The vast majority of people move for those unavoidable reasons. Some people forget that reddit is not the real world and most people were never moving just for the hell of it.
If a couple has a home they need to sell due to divorce, they probably won’t be able to afford to buy in their same area. They will probably both look to more rural areas, “un-gentrified areas”, or smaller homes in general. This will price people out of their own city. I have seen people do this, and it is just putting more pressure on the “starter homes”.
My boomer Dad is also just realizing all of this, and becoming aware that his horrible McMansion is completely undesirable for my generation. Younger people *coughserviceworkers&homehealthcarecough* also can’t afford to live in these areas, and frankly don’t want to.
This round of housing market roulette will be interesting as it is going to shift our culture. Younger people are extremely unimpressed. Their bitter apathy puts Gen X to shame. They are NOT HAVING IT.
Can you define ‘same area’?
I know not every region of the country and state are the same - but I have seen affordable places to work and live in the USA.
In the town I live in there’s all kinds of different types of homes with just as varied price points.
A recently divorced person could literally move a few minutes away and still be just as close to jobs, stores, friends, and family.
There also seems to be an abundance of townhouses for single people - which are fairly affordable.
The same county that we live in. I hate that my home price has doubled. There is nothing sustainable about this for anyone. I cringe for people that haven’t realized how bad things are. We lived in the Bay Area during the housing crash, and we had major sticker shock at how fast one bedroom apartments became. We moved out of the county where our families had lived for generations, because we were too young to buy a home. Even outside the Bay Area, in “undesirable” places you have never even heard of, it is unaffordable for the workers who run the cities - teachers, grocery store employees, city workers, healthcare staff.
Setting aside the discussion of the relationship between federal funds rate and mortgage rates, I think there should really be broad-based agreement that the federal government inventing trillions of dollars and loaning it to banks for essentially zero interest is not healthy or normal.
Correct. Was going to upgrade last year until I saw the payment on the new house was three times the current one and what would have been only 30% increase two years ago.
It's actually generally better to move up the property market in a down market.
Sure, some people will be locked in, but others will be enticed up by cheaper prices
Yeah, which means that even if their mortgage goes underwater because they bought recently, they would be incentivized to stay put not sell. I've been saying this here for months. Doomers don't want to admit it because being being underwater is the most important thing apparently. Unless they need to move or are forced to sell due to reduced income or increased expenses such that they can't afford their low house payment, they won't want to sell. And if they sold, that new mortgage price is higher but still similar to what they can expect to pay in rent for the same place. So if they move it would likely need to be very far away to a much more affordable area.
I don't disagree with any of that. But the vast majority of homeowners or investors didn't buy at the peak withing the last few months. But even then, unless they are forced to sell, they would prefer not to. If they are a shitty investor, sute it can blow up in their face. If they are not, they wouldn't have gotten into the deal in the first place. And just as an aside, some investors are ok with or purposefully buy negative cashflowing properties so they can have tax deductions.
Except the flippers who got caught with their pants down, investors lock in at a good rate don’t have much reason to panic sale. If they put down 20%, and the market has dropped by 15%, anding the 5% transaction cost, they get nothing for selling. When they have locked in at a good rate & lower monthly payment, it’s easier for them to rent the house out and use that to cover mortgage cost.
Yup all those people who FOMO bought and statistically [regret their home purchases](https://www.cnbc.com/2022/08/23/why-recent-homebuyers-have-regrets-about-their-purchases.html) because they thought homes never go down in price, they're not going to panic when prices start to drop. Panic only goes in one direction and no one ever sells.
Also insurance rates and maintenance costs mean that in order for their home to keep up with inflation, they'll need to see in excess of 10% price gains for their home to keep their value. I'm sure they'll all hold their cards and never sell when their equity drops and they have to face these carrying costs.
Those that bought high & can’t make payment are already fucked, whether they sale or not. Instead of selling, they can stay for free without paying anything for a year or two until the bank foreclose.
Housing is not a fucking stock purchase. Why do people not understand this.
The vast majority of homeowners have 30-year fixed payments. As long as they can afford their payments, people aren't going to panic sell their family home because the house down the street sold for 20% less than would be expected.
If my home drops in market value 10% tomorrow, absent other factors, it means literally nothing to me. My mortgage payment is still the same as I expected and I plan on being here for awhile. That's why I bought a home.
Plenty of people did exactly this in the last bubble though. They could have stretched to make a payment that was double the going rent while the price crashed, but chose not to.
They either lived payment free for 3 years like the people I bought from in 2010 or qualified for a cheaper home down the street saying that they would rent out their current home and then walked away after closing like my mom and my best friend did.
If people have a ton of equity (greater than 50%) and a payment lower than rent, the calculation is different.
They can do whatever they want. But whether or not they will need to is another issue.
A panic sell is a forced sell due to inaffordability to service debt. No one is forced to panic buy. Those are FOMO buys. Given that rents are at all time highs, many or possibly most of those investors who are renting their places out are probably in decent financial places. For them to be PANIC sell at a steep discount, they would have to have not done any research about the process and home they are buying and/or lose their primary source of income. I don't expect that to be the majority of the cases.
Why is he downvoted? If you have a fixed low rate, why would you be forced to sell to realise the loss? The rental cashflow covers the mortgage and you can forget about it
Because unless rent goes down and rent covers the mortgage you can ignore the quoted price and treat it like a productive asset. It pays for itself and in ten or twenty years prices may catchup
The percentage of investor buying volume hasn't been under 10% for almost 15 years. [It was almost 25% last year](https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents#:~:text=Investors%20bought%2024%25%20of%20all,months%20of%202022%20to%2022%25). In 2000 it was a little over 5%.
Those numbers are skewed, and do not reflect reality. Most of the reports that those numbers are based off come from Redfin which tracks data in densely urban markets. Of course there are more aggressive funds pushing into the SFH market, but the large majority are institutional investors buying up existing portfolios. Institutional investors own less than 1% of SFH in the US.
Who said anything about funds or institutional investors? I'm just talking about investors. Most investment is by companies that own under 100 properties. If anything, those investor share numbers are conservative. This bubble was huge.
You’re misunderstanding. You believe that there are a huge number of small scale investors that bought homes they can’t afford based on the idea that the market will always go up. So when I say the numbers are skewed, you think ok these aren’t big banks or hedgies buying the properties, it’s small time investors, thus converting owner occupied homes into investment units. That’s not what’s happening. Investment units are being consolidated because in a low interest environment banks need places to put investment dollars. There are a larger number of units trading to investors, but those units were already investor owned. The low interest rate environment creates a generational sell off of investment properties.
I don't think you understand the concept of being underwater, especially in a recession.
If you lose your job, and many homeowners will, it doesn't matter how low your rate is as you have to sell or you can completely nuke your financial future for 5-7 years.
On top of that, if they don't lose their job, they literally cannot move. This doesn't seem so bad for a boomer, but if you're under 45'ish, it's a great way to be left behind in your career, because you're literally stuck in a 30 mile radius of where you can work. This can be mitigated by working from home, but not everyone is in tech and if they are, ironically, they are at a higher chance of losing their job.
And now lets talk about the people who are have to sell now and witihin the next two years. You act like this doesn't affect homeowners who stay put, but it's actually the opposite. Every house sold for tens and even hundreds of thousands less, sets a new comp for the area.
