patrick.net

gabbar says

FortwayeAsFuckJoeBiden says

thats why they went on loan forgiveness, preventing collapse

Schemes like loan forgiveness come at a cost, the cost is printing money? Its a ponzi scheme.

They haven't caved on loan forgiveness, it's forbearance at this point. I'll sue for forgiveness on loans I paid.

Booger says

Same type of person that expects or had student loans paid off by government.

https://nypost.com/2022/06/20/capital-economics-reports-us-home-prices-to-sink-by-2023-as-mortgage-rates-hit-6/

Booger says

https://nypost.com/2022/06/20/capital-economics-reports-us-home-prices-to-sink-by-2023-as-mortgage-rates-hit-6/

A whole whopping 5% huh?

HunterTits says

Booger says

https://nypost.com/2022/06/20/capital-economics-reports-us-home-prices-to-sink-by-2023-as-mortgage-rates-hit-6/

6%!

That's IMPOSSIBLE, @Booger

PatNet 'experts' earlier this year said so. And when I said (basically) "Hold my beer and just wait!", I got lectured how that wasn't going to happen based on their self-proffessed 'expertise' in the housing market which - their 'expertise' -had nothing to do with the Fed or macroeconomics.

But what do I know?

How much will prices decline?

WineHorror1 says

A whole whopping 5% huh?

I'm expecting them to periodically revise this number upward.

I had family in Long Island (NY). They've mostly left either dying off or fleeing to no-state-income tax Florida. We used to look at ®eal Estate ads in the local papers when we visited (in those days there was no internet). A key attribute was the Property Tax. Those small classified listings would include sq ft, bed/bath, and annual property tax bill. Just saying.

Here in SJ where I was growing up, during high school my best friend's family moved from SJ to San Carlos in Q2 of 1977. I remember the huge headline in the SJ newspaper during that time. In April of that year, SJ house prices had zoomed up 30%already from the first of the year 1977. That amazed me at the time so I began following the ®eal Estate ads in the local SJ newspaper.

In those days before the S&L crisis, late '70's to early '80's, mortgage loans, and the terms of the original mortgage note were assumable. After Volcker was appointed the mortgage rates on new loans went sky-high. The terms of the original assumable loan would be displayed right along with the sq ft, bed/bath. The listing showed the loan balance and interest rate for the assumable loan. The seller would sell a second, smaller mortgage for the difference between the loan balance and asking price, or the buyer would get a smaller, new mortgage to finance that portion, at the new Volcker-high rate. This scheme created a floor under the prices, preventing a crash.

When I borrowed to buy a home after the S&L crisis, I asked the loan officer if the mortgage would assumable. He told me that absolutely it would be. I asked him to show me the language in the paperwork that said so. He pointed it out to me. Yes indeed if I sold the place the original mortgage could be assumed by the buyer.... so long as the buyer qualified for the mortgage (income or whatever), then the terms (interest rate, etc) would be reset for the assuming borrower... in other words, it meant nothing.

Some day I'm gonna go to the public library to get a print of those old classifieds because some Bay Area Cool Aid Drinking Smugsters will likely accuse me of fabricating this story about all the used home listings with original mortgage terms listed with sq ft, bed/bath, etc. It was a floor for house prices (and therefore, Property Tax Assessments) that we no longer have.

What could go wrong?

BayArea says

SFH is king.
I don’t see any new ones going up

That is good for you, but remember, ANY of your neighbors can subdivide by right (due to SB9) and build another house on their lot. They're literally making more land in California...

EBGuy says

BayArea says

SFH is king.
I don’t see any new ones going up

That is good for you, but remember, ANY of your neighbors can subdivide by right (due to SB9) and build another house on their lot. They're literally making more land in California...

Sure it happens, It’s particularly common near downtown areas. However, it’s only an option on larger lot size plots which means older homes. Lot size have gotten smaller with time as new developments tend to have smaller and smaller yards.

WineHorror1 says

How much will prices decline?

I look at it this way. My family bought a townhome (3 bedroom/2.5 bath/2 car garage) that was brand new.

They bought it in summer 2016 for $187,000 and it is about 2 miles from the beach in the Florida panhandle.

I would say its fair value is $187,000 x 1.04^6 = $187,000 x 1.27 = $237,490

Right now older but identical townhomes are selling for $300,000. The peaked around $320,000 about 3 months ago.

I suspect they will bottom to $220,000 (not near $237,490) as any speculative asset (housing, stocks, crypto, etc.) always over-sells and over-corrects based on group psychology and herd mentality. So there will be a bloodbath like in 2008 to 2012.

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EBGuy says

What could go wrong?

