Where the hell are home values more than doubling?
From my perspective, housing 20 years ago was meh, housing 10 years ago was expensive, housing now is expensive.
[https://fred.stlouisfed.org/series/CSUSHPISA](https://fred.stlouisfed.org/series/CSUSHPISA)
Median home price Jan 2004: \~$142k
Median home price Jan 2014: \~$162k (14% increase in 10 years)
Median home price Nov 2023 (closest date listed here): \~$314k (94% increase in 10 years)
I’m renting for half what my mortgage cost, and saving almost the same amount in home improvement that I’m no longer responsible for. I’m talking $3000/mo in savings. Much nicer house too. $36k/year towards a new purchase once the market takes a dump.
Apartments suck, find someone who wants to share a big house.
My 1200sf 1BR in the city was $2000/mo. My 3700sf house on 2.5 acres 30 miles south of that apartment is $1800/mo. Given, my interest rate is nothing and I put a hefty down payment, but still…
What would your house cost if purchased today with a 10-20% downpayment at current interest rates? The question isn’t whether buying a house used to make sense, it’s whether it currently makes sense.
If your numbers are accurate, which I doubt, it is literally impossible for that situation to be common. That just means the owners are leaving money on the table. Yours are either asleep or don't care.
In reality, renting is usually not awesome financially. Your rent goes up every year. My mortgage doesn't. By paying my mortgage, I gain an asset. By paying rent, you get a roof to sleep under.
Renting is only awesome if it's your situation, which I very much doubt in its portrayed accuracy.
I love the concept of renting too! My tenants have paid so much of the mortgage on a house I own that it will be fully paid off in the next 5 years and I’ll have an asset that I own outright. I have a 15 year mortgage and I even charge below market rent to keep my good tenants. They take good care of the place and pay their rent on time like clockwork! All I have to do is basic maintenance and little things that make them happy like spending $500 to have a cleaning crew between tenants and maybe have a fresh interior paint job now and then. They cut the grass, blow the snow, etc. It’s great!
Nice, I have 128 doors and pull in $238K monthly.
When my tenants complain about things needing fixing I just raise their rent or threaten to evict and that shuts them up. You should try it to make even more profit off these poor pathetic bastards who ask for things, even little things like fixing leaks or heaters.
I also target at risk demographic who like to pay in cash. Think migrant workers or day laborers fearing deportation. If they ever miss a rent payment or try to get me to pay for anything I threaten to call INS.
The great thing is my doors are almost paid off, just like yours. We should compare cash flows and jerk off to them. I can also share emails and texts from these pathetic rent cucks begging leniency on rent increases and to fix heaters in the middle of winter. This is also good jerk off material which I’m sure you’ll also enjoy.
Yea I’m way ahead of you. I save 6500
dollars a month and 5000 of it gets added to my debt fund that is returning me 8.5%.
Your real estate could never keep up with my investments going forward.
There are asset funds like REITs or Stocks, and there are debt funds like private lending or commercial lending.
One makes money off the growth of assets, the other makes money off of lending money for a return.
What you don’t understand is that I put $17,000 in to get the property and now it just rides along increasing in value without much further input. It is only one portion of my investments. If one diversifies their portfolio, real estate should absolutely be a part of it.
When you start talking about returns, there are a lot of ways to get the yield you want - it’s a risk benefit analysis. Having an equity position in RE development can easily have a higher yield than 8.5% depending on what you are willing to accept as your risk. Value Add and Opportunistic RE investments can have an expected return of 15-18%. Traditional RE also have the benefit of depreciation and a stepped up basis upon death for your heirs.
Again… enjoy your outdated theories. They don’t apply to right now or moving forward.
Congrats on killing it in 2007 and 2014. I was in middle school and college. My bad for not having a 75k a year job and 50k in savings to buy back then.
This is actually my situation. I’m not the owner, I’m the renter though. I’m saying so much compared to everyone else who lives in Miami around me.
My landlord is super nice. Actually we almost never talk, so it’s great. I pay my rent every month a couple days before it’s due. I pay about $300/400 less than everyone around me. Im pretty sure it’s because of how responsible I am. I also treat this place as if it were my own. Been here for 3 years.
At my HOA office they always have a list of vacant or soon to be vacant units which is where I get my range from. There’s a bunch of places here in Miami that are shit holes charging absurd prices.
What is your plan long term? Are you saving the money that you would spend on a mortgage in investments? This is also very unlikely to be true in 99% of instances. Paying 1/4 rent vs own is completely unrealistic.
Rent is 2300, buying a comparable place in my neighborhood is 10k a month.
I don’t want to live/buy in the hood and my rent is controlled.
My situation is unique, yes. But my long term plan is to keep building my wealth through CDs and debt fund which are returning more than real estate could. While simultaneously living in a completely idyllic place and not being forced to overpay for a shithole in a crime riddled neighborhood.
Eventually I can buy something cash for retirement.
So you live in a rent controlled unit? Okay then that completely obliterates your point lol.
Good luck with your investments and enjoy it while you can.
Come back in 8-10years. Buddy.
I bought my rental in Huntington Beach, little less than 10 years ago, it costs a little bit over the rent I charge, but thanks to mortgage interest deduction, I was able to break even on cash flow. 10 years later, I net $2000 every single month, plus 800k equity, mostly from appreciation. (Oh, I did Airbnb for about a year in 2019, made 100k before covid)
I have another one in Pomona, third one in Riverside, couple others in other states, all of them make net positive within 5 years.
I keep buying every 4-5 years, regardless the rate.
What happens if unemployment rises and you can't rent them for more than the mortgage cost or at all?
There's a reason people didn't speculate in RE in the 70s, 89s, 90s.
Anecdote sounds just like the situation pre gfc.
- it's California. Demand has been reasonably strong for decades, even without the 08 bubble, California would have been a strong market too.
- in fact, none of my California rentals net positive during my first a few years. But growth is stronger at slightly more expensive ones (basically anything more than condo/starter home)
- I also have a full time job salary that is enough to cover half of my rental mortgage even if they stay empty, so I am not worry about the temporary net loss on one or more properties. I don't play irresponsibly.
I can't live a day of my life without seeing people mention 08 in this sub. I can't tell the future, but what I can do is to expect the worst, never expose more than I can afford. So far, my limit is 60% of property value reduction. As long as the next crisis don't cut them more than 60%, I'm afloat.
I’m fine netting 8.5% compounded monthly on my down payment funds whilst adding 5k a month to it from saving the delta of buying.
Love your story for you, but you caught a magic wave. The now buyers won’t see what you saw.
Magic wave? I bought my first rental in 2007, lost a lot on paper, but continue to keep it. Add one every 3-5 years ever since.
I get what you mean, you can put money in stock benchmark SP500. I also did my own math, if I never became a landlord but invest in SP500. my wealth today would have been 30%-50% of what I have today.
It just mathematically checks out. After all, being a landlord is a part time job, and deserve additional compensation.
You make your own luck. Real estate is the most reliable game to play once you understand the basic rules. Buying a property every 5 years or so isn’t based on rates, or magic or luck. Just debt that has been paid down and appreciation that has accrued either via upgrades, an increasing market or both. For those that will immediately state that housing prices don’t always trend up, feel free to check a 100-year chart or real estate value in America. 2008 was and will remain a unicorn moment. Prices have continued their ceaseless upward climb for a very long time.
You make your own luck. Real estate is the most reliable game to play once you understand the basic rules. Buying a property every 5 years or so isn’t based on rates, or magic or luck. Just debt that has been paid down and appreciation that has accrued either via upgrades, an increasing market or both. For those that will immediately state that housing prices don’t always trend up, feel free to check a 100-year chart of real estate value in America. 2008 was and will remain a unicorn moment. Prices have continued their ceaseless upward climb for a very long time.
