patrick.net

zzyzzx says

https://www.msn.com/en-us/money/realestate/the-price-is-wrong-for-housing/ar-AA1kFGVt

The Price Is Wrong for Housing

Lower rates would make U.S. houses more affordable, just not affordable enough.

Take mortgage rates all the way down to 5%, versus September’s 7.2%, and the Atlanta Fed’s measure shows that housing costs are still nearly 25% beyond affordable. One way to make the numbers work at a 5% mortgage rate would, of course, be to boost household incomes by about 25%. The other would be to drop home prices by about 25%.

Without an increase in building, we will start seeing the homeownership rate decline.

“My mortgage was 1169 and my rent 1370. My payments are jumping to nearly $1250. I can't raise rents until May as I just raised them, but I am going to have to go for a full $137 increase (Oregon's max is 10% this year). But this is just moving me back to where I was. I am barely gaining ground.”

This is why you shouldn’t buy investment real estate with debt unless you can wholly afford the payment on your own without the expected income from said property. These fucks that just buy property on a wing and a prayer expecting it to cash flow have a RISK premium realization problem.

ForcedTQ says

This is why you shouldn’t buy investment real estate with debt unless you can wholly afford the payment on your own without the expected income from said property.

That's the difference between E-man and the schmucks cited in your post.

B.A.C.A.H. says

"Housing Woes Won't Let Them Split Up'
...
Danielle moved out last month after finding an affordable rental ... Michael [...] plans to stay in the home, although they have stopped making payments, until it sells
...
interest rate of 5.62%. Both planned to refinance when mortgage rates fell.

I'm having a hard time seeing this as a housing sob story. Their current interest rate is 5.62% and they are lamenting that neither can buy something else at only 2% higher? The person without the kids could live with roommates — just as I did for my first 7 years out of college. It looks like they are currently underwater, so, even without a divorce, dumping the house on the bank/taxpayers might be a good financial move.

I think the only real takeaway from this is: If you are buying a house, make quite certain that you are going to stay in that house for 10+ years.

Promised my partner not to discuss anything real estate related on any forums until our last flip is closed for this cycle. It’s closed today for $1.05M. https://redf.in/lnJ1AF

We’ll be looking for new opportunities, but deal underwriting will be very stringent.

Made an $8M offer on this 40-unit building in downtown San Jose, but seller is not motivated to sell at this price. 5/1 ARM rate is at 6.5% while bridge loan is at 9% interest only. Tough environment for both buyers and sellers. https://redf.in/JtVkdu

Eman says

Tough environment for both buyers and sellers.

I've been out of the game. Given demographics, we're entering probably one of the best markets ever for buyers. You know how many widows there are going to be holding real estate that they have no fucking clue what to do with it? Not promoting taking advantage of people, but the next 10 years are saucy for people looking to buy and hold, interest rates be damned.

Some are strong, but most women are easily manipulated (legally). They don't want the hassle of what their husbands left them. We're entering a once in a lifetime deal buying phase for the next 5-7 years. Especially multiunit properties. Don't wait for the MLS. Door knock the fuck out of a neighborhood you want to invest in right now. The window is small in my opinion. Might look bad for a year or two, but there's money to be made right now. The hyper focus is on interest rates. Not demographics and people looking to unload and retire.

Eman says

Promised my partner not to discuss anything real estate related on any forums until our last flip is closed for this cycle. It’s closed today for $1.05M. https://redf.in/lnJ1AF

We’ll be looking for new opportunities, but deal underwriting will be very stringent.

Made an $8M offer on this 40-unit building in downtown San Jose, but seller is not motivated to sell at this price. 5/1 ARM rate is at 6.5% while bridge loan is at 9% interest only. Tough environment for both buyers and sellers. https://redf.in/JtVkdu

I thought it was strange you went silent. Stay active here please.

WookieMan says

Some are strong, but most women are easily manipulated (legally). They don't want the hassle of what their husbands left them. We're entering a once in a lifetime deal buying phase for the next 5-7 years. Especially multiunit properties. Don't wait for the MLS. Door knock the fuck out of a neighborhood you want to invest in right now. The window is small in my opinion. Might look bad for a year or two, but there's money to be made right now. The hyper focus is on interest rates. Not demographics and people looking to unload and retire.

