patrick.net

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/134puir/mortgage_company_closed_a_week_before_closing/

Mortgage Company Closed A Week Before Closing

https://www.reddit.com/r/homeowners/comments/1345gqf/new_homeowners_insurance_policy_will_be_more_than/

New homeowner's insurance policy will be more than my mortgage. What would you do?

zzyzzx says

So the bottom for U.S. median home price in the upcoming housing crash will be near the peak at the last housing boom (~2009-2011) ?

Looks like the bottom for the the 2009-2011 housing crash was near the peak for the housing boom in 1989.

.

https://www.cnbc.com/2023/05/03/mortgage-demand-drops-as-bank-failures-hit-jumbo-loan-rates.html

Mortgage demand drops as bank failures hit jumbo loan rates

Bitcoiner says

Totally, this couldn’t be more different than 07/08. What happened in 05-07 was a once in a lifetime occurrence (ninja loans and stated income + arm loans). Owners back then should never have been allowed to buy and owners today are in the best shape ever. Inventory (active listings) was rising to 4M back then while inventory today is at all time lows. Too funny that some people still compare this to today.

History often "rhymes" instead of simply repeating. Higher interest rates are going to have an effect on housing prices at some point, as is the insane P/E ratios of housing (price of housing compared to average earnings in a given area). Everyone isn't going to pay California prices forever. Also, given the recalculation of credit scores causing credit score inflation you really can't compare those from back then to now. Credit tightening also suggests a smaller pool of potential new buyers. I'm looking to sell while the market is still bloated, but I expect the market to stay bloated for some time still.

https://www.calculatedriskblog.com/2023/05/lawler-invitation-homes-net-seller-of.html

Invitation Homes Net Seller of Single-Family Properties for Second Straight Quarter

https://www.redfin.com/news/homes-cost-less-than-year-ago-2023/

Roughly 1 in 4 Homes for Sale in Austin and Seattle Cost Less Than They Would Have a Year Ago

ad says

So the bottom for U.S. median home price in the upcoming housing crash will be near the peak at the last housing boom (~2009-2011) ?

Looks like the bottom for the the 2009-2011 housing crash was near the peak for the housing boom in 1989.

Yes.

That's how inflation distorts trying to tell a story with a simple plot.

Bitcoiner says

Totally, this couldn’t be more different than 07/08. What happened in 05-07 was a once in a lifetime occurrence (ninja loans and stated income + arm loans). Owners back then should never have been allowed to buy and owners today are in the best shape ever. Inventory (active listings) was rising to 4M back then while inventory today is at all time lows. Too funny that some people still compare this to today.

Great example of how central banking fools people. While you spend your time digging through the weeds justifying the greed and making money by doing nothing, your lifestyle tightens a little more, your quality of life continues dropping, until you are a slave in the country your fore-fathers fought for.

Bitcoiner says

Buying houses was the best investment besides crypto.

You're back... I actually agree with everything in your comment besides this. Most crypto is down 50-60% from peak. It's likely the cause of the recent bank failures it just trailed the trading for a couple months. And alas, urban areas popular with crypto are losing banks. They're also losing population. Cities are going to get fucked over the next decade.

I think housing is fine. It's going to stagnate but as you say there's nothing there to cause a crash. People that bought in the last 18 months and got laid off might be in a tough spot. That's 1-2% of the buying population best case. I don't think there's much upside for a while, but the floor on prices is pretty high if they drop at all. We'd need double digit interest rates for a true negative move.

WookieMan says

I don't think there's much upside for a while, but the floor on prices is pretty high if they drop at all. We'd need double digit interest rates for a true negative move.

Double digit inflation can not pull the prices down for too long.

Blue says

WookieMan says

I don't think there's much upside for a while, but the floor on prices is pretty high if they drop at all. We'd need double digit interest rates for a true negative move.

Double digit inflation can not pull the prices down for too long.

Wages will not pace with inflation though. That's where there could be a problem. I don't like the current economy, but for some reason I'm not overly pessimistic. We'll see. I dislike making predictions. I for sure am not seeing a crash on the horizon. Current loans are generally solid unless you bought in the last year or so. Even then it's qualified and not 2005 style with no doc loans.

