patrick.net

https://www.bloomberg.com/news/articles/2022-12-06/millions-of-us-millennials-moved-in-with-their-parents-this-year

Millions of US Millennials Moved in With Their Parents This Year

These days, a luxury high-rise in downtown San Francisco with units that appear to be mostly empty isn’t an uncommon sight. As a cooling real estate market continues to impact the city, downtown condos might be some of the hardest-hit properties around.

Patrick Carlisle, Compass’ chief market analyst, said that while economic headwinds are affecting real estate markets everywhere, downtown San Francisco’s condo market has been hit especially hard.

“That market has been hit hardest in the city,” Carlisle told SFGATE. This is due to a few different factors, he said, one being the mass abandonment of downtown office spaces since the start of the pandemic.

“San Francisco went from probably being the hottest office market in the country to being about the weakest,” Carlisle said. “High-tech workers were the ones who were most likely to say, ‘Well, I can work from any place. I’ll move someplace where housing costs 90% less.’”

Speaking of tech workers, Carlisle said the uncertainty brought on by mass tech layoffs has also affected property sales downtown. He added that an increase in homelessness and crime in downtown areas has affected the “quality-of-life ambiance” for people in those areas, presumably buyers who are reluctant to live among the city’s unhoused populations.

...
According to a recent report from Compass, the median sales price of a two-bedroom condo in downtown areas has dropped by 16% since 2021, compared to a 7% drop in the price of two-bedroom condos outside of that area. The report also states that condo inventory in this area is more than twice as high as the rest of the city — which explains the seemingly empty high-rises looming everywhere downtown.

In October, one 45-story luxury high-rise made news after it was revealed that only 13 of its 146 units had been purchased in the two years they’d been up for sale.

...

https://www.sfgate.com/local/article/downtown-sf-condo-market-struggling-17643941.php?IPID=SFGate-HP-CP-Spotlight

zzyzzx says

https://www.bloomberg.com/news/articles/2022-12-06/millions-of-us-millennials-moved-in-with-their-parents-this-year

Millions of US Millennials Moved in With Their Parents This Year

Living with parents/family members is considered normal and positive in many cultures/countries.

gabbar says

In defense of agent's, what exactly do you want them to do? An agent puts a lot of time, effort and $$ into getting to the point of agreements let alone the amount of $$ they put into a listing. However, I do think there is an argument to be made that the industry is a monopoly. The fact that a Realtor must post all listings to an MLS is where, imo, the control is made most effective. You can sell real estate without being a Realtor.

To above post, not in California.....

zzyzzx says

Where/when do tax valuations change simply by refinancing?

cisTits says

GNL says

Where/when do tax valuations change simply by refinancing?

One good thing about California is that doesn't happen.

Still, I don't get the relationship between the two lines in that meme either.

It doesn't. Not with a refi. Purchase will though. Bought my house for $85k it's worth $300k now and refi'd twice. Property taxes went up $300 annually since we've bought. We're IL unicorns at $3,200 in taxes annually.

GNL says

In defense of agent's, what exactly do you want them to do? An agent puts a lot of time, effort and $$ into getting to the point of agreements let alone the amount of $$ they put into a listing.

Only a fox/stakeholder in real estate can defend other real estate agents/foxes. Real estate agents are worse than used car salespeople.

Current and expected conditions are like those that have signaled past global recessions. Significantly deteriorated financial conditions, increased policy rates, energy concerns, and declining trade volumes indicate the global economy will likely enter a recession in the coming year. The brunt of job losses to hit the technology and real estate sectors. They were among the strongest beneficiaries of the zero-rate environment. - Vanguard Report, December 14, 2022

GNL says

You can sell real estate without being a Realtor.

In Virginia, you can sell your own real estate without a broker, but you cannot sell for someone else without a license.

HeadSet says

GNL says

You can sell real estate without being a Realtor.

In Virginia, you can sell your own real estate without a broker, but you cannot sell for someone else without a license.

As I understand it, you have to have a state license and work under a Broker (I'm pretty sure) but you do not have to join the NAR or become a Realtor. You can simply be a real estate agent.

