patrick.net

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Morningstar predicts a 5% rate for 30 year mortgage in 2024. Goldman Sachs predicts 5.9%.

I figure peak prices in early 2022 were based on a locked-in mortgage rate of 4%.

So prices need to drop 20% if the 30 year mortgage rate is 6% based on housing affordability, that is a 10% drop in price for a 1% increase in the 30 year mortgage rate.

The price drop may be 18.2% by discounting for wages and income rising about 6% in 2022 and 3% in 2023.

20% x .94 x .97 = 18.2%

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https://finance.yahoo.com/news/housing-market-outlook-where-expect-162543246.html

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Eman says

Interesting observation as housing accounts for 33-42% of the CPI. OER = Owners’ Equivalent Rent.

https://x.com/joecarlasare/status/1690715526211817472?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

I notice rent is at same price level as 2022. As housing may stay flat for a few years, while income rises about 2.5% to 3% a year. I am hoping income catches up more to housing.

3 bedroom, 2 bath, 2 car garage townhome about 2 miles from the beach in Panama City Beach rents on average for $2150. Rent was around $1500 back in 2016 for the same type of townhome.

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https://traffic.americanmilitarynews.com/2023/08/us-debt-downgrade-means-mortgages-just-got-more-expensive/

For 30-year rates, however, the most relevant benchmark is the 10-year Treasury yield.

That brings up a quirk of post-pandemic mortgage rates: The gap between 30-year mortgage rates and the 10-year yield is unusually wide.

This interval, known to economists as “the spread,” typically runs between 1.5 and 2 percentage points. If the 10-year yield sits at 4%, for example, the 30-year fixed mortgage rate should track close to 6%.

However, the spread has jumped to more than 3 percentage points — the highest level since the darker days of 2009, according to Bankrate research. That means that instead of a 4% yield translating to a 6% mortgage rate, borrowers are paying 7% for 30-year loans.

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https://sfstandard.com/2023/08/15/over-50000-to-lose-coverage-as-two-home-insurers-exit/

Two more insurance companies will exit the California homeowners market, further narrowing options for people seeking to insure their home or to purchase a house with a mortgage.

AmGUARD Insurance—a subsidiary of Berkshire Hathaway GUARD Insurance Companies—will withdraw its homeowners and personal umbrella programs in California, while Falls Lake Insurance will also end its homeowners program.

Both companies made the announcements in little-noticed filings submitted to the state regulator on July 21.

The two companies are the latest insurers to rush for the exits in California or limit their business in the state during the past year. But unlike heavyweights State Farm and Allstate, which declined to sign new homeowners business in the state, AmGUARD and Falls Lake will drop their existing policyholders.

That will force tens of thousands of California homeowners to seek new coverage at a time when the available options are growing fewer.

True, mortgages are often contingent on insurance coverage, and that just got harder to get.

This seems certain to add downward pressure to house prices in California.

Why are they leaving...fires?

Patrick says

That will force tens of thousands of California homeowners to seek new coverage at a time when the available options are growing fewer.

And that coverage will have very high deductibles. Also, you may see the State of California sell policies of last resort.

HeadSet says

that coverage will have very high deductibles

Yup.

Our earthquake policy has a $30k deductible. Chump Change to techies I suppose.

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https://www.foxbusiness.com/economy/housing-starts-rise-more-expected-july-despite-rising-mortgage-rates

New U.S. home construction ticked higher in June after declining the previous month, even as the housing market continues to confront headwinds like higher mortgage rates.

Housing starts rose 3.9% last month to an annual rate of 1.45 million units, according to new Commerce Department data released Wednesday. That is slightly above Refinitiv economists' forecast for a pace of 1.44 million units.

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GNL says

Why are they leaving...fires?

@GNL

https://abcnews.go.com/US/wireStory/california-insurance-market-rattled-withdrawal-major-companies-99855058

Two insurance industry giants have pulled back from California's home insurance marketplace, saying that increasing wildfire risk and soaring construction costs have prompted them to stop writing new policies in the nation's most populous state.

Economists say 30 year mortgage rate could hit 8%. I wonder if the plan is to crash the economy by end of this year and then have a rigged or phony recovery at least 3 months before the November 2024 election.

https://www.marketwatch.com/story/mortgage-rates-could-hit-8-economists-say-citing-a-worrying-sign-not-seen-since-the-great-recession-edf2b4a4

Patrick says

Two insurance industry giants have pulled back from California's home insurance marketplace, saying that increasing wildfire risk and soaring construction costs have prompted them to stop writing new policies in the nation's most populous state.

Darn. I thought they would start offering DEW insurance.

