patrick.net

GNL says

https://www.strongtowns.org/journal/2024/8/19/the-housing-market-is-a-bubble-full-of-fraud-and-its-going-to-pop

The Housing Market Is a Bubble Full of Fraud, and It’s Going To Pop

What exactly does “pop” mean?

I think it is going to slowly deflate but not pop as income catches up with housing cost (mortgage payment or monthly rent).

Here in Florida panhandle seems like prices peaked in early 2022 when the locked-in rate for 30 year mortgage was around 3.5%. Since then I would say income has gone up about 23% such as $15 an hour for entry level (versus $12 an hour).

So if the 30 year rate returns to 5.5% by this December (as I predicted about 10 months ago) then housing should return to nearly same affordability level as it was in early 2022.

One thing I'd do if I could not allow the buyer to assume my low rate VA or FHA mortgage, then I'd at least offer to buy down their mortgage by 4 discount points, so it drops from 5.5% to 4.5%.

.

.
median housing price should be at $380,000 based on 7% annual appreciation since 2013 (~$180,000) as the last 11 years have been a red hot market for housing after recovering from 2007 to 2012 collapse , as it is just the way it is in a boom-bust or roller coaster economic environment

housing costs have decoupled from household income starting again in 2013

that means housing has to drop 10% from $420,000 to around $380,000 (while household income has increased at least 20% since early 2022

thanks to the Wolfman at Wolfstreet for the chart who gives excellent analysis on housing affordability, federal debt load and other major finance topics
.



.

Eric Holder says

And it's the norm to get fucked when you stay put less than 7 years, not an exception.

good rule of thumb about planning on staying put for 7 years after you buy a home to recover the closing costs and also recover from a drop in price

,

Someone recently told me Nashville prices are down 37%.

out here it’s different. housing ballooned because a lot of people moved in from outside, mostly retirees with good finances. housing doesn’t go up here much otherwise if ever, because people’s work is often seasonal and not stable. so 30 year mortgages aren’t like CA where money is free flowing. i come to realize that i hate everything about housing in ca and artificially subsidized housing inflation driving people into debt slavery. i own few rentals myself now, and yet i still hate the system. i wish housing wasn’t ballooning, because i see how it fucks people over and takes away their dignity.

Sort of a couple of trip reports:

1. My high school pal who is senior at DR Horton and who was overseeing 150 houses being built at this same time last year says they aren't doing anything right now.

2. I just remodeled a rent house that easily fetched $2050 monthly rent before the remodel and almost no showings the past 2 weeks. One low ball offer that soon will have made sense to accept. One price drop so far. I've never had a vacancy like this since I started it in 2013.

(San Antonio)

SoTex says

Sort of a couple of trip reports:

1. My high school pal who is senior at DR Horton and who was overseeing 150 houses being built at this same time last year says they aren't doing anything right now.

2. I just remodeled a rent house that easily fetched $2050 monthly rent before the remodel and almost no showings the past 2 weeks. One low ball offer that soon will have made sense to accept. One price drop so far. I've never had a vacancy like this since I started it in 2013.

(San Antonio)

wide range of consumers are finally pushing back ? look at what Amazon and Disney CEO's said about consumers cutting back

Subway CEO said same thing and explains why they now offering $6.99 for a footlong sandwich (normally $11) whereas it was $5 a footlong back in 2014

McDonalds CEO said McDonalds to offer more than the $5 meal deal to get customers back to the food chain

in Panama City Beach on east side, I noticed 3 bedroom townhomes going for same rent price ($2100) as they were in 2021

.

AD says

wide range of consumers are finally pushing back ?

I don't know that this is true for rental housing. Lots and lots of apartments have been built here over the last decade. As well as rental houses. I just moved to a remax rental from a progress residential estate rental. Progress is one of those nameless faceless companies that have been buying up all of the stock. I wanted to check out my competition and they are definitely scammers. So maybe people purposely are avoiding those? Small mom and pops I doubt.

Another thing I've noticed is during recessions rents actually drop and in the SF Bay Area in particular by A LOT. People start moving in together to save money.