I wonder if there is some type of list containing these types of people?

The listing agent overplayed his hand and this fixer-upper has been languished on the market for over 5 months. https://redf.in/Qi5BFb

Eman says

The listing agent overplayed his hand and this fixer-upper has been languished on the market for over 5 months. https://redf.in/Qi5BFb

Teardown, no?

GNL says

I wonder if there is some type of list containing these types of people?

This will sound sick but obituaries. This was the situation my mom was in when my dad passed in 2019. I had no interest in any of the shit my dad had purchased over the years nor my sister. So my mom just unloaded it. If approached by someone without a broker she would have sold at a discount in a heartbeat to be done with it. Access to any database with tax records nationwide is key though. A dude dies locally born in the 40-60's and plug the name in and see what they owned.

In hindsight I'm kind of kicking myself for not taking one of the Florida properties off her, but whatever. Would've been nice to have a cheap water front newer home, 3/2 about 25-30 minutes from Panhandle beaches. A bit FL redneck, but I can deal with those types just fine as long as the neighbors aren't meth heads.

I still might buy her current primary residence which is 60 acres of riverfront land in the country. Or maybe do a swap with my current house. Was a campground at one point. Contemplating opening it back up and making that my job after a current health scare I had that prohibits me from driving potentially forever. Live out there on the weekend and collect cash from campers (no taxes....) and come back to my new house during the week. That way I'm commuting there and back once on back roads on a suspended license.

FWIW don't have a seizure if you can control it... especially while driving. I'm a lucky fucker let me put it that way. MRI tomorrow, but everything else has checked out fine health wise. Happened at work with a work vehicle. Miraculously no damage and no injuries. Bit 1/5th my tongue off and was out for 10-15 minutes after putting the truck in the ditch. Wasn't wearing a seatbelt either. Not housing related, but recent comments here have my gears turning given my new sudden lot in life. Ugh... Probably gonna create a new thread on this so as not to derail this one.

WookieMan says

I still might buy her current primary residence which is 60 acres of riverfront land in the country. Or maybe do a swap with my current house. Was a campground at one point. Contemplating opening it back up and making that my job after a current health scare I had that prohibits me from driving potentially forever. Live out there on the weekend and collect cash from campers (no taxes....) and come back to my new house during the week. That way I'm commuting there and back once on back roads on a suspended license.

It's a no brainer decision imo.

https://www.actionnetwork.com/general/expert-claims-young-mens-focus-on-sports-betting-could-cause-deflation-in-housing-market

Expert Claims Young Men’s Focus on Sports Betting Could Cause Deflation in Housing Market

Whitney claimed that younger men's focus on technology — with sports betting a big culprit — is preventing family formation to a level that will reduce demand in non-rental housing for years to come.

.

Housing prices are affected by also property insurance and property tax. Higher property tax will bring down the price such as in Democrat shithole Illinois

the average USA annual home insurance premium is about 0.5% of the home replacement value

https://www.usatoday.com/money/blueprint/home-insurance/average-cost-homeowners-insurance/

in Florida the average is well above 1.25%

.



.

New listings jump by the most in over 2 years

https://markets.businessinsider.com/news/commodities/housing-market-mortgage-rates-fed-rate-cuts-payments-home-listings-2023-11

https://www.bloomberg.com/news/articles/2023-12-06/carson-block-shorts-blackstone-s-publicly-traded-mortgage-reit

Carson Block Shorts Blackstone Publicly Traded Mortgage REIT

Carson Block said he’s short Blackstone Mortgage Trust, saying the publicly traded real estate investment trust is exposed to a perfect storm of economic conditions hitting commercial real estate and may face a liquidity crisis.

The Blackstone Mortgage Trust makes loans collateralized by commercial real estate. Block, who heads short-selling firm Muddy Waters, said the trust is facing a possible liquidity crisis and may default on its loans, and he expects it will have to cut its dividend by at least half.