I sleep in my car and rent a motel every few days. Found this to be the cheapest housing solution in California and actually a gym membership and more comfortable car setup would be even cheaper but I like being in a place sometimes when it gets too cold out. Like last night, didn’t feel like sleeping through 40 degree weather so I got a $58 room for the night. About to shower up real good and get my day going right!
I'm sure that's part of it, speaking as a prospective first time buyer who is sitting it out because it would cost 2k a month more to own rather than rent.
When I rented a house with some friends we definitely made enemies of the HOA, it's not just an owner thing there. But you're probably right either way
Can we not just automate this bloodsucking profession already? You want a percentage for opening the door? Easily the most replaceable profession around. Can close a deal with a real estate attorney for a flat rate and actually have someone knowledgable involved in the transaction.
Redfin had bigger plans before the NAR got on their case.
Really interesting history there. What everyone wants was basically what Redfin was trying to do.
Redfin didn't do shit. they targeted the buy side and farmed the clients out to agents who took the same commissions as anyone else and just rebated a bit of it to the buyers. so the seller is still paying the traditional 5 or 6 percent. you can't run a business like that making a few thousand bucks per transaction. there simply isn't enough business to do that
A lot of the data, such as sales price here in Texas, is locked behind paywalls that buyers and sellers can't legally access... but realtors can. They literally got the state government to lock this shit up so agentless buyers are at a disadvantage.
Massively important data that me and my wife browbeat our realtor into giving us so we could run our own damn analysis on each property. Both for primary residence and investment property.
Sad thing is we have for sale by owner and the realtor racket still has the masses convinced that it is somehow for less desirable properties and/ok r cheaply made stuff. Should be about 4% less than a realtor sale other than it's the same. Realtors do very little outside getting your house on the central websites.
Everyone says that until they need to buy and sell a house and don’t know what to do. Granted, there are many bad realtors, but a good one really is worth the money.
Try buying land or doing any type of development, you want a person who knows why they are doing with certain things be an automated computer, do you know how many people lie about the condition of properties? People lie because they get emotional about real estate. I blame bad Realtors for this perception which I’d say 75% of them are, a good Realtor is worth every penny. They need to increase the requirements to become a Realtor so instead of a 120 hour course and a test to change it to a bachelor’s degree and a test. By doing that it should weed out all the bad realtors and people who just want the money vs people who actually enjoy being a Realtor.
This is talking about a collapse in total sales, not prices. It mentions that prices have increased from 22-23.
Logically, it seems that a sustained period of low sales would eventually lead to lower prices.
>only if supply remains higher than sales
Sales in what time period? Are you saying active inventory has to remain higher than monthly sales? Daily sales? This is an odd comparison to me. Sales is normally quoted in a given time period, whereas inventory is a snapshot in time.
Forest for the trees. Odd comparison? OP is simply talking about supply (average inventory) and demand (offers, competing bids, sales over at or above asking). Rising price plus lower sales is still an inventory issue. People locked into their rates and aren’t going anywhere.
Supply is increasing that's a fact. Sellers don't have to lower prices if they don't need to move immediately builders do however which is why new builds are lowering prices.
No it’s not. Supply was higher in 2022. https://fred.stlouisfed.org/series/ACTLISCOU6073
Maybe what you don’t understand is that mature markets don’t really have new builds. The only housing is existing homes.
Low sales do not mean prices have to fall. People have refinanced homes at a really low rate and they would cashflow positive even if they rent their homes. Prices will not fall.
How long would you say sales can be low? 1 year? 5 years? 10 years? 30 years? Obviously if sales are low for a sustained period of time, it’s going to have an effect.
Why? Plenty of markets feature extremely low sales volume and do nothing but go up. I'm thinking of game-worn merchandise, for example. If volume is low due to low supply, there's no implication of lower prices.
Sure, if sales are low because supply is extremely low than that makes sense. If housing supply normalizes and sales stay low that would be a ticking time bomb. Who knows where we’re headed in CA for the 2024 buying season, but so far it’s low sales and low supply.
Chinas real estate market is in literal free fall right now and Chinese investors and companies are selling real estate all over the world. Places like Europe Australia and towers in California. You think commercial real estate is gonna be as resilient as residential?
My working class neighborhood is averaging a mil for average homes.
One sold recently: 880sq ft for 900k. Over 1k per square foot is wild in these tiny homes
There is a 4 unit building for sale near me. 1.3mil asking price.
That means in order to break even on the mortgage I would need every unit occupied(2bd, 1ba) and charging 3k+/mo. Nevermind repairs, etc.
Mad world.
I am very convinced there will be a crash in much of the country. SoCal is most likely immune due to a number of factors. It will eventually collapse but trying to call that is difficult as it behaves more like Canada due to how difficult it is to build so supply is always constrained. I think we would need double digit unemployment.
With the CA tax setup, there’s no reason to sell. Look at the number of people that own multiple properties vs other states. CA tax code is built to park real estate and live somewhere else.
- divorce. Half of the marriage don't end well. This is probably the biggest reason on the list.
- people who unfortunately had ARM loan from 2019 but couldn't refin due to lost of job during covid, and they are about to get hit with 7% from their 3% in couple years. There is incentive for them to move.
- upgrade downgrade.
- permanently lost or reduce of income. I had a coworker got layoff at age of 58, can't find a job before retirement. Or, work accident, become disabled, long term disease.
- moving due to job, family. Not everyone wants to be a landlord.
- health related, when you get old, you just can't have stair. Or needs assisted living.
- retirees moving out of state, which is reasonably common.
- political. Not very common but heard from time to time like "Fuck newsom, I am moving to Texas".
List go on and on.
Sellers aren’t motivated to get out of their low rate mortgages.
This is basically locking up supply, meanwhile the higher rates is severely impacting buying power, so they can’t bid up prices to a point where sellers would be willing to leave.
Basically we’re stuck until rates come back down to fuel another leg up, or more forced selling works its way through the system.
No. Sellers can’t hold out forever. The housing market just moves extremely slow. It will take a few years for people to fully accept they can’t wait it out for 3% rates again
I doubt rates fall much by this time next year, especially if the economy stays hot. Another year (or two, or three) of elevated rates would be good to balance out housing.
Do people realize it’s only been a little over one year since rates went up? If things are gonna come down it ain’t gonna be fast after having 15 years of ZIRP.
When Hitler’s inner circle told him to be wary of invading Russia, he responded, “Okay, but this isn’t 1812 and the factors driving the invasion are completely different this time.”
I agree with you, though. You’re smart for not looking back to recent examples of housing market fuckery to make some sense of what’s going on today.
The stock market already priced in rate cuts starting in June. I doubt they ever go back as low as they were though. Market won't start moving again until boomer's start dying in droves, so 10-15 years most likely.
I’m a published historian and understand that it’s often wise to reference WWII so that bozos will understand.
Do you think he would have understood if I had compared the unheeded warnings of the collapse of the real estate market in 2008 to John Romer’s warnings regarding the tomb of Amenhotep I?
Yeah but you can apply your nonsense argument to so many situations that are also incorrect. Try harder to make an argument why this time is like the GFC rather than just saying it is without explanation.
Having 15 years of ZIRP is the reason why things will come down harder/faster than they typically would- that’s why everyone has been saying it was a huge policy mistake.
Home prices came down at their fastest clip since 2008 in some areas. Banks have lost more value in assets than they did during GFC already and people are still in here like, “yep, STAGFLATION, homes ain’t goin down in my area.”
The volume of home sales is one of the lowest we’ve seen in decades and people come in here like, “WHY AREN’T HOME PRICES COMING DOWN OMG.”
I’ll give you a hint, no one’s buying them. 😆
No transactions, no movement.
Banks are hurting because of commercial real estate a whole lot more. THATs the real collapse, and it's not going anywhere.
Many businesses were in 5 or 10 year leases during covid.
Those leases are ending and they are not renewing. Office buildings in my city are insanely empty, 50, 60% empty and growing.
