OT: Why the real estate market is not in a bubble: Q1 2023 update video added to OP

[koleszar]

Is there a housing shortage? Yes. Are rentals in demand because people can't afford/find a house? Yes. What people are not discussing is if inflation and uncertainty in business continues, there will be layoffs. It's already started in some industries. People will not be able to afford those mortgages and high rents. That is when the housing market crashes. I hope it doesn't happen but that possibility is out there. Be ready. I am.

Yup, just be prepared and take advantage where you can. Decided to put off all housing and farm projects till the end of the year to see where this is headed. A recession does hit(more than likely), I'll get cheaper labor and material prices as guys will be dying for work. Can also supplement work for my guys by now doing work at my house if work becomes that scarce. I used the Pandemic in the same way.

 

[anon_0k9zlfz6lz9oy]

Yup, just be prepared and take advantage where you can. Decided to put off all housing and farm projects till the end of the year to see where this is headed. A recession does hit(more than likely), I'll get cheaper labor and material prices as guys will be dying for work. Can also supplement work for my guys by now doing work at my house if work becomes that scarce. I used the Pandemic in the same way.

That imo is why this next 3-6 month window is the time to take advantage. There are people hitting pause not backed by data and numbers but rather feelings.

 

[fsg2]

Bus are you seeing a spike in Ginger-beer (the kind w alcohol)?

I tried it recently and am hooked. That’s the drink of choice for me moving forward

Was the butter beer keg kicked? 😂

 

[e5fdny]

Yup, just be prepared and take advantage where you can. Decided to put off all housing and farm projects till the end of the year to see where this is headed. A recession does hit(more than likely), I'll get cheaper labor and material prices as guys will be dying for work. Can also supplement work for my guys by now doing work at my house if work becomes that scarce. I used the Pandemic in the same way.

Was told to hold off on redoing my huge deck (from 1st generation Trex to the TimberTech I have everywhere else - front entrance, side entrance for mud room, outdoor shower, etc.) for the same reason.

 

[koleszar]

That imo is why this next 3-6 month window is the time to take advantage. There are people hitting pause not backed by data and numbers but rather feelings.

For building and construction it's a contractors dream right now. Homeowner savings are through the roof, however, those savings are quickly diminishing with this level of inflation. Now is not the time to do home projects. Once savings are gone and loan rates are high those who saved and waited will get a bigger bang for their buck. There's always opportunity in a down turn to take advantage of, this is one of them.

 

[e5fdny]

Real estate isnt the stock market. Sooner people realize that the better.

One of the best bits of advice I got from my Dad was, “the best investment is the roof over your head.”

This coming from a man who left this world at 92 with two homes on the water in Sea Girt and Naples. Both purchased at the perfect time.

He also learned as much as he could on the stock market (with at the time just a HS education - later in life he put himself thru college graduating Magna) and did extremely well there too.

 

[sct1111]

That imo is why this next 3-6 month window is the time to take advantage. There are people hitting pause not backed by data and numbers but rather feelings.

It's pretty discouraging what you can get for the money in northern NJ right now. $400k gets you either small outdated capes or slightly bigger houses that are falling apart.

 

[jordkap]

I think a multi-year (possibly up to a decade) plateauing of prices is the most likely outcome in the NJ market rather than a broad scale, sudden decline in value. Schools and jobs will perpetually make this a desirable area and we haven’t seen the beyond insane runup in prices other parts of the country. Some states are still seeing places get snatched up same day sight unseen. That doesn’t happen around here.

Jersey will always be desirable for people who value education and like being near but not in NYC or Philly. Housing prices could go down one day, but it would be short lived

 

[e5fdny]

It's pretty discouraging what you can get for the money in northern NJ right now. $400k gets you either small outdated capes or slightly bigger houses that are falling apart.

Well depending on the town, that $400K could turn into something much more down the road if you buy in one of those types of towns in the bold below…

Jersey will always be desirable for people who value education and like being near but not in NYC or Philly. Housing prices could go down one day, but it would be short lived

That’s what I did. Although it was in Central NJ (Monmouth) and kinda close to the ocean.

 

[anon_0k9zlfz6lz9oy]

For building and construction it's a contractors dream right now. Homeowner savings are through the roof, however, those savings are quickly diminishing with this level of inflation. Now is not the time to do home projects. Once savings are gone and loan rates are high those who saved and waited will get a bigger bang for their buck. There's always opportunity in a down turn to take advantage of, this is one of them.

For rates to stay high with duration you are making the case the economy will be on fire (in a good way on fire).

 

[Section124]

That imo is why this next 3-6 month window is the time to take advantage. There are people hitting pause not backed by data and numbers but rather feelings.

It’s called experience. Some of us have experienced 2-3 of these markets in the past.

 

[anon_0k9zlfz6lz9oy]

It’s called experience. Some of us have experienced 2-3 of these markets in the past.

Define “these” markets and the case for a bubble and what you define as a bubble

 

[theRU]

Ill play along. I dont think we see prices drops nationally. Some markets yes, national avg nope.
But lets say prices come down 20%. The homeowner with a $500K house and $150K mortgage now has a $400K house and a $150K mortgage

It's not about playing along it's just a fact... Housing nearly appreciated 40% over the last few years so it's merely addressing the why behind the chart you cite.

Has equity been built? Yes? Is some alot of that due to major asterisk? Yes.

You have to take each data point not in a silo but against the backdrop of a multitude of factors and issues.

 

[anon_0k9zlfz6lz9oy]

It's not about playing along it's just a fact... Housing nearly appreciated 40% over the last few years so it's merely addressing the why behind the chart you cite.