“There’s been a lot of extending and pretending when things have been backed by paper profits,” Block said in an interview, speaking on the sidelines of the Sohn investment conference in London on Wednesday. “It’ll be the second half of next year that we’ll really start to see losses.”

Block predicted the trust’s borrowers will be unable to refinance and repay the trust and will need to post more collateral.

A spokesperson for the Blackstone Mortgage Trust said in an emailed statement that the trust’s liquidity is at “record levels,” it has continued to reduce its leverage, and has taken steps that leave it “well positioned to navigate this environment.”

“We believe this self-interested and misleading report is designed solely for the purpose of negatively impacting BXMT’s share price for the short seller’s own benefit,” the spokesperson said, adding that the firm plans to issue a more detailed response to the report.

Even if the Federal Reserve lowers interest rates, Block estimates that losses on the trust’s $23.2 billion net book value of loans could reach between $2.5 billion and $4.5 billion, meaning the trust’s equity could be completely wiped out.

Blackstone Mortgage Trust shares fell 8.1% on Wednesday, to close at $20.68.

The vehicle is separate from Blackstone Real Estate Income Trust, the firm’s $64 billion vehicle for wealthy individuals that began limiting withdrawals late last year amid commercial real estate market woes. BREIT has limited withdrawals for 13 straight months but has signaled that the backlog is easing.

Higher Rates

Commercial real estate owners have come under pressure as higher borrowing costs complicate financing and many properties including offices face a shift in demand. Property prices have plunged, with a measure of those values falling 19% through October from its March 2022 peak, according to real estate analytics firm Green Street.

Landlords including Brookfield Asset Management Ltd. and Blackstone Inc. have defaulted on property debt, with some owners opting to take that path to kickstart talks to renegotiate terms with lenders. More than $650 billion of commercial property debt is expected to mature in 2024, according to Mortgage Bankers Association data.

The Blackstone trust hasn’t yet shown signs of distress because it has been modifying troubled loans by extending maturities and allowing payment in kind, Block wrote in a report published on his website. Block estimates that at least nine loans totaling $1.6 billion, or about 6% of the trust’s net book value, have already been modified through the third quarter of this year.

Block, 46, built his reputation as a short seller with bets against companies including Sino-Forest Corp, which he accused of exaggerating its assets. The Chinese company filed for bankruptcy protection 10 months after his report was published. He’s also made several bets against European real estate companies, shorting both Corestate Capital Holding SA and the bonds of Vivion Investments.

Real estate has been a theme for Muddy Waters this year. In November the firm said it was shorting the bonds of CPI Property Group SA. The Eastern European landlord said Block’s firm “purports to conduct research but thrives off shorts and explosive headlines.”

.

"Over the next decade, the U.S. population over the age of 75 will increase by 45%, growing from 17 million to nearly 25 million. And many of those people are expected to struggle financially. The report notes that in 2021, nearly 11.2 million older adults were “cost burdened,” which means they spend more than 30% of their income on housing."

https://fortune.com/2023/12/02/housing-baby-boomers-aging-homelessness-elderly/

.

https://www.merkley.senate.gov/wp-content/uploads/2023/12/MCG23660.pdf

To amend the Internal Revenue Code of 1986 to impose on excise tax on the failure of certain hedge funds owning excess single-family residences to dispose of such residence.

This Act may be cited as the ‘‘End Hedge Fund Control of American Homes Act’’

zzyzzx says

https://www.merkley.senate.gov/wp-content/uploads/2023/12/MCG23660.pdf

To amend the Internal Revenue Code of 1986 to impose on excise tax on the failure of certain hedge funds owning excess single-family residences to dispose of such residence.

This Act may be cited as the ‘‘End Hedge Fund Control of American Homes Act’’

Looks like something I would happily support

https://sfstandard.com/2023/12/08/homebuyer-residential-real-estate-loss-san-francisco/

1 in 8 San Francisco Homeowners Are Selling at a Loss—the Highest Number in the Nation

San Francisco’s share of homeowners selling their properties at a loss is the highest of any major metro in the country and continues to rise.

Data from residential real estate company Redfin showed that 13.57% of San Francisco metro home sellers sold their properties at a loss—nearly double the 6.92% figure in Detroit, the city in second place.