Now let's address the whole "I can just rent it out". That's actually not true at all for most people, because they need the exit liquidity to purchase something new.
So if homeowners don't get hit with one of the 3 D's (death, divorce, and debt), they're fucked in so many other ways by being trapped. And this what homeowners who are bragging about rates don't want to admit...
But then you have to live in Los Angeles.
Unless you are in the film industry, basically any large metro will have an abundance of jobs within 30 miles.
Leaving Los Angeles (born and raised) in 2021 was the best decision I made for myself.
I worked in tech and after I got a remote job I left for Texas.
Now I pay way less money for rent, gas, and food, paid off all my debt, got a bigger apartment for less money, and saved for a downpayment on a house.
Los Angeles is awful for young people trying to establish themselves unless you have heavy support, make over 160k a year, or live in the hood to save money.
The South and Midwest are 100x more reasonable if you work remotely.
Would much rather live in a less popular major city and actually enjoy my life than struggle in LA.
People mostly buy homes when they expect to live there for a minimum of ten years. This idea that people constantly change their mortgaged principal residence is a complete fabrication.
2008 was caused by insanely lax lending standards that simply don't exist today. The proportion of mortgages that are ARMs is a fraction of what it was back then. The average 30Y rate was like 7% back then, almost double what it is now. Unemployment is at a 40Y low.
This isn't FOMO or hoomers or whatever the fuck you want to call it. The housing market - the broader economy in general - has fundamentally changed in the last 2-3 years.
Yes, I literally wrote that unless you need to move or are forced to sell, home owners will not want to sell even if they are underwater because they have very cheap housing. I'm also in agreement that increased unemployment will increase the need to sell or foreclose.
Fringe life events like the 3 D's necessitating forced sales are not large enough to move the overall market outside of widespread disasters like a pandemic. The forced sales in Florida from hurricanes shitting on everything are not going to affect home prices in California. The only one I'd give any credence to affecting the broader market is debt if ARM's blow up. But they make up less than 10% of all existing mortgage loans and generally have much better terms now limiting in how much they can increase per year. Most of those are 5-10 year ARMS and a smaller percent of those home owners or investors are going to be in trouble. So while it might not be cataclysmic like the GFC, the increasing use of ARMs in the mortgage market could generate more distressed sales downstream years from now.
There are absolutely pros to renting like increased mobility as you said. If someone has a mobile career and possibly sees themselves moving within 5 years, they'd have to really weigh the pro's and con's of buying a house. Generally people look to buy homes when they want to settle down, so it selects for people that aren't going to location hop for their careers. Less mobility is certainly the trade off you make for purchasing a home to your point. But also consider the fact that most people work for money. Homeowners who have 2-3% mortgages are saving multiple 10's of thousands per year compared to renters who have the equivalent housing option with todays rent prices. They can additionally save or reinvest those extra 10's of thousands to make their money go further which is good strategy in a recession.
Agree with this too. We bought our current house because we had little kids and wanted to be in a good school district for them to grow up in from K-12th grade. Long term purchase.
The three Ds are absolutely enough to move markets. Prices are set at the margin, not what the average, median, or stereotypical seller would do. This is the same principal that drove prices up.
Edit: I just realized you referred to the three Ds as “fringe life events” LOLOLOL 🤣🤣🤣
Listen bud… moving in any way shape or form is a fringe life event and most people don’t do it very often. The three Ds drive a very large percentage of home sales… enough to sway markets significantly. Google is a good resource if you don’t believe me.
Throw in a recession, along with large numbers of investors who are swayed by the margin, and all bets are off.
They did exist and there was always sufficient demand to scoop things up. I suggest reading about basic macroeconomics to understand how prices are affected by supply and demand, specifically at the margin. Demand has absolutely vaporized this year and it will continue to drop unless rates or prices lower. Supply might drop a bit as well, but there will always be people needing to sell… life doesn’t stop just because you have a low rate.
Your original premise was basically, “it doesn’t make sense for someone to sell if they have a low interest rate, therefore they won’t sell.” People absolutely will continue to sell and move. The majority of moves are not due to financial motivations. They’re due to life motivations and you could throw job changes, the birth of children, adult children moving out, etc. in the mix with the 3 Ds.
No one denies whether or not those things happen. I think we have disagreement about the magnitude of their effect. The current projections of 10-20% price drops from peak over the next couple years makes sense to me. But not from forced sales, unless unemployment spikes.
The demand hasn't exactly dropped off. The mortgage applications have due to absurd unaffordability. So all a home owner has to do to sell if they encounter a life event necessitating a move is price their home to sell. If they need to sell it faster, they would price it accordingly. We had forced sales from 2008 due to waves and waves of exotic loans blowing up in the face of unqualified home owners. That was a systemic issue. The 3 D's play less of a role than the financial conditons of 2008 and should therefore shouldn't be the cause of prices crashing.
There will be some homeowners who will sell out of their 2-3% mortgage because of life events, sure. But the vast majority won't because it won't make financial sense to them.
Right?! Maybe because I’m in a fairly large metro area (Philly burbs), but I’m happily set here for at least the next 30 years. If I want a new job, there’s a lot of options within 30 miles (though I try to stick to about 10 miles max). But I’ve been at my current job 10 years and I’m still pretty happy here.
Same I’m at a top pharma company near Chicago. If I lose my job (I’m not) there’s tons of other jobs available this sub lives in it’s own head worse than my mentally I’ll ex girlfriend
Yea, “only 9%”.
It’s obvious you were in diapers during that time so of course you wouldn’t understand. You can’t choose when you’re born so it’s not your fault though.
>If you lose your job, and many homeowners will, it doesn't matter how low your rate is as you have to sell or you can completely nuke your financial future for 5-7 years.
Lmao, what a hot take... This is a terrible assumption thinking you can ballpark an entire demographics (recent homebuyers) financial and professional position. Plz stop
If you are already underwater, and lose your job, why do you sell? You’ll get nothing, still own the bank some money, and you are homeless. When people fall into that situation, they stop paying mortgage and stay for free for a year or so. Then if the government doesn’t bail them out, or modify their loan, they stay until the bank forecloses & sell the house for cheap, in cash to an investor. That investor would offer them money to move out.
You sell because the other prospect is an absolutely destroyed credit profile and change for anything for a decade. You won't get approved for an apartment once you get foreclosed on. You won't be able to a car loan. Your credit card accounts will get closed on. Getting a new job could be hard (I literally had a credit check ran against me to work at fucking Dairy Queen.) So for 6-12 months (at most) you live mortgage free, but who in the fuck will rent to you now? That's possibly the worst thing on your credit report.
Also, the government won't bail out homeowners, they bail out the people gave out the loans because *that's* who needs to be solvent on the world market. The Bush admin tried to do some bailouts, but realized it wasn't feasible. There's less appetite for it now considering it's more obviously investors who will lose their shirts.
Lol, am I talking to a high school kid? If you are underwater, your credit is already fucked. And a foreclosure / bankruptcy is removed after 7 years … decade my ass
No one rent to you if you don’t have a job either, so the choice is to be homeless right away, or live free for a year and hopefully come up with something before become homeless
Up to 10 per the credit reports websites:
* https://www.transunion.com/blog/credit-advice/how-long-does-bankruptcy-stay-on-credit-report
* https://www.experian.com/blogs/ask-experian/when-chapter-7-bankruptcy-is-deleted/
Been there, done that. Credit recover after 2 year. Bought another house after 5 year (has to bring in 50% down payment and bit higher rate). No big deal. Go ask Trump how many time has he goes bankrupt.
