patrick.net

ZipperTits says

Emwe're.
ys

Let’s wait and see the default rate. You’re speculating at the moment.

Default rate has nothing to do with what I was talking about.

Stop the bullshit.

Have you ever witnessed any lender calling the loan due when the borrower is not in default? Bank would cut or freeze the line of credit to reduce risks. Banks are in the business of lending. The last thing they want to do is to call any loan due as foreclosing can get very expensive.

I’m not BSing. I live in the trenches and breathe this stuff everyday. I underwrite many deals to get one. I share real life experience in the hope people can learn from it instead of listening to fake news from the MSM.

As I shown in the quote above, 4.25% for 30-year fixed is available for OO housing in the Bay Area, not 5.5-6% as the MSM are touting.

zzyzzx says

OpenDoor taking another bath:
https://www.redfin.com/CA/San-Marcos/1481-Beechtree-Rd-92078/home/6311329

Personally, I think Zillow, Opendoor and the likes were playing the the WallStreet game and got caught. They were playing the “price to sale” valuation to drive up their stock so they got into the acquisition biz model rather than selling leads and ads, which have much higher profit margin.

To me, the more important parameters are growth and profit margin. Retail companies have profit margin in the single digit while software companies have profit margin as high as 50-70%. Price to sale ratio doesn’t mean much IMO.

https://mynorthwest.com/3612510/50-percent-seattle-home-require-price-drop-order-sell/

Half of Seattle homes failed to sell for initial asking price in July

https://www.realtrends.com/articles/anywhere-is-the-latest-real-estate-firm-to-make-layoffs/

Anywhere is the latest real estate firm to make layoffs

It appears Anywhere Real Estate is not immune to the housing market slowdown. A spokesperson confirmed that the company underwent layoffs last Thursday, but the number of impacted employees and their departments was not disclosed.

According to the LinkedIn post of a former Anywhere employee affected by the most recent round of layoffs, a “number of Talent Acquisition and Human Resources” were affected.

RE is pretty solid outside of a few hotspots. IL is a big nothing burger. For some reason CA and FL seem like places that it just goes up. Maybe it ends, but I'm not predicting that. Places like TX, MT, ID, NV, etc seem to have some really hot spots. Those might crash and burn at some point?

Alabama and Mississippi are my picks for the next hipster hotspot. Like Austin, TX or Boisie, ID. Not sure the cities though. Montgomery, AL is a pretty clean city. Birmingham, AL is a touch rough. MS I've explored very little. Went to my cousins wedding and that was it. Been on the Gulf there. I'd like to explore Jackson, MS and surrounding burbs, those with lakes.

WookieMan says

Alabama and Mississippi are my picks for the next hipster hotspot.

Huntsville for sure

https://www.politico.com/news/2022/08/31/housing-recession-economy-00054276

We’re in a housing recession

https://www.cnbc.com/2022/08/31/mortgage-demand-falls-even-further-as-rates-shoot-back-up-to-july-highs.html

Mortgage demand falls even further, as rates shoot back up to July highs

https://www.reddit.com/r/realestateinvesting/comments/x1rksa/it_might_be_time_to_stop_looking_for_a_bit/

I am a casual investor as of right now with my one property. I have been actively looking for a new deal for a few months right now and I just can't seem to find anything that is anywhere near cashflow positive. Maybe its my market but prices have increased so much that the rent I would have to charge is ridiculous. I know people say its always a good time to get into real estate but I really believe now the prices are over inflated on top of the higher interest rates makes finding a good deal harder than its worth.

https://wolfstreet.com/2022/08/17/craigslist-cuts-asking-price-of-class-a-office-building-it-owns-in-san-francisco-by-40-the-building-is-78-vacant/

Craigslist Cuts Asking Price of Class A Office Building it Owns in San Francisco by 40%. The Building is 78% Vacant

Ceffer says

I forgot in CalfuckUornia Prop 19 limited the use of prop 13 inheritance. Heirs have to take occupancy within time limits as primary residence, or tax base valuation goes up. I doubt this will stop some from using houses as rentals under the radar, but the idea of leaving inherited houses fallow and empty for generations got harder.

