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Housing Crash | Incoming


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2021 Aug 27, 11:25am   7,874 views  102 comments

by joshuatrio   ➕follow (4)   💰tip   ignore  

From: http://housingbubble.blog/?p=5085

You Chose To Buy A Home That You Can’t Afford

August 26, 2021Ben JonesUncategorized133 Comments

A report from the Atlanta Journal Consitution in Georgia. “The metro Atlanta housing market clicked into balance in July: Supply met demand and home prices stopped their rapid rise. About 12,300 homes were listed for sale last month. In the city of Atlanta, home prices are up 20% from a year ago, according to Bill Adams, president of Adams Realtors. But the change in price ranges from a decline of 3% in Candler Park to a leap of 36% in Inman Park, he said. The trend of higher prices is going to continue because there won’t be a large increase in homes listed for sale, he predicted.”

From Market Watch. “‘Although housing is expected to remain sturdy for some time, several key gauges are cooling as the pandemic-induced buying frenzy eases and elevated prices cut into affordability, particularly for first-time homebuyers,’ Priscilla Thiagamoorthy, an economist with BMO Capital Markets, wrote in a research note.”

The Chicago Tribune on Illinois. “Seneca Oaddams, 44, bought his two-flat in Roseland for $132,000 a little over two years ago. The property, which he purchased as an investment and rental property, now has an estimated worth of $250,000, according to Redfin. But having endured 17 months of the pandemic, Oaddams says it’s hard to hold on to the building. His tenant, whose rent covers approximately half of Oaddams’ monthly mortgage, lost her job at the start of the pandemic and hasn’t been able to keep up her payments.”

“‘I’m actually hopeful for the future,’ Oaddams said. ‘I’m hopeful that it’s going to get better. … It needs to get better. Who doesn’t want to own property? Why not be able to help someone as well and lessen the load on your pocket with a building, so it’s a win-win for the renter and the tenant? The problem is when the rent can’t get paid.'”

The Norwich Bulletin in Connecticut. “Mark Kulos, president of the Norwich Property Owner’s Association and a landlord with 27 units, said while there are ways today for landlords to evict people, most won’t try because a misstep under the federal moratorium can lead to heavy fines. Kulos said this affects ‘mom and pop landlords,’ who have day jobs and have an operation of 50 units or smaller, as the landlord still has to pay for mortgage, taxes and upkeep without making a profit. ‘(The landlords) are working their other jobs to pay their bills, especially if the tenants aren’t paying,’ he said.”

From CBS DFW in Texas. “Clint Cash owns a handful of rental properties in the Dallas-Fort Worth area, some of whom have tenants impacted by the pandemic. Cash and other rental property owners believe the eviction moratorium that the Centers for Disease Control and Prevention enacted last year has gone on for too long with an expanding job market making it easier for people to find work. Cash says he’s sympathetic to those who still can’t pay their bills, but he says the government has put landlords in a position where they can’t either.”

“‘There’s not enough profit in it for these mom and pops to continue and pay their own bills and so they will lose their houses and those houses will thus go to foreclosure,’ he said.”

The Steamboat Pilot in Colorado. “Before casting their votes, members listened to nearly two hours of public comment from dozens of residents, most of whom were short-term rental owners, property managers or property owners who spoke in favor of short-term rentals. Michelle Williams bought her home on Bear Creek Drive in 2018, with a plan to retire in the home one day. Williams said she and her family spent four months in the home in 2020 and supported the city’s economy during the COVID-19 pandemic.”

“To supplement the cost of owning the home until she can retire in it, Williams rents her home out to nightly renters when she is not living in it. ‘We spent an absurd amount of money downtown, as we dined out almost every night,’ Williams said. ‘We’re really good people, and we want to do the right thing and abide by rules and regulations set forth.'”

“Debby Spiker, a resident on Meadow Wood Court, said she understands many property owners need to cater to short-term renters to help pay for their homes, but that choice infringes on her quality of life. ‘I’m hearing a lot of self interest and financial ‘woe is me,’ Spiker said. ‘It’s not my fault that you chose to buy a home that you can’t afford without renting it out to carry the cost.'”

“Spiker said nightly renters have brought ‘destruction’ into her neighborhood — as nightly renters are often loud, do not pick up trash and may cause other issues in neighborhoods traditionally home to full-time families and working residents. ‘I get you want to monetize your home, but it affects me personally,’ Spiker said.”