Other people are still out there hustling the real estate market. Hard money loan at 9%.

https://www.linkedin.com/posts/marshall-reddick-real-estate_hardmoney-realestate-hardmoneylender-ugcPost-7095494366013571073-3imo

I paid $890,000 for Home Last Year, Now It’s Worth $600,000

https://www.youtube.com/watch?v=2qYsG8jWy_Y

Rubicon says

Anyone forecasting a RE crash would need to have an idea of how inventory is supposed to skyrocket from todays levels:

What an interesting chart. The bottom of the 1990’s housing market was around 1993-1994. It coincided with the lowest inventory at around 1.5M. Then inventory started to build while prices also climbed gradually. Then in late 1990’s, housing prices started to go ballistic due to the dotcom boom and coupled it with gradually declining inventory.

Then the dotcom bust and 9/11/2001. Housing prices took a little dip, then took off again till 2006-2007, likely due to easy lending (aka NINJA loans), while inventory building. Then the bottom fell out with NINJA loans and housing inventory soared to all time high with distressed sales for a few years…an opportunity once in a lifetime. New construction came to a screeching halt. Home builders have been extremely cautious since.

Now, record low inventory, strict lending requirements for the last 1.5 decades, home builders are not over building, we need massive job losses to create distressed sales.

Eman says

we need massive job losses

Wishing that is Bad Karma

Actually, job losses have been on the rise since October 2022 especially for higher paying jobs. This reminds of the MSFT, GOOG, META layoffs, etc last year. Simply mind boggling how the housing and stock markets have been holding up since. It’s not as simple as people think.



https://x.com/samro/status/1690835119299342337?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

Eman says

we need massive job losses

Eman says

job losses have been on the rise since October 2022

Good for you!

Folks pushed out of the housing market = more renters to exploit.

B.A.C.A.H. says

Eman says

we need massive job losses

Eman says

job losses have been on the rise since October 2022

Good for you!

Folks pushed out of the housing market = more renters to exploit.

I doubt he rents to unemployed folks. I wouldn't.

Rubicon says

EMAN,

“ Now, record low inventory, strict lending requirements for the last 1.5 decades, home builders are not over building, we need massive job losses to create distressed sales.”

Bingo! Until we see significant increases in unemployment we don’t need to worry about skyrocketing inventory.

Agree/disagree. At some point interest rates will make a difference if they get high enough. Historically they're not bad. We just grew up or lived with low interest rates most of our adult lives. Job losses and really high interest rates are the only thing that can bring it down in my opinion. I don't see either getting massively out of line. Flat line, maybe a slight decrease. Housing ain't the issue in this economy. I don't have an answer, but housing isn't gonna be the "thing" this time.

Rubicon says

Bingo! Until we see significant increases in unemployment we don’t need to worry about skyrocketing inventory.

Be cautious. CA housing affordability index hit 16% in the 2Q of 2023. It was 19% in 1Q. From a historical perspective, the CA housing market peaks at 17% and bottoms at 40% in past decades.

We don’t know what’s the catalyst for the next housing downturn, but history tends to rhyme itself. It’s NEVER different this time. As Charlie Munger said sometimes it’s best to sit around and twiddle our thumbs. This is likely one of those times.

Was talking to a neighbor who thinks that there are going to be massive fires that make thousands of people homeless. She believes that is why so many insurers are dropping coverage , not taking new customers.

I’m not saying I believe her but it sure would be interesting if thousands and thousands of people were suddenly homeless due to raging “wildfires”.

Eman says

As Charlie Munger said sometimes it’s best to sit around and twiddle our thumbs. This is likely one of those times.

No, don't listen to that old fool. Listen to Rubicon...it's always the right time to buy. No matter the price, rates, economic cycle or location. Buy, buy, buy. NOW

https://finance.yahoo.com/news/mortgage-rates-top-7-hitting-21-year-high-160707969.html

Mortgage rates top 7%, hitting 21-year high

Rubicon says

GNL, i think you are finally getting it. Good job!

You are right. It’s always a great time to buy a house if you hold longterm and can comfortably afford the house!

If you bought during the peak of the Great Recession (peak was in 2006) you would do cartwheels today. 2006 is just a blip on the charts. If you buy in 2023 you will do cartwheels in 2043. Housing only goes up in the longterm.

I thought Eman was your hero. He's not a buyer right now.

Rubicon says

He already got several houses. I am not a buyer right now either. I also own several. Nobody said you should buy a house every year?

But if you don’t have a house and you plan on having one. And you meet the two criteria I gave: hold long term and can comfortably afford it, what’s stopping you from buying? other than the annual perma bear saying: it’s going to crash?

This is well said. Something got lost in the exchanges IMO. If one can afford to buy and hold long term, there’s no point of trying to buy at the bottom.

Since you have a job, you can afford to dollar cost average on your rentals. I need value-add properties to create equity and recycle my seed capital.

GNL says

Rubicon says

GNL, i think you are finally getting it. Good job!

You are right. It’s always a great time to buy a house if you hold longterm and can comfortably afford the house!

If you bought during the peak of the Great Recession (peak was in 2006) you would do cartwheels today. 2006 is just a blip on the charts. If you buy in 2023 you will do cartwheels in 2043. Housing only goes up in the longterm.

