patrick.net

REpro says

From last 20 years or so, banks (maybe some exemptions) do not hold mortgages at all. Every closed transaction is sold to Fannie Me or Freddie Mac agencies. From there collateralized and sold as bond tranches to various investors e.g., mortgage REIT's. If value goes down that the risk investors took.

This is true for 30-year fixed mortgages although Fannie/Freddie do hold some ARM commercial loans too. Most banks hold onto commercial mortgages as they have lower risk and higher yields. Unfortunately, the Fed hiked rates at unprecedented pace, even faster than Paul Volcker, which the banks couldn’t hedge fast enough; thus, resulted in unrealized losses.

With the office and retail space not doing well and likely result in foreclosures or forbearance of some sort in the near future, if not already, banks have to set aside reserves for these assets. Big money saw this coming and withdrew their money from these regional banks; thus, created bank runs. My buddy, who works for the Federal Reserve, said he’s been extremely busy at work the last few weeks. It’s obvious at this point that more regional bank failures are on the way. The too big to fail banks will be fine.

mell says

You have to compare it though with a renter who invests their excess money during that time. Just because it's more expensive years later doesn't mean it's better than renting. There will be no crash imo but that's no reason to buy at a (local) top either. However if the interest rate and your situation is right you likely will never regret buying. Interest rates of 3% or below were the shit. Nowadays I'd think twice about buying, def a more complex calculation/consideration now

Well said mell. The calculation is more complex in the current environment.

In late 2021, we got 3% IO on a 10/1 ARM with First Republic Bank. In summer 2022, it was 4.2% for a fully amortized 5/1 ARM with them. They’re no longer in business. Other banks’ quotes recently came in between 5.25 to 5.8% for 5/1 ARM while sellers still want sub 5% cap for their assets with no upside in rent.

Bitcoiner says

I said it many times, if you are happy renting, good for you!

When you think about it renting is better than buying if the rent is cheap enough.

Bitcoiner says

I like the discussion but I wish the bears could bring some inventory predictions to the table.

Inventory is already plentiful if you are looking for a new build and want an expensive house in certain areas. That's pretty much step one. It's going to take time for the repos accumulated during the moratorium to work their way through the system (and this might be step 2). I am not expecting inventory to return to normal levels at all this year. In some places (like Arizona and Florida) full of old people that literally need a constant flood of people moving in to replace all the deaths it will be interesting to watch inventory levels, as the "value proposition" is pretty much gone (as in it's more expensive for me to live in Florida then in Maryland, so why move there?). Sure it's almost always going to be cheaper to live in various places when compared to Manhattan and California, but when (the south mostly) is as or more expensive then the Midwest and most of the Northeast, who is going to move their especially with the salaries being lower (like in Florida). I'm not going to take a 25-40% cut just to live in Florida.

This is going to take years, unless the proverbial Black Swan event happens.

Bitcoiner says

Actually, active listings (which includes existing homes and new construction) are very low by historic measures.

If you look at new construction only without looking at existing homes, the inventory is high. That's what I was referring to. Something like a 7 months supply.

Bitcoiner says

Repos / moratorium? Are you talking about the upcoming foreclosure tsunami due to the mortgage forbearance?

I don't know if it's going to be a tsunami at ay point due to general slowness when it comes to repos, but yeah, between short sales and repos it should supply the market at least something that it wasn't doing in 2022.

That’s a steal and would cost you 30k for a comparable lot size in CA. AZ will always see an inflow of retirees from CA. That demand won’t dry up.

I'm thinking more along the lines of what's going to happen in the SouthEast. I would still expect people to flee CA and flood NV, AZ, etc. as long as the value proposition still exists (and it most likely will). I am expecting things to be different in the SouthEast where new builds are plentiful and the value proposition is basically gone for most people in the NorthEast and Midwest who typically move south. Of course, if people from CA decide to flood the SouthEast, that could be different, but CA will run out of conservatives eventually.

just_passing_through says

Bitcoiner says

.alpine?

My bet: El Cajon

El Cajon is way too city for me. Where I live we call going to San Diego(which starts in El Cajon), "Going into town", or "Going down the hill".

