patrick.net

Onvacation says

Yeah, fuck those poor people. They should have bought at the bottom.

^-- This! A $200 rent increase here in San Antonio sucks for my renters. In CA that would seem like nothing but there is much less $ sloshing around here.

On that note I'm in the county so no restrictions of raising rent in the most landlord friendly state. I still don't like it and so far in 10 years have only gained large increases in between tenants. Even then I didn't raise $200 or I would have sat on the market and eventually learned I needed to drop the prices.

https://finance.yahoo.com/news/mortgage-rates-hit-the-highest-point-of-the-year-160015951.html

Mortgage rates hit the highest point of the year

Why not say..."the highest in X number of years"?

Been tracking Yuma rental market for months, and things are definitely nose-diving hard there. Out of all the rentals we've looked at, only two have rented. Most of them have dropped their price, some significantly($400 or more). More than one is asking less than what they got from their last tenant.

What's weird is agencies there are slow as fuck to lock people in. We were willing to sign lease at several places, but they took a week to get us anything, and by that time, we saw something better, so we passed. Every time we've ever rented in the past, turn around is usually 24 hours from receiving the application, 48 tops. But in Yuma a week seems to be standard.

Beware home owners, I know of two properties we would have taken at the price they were asking if they had been faster on the lease. But because the managers were so slow, we moved on and both had to drop $100 of their rent, and still without tenants. I might be ok letting these places collect rent and do maintenance, but I wouldn't trust them to handle applications.

NuttBoxer says

I might be ok letting these places collect rent and do maintenance, but I wouldn't trust them to handle applications.

80/20 rule. Property managers are largely scum. There are some good ones, but you need to kind of get lucky as an owner. Once you have a good one don't let them go. It's a shitty job either way. But handling applications is literally the easiest part. You can sit at a desk and do that. You don't even need to go to the property.

Booger says

They are counting on being able to refinance once rates go down.

Booger says

The first 50 years are all interest.

For those Canadian mortgages, it don't really matter much how far they can extend out the loan. Only the US has 30 year FIXED rate mortgages. Sure the repayment terms can go to 60, 70, even 90 years, but the Canadians are still sucky variable rate mortgages. Yep, the kind that the Banksters can shoot up the payments on by fucking with interest rates.

Our forefathers didn't trust the banksters so we get long term fixed rate mortgages.

Rubicon says

Inventory continues to decline. Now negative YoY.

I have yet to hear an explanation for why I have been able to rent hundreds of dollars under market, and move countless times in Southern California that lines up with there being a shortage of housing.

Or explain all the rentals that have sat all summer in Yuma, and owners having to drop rents below what they got from previous tenants.

The simplest explanation for the lack of listings is the rise of interest rates, and people who bought at the top being unable to sell without losing money. As I've mentioned here I know of two owners in Yuma who opted to rent after initially trying to sell, likely because they would lose money.

NuttBoxer says

Rubicon says

Inventory continues to decline. Now negative YoY.

I have yet to hear an explanation for why I have been able to rent hundreds of dollars under market, and move countless times in Southern California that lines up with there being a shortage of housing.

Or explain all the rentals that have sat all summer in Yuma, and owners having to drop rents below what they got from previous tenants.

The simplest explanation for the lack of listings is the rise of interest rates, and people who bought at the top being unable to sell without losing money. As I've mentioned here I know of two owners in Yuma who opted to rent after initially trying to sell, likely because they would lose money.

Also in CA people are married to their low property tax so most prefer not to sell. Several people I know moved to TX, FL and NC and they all rented out their shacks instead of selling.

Rubicon says

If more people sell you think inventory rises, which is actually not correct. A seller is usually a buyer. You sell one +1 and you buy another -1 = 0. Your net inventory doesn’t increase.
Inventory rises when you add more supply to the market (building new construction).

That's overly simplistic. You may be aware some people own more than one property. On the construction front it's the same story as everything else, inflation, and STILL interest rates. Because most people are mortgage owners, not home owners. So they have to take out a higher interest loan, but if inflation means the builder can't adjust the selling price to make it affordable, they can't sell. And no one builds houses to sit empty...

Rubicon says

You moving countless times has absolutely nothing to do with explaining an overage or shortage of homes.

Yeah, bullshit on that and here's why. If there's no extra homes, I shouldn't be able to move whenever I want, because there's no extra homes. And to your reference to markets, what happens when the supply is limited but the demand is high? Well, people don't consistently find places way under market because demand drives up the price everywhere.

On the move question I don't even wanna calculate, but probably close to ever two years. When we were younger, it was almost like changing sneakers. Not that way anymore though. Been at the current place over three years, and really hoping the next place will be at least four years. My dream would have been to live in the same place 20 years. Not sure if you've ever seen The Burbs, that's pretty much it.