Twice in the bay area it was as if someone picked up the region and shook out half of the people. The dot com crash and the financial crash. Both times lots of empty units in my buildings and I was able to ask for (and get) a significant rent reduction.

Side note: I sent messages to a Realtor 2 months ago about wanting to rent one of the houses they had advertised. No response.

Yesterday they reached out to ask if I was still interested in buying a home.

I told them too late, nice if you'd responded about the rental 2 months ago. Additionally I don't buy 'homes' I buy 'houses' and I happen to have one for rent on the MLS that pays a nice fee to the agent that helps me get it rented lol... I sort of turned the tables on him. He wasn't interested for whatever reason. Such a dumbass.

I keep texting his phone about all of the nice features this house has... Like new floors haha...

Mortgage rates dropped to 6.50%, the lowest since May 2023, according to the Mortgage Bankers Association today. But instead of re-igniting demand for homes from buyers who need mortgages, these dropping rates have caused potential buyers to wait for mortgage rates to drop further, and to wait for home prices to drop, as prices are way too high, and so demand has dropped further, with applications for mortgages to purchase a home dropping toward their historic lows.

https://wolfstreet.com/2024/08/21/home-buyers-strike-expands-even-as-mortgage-rates-drop-to-lowest-since-may-2023-but-surging-refis-will-speed-up-the-feds-qt/

Despite Xiden-Kamunist Propaganda, nobody believes the economy is getting better or will be better in 2025. Everybody knows the rates are going to be cut at some point in the next quarter or so.

SoTex says

1. My high school pal who is senior at DR Horton and who was overseeing 150 houses being built at this same time last year says they aren't doing anything right now.

As the saying goes, location. No one wanted to build in IL for about 17 years now. You can't find a home in my area. So they're actually building again. Much of it is one off custom builds though. There are a few subdivision communities near(ish) to me and they're almost all built out finally.

I don't see land acquisition though for new subdivisions. Developers got burned here and are hesitant to buy more land and build more unless there's a contract to build the houses. Used to be they'd pop up 20 houses and just sell them.

The custom home builders are doing well by me. They pop out 2 per year and make $200k or more personally and visit the job site for 2 hours to check in on the subs. There is no "used" housing inventory so people are finally being forced to build.

My guess is places like TX, AZ, FL, CO, ID, TN and even MT are going to see a slow down for sure of building and prices. When a place like CA, NY and IL sees an exodus to these types of states they get all excited and overbuild. Factor in inflation and interest rates, the first states are going to get hit the hardest. Nevada might be on there as well. Most other states I think will stay within 5% of their local median. Those other states dragging down the national median making people think it's a crash.

I'm not paying $250k for a half century old ~1400 sq ft starter home with no walk in master closet, no views, suburban blah, nothing special like direct water access or bordering right on a State/National Park. without any character and needs $30k just to bring it semi-into the 21st Century and really $50k.

Crack Smokin' Homeloaners


What is that, 80% increase in 8 years? Hell no, to the no, no, no.

Why in Green Acres would I not pay $30-50k more to get a new house than somebody's 1990 starter/retirement downsize house (35 years old)? I'd hafta put in at least $30k anyway.

a more comprehensive chart for housing affordability

.

https://wolfstreet.com/2024/08/28/treasury-department-aggressively-pushes-down-long-term-interest-rates-via-shift-to-t-bill-issuance-and-bond-buybacks/

DemocratsAreTotallyFucked says

https://wolfstreet.com/2024/08/28/treasury-department-aggressively-pushes-down-long-term-interest-rates-via-shift-to-t-bill-issuance-and-bond-buybacks/

Election year financial engineering gimmick, almost like Biden releasing the strategic oil reserve in 2022 and then gas prices going up just after the November 2022 midterm election

.

AD says

Election year financial engineering gimmick,

Yup!

Hey kids, The days of >5% 13-week T-bills is slipping away.

SoTex says

2. I just remodeled a rent house that easily fetched $2050 monthly rent before the remodel and almost no showings the past 2 weeks. One low ball offer that soon will have made sense to accept. One price drop so far. I've never had a vacancy like this since I started it in 2013.

