patrick.net

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.

Bitcoiner says

I see. 50% doesn’t seem bad as a premium. I assume you are talking about monthly rent versus PITI. The p of course stands for principal. That’s your money/equity. And the premium on your PITI is only at the beginning. After a few years rents catch up and soon thereafter your rent is higher than someone else’ mortgage for a comparable property. But I see you point, you look at it as of now: cheaper to rent than to own you rent and wait until prices come down. Good for you. I hope it works out.

Dude, you're rationalizing stuff. Whatever you wanna rationalize and good for you.

Doesn't change my point, which is more to the point of the original post than your rationalizations, that the rare homies here along the coast who complained about the insane prices but then jumped in (capitulated) signal a top.

gabbar says

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?

"Would you like fries with that?"

Bitcoiner says

So you are in the outskirts of San Diego then. You are not talking about being in the city of SD. Don’t dox yourself, but could you tell me which city you are in? My mortgage is under 3k including HOA and I have 4bedrooms, 3 bathrooms, a large loft, an office, a great room, large backyard, 3 car garage. And that’s my point, in a few years a one bedroom apartment cost as much in rent as my house thanks to inflation. To me that’s a no brainer to buy because of those ever increasing rents.

Let us know how you like Yuma. People I know who moved from SD to phoenix like it except for the brutal summers.

East of San Diego, you can probably figure it out. Love it out here, would never go back to the city. But I also check rents in South Bay, where we used to live, and they're about the same range I mentioned.

Sounds like you got a good deal right now, and actually would have been a good deal for a while now. But I remember when houses in Chula Vista used to go for $1,700, and that's where they will return. Inflation always bursts at some point, and things level out. Been the name of the game since forever.

We were in Phoenix for a year. I'm not gonna say it ain't hot, but did seem a bit exaggerated to me. We'll be just a few hours drive from the beach, don't plan on many summer weekends in Yuma. If things go well, wouldn't be surprised if we move again in a year to a much cheaper 3/2. Housing out there is some of the cheapest in the country. But we've been cooped up for too long, gonna spoil ourselves this year.

Like I said, already seen two houses drop several hundred off their rent because they were sitting. I ain't thinking, I'm seeing.

NuttBoxer says

Like I said, already seen two houses drop several hundred off their rent because they were sitting. I ain't thinking, I'm seeing.

I noticed around Panama City Beach like apartments such as Urban Blu and 10X Living that they offer 1 month rent free for 13 month lease.

This is more common now and also the rental rates seems to be unchanged since 2022.

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Bitcoiner says

NuttBoxer says

Like I said, already seen two houses drop several hundred off their rent because they were sitting. I ain't thinking, I'm seeing.

It’s fascinating isn’t it. Two people can look at the same chart. One person says: I saw two houses go down in rent! The other says: looks like avg rent goes up over time.

It has to go up with inflation. Everything does as long as there's inflation.

My theory on when rent and home prices will come down? When food inflation really kicks off. At the turn of the last century food was 40% of household expense. Now the equation has flipped and some pay 40% for housing. Both can’t be high at the same time. (Clothing was nearly 20% (!) and is now negligible, this will change too if the shit kicks-off with China. Everybody gripes about ‘cheap Chinese shit’…wait till it disappears.)
When food and clothes got cheap, last century, housing costs could rise because they will ALWAYS get 100% of the working man's wages. They are trying to get more than that with consumer debt but that can only go so far.

mell says

Everything does as long as there's inflation.

Our wages (and pension income) and so purchasing power, - ie, ability to pay the higher rents the landlords covet - may not keep up, though.

This was my thinking decades ago in wanting to own my home.

B.A.C.A.H. says

mell says

Everything does as long as there's inflation.

Our wages (and pension income) and so purchasing power, - ie, ability to pay the higher rents the landlords covet - may not keep up, though.

This was my thinking decades ago in wanting to own my home.