Among those who lost money selling their homes in San Francisco, the average loss was $122,500. ...

The trend line is rising. During the same period last year, San Francisco was also the top city on the list, but only 9.15% of homes were selling at a loss.

According to an analysis by Redfin, the total value of homes in San Francisco has fallen by around $60 billion since last summer.

San Francisco has experienced outsize declines in home prices as higher interest rates have hit home values nationwide. This is due in part to its status as one of the most expensive home markets in the country, as well as the impact of remote work and layoffs in the tech sector. ...

Apparently, my biz partner also reads this site. He knows my handle and said there’s enough negative news on the housing market on a regular basis. No need for me to chime in and share my 2 cents. Now that we have exited all our flips, I can continue posting. 😅

@Wookieman,

It’s great that you’re okay. Do you know what caused you to have a seizure?

In my market, agents/brokers get all these sources and reach out to the trustees/executors/owners on a daily basis. I can see rural areas are less targeted by agents/brokers compared to the metros and suburbs.

Eman says

Wookieman,

It’s great that you’re okay. Do you know what caused you to have a seizure?

EEG and MRI came back with nothing. Blood work nothing. I'm fucking lost. I'd guess I'm in the top 10% of BMI and weight so i'm at a loss at this point. I feel good, not fat, move, etc.. BP is a touch high being the only thing. I think it was just a panic attack rolled up with a seizure. Meeting with the doc again, but there's nothing there diagnostic wise. I'm healthy for my age.

Wife won't let me drive the kids. Not allowed to work. I'm in limbo and it blows but I've been here. Life could be worse. I never realized the legalities of seizures. I drive, but I'm "technically" not able to. I feel great. It sucks. I rather would have gotten pulled over drunk. The gov. treats them nicer.

Patrick says

San Francisco has experienced outsize declines in home prices as higher interest rates have hit home values nationwide.

BUT the Housing Experts of PatNet (which I note haven't commented on this for at least 18 mos) insisted this would never happen!

GNL says

Looks like something I would happily support

Same. It ain't the mom-n-pops that are a serious problem.

PumpingRedheads says

Patrick says

San Francisco has experienced outsize declines in home prices as higher interest rates have hit home values nationwide.

BUT the Housing Experts of PatNet (which I note haven't commented on this for at least 18 mos) insisted this would never happen!

Not happening where I'm at dude. San Francisco and CA in general aren't the the entire market is all I'll say. Hipster cities like Boise and Austin may take a hit, but the reality is there will be 5-10 major metro areas that are going to bring down the median nationally because of high priced homes selling for less as people flee those areas.

This is what I've been predicting the whole time. Boomers are no longer the largest generation. Millennials are finally in their delayed family formation phase and done with the party years and don't want to be in cities anymore because of homelessness, crime and shit schools. This is a demographic shift more than anything. People are opting for a townhome for $300k or single family home for $400k further from cities instead of a $500k 2/2 condo in urban areas. At least in my region.

Fact is CA is its own animal. It would be the 5th largest nation by itself. This is why when people bring up the popular vote during elections. It's skewed by CA in a huge way and so are national metrics for housing. Take the CA vote out of any election and I'm not sure a Democrat would ever win based on popular vote.

Also as much as people don't like it, these interest rates are historically normal, just not for people 50 and under. We were spoiled for almost 2 decades. Now people that got to places they like living, they ain't gonna move. Cities will be where the blood bath happens. That's where any "crash" is gonna happen. Those of us in the hinterlands will just watch and laugh at those people. The warning signs have been there for decades. It's not Biden, Trump, Obama, etc. Urban areas suck and will take a beating in a higher interest rate market and demographic shift in housing.

WookieMan says

Not happening where I'm at dude. San Francisco and CA in general aren't the the entire market is all I'll say.

Learn to read; https://sfstandard.com/2023/12/08/homebuyer-residential-real-estate-loss-san-francisco/

WookieMan says

Fact is CA is its own animal. It would be the 5th largest nation by itself.

It is losing population.
Canada has slightly more ppl than California does and it is only 37th in population size.