Bitcoiner says

Too funny that some people still compare this to today.

Yup.

Like ®ealtors say, "It's Different This Time."

Bitcoiner says

WookieMan says

You're back...


Yep, hi Wookie and Patnet :)

Keep it to housing. I can agree on some things there. Otherwise I'll try to ignore any crypto threads. You piss me off on those.

If the entire MMT fiat economic system is based on credit and it needs and demands constant credit creation to function, how will this effect housing? With sales, inventory and housing construction down, credit cannot expand, correct? What happens? Especially seeing that rates will(?) climb.

Bitcoiner says

You can’t seriously suggest that todays market rhymes with what happened in 07/08!

Probably not. So what is the telephone pole that the corrupt greed-drunk Central Bankers will crash the car into this time?
Some call it the 'everything bubble' which I guess implies a monetary collapse.

Bitcoiner says

nuttboxer, My lifestyle? Buying a house opens a lot more opportunities. First of all you save and build wealth. The rent for my house would be triple of my mortgage!! Renting longterm in states like CA is financial suicide. Buying houses was the best investment besides crypto. It’s really not that complicated: rents go up long term. A mortgage remains stable and goes down when you refi. Inflation is your best friend when you own assets like real estate. what I really don’t get with your comment is, don’t you realize you pay waaaay more in the long run in renting instead of owning but the worst part is: not only did you pay more in rent compared to a mortgage but at the end you have nothing to show for. Makes me think how thankful I am for long term renters who pay off my houses. I really shouldnt try to convince them to change their lifestyle.

How much money do you owe? I don't owe anything. If you had to get some money together today for some emergency, could you? I could. Most people I know left a while ago. Those who stayed are drowning in debt(and they all own). During the 20+ years I've lived in California I've never paid more than $1,900 a month, and have averaged closer to $1,300. And the majority of that time was living in houses.
I'm moving to a 4/3, 2,300 sqft two story with a pool this summer. Decided this just a few months ago. I don't have to list anything, don't have to drop my asking price $50k after two weeks when no one bites.

I've seen multiple places drop rent hundreds of dollars because no one is paying. Housing on average is dropping $40k because no one is buying. Economy is in the shitter, banks collapsing left and right, everyone working two jobs, paying more for poisoned food, more for poisoned medical treatment. But as long as you make money for doing nothing, who cares right? As long as you can keep leveraging yourself up the ass, everything will be fine. Until it's not...

NuttBoxer says

Renting longterm in states like CA is financial suicide.

Not necessarily. I did quite well by renting.

Bitcoiner says

Renting longterm in states like CA is financial suicide. Buying houses was the best investment besides crypto.

Patrick has been renting at least since I remember this article, and seeing him around 2007 on ABC's 20/20 being interviewed about the housing boom. The 20/20 episode on housing is what led me to Patrick.net

You can still recover from opportunity cost of not buying a home by diligently investing in the stock market any savings from not buying a home.

https://www.sfgate.com/business/article/Real-estate-blogger-taps-into-bursting-market-2538820.php

.

Patrick says

NuttBoxer says

Renting longterm in states like CA is financial suicide.

Not necessarily. I did quite well by renting.

A mortgage loan 'officer' told me, you have this 100k cash in your account because you didn't upgrade your life after graduating from school; you still live like a poor student. And I was actually living a great life then, spending money on things I liked to do.

NuttBoxer says

How much money do you owe? I don't owe anything.

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. The bonus is you could drag the foreclosure process out 2 years if you're savvy not paying PITI at all, just utilities. I think most would take that for two years not paying anything for a roof over their head which we all have to.

The other thing with owning is yes, you can move out whenever you want. You don't sell and rent the place to someone like you that pays down the debt for you. My parents owned 4 houses, land and a condo in FL for 15 years, remotely from IL. It's not hard to be a landlord from anywhere in the country. Just because you own doesn't mean you need to sell. You then have cash out refi opportunities that are tax free income. No different than a margin loan on stocks. We got $85k on margin to the tune of $110/mo. With taxes and insurance our current house was $350/mo out the gate PITI.