I figure it will stay within the trend line when it drops. Likely bottom at or just above the last peak since it is in a highly desirable area (San Fran Bay Area). That means about a 30% to 40% drop.
;
;

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I remember back in Warren County, VA (Linden and Front Royal) in 2006 to 2012. An honest local real agent said it would take about 15 to 20 years for housing prices to return to peak levels set around 2006.

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It really depends what you price them in.

If you price houses in Bitcoin they are skyrocketing.

The Japanese are kinda befuddled at US real estate prices. Who woulda known Japanese real estate in Yen kinda looks inviting compared to US real estate. Now there's a government who really hates savers. The Japanese citizens were absolutely stupid for saving 10% on average for years upon years. The Yen is down about 18% vs the dollar from the beginning of the year and the Japanese government wants it to go down even more.

I guess that's still better than if you were counting on your Apple stock options.

Something different about this housing bubble is that rents are skyrocketing, which didn’t happen in the last one. So when I did my rent vs buy analysis before purchasing our home in TN, it still made sense to buy. Historically, I believe it’s rare or nonexistent to see rents drop significantly at a systemic level. Ultimately, everyone needs a place to live, so the demand for either renting or buying will always be there.

Any thoughts on this?

porkchopexpress says

Something different about this housing bubble is that rents are skyrocketing, which didn’t happen in the last one. So when I did my rent vs buy analysis before purchasing our home in TN, it still made sense to buy. Historically, I believe it’s rare or nonexistent to see rents drop significantly at a systemic level. Ultimately, everyone needs a place to live, so the demand for either renting or buying will always be there.

Any thoughts on this?

Agree, rent and inflation going up countering the housing crash that should be happening. Rates going up will slow down new buyers but isn't going to do anything to people with lots of equity without a 30+% crash.

porkchopexpress says

Ultimately, everyone needs a place to live, so the demand for either renting or buying will always be there.

Yes, as long as population grows and banks don't do fucked up financing to unqualified buyers. Don't think we'll see a housing crash like we did in our lifetimes again.

I don't think people realize how much money banks pissed away foreclosing on people. The banks totally understand what happened. We had a deal where a foreclosure had a contract on it, they didn't want to budge on some inspection issue. Killed the deal. Shitty construction and a pipe blew up during the winter when it was cold. They lost $80k on the eventual sale and more with carry costs (taxes, insurance, etc.).

If housing/employment hits the shitter I think banks will do more forbearance and work with the borrower to keep housing prices up. Remember banks are usually paid back in the first 2-4 years with amortization even during a bust. They're not in the business of land lording, so it's beneficial to not foreclose.

I cant help but wonder if we're going to serve a rash of foreclosures like '08. I think not. Not only are there fewer NINJA loans out there, the morgatge industry hasn't pushed ARMs in over a decade, most SHOULD have locked in a low rate by now. Plus a larger portion of SF homes are held by institutional investors compared with the last time. There should be a moderate uptick as COVID protections expire, but I don't expect nearly the carnage of the prior bubble.

I expect proces to drop a bit, then stabalize similar to 05 to 07. If people can't get top dollar, they won't sell unless they have to. Market will slow but prices will be buoyed by inflation.

The bigger question is when will wages finally rise? At some point the dam breaks and companies have to pay more for talent, it's just a matter of when that occurs. I think by Q3 2024 you'll start seeeing major salary increases among middle class wage earners.

WookieMan says

Yes, as long as population grows and banks don't do fucked up financing to unqualified buyers. Don't think we'll see a housing crash

GreaterNYCDude says

there fewer NINJA loans out there, the morgatge industry hasn't pushed ARMs in over a decade,

That is one way of looking at it.

Another way of looking at it is that since those types of buyers no longer exist there's fewer potential buyers to prop up demand.

B.A.C.A.H. says

Another way of looking at it is that since those types of buyers no longer exist there's fewer potential buyers to prop up demand.

Agreed but I expect that will be balanced out by people who choose not to move and simply stay where they are. If there's less demand but less inventory, market should stay flat for a few years.

https://www.calculatedriskblog.com/

Wow! That was quite the example of 'flipr be fuckt'.

Booger says

Wow, couldn't rent it at $2,00/month but expects someone will buy it for $2,500/month.

From

Bloomberg...

A housing correction will reach from “coast to coast” in the US, but it will fall short of a crash, according to Mark Zandi, chief economist at Moody’s Analytics.

With the Federal Reserve introducing the biggest increase in interest rates in years to combat rising inflation, home prices will likely fall in the housing markets that are most “juiced,” says Zandi. Regions with signs of significant speculation, namely in the Southeast or Mountain West, can expect the pendulum to swing back. Cities and states due for a correction include Phoenix and Tucson in Arizona, the Carolinas, northeast Florida, and above all, Boise — “the most overvalued market in the country,” per Moody’s analysis.