Still nothing. I may be replacing 4 black kitchen appliances with stainless to keep up with the competition in addition to asking for lower rent. I guess there are labor day sales this weekend so there's that.

Realtor pictures of the place suck too so I'll be doing that myself this holiday weekend as well.

Al_Sharpton_for_President says

Hey kids, The days of >5% 13-week T-bills is slipping away.

Smoke em if you got em!

My Property tax went from $800 in 2018 and is now projected to go to $1050. Basically a 25% increase in 6 years.

My condo assoc fees went from $280 to $420 in the same period, almost all of which was insurance costs. Almost all of the increase in the past 3 years.

I live in a two-story, so exempt from most of the new requirements. I've heard of high rise owners fees more than doubling, and for housing development owners, too.

People are running insurance costs when under contract, finding the insurance company wants $20k in repairs to be insurable, and told their homeowners will START at $5k/year.

Florida is set for a massive reset.

One good piece of news is DeSantis signed a bill that severely restricts HOAs in limiting work vehicles in driveways, requiring them to keep itemized expenses, banning fines without multiple warnings, requiring new fineable rules to be promulgated in writing to all members and not enforceable until after the next board meeting (which by law must be announced well in advance in writing), redefining HOA entry to immediate emergencies only, limiting backyard restrictions, limiting fines to less than the county/cide code violation equivalent, etc. etc.

Excellent news, and this is actually the Realtors and Developers pushing this, since people are shying away from HOAs but 3/4 of the new housing in FL has been under HOAs this century so far.

SoTex says

SoTex says

2. I just remodeled a rent house that easily fetched $2050 monthly rent before the remodel and almost no showings the past 2 weeks. One low ball offer that soon will have made sense to accept. One price drop so far. I've never had a vacancy like this since I started it in 2013.

Still nothing. I may be replacing 4 black kitchen appliances with stainless to keep up with the competition in addition to asking for lower rent. I guess there are labor day sales this weekend so there's that.

Realtor pictures of the place suck too so I'll be doing that myself this holiday weekend as well.

Haha, make sure to post your better photos of what your Realtor provided. Seriously, I’d like to see them.

AmericanKulak says

One good piece of news is DeSantis signed a bill that severely restricts HOAs in limiting work vehicles in driveways, requiring them to keep itemized expenses, banning fines without multiple warnings, requiring new fineable rules to be promulgated in writing to all members and not enforceable until after the next board meeting (which by law must be announced well in advance in writing), redefining HOA entry to immediate emergencies only, limiting backyard restrictions, limiting fines to less than the county/cide code violation equivalent, etc. etc.

Excellent news, and this is actually the Realtors and Developers pushing this, since people are shying away from HOAs but 3/4 of the new housing in FL has been under HOAs this century so far.

Las Vegas needs this too.

GNL says

Haha, make sure to post your better photos of what your Realtor provided. Seriously, I’d like to see them.

I love seeing bad realtor photos. Not a pro like you are, but some realtors that do their own work are astonishingly awful at it. It's like come on dude/gal, you didn't know that was absolute shit. Can't have shitty photos when selling or leasing a place. I prefer real cameras, but there's no reason you can't get passable photos with your phone if you're not lazy.

I've seen photos where they just shoot the toilet in the bathroom. I'd hope everyone knows what a toilet looks like. I want to see the ROOM. They didn't put bath in front of that word for just the shower and toilet. REO (bank owned) properties were the worst around 2009-13. They'd always use the time stamped photos from their inspections. Made the house look like a crime scene. Probably knocked $30-50k off the price just from the photos.

I don't miss those days. You learn a lot about going through other peoples houses. Not including family and friends, I've been in well over 5,000 houses/condos/apartments. Usually 3-7 a work day for 15 years. The way some people live is mind boggling. I wouldn't eat a meal from probably 60% of the houses I entered.

I'd walk out when taking photos if the place looked like shit. Owner of the brokerage would get pissed at me and then I'd show him some quick shots before I gave up. You either want to sell the place or have everyone see your trash all over. I wouldn't shoot houses that looked like turds. I offended plenty of people in those 15 years. I'm actually nice in a casual setting. If you waste my time and can't do the basics I'm an ass hole. Also inspectors are losers. That's another topic/thread though.