Interesting that when I share seeing rentals drop hundreds of dollars, I'm simply dismissed because reality does fit someone's agenda. Well, here's some more reality you won't like...

https://www.trulia.com/p/ca/alpine/address-not-disclosed-alpine-ca-91901--2697408133
https://www.trulia.com/p/ca/alpine/2301-s-grade-rd-s-alpine-ca-91901--2122158620
https://www.trulia.com/p/ca/alpine/1942-tavern-rd-alpine-ca-91901--2079171155
https://www.trulia.com/p/ca/alpine/1222-willowside-ter-alpine-ca-91901--2079169915

There will be no housing bust. It's becoming more and more clear to me that America is moving toward 3rd world status. At least so far as income/wealth inequality is concerned. I will predict property taxes possibly shooting to the moon though if a larger and larger % of the population can't make enough to support themselves.

Gotcha. Yeah, a city only view is bit narrow for me if I want to spot trends. I prefer county searches. Price drops that start in the county will eventually spread to the city. Makes sense the further out places have to drop first. Although personally you couldn't pay me to move back to the city, so I'd actually price real estate the opposite. Give me wide open spaces and no neighbors!

NuttBoxer says

Interesting that when I share seeing rentals drop hundreds of dollars, I'm simply dismissed because reality does fit someone's agenda. Well, here's some more reality you won't like...

https://www.trulia.com/p/ca/alpine/address-not-disclosed-alpine-ca-91901--2697408133
https://www.trulia.com/p/ca/alpine/2301-s-grade-rd-s-alpine-ca-91901--212215862 (some text omitted to shorten quote...) get="_blank">https://www.trulia.com/p/ca/alpine/2301-s-grade-rd-s-alpine-ca-91901--2122158620
https://www.trulia.com/p/ca/alpine/1942-tavern-rd-alpine-ca-91901--2079171155
https://www.trulia.com/p/ca/alpine/1222-willowside-ter-alpine-ca-91901--2079169915

Jesus, who pay these rental prices? They’re even more expensive than San Jose. 🤯

Eman says

Jesus, who pay these rental prices? They’re even more expensive than San Jose. 🤯

Probably nobody. These rentals are probably sitting empty. I mean, look at that shit and its location.

Bitcoiner says

“Bay Area home prices spike 17% as sellers pull back”

https://www.siliconvalley.com/2023/04/24/bay-area-home-prices-spike-17-as-sellers-pull-back/amp/

From the article for reference:
“For the right house, there’s definitely a lot of buyers,” said William Wu, 36, who along with his wife and two young children were at a recent crowded open house for a white four-bedroom home in the Burlingame hills with panoramic views of the San Francisco Bay. It’s estimated value is $2.5 million.
...
Wu, the home-seeking software engineer in Burlingame, recently sold the condo he and his wife, Amy, owned in San Francisco. They’re counting on that windfall going a long way in landing their dream home.
“We have a fair amount of cash, so then our mortgage doesn’t have to be as large,” he said. “Hopefully, that’s a leg up on some of the other buyers.”

This is the condo they just sold:
https://www.redfin.com/CA/San-Francisco/152-Summit-Way-94132/home/109464687
Bought at the end of 2015 for $1,176,974
Sold for $1,315,000 in March 2023.

At least they did not lose any money on the condo sale and it gives them $140k profit to roll into the home purchase.

Bitcoiner says

That’s freakin insane….3.7k for 2b/1b, 1Sqft
That’s Alpine….35min away from San Diego…

$3750 for a 2 bedroom, 1 bath that is 35 mins from San Diego ?

Wow, you can get the same condo or apartment as far as quality for around $1300 in Panama City Florida and only about 15 to 20 minutes from the beach.

.

GNL says

There will be no housing bust. It's becoming more and more clear to me that America is moving toward 3rd world status

Yeah. Maybe.

But in that case if the high inflation continues and the house prices don't crash but "stay flat" then they sort of did crash by not keeping up with the inflation.

ad says

Bitcoiner says

That’s freakin insane….3.7k for 2b/1b, 1Sqft
That’s Alpine….35min away from San Diego…

$3750 for a 2 bedroom, 1 bath that is 35 mins from San Diego ?

Wow, you can get the same condo or apartment as far as quality for around $1300 in Panama City Florida and only about 15 to 20 minutes from the beach.

.