If and when it comes, a drop in housing prices isn’t going to bring much immediate relief to renters, Zandi cautioned. With the supply of starter homes for buyers so limited, and interest rates rising, would-be buyers will have limited options to move from leases to loans. Rising permits and construction for multifamily housing will relieve pressure some, causing rent growth to increase less rapidly.

Zandi made the comments at a bipartisan housing policy summit in Washington, D.C., where speakers and participants, including members of Congress, addressed the severe stress in the housing market amid the growing specter of recession. Despite the broad reach of a looming price adjustment, a crash is unlikely, he says, for three reasons:

Housing vacancy rates are at an all-time low. Vacancy rates reached historic highs before the financial crisis more than a decade ago that led to the Great Recession.

The quality of mortgage underwriting is high. Most loans are “plain vanilla” 30-year or 15-year fixed-rate products, with no sign of the subprime or negative amortization activity that precipitated the foreclosure crisis.

While some markets are marked by speculation and flipping, nationwide the evidence for flipping is low.

“I just don’t see the the kind of mortgage defaults and distressed sales that would be necessary for big declines in housing values. That’s when you get crashes, when you have lots of foreclosures and a lot of distressed sales,” Zandi says. “That’s just not going to happen.”

HunterTits says

WTF does the quality of current mortgages have to do with that? NOTHING.

A lot, actually. Poor quality of mortgages was instrumental in driving up property prices in the prior cycle, and then mortgage defaults contributed to the snowball effect on the way down. That's not what's happening today. Prices climbed even higher, but this time it happened without drawing in poor schmucks who couldn't afford the place to begin with. So, when prices initially go down (which they probably will), it shouldn't cause that same chain reaction.

mostly reader says

HunterTits says

WTF does the quality of current mortgages have to do with that? NOTHING.

A lot, actually. Poor quality of mortgages was instrumental in driving up property prices in the prior cycle, and then mortgage defaults contributed to the snowball effect on the way down. That's not what's happening today. Prices climbed even higher, but this time it happened without drawing in poor schmucks who couldn't afford the place to begin with. So, when prices initially go down (which they probably will), it shouldn't cause that same chain reaction.

I would encourage you to watch the "Big Short" if you aren't much for reading. Basically, the movie is based on historical facts, it wasn't ARM or subprime loans that lead the fall in housing prices, it was all the mortgages. Even the 'prime' mortgages, the ones that couldn't go bad, that did. These prime mortgages were graded Aaa by Moody and the like.

My own experience working at a one of the mortgage companies I worked with that dealt with VA ARM loans extensively makes me ponder how the market will turn. VA loans are $0 down. VA loans make up a small amount of the overall mortgage market. This article below is worth a read regarding that...

https://resources.ownup.com/va-loan-data-study-overview

https://nypost.com/2022/06/24/us-housing-market-price-correction-to-hit-coast-to-coast-moodys-economist-warns/

US housing market price correction to hit ‘coast to coast,’ economist warns

1337irr says

While some markets are marked by speculation and flipping, nationwide the evidence for flipping is low.

Yeah the new narrative is, the market only crashes if most of the current homeowners are flippers.

During the financial fraud RE meltdown, folks who could continue to pay their mortgage walked away from an underwater, negative equity home.

1337irr says

I would encourage you to watch the "Big Short"

I saw it, although it was more of "it plays in background while I'm doing something else" type of watching.

IIRC, bad mortgages was exactly the problem. Quality of mortgages was poor, but Moody put lipstick on that pig by grading them AAA. Plus the characters went door to door and discovered whole blocks of unoccupied houses - tell for speculation in unprecedented numbers (IIRC, yet again). Prices coming down caused those bad mortgages to crash, which in turn caused further decline in prices - classical snowball effect.

That's not what we have today, not at least in terms of quality of mortgages. Rise in interest rates may have somewhat of a similar effect because, on top of cost of new ownership, some owners have to refinance. But it won't be the same.

My personal understanding of unhealthy RE market is partially based on number of owners who depend on appreciation and follow-up refinancing to continue paying the bills. They are always there in some numbers, but when those numbers go out of whack - that's a red flag. I'm not seeing it today. But then again, may be it's there and it's just that I don't go out and talk to people as much as I used to.

HunterTits says

WTF does the quality of current mortgages have to do with that? NOTHING.

Please watch the movie The Big Short which explains why subprime mortgages or quality of current mortgages have to do with that. Dr Michael Burry is my hero.

I agree as I have seen one "luxury" apartment building going up after another over the last 2 years in my zip code and county.

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