WookieMan says

GNL says

Where/when do tax valuations change simply by refinancing?

One good thing about California is that doesn't happen.

Still, I don't get the relationship between the two lines in that meme either.

It doesn't. Not with a refi. Purchase will though. Bought my house for $85k it's worth $300k now and refi'd twice. Property taxes went up $300 annually since we've bought. We're IL unicorns at $3,200 in taxes annually.

It doesn't. It just tracks the market price. From what I can tell, the county government's property appraiser office attempts to appraise or assess (for calculating the property tax) the home value to about 25% below the average market price for the year.

Market price is what the home would likely sell at.

That is why I usually multiply the county assessed value by 1.25 to get a rough order of magnitude estimate on what price the house should sell at.

.

zzyzzx says

Redfin all time high was about $96 in early 2021. It may be a good bottom feed price now if you willing to hold it for at least 3 years. Look at AirBnb and Zillow, they also got beat up a lot also.

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https://wolfstreet.com/2022/12/11/starting-to-be-housing-bust-2-for-homebuilders-new-single-family-houses/

Starting to Be Housing Bust 2 for Homebuilders & New Single-Family Houses
by Wolf Richter • Dec 11, 2022 • 217 Comments
To get rid of ballooning inventories amid spiking cancellations & plunging sales, builders try to sell to rental operations, but they pulled back too.
By Wolf Richter for WOLF STREET.
If a homebuilder cannot sell their ballooning inventory of unsold new houses to households, at current prices and mortgage rates, amid plunging sales and soaring cancellation rates of signed contracts – topping out at 45% in the Southwest and at 38% in Texas – despite aggressive incentives such as mortgage-rate buydowns to stimulate sales and prevent cancellations, well, whom are homebuilders supposed to sell those houses to?

Rental operations? That may be hard too because many have pulled back for all the same reasons as households: Prices are too high, and financing is too costly. Sales to single-family rental investors have plunged by 32% in Q3 from a year ago. So here we go with a good-luck nod…

Patrick says

https://wolfstreet.com/2022/12/11/starting-to-be-housing-bust-2-for-homebuilders-new-single-family-houses/

Starting to Be Housing Bust 2 for Homebuilders & New Single-Family Houses
by Wolf Richter • Dec 11, 2022 • 217 Comments
To get rid of ballooning inventories amid spiking cancellations & plunging sales, builders try to sell to rental operations, but they pulled back too.
By Wolf Richter for WOLF STREET.
If a homebuilder cannot sell their ballooning inventory of unsold new houses to households, at current prices and mortgage rates, amid plunging sales and soaring cancellation rates of signed contracts – topping out at 45% in the Southwest and at 38% in Texas – despite aggressive incentives such as mortgage-rate buydowns to stimulate sales and prevent cancellations, well, w...

@patrick, short home builder stocks, or XHB?

iShares US Home Construction ETF' 52 week high is $83.22 and its 52 week low is $48.02 (June 2022). Its at $62.84.

Its has to return to its Feb 2022 level of around $50. It likely will bottom around that level.

.

Eman says

short home builder stocks, or XHB

I wouldn't short anything, since losses are potentially unlimited, but buying put options on some overvalued builders (p/e > 30?) might be good.

Patrick says

I wouldn't short anything, since losses are potentially unlimited, but buying put options on some overvalued builders (p/e > 30?) might be good.

The PE is less than 5 for the most home builders. Interestingly, most stocks are on the raise from 2022-Nov.

Fans of the 2008 housing crash redux, rejoice!

It appears the BLS has been cooking the books on employment. Actual job creation since March is about 12k, vs. BLS numbers of 2.7 million. There is no 'strong and tight' labor market.

Zerohedge has been all over this for a while now :

https://www.zerohedge.com/markets/here-comes-job-shock-philadelphia-fed-admits-us-jobs-overstated-least-11-million

While I'm still in the "there won't be a housing crash" camp, I have had the caveat that job loss could create forced selling and it could crash housing.

stfu says

While I'm still in the "there won't be a housing crash" camp, I have had the caveat that job loss could create forced selling and it could crash housing.