Yeah purchasing power erodes slowly against inflation, but it takes a long time to make a dent. Plus low inventory will sell/rent it to the next immigrants/transplants that have enough money. Also corporate housing by big tech. SV has been in decline for a while now, but it's slow. Many chindians still moving in, the decline may not be unwanted for those seeking a break from tech hipster doofuses

Bitcoiner says

I bought the top in 2020 and again a top in 2022 for one of my rentals. Everytime i buy, it’s the top at that time. Funny thing is people TODAY would kill to buy the top

Bully for you.

The title of the thread is "housing prices peak 2".

Your incessant comments about how savvy your purchases at peak prices are sounds like you're trying to make a convincing argument to someone about a premise that's different than the original post.

Is that someone you?

Bitcoiner says

.alpine?

My bet: El Cajon

Bitcoiner says

I don’t think I am wrong. Buying at peak / top in housing means very little in the context of a longterm time horizon. A purchase today at 2006 peak bubble prices is considered a steal today. Even buying today at 2020 prices would be worth a murder. Can you imagine that in a decade people would love, love, love to buy at 2023 price levels? I can. Easily.

You’re not wrong, but you’re not right either. The catch is no one knows where the peak is, and no one knows where the bottom is. However, buying at the peak locks one in a higher property tax basis vs. buying at the bottom. I have properties where I paid $150-$160k each a decade ago, and they’re worth $550-$600k now. My property tax liability is $3k/year vs. buying now and paying $8-$9k. That’s $400-$500/mo delta in cash flow perpetuity. Buying “right” allows for a higher return.

We live in an inflationary economy so assets tend to rise over time and coastal housing has been appreciating at a rate exceeding inflation. We can agree that coastal housing is a good inflation hedge. I can see real estate prices continue to rise while the yield keeps getting compressed; thus, the premium in owning vs. renting may get wider/bigger. However, I don’t believe real estate return in the next decade will be anything like the last decade.

NuttBoxer says

Like I said, already seen two houses drop several hundred off their rent because they were sitting. I ain't thinking, I'm seeing.

Yes, as supply has been increasing such as number of unsold homes on the market. My post above about Invitation Homes is part of that.

And then I noticed rentals such as for 2 bedrooms are still holding at reasonable rates in my county.

In this case, the below 2 bedroom, 1 bath apartment is near Tyndall AFB. Its very affordable at $950 a month considering the starting wage is at least $15 an hour for fast food.

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ad says

NuttBoxer says

Like I said, already seen two houses drop several hundred off their rent because they were sitting. I ain't thinking, I'm seeing.

Yes, as supply has been increasing such as number of unsold homes on the market. My post above about Invitation Homes is part of that.

And then I noticed rentals such as for 2 bedrooms are still holding at reasonable rates in my county. In this case, the below is near Tyndall AFB. Its very affordable at $950 a month considering the starting wage is at least $15 an hour for fast food.
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Very reasonable these days.

Eman says

I don’t believe real estate return in the next decade will be anything like the last decade.

Why do you suspect there wont be any more printing, I suspect 'QE' would continue under different forms some of them may not be very obvious. Eventually hidden inflation will catch up and pushes stuff like RE and stocks etc. Look at recent banks, ideally they must book losses and close them in free market system but gov is pumping from thin air and covering their irresponsibility which is a form of delayed inflation. As I said before cash is always trash. Gov inflation numbers are always fake and comical and not applicable to so many places. By the way I am not suggesting to invest toxic urban RE.

Blue says

Eman says

I don’t believe real estate return in the next decade will be anything like the last decade.

Why do you suspect there wont be any more printing, I suspect 'QE' would continue under different forms some of them may not be very obvious. Eventually hidden inflation will catch up and pushes stuff like RE and stocks etc. Look at recent banks, ideally they must book losses and close them in free market system but gov is pumping from thin air and covering their irresponsibility which is a form of delayed inflation. As I said before cash is always trash. Gov inflation numbers are always fake and comical and not applicable to so many places. By the way I am not suggesting to invest toxic urban RE.

