How's your housing market? (2 Viewers)

[Chadstroma]

I get you want housing values to fall. I am asking what policy you want to see that would make this happen and then how do you see that playing out?

My point is that I don't want to see any government policies that help stoke demand or inflate housing prices. Prices are currently on a downward trajectory because prices are too high relative to incomes. I want to see them continue to fall to be more in line with incomes. I don't want them to be made "more affordable" artificially by lowering interest rates (stokes demand and causes rise in prices) or relaxing lending standards (we saw how this plays itself out in 2008) which is what I'm seeing voiced as solutions to the issue.

How do I see this playing out? Lower housing prices means higher affordability at existing interest rates. Investors, who have helped exacerbate price appreciation since Covid, will bail on their investments further increasing supply.

Will this mean pain for those of us who have housing assets? Yes, but we're in a better position to weather the storm.

The 2010's home construction went off the cliff. We built less homes in that decade than any other decade until you got back to the 1930's. The construction pace so far this decade is on the slower side as well with comparable to the 1960's. Population growth has slowed a bit but still is much higher than what we saw in 1930's with 9 million versus almost 23 million.

Higher interest rates will not solve anything. Higher interest rates are not just mortgage rates but mean higher credit card and vehicle loans. I work with a lot of first time homebuyers. I have done a lot of work to try to get FTHB's into homes. I even had a FB group with over 10K in it giving free guidance on credit score improvement with a focus on helping FTHB's (I saw had... I still have it, but FB algorithm changed for some reason and basically killed the group so I don't put much time into now). The two biggest issues I see for these FTHB's? Credit debt and car loans. Established homeowners are not the ones that generally are hurting on those as they have equity that they can tap into and bail out on it. Renters are screwed. Their rent is a sunk cost and they struggle to make progress. Then, once they do, they are still cash strapped because they have put all their money on paying down/off the credit card debt and not saving so they have very little resources to buy a home. Further, higher interest rates come due to one reason: high inflation. Inflation hits the poor and renters much harder than it does wealthier people and home owners. On top of that, interest rates being high fights inflation in one way: killing the economy, When the economy goes south, you get people without jobs and making less money which makes it harder for them to buy homes and which also tends to lower the construction of new build homes.

With the lack of housing, rent comps will continue to remain strong even with property values declining. They will be even more incentivized to hold their property and rent versus sell at a lower value. And in fact, lower property values will further incentivize investors to buy more property as it would be a temporary buying opportunity so that they can increase their portfolio.

The only thing that will actually help is that we build many more homes. That is something Trump pressured the home builders to do recently (last week I believe). High interest rates discourages more new builds while lower interest rates are incentive for builders to build more.

We don't have a supply problem. We have an affordability problem. There are enough houses on the market to meet the demand, at least in the areas I'm referring to where affordability waved goodbye in late 2020. However, those looking to sell are still clinging to 2022/23 prices. The market is stuck because the remaining demand is too stretched to afford the current ask. Sellers need to reduce prices to meet what buyers can afford.

What's a better situation for a potential buyer: Use low interest debt to buy a $500,000 home only to see its value fall to $400,000 when a recession does occur, or wait for the market to correct and buy the same house for $400,000 at a future time?

What do you think drives valuations? We are currently, as of now, still below what is considered a 'balanced' market in inventory.

 

[Manster]

I pay attention to 3 areas….Reno, Bend OR, and Salem OR

All 3 are expensive. I’ve been seeing more and more markdowns in all 3 recently.

 

[Captain Cranks]

I get you want housing values to fall. I am asking what policy you want to see that would make this happen and then how do you see that playing out?

My point is that I don't want to see any government policies that help stoke demand or inflate housing prices. Prices are currently on a downward trajectory because prices are too high relative to incomes. I want to see them continue to fall to be more in line with incomes. I don't want them to be made "more affordable" artificially by lowering interest rates (stokes demand and causes rise in prices) or relaxing lending standards (we saw how this plays itself out in 2008) which is what I'm seeing voiced as solutions to the issue.

