiking interest rates will take away rent seeking incentives and put a lot of pressure on the NAR racket. Doesn't mean you shouldn't own a modestly priced home if it's your time but shack flipping and slumlording is done for the next decade.
7   WineHorror1   ignore (1)   2019 Jan 6, 2:26pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

BayArea says
How does a decrease in YoY #sales eventually translate to a decline in prices?

It doesn't necessarily. It would require at least 1 other factor...uptick in joblessness or increase in inventory.
8   APOCALYPSEFUCKisShostikovitch   ignore (38)   2019 Jan 6, 2:32pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

FAKE! NEWS!

If you don't hurry and throw millions at burned out shacks in San Bernardino, you'll be homeless and die of starvation with diseased Mexicans gnawing on your face.

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