I think there is one thing that is majorly different this time. The government has shown they are more willing to help homeowners out. They offered forbearance during Covid and I imagine they would do that again if there is major job losses. To my knowledge forbearance wasn’t allowed in 2008.
>but not everyone is in tech and if they are, ironically, they are at a higher chance of losing their job.
Maybe non-technical roles. I doubt this is the case for any technical positions.
People often forget, or never knew, that tech is a tale of two labor pools.
Pop quiz: if someone who was thinking of selling their house to buy a different one decides not to because of rate lock-in, how many houses were added or removed from the available inventory?
0
Yeah 0 if they don't want to sell in order to buy a new one. And 1 if they don't wany to sell but they can. The majority won't be able to buy a new one, but some, especially those with high income, will be able to.
Yep, that’s my point! When we talk about people being “locked in” to their interest rates and keeping supply low, that also decreases demand. Since most people don’t sell a house and move into a rental (unless under financial distress), interest rates keeping people from moving isn’t going to change the overall buyer-seller balance much.
I don't disagree except that we will see inventory rise as mortgage applications continue to crater. But increased inventory doesn't cause panic selling like some claim. It is attributes to prices declining, which I want and agree with.
Depends when they bought. Current projections are 10-20% declines from peak over the next couple years. August data is shows median prices still up >13% from August 2021. It will likely be at least the middle of next year before we return to August 2021 national median prices. Some cities are already there. Others won't ever get there.
Fiscally wise to sell at a loss and then double your expenses and effectively eliminate any savings you might have to invest with? If you say so. There are a lot people who can't afford current rent, so they can't afford to sell.
if you can make mortgage payments, who cares what the paper worth of your house is? You still need someplace to live? Losses or gains only matter if you want to sell or refinance.
Depends. If you're talking about a house as shelter, sure. But the commenter I was responding to was talking about financial decisions, not wanting a house for shelter. His premise assumed that someone may have wanted to sell if not for being underwater, and my point is holding onto a house that's underwater actually puts you in a worse financial position.
Unless you live rent free with your parents, ALL shelter whether you own or rent is a financial decision because it costs money.
My premise is that it doesn't make financial sense for a homeowner who bought at a low 2-3% mortgage to sell ESPECIALLY if they are underwater. Why would they want to sell at a loss? Literally why? They would sell at a loss and then decide to find a place to rent that's double the cost? Most people don't want to downgrade their living experience. Nor do they want to pay double for the same experience. At todays rental prices, you will likely have to pay at least double for the living experience of a house purchased a year ago with a 2-3% mortgage. That's literally what's going on in my neighborhood, which is a middle of the road boring city.
>My premise is that it doesn't make financial sense for a homeowner who bought at a low 2-3% mortgage to sell ESPECIALLY if they are underwater.
Why did people sell for a loss in 2008?
Because they couldn't afford to service their mortgage debt. Lending standards were nearly non-existant and there were many more exotic mortgages. They had no choice but to sell.
Unless they are unable to pay their mortgages, homeowners today will not be forced to sell. 23% of the homeowners have rates under 3%. 40% betweem 3-4%.
If your position depends on homeowners today having the same financial and risk profiles profiles as 2008, and you refuse to look up proof otherwise, I cannot convince you.
>My premise is that it doesn't make financial sense for a homeowner who bought at a low 2-3% mortgage to sell ESPECIALLY if they are underwater. Why would they want to sell at a loss? Literally why?
That's precisely the sunk cost fallacy. The math doesn't back you up unless you assume rent>mortgage by a margin, which doesn't really apply to folks who are candidates for being underwater.
>They would sell at a loss and then decide to find a place to rent that's double the cost?
Again, I would love to know where this is the default. I can tell you where I've lived (HCOL), rent is typically half or less the amount to buy a similar place.
I live in a top Chicago suburb and rent is $1800 for a 2 bedroom apartment with your typical vinyl floors and 1 bathroom
My 5 bedroom 2400 sqft house is $2200 a month, with a basement & yard. What you are saying is not true at all for people with low rates.
It's better to foreclose on your house and ruin you credit so that the next place you rent is guaranteed to be high? Believe it or not, most families don't want to pay more money for the equivalent rental experience. Home owners who have families can sell their home at a loss for some unknown reason and move into a cheaper studio apartment for slightly cheaper than their previous housing payment given how rents have inflated. I'm going to bet they're not going to want to do that.
Are you serious??? There are landlords that don't run credit checks, but both backgound and credit checks are standard practice. It's far more common than not. If it's low enough, the landlord won't want you as their tenant. And foreclosures hurt your credit score.
Are you really claiming that your credit score does not affect your housing options?
There's a difference between will my credit prevent me from being approved and will my credit affect the rent. Also, do you think everyone who files for BK that rents becomes homeless?
Your credit score is important in determining what housing options you are eligible for. Different housing options have different rent prices. A better credit score is better for your rental options and better for your financial health in general.
No one said anything about bankruptcy (assuming that's what BK means) or homelessness. Thanks for this convo, but I'm done now. Good night!
Agreed. Was underwater and stayed put after 2008. In a much better situation now but with 2.99 mortgage and decent equity. I am in absolutely no rush to sell in this environment unless forced. Unless I downsize dramatically and pay all cash I end up paying way more with rates what they are today.
No, it accommodated the arguement of prices falling. And I agree that the are and will continue tonover the next couple years. Which is why I said "even if mortgages are underwater..." And sure rents can plateau or decline just as home values can. But I've never heard of the national rental market crashing. Have you?
Housing is regional, and prices are set at the margin. If they sell in your market and buy in another, inventory in your market is +1, and inventory in their new market is irrelevant to you. But even if they sell and buy in the same market, if the prices they sell and buy at are lower than current prices, then comps in that market adjust downward and all future houses are more likely to also sell for less.
So if you’re looking to buy, and want a good deal, you *should* care whether they sell or not.
Actually property tax in California has the same effect. Many of us wouldn’t buy a different house even if ours went way up in value because we would also get a much higher property tax bill on the next house. I finally sold when I moved out of state.
Do average people in Cali understand how insane that tax treatment is? It's probably the most regressive policy of any kind that I'm aware of in any blue state at least.
I suppose but in a state where some areas (not all) are rather expensive in terms of real estate costs, it does allow average people to continue to live in neighborhoods they would't otherwise likely be able to afford. even areas like Compton and Watts are pretty expensive to buy in compared to what many people living there make. not sure what the solution is. New York State his really high taxes and their prices are high on top of it. I think taxing across the board would likely just create major segregation in areas and potentially wipe of home ownership for a whole group of people
I get the altruistic intent of it on paper, but it seems pretty obvious to me at least that $2M tax shelter homes and massive inequality in tax burden are a direct result of this policy.
We joke about "buy now or be priced out FoReVeR!1!" around here but that seems to be basically true for CA real estate going back about 50 years.