Agree with this. But since the QE benefits the rich disproportionally, the renters, usually middle or lower middle-class or gov dependent (yes, there are upper middle class, upper class and uber wealthy renters, but I peg them at 20% max), rents will not rise as fast as house prices imo.

Blue says

Eman says

I don’t believe real estate return in the next decade will be anything like the last decade.

Why do you suspect there wont be any more printing, I suspect 'QE' would continue under different forms some of them may not be very obvious. Eventually hidden inflation will catch up and pushes stuff like RE and stocks etc. Look at recent banks, ideally they must book losses and close them in free market system but gov is pumping from thin air and covering their irresponsibility which is a form of delayed inflation. As I said before cash is always trash. Gov inflation numbers are always fake and comical and not applicable to so many places. By the way I am not suggesting to invest toxic urban RE.

From where I sit, prices/valuations are frothy. The markets need a reset. I don’t know when the reset will happen, but I expect one for valuations to comeback in-line before the markets can move significantly higher. Alternatively, the markets can continue to chug along with mediocre return in the coming years and decade.

As someone who have been buying and selling real estate every year since 2008, I haven’t bought anything in 2023. Numbers just don’t pencil out although I see some deals going down with numbers that make sense. At the moment, low inventory is helping to hold up prices. The risk/reward is not there in most cases.

Just my 2 cents.

Blue says

Look at recent banks, ideally they must book losses and close them in free market system but gov is pumping from thin air and covering their irresponsibility which is a form of delayed inflation.

There are two types of paper the banks are holding: 1) AFS (available for sale). These must be marked-to-market from a valuation POV; thus, the unrealized losses are real, and the banks are required to hold reserves for them, and 2) HTM (held to maturity), not mark-to-market; thus, no reserves are required.

Most banks hold HTM paper. Why should they book the losses? Say they lent money out at 3% for a 5 or 10-year ARM. These loans will balloon and reset themselves by maturity. Some of them, in fact, will mature sooner as the borrowers sell the assets or refinance due to their own circumstances. Banks just earn less money during this time.

Bank run was what caused these banks to fail recently.

mell says

Agree with this. But since the QE benefits the rich disproportionally, the renters, usually middle or lower middle-class or gov dependent (yes, there are upper middle class, upper class and uber wealthy renters, but I peg them at 20% max), rents will not rise as fast as house prices imo.

I expect this to happen as well regardless people like it or not. The premium to own real estate will continue to get wider. However, valuations seem frothy at the moment to me so I expect, or shall I say I believe, a high chance of a reset to happen. However, as I mentioned above, chugging along, or moving sideways, for years or a decade, is another way of a reset, or let valuations get somewhat in-line before prices getting out of line again.

mell says

Agree with this. But since the QE benefits the rich disproportionally, the renters, usually middle or lower middle-class or gov dependent (yes, there are upper middle class, upper class and uber wealthy renters, but I peg them at 20% max), rents will not rise as fast as house prices imo.

I can easily sew this being true. Does anyone doubt tech and AI will continue to kill the middle class on down the chain? If I understand correctly, the Hollywood writers strike has something to do with AI doing the job of writers and then the writers becoming editors to AI.

GNL says

I can easily sew this being true. Does anyone doubt tech and AI will continue to kill the middle class on down the chain? If I understand correctly, the Hollywood writers strike has something to do with AI doing the job of writers and then the writers becoming editors to AI.

So true. I suspect the material fed to "AI" is pretty much is free or low cost if at all paid and it produce any amount and make writers useless temporarily until it needs new stuff to feed it again.
I heard on radio that studios have enough material for the next almost a year that they do not need anything immediately from the writers. Writers strike for few weeks or months make no difference for the studios.
One way to solve this puzzle is, find a competent lawyers who can find the materials or "modified patterns" that belongs to the authors that being fed to AI on the way to create models that used as a basis to generate text/images/videos etc. for the end paid customers.
I have not explored fully but AI (neural networks) may have reverse feed back procedures to find the source pattern detection to find the original material or patterns to prove them in court to sue them for stolen stuff.