I was a teenager when the Proposition 13 passed. I followed the election on that ballot proposition keenly because I was taking a class in high school in which the students were encouraged to follow current events in the news. Many stakeholders in local government had strong feelings about it when Prop-13 was scheduled to appear on the ballot, and expressed strong opinions, though I think my teachers did not express their views in the classroom at the students.

It's only a matter of time before that part of our state Constitution is repealed, or reformed so that only owner-occupied residences are protected from market assessments. The pro-13 argument and voter appeal was to protect mom-and-pop on fixed incomes from being forced to sell their homes due to the property tax bills that were based on market assessments. It was not to exempt commercial real estate and landlords. I remember the political campaigns back then, - protecting mom and pop was the original appeal of the law to the voters anyway.

Nearly half a century after it passed, the law has created among other distortions, a positive feedback loop of seniors aging/dying in place (because they cannot afford to relocate), low turnover, landlords big-and-small exploiting renters who have been priced out of owning, exacerbating the shortage, ad nauseam. The cohort of victims of Prop 13 has been growing by the millions.

I know some Smart-Ass Bay Area Hipster types here will tell me such a repeal or reform will never happen, that such efforts keep losing at the ballot. If you say so, homie: I was there in 1978 when deniers said nor would the original Prop-13 ballot measure ever pass, either. Or in more recent years when Hipsters said no way could Trump ever get elected.

Summer slide is an ominous sign.Case Shiller HPI for Ess Eff just reported a 1.3% drop in June. It has begun...

EBGuy says

slide is an ominous hopeful sign

https://notthebee.com/article/check-out-the-data-on-the-coming-housing-crisis-as-home-sales-tank

Patrick says

https://notthebee.com/article/check-out-the-data-on-the-coming-housing-crisis-as-home-sales-tank

Those payments are not back breaking. The spike is alarming, but it will calm down. The graph will look different in 5 years. Love/hate with graphs. The imagery scares the fuck out of people. You're talking $400-500 increase over 2 decades for the midwest and most people are locked in since 2012-2016 at low rates. This is for new purchases of homes.

ZipperTits says

Eman says

Have you ever witnessed any lender calling the loan due when the borrower is not in default? Bank would cut or freeze the line of credit to reduce risks. Banks are in the business of lending.

Banks call those on all the time for institutional investors.

Eman says

The last thing they want to do is to call any loan due as foreclosing can get very expensive

This isn't about foreclosures. That only applies to 'people lending', not corporations with thousands of houses listed as assets. The bank says, "The value of your underlying assets are shit. Pay up, now." like a margin call and that firm has to get the money somewhere, so they liquidate...fast. That is what Blackrock and Zillow and all the others are doing.

See, you don't know what the fuck yo...

Can you share the link(s) where the bank called the loan due on Blackrock and Zillow?

https://www.deseret.com/utah/2022/8/26/23323488/housing-market-home-prices-house-rich-cash-poor-bubble-recession-crash

They bought at the height of the housing frenzy. Now they’re ‘house rich, cash poor’

https://www.reddit.com/r/realestateinvesting/comments/x3ao1b/house_depreciated_8_percent_30_days_after_closing/

House Depreciated 8 Percent 30 days after closing

I bought a rental investment property in coastal NC and closed the end of August. The property is a sfh home and the appraisal came in $10k above what I paid for the property. I paid 380k, and now the property is showing a value of $354k.

https://www.reddit.com/r/realestateinvesting/comments/x36qi5/is_rent_dropping_in_your_city_what_to_do_with/

What to do with cash flow negative rental

https://www.bloomberg.com/news/articles/2022-09-02/toronto-home-prices-drop-16-in-historic-five-month-correction

Toronto Home Prices Drop 16% in Historic Five-Month Correction

zzyzzx says

https://www.bloomberg.com/news/articles/2022-09-02/toronto-home-prices-drop-16-in-historic-five-month-correction

Toronto Home Prices Drop 16% in Historic Five-Month Correction

Not enough

https://www.reddit.com/r/REBubble/comments/x3jimp/the_seemingly_normalization_of_formerly_average/