Rubicon says

Your net inventory doesn’t increase.
Inventory rises when you add more supply to the market (building new construction).

Or if the pop-n-drop picks up considerable speed.

NuttBoxer says

Rubicon says

If more people sell you think inventory rises, which is actually not correct. A seller is usually a buyer. You sell one +1 and you buy another -1 = 0. Your net inventory doesn’t increase.
Inventory rises when you add more supply to the market (building new construction).

That's overly simplistic. You may be aware some people own more than one property. On the construction front it's the same story as everything else, inflation, and STILL interest rates.

It is correct though. There are layers to it. I'm dealing with it now. We lost a generation of what would be quality tradesmen during the housing bust. Framers, concrete, HVAC, plumbing, etc. It's takes 1 month to get bids from builders on our house. We're not in a rush, but no one has any contractors they can rely on. If they do they're constantly booked.

Outside of hipster areas no one is building. If you move and buy an existing home in the new location and rent the old, that will saturate the rental market. In Rubicons example it would actually be -1. If you have a 3-4% rates why not just keep the place, rent it? Depreciate it, save on taxes and likely cash flow. People under 40 are more savvy with RE than people expect. That's why rental rates are facing downward pressure. It has to do with LOW interest rates, not high. Those with high rates are likely in the 5-10 year cycle. They wouldn't move anyway. Hope the rates come down and refi.

And anyone that HAS to move within 5 years is probably a corporate relocation. You're talking less than 5% of the market in housing. So it's not about high interest rates. People are just keeping their homes as a tax and appreciation benefit. You benefit from lower rents, but I can bet that 95% of landlord are still cash flowing and getting the tax benefits even in a high(er) interest rate environment.

WookieMan says

It is correct though. There are layers to it. I'm dealing with it now. We lost a generation of what would be quality tradesmen during the housing bust. Framers, concrete, HVAC, plumbing, etc. It's takes 1 month to get bids from builders on our house. We're not in a rush, but no one has any contractors they can rely on. If they do they're constantly booked.

Which is why it's going to cost WAY more than you originally anticipated... You forgot to mention that.

zzyzzx says

WookieMan says

It is correct though. There are layers to it. I'm dealing with it now. We lost a generation of what would be quality tradesmen during the housing bust. Framers, concrete, HVAC, plumbing, etc. It's takes 1 month to get bids from builders on our house. We're not in a rush, but no one has any contractors they can rely on. If they do they're constantly booked.

Which is why it's going to cost WAY more than you originally anticipated... You forgot to mention that.

Where do you live? Texas it's easy to get bids generally.

Rubicon says

If more people sell you think inventory rises, which is actually not correct. A seller is usually a buyer. You sell one +1 and you buy another -1 = 0. Your net inventory doesn’t increase.
Inventory rises when you add more supply to the market (building new construction).

yes as far as net housing available for long term rent or purchase

hopefully areas of population AND housing growth that has some tourism do not see where new housing starts are eventually made into vacation or short term rentals

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1337irr says

Where do you live? Texas it's easy to get bids generally.

No one builds in IL. They move out. That includes contractors. There's not work, so they go where it is. Texas or Florida is probably a good guess.

zzyzzx says

Which is why it's going to cost WAY more than you originally anticipated... You forgot to mention that.

I honestly don't care about the cost. We do very well. We won't be house poor that's for sure. That would take $2-3M and that ain't happening where we live. $600-700k on the high end. 2x's income. We just can't live in this current house with 3 boys that are nearing teenage years. There's zero inventory. So we have to build. Rates will come down. Centrally located for the wife's work and I'm 14 minutes away from mine. My mom wants the house and has cash to give us. Knock on wood, life has worked out for me. My dad was a fucking ass hole, but he did teach me a lot.

Freakin' housing market is crazy here in San Jose, July 7,2023.

I thought Trailer Homes were difficult to sell. Silly me. Our Friday Senior Fitness Instructor at the gym told us her Trailer Home will be "shown" tomorrow.

Jeez.

We like her a lot. We wish her the Best.

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https://www.cnn.com/2023/07/08/business/mortgage-rates-home-prices/index.html

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Higher mortgage rates have reduced home inventory
In theory, when mortgage rates go up, home prices should fall since it raises the cost of homeownership, thereby reducing demand. But that’s not happening.

That’s partly because the higher mortgage rates that came after the Fed hiked rates created a major lock-in effect, said Kiefer.

At the start of the pandemic, the Fed slashed rates to near-zero levels in hopes of stimulating the US economy as businesses closed and workers stayed home to avoid catching or spreading Covid. With such low rates, homeowners and homebuyers were then able to refinance or buy with rates as low as 2%.

With mortgages now approaching 7%, all that has changed. Selling could mean forfeiting a low mortgage rate for one that’s potentially double.