San Diego is fucking expensive, moreso than other areas in CA by now. It has beautiful areas, but is overpriced.

B.A.C.A.H. says

GNL says

There will be no housing bust. It's becoming more and more clear to me that America is moving toward 3rd world status

Yeah. Maybe.

But in that case if the high inflation continues and the house prices don't crash but "stay flat" then they sort of did crash by not keeping up with the inflation.

Not gonna happen. Why? Muh inventory. Inventory will from this moment forward NEVER meet demand. Especially for middle and lower classes. They want to reduce consumption. They've been telling us this.

ad says

$3750 for a 2 bedroom, 1 bath that is 35 mins from San Diego ?

Wow, you can get the same condo or apartment as far as quality for around $1300 in Panama City Florida and only about 15 to 20 minutes from the beach.

They're not going to get it until they move out of CA. I actually don't have a beef with a user here currently, but people from CA see the world from their lens. It's not reality. It's their reality. My mom just sold 3 houses, 3 bed, 2.1 bath for $250k, on water that leads to Escambia Bay, to Pensacola Bay to the Gulf or you could do ICW. That would be $2-3M in CA.

They don't understand because the weather is so nice there, there's mountains, surfing, etc. They don't need to travel. They live in a bubble. Not digging at anyone, but housing is cheap as shit, including rentals in many parts of the country that are 100% acceptable places to live.

Not accounting for housing I would have lost $40k/yr moving to CA. Taxes out the gate. I had a spread sheet for it when we were contemplating it. Denver, CO was pure shit too. IL is shit, but I don't foresee us moving for a good 10-15 years. It's less shittier than other place financially which is surprising.

Bitcoiner says

home owners are protected from higher payments.

Lol! In you happen to live in CA, owner can be "protected" from property taxes and become (bigger) leach in the long run on ponzi scheme of CA 1978 Prop 13.

Blue says

Bitcoiner says

home owners are protected from higher payments.

Lol! In you happen to live in CA, owner can be "protected" from property taxes and become (bigger) leach in the long run on ponzi scheme of CA 1978 Prop 13.

How can we call Prop 13 a leech when it’s available for everyone the moment one becomes a property owner?

Look at all the CEOs who collect their paychecks through stock options so they only have to pay long term capital gains and avoid paying all kinds of taxes?

WookieMan says

The problem most don't understand is you literally owe nothing if debt was obtained without fraud. People have been trained that debt and leverage are bad because it could hurt your credit score. That's literally the only penalty as long as you didn't commit fraud by lying to get the loan and make sure your savings are in protected assets.

While a first mortgage normally has no collateral beyond the house itself, I believe if you refinance, then you are usually personally on the hook for the entire mortgage. So then the bank can go after your savings and checking accounts, etc, if you default.

Patrick says

So then the bank can go after your savings and checking accounts, etc, if you default.

Not going back to my comment, but I believe I said keep your assets in protected class investments. You should really never have more than $10k in a personal checking account and $10k in a savings. Once you stop paying go to cash, get a nice safe. NEVER borrow from the bank you have a checking or savings account even if you don't default. Have your 6 month safety net in cash so it's not traceable. Trusts are good as well for protection.

Also they cannot garnish wages. It's harder if you're into stock investment though. They can go after that. But you can still have fun with that in self directed IRA's. Remember too if it was on this thread, you're still going to short sale the property. You sign a document that releases you from all obligations of that loan. Amortization is a thing. The bank likely has no potential loss if you paid for 3-4 years. And they waive the right to come after you because they got most the money back.

Fact is lending is a business transaction. There's always a risk. Think of a restaurant. They make you food assuming you're going to pay. Well some people eat and drink and don't pay if service was bad or the food sucked. I've never done it, but it's perfectly legal. It's different law but kind of the same concept. Or think if you ordered a computer monitor and it was broken. Obviously first try for a refund or replacement, but you're not paying for it, that's for sure.

None of this is necessary though if you just don't over do you debt to income on a house. Our income is above our debt on our house. I'd never go above 3x's income to price on a purchase. You make $100k, a $300k property is the max you should go after. And as the price gets higher I'd cut that back to 2x's. With the 3x's rule I could afford a $1.3(ish) million dollar home. Hell no.

