patrick.net

Eman says

It’s not only my imagination of the buy/rent disparity ratio. I guess it’s NOT only happening in the Bay Area, but almost across the country.

Someone on LinkedIn shared this data to make a point on owning vs. renting while our Federal Reserve’s inflation target has always been 2%. 🧐

1337irr says

This is easy to spot. Numbers don’t pencil out for investors at the current borrowing rates. While rents have gone up, they haven’t gone up as fast as the borrowing rates. Something has to give

1337irr says

Your chart supports this chart below. Rents were going up since early 2010’s while mortgage rates kept going down until spring 2022, which made buying residential real estate ludicrous for investors. Not so much since so they have sidelined.

I still remember people on this site kept arguing that prices had to drop more between 2009-2012 and beyond especially that Thomas Wong guy.

Wait and see if home prices remain unchanged while the 30 year mortgage rate drops from now around 7.25%, and steadies between 5% and 5.5% next year.

Also income goes up 3% during the same time period.

That should lead to a substantial decrease of "cost to buy" on the above graph, and closing the gap or difference between "cost to buy" and "cost to rent".

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“Mortgage delinquency rate falls to lowest level since 1979.”

https://www.housingwire.com/articles/mortgage-delinquency-rate-falls-to-lowest-level-since-1979/

Eman says

“Mortgage delinquency rate falls to lowest level since 1979.”

Yes, lets also track unemployment rate as well as credit card debt. Increasing credit card debt delinquency may be a prelude to future mortgage delinquency.

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ad says

Eman says

“Mortgage delinquency rate falls to lowest level since 1979.”

Yes, lets also track unemployment rate as well as credit card debt. Increasing credit card debt delinquency may be a prelude to future mortgage delinquency.

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Wow, I would expect it to be higher, but it’s lower than the two previous recessions, the Great Recession and S&L crisis.

Eman says

Wow, I would expect it to be higher, but it’s lower than the two previous recessions, the Great Recession and S&L crisis.

Wait and see as far as economic statistics like credit card delinquency and unemployment as it may get worse toward the end of this year.

The problem for the Dems is that they want to start promoting the economy's health by next August.

So we'll see how all this plays out and if the Dems put pressure on the Federal Reserve to lower rates by next spring.

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https://www.coffeeandcovid.com/p/remarkably-consistent-tuesday-september

📉 President Peters has bigger problems than Jill’s covid infection. As Wall Street Silver tweeted yesterday, in the face of rising mortgage interest rates, home sales growth (measured by investor purchases) has fallen below previously-historic levels seen during the 2008 real-estate collapse:

Eman says

The reality of MY market and buy/rent ratio disparity.

That's nothing! Check out my shack (and also don't forget a new buyer will be paying more than $2k/month in property taxes).

Eman says

It looks like RE investors are subsidizing their tenants. Or at least that RE investing is becoming less and less lucrative. Where am I wrong?

RWSGFY says

Where am I wrong?

Where you're wrong is you're not being smug and not trying to keep face.

Silly RWSGFY.

Well, Rubicon is a VERY successful RE investor and he says to buy rental RE at any time, all the time and any time you see a house for sale you should buy it. Price, rates and the economy simply doesn't matter. I'm sure he knows what he's talking about.

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https://www.cnbc.com/2023/09/05/mortgage-rate-tipping-point-homeowners-say-5percent-is-the-magic-number.html

" But there is a tipping point, recent reports found: Homeowners are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to Zillow, and 71% of prospective homebuyers who plan to purchase their next home with a mortgage said they would not accept a rate above 5.5% — that is the “magic mortgage rate,” according to a survey by John Burns Research and Consulting. "

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SunnyvaleCA says

Eman says

The reality of MY market and buy/rent ratio disparity.

That's nothing! Check out my shack (and also don't forget a new buyer will be paying more than $2k/month in property taxes).

Thanks, good summary of my housing arguments right there.

Big_Johnson says

GNL says

Well, Rubicon is a VERY successful RE investor and he says to buy rental RE at any time, all the time and any time you see a house for sale you should buy it. Price, rates and the economy simply doesn't matter. I'm sure he knows what he's talking about.

Liar. Never said it that way ever. Show an example.