Eman says

Buying “right” allows for a higher return.

I've seen old-timers say, "You make your money when you buy", basically saying don't buy at the peak.

There has been writer's software for a while that will spit out plot suggestions and scenarios, which the actual writers only need to massage a bit. There are also 'script factories' that generate all kinds of pre-wrapped scripts for script buffets. Script writing has become industrialized.

Actual writers are mostly massaging these scripts unless there is specific plot material that needs adaptation. Also, some more seasoned writers act as 'doctors', who for large amounts of money and short work spells, will add repartee and cleverness to rote dialogues. These script doctors are often actors themselves, who know how certain types of dialogues will play out in front of the camera with particular actors.

My wife and I always laugh, because writer is the first job the Hollywood dynastic children get out of college at Daddy's studio, which is why so many plots are childish, unoriginal, plagiarized and derivative. The shallow rich kids are writing them rather than seasoned talent with real life experience. Most people would be surprised at how young the writers are for most standard fare, the '24 year old' script writer syndrome. I guess some of these spoiled spawns eventually move into production, and the next generation of spoiled entertainment industry brats take their places.

The scripts are changed and butchered so often that Hollywood has an incredibly complex 'script credit' system, in which original writers of scripts may wind up with a very small 'credit' attribution for an original script that has been altered every which way from the original. You can have upwards of six to ten writers who wind up with a credit on the scripts. These script credits are important because of resume recognition and also profit residual sharing on movies that are successful enough to generate a profit. The accounting for movies is arcane, and is designed to avoid anything that resembles a profit, but some are so successful they do transcend the accounting dodges to produce profits and residuals.

Eman says

There are two types of paper the banks are holding: 1) AFS (available for sale). These must be marked-to-market from a valuation POV; thus, the unrealized losses are real, and the banks are required to hold reserves for them, and 2) HTM (held to maturity), not mark-to-market; thus, no reserves are required.

Most banks hold HTM paper. Why should they book the losses? Say they lent money out at 3% for a 5 or 10-year ARM. These loans will balloon and reset themselves by maturity. Some of them, in fact, will mature sooner as the borrowers sell the assets or refinance due to their own circumstances. Banks just earn less money during this time.

Bank run was what caused these banks to fail recently.

From last 20 years or so, banks (maybe some exemptions) do not hold mortgages at all. Every closed transaction is sold to Fannie Me or Freddie Mac agencies. From there collateralized and sold as bond tranches to various investors e.g., mortgage REIT's. If value goes down that the risk investors took.

Bitcoiner says

just_passing_through says

Eman says

Buying “right” allows for a higher return.

I've seen old-timers say, "You make your money when you buy", basically saying don't buy at the peak.

Every time i bought houses some Schmoe told me, “you bought the peak”. In hindsight that so called peak/top would be a steal compared to todays prices. Since nobody knows, the peak discussion is a waste of time. If you want to wait for a crash like 2008/2009 you most likely never buy. From a long term perspective it makes not much of a difference if you buy +/- 10-15%. Any price you pay today is considered cheap in ten years from now.

You have to compare it though with a renter who invests their excess money during that time. Just because it's more expensive years later doesn't mean it's better than renting. There will be no crash imo but that's no reason to buy at a (local) top either. However if the interest rate and your situation is right you likely will never regret buying. Interest rates of 3% or below were the shit. Nowadays I'd think twice about buying, def a more complex calculation/consideration now

Bitcoiner says

I don’t think I am wrong. Buying at peak / top in housing

Who are you trying to convince?

Keep telling yourself that, bro.

Bitcoiner says

Every time i bought houses some Schmoe told me, “you bought the peak”.

Well, I'm quite happy I bought all my investment properties prior to 2018 but most earlier in the decade. I'm sitting tight waiting for a better entry point and making other investments in the meantime.

BTW, glad the clot shot didn't kill ya! Some folks on here were concerned when you disappeared for awhile.