And don't say you were referring to GDP instead. Because if CA were to be separate, that value both in absolute and relative terms would fall like a rock within a year.

WookieMan says

Also as much as people don't like it, these interest rates are historically normal, just not for people 50 and under. We were spoiled for almost 2 decades

Yeaahhh(true)....so why write all the other things you stated that is contradicted by this then?

WookieMan says

Cities will be where the blood bath happens. That's where any "crash" is gonna happen.

Yeah. That is the bulk of California, right there.

Yet you claimed that CA is special and not effected.

What a load of bullshit.

PumpingRedheads says

Yet you claimed that CA is special and not effected.

Huh??? I'm saying CA IS the problem with national metrics for housing data. They are losing property value. BUT, that doesn't mean the housing market is crashing nation wide. Is it going to the moon, nope. But get out of a city and you'll be doing just fine is my point. Those that move are dragging down the national median. Interest rates don't matter when you're moving from say a $500k market to a $250k market. Payment is lower even at 8%. Guess what? That bring the national median down.

Cities are crashing. Not the overall housing market. I have no stake in CA. I'm not a huge fan to be honest having hit all the lower 48 multiple times. Housing is doing just fine in most of the country though. Not really debatable. I really don't care about the CA market, but get frustrated when people say the housing market is bad because one state has overpriced housing and dumb ass laws that create fake value. IL is a shit hole and you can't find a house right now. Prices are going up in a high(er) interest rate market. That's the opposite of a bad housing market.

Really not sure the point of your comment. I've been clear on mine.

WookieMan says

BUT, that doesn't mean the housing market is crashing nation wide

Did you read the story Patrick posted? That is the context we are discussing all this in. Or should be.

WookieMan says

Really not sure the point of your comment. I've been clear on mine.

No, you haven't. See above.

PumpingRedheads says

Did you read the story Patrick posted? That is the context we are discussing all this in. Or should be.

I'm not going off comments. I'm going off the OP. I skimmed the article Patrick posted. My comment stands and is 100% valid after reading. The OP is about the housing market as a whole nationwide.

I replied to a CA centric comment. That's not the rest of the country. Again, I'm not sure how much clearer I can be. SFBA is eating shit. I don't disagree. That is not the overall housing market. Can we at least agree on that??? We're not in a housing crash is my point. The CA market has needed to eat shit before the previous housing crash in 2006. There are other parts of the world besides CA....

WookieMan says

comment stands and is 100% valid after reading. The OP is about the housing market as a whole nationwide.

It was about San Francisco.

I think you might want to consider laying off the internet while on your present meds.

PumpingRedheads says

Patrick says

San Francisco has experienced outsize declines in home prices as higher interest rates have hit home values nationwide.

BUT the Housing Experts of PatNet (which I note haven't commented on this for at least 18 mos) insisted this would never happen!

Which housing experts of Patnet insisted this would never happen? Can you share names and back it up with some data points?

I see you keep repeating this many times so I’d love to know.

Eman says

PumpingRedheads says

Patrick says

San Francisco has experienced outsize declines in home prices as higher interest rates have hit home values nationwide.

BUT the Housing Experts of PatNet (which I note haven't commented on this for at least 18 mos) insisted this would never happen!

Which housing experts of Patnet insisted this would never happen? Can you share names and back it up with some data points?

I see you keep repeating this many times so I’d love to know.

I also witnessed people saying things to this affect but, no, I cannot back it up with links to the comments. That doesn't mean I think housing will "crash" all over the country. I think inventory will have a say in all of this. Personally, I believe "You will own nothing and be happy" (except the happy part) is well on its way to becoming true.

PumpingRedheads says

It was about San Francisco.

I think you might want to consider laying off the internet while on your present meds.

I'm fully aware. I'll be more blunt. No one cares about San Francisco. It's a rotting/dying city. That's my point. The housing market isn't CA. Again my point. I don't know how to be clearer. SFBA is NOT the housing market. No one actually cares besides those locked into prop 13 properties. Otherwise it's a sinking ship outside of a few places. Dickhole Kansas will do better than CA. No one cares about CA in the housing market.