My mistake. I thought you were a cost averager. Also, I see you changed your name again.

ad says

Is this a joke? Even if such a modest home is worth $1.6 million, it is very difficult to get a bank to cash out rental property, or even just to refinance. Even if you did manage a loan, through compensating balances or other scheme, the interest rate will be higher. There are also points and origination fees.

HeadSet says

ad says

Is this a joke? Even if such a modest home is worth $1.6 million, it is very difficult to get a bank to cash out rental property, or even just to refinance. Even if you did manage a loan, through compensating balances or other scheme, the interest rate will be higher. There are also points and origination fees.

Interesting. The books and sites on the subject of RE investing are all braying about regularly refinancing rental properties and how easy it is.

RWSGFY says

Interesting. The books and sites on the subject of RE investing are all braying about regularly refinancing rental properties and how easy it is.

It is and it isn't. You need a banking relationship. We're not talking the VP of a Chase branch. You need to know the owner or primary shareholder of the bank. Not happening with Chase. You need to get in with the top commercial lending people at a small regional bank. Or OPM. There are ways. We'd cash out and buy another building after rehabbing it and getting it fully rented. It was a small bank on the South side of Chicago. As long as you perform on the loan and financials are solid, small banks will lend to you. Buying a couple dinners or taking people on vacations doesn't hurt either. Cost of doing business.

If you're doing Fannie/Freddie loans you're gonna find it harder. One your capped at 4 units. Two you can only have so many loans held by them. Can't remember if it's was 6 or 10. So if you want a RE empire, you're going to have to find a lender that can do more for you.

Acquaintance in Oakland put his home up for sale over a month ago. No bites and price was lowered a couple of weeks ago. His real estate professional said the whole area was the same. And so it begins?

ad says

It all works out very well unless it doesn't. That same leverage that allows for huge capital gains also means there's a chance you lose it all if things go only moderately downhill.

I know a person who had 3 highly-leveraged rentals. He might have pulled through the 2008-2009 meltdown except that his highest-paying renter decided to stop paying the rent. Without the cash flow, he lost that house and the two other condos.

There's plenty to be made in landlording and creating a rental empire, but beware of survivorship bias: We only hear about the success stories!

SunnyvaleCA says

ad says

It all works out very well unless it doesn't. That same leverage that allows for huge capital gains also means there's a chance you lose it all if things go only moderately downhill.

I know a person who had 3 highly-leveraged rentals. He might have pulled through the 2008-2009 meltdown except that his highest-paying renter decided to stop paying the rent. Without the cash flow, he lost that house and the two other condos.

There's plenty to be made in landlording and creating a rental empire, but beware of survivorship bias: We only hear about the success stories!

This is true...There were a lot of BKs. I worked at a servicer and there was one house that could have avoided foreclosure if their mineral rights were sold. The bank didn't want to bother with it and foreclosed anyway.

https://www.msn.com/en-us/money/realestate/housing-crisis-2023-why-home-prices-will-keep-surging-on-rising-rates/ar-AA1glwQW

Why housing will keep going up according to a mainstream media source.

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SunnyvaleCA says

ad says

It all works out very well unless it doesn't. That same leverage that allows for huge capital gains also means there's a chance you lose it all if things go only moderately downhill.

I know a person who had 3 highly-leveraged rentals. He might have pulled through the 2008-2009 meltdown except that his highest-paying renter decided to stop paying the rent. Without the cash flow, he lost that house and the two other condos.

There's plenty to be made in landlording and creating a rental empire, but beware of survivorship bias: We only hear about the success stories!

Well, we DO remember Casey Sirin.

https://www.reddit.com/r/realestateinvesting/comments/16ayk8g/whats_the_longest_your_property_was_cash_flow/

What's the longest your property was cash flow negative?

1337irr says

This is true...There were a lot of BKs. I worked at a servicer and there was one house that could have avoided foreclosure if their mineral rights were sold. The bank didn't want to bother with it and foreclosed anyway.

They won't foreclose this time, unless the owner goes completely off the grid. Banks lost exponentially more during the housing crisis by foreclosing and managing and then trying to sell homes in a corporate manner. Remember amortization. After two years of on time payments it's a near impossibility for them to have a loss. Forebearance will be the new method to handle a housing crash. Banks screwed everything up from the word go, but then made it worse foreclosing on people.