Wookie, you hit a lot of notes. I was told, just yesterday, that only 40% of Realtors/listings use professional photography. I have so much to say about this. It blows my mind. It ain't expensive to have a "professional" come and take photos. $200 (of course, depending where you live) should get you 30 HDR photos. HDR has come a long way and lots of Realtors actually like the "look" of HDR. Really, a Realtor can't pay $200 for photos? A broker can't front a Realtor the $200? Not only that but, professional photography helps the Realtor in 3 ways. 1. The photo session can be a show. People like a show. 2. It makes the Realtor look much more like a full time professional to be working with other professionals. And 3. Of course, nice big and bright photos make a house much more desirable than the "other listing" down the street with small and dark photos. It really is a no brainer. Call a professional real estate photographer.

The only nitpick on your comment would be...I believe EVERY listing deserves to be photographed. My closing line when selling a Realtor is..."If you aren't online, you're invisible." This has to do with photos.

Here's a simple photo (please remember, Patrick compresses(?) the photos on upload) one of our photographers (Btw, just today, we charged a Realtor $600 for 3 sets of photographs for 3 different commercial condos that took the photographer a total of 45 minutes to complete) handed in the other day...

https://ycharts.com/indicators/case_shiller_home_price_index_national#:~:text=Case%2DShiller%20Home%20Price%20Index%3A%20National%20is%20at%20a%20current,5.37%25%20from%20one%20year%20ago.

I dunno...maybe this is the top...but there's talk of maybe $25k in "free" money to new homebuyers in addition to the about $10k already being put up by the States.

Except for Florida, I don't see any forced selling, and even in Florida there's tons of folks moving there. If you look at the overall monthly cost for Florida...sure the sales prices may go down, but the increase in HOA expenses and insurance expenses wipe out any "savings" from a lower price.

Developers will build what they can get financing for, and the banks have cut back on financing multi-family. Without a bunch of new supply, it'll put pressure on rents. So much cash in the system too, Dunno how long any downturn in prices would last with the trillions in CDs and trillions in money markets.

Nationwide, if you look at the chart...it doesn't show any slowdown in price increases.

Misc says

HOA expenses and insurance expenses wipe out any "savings" from a lower price

eventually the "system will collapse" when the insurance annual premium (for the HOA master insurance and the HO-6 for condo or HO-3 for townhome) reaches 2.25% of replacement value even with a deductible of 5% (of replacement value)

I estimate that with my HOA master insurance policy AND my HO-3 policy, that the total annual premiums are 1.47% of a replacement value of around $250,000 for a 3 bedroom, 2.5 bath, 2 car garage within 2 miles of the Florida panhandle white sand, emerald water beaches

They were only about 0.6% of replacement value in summer of 2018 before Hurricane Michael hit

Rents have gone down some such as townhome rents on east side of Panama City Beach; so that should help keep down HOA quarterly assessments (i.e., no 10% increase in landscaping, pool service, etc).

Seems rents are at 2021 levels like $1900 for a 3 bedroom townhome on east end of Panama City Beach, whereas same home rented for $1400 in 2017.
.

FL Legislature has been busy.

Unless DeSantis exercises his veto power - unlikely - It will be law that all House Sellers must reveal if they've claimed flood damage during their entire ownership of the property. Including filings with any federal programs, not just private insurance. It must be provided Prior to contract execution.

During the 2024 Florida legislative session, the legislature passed CS/CS/HB 1049 Flood Disclosure in the Sale of Real Property. The bill requires sellers of residential real property to provide a completed flood disclosure form to the purchaser before a sales contract is executed. The bill requires the following of the flood disclosure:

- The form's title must be “FLOOD DISCLOSURE.”

- A flood insurance disclaimer must be provided stating: “Flood Insurance: Homeowners' insurance policies do not include coverage for damage resulting from floods. Buyer is encouraged to discuss the need to purchase separate flood insurance coverage with Buyer's insurance agent.”

- The seller must state whether they have filed a claim with an insurance provider relating to flood damage on the property, including, but not limited to, a claim with the National Flood Insurance Program.