There are so many variables. The problem is education. 60-70% of people will own a home in their life. Guess who is teaching them about it? Realtors. Guess who taught the Realtors? Nobody besides a state licensing process an ape could guess its way through. Most realtors are not even college educated in anything worth while.

We need to fix education. No high school student should graduate without a real estate course and a banking/investment/credit type course. All the fluffy stuff should be extracurricular. Where I'm at FFA (Future Farmers of America) do all their shit outside the classroom. Same with 4H. It has to be in school though for this. No lobby is going to allow you to tell high schools what the real world is actually like though. They want you as blind consumers. It won't happen in our lifetime.

I'm not promoting defaulting. Just trying to educate people that it's not scary or bad. People kill themselves for defaulting on debt. Outside of mental illness, finances are probably the number 1 cause of suicides. It's just money and a score other humans just make up. I've had no money in the past and a lot now. I've seen my successful parents go bankrupt. Sometimes you have to just let go. The system allows you to say fuck it, I'm not paying. But you need to be prepared on how to handle it. High school and college doesn't teach you that. Never will....

Eric Holder says

Probably nobody. These rentals are probably sitting empty. I mean, look at that shit and its location.

My guess someone overpaid, and is trying to cover their exorbitant mortgage. Always a sure sign of a market on the decline. I watched rental prices for months before we got our house in Yuma. Made it really easy to tell long-time owners from those who over-paid.

NuttBoxer says

My guess someone overpaid, and is trying to cover their exorbitant mortgage. Always a sure sign of a market on the decline.

Too much Losing Face to say it like that.

Blue says

Lol! In you happen to live in CA, owner can be "protected" from property taxes and become (bigger) leach in the long run on ponzi scheme of CA 1978 Prop 13.

Blue,

do you live in California? Just asking.

On a tangent, but former Californian homeowners who sell and move to Texas do complain about property taxes and learn to protest them. Texas puts the "taxes" in Texas. You can't spell taxes without Texas :)

Basic economics, you can only charge what someone is willing to pay. Your market rental rate is determined by me(the consumer), not you. Properties that sit, sit for a reason. No one is willing to pay. That owner can spew market rates and charts out their ass all they want, they will lose money until they lower the price. That's what these rentals show. The chinks in the wishful thinking of the '06 crowd - "Rents will never drop again!!".

As your renters are squeezed more and more by inflation, lack of good jobs, what do you think they will do? The stupid ones will keep ponying up, taking side jobs, killing themselves to stay where they are. The smart ones will leave.

It's a lot easier to just know the values because you've been looking forever, than check the history of every rental. When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid. Because as you said, they don't want to take a loss on their "investment", so they pray for some sucker to bail them out. But the suckers are drying up fast, and the owners will be left holding the bag in the end.

NuttBoxer says

Basic economics, you can only charge what someone is willing to pay. Your market rental rate is determined by me(the consumer), not you. Properties that sit, sit for a reason. No one is willing to pay. That owner can spew market rates and charts out their ass all they want, they will lose money until they lower the price. That's what these rentals show. The chinks in the wishful thinking of the '06 crowd - "Rents will never drop again!!".

As your renters are squeezed mor (some text omitted to shorten quote...)
It's a lot easier to just know the values because you've been looking forever, than check the history of every rental. When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid. Because as you said, they don't want to take a loss on their "investment", so they pray for some sucker to bail them out. But the suckers are drying up fast, and the owners will be left holding the bag in the end.

I'd also think that they slow deterioration of society under xiden, widening of wealth gap will make renters more "destructive" and less reliable on payments, so being as landlord will become harder (has already, see moratoriums), unless you're a big corp.

https://www.calculatedriskblog.com/2023/05/update-framing-lumber-prices-down-57.html

Framing Lumber Prices Down 57% YoY, Below Pre-Pandemic Levels

https://www.homedepot.com/p/2-in-x-4-in-x-8-ft-Prime-Whitewood-Stud-058449/312528776
Shows $3.35 in my area.

It's going lower...https://www.nasdaq.com/market-activity/commodities/lbs

1337irr says

On a tangent, but former Californian homeowners who sell and move to Texas do complain about property taxes and learn to protest them. Texas puts the "taxes" in Texas. You can't spell taxes without Texas :)

No income tax. If you're a high income earner, Texas makes absolute sense. I'm not a fan myself and would never live there, but cost of living for upper middle class to wealthy beats the living shit out of CA. Prop 13 doesn't remotely make up for 13% top end income taxes unless you're locked in for 20 years to a house and don't make much.