“Many existing homeowners find it difficult to give up a mortgage under 4% to trade for one over 6%,” Kiefer said. That has contributed to a decline in housing inventory.

And since many homes are still listed above where they were before the pandemic, homeowners have little incentive to sell.

“It seems to be that supply will be stuck for the foreseeable future,” said Dougherty.

Housing inventory, or the number of active home listings, is down by a third from before the pandemic. As of June, there were nearly 614,000 existing homes listed compared to almost 928,000 in February 2020, according to data from Realtor.com.

In many ways, the housing market is still playing catch-up from the Great Recession, which induced nearly a decade of sluggish new home construction, Divounguy said. When mortgages fell below 3% in 2020, home builders started to pick up — but not fast enough to meet the pandemic surge in demand.

Home inventory is likely to drop even lower due to the “low flow of listings paired with the demand for homebuying in the spring,” Zillow’s Divounguy told CNN. On top of that, housing demands remain high because the labor market is still so strong and workers continue to earn more than they had before the pandemic, he added.

“That tells the crux of the story for why the housing market seems a bit odd right now,” Divounguy said.

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The author of the article made some great points. In theory, people expect home prices to fall when mortgage rates go up. Unfortunately, this has been proven wrong time and time again. If this were true, how would the author explain what happened in the 1970’s and 1980’s when mortgage rate went as high as 18% and home prices tripled? Reality and theory are 2 different things

ad says

“It seems to be that supply will be stuck for the foreseeable future,” said Dougherty.

i rarely agree with CNN but this is pretty much spot on for anything outside the major cities. My tenants are pretty much stuck being renters unless rates crash so sucks for them, but I only raised the rent 4% for the good ones. Feeling pretty good as a landlord right now. My brother has been telling me housing will crash for the last 5 years. I just don't see it anywhere outside the big cities.

Eman says

Reality and theory are 2 different things

I'm not sure as far as the number of housing sales in this market of +6% rate. The number of sales has significantly dropped off recently; please check this chart. Hence, less liquidity. Look at the drop off in home sales in 1980 when interest rates increased significantly.

Like Patrick said when he was on 20/20 and/or in his book, you are buying a house payment (mortgage, property tax, property insurance, and HOA fee); so a higher interest rate means higher house payment. That prices people out of buying a home they could barely afford at a lower interest rate.

What I want to see is more new housing construction starts to increase to increase supply and drop prices.
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RedStar says

ad says

“It seems to be that supply will be stuck for the foreseeable future,” said Dougherty.

i rarely agree with CNN but this is pretty much spot on for anything outside the major cities. My tenants are pretty much stuck being renters unless rates crash so sucks for them, but I only raised the rent 4% for the good ones. Feeling pretty good as a landlord right now. My brother has been telling me housing will crash for the last 5 years. I just don't see it anywhere outside the big cities.

I remember buying a 12-unit building in summer 2018. I told myself it was the top of the housing market while I’m going all out, but the deal was too good to pass up.

Then in the fall 2018, another 10-unit came up, I told my partner it’s a no go for me. He said let’s raise money to buy it, and we did. Both buildings are doing super well and we’ve been getting record rents on turnovers. More people are being forced to rent due to the higher mortgage rates. The Fed did it again…

ad says

Eman says

Reality and theory are 2 different things

I'm not sure as far as the number of housing sales in this market of +6% rate. The number of sales has significantly dropped off recently; please check this chart. Hence, less liquidity. Look at the drop off in home sales in 1980 when interest rates increased significantly.

Like Patrick said when he was on 20/20 and/or in his book, you are buying a house payment (mortgage, property tax, property insurance, and HOA fee); so a higher interest rate means higher house payment. That prices people out of buying a home they could barely afford at a lower interest rate.

What I want to see is more new housing construction starts to increase to increase supply and drop prices.
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How do you expect sales not to decline when there are less homes for sale? How did Patrick explain the housing phenomenon in the 1970’s and 1980’s on 20/20?

I’m shocked that people are still buying in the current market. As I’m clueless, I’m observing and learning. I’m not going to call anyone stupid or an idiot. They must be doing something right to be buying in the current market environment.

With respect to new construction, it’s around 10% compared to existing home sales if my memory is correct. It’s not significant. I haven’t been tracking housing data for years since I switched to buying apartments so you may want to look it up and prove me wrong.

Rubicon says

Lol, I got people like that in my circle of friends and relatives. Since 2016 I hear the RE market is going to crash. I just keep buying houses is my response to that.

This couple in our social circle sold their home in 2020 for maybe 300k in profit and I was the only one telling them not to do it. The guy wont even show his face to me anymore as if it's my fault.

Eman says

I’m shocked that people are still buying in the current market. As I’m clueless, I’m observing and learning. I’m not going to call anyone stupid or an idiot. They must be doing something right to be buying in the current market environment.