I thought Eman was your hero. He's not a buyer right now.

I’m not a buyer at the moment b/c the numbers don’t pencil out. The risk/reward is not there. I’m always a buyer and seller for the right price.

I get it guys. RE probably is one of the most assured paths to wealth. It can be done fairly quick or over the long term depending on 1. Risk tolerance 2. Intelligence and 3. Some luck. No one could have foreseen the last 3 years.

I've mentioned the family my daughter married into. Her husband's grandfather and his grandfather's brother built quite an empire. Seriously impressive. They were workaholics and only enjoyed a relatively small dollar figure of the success that resulted from it. What I've personally witnessed is what looks to me as unhappiness from those that inherited it. They don't work and there are many personal problems from criminal problems to drug problems to multiple divorces and baby daddies and nonstop worry over $$ etc. Unearned wealth is, in my experience, cancerous.

Well, some families and people handle things better I assume.

I will say that they've been very nice to me and my wife though.

GNL says

Unearned wealth is, in my experience, cancerous.

Correct. Every man who has been born poor but became successful has the issue of stopping his kids from being spoiled.

HeadSet says

GNL says

Unearned wealth is, in my experience, cancerous.

Correct. Every man who has been born poor but became successful has the issue of stopping his kids from being spoiled.

Did you hear what the founder of Hobby Lobby said/did? He gave his company to a charity because he didn't want to burden his kids with the wealth. Sounds crazy but that's as I heard it.

GNL says

Well, some families and people handle things better I assume.

Buffet said that he gave his kids enough money to do anything they wanted but not enough to do nothing at all.

RWSGFY says

Buffet said that he gave his kids enough money to do anything they wanted but not enough to do nothing at all.

That means absolutely nothing. Those Buffet kids need not worry about doing well in a career in order to afford common needs like a home, cars, medical care, or kid's schooling.

rates recently gone up, prices will go down in a few month as markets catch up. in our area average house price went down from about 420 to 380 so far. thinking of getting another rental prop. its not same as CA though, property taxes can go up and landlord pays for many utilities as they can be a lean on a property. and values don’t go up most of the time.

FortwayeAsFuckJoeBiden says

landlord pays for many utilities as they can be a lean on a property.

Luckily that is not the case in Virginia. The tenant I had to evict was over $1,000 due on the water bill and thus had the water shut off. All I had to do to get the water turned on after the tenant was removed was to give the water works a copy of the eviction notice. They turned the water on and filed a claim against the tenant.

HeadSet says

Those Buffet kids need not worry about doing well in a career in order to afford common needs like a home, cars, medical care, or kid's schooling.

With UPS drivers getting $170,000 package nobody really needs to worry about doing well in a career. =)) But with that kind of job one can get bored out of their fucking mind (while others find it perfectly ok).

What to do with this house? Rent at negative cash flow or sell for a big loss?

https://www.reddit.com/r/realestateinvesting/comments/15qyujp/what_to_do_with_this_house_rent_at_negative_cash/

Rubicon says

How’s the eviction process in Virginia? How long did it take from the time he was past due until you got the fucker out? Lots of details please! Thanks!

Virginia has a standard Landlord Tenant Act that applies everywhere in the state - a locality cannot form its own rules. The L-T Act is very fair. If the rent is not paid by the date it is due, the Landlord sends a 5 Day pay or quit notice. If not paid in 5 days, the Landlord can terminate the rental agreement and file will the court for eviction. It takes about a month to get the court date. If the tenant has not paid in full by the time you see the judge, the judge will authorize the sheriff to do the eviction. Scheduling with the sheriff usually takes a week. Then the sheriff meets the landlord at the house to throw out the tenants if they are still there. Then the sheriff watches while the landlord changes all the locks. At that point, the tenants have 24 hours to come by and get their stuff and after 24 hours, everything inside the house becomes the property of the landlord.

When you show up in court, the judge will check to see that you sent the proper 5-day notice (I had registered mail). If so, he will not only set the eviction, but he will also compile a judgement of any back rent that applies interest until paid. I did not use a lawyer as the judge did all the paperwork since it is very straight forward.

The landlord must use the courts for eviction and cannot degrade the premises in any way. Also, if the tenant shows up in court with a cashier's check for the rent owed, the eviction is halted and the remaining term of the lease applies. A tenant can only do this trick once, however. Also, when a tenant leaves at the end of a lease the landlord has 30 days to refund the deposit or give a detailed list of deductions for damages. If the landlord is even one day late refunding the deposit, the full deposit is due regardless of any damages.

zzyzzx says

What to do with this house? Rent at negative cash flow or sell for a big loss?

https://www.reddit.com/r/realestateinvesting/comments/15qyujp/what_to_do_with_this_house_rent_at_negative_cash/

The post has been deleted. Based on the comments, it seems like the owner has options. Not all is lost.