The New York Post on California. “There is really nothing Kate Beckinsale can’t do, including sell her longtime Los Angeles home after only weeks on the market. The Brentwood property, which was listed on Aug. 2 for $3.995 million, is already in contract after it found a buyer on Aug. 20, The Post has learned. The English-born actress has enjoyed a 15-year run in the four-bedroom, five-bathroom pad she purchased for $3.595 million in 2006.”

“But this also means that she won’t be leaving with that much of a profit, considering renovation projects over the years and broker fees.”

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82   SunnyvaleCA   2022 Mar 30, 12:11pm  

joshuatrio says
Demand looks like it dropping, but supply is so low that it's hard to tell.

With higher rates, supply might drop because people can't afford to move out of their old home, freeing up something for sale. If you're in a 30-year mortgage at 4% and sell to move somewhere else, you won't be able to afford a similar house at 5%. Or, even if the bank will give you the loan, paying that higher monthly payment (or having the payoff time extended back to 30 years) looks like a painful financial step backwards. Or, at the very least, since your current mortgage is better than any available mortgage, you feel content to stay with what you have.
83   porkchopXpress   2022 Mar 30, 2:19pm  

SunnyvaleCA says
With higher rates, supply might drop because people can't afford to move out of their old home, freeing up something for sale. If you're in a 30-year mortgage at 4% and sell to move somewhere else, you won't be able to afford a similar house at 5%.
True if people keep their salaries and jobs. If we enter a job-loss recession, watch out below.
84   richwicks   2022 Mar 30, 2:27pm  

joshuatrio says
Demand looks like it dropping, but supply is so low that it's hard to tell.


It's said there is a 10% non occupancy rate in Silicon Valley - homes that aren't occupied, purchased exclusively as an investment.

This is a ponzi scheme.

Chinese people buy apartments in China for investment purposes - but they basically have to pay the place off in like 3 YEARS. Here, it can be 20-30-50 years.
85   RC2006   2022 Mar 30, 2:34pm  

richwicks says
joshuatrio says
Demand looks like it dropping, but supply is so low that it's hard to tell.


It's said there is a 10% non occupancy rate in Silicon Valley - homes that aren't occupied, purchased exclusively as an investment.

This is a ponzi scheme.

Chinese people buy apartments in China for investment purposes - but they basically have to pay the place off in like 3 YEARS. Here, it can be 20-30-50 years.


Just offsoring money away from CCP.
86   Booger   2022 Mar 30, 3:11pm  

richwicks says
It's said there is a 10% non occupancy rate in Silicon Valley - homes that aren't occupied, purchased exclusively as an investment.


Sounds like an opportunity for squatters.
87   Eman   2022 Mar 30, 3:55pm  

zzyzzx says
So some companies have come up with this fix where they say they'll buy the house with cash and wrap up the loan part with you later.


They show they have the cash in the POF. They waive the financing contingency. As long as they close with CASH by the closing date, who cares if the cash is coming from a lender, or their bank account?
88   Booger   2022 Mar 30, 4:23pm  

Eman says
They show they have the cash in the POF. They waive the financing contingency. As long as they close with CASH by the closing date, who cares if the cash is coming from a lender, or their bank account?


From the sellers perspective, these fake cash loans should be fine. But they probably bloat the "cash buyer" stats that supposedly make the housing market look more sustainable than it really is. I'm also guessing that these fake cash loans people have very little or no equity.
89   B.A.C.A.H.   2022 Mar 30, 4:29pm  

Booger says
they probably bloat the "cash buyer" stats that supposedly make the housing market look more sustainable

Absolutely.
90   Eman   2022 Mar 30, 4:33pm  

Booger says
From the sellers perspective, these fake cash loans should be fine. But they probably bloat the "cash buyer" stats that supposedly make the housing market look more sustainable than it really is. I'm also guessing that these fake cash loans people have very little or no equity.


Unless they fake the POF (Proof of Funds), the equity is real. Buyer will bring the cash to close if they can’t get the loan within the specified time frame. There’s no reason to pay all cash. Then refinance to pull out the equity and pay 2 closing costs.

I operate in this space so I know. We offer $3M cash with no loan contingency. We show our POF. We have the right to obtain a loan within this time frame to close the deal. If for whatever reason we can’t obtain the loan, we’ll bring in the cash to close. Loan hiccup happens. Happened to us a couple times, but we have a portfolio lender who can close within a couple weeks if need be.
91   Eman   2022 Mar 30, 4:38pm  

Example: offer to buy all cash with no contingencies. Lender A sends out an appraiser. Appraiser says the foundation is brick. Lender A says F up, we don’t lend on brick foundation. Good luck 2-3 weeks wasted.

