Hahaha very funny... even funnier when my property appreciated >500k even with the recent down trend and will continue to climb per year, inflation-proof moolah bb

Cliffs:

A few things:

- Supply is going to remain tight. Nobody locked into a 3% loan is selling anytime soon. There are no adjustables out there to create major supply via foreclosure. Those artificially low rates actually mean people locked in affordable payments on those insane purchase prices.

- Massive inflation is a real factor. Housing is an asset. If the dollar is worth half as much, that $300k house from 2018 really is worth $600k now... just based on the real value of money having changed.

- The FOMA buying is obviously over. In places like Austin, that alone was adding like 10% to sale prices. That part isn't coming back unless rates drop

- Basically, I see a stalemate for the next couple years unless some material issue changes. If rates get slashed or unemployment of white collar workers skyrockets, things could change. I don't see that happening.

[QUOTE=UnawareJonSnow post_id=1677822353]Hahaha very funny... even funnier when my property appreciated >500k even with the recent down trend and will continue to climb per year, inflation-proof moolah bb

[img]https://media.makeameme.org/created/feels-good-man-5c1f64.jpg[/QUOTE]Let’s see this property that appreciated >$500k

Low interest rates, low supply and high demand caused prices to skyrocket

Doubling the interest rate priced a lot of people out of the market

Prices fell 10% or so

Demand is still high, supply is still low, but interest rates have still kept people out of the market

Until they lower the interest rates the market is going to stay stagnant, but a crash doesn’t look likely

What I saw where I live, rural rocky mountains. Live and let live mentality, we had tons of people move here from California during the COVID bs. And they were buying at above market price without even looking at houses. Makes sense though, houses here are probably 40-50% what they would be in orange country. I even dated a chick for a while who moved here during lockdowns from OC. But in our local housing market, that drove up prices. Right as COVID was beginning a lot of people bought, economy was good and interest was low. That's what led to me buying, thankfully before the market went completely insane.

My sister just moved away from Denver. Their house pretty much doubled in price over the last few years, 300k-600k but Denver housing prices have been dropping 1-3% a month. I think a lot of people are moving away from cities in general. And moving away from dark blue areas. Whether they want to admit it or not, cost of living is high, taxes are insane, crime is exploding. That led to them leaving Denver.

Personally I think their was a housing bubble and it's popping. I don't think we have seen the worst of the housing and employment crash. Housing market and unemployment will be the next national emergencies.

Tech industry was low hanging fruit and first to lay off. They were over paid and over staffed. My gf works for a company that sells internet security to large global fortune 50 type companies. Nobody is spending money right now. The worst is yet to come.

Here in So Cal at least i have seen low interest and high demand for Air Bnb rentals has made a bunch of people buy up properties just to put on Airbnb. There are several areas where you can buy a house and if you rent it out like 10 days a month it will pay the mortgage. But these things will be booked nearly everyday, some even have waiting lists.

I have a coworker who owns 3 rentals in Hawaii. If he rents them out fully in the Summer it pays the mortgage for the year.

These people will have fully paid off homes in 30 years or less (some may have gotten 15 or 20 year mortgages )

Some good things you've noticed, OP. But there already is a correction. Housing bubbled up earlier and faster in the western states so the correction hit there first. It's hitting the South now too, where the bubble started a little later. Other than a few cities in the Northeast or Midwest there was no bubble. Housing was already dirt cheap in places like upstate NY or the entire Midwest so an increase of 20% in those places makes them still cheap today compared to the West and South, so what happens with them is more a crapshoot.

Demand was artificial. In both the 2000s housing bubble and the Covid housing bubble investors drove the market up. They've pulled out to half of what they were spending a year ago, so that leaves sellers in an opposite situation compared to '21-22. Quick flips are done. The iBuyers like Zillow (conflict of interest, lol) and Opendoor are at the verge of bankruptcy. Flipping will happen still, but more so in the value markets, like foreclosures and tax sales. A lot of small investors bought up properties for Airbnb/Verbo but that's very oversaturated now. The companies themselves are still rock solid now, but there are so many who got into that business that individual properties are generally not getting booked compared to during Covid. People will try selling those in the next couple of years as short-term rentals go from printing money assets to more of a liability.