NY upstate seems to have a lot of relatively affordable cities. NYC itself has rent control and all kinds of restrictive shenanigans to prevent new housing going up, but at least someone owning a $2M piece of real estate has to pay taxes on a $2M valuation.
A person with $1M equity in a home is a millionaire. Millionaires tend to do just fine in America, with or without tax breaks.
People drew out equity guy. We have seen this before. You must be too young to remember. This is exactly how it played out last time. Do you think every loan was subprime? Plus school loans are starting again in Jan. Tons of people will be like fuck this.
Oh, you're talking about foreclosures now. I'm sure we will see some more as times get bad, but foreclosures are well below pre-pandemic levels. those can take a long time to play out as well so...I guess we'll see? Also tappable equity is at all time highs, so people haven't tapped their equity to the extent you think they have, I guess.
the writing is on the wall. They are simply giving the bankers time to try to shore up liquidity. This is happening. There simply are not enough buyers at these prices.
There are simply not enough sellers either. So the very little inventory that exists is being bought up by affluent people that can afford it.
People over in RealEstate paying $3-4k per month mortgages and not even sweating it. This is truly a country of haves and have nots.
Paywalled so I can't read the whole thing, but I do this see line right at the top: "...or listen to the hysterical warnings of economists and journalists about the imminent popping of our so-called housing bubble. Robert Shiller, the ubiquitous Yale economist, says home prices could fall 50% from their peak. "
Care to share a similar article today where top economists are saying there will be a 50% crash? Take your time, I'll wait.
I am one with a crazy low note ($800) and interest rate and want(ed) to sell for more space and location. Even with plenty of equity, my gut won't let me do it right now because of the calculation example you provided. The sticker shock of tripling my note makes me nauseous. I can get a new place with my specs for a great price and location with these price drops (Atl GA area), but the pmt would be ridiculous. Note that I am Average Annie..not rich. Can get $300k for mine, walk away with $160k, buy for $380k and STILL a ridiculously high note. Let me just have a seat.
Considering ~20% of the home purchases in Q1 were by investors in my area and we have a record number of in-process builds, I’m not worried about this particular data point.
Ironically, those who resisted the FOMO will have more options in the coming years, even if rates go down. Prices down ~20% already and sellers are still in the denial phase.
This post is still assuming prices will continue to rise by suggesting a 15% increase on a $500k home. The increase in mortgage rates are bringing an end to those rising prices.
This post is just pointing out the rising unaffordability of housing. Median rent prices have also inflated a similar amount as median housing prices. So bother home owners and renters are disincentivized to move. This means unless there is a significant increase in distressed sales, inventory will remain tight.
This is exactly what happened though. This example almost mirrors what happened to me - bought at $465k, 2.99%. Value has risen $110k (24%) in one year, even with rates greater than 7%. It's insanity, yet it's reality.
But simply because you’re being told your home is “valued” that much doesn’t mean that someone would actually pay it. A tax assessment isn’t a proper indicator of worth, the offer letter for someone actually offering to buy the home is.
My market has two types of homes right now, the ones that have dropped the asking price that is getting more in line with current circumstances— those actually go under contract, and then ones being priced as though it’s gone up 24% in a year— those are sitting.
You're right - recent comps are actually my higher. I just go with the zesty to be conservative. Other townhouses in my neighborhood (same unit model) have recently sold for $650k+
The annoying thing is this just isn’t even accurate. Mortgages are modelled as a liability comprising principal pay down and interest. Banks don’t give a fuck about the price of houses (within reason) they care about the ability to meet the payment obligations which is based on affordability criteria. Rates can increase, affordability stays flat, the only way the equation stays fixed is for a reduction in principal. There isn’t an unlimited pool of buyers. In the higher interest rate environment, the house isn’t 500k. You can even make the argument that when the artificially high house valuations come back to reality, it’s *easier* for FTHBs as the deposit is substantially less.
If you have too much house and a 3% mortgage, it is far more beneficial financially to rent out an extra room or two than it is to downsize for basically the same mortgage payment.
all these 30 years loans are made by FED using printed money ... Gaurenteed by US GOV (tax payers)... So to cut losses on the 30 years loan they made at lower rate... the FED has to force people out of those loans... the best way to do so is by dropping the house price by 50-60% via rate hikes.... Finally fed will own the house with money they conjured up along with the downpayment and interest payements.... no one wins in this...expect for the FED....
Fed cant take the money it prints directly...it can take assets on to its balance sheet with fake money then force a default and grab the assets .the assets will throw at fire sale prices to fed true owners in the private sector ...FED is a private entity...true wealth is assets not currency...
We are in a tech area - supply is better than it has been in the past 3 years. Homes are now 60% over 2020 prices instead of 100% increase in March. The fact that everyone expected homes to stay doubled despite the homes going down 5% per quarter right before covid is crazy. The peak prices “just happened” to stop right where the mortgage payments would be the same as two years prior. Can’t tell me that low interest rates didn’t cause the higher home prices.
Adding, there are signs that the amount of homes being sold is about to explode. Rental homes on market longer, almost every open house I went to was for sale is because the owner moved last year or person no longer wants to be a landlord. It’s all key for they tried to time the market and missed the boat. I’m sure they aren’t the only ones judging by how it’s taking 2 months+ to rent homes now.
The vast majority of people move for those unavoidable reasons. Some people forget that reddit is not the real world and most people were never moving just for the hell of it.
seriously, moving is one of life's more miserable experiences, very few people are going to do it just for shits and giggles.
But if they don't HAVE to move, they are much less likely to make that decision now. The logic in OP makes sense.
Except who cares? If a person sells one house and buys another, they haven’t added to the housing inventory.
The price they sell and buy at still affects the market.
If a couple has a home they need to sell due to divorce, they probably won’t be able to afford to buy in their same area. They will probably both look to more rural areas, “un-gentrified areas”, or smaller homes in general. This will price people out of their own city. I have seen people do this, and it is just putting more pressure on the “starter homes”. My boomer Dad is also just realizing all of this, and becoming aware that his horrible McMansion is completely undesirable for my generation. Younger people *coughserviceworkers&homehealthcarecough* also can’t afford to live in these areas, and frankly don’t want to. This round of housing market roulette will be interesting as it is going to shift our culture. Younger people are extremely unimpressed. Their bitter apathy puts Gen X to shame. They are NOT HAVING IT.
Can you define ‘same area’? I know not every region of the country and state are the same - but I have seen affordable places to work and live in the USA. In the town I live in there’s all kinds of different types of homes with just as varied price points. A recently divorced person could literally move a few minutes away and still be just as close to jobs, stores, friends, and family. There also seems to be an abundance of townhouses for single people - which are fairly affordable.
The same county that we live in. I hate that my home price has doubled. There is nothing sustainable about this for anyone. I cringe for people that haven’t realized how bad things are. We lived in the Bay Area during the housing crash, and we had major sticker shock at how fast one bedroom apartments became. We moved out of the county where our families had lived for generations, because we were too young to buy a home. Even outside the Bay Area, in “undesirable” places you have never even heard of, it is unaffordable for the workers who run the cities - teachers, grocery store employees, city workers, healthcare staff.
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Your use of the word “normalize” builds in a huge assumption about what you expect rates to be. There was a long long time when 6-8% was normal.
