patrick.net

Eman says

30-year fixed mortgage rate is below 6% for the Bay Area now.

To be fair, that 5.875% rate requires you pay 0.25 points up front. An APR "as low as" 5.992% is breaking the 6.0 barrier by the barest of margins.

SunnyvaleCA says

Eman says

30-year fixed mortgage rate is below 6% for the Bay Area now.

To be fair, that 5.875% rate requires you pay 0.25 points up front. An APR "as low as" 5.992% is breaking the 6.0 barrier by the barest of margins.

What I would do is get 2 discount points costs along with other closing costs rolled into my VA mortgage. If we buy this year and the 30 yr rate is 5.5%, then we'll buy 4 discount points to get to a 4.5% rate.
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In the current environment, I’m not sure it’s prudent to buy down rate as history suggests there’s a higher chance of interest rate dropping in the coming years rather than rising. Paying 4 points is a lot of money to buy down 1%

SunnyvaleCA says

Eman says

30-year fixed mortgage rate is below 6% for the Bay Area now.

To be fair, that 5.875% rate requires you pay 0.25 points up front. An APR "as low as" 5.992% is breaking the 6.0 barrier by the barest of margins.

Rates were floating around 7.5% and higher just a couple months ago. The Fed hasn’t done anything, and rates fell 150 bps since. I just want to share the dynamic of interest rates. This should provide some tailwind to hold up the housing prices.

A recession is likely needed to see significant housing price drop at this point.

“San Jose rent growth in 2023 pacing below last year. Twelve months into the year, rents in San Jose have fallen 0.7%. From January to December 2022 rents had increased 6.1%.”

“Santa Clara County rent growth in 2023 pacing below last year. Twelve months into the year, rents in Santa Clara County have fallen 1.0%. From January to December 2022 rents had increased 8.7%.”

Eman says

In the current environment, I’m not sure it’s prudent to buy down rate as history suggests there’s a higher chance of interest rate dropping in the coming years rather than rising. Paying 4 points is a lot of money to buy down 1%

Eman, the cost is 4% of the mortgage when you buy down 4 points. It is equivalent to dropping the price 10% (assuming no down payment) and the payback period is around 6 years. If I could buy down to 5% from 6% rate for the 30 year mortgage, then I would refinance likely when the rate drops below 3.75%.

I posit that it is much more profitable to increase prices based on scarcity. With scarcity, there's no effort and prices can go to infinity.

Eman says

“San Jose rent growth in 2023 pacing below last year. Twelve months into the year, rents in San Jose have fallen 0.7%. From January to December 2022 rents had increased 6.1%.”

“Santa Clara County rent growth in 2023 pacing below last year. Twelve months into the year, rents in Santa Clara County have fallen 1.0%. From January to December 2022 rents had increased 8.7%.”

Eman, Venture capital money is drying up more in Silicon Valley compared to 2019-2022. Layoffs are abound in Silicon Valley 😕

ad says

Eman, Venture capital money is drying up more in Silicon Valley compared to 2019-2022. Layoffs are abound in Silicon Valley 😕

Yup. It's really bad. Almost dot.com bust nuclear winter bad.

And contributing to that is the AI scam. That the new 'thing' in SV.

We all know it, but worth repeating. A picture is worth a thousand words. The link is below too.



https://x.com/charliebilello/status/1747316842861838567?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

Eman says

We all know it, but worth repeating. A picture is worth a thousand words. The link is below too.



https://x.com/charliebilello/status/1747316842861838567?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

What would you, as an investor, do going forward? Reading the tea leaves (the totality of the economy and the political and financial atmosphere) I'm pretty sure this is the new normal. I believe the homeownership rate is going to fall for years to come.

It may tick up and down from time to time but, the trajectory = down for a long time. IMO, of course.

These analysts are hilarious. The housing market is bottoming. 😂

https://www.marketwatch.com/story/buy-home-depots-stock-because-the-housing-market-is-bottoming-analyst-says-732d5268?siteid=msnheadlines

Eman says

These analysts are hilarious. The housing market is bottoming. 😂

https://www.marketwatch.com/story/buy-home-depots-stock-because-the-housing-market-is-bottoming-analyst-says-732d5268?siteid=msnheadlines

Good candidate for the predictions thread.