You can also be more creative with it. I'm going to borrow $150k from my mom to build our new house. And yes we have over $50k of our own money to be at almost 40% down payment.

She's moving into my current house we live in once the new one is built. My property taxes are extremely low for IL. She's just going to assume the mortgage payments to the tune of a whopping $15,600/year PITI. On a $95k pension (tax free) with over a million in the bank and medical insurance taken care of. I could never provide that for my mom or her for me to build if I didn't own. Her buying now would have been double the cost even with senior exception. Depending how long she lives, if the kids are gone we sell the new build in 15-20 years and downsize back to our paid off old house.

People complain about the maintenance of owning a home. Don't buy then if you're not handy. Not bashing renters, but you're not cemented into owning a home and have no flexibility. You honestly can do more owning financially versus renting. If I cancel the build tomorrow I could move to St. Thomas and cashflow $1k/mo on my current home renting it. Live there for two years and see if I like it renting. Then I can always come back and move into my house kicking the renter out while they paid down my mortgage and paid my rent in Saint Thomas.

You can't do anything like that as a renter. You're not locking in your lease for 30 years. And yes I know most people don't stay in one place that long generally. I get the beef with the real estate industry itself #Realtors® as having been one myself. But owning WITHIN your means blows away renting 9 out of 10 times outside of living in Detroit of some other shit city.

Also in all my scenarios above I never paid a commission or an attorney besides the build. Learn how to play the game and owning destroys renting. The only time the game changes is when you can pay yourself with the debt after you have enough assets. That's risky and I think some small to mid level RE investors might get burned soon with the higher interest rates if they cashed out recently. If you have a job and don't pay yourself through debt leverage you should be fine. Certain areas will get hit harder. Depends on local politics, crime, zoning and regulation of housing.

Ultimately it's a preference if you have discipline. Rent has got to cover the note for the owner or they should just let it go. So at minimum you're paying what a homeowner would unless you get lucky. They can sell the house and cancel your lease, you're forced to move. It's happened to me, albeit it was a blessing in disguise and we bought a place. I'm paying at least $1k less per month than what I'd rent it for. We invest those savings and still make more money. If I had a $1,300 lease and got booted and moved to a $2k/mo lease I now have to make up over $7k of after tax money annually. Income is not increasing at that rate.

My life has been real estate until recently since I was probably 12 and my dad explained it to me as an attorney. Owning is better. It's just knowing the game. He made a solid attempt to cut out Realtors in the region. He knew they weren't necessary. When he did this if I knew what I know now, he likely would have succeeded. I was in middle school, so yeah, didn't know the game.

NuttBoxer says

How much money do you owe? I don't owe anything.

Bitcoiner says

Nuttboxer, why does it have to be so dramatic (leveraging up the ass). Just because I own properties doesn’t mean I am drowning in debt. Yeah, sure, when you add up the debt of these houses it’s seems like a large figure but that’s the wrong way of looking at it.

gabbar says

A mortgage loan 'officer' told me, you have this 100k cash in your account because you didn't upgrade your life after graduating from school; you still live like a poor student. And I was actually living a great life then, spending money on things I liked to do.

ad says

Patrick has been renting at least since I remember this article, and seeing him around 2007 on ABC's 20/20 being interviewed about the housing boom. The 20/20 episode on housing is what led me to Patrick.net

You can still recover from opportunity cost of not buying a home by diligently investing in the stock market any savings from not buying a home.

WookieMan says

ltimately it's a preference if you have discipline

All true.

When I was in college I noticed that my elderly relatives who owned their homes were able to manage. They had a bit of money to go to a restaurant or a show. My elderly relatives who were renting were mostly either struggling to make ends meet, or weren't struggling but did not have much extra for discretionary stuff. Of course, it did not occur to me at the time that the ones who did not spend much on discretionary stuff could have been miserly thrifts (or, is it thrifty misers?) but with a single exception, I doubt it based on what happened with the estates when they passed.

So this is how after I got out of college I had a goal to live in a paid off home by age 60. It was not an "investment". It was just to be able to control my living cost in old age.