- The seller must state whether they have received federal assistance for flood damage to the property, including, but not limited to, assistance from the Federal Emergency Management Agency.

The bill defines flooding as a general or temporary condition of partial or complete inundation of the property caused by any of the following:

- The overflow of inland or tidal waters.

- The unusual and rapid accumulation of runoff or surface waters from any established water source, such as a river, stream, or drainage ditch.

- Sustained periods of standing water resulting from rainfall.

This bill's passage is considered a significant win in Florida’s floodplain management community. A majority of local floodplain administrators and the Florida Floodplain Managers Association supported the bill. Florida now joins 32 other states requiring some form of flood disclosure to sell real property as it becomes more flood-damage resilient. Potential buyers, both in-state and out-of-state, will be informed of flooding risks before purchasing a home and may avoid flood-related costs.

The effective date of this bill is October 1, 2024, unless vetoed by the Governor.

https://www.withforerunner.com/post/florida-flood-disclosure-in-the-sale-of-real-property

AmericanKulak says

Unless DeSantis exercises his veto power - unlikely - It will be law that all House Sellers must reveal if they've claimed flood damage during their entire ownership of the property. Including filings with any federal programs, not just private insurance. It must be provided Prior to contract execution.

Yes, disclosures. Is that not law in FL??? We had to settle out of court over a property that flooded. That's common law in pretty much every state. I've never heard of a state the doesn't require flooding as part of disclosures. Federal programs don't matter, you have to disclose if your house floods.

WookieMan says

Yes, disclosures. Is that not law in FL??? We had to settle out of court over a property that flooded. That's common law in pretty much every state. I've never heard of a state the doesn't require flooding as part of disclosures. Federal programs don't matter, you have to disclose if your house floods.

^^^^ this was my line of thought when reading that too.

But then I thought: FLORIDA

DemocratsAreTotallyFucked says

WookieMan says

Yes, disclosures. Is that not law in FL??? We had to settle out of court over a property that flooded. That's common law in pretty much every state. I've never heard of a state the doesn't require flooding as part of disclosures. Federal programs don't matter, you have to disclose if your house floods.

^^^^ this was my line of thought when reading that too.

But then I thought: FLORIDA

"Florida law requires the seller of residential real property to affirmatively disclose to the buyer all known facts materially affecting the value of the property, which are not readily observable and are not known to the buyer."

But buyer beware, and do a thorough check to see any hidden damage. Check for hidden mold damage. Can run mold and mildew testing also by buying the test kits at Home Depot or Lowes.

Same goes for testing for radon especially in Northern Virginia like Fairfax County and Fauqier County.

.

.

Even Zillow today says the housing market has cooled in Panama City Beach , Florida

.



.

The coming Fed Rate cut is already priced in by the banks. Wall Street fled the SFH market last year.

Needs to be 3.5% to adjust for median income, something that happened for a few months in the last 25 years.

And 2.75% to adjust for the 25-30% nationwide increase property tax and insurance markups these last few years. And the AirBNB battering from both the Economy and from Local Ordinances.

The Realtor's last year excuse of no inventory/no choice rings hollow as Florida inventory skyrockets.


There's only one solution: Pound those asset prices down, beat 'em like the printer from office space.

My prediction is by March, panic ensues.

AmericanKulak says

The Realtor's last year excuse of no inventory/no choice rings hollow as Florida inventory skyrockets.

Florida's problem has been North of I-80 boomers (NY, PA, IL, WI, IN and the rest of the northeast) moving down there. Throw in some vacation rental investments. Tack on a covid friendly governor and you had over investment in housing. This was obvious as shit coming out of your ass every morning after a cup of coffee.

The dreaded Boomer movement and selling is already done. And/or the Boomers that can't retire are just going to stay put for the next decade or two. This Boomer sell off was a thing before the housing bust. When you don't build that shit was fake. FL saw an influx of retirees and thought it wouldn't stop. It is. There goes the market. It's pretty basic if you think about it. Covid bump and poof, it's over. 2-3 years from now I'd be intrigued in the FL market after it crashes. It's got a way to go.