GNL says

Eman says

We all know it, but worth repeating. A picture is worth a thousand words. The link is below too.



https://x.com/charliebilello/status/1747316842861838567?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

What would you, as an investor, do going forward? Reading the tea leaves (the totality of the economy and the political and financial atmosphere) I'm pretty sure this is the new normal. I believe the homeownership rate is going to fall for years to come.

It may tick up and down from time to time but, the trajectory = down for a long time. IMO, of course.

Be patient and wait for opportunities. No reason to force any deals when there are no deals.

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Increase income by +3% annually while hold home prices and 30 yr mortgage rate constant to achieve more housing affordability
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There was a mainstream media headline that notes that poor Americans are benefiting from falling inflation !

gabbar says

There was a mainstream media headline that notes that poor Americans are benefiting from falling inflation !

Mainstream media is doing what it can for the Democrats going into this November elections.

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gabbar says

There was a mainstream media headline that notes that poor Americans are benefiting from falling inflation !

Noooooooooo!

gabbar says

There was a mainstream media headline that notes that poor Americans are benefiting from falling inflation !

Other than gasoline and used vehicles, too bad poor Americans aren't buying the (few) things whose prices are actually falling. Even those two categories are only falling from all-time highs to being merely near-all-time highs. As for food, clothing, and rents... up up and away!

If the median-income person is a house or apartment renter forever — as has been the case in much of Europe forever — does comparing median housing payment to median income make any sense? Maybe the comparison should be to median income of house owner. I also hear about the trend of investors buying up housing. This will make even more people renters for life and further reduce the predictive utility of the statistic.

https://nakedemperor.substack.com/p/has-the-american-dream-disappeared

gabbar says

There was a mainstream media headline that notes that poor Americans are benefiting from falling inflation !

Only the poor benefit from falling prices? LOL

Patrick says

Wow, this is really terrible. I guess Klauss is a genious. He was right. Well, except for the happy part.

SunnyvaleCA says

does comparing median housing payment to median income make any sense?

Of course it does: if renting is cheaper than buying, somebody must subsidize the whole thing, there is no other way around, and this somebody must be either the landlord or the government.

Every house for sale I follow in wine country still sells within a few days or weeks on the market, at asking or above.

mell says

Every house for sale I follow in wine country still sells within a few days or weeks on the market, at asking or above.

The drop in mortgage rates gave it a nice little tailwind.

This thread started about 2 years ago, right about the time that housing stopped going down on that little blip on the chart, Since then, prices have simply gone up confounding the housing bears who expected prices to crater like they did in 2008.

It is not just housing assets that are at a new all time peak vs income, but if someone were to graph outstanding financial assets vs income, the chart there would show a new peak as well.

The US GDP is about $23 trillion dollars. America's savings rate is right about 4%. That means we have to find a place to put about $920 billion per year. That 25% of houses are bought all cash should be no surprise. That the average amount of the down payments are at a new high should also be no surprise. That most states have new buyer assistance programs (giving the buyer about $10k in additional down payment assistance) and with 25% of new buyers also getting down payment assistance from their parents adds pure fuel to the prices that people can pay.

Prices could also shoot up more if Biden's plan for a Federal first time buyers program passes too.

Millions and millions of illegals with limited construction of housing adds to the dynamic.

https://homebuyer.com/learn/15000-first-time-home-buyer-tax-credit

All cash buyers is a Realtor distortion. Most cash buyers borrowed money from their equity line of credit or a bank at variable interest, or from investors demanding ROI or a mixture.

The Chinese aren't moving to Anniston, Alabama or the suburbs of El Paso, TX or Albany, NY. The $2300 mortgage payments aren't doable outside the land of Silly Con Valley make believe - outside of it the national median income is $4400/month.