Over the 30 years of amortizing the loan I came to realize that what we had was not "control", but a "measure of control", - we still have some costs like the insurance, taxes, repairs, etc. I view those costs as our "owners' equivalent rent". Presently it's about $1200 per month for a sh*tbox in an undesirable neighborhood in Silicon Valley that would rent for about $3000 - $3500 per month. So I suppose presently we have 60% or so ownership discount. But! That does not mean it was a superb investment because for much of those 30 years we were paying an ownership premium. Could we have done better investing that premium in the stock market? I don't know, too many variables to figure that out.

Some Cool-Aid drinkers might speak of the $1 million equity we have. It doesn't mean a whole lot, especially here in California with Proposition 13. If our ownership premium is about $1800 - $2300 per month on a million dollar property, it's about a 2% return on the equity. And that's with a Proposition-13 tax assessment based on a 1989 purchase. Does that sound like such a savvy "investment", homie?

I look at Zillow sometimes. To buy-in these days in our region, which means buying-in to a huge Property Tax bill, is to pay a massive ownership premium for the privilege, 60% or more. It is ridiculous. This is how it was in 2005-6 when I first began following Patrick's site. It was because I was sick and freaking tired of the Smug behavior of some Silicon Valley office mates, every one of them moved to here from somewhere else like India, China, or other parts of the US, towards my other office mates who were renters (mostly local kids like me). Like they were people with an inferior intellect, like they "don't get it", like they pissed away their Silicon Valley salaries and RSU's on stupid shi*t.

Some of those techies came from Old Money Back Home (Asia) and couldn't care/worry less. But many did not "bring old money to the table", nor did the Hipster Cool-Aid Drinkers who moved here from other parts of the USA. (Some of them were Serial Refinancers, including equity out. So many folks talk about how the RSU's paid for the fancy cars in the parking lot. Maybe. Just as likely though it was the HELOCs). The stress/anxiety of the huge PITI brought out the worst in some of these folks at the workplace. When I finally quit working (laid off in late 50's) and decided to retire I'd had enough of being around those folks.

So back then (2005-06 Bubble) the few homie office mates and I began following Patrick's site of kindred spirit.

Bitcoiner says

Nuttboxer, why does it have to be so dramatic (leveraging up the ass). Just because I own properties doesn’t mean I am drowning in debt. Yeah, sure, when you add up the debt of these houses it’s seems like a large figure but that’s the wrong way of looking at it. The market value of those homes is significantly more than the debt.

I am making some assumptions based on your posts, and people I know personally who have similar thoughts.

The value of the houses right now, correct? In an inflated market where housing is over-valued by at least 60%? What happens to your financial situation when those values correct? If everything stays as is, you're right, doing very well. But all the warning signs indicate we are very far from a stable situation being reality anytime soon.

My credit is very high, despite never having a car loan, home loan, and only owning one credit card I only used sparingly for a few years. As I've said many times, if you can pick the bones, go for it! But make sure you have an exit strategy as the worm turns, or you will be in a very bad spot.

If your creditors call in their loans all at once, where would you be at? Do you trust the people you owe? May not happen, or be a likely outcome, but we have a financial system attempting to transition to CDBC, and run by ruthless sociopaths who locked everyone in their homes for no reason, so your loans in this environment are a risk.

I'm still in San Diego, and the drops I mentioned are easy to find on Zillow and Trulia(for rent drops). The for sale signs in my neighborhood stay up for a long time, plenty of housing, just no one willing to pay for it. My wife's friend's sister just bought a house for $750k, after divorcing her husband, so only one income, and she doesn't make that kind of money. My wife's cousin bought a few years ago. Had to lower their asking significantly to sell, and didn't get much for their money, though their location is nicer. In debt again, of course. My friend sold in Point Loma after a divorce several years back. When you factor in the work he did on the property, was a net loss.

Had a co-worker who bought in Dallas a few months back. Told us his realtor said his house wouldn't go down in value, just wouldn't gain(ahahaha). Another co-worker who bought in 2011 outside Dallas(at the time), told him no way! That guy said he has lost money, and he bought near the bottom!

