patrick.net

HeadSet says

2 price drops in 15 days? No patience at all.

Got to stay ahead of the market if you want to sell!

https://www.dailymail.co.uk/news/article-11150999/Is-America-verge-new-housing-collapse-Mountain-West-Sun-Belt-overvalued-72.html

Is America on the verge of a house price collapse? Prices could crash by up to 20% and homes are overvalued by as much as 72%, expert warns
Boise, Idaho; Charlotte, North Carolina and Austin, Texas were the three most overvalued areas in the United States, according to Moody's Analytics
Moody's found that found that 183 of the nation's 413 largest regional housing markets are 'overvalued' by more than 25 percent
If a recession hits, house prices in those 183 regions could plummet by as much as 20 percent, Moody's predicted
If there is not a recession, they will still fall 10-15 percent, the analysts believe - echoing other experts
The housing inventory is at its highest level since April 2009, as sellers struggle to get rid of their property because mortgages have become more expensive
Mortgage rates have nearly doubled since January, rising to 5.13 percent for a 30-year loan as of last week, according to Freddie Mac

Patrick says

Boise, Idaho; Charlotte, North Carolina and Austin, Texas were the three most overvalued areas in the United States, according to Moody's Analytics

This is disgraceful. How dare they take away the 'overvalued areas' crown from Coastal California!

https://www.marketwatch.com/story/its-a-remarkably-uncertain-time-redfin-ceo-warns-of-rapidly-cooling-housing-market-says-deals-under-contract-are-being-cancelled-11661467568

‘It’s a remarkably uncertain time’: Redfin CEO warns of rapidly cooling housing market — including the cancellation of deals under contract

After a stellar two-year run, the housing market is sputtering as buyers pull back sharply. One real-estate chief said the market is indeed course correcting, and it’s getting hard to make a deal as more contracts falling through.

With the Federal Reserve hiking benchmark interest rates, “demand fell sharply in May and June … [as] buyers were absolutely freaked out,” Redfin RDFN, -5.75% CEO Glenn Kelman told MarketWatch in an interview.

Since then, the housing market has since recovered somewhat, he noted, but “we still will have, even for the deals that are under contract, a very high cancellation rate.”

“It’s just hard to put deals together because the economy is so volatile,” he added. “It’s a remarkably uncertain time.”

Responding to buyers pulling back from the market, sellers have also become increasingly apprehensive about listing.

New listings for homes have fallen 15% in the four weeks ending Aug. 21, a report published Thursday by Redfin said. That is the biggest decline in listings since the start of the pandemic.

That’s pushing down the supply of homes slightly, Redfin said, as the number of for-sale homes dropped 0.6% from the previous four week period.

To find a match quickly, sellers are pricing their homes more aggressively, with the median asking price of newly listed homes falling 5% from the record high set in May.

But not all sellers are able to find eager buyers. In some hot pandemic markets like Boise, Idaho, 70% of the homes for sale had their prices slashed in July, Redfin said.

Builders are also trying harder to entice buyers, Kelman added, and “just as aggressive” with price cuts as existing-home sellers.

https://www.wsj.com/articles/shorting-zillow-is-your-best-bet-in-housing-this-year-11661556266

Shorting Zillow Is Your Best Bet in Housing This Year

Think the real-estate market is in for a price cut? The biggest one could still come to Zillow’s stock

Non-paywall version:
https://archive.ph/MHSpJ

U.S. home seekers are desperately eyeing an expected turn in housing prices, but the best near-term deal in real estate could come from yet another price cut to Zillow’s stock.
Having lost two-thirds of its value over the past 12 months on the heels of its home-flipping implosion, Zillow Group has already fallen to a market capitalization of barely $8 billion, despite the fact that virtually every U.S. adult is still “surfing” its namesake site monthly. Zillow might continue to draw a crowd, but that won’t earn a business model based on transactions much money.

More pain is likely coming. On its second-quarter conference call, even Chief Executive Rich Barton, known for his upbeat, colorful divinations, described the housing market as undergoing a “rebalancing.” In July, sales of new single-family homes fell nearly 30% on an annual basis and nearly 13% versus June. New home inventory has ballooned to the highest level in more than a decade. Zillow now expects transactions to “meaningfully contract” as inventory rises this year.
In perhaps the biggest sign that Zillow isn’t expecting a miraculous recovery in the near-term, Mr. Barton said he launched an employee-retention plan this month, including an off-cycle grant of restricted stock units to employees—ultimately accepting an expected 2% dilution over a few years in an attempt to ensure his top talent doesn’t flee over lower compensation, much of which is often based on equity value.