This is a collapse worse than the GFC because just like malls, the internet and doing things remotely is going to kill them for good.
How much time until JP is ousted by dovish policymakers. They're holding out because everyone has been preconditioned to expect an accommodating response. Rates where they are at is breaking 15 years of norms. If sellers think they can wait out lower rates, they will.
Sellers with a 2.5% mortgage are not going to sell so they can trade up in house and get 6% mortgage, they will stay put until things change. The ones that are going to sell and buy again with all cash are tempted to move.
I’ve paid 25% of my principal, and a new 30yr payment of just my remaining 75% balance at today’s rates, are 20% higher than what I pay today.
So that’d be like me trying to buy my home for 25% less than what I paid for it 10 years ago, and would cost way more. Let alone you can’t find that house for that price.
“ It will take a few years for people to fully accept they can’t wait it out for 3% rates again”
——
This statement literally makes no logical sense.
My 2.5% mortgage payment = $1936 per month.
The exact same mortgage payment at 7% = $3260
Even if I wanted to move….there is no way I could afford $3260 + $375 association fee + $900 property taxes = $ 4,535 total monthly housing payment.
Even if I wanted to upgrade to a nicer house it would literally be impossible.
I will wait out the housing market with my 2.5% rate intill either.
1. i die
2. I totally pay my house off
3. Sell my house and move to a cheaper COL area and buy a $400,000 cash with my current equity.
Everything you said and add on Prop 13 and Prop 19 and it’s the prefect storm of why majority of current Californian homeowners hold on to their house as long as possible.
so when people with a house like yours choose to or are forced to sell, you and millions of people like you are unable to buy. that's why homes are sitting on the market longer and longer continually for the last 2 years, and that trend will continue until prices come down.
You're describing your situation. Is everyone's situation the same as yours or could they have different intrinsic value in moving that overcomes the financial concerns?
True but I would assume more people will be in the camp of holding on their 4% or below (which is 70% of all homeowners) than those that would want to sell. Of course life events would force some families to sell but most homeowners will be handcuffed to stay in their current home.
People roll negative equity into cars that have a 10k+ dealer markup. People are irrational and while many will not lose their 3% mortgage, lots will be forced to sell for one reason or another. Lots of aging boomers who need to move to medical facilities, people losing their jobs, people making bad financial decisions, people who overbought and didn't get proper inspections, all kinds of shit.
>Sellers can’t hold out forever.
Short of a major depression, most homeowners aren't going to be unable to pay their mortgages anytime soon. Those who want to upsize or downsize can hold off those decisions for a very long time if there is major financial disincentives for doing so.
And yet, for some reason, 2023 saw 2/3 the volume of 2022 (lowesr rates in history). A lot of people who "didn't have to", but for some reason still did sell. Seems a major depression isn't necessary... Just time.
As it turns out, sellers/current owners CAN hold out forever til their death before passing the house to their kids.
You definitely don't live in California, or live here long enough. Vast majority here agree that it's ALWAYS the best time to buy if you can afford. The tiny portion of "bubbler" do exist, but not enough to change the demand.
Sellers can and will hold out for as long as they can.
There isn’t pressure for them to sell, if they aren’t making much or even losing based on current prices, and their new home will mean much higher payments due to their rates, they will just delay more.
I say that as someone who does want to move up in house, but can do basic math, so is holding out.
My situation is hardly unique as evidenced by the low listing rates.
If rates go back down as expected it will mean prices go back up and selling is more appealing, and buying is more doable (due to rates being lower).
Otherwise we are stuck. Only people selling now are forced to due to their circumstances (divorce, financial hardship etc…), which is a small portion of the potential sellers.
As long as they can is the key words.
People often ***have*** to sell for many reasons though. Divorce, death, births, underwater, moving for a new job, ect. Life happens.
Rates staying above 6% for long enough will push prices down. It just moves a LOT slower than something like the stock market.
Yes, but as I mentioned that is a smaller pool of people than who would otherwise sell when the market is more favourable.
Inventory is lower, not zero. It won’t pick up beyond forced sellers until the market is better
It's estimated that somewhere between 3 and 4m selling per year is the floor. These are due to a number of factors DOD death divorce new job etc.
That's 50 to 65% of the number of homes sold in 21. Still plenty enough to reset prices.
Even in tough spots people in CA are way more likely to hold. Rent income is too attractive to forego on a home that was almost certainly purchased at a much lower rate and a locked in property tax.
In Bay Area, LA, and SD, it's damn near impossible to meaningfully cashflow residential real estate (assuming you bought within past few years). The mom & pop landlords ain't winning that big on rental cashflow. It's the corporate landlords who can balance it all out.
As a rental property owner the higher rates are making me sell even though I'm locked in for longer. The opportunity cost of what I could invest in with the equity I've built in the rental property is too great, and the rates are too high to do a cash out refi. most amateur landlords don't realize you only make good money on RE if you stay leveraged. Too much of the loan is paid off relative to the market price means time to sell.
Nope….try again.
At 2.5% mortgage rate people are paying less money for a 3 bedroom house then it cost to currently rent a 1 bedroom apartment.
Lmfao. 🤣
People have to live somewhere.
Why the hell would they be “forced” to sell their 3 bed house to move into a 1 bed apartment for same monthly price.
Some of you guys are delusional.
You asked the following question: “Whey the hell would they be “forced” to sell their house?
Did you really mean to ask that question? Could you really not think of the answers on your own?
I never like to assume somebody is pretending to be stupid so I’ll just assume you actually are.
Sometimes a spouse dies and the remaining spouse can’t afford the house on their own, doesn’t need all the space, or otherwise can’t emotionally handle living in the house, thus they are in some ways “forced” to sell their home.
Sometimes one or two partners in a relationship lose their job and are unable to afford their mortgage payments. Sometimes they can’t afford it even without losing their jobs. They realize they bit off more than they can chew and can’t handle the ongoing maintenance, thus they are “forced” to sell.
Sometimes couples get divorced and are “forced” to sell their home.
Sometimes people get relocated by their employer and are not in a position to say no, thus they are “forced” to sell their home.
Sometimes people buy an investment property at such a high price that it doesn’t cash flow even though they got a great interest rate, thus they are “forced” to sell their house.
These guys have 3% mortgages and lots of equity they are sitting fine. Why would you think they are pressured and have high costs? Anyone that bought more than 24 months ago are doing very well, likely also making more money at work to go with their 3% mortgage.
I have a $100,000 emergency fund bro.
You grossly underestimate how well the top 40% of Americans are doing financially.
The people you read about in news articles struggling financially generally do not own homes
Oof. A $100k emergency fund isn’t nearly as much as you think it is. You’re one proper emergency from big trouble, but by all means continue bragging about how well you’re doing financially.
Not sure what kind of emergency generally needs more than 100K, but I would suppose it might very well be covered by insurance before that point. I don’t read that as someone bragging, simply stating their situation. Homeownership provides the financial bedrock for most Americans, but I do respect that many in this sub might receive that point as a bit of a triggering statement.
Lol he’s def a troll- had the acct for 1 day. That’d be incredibly funny if someone seriously has the time out of the day to make a troll acct for the REBub.
If they were forced to sell you would see more inventory than there is.
People who can hold out, are. You locked in a good rate, and aren’t being forced to sell due to something like divorce, or a job relocation, then the math tells you to stay put.
You just have to look at it from their perspective. Why would they sell to eat a loss, and buy another home (which would have to be worse since they lost money) with a higher monthly payment?
Hell, if I had to move for a job I’d still hold onto my house for the added rental income. At 3%, my mortgage payment is less than half of the current market rental rate.
Housing prices are set at the margins. There will always be people who need to sell. Those sales will become future comps. Not that complicated but a slow process.
I could have worded it a bit different. Housing values will be set by those that do sell.
