patrick.net

joshuatrio says

Anecdotal.... but....

Friend at the gym is a plumber who 6 months ago was trying to hire me as his apprentice because he had so much work (working 7-7) and couldn't keep up. He was making about $15k/week in service calls. He has been self employed about 5 years.

Spoke with him today and he said it all stopped about 2 weeks ago - around the time rates really started going up. He went from working 5-6 days a week, down to 1.

He went back to work for a local plumbing outfit today to float things over, but he has never had things get this slow.

I wonder if there was pent up plumbing work that people deferred during covid, causing such a burst in work for him. Not saying rates didnt contribute to the cooling tho.

Look at the entire price history of this rental. The owners purchased it for $1.4M in March and turned it around as a rental for $8,000/month listing. It's now down to $6,500 and still no takers.

https://www.zillow.com/homedetails/2468-Santa-Barbara-Ln-Franklin-TN-37069/332944429_zpid/?source=patrick.net

People are fucked.

Al_Sharpton_for_President says

And here comes the fat lady...

Well if rates are causing plumbers to lose their jobs, seems likely that more pain is in the future, for a lot of people.

I did notice that Cabelas/Bass Pro Shop parking lot was nearly empty today, which is unheard of for a normal Saturday. Was is the economy cooling/freezing up or is it just that everyone stayed home to watch the derby?

joshuatrio says

Rates hit a fresh high of 5.64% yesterday.

Boom bust cycle economy (or casino style economy)

I wonder how much housing and the S&P 500 will bust this time ... housing dropped about 28% for the US National Home Price Index from 2006 to 2012 .... whereas the S&P 500 dropped about 58% from 2007 to 2009....

I had a townhome I bought for $270k in Alexandria, VA back in 2004 ...sold it for $300k in 2008 ... after selling costs like 5% broker fee, I walked out with $5k in my pocket.... at one time identical townhomes in my community were selling for $410,000 in 2006....

https://fred.stlouisfed.org/series/CSUSHPINSA?source=patrick.net

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The trend be your friend.




https://www.calculatedriskblog.com/2022/05/1st-look-at-local-housing-markets-in.html?source=patrick.net

The houses in our rural county and hood just made a fresh high in appreciation. Inventory increased but that's totally normal considering nobody was putting their house on the market during covid. I see no evidence whatsoever of a crash, more like a slowdown in appreciation. Also the flight away from big cities continues, so big metro areas are not a good indicator (anymore). Btw. Austin is reaching new peaks by the day as well, that market has gone completely bonkers.

Counterpoint: I lived on the eastide of Seattle during the financial fraud crash. While we were watching prices plummet in the Bay Area and elsewhere, prices continued ro rise in our hood and Seatte proper, as well. Everyone thought we were immune from the growing RE crash, that things were somehow different in the Northwest.

Let's see where this may all be going longer term.

mell says

The houses in our rural county and hood just made a fresh high in appreciation.

Prices of actual sold homes is trying to predict the future looking through the rear-view mirror. Wait until all of the buyers with lower locked-in rates filter through the system. I believe we'll start seeing a real shift starting in July.

mell says

houses in our rural county and hood

Where is your rural county / neighborhood?

It all comes down to affordability versus profitability. It's a balance between both. And we saw it play out from 2005 to 2012.

As far as profitability, can a landlord earn at least a 7% return on investment annually while the tenants do not spend more than 38% of their household income on rent. The return on investment accounts also for appreciation of the rental property's value.

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Also, I read on Business Insider the start of layoffs like at Better.com, Robinhood, Peloton and Wells Fargo (mortgage division?)

https://www.businessinsider.com/layoffs-sweeping-the-us-these-are-the-companies-making-cuts-2022-5?source=patrick.net

So the labor market may be tightening also, which will be problematic for housing especially tenants able to pay rent.

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In the for what its worth category, in southwest Utah (Washington County), for residential units, inventory is up 49.3% since the beginning of the year and up 71.4% since the inventory low, which occurred on February 14, 2022. Sold price declined for the first time in quite some time last month. This market has definitely started the shift.

another anecdotal .. around my hood, came to know that there are only 3 applicants for a rental shack that I know used to be much higher number before. Also its not recent but I visited someone few months back is a rental place across HS in Sunnyvale, quite (1/3?) a number of apt were vacant which is not normal unless bought over by investor for renovation.

B.A.C.A.H. says

mell says

houses in our rural county and hood

Where is your rural county / neighborhood?

Napa/Sonoma

porkchopexpress says

mell says

The houses in our rural county and hood just made a fresh high in appreciation.

Prices of actual sold homes is trying to predict the future looking through the rear-view mirror. Wait until all of the buyers with lower locked-in rates filter through the system. I believe we'll start seeing a real shift starting in July.

Agreed, without mass layoffs no crash though, just a slowdown. Most people have their rates locked in

Redfin raised my home price estimate by $50k this past week. Huh?

Anecdotal again.. But we're vacationing down in Florida right now and I've been spending time at the local rec center with some of the seniors.