Yet Wall Street might not have fully digested this warning sign. Analysts’ third-quarter sales estimates for Zillow’s agent ads business (its largest) have come down by an average of just 12% since the company’s second-quarter report. On average, those estimates are still 7% above the midpoint of Zillow’s guidance.
Perhaps investors should take Zillow at its word. You might think fewer potential transactions would have agents upping their ad spending to compete for the smaller number of buyers there. But it seems that isn’t the case: Chief Financial Officer Allen Parker candidly said on the second-quarter call earlier this month that in a quickly declining macroeconomic environment, agent ad spending tends to slow down as buyer demand wanes. Importantly, he also said the slowdown in spending on Zillow’s platform tends to lead the market’s transaction declines, implying Zillow could see outsize weakness sooner rather than later.

Zillow’s agents don’t pay for idle eyeballs; they pay for motivated leads. A decline in their platform spending would suggest that, at least when the chips are down, they don’t feel like they are getting enough of those leads yet from Zillow. That might help to explain why 234 million people surf Zillow’s apps and sites monthly (a figure equivalent to over 90% of U.S. adults), but Zillow monetizes only 3% of U.S. real-estate transactions.
Longer-term, this will probably improve. Its new partnership with automated home-flipping market leader Opendoor means Zillow will collect a referral fee when its users choose to sell directly to Opendoor. But the bigger hope is that those whom Opendoor turns down, or who decide to sell the traditional way, can be fed as quality leads to Zillow’s so-called “Premier Agents.” It also brings to the platform home sellers it can try to monetize on a subsequent home purchase, via adjacent services like mortgages, title and escrow.

Getting into bed with the company that just last year was its rival in iBuying had to be hard for Zillow, given its own failure in that business. So its decision to pursue a partnership despite that underscores Zillow’s belief in the scope of the opportunity on the seller side of transactions for its own platform.
Zillow wants to evolve from America’s favorite pastime to its best-paid quarterback on both sides of the real-estate game. The fact that its mobile app has over three times the number of monthly active users as its closest competitor means that, if anyone can do it, Zillow probably can

St Petersburg 25% property tax increase:



And this is low for Florida.

West side Santa Cruz is particularly crime prone, drug gangs etc., still, prices are high over there. $300k price drop for a more Eastie home that might go for 600-700k in a nice neighborhood in Texas (looks like areas of Texas have inflated, too). There are probably about twice as many listings as there were a month ago, maybe even more.

ZipperTits says

Cap rate is collapsing for San Jose market.

This means an investor would get more ROI just by parking their dough in t-bills than buying and renting housing here.



https://youtu.be/IZ65sM01K6U

Disclosure: All of the above should be outright false according to the PatNet Real Estate 'expert' community.

Isn't this disingenuous? How much of the investor's actual money is tied up in the investment? Not $1.6 million.

I forgot in CalfuckUornia Prop 19 limited the use of prop 13 inheritance. Heirs have to take occupancy within time limits as primary residence, or tax base valuation goes up. I doubt this will stop some from using houses as rentals under the radar, but the idea of leaving inherited houses fallow and empty for generations got harder.

https://finance.yahoo.com/news/census-bureau-3-8-million-100000978.html

Census Bureau: 3.8 million renters will likely be evicted in the next two months

ERECTION INTENSIFYING!!!

zzyzzx says

More pain is likely coming. On its second-quarter conference call, even Chief Executive Rich Barton

Oh, lol, I didn't know that former Zillow CEO Spencer Rascoff had been canned:

https://www.housingwire.com/articles/48253-zillow-replaces-ceo-spencer-rascoff-with-original-ceo-rich-barton/

In what can only be categorized as a shocking development, Zillow Group announced Thursday that Spencer Rascoff is stepping down as the company’s CEO, a position he’s held since 2010.

Is Zillow on the ropes?

Does anyone have a C-Suite contact at Zillow?

ZipperTits says

No. It isn't disingenuous because investor lending costs has to be deducted from that income.

True, one way or another, the buyer has to carry the cost of buying the house.

There are two sources of income from owning a house:

1. getting rent (or avoiding paying rent)
2. land appreciation (the building itself always falls in value over time as nature rots it away)

If the land is not appreciating, then the only income is the rent. If that rent does not cover the expenses of owning, then it's a loss.



In this case, the rental income from investing in the house is 26101 / 1619785 = 0.016, which is 1.6%

If the land is not appreciating, it's a bad investment because that's a shitty return.