Yeah right now just doesn't make sense. The fortress areas in Placer County (loomis, lincoln, newcastle) where I'd like to upgrade to haven't dropped at all.And everything still sells. I'm guessing its the bay area people.

RedStar says

Eman says

I’m shocked that people are still buying in the current market. As I’m clueless, I’m observing and learning. I’m not going to call anyone stupid or an idiot. They must be doing something right to be buying in the current market environment.

Yeah right now just doesn't make sense. The fortress areas in Placer County (loomis, lincoln, newcastle) where I'd like to upgrade to haven't dropped at all.And everything still sells. I'm guessing its the bay area people.

Bay Areans bring their housing market mindset to other markets and F everything and everyone up. It’s a disease IMO. I don’t share their value and their politics.

Commercial loan mortgage rates were kind of high in 2018. We borrowed at 4.6% and 4.4% on the 2 buildings. Rates dropped in 2019. We asked our lender if they could do something for us. The modified our loans and lowered our rates to 4.25% and 4%, respectively. We had to pay $1k or so for the fees and recording new loan docs.

In 2021, rates dropped even lower. We refinanced both buildings to 3.5% on another 5/1 ARM so they’re good till 2026. Both buildings have been performing exceptionally well since. Hopefully, we’ll be alright when it’s time to refinance in 2026.🤞

Higher mortgage rates have reduced home inventory

That's just lazy. Mortgage rates are historically normal to low :

https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart


The inventory problem is a demographic problem. There are more millennials, and right on the heels of that more Z'er's, than boomers.

https://www.statista.com/statistics/797321/us-population-by-generation/

I highly recommend going to housingwire.com and listening to any and all podcasts with analyst Logan Mitsubishi (not even attempting to spell his name right). : https://www.housingwire.com/shows/housingwire-daily/ Agree or disagree, he's been proven right over time.

stfu says

That's just lazy. Mortgage rates are historically normal to low :

https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart

That's lying by omission because if peak prices were set around a locked-in 30 year mortgage rate of 4% and if the rate increases to 6%, then it would be harder to sell a home without dropping it every 10% for a 1% increase in the rate.

Remember what Patrick said that you are buying a monthly home payment not a home, unless you are buying with cash and are presumably Eman-like.

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Rubicon says

Rates fuel the market or put pressure on prices but the notion that higher rates mean lower prices have been proven wrong for decades.

We haven't had high rates for decades so how can you say that? But yes, home prices are set by more than 1 factor.

Logan was on Patnet for a while. He used to argue with iwog. Funny guy.

I was skeptical with some of his predictions, but have to give credit to him for being right. Did he say when this housing cycle would peak? around 2026?

GNL says

Rubicon says

Rates fuel the market or put pressure on prices but the notion that higher rates mean lower prices have been proven wrong for decades.

We haven't had high rates for decades so how can you say that? But yes, home prices are set by more than 1 factor.

I’m not sure the definition of high rates. The last time we saw rates this high was in 2007. My in-law bought their house in 1999 at 8% for a 30-year fixed mortgage. Their house has appreciated more than 4x since.

Rubicon says

And currently, inventory is historically low.

I personally do not think this will change. We are at the point where % of owners vs renters is going to go down down down.

Rubicon says

Do you know what happened to rents and house prices during the 70’s? I’ll let you google that yourself.

You said decades. You're referencing half a century ago.

Rubicon says

wouldn’t be surprised if in a few decades law changes and you can’t do it that easily anymore because it will be dominated by corporate America.

And what will be your opinion then...whatever? Was America always destined for feudalism? I'm scratching my head not knowing why people don't have a problem with this. Corporations as our masters? This sucks for everyone.

Unless there's something attractive about patnet to RE Rubicon is someone who has been here before, but doesn't want to use his old monikor. Maybe because he's on the ignore list a bit too much to get any attention?

I don't live in philosophy man, I live in reality. And reality for me, living in SoCal for 20+ years has been no housing shortage. I've moved whenever I wanted, wherever I wanted, lived almost exclusively in houses, and never paid the rent everyone else has. And unlike you, I've never had to pay a cent for maintenance. Boiler blows up, not my problem. Roof leaks, not my problem. Pipes are bad, not-my-problem. I bought in '06 and now loan is worth more than the house it's attached to, never happened to me. I bought in Yuma recently and can't rent or sell my house for enough to cover my mortgage, NOPE - not me.

Oh yeah, and I've done all this on one income. My wife never had to work, was able to be fully dedicated to raising our kids. Your outlook is unrealistic, narrow, and biased. Mine is based on not wanting to buy something without seeing it first, and without paying a reasonable price. When those factors are true in a market we're willing to buy in, that's when we'll buy something.