Anyway, it eventually does come back to P/E as you mentioned. A lot of Covid era buyers overbought. They're overextended so they're not spending money places they normally would. That by itself causes a slowdown in the economy outside banking over time. Guess what happens then - layoffs, downsizing. A lot of overextended are on fragile ground, which can show itself later through so many ways. The counter to layoffs is once a few centuries stroke of luck. Right now is the peak of Baby Boomers retiring, leaving behind jobs to be filled, which trickles down. That's why we have low unemployment and tons of jobs open everywhere.

Homes for sale are somewhat low now, but so is demand. People know the bubble up is over so they're not as eager to upgrade or even go laterally with headwinds looking down.Half the people who bought in '21-22 would not qualify for the home they live in now with today's mortgage rates.So they're not going anywhere until after this correction is over (not that many people rebuy after just 1-2 years anyway). FOMO is mostly gone. With an average 30 yr fixed heading to 8% in a few months it means new mortgage carriers will slow down even more. With supply it's more mixed. That part will be the bigger variation by location. Builders are still busy right now and that definitely varies a lot by location.

In the end, it's going to take a few years to play out with counter factors at odds with one another. But also in the end it comes back to the P/E. The home bought for $500K with 2.5% interest last year - great. What about the wannabe seller next door with the same house in 2023? Even if the house is valued down at $460K now they aren't going to have the offers from before with 8%, or even 6% mortgage rates if the Fed lowers rates next year. And with investors who were offering over list price during Covid on the sidelines now that $460K is going to sit a lot longer.

If you look at multiple data points (time on market, mortgage applications down, offers cancelled on the rise, etc) it all points to a slog downward. No analysis would be complete without the necessary caveat that it does matter what market we're talking about. As a national average though, it's a few years of down. People's incomes rising more now than normal due to keep up with general inflation being higher won't be enough to counteract the downslope. Incomes rise after inflation. And they'd have to increase by about 10% every 6 months or so for the next couple of years to counteract the unaffordability factors. Great for everyone who achieves those income leaps, but it's not going to be a national trend.

strong post, raped

Brandon’s state of the union, he mumbled something about building materials will have to come from within the US only. I can see how that might drive prices up some more.

-Supply is the lesser factor. Right now is winter so looking at it through that lens isn't great. A lot of would be sellers pulled out last year, hoping the drop would only last a few months like Zillow and Fortune and realtors in their local news stories told them it would. The same people who said a Fed pivot would happen in fall 2022, but is unlikely before 2024 in reality. We'll see what happens with those would be sellers in high season. If they don't try to sell this year, we'll see more houses available for rent instead of for sale.

-People who bought in 2021-22 and actually live in the homes weren't a factor for selling in '23-24 anyway even if they had normal mortgage rates. Few people rebuy every 1-2 years under any market circumstances.

-Inflation causing rises in wages isn't fast enough. Not for the next couple of years anyway. Wages would have to rise 25-30% this year to match the prevailing housing prices of today.

-The Fed has reasserted they're determined to get to 2% inflation, so how they get there is going to break backs along the way.

-Demand is in the schitter. Yes FOMO is gone, so are investors that were buying at 10% over asking price. This is why even though supply is down YoY, demand is so low now that the months of inventory is rising. Inventory was 1.5 to 2 months last year. It's now over 3 months of inventory, back to pre Covid levels. We'll see if that keeps rising or if it levels off.

-People with lots of cash will buy regardless. They don't give a fuk about rates. But that's not a lot of people. The places that are cheap are places people are moving away from. Sure some California coastal sellers will move other places and prop up prices, but that also is only so many people.

-Before any attacks come my way, I'm agnostic. I wasn't planning on selling or rebuying soon anyway; planning on upgrading in a few years whether the market stays flat or drops. Any direction it goes doesn't matter much to me since I'll be buying within the same market.

I usually have the patience to read long posts but F, maybe tomorrow.

Sure. But I think layoffs could become a national trend. If people aren't working they aren't going to be able to pay their mortgage. If there are a lot of foreclosure, that could drive the housing market down. Big companies are operating in recession mode. Seriously, none of the top 500 companies are spending money right now, layoffs are inevitable