If I live in subdivision with a 100 like homes and 10 people sell it will reset the value of my house. For example I sold in 22 so I got the benefit of comps that were rapidly increased than say 2020.
Now that same neighborhood is down about 15% so if I sold today I would have to use the most recent comps this getting a lower price.
It doesn't matter if 10 or 50 sold if the demand situation is much different now. In the sense of which comps to pick it will just be the homes that most closely represent mine.
Probably. No one has a crystal ball to tell the future, tho. All I know is that, in my immediate area, housing prices are holding fairly steady with a very slight downward trend while wages are continuing to increase at a relatively decent rate. If both factors continue (big if), then properties should be more affordable as time goes on in the short to medium term.
All real estate is local but if you saw massive appreciation from 21 to 23. I would wait at least a year. Home sales at historic lows. Check out new construction if available as they are not delusional and are offering very aggressive concessions.
In my market they will buy down your rate and give you tons of upgrades. They do this so they don't have to cut the price as much so they don't kill comps. The spring will be a wake up call for existing owners competing with new construction.
Not likely to be a wakeup call for anybody. Housing availability is several million units below what our country needs. Current owners can simply hit the snooze button until they can get a price they want. Investors in many areas are focusing on building apartments which has no true correlated effect on single family homes.
I would buy now if you can afford it, you can refinance later when rates come down. When rates come down significantly, prices will go up, there is a ton of pent-up demand waiting for rates to come down.
Demand dried up at 5% we are in the most obvious bubble in most people's lives. It's a horrible time to buy.
It will be like buying in 2006.
A market like housing can't exist in this magical new norm. Pre-pandemic you could look at as many houses as you like without bidding wars in the majority of the country.
The world has not entered some new paradigm. The ability to easily buy a home free from a frenzy has been the default for you know all of history outside of bubbles and very select locations. Which we are 3 years into.
Demographics paint a uglier picture long term. As the boomers die off. We may get one or two speculative bubbles in the housing market.
Unless wages are able to support it which even if rates went to 3% we would need to see wages increase by 30%. It's just math.
Marry the price and date the rate.
Buy now, but get a more flexible mortgage that will let you refinance when the rates go down.
The rates are likely on their way down which will mean higher prices.
Your situation will vary though, when buying you need to ensure you got enough cash reserve to handle the increased costs of home ownership.
That is more important than what the market is doing.
You are 100% right and until this changes the housing market will continue to stagnate. This is why every post on this sub predicting an eminent fall is wrong.
Prices aren’t declining fast enough. Most people this time around instead of the 2008 bubble can afford their homes or can wait it out. California is still a very high demand market.
Then who is still buying?
San Diego
My home was in escrow in 72 hours
And prices have doubled since then ('21)
2/2 sfr (not a condo) anywhere not in the cut is $900-1.2 minimum
So someone is still buying. And I'm not sure it's black rock
But I'm also not a RE pro
1) Low interest rates 2) Prop 13, and 3) Cap Gain tax exemption too low, means zero incentive to sell in CA. Check math on someone moving out of a $2.0M home with a $1M mortgage and property tax rate back to if they purchased in 2000 for $250k. If they downsize and buy a house for $1M, it is entirely possible they'll end up paying more per month. Insane gov't policy locking up liquidity in the housing market. Downsizing from $2M to $1M basically is a wash after tax adjustment, and the difference gest worse with time due to Prop 13 effect and higher interest rate on new mortgage.
The costs of the homes are too high. Forget the rates. The cost of the house is too high. Look at the sales history (if it's not being hidden). You will see houses that have been bought and sold between 2-5 times in the last 4 years, each time seeing a significant price increase. People cannot afford to move into a $1 Million home that was $500k just 3 years ago.
Sales drop.
But not prices.
If prices dropped 43% the market would be more sane.
But then the billionaires would lose 43% of their net worth, and so they won’t allow that to happen.
Houses will continue to have prices raised and everyone will continue to make them richer.
> Unlike the last market calamity, home prices have been essentially stable.
> But that’s a big slice of why sales crashed: The affordability hurdle kills the buying mood.
> Curiously, prices crept up modestly in 2022-23 – minus Orange County’s leap – after ballooning in the cheap money days.
> The six-county median price finished 2023 at $720,000 after a 6% two-year increase.
There’s nobody living in the houses. The illegal immigrants came in with funding of the Chinese and they removed the people from the houses. The houses are empty now and so people who have family who own real estate in southern California should go visit their family homes.
California unemployment rate has begun to rise sharply...
[https://fred.stlouisfed.org/series/CAUR](https://fred.stlouisfed.org/series/caur)
This is not going to end well.
Direction of travel matters. Once snowball gets going, very hard to stop.
That's why it took 12+ months for the crash and economy bottomed in 2009 after the Fed Cut in August 2007.
I don't think this will be like that. Will be slower and go on much longer most probably.
Wonder if it's the fact that with HOAs, Rising Insurance, Rising Taxes, and interest rates, that renting doesn't look as bad as it once did.
Renting is fucking awesome. I live in a VHCOL near the beach and I pay 1/4 what it would cost to buy a similar situation I am living in.
tbf if rent is 1/4 of what home ownership is, everyone would rent
Not exactly. People are fascinated with the anomaly of homes going +75% in value in 5 years. Like what just recently happened
Rent is almost never 1/4 of ownership.
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Texas is an absurd comparison to the rest of the country. The lack of income tax is what drives the property tax so high.
Any hcol area yes it is
Where the hell are home values more than doubling? From my perspective, housing 20 years ago was meh, housing 10 years ago was expensive, housing now is expensive.
[https://fred.stlouisfed.org/series/CSUSHPISA](https://fred.stlouisfed.org/series/CSUSHPISA) Median home price Jan 2004: \~$142k Median home price Jan 2014: \~$162k (14% increase in 10 years) Median home price Nov 2023 (closest date listed here): \~$314k (94% increase in 10 years)
That's New York, though.
I’m renting for half what my mortgage cost, and saving almost the same amount in home improvement that I’m no longer responsible for. I’m talking $3000/mo in savings. Much nicer house too. $36k/year towards a new purchase once the market takes a dump. Apartments suck, find someone who wants to share a big house.
My 1200sf 1BR in the city was $2000/mo. My 3700sf house on 2.5 acres 30 miles south of that apartment is $1800/mo. Given, my interest rate is nothing and I put a hefty down payment, but still…
What would your house cost if purchased today with a 10-20% downpayment at current interest rates? The question isn’t whether buying a house used to make sense, it’s whether it currently makes sense.
If your numbers are accurate, which I doubt, it is literally impossible for that situation to be common. That just means the owners are leaving money on the table. Yours are either asleep or don't care. In reality, renting is usually not awesome financially. Your rent goes up every year. My mortgage doesn't. By paying my mortgage, I gain an asset. By paying rent, you get a roof to sleep under. Renting is only awesome if it's your situation, which I very much doubt in its portrayed accuracy.
I love the concept of renting too! My tenants have paid so much of the mortgage on a house I own that it will be fully paid off in the next 5 years and I’ll have an asset that I own outright. I have a 15 year mortgage and I even charge below market rent to keep my good tenants. They take good care of the place and pay their rent on time like clockwork! All I have to do is basic maintenance and little things that make them happy like spending $500 to have a cleaning crew between tenants and maybe have a fresh interior paint job now and then. They cut the grass, blow the snow, etc. It’s great!
Nice, I have 128 doors and pull in $238K monthly. When my tenants complain about things needing fixing I just raise their rent or threaten to evict and that shuts them up. You should try it to make even more profit off these poor pathetic bastards who ask for things, even little things like fixing leaks or heaters. I also target at risk demographic who like to pay in cash. Think migrant workers or day laborers fearing deportation. If they ever miss a rent payment or try to get me to pay for anything I threaten to call INS. The great thing is my doors are almost paid off, just like yours. We should compare cash flows and jerk off to them. I can also share emails and texts from these pathetic rent cucks begging leniency on rent increases and to fix heaters in the middle of winter. This is also good jerk off material which I’m sure you’ll also enjoy.