I also don't take meds. I haven't swallowed a pill in close to 20 years. Dramamine for boat trips is it. So yeah, you missed that dig bigly.

Eman says

Which housing experts of Patnet insisted this would never happen? Can you share names and back it up with some data points?

I see you keep repeating this many times so I’d love to know.

I don't get this take. Anyone can make a boat load of money or lose their ass. I don't get the perma bears. No one here that I've seen has said RE is going to the moon. I could make $1M in Bemidji, MN and lose $1M in Palm Desert, CA. That's the point I'm trying to make with the bears.

YES, we know the market can go down. I'm mentioning that it's not in most of fly over country. Many investors give no shits about CA. But "nah" the CA market is down and we're all doomed.... lol. That's the hot take. Whatever. Not sure why I even give it time.

According to Kolanovic, inflation-adjusted liquid assets such as deposits and money market funds of nearly all US consumers will be below 2019 levels by mid-2024.

“It is likely that only the top 1% of consumers by income will be better off than before the pandemic,” he warned, noting the recent surge of credit card and auto loan delinquencies and a growing number of bankruptcy protection filings.”

https://www.rt.com/business/588783-us-consumers-drain-savings/

Only the top 1%.

All intentional and by design, the greatest wealth transfer in history from the middle class and working class to billionaires and multi-millionaires, 40% of all dollars in existence printed in the last 3-1/2 years.

Must be another one of those “we’re all in this together” kind of things.

It's blatantly false to claim that the housing market in CA is "bad". I'm surprised houses in SF still fetch that much considering the dilapidated state the city is in, but you cannot take SF stats and apply it to the whole large state. Wine country properties still sell within a few days or weeks for asking price or.above, with valuations maybe 5%-10% max off the covid craze peak, and they are rising again.

GNL says

40% of all dollars in existence printed in the last 3-1/2 years.

This is what I have been suspecting all the time. Never trust the gov "help" crap. Every action of their "help" to poor and middle class, eventually comeback and bite both of them in the form of delayed stealth tax aka inflation on average in 18 months depends on how it was structured. Only rich, upper middle can dodge by keeping wealth in non cash forms like stocks, RE, particularly cheap loans to leverage etc.
Also like @WookieMan says, CA is beyond the repair with 1978 Prop 13 and its so many derivatives in place over the period for rich commies along with so many CA commie craps particularly in major urban areas.
Rest of the state and country is on a different side and can go down as well but hard to think that it can crash with the given nn% inflation!

PumpingRedheads says

BUT the Housing Experts of PatNet (which I note haven't commented on this for at least 18 mos) insisted this would never happen!

I dunno Who The Heck you're referring to.

I've been following Patrick's site since 2006. At the time I was in a cubicle warren in the Trenches of (Silicon Valley) Tech with like-minded local housing skeptics like me (and Patrick).

Patrick began his SFBA-focused, SFBA-centric blog with a (healthy) skepticism about the SFBA Housing B*llshit. Yes, it is true, if Patrick and my office mates had paid (or borrowed for) peak prices in 2006, they'd have a lot of equity now (unless they used the equity as an ATM like so many of my Bay Area homies have done). They also would have pissed away massive amounts of their income on Super-High Property Taxes, which are now (2023) insane for new buyers.

There's a whole lot of us with deep roots in the SFBA (I grew up here) who just endure the high rents or house prices as the trade off we accept for living among our relatives, friends, etc. It's not a Left-Wing political stance, - some of us dislike those folks as much as you do. It's personal, - ;like the Jews who stayed in early 1930's Germany in spite of everything. Call us names, belittle us, etc, - whatever. Sticks and Stones. But please don't hate us.

Eman says

Wookieman,

It’s great that you’re okay. Do you know what caused you to have a seizure?

In my market, agents/brokers get all these sources and reach out to the trustees/executors/owners on a daily basis. I can see rural areas are less targeted by agents/brokers compared to the metros and suburbs.

our area gone down, but we still get people escaping cities so keeps prices up unfortunately. was hoping they’d stop buying at inflated prices. locals can’t afford what equity people can.