How do I see this playing out? Lower housing prices means higher affordability at existing interest rates. Investors, who have helped exacerbate price appreciation since Covid, will bail on their investments further increasing supply.

Will this mean pain for those of us who have housing assets? Yes, but we're in a better position to weather the storm.

The 2010's home construction went off the cliff. We built less homes in that decade than any other decade until you got back to the 1930's. The construction pace so far this decade is on the slower side as well with comparable to the 1960's. Population growth has slowed a bit but still is much higher than what we saw in 1930's with 9 million versus almost 23 million.

Higher interest rates will not solve anything. Higher interest rates are not just mortgage rates but mean higher credit card and vehicle loans. I work with a lot of first time homebuyers. I have done a lot of work to try to get FTHB's into homes. I even had a FB group with over 10K in it giving free guidance on credit score improvement with a focus on helping FTHB's (I saw had... I still have it, but FB algorithm changed for some reason and basically killed the group so I don't put much time into now). The two biggest issues I see for these FTHB's? Credit debt and car loans. Established homeowners are not the ones that generally are hurting on those as they have equity that they can tap into and bail out on it. Renters are screwed. Their rent is a sunk cost and they struggle to make progress. Then, once they do, they are still cash strapped because they have put all their money on paying down/off the credit card debt and not saving so they have very little resources to buy a home. Further, higher interest rates come due to one reason: high inflation. Inflation hits the poor and renters much harder than it does wealthier people and home owners. On top of that, interest rates being high fights inflation in one way: killing the economy, When the economy goes south, you get people without jobs and making less money which makes it harder for them to buy homes and which also tends to lower the construction of new build homes.

With the lack of housing, rent comps will continue to remain strong even with property values declining. They will be even more incentivized to hold their property and rent versus sell at a lower value. And in fact, lower property values will further incentivize investors to buy more property as it would be a temporary buying opportunity so that they can increase their portfolio.

The only thing that will actually help is that we build many more homes. That is something Trump pressured the home builders to do recently (last week I believe). High interest rates discourages more new builds while lower interest rates are incentive for builders to build more.

We don't have a supply problem. We have an affordability problem. There are enough houses on the market to meet the demand, at least in the areas I'm referring to where affordability waved goodbye in late 2020. However, those looking to sell are still clinging to 2022/23 prices. The market is stuck because the remaining demand is too stretched to afford the current ask. Sellers need to reduce prices to meet what buyers can afford.

What's a better situation for a potential buyer: Use low interest debt to buy a $500,000 home only to see its value fall to $400,000 when a recession does occur, or wait for the market to correct and buy the same house for $400,000 at a future time?

What do you think drives valuations? We are currently, as of now, still below what is considered a 'balanced' market in inventory.

Valuations of what? We're currently at 4.6 months inventory which is in the balanced inventory band of 4-6 months.

Let's rewind the clock to 2021 when a 30 year fixed was sub 3%. What happened was businesses and individuals with disposable income bought up a bunch of investment property, driving up prices beyond median income values. Now we have an oversupply of AirBnB investments which need to clear the system. The big money investors like Blackstone are already dumping. Ma and Pa need to follow suit (and they're starting to).

 

[Captain Cranks]

Anecdote as I've been looking for a cabin in NW Georgia the last few months in the $400-600k range. When I look through the listings I like to torment myself by looking at what they last sold for. Most that were sold in 2019 and 2020 were literally half the price of what they're currently listed for. What caused 100% price appreciation since then? Excess investor demand buoyed by cheap money.

 

[BassNBrew]

Anecdote as I've been looking for a cabin in NW Georgia the last few months in the $400-600k range. When I look through the listings I like to torment myself by looking at what they last sold for. Most that were sold in 2019 and 2020 were literally half the price of what they're currently listed for. What caused 100% price appreciation since then? Excess investor demand buoyed by cheap money.