High property taxes are trivial if you make $250k plus. Texas is still middle of the road property tax wise if I recall correctly. It's not NJ or IL. Lebron James would have been best just staying in Miami. You pay taxes where the games are played either way. He's getting raped in CA with the Lakers since half his games are there. That's 13% per game check. Any athlete that gets paid it's in the state you're playing in. Then the hassle of filing all the multiple state taxes.

As with anything everyone is getting their cut of your income. Agent, accountant, lawyers, etc. Mo money, mo problems.

1337irr says

It's going lower...https://www.nasdaq.com/market-activity/commodities/lbs

Fuck me running! Good! Great. Waiting on another quote on our build. I don't like puking after the first one. This one needs to be under $500k or we're pulling the plug I think and adding a basement bath and getting a new game plan.

NuttBoxer says

It's a lot easier to just know the values because you've been looking forever, than check the history of every rental. When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid

Sheesh Nuttboxer. Waste your time arguing on a blog with someone who is using the blog to rationalize and convince him/her self how savvy they are?

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/13c45dl/my_hoa_is_going_to_balloon_from_345_to_over_700/

My HOA is going to balloon from $345 to over $700 within my first year in my condo. Is this legal?

zzyzzx says

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/13c45dl/my_hoa_is_going_to_balloon_from_345_to_over_700/

My HOA is going to balloon from $345 to over $700 within my first year in my condo. Is this legal?

Totally different topic. They deferred the maintenance and the guy didn't pay attention. Generally if you own a condo you'r not good with trades, so you just expect it to be done. Most HOA's are run by morons and the maintenance doesn't get done.

No one should have to tell you, but if you're too dumb to realize there are things called special assessments, you're a common idiot and deserve the increase. Also it's $345 more. You don't have to do the work. Grow up or man up and get a house and do the work yourself. People have got to stop blaming others. It's unfortunate mommy didn't give you fresh milk from her tit until you were 35.....

I read shit like this and I know we're doomed. It's not an IF it's a WHEN.

WookieMan says

They deferred the maintenance and the guy didn't pay attention.

I have seen this in Dayton and in Virginia where a condo had to increase rates because the roads had to be repaved. Since the roads are private, the developer did not have to build to state DOT standards, so the roads deteriorated in less than 10 years.

https://www.calculatedriskblog.com/2023/05/lawler-american-homes-4-rent-net-seller.html

American Homes 4 Rent Net Seller of Single-Family Homes Last Quarter

WookieMan says

You should really never have more than $10k in a personal checking account and $10k in a savings.

How does one keep not more than 10 k in checking and 10k in savings? What are the options available?

Bitcoiner says

If he paid 20% down and has a 5% interest rate (remember rates were lower in 2021). his mortgage is 2,800 (including property taxes and insurance).

So what I see is they can't keep their renter. They found someone right away both times they listed, so price must have seemed rights, but for whatever reason, renter wasn't incentivized to stay. But this current listing has gone up only 8 months after signing last contract. Turnover costs money, and places that are priced right don't turn over for years. I know a guy in Santa Barbara that has rented the same house for 20+ years, paying WAY under market. I'd guess this owner is at best treading water, but likely negative assuming money for upgrades and maintenance. And with his rent going the wrong way, he may not ever see a profit. But that's what happens when you overpay at the top...

Bitcoiner says

“ When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid”

“Overpaid” is subjective. And you don’t know how much capital someone put down on a property and how his loan is structured.

Anyways, the notion of high rent>means someone overpaid>means housing top is near seems a bit one-dimensional to me. But whatever….. you found a house in Yuma and I am happy for you. Hope it all works out and you like it there! Send us some feedback on what you like/not like in Yuma!

Your feelings about people like me being successful without owning are subjective. A property listing for $500 over what most properties list for in same location, same amenities, same sqft is the definition of objective.

When do you think people are more likely to overpay, and attempt to over-charge, at the bottom, or at the top? I'm not sure what dimension you want to hypothesize about here, common sense makes it pretty clear. Unless you don't believe there will ever bet a bottom..?