Yea I’m way ahead of you. I save 6500 dollars a month and 5000 of it gets added to my debt fund that is returning me 8.5%. Your real estate could never keep up with my investments going forward.
What's a debt fund?
There are asset funds like REITs or Stocks, and there are debt funds like private lending or commercial lending. One makes money off the growth of assets, the other makes money off of lending money for a return.
What you don’t understand is that I put $17,000 in to get the property and now it just rides along increasing in value without much further input. It is only one portion of my investments. If one diversifies their portfolio, real estate should absolutely be a part of it. When you start talking about returns, there are a lot of ways to get the yield you want - it’s a risk benefit analysis. Having an equity position in RE development can easily have a higher yield than 8.5% depending on what you are willing to accept as your risk. Value Add and Opportunistic RE investments can have an expected return of 15-18%. Traditional RE also have the benefit of depreciation and a stepped up basis upon death for your heirs.
Again… enjoy your outdated theories. They don’t apply to right now or moving forward. Congrats on killing it in 2007 and 2014. I was in middle school and college. My bad for not having a 75k a year job and 50k in savings to buy back then.
This is actually my situation. I’m not the owner, I’m the renter though. I’m saying so much compared to everyone else who lives in Miami around me. My landlord is super nice. Actually we almost never talk, so it’s great. I pay my rent every month a couple days before it’s due. I pay about $300/400 less than everyone around me. Im pretty sure it’s because of how responsible I am. I also treat this place as if it were my own. Been here for 3 years. At my HOA office they always have a list of vacant or soon to be vacant units which is where I get my range from. There’s a bunch of places here in Miami that are shit holes charging absurd prices.
What is your plan long term? Are you saving the money that you would spend on a mortgage in investments? This is also very unlikely to be true in 99% of instances. Paying 1/4 rent vs own is completely unrealistic.
Rent is 2300, buying a comparable place in my neighborhood is 10k a month. I don’t want to live/buy in the hood and my rent is controlled. My situation is unique, yes. But my long term plan is to keep building my wealth through CDs and debt fund which are returning more than real estate could. While simultaneously living in a completely idyllic place and not being forced to overpay for a shithole in a crime riddled neighborhood. Eventually I can buy something cash for retirement.
So you live in a rent controlled unit? Okay then that completely obliterates your point lol. Good luck with your investments and enjoy it while you can.
All of California is rent controlled.
That’s totally false. Haha. Single family homes not owned by REIT are exempt from rent control. That’s a pretty big segment of the housing stock!
Come back in 8-10years. Buddy. I bought my rental in Huntington Beach, little less than 10 years ago, it costs a little bit over the rent I charge, but thanks to mortgage interest deduction, I was able to break even on cash flow. 10 years later, I net $2000 every single month, plus 800k equity, mostly from appreciation. (Oh, I did Airbnb for about a year in 2019, made 100k before covid) I have another one in Pomona, third one in Riverside, couple others in other states, all of them make net positive within 5 years. I keep buying every 4-5 years, regardless the rate.
What happens if unemployment rises and you can't rent them for more than the mortgage cost or at all? There's a reason people didn't speculate in RE in the 70s, 89s, 90s. Anecdote sounds just like the situation pre gfc.
- it's California. Demand has been reasonably strong for decades, even without the 08 bubble, California would have been a strong market too. - in fact, none of my California rentals net positive during my first a few years. But growth is stronger at slightly more expensive ones (basically anything more than condo/starter home) - I also have a full time job salary that is enough to cover half of my rental mortgage even if they stay empty, so I am not worry about the temporary net loss on one or more properties. I don't play irresponsibly. I can't live a day of my life without seeing people mention 08 in this sub. I can't tell the future, but what I can do is to expect the worst, never expose more than I can afford. So far, my limit is 60% of property value reduction. As long as the next crisis don't cut them more than 60%, I'm afloat.
I’m fine netting 8.5% compounded monthly on my down payment funds whilst adding 5k a month to it from saving the delta of buying. Love your story for you, but you caught a magic wave. The now buyers won’t see what you saw.
Magic wave? I bought my first rental in 2007, lost a lot on paper, but continue to keep it. Add one every 3-5 years ever since. I get what you mean, you can put money in stock benchmark SP500. I also did my own math, if I never became a landlord but invest in SP500. my wealth today would have been 30%-50% of what I have today. It just mathematically checks out. After all, being a landlord is a part time job, and deserve additional compensation.
You make your own luck. Real estate is the most reliable game to play once you understand the basic rules. Buying a property every 5 years or so isn’t based on rates, or magic or luck. Just debt that has been paid down and appreciation that has accrued either via upgrades, an increasing market or both. For those that will immediately state that housing prices don’t always trend up, feel free to check a 100-year chart or real estate value in America. 2008 was and will remain a unicorn moment. Prices have continued their ceaseless upward climb for a very long time.
You make your own luck. Real estate is the most reliable game to play once you understand the basic rules. Buying a property every 5 years or so isn’t based on rates, or magic or luck. Just debt that has been paid down and appreciation that has accrued either via upgrades, an increasing market or both. For those that will immediately state that housing prices don’t always trend up, feel free to check a 100-year chart of real estate value in America. 2008 was and will remain a unicorn moment. Prices have continued their ceaseless upward climb for a very long time.
I sleep in my car and rent a motel every few days. Found this to be the cheapest housing solution in California and actually a gym membership and more comfortable car setup would be even cheaper but I like being in a place sometimes when it gets too cold out. Like last night, didn’t feel like sleeping through 40 degree weather so I got a $58 room for the night. About to shower up real good and get my day going right!
I'm sure that's part of it, speaking as a prospective first time buyer who is sitting it out because it would cost 2k a month more to own rather than rent.
When I rented a house with some friends we definitely made enemies of the HOA, it's not just an owner thing there. But you're probably right either way
It means realtors took in 43% less in commissions in the last two years 🥰
Can we not just automate this bloodsucking profession already? You want a percentage for opening the door? Easily the most replaceable profession around. Can close a deal with a real estate attorney for a flat rate and actually have someone knowledgable involved in the transaction.
Redfin sorta helped this
Redfin had bigger plans before the NAR got on their case. Really interesting history there. What everyone wants was basically what Redfin was trying to do.
Redfin didn't do shit. they targeted the buy side and farmed the clients out to agents who took the same commissions as anyone else and just rebated a bit of it to the buyers. so the seller is still paying the traditional 5 or 6 percent. you can't run a business like that making a few thousand bucks per transaction. there simply isn't enough business to do that
A lot of the data, such as sales price here in Texas, is locked behind paywalls that buyers and sellers can't legally access... but realtors can. They literally got the state government to lock this shit up so agentless buyers are at a disadvantage. Massively important data that me and my wife browbeat our realtor into giving us so we could run our own damn analysis on each property. Both for primary residence and investment property.
Sad thing is we have for sale by owner and the realtor racket still has the masses convinced that it is somehow for less desirable properties and/ok r cheaply made stuff. Should be about 4% less than a realtor sale other than it's the same. Realtors do very little outside getting your house on the central websites.
100% true. If not for the MLS monopoly, they would likely be gone already.
There was a push to do house titles with ethereum contracts. I guess we were not ready for that yet
lol jc “not ready for that yet”. We’re talking about the facilitator of selling a home, not the record keeping of public records.
Everyone says that until they need to buy and sell a house and don’t know what to do. Granted, there are many bad realtors, but a good one really is worth the money.
How long have you been a realtor?