Boomers aren't living for ever, subsequent generations have smaller households and less wealth, and the development SFH landlords are fucked once their variable rate equity loans start getting adjusted as the rents don't rise anymore, which began last year.

"The boomers will leave it to the Millies". And their 30 something SINK Millie Daughter won't want to live in Homestead, FL or Golfcartville, AZ and may not be able to find a comparable job there if she did. She'll sell it. It's hard to manage a rental multiple states away.

It's going to be interesting The market can stay alive longer than a short position can be maintained, but it can't last.

Demographics is destiny, and laughs at the market as a Deterministic Datapoint of DOOM!

Also, the coming housing bust of Boomers is NOT baked in, though known. Just like marketeers were touting the Child and Youth consumer boom of the 50s and 60s, but the homebuilders missed the boat in the 70s, way behind on housing. So it will be again but in reverse.

There's enough housing but the wrong kind in the wrong places. We're in a for a ride.

Jamie Dimon is hedging bets and asskissing for a reason. He has the dataset, and got more at Davos. They know too, and the housing bust is going to both fuel and mitigate the Populist Wave

Talking up the market when they know they'll be a bust is par for the course for Wall Street And Realtors.

ad says

while hold home prices and 30 yr mortgage rate constant to achieve more housing affordability

Why not increase mortgage rates, and things like down payment requirements (minimum 20%) to get things back to historical norms?

All of you calling for a "housing bust" for the last 2 years have been wrong. How long do you get to be wrong before a real crash happens so that you can say you were right all along?

You're starting to sound like Peter Schiff. Get a grip.

Meanwhile, there is an on-going "housing bust" - just not the one you're hoping for. The one we have been in for the last three years involves a complete lack of shit to sell - which, if you are a realtor making your living doing this, has been considered a "housing bust". No transactions mean no money.

This is so easy a child can figure it out. There are more millennial's than boomers - and they want to buy a house.

AmericanKulak says

Also, the coming housing bust of Boomers is NOT baked in, though known.

People act as if boomers are all going to die at once. It's going to be a painfully slow process that takes place over the course of a couple of decades at least, and when you potentially add housing to the market at that slow of a rate it's not going to have an effect anytime soon.

I think $700 billion could default… The lenders are going to have to do things with them. They're going to be selling. It's going to be a generational change in real estate coming, end of 2024 and all of 2025. We will be talking about real estate being just a massive change, $700 billion to $1 trillion in defaults coming. - Howard Lutnick

stfu says

Meanwhile, there is an on-going "housing bust" - just not the one you're hoping for. The one we have been in for the last three years involves a complete lack of shit to sell - which, if you are a realtor making your living doing this, has been considered a "housing bust".

Very true. My thought is the only way we see a bust is continuing low transactions. Low transactions takes a huge bite out of the economy and "could" cause job losses. BUT, we definitely need more inventory/building also.

gabbar says

I think $700 billion could default… The lenders are going to have to do things with them. They're going to be selling. It's going to be a generational change in real estate coming, end of 2024 and all of 2025. We will be talking about real estate being just a massive change, $700 billion to $1 trillion in defaults coming. - Howard Lutnick

Based on the recent stats I got, office buildings are about 15% of the commercial real estate (CRE) market. $1.5T mortgages are coming due in the next 2 years. Say 20% of office buildings will go into default, we’re looking at $45B of losses.

If the Fed is going to cut rates this and next year as expected, this loss number will likely be less.

My friend is in contract to buy a 13-unit building for $3.2M. $1.8M loan with a $200k earn out once the vacant unit is rehabbed rented. So roughly a 62.5% LTV at 6.25% rate. With 30-35% upside potential in rent, it’s a good deal IMO.

Always be buying or selling for the right price regardless of where we are in the cycle of the housing market.

For the last 18-24 months or so since interest rate went vertical and up as much as 150% from the low, the housing market has held up extremely well. I’m surprised as an investor who live and breathe real estate everyday.

This shows buyers are going to buy based on their life circumstances. Sellers have more holding power as they have locked in the low mortgage. There’s no urgency to sell unless there’s a life changing circumstance.