REpro says

From last 20 years or so, banks (maybe some exemptions) do not hold mortgages at all. Every closed transaction is sold to Fannie Me or Freddie Mac agencies. From there collateralized and sold as bond tranches to various investors e.g., mortgage REIT's. If value goes down that the risk investors took.

This is true for 30-year fixed mortgages although Fannie/Freddie do hold some ARM commercial loans too. Most banks hold onto commercial mortgages as they have lower risk and higher yields. Unfortunately, the Fed hiked rates at unprecedented pace, even faster than Paul Volcker, which the banks couldn’t hedge fast enough; thus, resulted in unrealized losses.

With the office and retail space not doing well and likely result in foreclosures or forbearance of some sort in the near future, if not already, banks have to set aside reserves for these assets. Big money saw this coming and withdrew their money from these regional banks; thus, created bank runs. My buddy, who works for the Federal Reserve, said he’s been extremely busy at work the last few weeks. It’s obvious at this point that more regional bank failures are on the way. The too big to fail banks will be fine.

mell says

You have to compare it though with a renter who invests their excess money during that time. Just because it's more expensive years later doesn't mean it's better than renting. There will be no crash imo but that's no reason to buy at a (local) top either. However if the interest rate and your situation is right you likely will never regret buying. Interest rates of 3% or below were the shit. Nowadays I'd think twice about buying, def a more complex calculation/consideration now

Well said mell. The calculation is more complex in the current environment.

In late 2021, we got 3% IO on a 10/1 ARM with First Republic Bank. In summer 2022, it was 4.2% for a fully amortized 5/1 ARM with them. They’re no longer in business. Other banks’ quotes recently came in between 5.25 to 5.8% for 5/1 ARM while sellers still want sub 5% cap for their assets with no upside in rent.

Bitcoiner says

I said it many times, if you are happy renting, good for you!

When you think about it renting is better than buying if the rent is cheap enough.

Bitcoiner says

I like the discussion but I wish the bears could bring some inventory predictions to the table.

Inventory is already plentiful if you are looking for a new build and want an expensive house in certain areas. That's pretty much step one. It's going to take time for the repos accumulated during the moratorium to work their way through the system (and this might be step 2). I am not expecting inventory to return to normal levels at all this year. In some places (like Arizona and Florida) full of old people that literally need a constant flood of people moving in to replace all the deaths it will be interesting to watch inventory levels, as the "value proposition" is pretty much gone (as in it's more expensive for me to live in Florida then in Maryland, so why move there?). Sure it's almost always going to be cheaper to live in various places when compared to Manhattan and California, but when (the south mostly) is as or more expensive then the Midwest and most of the Northeast, who is going to move their especially with the salaries being lower (like in Florida). I'm not going to take a 25-40% cut just to live in Florida.

This is going to take years, unless the proverbial Black Swan event happens.

Bitcoiner says

Actually, active listings (which includes existing homes and new construction) are very low by historic measures.

If you look at new construction only without looking at existing homes, the inventory is high. That's what I was referring to. Something like a 7 months supply.

Bitcoiner says

Repos / moratorium? Are you talking about the upcoming foreclosure tsunami due to the mortgage forbearance?

I don't know if it's going to be a tsunami at ay point due to general slowness when it comes to repos, but yeah, between short sales and repos it should supply the market at least something that it wasn't doing in 2022.

That’s a steal and would cost you 30k for a comparable lot size in CA. AZ will always see an inflow of retirees from CA. That demand won’t dry up.

I'm thinking more along the lines of what's going to happen in the SouthEast. I would still expect people to flee CA and flood NV, AZ, etc. as long as the value proposition still exists (and it most likely will). I am expecting things to be different in the SouthEast where new builds are plentiful and the value proposition is basically gone for most people in the NorthEast and Midwest who typically move south. Of course, if people from CA decide to flood the SouthEast, that could be different, but CA will run out of conservatives eventually.

just_passing_through says

Bitcoiner says

.alpine?

My bet: El Cajon

El Cajon is way too city for me. Where I live we call going to San Diego(which starts in El Cajon), "Going into town", or "Going down the hill".