I don't own a home. Live in a good apartment in a relatively inexpensive and safe area with access to healthcare, entertainment, schools but not warm weather. I noticed that my wife buys a lot of trinkets (extra clothes, shoes, inexpensive jewelry, artwork, purses, make up, ....) If we owned a home, she would have filled up the home with this stuff, stuff we don't need. We have a good life without a home and this is how I judge my success/failure. I dont care what anyone thinks about being a renter rather than a home owner (you are renting the home when you are paying the mortgage) Life is just too short for optimizing housing options

Bitcoiner says

How many of your renter friends are financially disciplined and dollar cost avg (without emotional mess ups ) for a long period of time? Very few.

So because you own that makes your automatically better at finance!? I think not, and 2008 agrees with me. Plus the examples I listed above. If you're good with money, you can rent, own or squat, doesn't matter for shit. The two have zero correlation.

I've always done whatever I wanted to in my life. My wife has never needed to work despite living in San Diego. I've never felt the need to put up with shit at a job, though I'm a bit wiser about how I leave than I used to be. If you enjoy your life, and have the freedom to live how you want, that's what matters most.

It also depends I think on what you like to actually do in your free time. For me, I like tinkering. I like a garage that I can add 220 power, install machines, rip down walls, etc... I enjoy remodeling a bathroom even if it takes me months / years (wife is patient). I like building out new fences, chicken coops, etc...
If I became disabled I think what I did would change and renting would make more sense.

Another consideration is schooling for children. As a renter you have a risk of losing the rental and perhaps having to move to another district.
It is not always easy to stay in the same district/school depending on other rental availability, etc...

For me, home ownership is not about what is more financially "profitable" or "astute" but how I choose to live.

Bitcoiner says

otally agree with KRC. A home gives me space to store toys, additional cars, allows me to entertain and have larger parties etc. I don’t really care what my house is worth right now because I intend to never sell it. Evt I rent it out. Let’s say it increases by 30% in the next years. Great. Let’s say it loses 70% of its value. Great. None of these mean anything to my monthly bills. I get to live in my dream home and create memories with my family and friends.

Good points.

I don't like entertaining others or having a party for others. I like to read books, see interesting videos on YouTube on topics that make a difference in quality of life. Seems like we all find meaning in different ways and that is okay. You are the only person who should decide what something means for you and you are the person who should define criteria of success in life. (Hopefully one has not been brainwashed into reacting to issue that are some one else's agenda)

Bitcoiner says

Totally agree with KRC. A home gives me space to store toys, additional cars, allows me to entertain and have larger parties etc.

You are right as I also do not treat our home as an asset on my balance sheet.

My only concern is in regards to arbitrage, that is selling our home at a fair price and then buying another home at a fair price using the capital gains from the previous home sale.

Our home is a utilitarian means, as it serves also for hobbies like vegetable, herb and flower gardening by using large pots, and it has a garage which acts like a 2 car outdoor covered patio as well as art studio for my wife and a storage such as for my kayaks, fishing gear, etc.

I can relax watching a free movie on Youtube (like : https://www.youtube.com/watch?v=-KgApEKS7bY) using our large screen high definition TV instead of going to the movies.

Plus we have a nice enough kitchen to do a lot of cooking instead of going out to eat. So our home saves us money.

.

Bitcoiner says

The low mortgage is guaranteed for the next 25 years until the house is paid off…..what will that apartment rent for in 25years?

This is true. Though such low rate locked-in mortgages were only possible due to the Fed keeping the interest "discount" (rate) window near zero, a locked-in 3% mortgage is advantageous to the house owner. The higher the interest rate is, the more cash you want to pay upfront.

So, going forward, what happens to the real estate agents, brokers, mortgage officers, car salesmen, auto financing...or any other business where financing is required?

Bitcoiner says

Rents tend to go up and mortgages are fixed. In San Diego for instance, the avg rent for apartments is close to 3k! That’s more than my mortgage on a large house!
And it only gets better for me. The low mortgage is guaranteed for the next 25 years until the house is paid off…..what will that apartment rent for in 25years? Jeez I don’t even want to know.