One of the ladies I spoke with today is a loan officer. She said her volume is half of what it was last year and is slowly dwindling. She said the rate hikes neutered business.

She's done well, so I don't think she was too worried - but it's trickling down.

Another family we know has been looking for a home in Charleston, SC for the last 5 months. They have had their million + dollar home for sale in Seattle for 3 months. Two offers of in and they both fell through. Regarding Charleston, they made a lowball offer on a place that they thought wouldn't go through and the seller took it.

DooDahMan says

Those places have all seen an influx of new residents

Fixed:
Those places have all seen an influx of new investors.

DooDahMan says

Boise (overpriced by 75%)

Overpriced based on comparison of median home price to median household income ?

Yep, that is what has happened to mountain communities in Colorado with cash-flush Californians buying up properties. It is driving out the middle and working class since housing is unaffordable, including rental properties.

Lol, I worked for Zillow in 2016-2017. I don't have much love for them.

Patrick says

Lol, I worked for Zillow in 2016-2017. I don't have much love for them.

Why? Also, do you still have connections?

DooDahMan says

Those places have all seen an influx of new residents amid the pandemic's "work from anywhere" boom.

Like zzyzzx wrote in comment #119, how many of those homes were bought by investors ? Look at towns like Buena Vista, CO and the rise of AirBnB and vacation homes. What percentage of homes purchased will be second homes for rich people and/or vacation/short term rentals instead of long term housing (., 12 month leases, etc.) ?

,

Zillow and its Trulia subsidiary make money by selling sheep to wolves, which is not a very nice thing to do.

That is, they make money by selling buyers to realtors.

Patrick says

Zillow and its Trulia subsidiary make money by selling sheep to wolves, which is not a very nice thing to do.

That is, they make money by selling buyers to realtors.

One aspect of their business is lead generation, yes. Is Zillow a nationwide broker?

I've gotta say I do LOVE the fact that we have house bubble posts again! Sheeit's gonna get real here soon me thinks!

BayArea says

Redfin raised my home price estimate by $50k this past week.

It's only real wealth if you do something with it. The "wealth effect".

BayArea says

Redfin raised my home price estimate by $50k this past week. Huh?

Not one of these estimation services is remotely accurate. They're worse than political pollsters by a long shot. Your house, outside of a HELOC is technically worth nothing until someone writes a contract to purchase it and you get the cash or pay off the mortgage. Until then, the value is a roof over your head and running water and sewer/septic.

The estimation game from the likes of Zillow, Redfin, etc. is all a game to get leads for brokers. It's what I did for 15 years. They give zero shits if they're accurate. None. Estimating even a rough value on every residential property is not realistic. Commercial RE is different as it's math and not emotional. Residential will never be predicted well. The exact same houses next to each other in a tract subdivision could sell for 10's or even 100's of thousands different just based on landscaping and how the home was maintained, looked or was decorated by stuff the new owner doesn't get to have.

And not a knock on you BayArea, but RE agents hate estimated values based on an algorithm. Someone like you suggests that my house is worth X because I saw it on Y. It's much more nuanced. My buddy sold for less than he should have because he has a Hawaii/Tiki theme in his house. It totally clashed with suburban Chicago area style. He probably lost $20-30k (small by CA standards) but $30k is $30k tax free. He was too stubborn to pull down all his shit and it cost him. And sure you might get the random that liked the style, but that's rare.

Here in IL something like a pool reduces the buyer's that might light your place by 50%. They won't even look at it because it's time and money to maintain a pool. You can always buy a house and add a pool if that's a need. You don't buy a house with a pool if you don't want it. Zillow and the likes don't and likely never will have an algorithm to figure that out.

WookieMan says

Zillow and the likes don't and likely never will have an algorithm to figure that out.

I agree the estimations are sometimes wildly inaccurate (but usually they are actually pretty close) and biased a bit high to create selling excitement and get leads. They are far more accurate for homes that are actually for sale, or were recently sold, because a real listing has much more data input for them to use to predict with than a home off the market for decades. I disagree about the pool affect on price not being accountable by an algo. It should be relatively straight forward to do it, as this is right up modern machine learning's alley. It's exactly the type of thing it can usually do well.

They have structured data and can usually tell if a listing has a pool (assuming correct data entry, which often is the case).

When they do analytics and machine learning, what's really going on is they look at each independent variable and look to see how that variable affects other variables. If a pool results in less interest, and
1) they have a variable for if the home has a pool (they usually do)
2) they have a variable that lists how many people are interested in a given house (they usually do, via web interactions)

Then they can crunch that data and find how those variables are related and what predictive abilities, if any, each relation has. They will not stop there, and they will likely analyze the interaction between ALL other variables, and then between incredible numbers of combinations of variables to find predictive opportunities. Since real estate is very local, and a pool might be a plus or a minus in different parts of the country, they would likely find that including a variable for location into the relation gives them better predictive ability, and likely home style, price range, and other features of the home would be other useful variables. And then poof: you can make a decent guess as to how a pool will affect the sale. You wont be right in any particular case, but you will tend to be right over thousands of cases.