Put this way way the entire world shut down for 2 years practically because of covid. Pushing a loan payment back 1-2 months is a nothing burger as someone finds a new job in a low unemployment market. You're an idiot if you cannot get a job currently. I'd also venture to guess 90% of loans have 5% or less interest on them. Defaulting doesn't seem to be in the cards. It just sucks for those looking to buy. The future is foggy. If it's a primary buy and hold for a decade, I think you'll be fine long term. Just don't buy if you think you might move or need to upsize due to lifestyle changes.

A GAUGE of US mortgage applications for home purchases fell to a 28-year low last week, underscoring the stifling effect of high mortgage rates on buyer demand. The Mortgage Bankers Association index of home-purchase applications decreased 2.1 per cent to 141.9, the lowest level since April 1995, according to data out on Wednesday (Sep 6).

zzyzzx says

Obligatory:

1 in 8 San Francisco Home Sellers Is Losing Money—the Highest Share in the Nation
Roughly one of every eight (12.3%) homes that sold in San Francisco during the three months ending July 31 was purchased for less than the seller bought it for, up from 5% a year earlier. That’s a higher share than any other major U.S. metro and is quadruple the national rate of 3%.

EBGuy says

1 in 8 San Francisco Home Sellers Is Losing Money—the Highest Share in the Nation
Roughly one of every eight (12.3%) homes that sold in San Francisco during the three months ending July 31 was purchased for less than the seller bought it for, up from 5% a year earlier. That’s a higher share than any other major U.S. metro and is quadruple the national rate of 3%.

Interesting article. Oakland and San Jose are also listed in their table, and aren't outliers within the country with respect to percentage of houses sold at a loss. SF's woes don't seem to be related to overall high prices, as San Jose's median profit per sale is actually higher! Another realization is that "sold at a loss" — mere sale price minus purchase price — is probably not even quite the right metric, as selling costs can be really add up quickly. If you added in selling costs and also all the banking costs associated with getting a mortgage on a different house (presumably yoou're moving from from one house to another) and the 1-in-8 figure is probably a lot worse.

EBGuy says

1 in 8 San Francisco Home Sellers Is Losing Money—the Highest Share in the Nation
Roughly one of every eight (12.3%) homes that sold in San Francisco during the three months ending July 31 was purchased for less than the seller bought it for, up from 5% a year earlier. That’s a higher share than any other major U.S. metro and is quadruple the national rate of 3%.

Also from the article:

“Even though home prices have fallen from their peak, a majority of home sellers are still reaping significant financial gains. Nationwide, 97% of home sellers sold for a profit during the three months ending July 31, with the typical home that sold going for 78.4% ($203,232) more than the seller bought it for.

Even in San Francisco, most homeowners are still making a lot of money. The typical home that sold in the metro went for 70.5% ($625,500) more than the seller bought it for.”

The late buyers tend to get screwed.

Big_Johnson says

Forget about this timing the market BS and all the noise. If you can comfortably afford a house to live in for the long term. Buy and enjoy being a homeowner.

This is really all it's about. My mortgage payment is trivial at $1,300 PITI. It's so low I don't even think about it. That's changing, but it's still under 10% of debt to income. Fact is until lending gets out of control again or everyone decides to move, there's not much downside for the foreseeable future. High interest rates will slow the uptick and some hipster areas will eat shit price wise, but nationally I still don't see anything negative. By that I mean a 10% plus correction nationwide.

That said I wouldn't want to be a buyer right now. You're going to pay a touch more than you should. But if you stay 7+ years and keep your job you'll do fine with lending standards now. Real estate isn't about "timing" it's about "time." Big distinction there. I'm not sure of a point in history outside of maybe a Detroit or something where if you held onto a home 10 years, you came out with less.

https://finance.yahoo.com/news/americans-really-hate-the-idea-of-buying-a-house-right-now-152340819.html

Americans really hate the idea of buying a house right now

https://www.redfin.com/news/homeowners-selling-at-a-loss-2023/

1 in 8 San Francisco Home Sellers Is Losing Money—the Highest Share in the Nation

zzyzzx says

https://www.redfin.com/news/homeowners-selling-at-a-loss-2023/

1 in 8 San Francisco Home Sellers Is Losing Money—the Highest Share in the Nation

Nooooooooooo!