Go to lender B. Lender B says he’d lend, but put $XXX money in reserves to upgrade the foundation once closed. Lender B says he’d take the appraisal from Lender A at face value. Send it across. 3 days to review the appraisal. Loan docs out a couple days after review. Then schedule for signing, funding and closing the following week. BAM! 🚀🚀
92   mell   2022 Mar 30, 5:48pm  

Eman says
Booger says
From the sellers perspective, these fake cash loans should be fine. But they probably bloat the "cash buyer" stats that supposedly make the housing market look more sustainable than it really is. I'm also guessing that these fake cash loans people have very little or no equity.


Unless they fake the POF (Proof of Funds), the equity is real. Buyer will bring the cash to close if they can’t get the loan within the specified time frame. There’s no reason to pay all cash. Then refinance to pull out the equity and pay 2 closing costs.

I operate in this space so I know. We offer $3M cash with no loan contingency. We show our POF. We have the right to obtain a loan within this time frame to close the deal. If for whatever reason we can’t obtain the loan, we’ll bring in the cash to close. Loan hiccup happens. Happened to us a couple times, but we have a portfolio lender who can close ...


The funds are not as real as cash if it comes from fractional lending, no? Of course the cash could also come from a payout backed by a loan which was eventually made possible by fractional lending, aka leverage
93   Eman   2022 Mar 30, 7:43pm  

mell says
The funds are not as real as cash if it comes from fractional lending, no? Of course the cash could also come from a payout backed by a loan which was eventually made possible by fractional lending, aka leverage


When it comes to real estate, it’s mostly about control and leverage.

Cash = having access to it within a short amount of time. I use my HELOC as a POF all the time. HELOC is nothing but a loan. Therefore, as long as we have the cash to close the deal, nobody cares.

The same with syndications, where money is raised from investors for the down payment and rehab, and the rest comes from the lender/bank.
95   Eman   2022 Apr 2, 2:34pm  

Booger says


This is actually true in Oakland. One of my business partners used to live in Oakland and told me that.
96   Booger   2022 Apr 6, 2:28pm  

https://finance.yahoo.com/m/833954e9-5af5-3639-9cb5-b296644b69d4/us-mortgage-interest-rates.html?source=patrick.net

US mortgage interest rates hit 5% for the first time in a decade. That’s great news.
98   Blue   2022 Apr 6, 4:50pm  

Booger says
https://www.needhambank.com/personal/40-year-mortgage-744?source=patrick.net

40 year mortgages!


Hope we will approach 100 years soon like Japan so that multi generations get enslaved for a roof on the head.
99   HeadSet   2022 Apr 6, 5:29pm  

Booger says
https://www.needhambank.com/personal/40-year-mortgage-744?source=patrick.net

40 year mortgages!

Unless these 40year mortgages are government backed, they will be a niche market. I noticed that the ones at your link are adjustable every 5 years.
100   Eric Holder   2022 Apr 6, 5:31pm  

Booger says
https://www.needhambank.com/personal/40-year-mortgage-744?source=patrick.net

40 year mortgages!


I know many people who refinanced several times and every time took out another 30 year loan, effectively turning it into 40 or even 50 year loan if we count from the day they bought their house.
101   HeadSet   2022 Apr 6, 5:35pm  

In 2014 I bought a large house because I thought Hillary was going to win and we would have rampant inflation driving housed to unaffordable levels. Thus, I bought a home that can accommodate 3 generations (Husband/wife with their parents plus adult children). Of course, rampant inflation did not happen when Trump won, but may now happen under Biden.
102   AD   2022 Apr 6, 7:28pm  

I remember see Patrick K on 20/20 many years ago.

Since then I always keep in mind it comes down to housing costs (rent or mortgage+taxes+insurance+hoa fee) not being more than about 37% of gross household income. That is what drives the most of real estate price discovery.

Sometimes you have to make a down payment so that your monthly housing payments are no more than 37% of gross household income.

That is why home price to income ratio is another factor. It peaked last around 6 back in 2007. It is about 6 now, but granted, the 30 year mortgage rate is about 5 % (with no points) now whereas it was about 8% back in 2007.

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