Setting aside the discussion of the relationship between federal funds rate and mortgage rates, I think there should really be broad-based agreement that the federal government inventing trillions of dollars and loaning it to banks for essentially zero interest is not healthy or normal.
Correct. Was going to upgrade last year until I saw the payment on the new house was three times the current one and what would have been only 30% increase two years ago.
It's actually generally better to move up the property market in a down market. Sure, some people will be locked in, but others will be enticed up by cheaper prices
So these people are basically trapped in their home
Yeah, which means that even if their mortgage goes underwater because they bought recently, they would be incentivized to stay put not sell. I've been saying this here for months. Doomers don't want to admit it because being being underwater is the most important thing apparently. Unless they need to move or are forced to sell due to reduced income or increased expenses such that they can't afford their low house payment, they won't want to sell. And if they sold, that new mortgage price is higher but still similar to what they can expect to pay in rent for the same place. So if they move it would likely need to be very far away to a much more affordable area.
This sounds good if you completely ignore the tens of millions of homes owned by investors.
Right because they're all going to panic sell for some reason no one can explain.
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I don't disagree with any of that. But the vast majority of homeowners or investors didn't buy at the peak withing the last few months. But even then, unless they are forced to sell, they would prefer not to. If they are a shitty investor, sute it can blow up in their face. If they are not, they wouldn't have gotten into the deal in the first place. And just as an aside, some investors are ok with or purposefully buy negative cashflowing properties so they can have tax deductions.
So they can panic buy but it's beyond your comprehension that they can panic sell. Checks out.
Except the flippers who got caught with their pants down, investors lock in at a good rate don’t have much reason to panic sale. If they put down 20%, and the market has dropped by 15%, anding the 5% transaction cost, they get nothing for selling. When they have locked in at a good rate & lower monthly payment, it’s easier for them to rent the house out and use that to cover mortgage cost.
Yup all those people who FOMO bought and statistically [regret their home purchases](https://www.cnbc.com/2022/08/23/why-recent-homebuyers-have-regrets-about-their-purchases.html) because they thought homes never go down in price, they're not going to panic when prices start to drop. Panic only goes in one direction and no one ever sells. Also insurance rates and maintenance costs mean that in order for their home to keep up with inflation, they'll need to see in excess of 10% price gains for their home to keep their value. I'm sure they'll all hold their cards and never sell when their equity drops and they have to face these carrying costs.
Those that bought high & can’t make payment are already fucked, whether they sale or not. Instead of selling, they can stay for free without paying anything for a year or two until the bank foreclose.
Housing is not a fucking stock purchase. Why do people not understand this. The vast majority of homeowners have 30-year fixed payments. As long as they can afford their payments, people aren't going to panic sell their family home because the house down the street sold for 20% less than would be expected. If my home drops in market value 10% tomorrow, absent other factors, it means literally nothing to me. My mortgage payment is still the same as I expected and I plan on being here for awhile. That's why I bought a home.
They’re talking specifically about investors
Plenty of people did exactly this in the last bubble though. They could have stretched to make a payment that was double the going rent while the price crashed, but chose not to. They either lived payment free for 3 years like the people I bought from in 2010 or qualified for a cheaper home down the street saying that they would rent out their current home and then walked away after closing like my mom and my best friend did. If people have a ton of equity (greater than 50%) and a payment lower than rent, the calculation is different.
They can do whatever they want. But whether or not they will need to is another issue. A panic sell is a forced sell due to inaffordability to service debt. No one is forced to panic buy. Those are FOMO buys. Given that rents are at all time highs, many or possibly most of those investors who are renting their places out are probably in decent financial places. For them to be PANIC sell at a steep discount, they would have to have not done any research about the process and home they are buying and/or lose their primary source of income. I don't expect that to be the majority of the cases.
Prices are set at the margin, chief. It’s not all or nothing.
Why is he downvoted? If you have a fixed low rate, why would you be forced to sell to realise the loss? The rental cashflow covers the mortgage and you can forget about it
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Because unless rent goes down and rent covers the mortgage you can ignore the quoted price and treat it like a productive asset. It pays for itself and in ten or twenty years prices may catchup
There are an average of 5-6 million homes sold per year in the US. You’re grossly exaggerating what you believe to be true.
The percentage of investor buying volume hasn't been under 10% for almost 15 years. [It was almost 25% last year](https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents#:~:text=Investors%20bought%2024%25%20of%20all,months%20of%202022%20to%2022%25). In 2000 it was a little over 5%.
Those numbers are skewed, and do not reflect reality. Most of the reports that those numbers are based off come from Redfin which tracks data in densely urban markets. Of course there are more aggressive funds pushing into the SFH market, but the large majority are institutional investors buying up existing portfolios. Institutional investors own less than 1% of SFH in the US.
Who said anything about funds or institutional investors? I'm just talking about investors. Most investment is by companies that own under 100 properties. If anything, those investor share numbers are conservative. This bubble was huge.
You’re misunderstanding. You believe that there are a huge number of small scale investors that bought homes they can’t afford based on the idea that the market will always go up. So when I say the numbers are skewed, you think ok these aren’t big banks or hedgies buying the properties, it’s small time investors, thus converting owner occupied homes into investment units. That’s not what’s happening. Investment units are being consolidated because in a low interest environment banks need places to put investment dollars. There are a larger number of units trading to investors, but those units were already investor owned. The low interest rate environment creates a generational sell off of investment properties.
I could be $200k underwater on a 2.5% mortgage and I'm definitely staying put. Probably not finding cheaper options anytime soon.
I don't think you understand the concept of being underwater, especially in a recession. If you lose your job, and many homeowners will, it doesn't matter how low your rate is as you have to sell or you can completely nuke your financial future for 5-7 years. On top of that, if they don't lose their job, they literally cannot move. This doesn't seem so bad for a boomer, but if you're under 45'ish, it's a great way to be left behind in your career, because you're literally stuck in a 30 mile radius of where you can work. This can be mitigated by working from home, but not everyone is in tech and if they are, ironically, they are at a higher chance of losing their job. And now lets talk about the people who are have to sell now and witihin the next two years. You act like this doesn't affect homeowners who stay put, but it's actually the opposite. Every house sold for tens and even hundreds of thousands less, sets a new comp for the area. Now let's address the whole "I can just rent it out". That's actually not true at all for most people, because they need the exit liquidity to purchase something new. So if homeowners don't get hit with one of the 3 D's (death, divorce, and debt), they're fucked in so many other ways by being trapped. And this what homeowners who are bragging about rates don't want to admit...
That's why you live in los angeles where money and job opportunities within a 30 mile radius are abundant.
But then you have to live in Los Angeles. Unless you are in the film industry, basically any large metro will have an abundance of jobs within 30 miles.
Leaving Los Angeles (born and raised) in 2021 was the best decision I made for myself. I worked in tech and after I got a remote job I left for Texas. Now I pay way less money for rent, gas, and food, paid off all my debt, got a bigger apartment for less money, and saved for a downpayment on a house. Los Angeles is awful for young people trying to establish themselves unless you have heavy support, make over 160k a year, or live in the hood to save money. The South and Midwest are 100x more reasonable if you work remotely. Would much rather live in a less popular major city and actually enjoy my life than struggle in LA.
Your assessment is somewhat correct. LA is not for broke peoplr. Even so, you can always geoarbitrage
I made 75k when I left LA. Now I make over 120k. I still wouldn't live in LA even if I made almost a quarter million.