In desirable metros/coasts like California it seems to have become the norm that what would have been considered an average home (3 bed/2 bath) 10-20 years ago under $1 million has creeped to this $1.5-2+ million price point, with salary growth way behind. That comes around to about a $10k+/mo payment for a 30 year mortgage, or an annual salary around $350-400k+ (assuming monthly payment 30% gross), for 30 years. Makes you wonder how in the world are there that many people not just with with that salary range, but also with that job security in that salary range for 30 years? Or rather than salary do people have really enough stock options to safely afford that mortgage? Or are a lot of these mortgages actually risky if there is a round of layoffs or their stock options plummet? How many people are paying more than 30% gross income as their mortgage payment?

I just don't get is how this elevated price point is sustainable even in the next 5-10 years, or at the very least how this price point can keep creeping up from here. Most physicians barely make that (choosing them as an example because they would have that type of 30 year job security), except for the higher paying specialties. And there's no way a whole city is only physicians living there. You could consider dual income couples in tech or tech executives, but do they really have the job security over 30 years or the amount of stock to sell off to pay off their mortgage if they get laid off and job market slows?

Has anyone done the math and calculated if there's even enough potential salary in the area to buy up all of these homes in that price range? Regardless of the stock market, looming energy crisis, and Russia/China situation, even with all things being stable, the home values can't keep spiraling away from salary growth forever.

https://www.reuters.com/markets/us/feds-williams-mbs-sales-could-be-an-option-down-road-2022-05-16/

Sales of Fed's mortgage-backed securities may be future option

May 16 (Reuters) - New York Federal Reserve President John Williams said on Monday that selling mortgage-backed securities could be an option for the U.S. central bank to consider down the road in its goal to orient its balance sheet largely around holdings of Treasuries.

Realtor trolls other realtors:
https://m.youtube.com/watch?v=mPmhmvjU3uU

zzyzzx says

How many people are paying more than 30% gross income as their mortgage payment?

4.8% for me. Anything higher, personally than 15% is not doable. As we're witnessing with massive inflation on goods, fuels, etc.

You also mention 30% GROSS income. That's more like 20% after taxes. 3x's income has generally been accurate. $100k, you get a $300k home as the max. Interest rates matter, but if you stick to that, you should be fine owning. 4-5X's income is maxed out even in low interest rate environments.

So my max would be $3,750/mo PITI at 15%. I could go to probably $5-6k/mo but I'd be house poor. Not doing that shit. I like travel. And I don't like being home.

WookieMan says

zzyzzx says

How many people are paying more than 30% gross income as their mortgage payment?

4.8% for me. Anything higher, personally than 15% is not doable. As we're witnessing with massive inflation on goods, fuels, etc.

You also mention 30% GROSS income. That's more like 20% after taxes. 3x's income has generally been accurate. $100k, you get a $300k home as the max. Interest rates matter, but if you stick to that, you should be fine owning. 4-5X's income is maxed out even in low interest rate environments.

So my max would be $3,750/mo PITI at 15%. I could go to probably $5-6k/mo but I'd be house poor. Not doing that shit. I like travel. And I don't like being home.

I don't see what difference it makes though if you're paying the same amount in rent. Sure you can't downsize easily an owner, but unless you're single it's not that easy as a renter either. More important than the ration of income to house/rent payment is the amount of assets you have in case you find yourself without work in a cash crunch. As long as you can pay off your house taking all other assets into account (stocks, 401k) you can use hardship rules and keep paying the mortgage. I think 30%-40% of income is a good limit though, 50% can be done for a while if it's not permanent.

mell says

I think 30%-40% of income is a good limit though

House poor. I get that's probably what most owners here are paying. You sleep in a house, shower, go to work, cook a meal or two and then sleep. Not worth 40% of my income. I can go places and have others cook the meal, give me booze, clean my room, etc with the difference between 4.8% and 30-40%. That's my take.