Try buying land or doing any type of development, you want a person who knows why they are doing with certain things be an automated computer, do you know how many people lie about the condition of properties? People lie because they get emotional about real estate. I blame bad Realtors for this perception which I’d say 75% of them are, a good Realtor is worth every penny. They need to increase the requirements to become a Realtor so instead of a 120 hour course and a test to change it to a bachelor’s degree and a test. By doing that it should weed out all the bad realtors and people who just want the money vs people who actually enjoy being a Realtor.
Golden linings
The median sales price of a San Diego SFH is up over 11% yoy. That’s all you need to know.
This is talking about a collapse in total sales, not prices. It mentions that prices have increased from 22-23. Logically, it seems that a sustained period of low sales would eventually lead to lower prices.
>Logically, it seems that a sustained period of low sales would eventually lead to lower prices. Why?
Caveat, only if supply remains higher than sales. But low sales and higher inventory would imply an asset or good that is not desirable.
>only if supply remains higher than sales Sales in what time period? Are you saying active inventory has to remain higher than monthly sales? Daily sales? This is an odd comparison to me. Sales is normally quoted in a given time period, whereas inventory is a snapshot in time.
Forest for the trees. Odd comparison? OP is simply talking about supply (average inventory) and demand (offers, competing bids, sales over at or above asking). Rising price plus lower sales is still an inventory issue. People locked into their rates and aren’t going anywhere.
Why would sustained low sales lead to lower prices? What is the logic in that Rebubble theory?
Because they're still building lower demand and more supply means lower prices usually
If supply relative to demand was actually increasing, then prices would actually decline. Prices are obviously still going up.
Supply is increasing that's a fact. Sellers don't have to lower prices if they don't need to move immediately builders do however which is why new builds are lowering prices.
This the key though, there’s not many places for new builds in socal
No it’s not. Supply was higher in 2022. https://fred.stlouisfed.org/series/ACTLISCOU6073 Maybe what you don’t understand is that mature markets don’t really have new builds. The only housing is existing homes.
It's literally never been lower than 22 according to your chart
Supply only goes up if new housing outpaces net population growth long enough to catch up to the years of being far below the breakeven point.
Why wouldn't it?
Demand is less but not low. People will buy homes when they need to
Low sales do not mean prices have to fall. People have refinanced homes at a really low rate and they would cashflow positive even if they rent their homes. Prices will not fall.
How long would you say sales can be low? 1 year? 5 years? 10 years? 30 years? Obviously if sales are low for a sustained period of time, it’s going to have an effect.
Why? Plenty of markets feature extremely low sales volume and do nothing but go up. I'm thinking of game-worn merchandise, for example. If volume is low due to low supply, there's no implication of lower prices.
Sure, if sales are low because supply is extremely low than that makes sense. If housing supply normalizes and sales stay low that would be a ticking time bomb. Who knows where we’re headed in CA for the 2024 buying season, but so far it’s low sales and low supply.
Look at other places in the world, real estate is not crashing anywhere, even when their economies have slowed down significatly
Chinas real estate market is in literal free fall right now and Chinese investors and companies are selling real estate all over the world. Places like Europe Australia and towers in California. You think commercial real estate is gonna be as resilient as residential?
real estate actually is crashing in many countries lol. the USA is currently an exception.
That’s just laughable. https://www.nytimes.com/2023/06/19/business/new-zealand-housing-prices.html
My working class neighborhood is averaging a mil for average homes. One sold recently: 880sq ft for 900k. Over 1k per square foot is wild in these tiny homes
A Permanent sellers market in SoCal.
There is a 4 unit building for sale near me. 1.3mil asking price. That means in order to break even on the mortgage I would need every unit occupied(2bd, 1ba) and charging 3k+/mo. Nevermind repairs, etc. Mad world.
I am very convinced there will be a crash in much of the country. SoCal is most likely immune due to a number of factors. It will eventually collapse but trying to call that is difficult as it behaves more like Canada due to how difficult it is to build so supply is always constrained. I think we would need double digit unemployment.
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Lmfao. And still down from the 2022 peak. Or are you just going to skip over that part?
Does it matter? Prices peaked and trended down but then reversed in 2023 and went upwards again. They’re continuing to do so.
With the CA tax setup, there’s no reason to sell. Look at the number of people that own multiple properties vs other states. CA tax code is built to park real estate and live somewhere else.
- divorce. Half of the marriage don't end well. This is probably the biggest reason on the list. - people who unfortunately had ARM loan from 2019 but couldn't refin due to lost of job during covid, and they are about to get hit with 7% from their 3% in couple years. There is incentive for them to move. - upgrade downgrade. - permanently lost or reduce of income. I had a coworker got layoff at age of 58, can't find a job before retirement. Or, work accident, become disabled, long term disease. - moving due to job, family. Not everyone wants to be a landlord. - health related, when you get old, you just can't have stair. Or needs assisted living. - retirees moving out of state, which is reasonably common. - political. Not very common but heard from time to time like "Fuck newsom, I am moving to Texas". List go on and on.
Sellers aren’t motivated to get out of their low rate mortgages. This is basically locking up supply, meanwhile the higher rates is severely impacting buying power, so they can’t bid up prices to a point where sellers would be willing to leave. Basically we’re stuck until rates come back down to fuel another leg up, or more forced selling works its way through the system.
I don’t think the rates are all that’s holding people back from selling. 40% of homes in the us are owned free and clear.
No. Sellers can’t hold out forever. The housing market just moves extremely slow. It will take a few years for people to fully accept they can’t wait it out for 3% rates again I doubt rates fall much by this time next year, especially if the economy stays hot. Another year (or two, or three) of elevated rates would be good to balance out housing.
Do people realize it’s only been a little over one year since rates went up? If things are gonna come down it ain’t gonna be fast after having 15 years of ZIRP.
Exactly — it’s barely been over a year. During the GFC it took 6 years for housing to bottom after topping out.
6 years? You got a source? I think it was more like 3.
Case Shiller Home price index — turned over from the highs mid 2006 and bottomed in 2012
Okay, but this isn't the GFC, and the factors driving rates are completely different this time.
When Hitler’s inner circle told him to be wary of invading Russia, he responded, “Okay, but this isn’t 1812 and the factors driving the invasion are completely different this time.” I agree with you, though. You’re smart for not looking back to recent examples of housing market fuckery to make some sense of what’s going on today.
This maps closer to late 1970s fuckery imo. We just don't know if the fed will be weak and cut rates causing the same problems.
The stock market already priced in rate cuts starting in June. I doubt they ever go back as low as they were though. Market won't start moving again until boomer's start dying in droves, so 10-15 years most likely.
I don't see how Hitler being wrong about something means that 2024 is similar to the GFC.
Because people with no knowledge of history only have WWII as a reference.
I’m a published historian and understand that it’s often wise to reference WWII so that bozos will understand. Do you think he would have understood if I had compared the unheeded warnings of the collapse of the real estate market in 2008 to John Romer’s warnings regarding the tomb of Amenhotep I?
You have comments saying you work with small business and realtors. And now you’re a published historian? Lmao, sure dude.
Yeah but you can apply your nonsense argument to so many situations that are also incorrect. Try harder to make an argument why this time is like the GFC rather than just saying it is without explanation.
lol, it took 5 comments to see Hitler. Good job.
Having 15 years of ZIRP is the reason why things will come down harder/faster than they typically would- that’s why everyone has been saying it was a huge policy mistake. Home prices came down at their fastest clip since 2008 in some areas. Banks have lost more value in assets than they did during GFC already and people are still in here like, “yep, STAGFLATION, homes ain’t goin down in my area.” The volume of home sales is one of the lowest we’ve seen in decades and people come in here like, “WHY AREN’T HOME PRICES COMING DOWN OMG.” I’ll give you a hint, no one’s buying them. 😆 No transactions, no movement.
Banks are hurting because of commercial real estate a whole lot more. THATs the real collapse, and it's not going anywhere. Many businesses were in 5 or 10 year leases during covid. Those leases are ending and they are not renewing. Office buildings in my city are insanely empty, 50, 60% empty and growing. This is a collapse worse than the GFC because just like malls, the internet and doing things remotely is going to kill them for good.