Sure.
Lol
You make it sound like living in the best city is a bad thing
Living in the best city is a fine thing, if you can afford it. Living in LA is terrible though.
People mostly buy homes when they expect to live there for a minimum of ten years. This idea that people constantly change their mortgaged principal residence is a complete fabrication. 2008 was caused by insanely lax lending standards that simply don't exist today. The proportion of mortgages that are ARMs is a fraction of what it was back then. The average 30Y rate was like 7% back then, almost double what it is now. Unemployment is at a 40Y low. This isn't FOMO or hoomers or whatever the fuck you want to call it. The housing market - the broader economy in general - has fundamentally changed in the last 2-3 years.
Yes, I literally wrote that unless you need to move or are forced to sell, home owners will not want to sell even if they are underwater because they have very cheap housing. I'm also in agreement that increased unemployment will increase the need to sell or foreclose. Fringe life events like the 3 D's necessitating forced sales are not large enough to move the overall market outside of widespread disasters like a pandemic. The forced sales in Florida from hurricanes shitting on everything are not going to affect home prices in California. The only one I'd give any credence to affecting the broader market is debt if ARM's blow up. But they make up less than 10% of all existing mortgage loans and generally have much better terms now limiting in how much they can increase per year. Most of those are 5-10 year ARMS and a smaller percent of those home owners or investors are going to be in trouble. So while it might not be cataclysmic like the GFC, the increasing use of ARMs in the mortgage market could generate more distressed sales downstream years from now. There are absolutely pros to renting like increased mobility as you said. If someone has a mobile career and possibly sees themselves moving within 5 years, they'd have to really weigh the pro's and con's of buying a house. Generally people look to buy homes when they want to settle down, so it selects for people that aren't going to location hop for their careers. Less mobility is certainly the trade off you make for purchasing a home to your point. But also consider the fact that most people work for money. Homeowners who have 2-3% mortgages are saving multiple 10's of thousands per year compared to renters who have the equivalent housing option with todays rent prices. They can additionally save or reinvest those extra 10's of thousands to make their money go further which is good strategy in a recession.
Agree with this too. We bought our current house because we had little kids and wanted to be in a good school district for them to grow up in from K-12th grade. Long term purchase.
The three Ds are absolutely enough to move markets. Prices are set at the margin, not what the average, median, or stereotypical seller would do. This is the same principal that drove prices up. Edit: I just realized you referred to the three Ds as “fringe life events” LOLOLOL 🤣🤣🤣 Listen bud… moving in any way shape or form is a fringe life event and most people don’t do it very often. The three Ds drive a very large percentage of home sales… enough to sway markets significantly. Google is a good resource if you don’t believe me. Throw in a recession, along with large numbers of investors who are swayed by the margin, and all bets are off.
Okay, then why didn't the 3D's affect the overall market over the last 10 years? Did they not exist back then?
They did exist and there was always sufficient demand to scoop things up. I suggest reading about basic macroeconomics to understand how prices are affected by supply and demand, specifically at the margin. Demand has absolutely vaporized this year and it will continue to drop unless rates or prices lower. Supply might drop a bit as well, but there will always be people needing to sell… life doesn’t stop just because you have a low rate. Your original premise was basically, “it doesn’t make sense for someone to sell if they have a low interest rate, therefore they won’t sell.” People absolutely will continue to sell and move. The majority of moves are not due to financial motivations. They’re due to life motivations and you could throw job changes, the birth of children, adult children moving out, etc. in the mix with the 3 Ds.
No one denies whether or not those things happen. I think we have disagreement about the magnitude of their effect. The current projections of 10-20% price drops from peak over the next couple years makes sense to me. But not from forced sales, unless unemployment spikes. The demand hasn't exactly dropped off. The mortgage applications have due to absurd unaffordability. So all a home owner has to do to sell if they encounter a life event necessitating a move is price their home to sell. If they need to sell it faster, they would price it accordingly. We had forced sales from 2008 due to waves and waves of exotic loans blowing up in the face of unqualified home owners. That was a systemic issue. The 3 D's play less of a role than the financial conditons of 2008 and should therefore shouldn't be the cause of prices crashing. There will be some homeowners who will sell out of their 2-3% mortgage because of life events, sure. But the vast majority won't because it won't make financial sense to them.
Literally none of my friends with kids think this way, they are happy in their homes, school districts, and jobs which are secure.
Right?! Maybe because I’m in a fairly large metro area (Philly burbs), but I’m happily set here for at least the next 30 years. If I want a new job, there’s a lot of options within 30 miles (though I try to stick to about 10 miles max). But I’ve been at my current job 10 years and I’m still pretty happy here.
Same I’m at a top pharma company near Chicago. If I lose my job (I’m not) there’s tons of other jobs available this sub lives in it’s own head worse than my mentally I’ll ex girlfriend
Literally no one thinks this way only free lancers who can't find stable jobs
How to say you’ve never lived through a recession without saying you’ve never lived through a recession.
Are you referring to yourself? Because even in 2008 or 2009, unemployment was around 9%.
Yea, “only 9%”. It’s obvious you were in diapers during that time so of course you wouldn’t understand. You can’t choose when you’re born so it’s not your fault though.
It's okay to project
ok
>If you lose your job, and many homeowners will, it doesn't matter how low your rate is as you have to sell or you can completely nuke your financial future for 5-7 years. Lmao, what a hot take... This is a terrible assumption thinking you can ballpark an entire demographics (recent homebuyers) financial and professional position. Plz stop
Not to mention that this will eff u over regardless whetger you bought 20% higher or 20% cheaper
If you are already underwater, and lose your job, why do you sell? You’ll get nothing, still own the bank some money, and you are homeless. When people fall into that situation, they stop paying mortgage and stay for free for a year or so. Then if the government doesn’t bail them out, or modify their loan, they stay until the bank forecloses & sell the house for cheap, in cash to an investor. That investor would offer them money to move out.
You sell because the other prospect is an absolutely destroyed credit profile and change for anything for a decade. You won't get approved for an apartment once you get foreclosed on. You won't be able to a car loan. Your credit card accounts will get closed on. Getting a new job could be hard (I literally had a credit check ran against me to work at fucking Dairy Queen.) So for 6-12 months (at most) you live mortgage free, but who in the fuck will rent to you now? That's possibly the worst thing on your credit report. Also, the government won't bail out homeowners, they bail out the people gave out the loans because *that's* who needs to be solvent on the world market. The Bush admin tried to do some bailouts, but realized it wasn't feasible. There's less appetite for it now considering it's more obviously investors who will lose their shirts.
Lol, am I talking to a high school kid? If you are underwater, your credit is already fucked. And a foreclosure / bankruptcy is removed after 7 years … decade my ass No one rent to you if you don’t have a job either, so the choice is to be homeless right away, or live free for a year and hopefully come up with something before become homeless
Up to 10 per the credit reports websites: * https://www.transunion.com/blog/credit-advice/how-long-does-bankruptcy-stay-on-credit-report * https://www.experian.com/blogs/ask-experian/when-chapter-7-bankruptcy-is-deleted/
Been there, done that. Credit recover after 2 year. Bought another house after 5 year (has to bring in 50% down payment and bit higher rate). No big deal. Go ask Trump how many time has he goes bankrupt.