I admittedly did get lucky on my purchase and the income increase was earned (still too low). At 40% though I'm looking at a $1M house in IL. Where I want to live that would be insane market wise. Large land 15+ acres, maybe a pond or creek, pool, 6k square feet, etc. I don't need that. With kids we're not home. And when we retire and are empty nesters we won't need that much space.

I want to invest in a vacation rental in the Caribbean. Preferably PR or USVI for passport and land ownership with it being a territory. I just can't imagine putting 40% of income towards a single home. I've done it. It was an awful existence.

WookieMan says

House poor. I get that's probably what most owners here are paying. You sleep in a house, shower, go to work, cook a meal or two and then sleep. Not worth 40% of my income.

I agree with your remark.

But here in the Cool And Hip Bay Area, I am mocked and belittled by self-identified "locals" (mostly folks who moved to here from elsewhere) because "I Don't Get It". "It's Different Here".

WookieMan says

mell says

I think 30%-40% of income is a good limit though

House poor. I get that's probably what most owners here are paying. You sleep in a house, shower, go to work, cook a meal or two and then sleep. Not worth 40% of my income. I can go places and have others cook the meal, give me booze, clean my room, etc with the difference between 4.8% and 30-40%. That's my take.

I admittedly did get lucky on my purchase and the income increase was earned (still too low). At 40% though I'm looking at a $1M house in IL. Where I want to live that would be insane market wise. Large land 15+ acres, maybe a pond or creek, pool, 6k square feet, etc. I don't need that. With kids we're not home. And when we retire and are empty nesters we won't need that much space.

I want to invest in a vacation rental in the Caribbean. Preferably PR or USVI for passport and land ownership wit...

Depends on what your income is, if you make $10k-$20k net per month 40% leaves you with 6k-12k,plenty to party/travel with 4-5+ times a year, even after groceries and bills. I consider the primary home important.

mell says

I consider the primary home important.

And that's fine. I believe you've said you have kids though. How often are you actually home? Entertaining? Even just relaxing with the family?

For me with 3 kids it's a trivially stupid little amount of time for the cost when I'm home. As mentioned in the past I like travel. Usually gone 45 days a year. So I piss away almost 2 months of mortgage not using the house. Non-holiday/weekend I'm at the house 2-3 hours, rest is sleeping and showering after ours and the kids activities. Wife is gone 3 months a year. We're just not at our house much. Which I think is good.

And I don't begrudge anyone for wanting a nicer/expensive home in a better climate. I live in IL, so November to March it's a shit show with winter. But I've got Montana, Mexico, Dominican and potentially Germany on the books through March. Might do Miami in October. So you CA guys have an extremely different perspective. Not a bad one, but I'm turning 40 in '23 over the summer. IL born and raised. You have to travel if you're from here or you'll hang yourself.

My sister just checked off HI. So she's done all 50 states. Mexico and Spain international only though. Hawaii and Alaska are my missing states. I'll do Alaska, no interest in HI. But I want to dominate the Caribbean unless what's his nuts here give me a good rate on his condo ("justpassingthrough"?). Mexico, Aruba, Saint Martin, St Thomas, St, John, Curacao, Grand Cayman, Jamaica and Puerto Rico. Pacific side of Mexico I need to explore. Costa Rica was cool and we can get free lodging now, but I'm indifferent. In this hemisphere it's all the Eastern Caribbean islands, Antigua, Barbados, etc. Bermuda out in the Atlantic seems intriguing as well. Relatively easy flights from Chicago. 3-5 hours and you're in a kick ass spot.

B.A.C.A.H. says

WookieMan says

House poor. I get that's probably what most owners here are paying. You sleep in a house, shower, go to work, cook a meal or two and then sleep. Not worth 40% of my income.

I agree with your remark.

But here in the Cool And Hip Bay Area, I am mocked and belittled by self-identified "locals" (mostly folks who moved to here from elsewhere) because "I Don't Get It". "It's Different Here".

Many people now work from home (or from travel/the road), I've been for many years. Makes home much more important and makes you spend the majority of time at home, even though we travel 2-3 months per year easily. We also host quite a bit. If you're young and going to an office and partying eslewhere mostly, it's not that important. Once you hit your 30s or 40s, it becomes center to your life.