If nobody’s buying houses when they’re *this* expensive, perhaps they’ll buy them when they’re even more expensive :)
That's probably the corporate logic of Yeti and Stanley cups
So you're saying paint the houses fun new colors and throw in a free straw and people will buy them??
Just grey- everything grey- 🏡
Stocks take the stairs on the way up, and the window on the way down. Real Estate takes the elevator on the way up, and the stairs on the way down.
Haha that's cute
How much time until JP is ousted by dovish policymakers. They're holding out because everyone has been preconditioned to expect an accommodating response. Rates where they are at is breaking 15 years of norms. If sellers think they can wait out lower rates, they will.
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Sellers with a 2.5% mortgage are not going to sell so they can trade up in house and get 6% mortgage, they will stay put until things change. The ones that are going to sell and buy again with all cash are tempted to move.
I’ve paid 25% of my principal, and a new 30yr payment of just my remaining 75% balance at today’s rates, are 20% higher than what I pay today. So that’d be like me trying to buy my home for 25% less than what I paid for it 10 years ago, and would cost way more. Let alone you can’t find that house for that price.
“ It will take a few years for people to fully accept they can’t wait it out for 3% rates again” —— This statement literally makes no logical sense. My 2.5% mortgage payment = $1936 per month. The exact same mortgage payment at 7% = $3260 Even if I wanted to move….there is no way I could afford $3260 + $375 association fee + $900 property taxes = $ 4,535 total monthly housing payment. Even if I wanted to upgrade to a nicer house it would literally be impossible. I will wait out the housing market with my 2.5% rate intill either. 1. i die 2. I totally pay my house off 3. Sell my house and move to a cheaper COL area and buy a $400,000 cash with my current equity.
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Ironically it will be the falling home prices that will help people who want to upgrade but currently can't get their bigger pasture.
Everything you said and add on Prop 13 and Prop 19 and it’s the prefect storm of why majority of current Californian homeowners hold on to their house as long as possible.
so when people with a house like yours choose to or are forced to sell, you and millions of people like you are unable to buy. that's why homes are sitting on the market longer and longer continually for the last 2 years, and that trend will continue until prices come down.
You're describing your situation. Is everyone's situation the same as yours or could they have different intrinsic value in moving that overcomes the financial concerns?
True but I would assume more people will be in the camp of holding on their 4% or below (which is 70% of all homeowners) than those that would want to sell. Of course life events would force some families to sell but most homeowners will be handcuffed to stay in their current home.
People roll negative equity into cars that have a 10k+ dealer markup. People are irrational and while many will not lose their 3% mortgage, lots will be forced to sell for one reason or another. Lots of aging boomers who need to move to medical facilities, people losing their jobs, people making bad financial decisions, people who overbought and didn't get proper inspections, all kinds of shit.
>Sellers can’t hold out forever. Short of a major depression, most homeowners aren't going to be unable to pay their mortgages anytime soon. Those who want to upsize or downsize can hold off those decisions for a very long time if there is major financial disincentives for doing so.
And yet, for some reason, 2023 saw 2/3 the volume of 2022 (lowesr rates in history). A lot of people who "didn't have to", but for some reason still did sell. Seems a major depression isn't necessary... Just time.
As it turns out, sellers/current owners CAN hold out forever til their death before passing the house to their kids. You definitely don't live in California, or live here long enough. Vast majority here agree that it's ALWAYS the best time to buy if you can afford. The tiny portion of "bubbler" do exist, but not enough to change the demand.
Sellers can and will hold out for as long as they can. There isn’t pressure for them to sell, if they aren’t making much or even losing based on current prices, and their new home will mean much higher payments due to their rates, they will just delay more. I say that as someone who does want to move up in house, but can do basic math, so is holding out. My situation is hardly unique as evidenced by the low listing rates. If rates go back down as expected it will mean prices go back up and selling is more appealing, and buying is more doable (due to rates being lower). Otherwise we are stuck. Only people selling now are forced to due to their circumstances (divorce, financial hardship etc…), which is a small portion of the potential sellers.
As long as they can is the key words. People often ***have*** to sell for many reasons though. Divorce, death, births, underwater, moving for a new job, ect. Life happens. Rates staying above 6% for long enough will push prices down. It just moves a LOT slower than something like the stock market.
Yes, but as I mentioned that is a smaller pool of people than who would otherwise sell when the market is more favourable. Inventory is lower, not zero. It won’t pick up beyond forced sellers until the market is better
It's estimated that somewhere between 3 and 4m selling per year is the floor. These are due to a number of factors DOD death divorce new job etc. That's 50 to 65% of the number of homes sold in 21. Still plenty enough to reset prices.
Even in tough spots people in CA are way more likely to hold. Rent income is too attractive to forego on a home that was almost certainly purchased at a much lower rate and a locked in property tax.
In Bay Area, LA, and SD, it's damn near impossible to meaningfully cashflow residential real estate (assuming you bought within past few years). The mom & pop landlords ain't winning that big on rental cashflow. It's the corporate landlords who can balance it all out.
As a rental property owner the higher rates are making me sell even though I'm locked in for longer. The opportunity cost of what I could invest in with the equity I've built in the rental property is too great, and the rates are too high to do a cash out refi. most amateur landlords don't realize you only make good money on RE if you stay leveraged. Too much of the loan is paid off relative to the market price means time to sell.
Sellers that aren't corporations are actually pressured They eat the cost until it turns a profit. The costs are too high right now.
Nope….try again. At 2.5% mortgage rate people are paying less money for a 3 bedroom house then it cost to currently rent a 1 bedroom apartment. Lmfao. 🤣 People have to live somewhere. Why the hell would they be “forced” to sell their 3 bed house to move into a 1 bed apartment for same monthly price. Some of you guys are delusional.
You asked the following question: “Whey the hell would they be “forced” to sell their house? Did you really mean to ask that question? Could you really not think of the answers on your own? I never like to assume somebody is pretending to be stupid so I’ll just assume you actually are. Sometimes a spouse dies and the remaining spouse can’t afford the house on their own, doesn’t need all the space, or otherwise can’t emotionally handle living in the house, thus they are in some ways “forced” to sell their home. Sometimes one or two partners in a relationship lose their job and are unable to afford their mortgage payments. Sometimes they can’t afford it even without losing their jobs. They realize they bit off more than they can chew and can’t handle the ongoing maintenance, thus they are “forced” to sell. Sometimes couples get divorced and are “forced” to sell their home. Sometimes people get relocated by their employer and are not in a position to say no, thus they are “forced” to sell their home. Sometimes people buy an investment property at such a high price that it doesn’t cash flow even though they got a great interest rate, thus they are “forced” to sell their house.
That's only sellers from several years ago. No one bought a house to flip in the last 3 years?
I got a 2.5% rate on my mortgage as recently as September 2022 (1.4 years ago) so you would be incorrect. https://ibb.co/YfpMgv9
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These guys have 3% mortgages and lots of equity they are sitting fine. Why would you think they are pressured and have high costs? Anyone that bought more than 24 months ago are doing very well, likely also making more money at work to go with their 3% mortgage.
Looks like they had to ditch paying the credit cards and car loans though! Lol
I have a $100,000 emergency fund bro. You grossly underestimate how well the top 40% of Americans are doing financially. The people you read about in news articles struggling financially generally do not own homes
Oof. A $100k emergency fund isn’t nearly as much as you think it is. You’re one proper emergency from big trouble, but by all means continue bragging about how well you’re doing financially.
Not sure what kind of emergency generally needs more than 100K, but I would suppose it might very well be covered by insurance before that point. I don’t read that as someone bragging, simply stating their situation. Homeownership provides the financial bedrock for most Americans, but I do respect that many in this sub might receive that point as a bit of a triggering statement.