Income from land appreciation is just parasitical sponging off of the need for others to be in that area for work, as Henry George documents so thoroughly in Progress and Poverty.

Parasitical sponging off of others' wages worked as long as California was growing, but now that it's not, that unearned income from owning land without doing work cannot be counted on. This is very interesting. What happens now?

Banks are going to find that most of their loans are underwater, and people who had "money in the bank" are going to find it hard to get that money back, since the bank literally doesn't have it anymore, having lent it out to borrowers who then lost it.

The Fed will probably once again buy up the bad loans by money-printing, but this is inflationary, and everyone who owns dollars will find that they are footing the bill for banks that made bad loans and borrowers who overpaid.

I suppose that inflation will buoy the house price to some degree, in effect transferring wealth from responsible savers to irresponsible buyers and lenders.

Patrick says

ZipperTits says

No. It isn't disingenuous because investor lending costs has to be deducted from that income.

True, one way or another, the buyer has to carry the cost of buying the house.

There are two sources of income from owning a house:

1. getting rent (or avoiding paying rent)
2. land appreciation (the building itself always falls in value over time as nature rots it away)

If the land is not appreciating, then the only income is the rent. If that rent does not cover the expenses of owning, then it's a loss.



In this case, the rental income from investing in the house is 26101 / 1619785 = 0.016, which is 1.6%

If the land is not appreciating, it's a bad investment because that's a shitty return.

Income from land appreciation...

What seems weird to me, is that, what if I only have $50,000 of my own $$ invested in the house via down-payment? The return is pretty good, no?

GNL says

What seems weird to me, is that, what if I only have $50,000 of my own $$ invested in the house via down-payment? The return is pretty good, no?

You're talking about leverage.

Leverage works both ways. If you bought that house for $1,619,785 and the house goes down in value by 50000 / 1619785 = 3% then your $50,000 is gone.

It's very much like buying stock on margin. You can borrow to buy stock, up to a point, and you may increase your returns that way.

Or you may increase your losses.

When you buy a house, you're also buying the risk that the price of that house will decline. The amount of risk you assume is inversely proportional to your downpayment.

A small downpayment is a big risk.

I suppose the whole game comes down to how much the Fed is going to bail out land owners and the banks at the expense of people who own dollars when land values fall.

Patrick says

It's very much like buying stock on margin.

My current house was bought on my MIL's margin account I had her set up. We're up at least $150k with no money out of pocket to purchase.

I can pretty much get any house I want in flyover country. MIL is an alcoholic now with other issues, so a bit more difficult to convince here to loan. My SIL also is currently fucking her over trying the same thing with a kitchen remodel. No new kitchen yet. $50k she borrowed. So done with family.

Lowes is at $200. Its 52 week high was $263.

It was $125 in early 2020 before the COVID pandemic crash. It likely may bottom (again) within the range of $160 to $180.

.

Patrick says

I suppose the whole game comes down to how much the Fed is going to bail out land owners and the banks at the expense of people who own dollars when land values fall.

The only thing that limits the Fed is the threat of popular revolt as inflation keeps rising.

https://finance.yahoo.com/news/housing-worst-time-to-buy-151827122.html

Yahoo Money Housing expert: ‘This might be the worst time you could buy’

https://www.barrons.com/articles/the-housing-market-is-in-recession-what-it-means-for-home-buyers-51661617521

The Housing Market Is in Recession. What It Means for Home Buyers.

https://techcrunch.com/2022/08/28/burn-baby-burn-real-estate-focused-fintech-startups-feel-the-heat/

https://kunstler.com/clusterfuck-nation/the-wild-west/

The Fed Chair, Mr. Powell, said all the parts out loud at the annual Jackson Hole banker meet-up last week: look out below, we’ve decided to take this sucker down (in the immortal words of George W. Bush), since pretending to stoke prosperity via Modern Monetary Theory only results in, duh, ruinous inflation. This raises the question, though, as to which is more politically damaging: inflation or depression? It is really only the difference between having plenty of worthless money or having no money at all.

https://www.deseret.com/utah/2022/8/26/23323488/housing-market-home-prices-house-rich-cash-poor-bubble-recession-crash

They bought at the height of the housing frenzy. Now they’re ‘house rich, cash poor’

More price drops around Santa Cruz. Now, when that beach front 3,000 sq. ft. bungalow drops to 250K, I'm buying.

Ceffer says

More price drops around Santa Cruz. Now, when that beach front 3,000 sq. ft. bungalow drops to 250K, I'm buying.

Well, if it drops as you wish for, that will be 100,000 buyers betting on this same bungalow.