That's what it would take. Most loans up until 1-2 years ago are low interest rates and qualified. Even the high interest rate ones are qualified. Low likelihood of needing to move for 4-5 years. Any crash is really not possible without a job loss situation. No one wants to work and everyone here at least in IL is hiring. And I mean everyone. The only unemployment is those that don't want to work. Not my jam but I could get 10 jobs by next week that pay $20-30/hr. Low skilled jobs at that.

2006 was a once in a lifetime event like the depression. High interest rates stall prices and some bubbly cities might see a bigger drop that drags down the national median price due to exodus, crime and work from home. I think prices in smaller non-yuppy suburbs and rural do pretty well, but they're lower priced than the cities so it looks bad nationally overall even if there are smaller pockets of appreciation.

It's been a process, but probably breaking ground in March/April of 2023. I know inflation will stop at some point when we get the supply chains back to normal and the interest rates will drop and just refi. Building a home 2x's our annual income so we'll be on solid ground even if rates are 8-9%. I don't like the Biden admin, but not much can be done over the next two years.

Smart people know that and are adjusting. I just think we'll have lethargic markets overall for the next 3-6 years. You can't tell people to stay home for 12+ months and not expect it to take years to recover. Covid will go down as being worse than the 2006 housing crash. We just printed a bunch of money to make it not look as bad. It's worse we just don't know the full damage done yet.

You don't need a realtor to sell a house. Regardless of what agents tell you it's BS. When you do sell just price it correctly. If I was going to sell again I would demand the buyer pay the agents commission. They are only there to take a cut of your sale.

https://finance.yahoo.com/m/ac1718c7-a028-39c0-ad33-84fbfcb87377/15-years-ago-the-housing.html

15 Years Ago, the Housing Market Crashed Under Similar Circumstances

ad says

Redfin all time high was about $96 in early 2021. It may be a good bottom feed price now if you willing to hold it for at least 3 years.

Take this with a grain of salt as I'm not at expert at reading financials. Looks like they have $400+ million in cash on the balance sheet. They've been losing around $80 million a quarter, but have shutdown the iBuyer program so those losses should go down (EDIT:they actually showed a profit a couple of years ago before the iBuyer program started up). Currently (as of end of last quarter) they still had $300 million of inventory on the books (that is, homes Redfin had purchased through the iBuyer program, I believe). Not sure if they've been marked to market yet....

Now compare Redfin to Compass.
Compass lost $150+million last quarter and $100+million the previous quarter. They're down to $350+million in cash. It's not clear to me if there is a path to profitability for Compass. They've started to cut salaried staff. I suppose if they went under that could be a huge boon to Redfin...

I agree we’re in for some hurt but with remote work being so prevalent now, people lose jobs and get another remote job. They don’t have to move like the olden days. This is a massive difference in how the housing market will react to a recession

cisTits says

Actuallly, the remote jobs are drying up. For now. Companies are imposing RTO orders starting next Q1/Q2 to impose both quiet layoffs and to use their office R/E they are stuck with.

I know there's some of that, but I haven't heard of RTO being on any mass scale. Do you have data to support your hypothesis?

https://www.theregister.com/2022/10/03/remote_work_real_estate_values/

I do think RTO is happening to some extent. A tech executive I know from an adjoining hood in tri valley says he is going back to the office after almost two years remote.

Also, the 'Sunol-Grade-Ometer' aka the crowding of commute traffic on the Sunol Grade has been increasing, but still not quite like it used to be.

cisTits says

San Francisco & Silicon Valley Housing Markets Puke Huge Price Drops, as Startups, Crypto, Tech, Social Media Make Total Mess

In California overall, prices dropped year-over-year, as sales collapsed, supply more than doubled. No dear, this isn’t just a seasonal dip.

https://wolfstreet.com/2022/12/19/san-francisco-silicon-valley-housing-markets-puke-huge-price-drops-as-startups-crypto-tech-social-media-make-a-total-mess/

This is good news for now but I guess it’s temporary. Gov can’t pay these interests while still printing and borrowing. It will start its tantrum for zero interest rates soon, then all bets are off. Every shack in Death Valley starts with $1m no kidding.