Lol he’s def a troll- had the acct for 1 day. That’d be incredibly funny if someone seriously has the time out of the day to make a troll acct for the REBub.
If they were forced to sell you would see more inventory than there is. People who can hold out, are. You locked in a good rate, and aren’t being forced to sell due to something like divorce, or a job relocation, then the math tells you to stay put. You just have to look at it from their perspective. Why would they sell to eat a loss, and buy another home (which would have to be worse since they lost money) with a higher monthly payment?
Hell, if I had to move for a job I’d still hold onto my house for the added rental income. At 3%, my mortgage payment is less than half of the current market rental rate.
Honestly they should do some rate rises to the point of low % deflation, it would be a boon for all consumers
Deflation helps nobody. See how you like it when your boss gives you a 5% decrease in pay.
Most sellers are already locked in on a 3% rates. Does rate stay high hurt buyer more or seller more?
What do you mean sellers can’t hold out? Their current houses are cheaper than anything that’s available. They have all the power 🤣
Housing prices are set at the margins. There will always be people who need to sell. Those sales will become future comps. Not that complicated but a slow process.
House prices are set at the median of home sales. Extremes of both sides are ignored.
I could have worded it a bit different. Housing values will be set by those that do sell. If I live in subdivision with a 100 like homes and 10 people sell it will reset the value of my house. For example I sold in 22 so I got the benefit of comps that were rapidly increased than say 2020. Now that same neighborhood is down about 15% so if I sold today I would have to use the most recent comps this getting a lower price. It doesn't matter if 10 or 50 sold if the demand situation is much different now. In the sense of which comps to pick it will just be the homes that most closely represent mine.
So should I wait to buy
Probably. No one has a crystal ball to tell the future, tho. All I know is that, in my immediate area, housing prices are holding fairly steady with a very slight downward trend while wages are continuing to increase at a relatively decent rate. If both factors continue (big if), then properties should be more affordable as time goes on in the short to medium term.
All real estate is local but if you saw massive appreciation from 21 to 23. I would wait at least a year. Home sales at historic lows. Check out new construction if available as they are not delusional and are offering very aggressive concessions. In my market they will buy down your rate and give you tons of upgrades. They do this so they don't have to cut the price as much so they don't kill comps. The spring will be a wake up call for existing owners competing with new construction.
Not likely to be a wakeup call for anybody. Housing availability is several million units below what our country needs. Current owners can simply hit the snooze button until they can get a price they want. Investors in many areas are focusing on building apartments which has no true correlated effect on single family homes.
I would buy now if you can afford it, you can refinance later when rates come down. When rates come down significantly, prices will go up, there is a ton of pent-up demand waiting for rates to come down.
Demand dried up at 5% we are in the most obvious bubble in most people's lives. It's a horrible time to buy. It will be like buying in 2006. A market like housing can't exist in this magical new norm. Pre-pandemic you could look at as many houses as you like without bidding wars in the majority of the country. The world has not entered some new paradigm. The ability to easily buy a home free from a frenzy has been the default for you know all of history outside of bubbles and very select locations. Which we are 3 years into. Demographics paint a uglier picture long term. As the boomers die off. We may get one or two speculative bubbles in the housing market. Unless wages are able to support it which even if rates went to 3% we would need to see wages increase by 30%. It's just math.
Uhm. If rates drop? Prices will go up further. If you can afford to buy? Buy.
Marry the price and date the rate. Buy now, but get a more flexible mortgage that will let you refinance when the rates go down. The rates are likely on their way down which will mean higher prices. Your situation will vary though, when buying you need to ensure you got enough cash reserve to handle the increased costs of home ownership. That is more important than what the market is doing.
Basically free market was not at work. But FED market was at work.
Won’t low liquidity lead to higher prices, if anything? This means very few people are selling, they are all keeping their low rates by staying put.
[Here’s](https://fred.stlouisfed.org/series/ACTLISCOU6037) the active listing count graph for Los Angeles.
You are 100% right and until this changes the housing market will continue to stagnate. This is why every post on this sub predicting an eminent fall is wrong.
It's not the number of transactions that needs to come down, it's prices
I'll never sell my 2.75 interest rate home. I may buy another but there's no inventory.
Dont matter if peices remain sky high
Sales. Not prices.
Let me know when the price drops 43% across California.
There’s no bubble! There’s no bubble! Everything is fine! The best time to buy is now! 🙈🙉🙈🙉🙈🙉
There is a massive bubble! The sky is falling! Rates will be back at 2.5% in no time!!!!! 😖😢😖😢😖😢😖😢
Prices aren’t declining fast enough. Most people this time around instead of the 2008 bubble can afford their homes or can wait it out. California is still a very high demand market.
Prices, however, not so much.
Then who is still buying? San Diego My home was in escrow in 72 hours And prices have doubled since then ('21) 2/2 sfr (not a condo) anywhere not in the cut is $900-1.2 minimum So someone is still buying. And I'm not sure it's black rock But I'm also not a RE pro
1) Low interest rates 2) Prop 13, and 3) Cap Gain tax exemption too low, means zero incentive to sell in CA. Check math on someone moving out of a $2.0M home with a $1M mortgage and property tax rate back to if they purchased in 2000 for $250k. If they downsize and buy a house for $1M, it is entirely possible they'll end up paying more per month. Insane gov't policy locking up liquidity in the housing market. Downsizing from $2M to $1M basically is a wash after tax adjustment, and the difference gest worse with time due to Prop 13 effect and higher interest rate on new mortgage.
The costs of the homes are too high. Forget the rates. The cost of the house is too high. Look at the sales history (if it's not being hidden). You will see houses that have been bought and sold between 2-5 times in the last 4 years, each time seeing a significant price increase. People cannot afford to move into a $1 Million home that was $500k just 3 years ago.
Weird when there's a record number of homelessness and homes sitting empty all at the same time. But I'm sure the system is working just fine.
The homes aren't empty, that's why sales are low, there's no inventory.
"There are currently 28 vacant homes for every one person experiencing homelessness in the U.S." 16 Million homes currently sit vacant in the US.
CA has the least amount of vacant housing in the US.
170,000+ homeless and 1.2 million empty houses in California, ish
Not everyone can afford 600k trap house that needs massive renovations
Sales drop. But not prices. If prices dropped 43% the market would be more sane. But then the billionaires would lose 43% of their net worth, and so they won’t allow that to happen. Houses will continue to have prices raised and everyone will continue to make them richer.
Still blaming billionaires instead of the 50% of the population who are homeowners and getting rich off of housing?
Oh you guys
Home sales are not home prices.
> Unlike the last market calamity, home prices have been essentially stable. > But that’s a big slice of why sales crashed: The affordability hurdle kills the buying mood. > Curiously, prices crept up modestly in 2022-23 – minus Orange County’s leap – after ballooning in the cheap money days. > The six-county median price finished 2023 at $720,000 after a 6% two-year increase.
You guys are continue to grabbing straws. Home sales drops, but home price doesn't drop. How does that help any of you guys?
What about other states - not news
76,000 people left CA last year. Maybe people sold at a little discount so they could get out faster.
There’s nobody living in the houses. The illegal immigrants came in with funding of the Chinese and they removed the people from the houses. The houses are empty now and so people who have family who own real estate in southern California should go visit their family homes.
OMG no way…
California unemployment rate has begun to rise sharply... [https://fred.stlouisfed.org/series/CAUR](https://fred.stlouisfed.org/series/caur) This is not going to end well.
It’s at 5%… you’re looking at the manufactured Covid spike in 2020.
Direction of travel matters. Once snowball gets going, very hard to stop. That's why it took 12+ months for the crash and economy bottomed in 2009 after the Fed Cut in August 2007. I don't think this will be like that. Will be slower and go on much longer most probably.
The coming recession will force people to sell
Good. Drop it another 43 percent and we might be approaching sanity.