I'm not saying they currently do predict based on pool, as I dont work for any of them. But they easily could, and likely do, and have probably done so for many years by now. It's possible the pool variable doesn't often provide useful predictive abilities though.

WookieMan says

BayArea says

Redfin raised my home price estimate by $50k this past week. Huh?

Not one of these estimation services is remotely accurate. They're worse than political pollsters by a long shot. Your house, outside of a HELOC is technically worth nothing until someone writes a contract to purchase it and you get the cash or pay off the mortgage. Until then, the value is a roof over your head and running water and sewer/septic.

The estimation game from the likes of Zillow, Redfin, etc. is all a game to get leads for brokers. It's what I did for 15 years. They give zero shits if they're accurate. None. Estimating even a rough value on every residential property is not realistic. Commercial RE is different as it's math and not emotional. Residential will never be predicted well. The exact same houses next to each other in a tract subdivision could sell for 10...

I have been following the home sales for homes that were on zillow and the estimate usually turns out to be fairly accurate.

WineHorror1 says

One aspect of their business is lead generation, yes. Is Zillow a nationwide broker?

When I was there, almost all of their revenue was payments from realtors for betraying innocent buyers.

ad says

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https://finance.yahoo.com/news/pimco-kiesel-called-housing-top-160339396.html?source=patrick.net

Bond manager Mark Kiesel sold his California home in 2006, when he presciently predicted the housing bubble would pop. He bought again in 2012, after U.S. prices fell more than 30% and found a floor.

Now, after a record surge in prices, Kiesel says the time to sell is once again at hand.

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I just don't understand it when the wealthy do this. Selling primary residence and moving into a rental is a HUGE headache. Not to mention transaction losses and tax implications, which there are if you don't buy within what, a year? (he waited 6 years) You may save/make money in the end with accurate timing, but you still pay with time, labor, and (temporary) reduction of quality of life. If you have a family then it all gets multiplied many fold. It probably makes sense in a situation with no kids and limited resources, but a bond manager should be reasonably wealthy and probably have a family. It just doesn't sound worth it to someone who's time is valuable. If life gives you bunch of crap and you are forced to move out that's a different story, but voluntarily? I just don't see it. Yet it's apparently exactly what happened. Go figure.

Edit: I can see it in a corner case that it's time to upgrade anyways, but market analysis screams that it's a wrong time to buy. So the "upgrade" may include that intermediate rental state, in which you rent something that's bigger/better than the house that you sold.

Patrick says

WineHorror1 says

One aspect of their business is lead generation, yes. Is Zillow a nationwide broker?

When I was there, almost all of their revenue was payments from realtors for betraying innocent buyers.

If they aren't a nationwide broker, why not? Wouldn't it make sense? They could compete directly with the NAR.

Patrick says

When I was there, almost all of their revenue was payments from realtors for betraying innocent buyers.

Patrick, please elaborate on this. I want to learn. Also, I did order your book today.

mostly reader says

ad says

.

https://finance.yahoo.com/news/pimco-kiesel-called-housing-top-160339396.html?source=patrick.net

Bond manager Mark Kiesel sold his California home in 2006, when he presciently predicted the housing bubble would pop. He bought again in 2012, after U.S. prices fell more than 30% and found a floor.

Now, after a record surge in prices, Kiesel says the time to sell is once again at hand.

.

I just don't understand it when the wealthy do this. Selling primary residence and moving into a rental is a HUGE headache. Not to mention transaction losses and tax implications, which there are if you don't buy within what, a year? (he waited 6 years) You may save/make money in the end with accurate timing,...

This 100%. Makes no sense to go through all that work and headache.

The ups and downs are fleeting, but the trend is up because people want to buy houses.

They can’t help it.

Look at Lowes and Home Depot, they’re huge businesses.

Look at the numerous TV shows about selling, buying, fixing, flipping houses.

I’m stuck seeing them sometimes in a doctor’s waiting room.

Today things are slowing down a little bit, which is expected.

Interest rates rising and consumer confidence falling have a downward effect on houses.

Using possible rental income on loans is the same as stated income loans back then.

Mortgage delinquencies have not played out yet as many states still in forebarences. Add student debt moratoriums in that and it could be a lot worse than the last bubble.

Booger says

Using possible rental income on loans is the same as stated income loans back then.

Mortgage delinquencies have not played out yet as many states still in forebarences. Add student debt moratoriums in that and it could be a lot worse than the last bubble.

Interesting point...I think natural gas prices will have a minor impact as well in regards to electricity and heating for big houses that are overleverage by owners.

Booger says

Using possible rental income on loans is the same as stated income loans back then.

Mortgage delinquencies have not played out yet as many states still in forebarences. Add student debt moratoriums in that and it could be a lot worse than the last bubble.

thats why they went on loan forgiveness, preventing collapse

clambo says

Home Depot

Home Depot has been among my best stocks. Even now with the downturn I've averaged an annual 15% return on it with it over 11 years or so.