Dreams of working for Jamie Dimon in your underwear from a beautiful spot.

 

[Osaurus]

I pay attention to 3 areas….Reno, Bend OR, and Salem OR

All 3 are expensive. I’ve been seeing more and more markdowns in all 3 recently.

Was there a few weeks ago and I can confirm prices have dropped a little, but nothing substantial imo and seems like the overall inventory is less than normal. I did see new construction on the south side where I never have seen it before.

 

[TwinTurbo]

I get you want housing values to fall. I am asking what policy you want to see that would make this happen and then how do you see that playing out?

My point is that I don't want to see any government policies that help stoke demand or inflate housing prices. Prices are currently on a downward trajectory because prices are too high relative to incomes. I want to see them continue to fall to be more in line with incomes. I don't want them to be made "more affordable" artificially by lowering interest rates (stokes demand and causes rise in prices) or relaxing lending standards (we saw how this plays itself out in 2008) which is what I'm seeing voiced as solutions to the issue.

How do I see this playing out? Lower housing prices means higher affordability at existing interest rates. Investors, who have helped exacerbate price appreciation since Covid, will bail on their investments further increasing supply.

Will this mean pain for those of us who have housing assets? Yes, but we're in a better position to weather the storm.

The 2010's home construction went off the cliff. We built less homes in that decade than any other decade until you got back to the 1930's. The construction pace so far this decade is on the slower side as well with comparable to the 1960's. Population growth has slowed a bit but still is much higher than what we saw in 1930's with 9 million versus almost 23 million.

Higher interest rates will not solve anything. Higher interest rates are not just mortgage rates but mean higher credit card and vehicle loans. I work with a lot of first time homebuyers. I have done a lot of work to try to get FTHB's into homes. I even had a FB group with over 10K in it giving free guidance on credit score improvement with a focus on helping FTHB's (I saw had... I still have it, but FB algorithm changed for some reason and basically killed the group so I don't put much time into now). The two biggest issues I see for these FTHB's? Credit debt and car loans. Established homeowners are not the ones that generally are hurting on those as they have equity that they can tap into and bail out on it. Renters are screwed. Their rent is a sunk cost and they struggle to make progress. Then, once they do, they are still cash strapped because they have put all their money on paying down/off the credit card debt and not saving so they have very little resources to buy a home. Further, higher interest rates come due to one reason: high inflation. Inflation hits the poor and renters much harder than it does wealthier people and home owners. On top of that, interest rates being high fights inflation in one way: killing the economy, When the economy goes south, you get people without jobs and making less money which makes it harder for them to buy homes and which also tends to lower the construction of new build homes.

With the lack of housing, rent comps will continue to remain strong even with property values declining. They will be even more incentivized to hold their property and rent versus sell at a lower value. And in fact, lower property values will further incentivize investors to buy more property as it would be a temporary buying opportunity so that they can increase their portfolio.

The only thing that will actually help is that we build many more homes. That is something Trump pressured the home builders to do recently (last week I believe). High interest rates discourages more new builds while lower interest rates are incentive for builders to build more.

We don't have a supply problem. We have an affordability problem. There are enough houses on the market to meet the demand, at least in the areas I'm referring to where affordability waved goodbye in late 2020. However, those looking to sell are still clinging to 2022/23 prices. The market is stuck because the remaining demand is too stretched to afford the current ask. Sellers need to reduce prices to meet what buyers can afford.

What's a better situation for a potential buyer: Use low interest debt to buy a $500,000 home only to see its value fall to $400,000 when a recession does occur, or wait for the market to correct and buy the same house for $400,000 at a future time?

Yeah housing prices reflect the post pandemic rampant inflation but wages haven't caught up and likely never will. And unfortunately housing prices don't have to "correct". Buyers are going to have to move downstream. There is almost no real price appreciation with many of these homes, its almost entirely due to the dollar being worth 20-30% less since 2020. It was like 2 decades worth of inflation compressed into 2 years