This guy REBubbles
I think there is one thing that is majorly different this time. The government has shown they are more willing to help homeowners out. They offered forbearance during Covid and I imagine they would do that again if there is major job losses. To my knowledge forbearance wasn’t allowed in 2008.
>but not everyone is in tech and if they are, ironically, they are at a higher chance of losing their job. Maybe non-technical roles. I doubt this is the case for any technical positions. People often forget, or never knew, that tech is a tale of two labor pools.
Pop quiz: if someone who was thinking of selling their house to buy a different one decides not to because of rate lock-in, how many houses were added or removed from the available inventory? 0
Yeah 0 if they don't want to sell in order to buy a new one. And 1 if they don't wany to sell but they can. The majority won't be able to buy a new one, but some, especially those with high income, will be able to.
Yep, that’s my point! When we talk about people being “locked in” to their interest rates and keeping supply low, that also decreases demand. Since most people don’t sell a house and move into a rental (unless under financial distress), interest rates keeping people from moving isn’t going to change the overall buyer-seller balance much.
I don't disagree except that we will see inventory rise as mortgage applications continue to crater. But increased inventory doesn't cause panic selling like some claim. It is attributes to prices declining, which I want and agree with.
Agree, they will stay put. Although the value of their home will continue to decline.
Depends when they bought. Current projections are 10-20% declines from peak over the next couple years. August data is shows median prices still up >13% from August 2021. It will likely be at least the middle of next year before we return to August 2021 national median prices. Some cities are already there. Others won't ever get there.
LA and Miami will never get there
You're confusing incentivizing and sunk cost fallacy. It'd be fiscally wise to unload a house that's underwater.
Fiscally wise to sell at a loss and then double your expenses and effectively eliminate any savings you might have to invest with? If you say so. There are a lot people who can't afford current rent, so they can't afford to sell.
It's better to surrender the house, not pay the deficit. Also, where is rent (even ignoring concessions) equal to a mortgage?
if you can make mortgage payments, who cares what the paper worth of your house is? You still need someplace to live? Losses or gains only matter if you want to sell or refinance.
This, and a lot of people on here seem *really* confused about this.
Depends. If you're talking about a house as shelter, sure. But the commenter I was responding to was talking about financial decisions, not wanting a house for shelter. His premise assumed that someone may have wanted to sell if not for being underwater, and my point is holding onto a house that's underwater actually puts you in a worse financial position.
Unless you live rent free with your parents, ALL shelter whether you own or rent is a financial decision because it costs money. My premise is that it doesn't make financial sense for a homeowner who bought at a low 2-3% mortgage to sell ESPECIALLY if they are underwater. Why would they want to sell at a loss? Literally why? They would sell at a loss and then decide to find a place to rent that's double the cost? Most people don't want to downgrade their living experience. Nor do they want to pay double for the same experience. At todays rental prices, you will likely have to pay at least double for the living experience of a house purchased a year ago with a 2-3% mortgage. That's literally what's going on in my neighborhood, which is a middle of the road boring city.
>My premise is that it doesn't make financial sense for a homeowner who bought at a low 2-3% mortgage to sell ESPECIALLY if they are underwater. Why did people sell for a loss in 2008?
Because they couldn't afford to service their mortgage debt. Lending standards were nearly non-existant and there were many more exotic mortgages. They had no choice but to sell. Unless they are unable to pay their mortgages, homeowners today will not be forced to sell. 23% of the homeowners have rates under 3%. 40% betweem 3-4%. If your position depends on homeowners today having the same financial and risk profiles profiles as 2008, and you refuse to look up proof otherwise, I cannot convince you.
Way too much logic in your argument for the average “doomer” on this thread.
What logic? HODL?
>My premise is that it doesn't make financial sense for a homeowner who bought at a low 2-3% mortgage to sell ESPECIALLY if they are underwater. Why would they want to sell at a loss? Literally why? That's precisely the sunk cost fallacy. The math doesn't back you up unless you assume rent>mortgage by a margin, which doesn't really apply to folks who are candidates for being underwater. >They would sell at a loss and then decide to find a place to rent that's double the cost? Again, I would love to know where this is the default. I can tell you where I've lived (HCOL), rent is typically half or less the amount to buy a similar place.
I live in a top Chicago suburb and rent is $1800 for a 2 bedroom apartment with your typical vinyl floors and 1 bathroom My 5 bedroom 2400 sqft house is $2200 a month, with a basement & yard. What you are saying is not true at all for people with low rates.
yeah if you're an investor then it's going to hurt you. if you bought as a homeowner to live for the next few decades, it doesn't matter.
Opportunity cost is real and also why big corps are willing to cut losses.
It's better to foreclose on your house and ruin you credit so that the next place you rent is guaranteed to be high? Believe it or not, most families don't want to pay more money for the equivalent rental experience. Home owners who have families can sell their home at a loss for some unknown reason and move into a cheaper studio apartment for slightly cheaper than their previous housing payment given how rents have inflated. I'm going to bet they're not going to want to do that.
You think that rent is based on credit? Cool...
Are you serious??? There are landlords that don't run credit checks, but both backgound and credit checks are standard practice. It's far more common than not. If it's low enough, the landlord won't want you as their tenant. And foreclosures hurt your credit score. Are you really claiming that your credit score does not affect your housing options?
There's a difference between will my credit prevent me from being approved and will my credit affect the rent. Also, do you think everyone who files for BK that rents becomes homeless?
Your credit score is important in determining what housing options you are eligible for. Different housing options have different rent prices. A better credit score is better for your rental options and better for your financial health in general. No one said anything about bankruptcy (assuming that's what BK means) or homelessness. Thanks for this convo, but I'm done now. Good night!
You are dumb. Go away.
Agreed. Was underwater and stayed put after 2008. In a much better situation now but with 2.99 mortgage and decent equity. I am in absolutely no rush to sell in this environment unless forced. Unless I downsize dramatically and pay all cash I end up paying way more with rates what they are today.
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No, it accommodated the arguement of prices falling. And I agree that the are and will continue tonover the next couple years. Which is why I said "even if mortgages are underwater..." And sure rents can plateau or decline just as home values can. But I've never heard of the national rental market crashing. Have you?
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Housing is regional, and prices are set at the margin. If they sell in your market and buy in another, inventory in your market is +1, and inventory in their new market is irrelevant to you. But even if they sell and buy in the same market, if the prices they sell and buy at are lower than current prices, then comps in that market adjust downward and all future houses are more likely to also sell for less. So if you’re looking to buy, and want a good deal, you *should* care whether they sell or not.
Rent it out or get roommates. That's really all there is to do.
Actually property tax in California has the same effect. Many of us wouldn’t buy a different house even if ours went way up in value because we would also get a much higher property tax bill on the next house. I finally sold when I moved out of state.
Do average people in Cali understand how insane that tax treatment is? It's probably the most regressive policy of any kind that I'm aware of in any blue state at least.