I've been paying $1,500 - $1,700 the last three years. Went up to $1,870 this month, and that's when we decided to cash out. You can get a nice house in Yuma for that price. You know prices for anything, doesn't matter what it is, can't go past what people are willing to pay or can afford right? I mean this reasoning sounds very '06 to me. And as I mentioned, worm is already turning, even in rentals. I expect things will look much better in a year for realistic housing values.

Look at the price drops in the 2000's and tell me 60% isn't realistic, considering inflation is even higher now. A severe correction is long overdue.

I'm in complete agreement on property as an asset if it's out in the country, several acres in size, has water, and farmable land. Property like that will always have a use, in any situation.

I will say we regret not buying in 2011. We could have bought outside of town where we live now for a reasonable price, under the USDA program, without being rushed into it. But we weren't willing to leave the city at that time. Not a financial regret at all, a lifestyle regret. We really like where we live, just aren't willing to pay more to stay. So in that respect you are 100% correct. But we were young, and different people back then.

NuttBoxer says

You know prices for anything, doesn't matter what it is, can't go past what people are willing to pay or can afford right? I mean this reasoning sounds very '06 to me

Yup. Folks here in the SFBay Area who buy now paying a 60% or so premium to "own" vs rent. Sounds like 2006.

"Oh but it's different this time.". Yeah some differences. But what's not different is the insane ownership premium.

When I followed patrick's website during the previous Bubble in California real estate there was a local renter kid (local to the LA Area) with the handle surferex who contributed many comments to threads about the insanity of the prices. Then one day he shared a photo of himself in the home that he bought around that time. At peak of that market. It was a capitulation, signaling a peak.

Kind of like the local Bay Area kid who commented on threads for a long time in recent years about the insanity till he shared that he capitulated and bought a place. Another capitulation from a local who knew better, - signaling the top.

Bitcoiner says

Forgive me, I have a hard time following what your point is.

The rare capitulation of a local kid to the high prices signaled a price peak, with ownership premium at 50%+ over renting. That's the point. After all, the heading for the original post is "Housing Prices Peak 2".

My homies who bought in this expensive market did so when the ownership premium was closer to zero than the insane premium now, - locking-in a reasonable Proposition-13 property tax. They weren't necessarily savvy, - they just didn't capitulate to the overpriced insantiy.

Kind of like the local kids who post on patrick's site iwog and Eman buying when The Sky Was Falling Down in the Financial Crisis.

Bitcoiner says

Nuttboxer, do I read this correctly, you are moving to Yuma to rent there or are you planning on buying a house there?

Renting. We would never buy somewhere without living there first.

Bitcoiner says

And regarding the rents in San Diego. That’s a 15 sec exercise to open your Zillow app and see the enormous high rents in the city. I am just the messenger.

Trulia is better, because they show the price changes without having to dive into the listing. Average rent where I live and used to live is $2,000 - $2,200, which is well over anything I've ever paid, and way too much. And I've been following rents pretty closely for the past year, being a renter. To level set, this would be for a 2/2 or 2/1.

Bitcoiner says

For any significant price drops you need inventory to go up significantly, right?

First of all, we've never paid the rents you assume are normal in San Diego, and never had trouble finding a place. And unfortunately, we've had a bad habit of moving far more often than we should have. So personal experience is housing "shortages" are a giant crock of bullshit.
You don't need more units, just longer vacancies due to no one being willing to pay your rent. Basic economics, owner can't charge more than someone is willing to pay.

And despite living somewhere where the rent has been at least $400 under every other property in the area, we see constant turnover. My guess is inability to find work in San Diego, coupled with the fact that it's way cheaper elsewhere. Neighbor behind us bought a house in Wisconsin next to his brother.

Bitcoiner says

Think about it, if I sell my home today because I want to upgrade or downgrade, I would give up 2.75% for 25y and replace it with 6.5%. Why wouldn’t I just stay put if I can?

Because 0% is even better. A family friend from Santee sold their crapshack and bought a multi-acre 3,000 sqft home in Prescott, and had a good chunk left over.

I'm left wondering if this person is a realtor:



Reddit commentary:
https://www.reddit.com/r/REBubble/comments/136z4vs/just_take_out_a_heloc/

Maybe a loan officer.