ZipperTits says

fake a dirty bomb attack

The whole fake epidemic was essentially a fake dirty bomb attack already.

https://finance.yahoo.com/news/us-mortgage-lenders-starting-bankrupt-191500850.html

ZipperTits says

Cap rate is collapsing for San Jose market.

This means an investor would get more ROI just by parking their dough in t-bills than buying and renting housing here.



https://youtu.be/IZ65sM01K6U

Disclosure: All of the above should be outright false according to the PatNet Real Estate 'expert' community.

A lot of misinformation and examples being thrown around IMO.

The housing market has been on the mend and dropping, no doubt about that. Will it continue to drop? Probably. By how much? It’s anyone’s guess.

This YouTuber said he has experience in commercial real estate while he talked about single family homes and calculated them based on cap rate. Then he compared Denver, San Jose and Pittsburgh cap rates. Why didn’t he use Detroit as an example and told everyone to buy there?

Which institutions do we know who bought rentals in Denver and San Jose markets with 1.6% and 3% cap rate? I’ve seen articles where they bought in suburban markets of Atlanta, etc…. With 5-7% cap rate a few years ago.

Also, these institutions borrow at COFI rate. It’s around 1.5% at the moment while Fed fund rate is 2.5-2.75%. Even commercial banks are still lending at 3.75%-4% for 5/1 ARM. It’s because their profit margin is 2.25-2.5% above COFI. This means they don’t foresee rates to remain high within the next 5 years. Follow the money. Be objective will benefit us.

ZipperTits says

Eman says

Which institutions do we know who bought rentals in Denver and San Jose markets with 1.6% and 3% cap rate?

The ones who bought in those markets. Was fine when interest rates were low. But not now when they are high.

Let’s wait and see the default rate. You’re speculating at the moment.

Banks don’t call loans due as long as payments are made. Have you seen the rate of rent increases in some of those markets. If they can command high rents, lower chance of them defaulting on the loans.

Quit being a dick. Be objective. Look at the data. Rising rents can service higher interest rates. These institutions are playing a different game with their borrowing cost unlike the little sheeples who have to pay higher rates.

Show where I said housing prices will not decline earlier this year. CA home prices have hit the max housing affordability index, which means the top is in. The question is how much will it fall. I follow data. I don’t talk out of emotions and say wishful 💩

This just hit the inbox. 7/1 ARM is 3.65% for owner occupant. 4.35% for investment. This is the reality like it or not.

What do you think will happen if the economy hit a bump in the next few years? If history is any guidance, the Fed will cut rates to 0% again. Rates will drop to the 2%ish again. It’s time to refinance and lock in that 30-year fixed then. Voila.

https://www.reddit.com/r/RealEstate/comments/x0ruq1/no_one_showed_up_at_our_open_house/

No one showed up at our open house!

My favorite response:
Same thing happened to me. My realtor was very, very optimistic. When we lowered the price it was like magic...people all of the sudden showed interest. Not hoards of people, but more than zero. Don't be bummed out however, if you still get people bidding under your new, low price. At least you'll be selling.

zzyzzx says

https://www.reddit.com/r/RealEstate/comments/x0ruq1/no_one_showed_up_at_our_open_house/

No one showed up at our open house!

Raleigh, NC: Black or African American (Non-Hispanic): 28.1%.

https://nationalmortgageprofessional.com/news/housing-market-inflection-point

Black Knight analyst says data shows clear signs that housing-price growth “tipped from deceleration to decline” in July.

Misc says

It should be about time for the Washington establishment to start expanding opportunities for generational wealth building. Especially for the marginalized members of society. I mean the Blacks fell for it under Bush's "ownership society". Mortgage brokers fell all over themselves to put Blacks into subprime mortgages that shot up in payments after a year or so. Sure, they made these products available at the height of the housing bubble when prices were stupid, but the mortgagees had "character". After the bubble burst, and by golly the mortgage payments that doubled just weren't paid; the Blacks were worse off than they started as a percentage of them as homeowners.

Think they will fall for government help again ????

Their track record ain't the greatest.

Looks like I called this one right. Bank of America trying to help out those landlords holding rental properties in Black areas.

So Real Estate prices should crash because of higher rates...time to get the Blacks to buy. So Bank of America decides that NOW is the time to make zero down payments available to Blacks. ---- You know they're gonna fall for it again.

I called this back on July 6.

https://www.bloomberg.com/news/articles/2022-08-30/bofa-tests-no-down-payment-mortgages-for-minority-communities?srnd=premium#xj4y7vzkg