Blue says

cisTits says

San Francisco & Silicon Valley Housing Markets Puke Huge Price Drops, as Startups, Crypto, Tech, Social Media Make Total Mess

In California overall, prices dropped year-over-year, as sales collapsed, supply more than doubled. No dear, this isn’t just a seasonal dip.

https://wolfstreet.com/2022/12/19/san-francisco-silicon-valley-housing-markets-puke-huge-price-drops-as-startups-crypto-tech-social-media-make-a-total-mess/

This is good news for now but I guess it’s temporary. Gov can’t pay these interests while still printing and borrowing. It will start its tantrum for zero interest rates soon, then all bets are off. Every shack in Death Valley starts with $1m no kidding.

Nope. You're not.

I'm telling everybody, and I've said it many times before, silly con valley is the next Detroit.

What does the public want? Do you need a faster processor? Not satisfied that your PHONE literally beats the shit out of a super computer from 1990? Is a 256GB $30 memory card too small? Too expensive? You can only store 2 years of music on it, and more than 10 times more books than you could read if you lived 100 and was born being able to read. You can only store 1 month of films in quality suitable to display in a movie theater - every major film that is released in a year in all theaters in all the United States? That not enough??

What do you need? A faster Internet? Too troublesome that it takes 10 minutes to download an entire operating system or a film? Video games not realistic enough? Need a higher resolution display? We already make displays that have more pixels than your eye has receptors.

All you MIGHT want is a greater ability to access information, and it's not going to come from here. Intelligence agencies infest this place, but it will come.

Blue says

The PE is less than 5 for the most home builders. Interestingly, most stocks are on the raise from 2022-Nov.

Yes, as the E of P/E is based on last 12 months and housing stocks were red hot during that period. Expect P/E to skyrocket for housing stocks if not go negative due to negative earnings (E).

Housing stocks like DR Horton and ETF's like iShares US Home Construction need to return to early 2020 levels or at least be no more than 10% above early 2020 levels based on the next 12 months economic activity and to return to fair value.

There's absolutely no reason why firms have to be in SFBA.

Detroit, Pittsburgh, etc. were where they were due to easy transport of steel, iron, coal, etc. There's no reason for a company whose business is entirely on the internet to be in SFBA.

There's nothing Twitter is doing that can't be done in Hoboken or Tulsa.

"But the people". Elon laid off what, 3/4 of the workforce and Twitter is running faster and with more quality improvements than ever just a few weeks later. Car Manufacturers had no problem leaving for Tennessee or Mexico, so long as they had good transport networks, but it did take a few years. A tech company can move cheaper and faster than that, any schmuck can get on a plane and rent a furnished apartment somewhere until their furniture arrives or they buy new shit.

"Everybody wants a farm in Sicily! It's the Breadbasket of the Med!" - 500BC to ~1850AD. Now they can't give them away. ( Timed right with the implementation of large scale rail traffic then naval bulk transport didn't matter?)

AmericanKulak says

There's absolutely no reason why firms have to be in SFBA.

Detroit, Pittsburgh, etc. were where they were due to easy transport of steel, iron, coal, etc. There's no reason for a company whose business is entirely on the internet to be in SFBA.

There's nothing Twitter is doing that can't be done in Hoboken or Tulsa.

"But the people". Elon laid off what, 3/4 of the workforce and Twitter is running faster and with more quality improvements than ever just a few weeks later. Car Manufacturers had no problem leaving for Tennessee or Mexico, so long as they had good transport networks, but it did take a few years. A tech company can move cheaper and faster than that, any schmuck can get on a plane and rent a furnished apartment somewhere until their furniture arrives or they buy new shit.

"Everybody wants a farm in Sicily! It's the Breadbasket of the Med!" - 500BC to ~1850AD. Now they can't give them away. ( Timed right with the implementation o...

You are right. The talent will exit, the capital will slowly leave. The Bay Area is a network city with staying power for a while.