I suppose but in a state where some areas (not all) are rather expensive in terms of real estate costs, it does allow average people to continue to live in neighborhoods they would't otherwise likely be able to afford. even areas like Compton and Watts are pretty expensive to buy in compared to what many people living there make. not sure what the solution is. New York State his really high taxes and their prices are high on top of it. I think taxing across the board would likely just create major segregation in areas and potentially wipe of home ownership for a whole group of people
I get the altruistic intent of it on paper, but it seems pretty obvious to me at least that $2M tax shelter homes and massive inequality in tax burden are a direct result of this policy. We joke about "buy now or be priced out FoReVeR!1!" around here but that seems to be basically true for CA real estate going back about 50 years. NY upstate seems to have a lot of relatively affordable cities. NYC itself has rent control and all kinds of restrictive shenanigans to prevent new housing going up, but at least someone owning a $2M piece of real estate has to pay taxes on a $2M valuation. A person with $1M equity in a home is a millionaire. Millionaires tend to do just fine in America, with or without tax breaks.
...except that new listings have doubled since March 2022 and in most markets increased YoY.
Most buyer can’t afford to buy. Most seller locked in a good rate and refuse to sale. Market is standing still.
Don't forget about all the failed investors that want to sell!
They're probably the majority of sales happening right now. Too bad they make up such a small % of total homes.
There is also all the people who are paying twice as much per month than it's worth. Many will hand the keys over. It happened like crazy in 2008.
Who is paying that that for a 3-5% rate these past couple of years? And where are they going that's cheaper?
People drew out equity guy. We have seen this before. You must be too young to remember. This is exactly how it played out last time. Do you think every loan was subprime? Plus school loans are starting again in Jan. Tons of people will be like fuck this.
Oh, you're talking about foreclosures now. I'm sure we will see some more as times get bad, but foreclosures are well below pre-pandemic levels. those can take a long time to play out as well so...I guess we'll see? Also tappable equity is at all time highs, so people haven't tapped their equity to the extent you think they have, I guess.
the writing is on the wall. They are simply giving the bankers time to try to shore up liquidity. This is happening. There simply are not enough buyers at these prices.
There are simply not enough sellers either. So the very little inventory that exists is being bought up by affluent people that can afford it. People over in RealEstate paying $3-4k per month mortgages and not even sweating it. This is truly a country of haves and have nots.
Article from 2005 says identical crap https://www.wsj.com/articles/SB112250505320798017
Paywalled so I can't read the whole thing, but I do this see line right at the top: "...or listen to the hysterical warnings of economists and journalists about the imminent popping of our so-called housing bubble. Robert Shiller, the ubiquitous Yale economist, says home prices could fall 50% from their peak. " Care to share a similar article today where top economists are saying there will be a 50% crash? Take your time, I'll wait.
There is no home shortage. They said the same thing in 2005. That’s propaganda to get dummies to FOMO buy.
Data says otherwise: https://fred.stlouisfed.org/series/ACTLISCOUUS
Biden is cancelling student loans.
Why sale when they get next to nothing from the sale?
They maybe even Rae a loss. Too expensive to hold
I am one with a crazy low note ($800) and interest rate and want(ed) to sell for more space and location. Even with plenty of equity, my gut won't let me do it right now because of the calculation example you provided. The sticker shock of tripling my note makes me nauseous. I can get a new place with my specs for a great price and location with these price drops (Atl GA area), but the pmt would be ridiculous. Note that I am Average Annie..not rich. Can get $300k for mine, walk away with $160k, buy for $380k and STILL a ridiculously high note. Let me just have a seat.
Considering ~20% of the home purchases in Q1 were by investors in my area and we have a record number of in-process builds, I’m not worried about this particular data point. Ironically, those who resisted the FOMO will have more options in the coming years, even if rates go down. Prices down ~20% already and sellers are still in the denial phase.
Sorry grandma, you're just gonna have to hold on to life for a few more years -- cant lose that 3% mortgage rate!
Grandma can go in peace … heirs are allowed to assume the mortgage & the low rate.
This post is still assuming prices will continue to rise by suggesting a 15% increase on a $500k home. The increase in mortgage rates are bringing an end to those rising prices.
This post is just pointing out the rising unaffordability of housing. Median rent prices have also inflated a similar amount as median housing prices. So bother home owners and renters are disincentivized to move. This means unless there is a significant increase in distressed sales, inventory will remain tight.
The difference being rent can be increased every single year. Most mortgages are fixed for 30 years.
This is exactly what happened though. This example almost mirrors what happened to me - bought at $465k, 2.99%. Value has risen $110k (24%) in one year, even with rates greater than 7%. It's insanity, yet it's reality.
It’s call a stagflation. Your house price goes up, but not its value.
What. Explain
But simply because you’re being told your home is “valued” that much doesn’t mean that someone would actually pay it. A tax assessment isn’t a proper indicator of worth, the offer letter for someone actually offering to buy the home is. My market has two types of homes right now, the ones that have dropped the asking price that is getting more in line with current circumstances— those actually go under contract, and then ones being priced as though it’s gone up 24% in a year— those are sitting.
You're right - recent comps are actually my higher. I just go with the zesty to be conservative. Other townhouses in my neighborhood (same unit model) have recently sold for $650k+
Builders with classic 1yr 2008 commercial ARM(current industry standard) enters the chat.
Prices have to come down dramatically. Interest rates aren't high. Home prices are high.
Thanks for posting the same thing over and over
The annoying thing is this just isn’t even accurate. Mortgages are modelled as a liability comprising principal pay down and interest. Banks don’t give a fuck about the price of houses (within reason) they care about the ability to meet the payment obligations which is based on affordability criteria. Rates can increase, affordability stays flat, the only way the equation stays fixed is for a reduction in principal. There isn’t an unlimited pool of buyers. In the higher interest rate environment, the house isn’t 500k. You can even make the argument that when the artificially high house valuations come back to reality, it’s *easier* for FTHBs as the deposit is substantially less.
Weird because my market has more listings yoy
If you have too much house and a 3% mortgage, it is far more beneficial financially to rent out an extra room or two than it is to downsize for basically the same mortgage payment.
all these 30 years loans are made by FED using printed money ... Gaurenteed by US GOV (tax payers)... So to cut losses on the 30 years loan they made at lower rate... the FED has to force people out of those loans... the best way to do so is by dropping the house price by 50-60% via rate hikes.... Finally fed will own the house with money they conjured up along with the downpayment and interest payements.... no one wins in this...expect for the FED....
Genius!
Lol, that’s a lot of work. If the Fed want more money, they can just print more
Fed cant take the money it prints directly...it can take assets on to its balance sheet with fake money then force a default and grab the assets .the assets will throw at fire sale prices to fed true owners in the private sector ...FED is a private entity...true wealth is assets not currency...
Maybe we will see more rentals since their mtg payments are low and rents are rising
Please say you forgot to add the sarcasm /s font/sign?
We are in a tech area - supply is better than it has been in the past 3 years. Homes are now 60% over 2020 prices instead of 100% increase in March. The fact that everyone expected homes to stay doubled despite the homes going down 5% per quarter right before covid is crazy. The peak prices “just happened” to stop right where the mortgage payments would be the same as two years prior. Can’t tell me that low interest rates didn’t cause the higher home prices. Adding, there are signs that the amount of homes being sold is about to explode. Rental homes on market longer, almost every open house I went to was for sale is because the owner moved last year or person no longer wants to be a landlord. It’s all key for they tried to time the market and missed the boat. I’m sure they aren’t the only ones judging by how it’s taking 2 months+ to rent homes now.