Has equity been built? Yes? Is some alot of that due to major asterisk? Yes.

You have to take each data point not in a silo but against the backdrop of a multitude of factors and issues.

Did you watch the vid?

 

[JayDogSmooth]

Was the butter beer keg kicked? 😂

Lol on the verge

 

[RUskoolie]

Go to about 1:07 (1 hour and 7 minutes) into the video in OP. I actually studied how high rates + inflation effected real estate 40-50 years back.

You can't really compare the 70s to today. We just printed 80% of the USDs in circulation in 2020. Speaking from my boutique brokerages experience our listings have gone ice cold and we have gone much more aggressive on the buy side. People are still pricing homes like rates are sub 4% when they're pushing 6%. We will absolutely see an adjustment in demand and prices. It will flush a lot of people out of buying right now, it's math. They can afford less house than 3 months ago just based on rates and rates won't stop going up partially because we have a dunce in DC rn.

 

[koleszar]

For rates to stay high with duration you are making the case the economy will be on fire (in a good way on fire).

View embedded media

They're raising rates to slow down the economy in order to reduce inflation. Higher rates less people taking out loans, less loans, building slows down. Building slows down more competition for fewer jobs. More competition for those fewer jobs, pricing becomes more competitive. Also, fewer jobs less material being used, inventory rises and companies reduce prices to move that inventory. It's been this way since I've been in business for the past 24 yrs..

 

[theRU]

They're raising rates to slow down the economy in order to reduce inflation. Higher rates less people taking out loans, less loans, building slows down. Building slows down more competition for fewer jobs. More competition for those fewer jobs, pricing becomes more competitive. Also, fewer jobs less material being used, inventory rises and companies reduce prices to move that inventory. It's been this way since I've been in business for the past 24 yrs..

Recession for sure, depression likely. I thought we were heading for depression when covid struck but I didn't expect all the stimulus, we over did that to the point Of overheating everything.

 

[anon_0k9zlfz6lz9oy]

They're raising rates to slow down the economy in order to reduce inflation. Higher rates less people taking out loans, less loans, building slows down. Building slows down more competition for fewer jobs. More competition for those fewer jobs, pricing becomes more competitive. Also, fewer jobs less material being used, inventory rises and companies reduce prices to move that inventory. It's been this way since I've been in business for the past 24 yrs..

Were 5.5 million housing units short. If building slows, that gap gets worse all while the most amount of people ever are at peak home buying age. Theres 11,000,000 open jobs right now

 

[RUBlackout]

Were 5.5 million housing units short. If building slows, that gap gets worse all while the most amount of people ever are at peak home buying age. Theres 11,000,000 open jobs right now

key words: right now

Places like Coinbase freeze hiring and even rescind offers. Companies are starting to freeze hiring elsewhere and already starting to reduce work forces by 10% in some cases. The open jobs will shrink and people will be laid off as well. This will ultimately slow down buying power along with everything mentioned above in the slowing economy.

To add to this you have the largest demographic population in the baby boomers ready to retire(having retired) within this next 5yr period. A lot of that money invested and spent will slow tremendously to allow for a solid retirement. Expecting Millenials or Generation Z to replace those incomes, amount of discretionary spending, and even skillsets to earn is tough to imagine so again I think this also slows down the economy.

 

[tom1944]

I saw an article that mortgage backed securities could not be sold for any price on Friday

Why and what will happen if that continues

 

[S_Janowski]

They're raising rates to slow down the economy in order to reduce inflation. Higher rates less people taking out loans, less loans, building slows down. Building slows down more competition for fewer jobs. More competition for those fewer jobs, pricing becomes more competitive. Also, fewer jobs less material being used, inventory rises and companies reduce prices to move that inventory. It's been this way since I've been in business for the past 24 yrs..

Well said.

While it’s very hard to predict the future, or how and when things will shake out considering how out of balance everything has been, basic economic principles are probably the best things to fall back on.

 

[jtung230]

I saw an article that mortgage backed securities could not be sold for any price on Friday

Why and what will happen if that continues

no bonuses for the MBS traders or issuers.

 

[anon_0k9zlfz6lz9oy]

I saw an article that mortgage backed securities could not be sold for any price on Friday

Why and what will happen if that continues

 

[yesrutgers01]

It's pretty discouraging what you can get for the money in northern NJ right now. $400k gets you either small outdated capes or slightly bigger houses that are falling apart.

What part of NNJ are you even getting those for $400k?
Complete knockdown maybe. I know there are houses at that price but they are horrendous. You have to come close to 600 and expect to put another 100-150k minimum.
And even those- you find out they have mult bids and you are in a bidding war.

 

[anon_0k9zlfz6lz9oy]

key words: right now

Places like Coinbase freeze hiring and even rescind offers. Companies are starting to freeze hiring elsewhere and already starting to reduce work forces by 10% in some cases. The open jobs will shrink and people will be laid off as well. This will ultimately slow down buying power along with everything mentioned above in the slowing economy.

To add to this you have the largest demographic population in the baby boomers ready to retire(having retired) within this next 5yr period. A lot of that money invested and spent will slow tremendously to allow for a solid retirement. Expecting Millenials or Generation Z to replace those incomes, amount of discretionary spending, and even skillsets to earn is tough to imagine so again I think this also slows down the economy.

Ill add a couple things.
-Everything is fluid and dynamic
-As i said in the video, if there is one concern i do have its the unknown of the effect of the fed letting mbs roll off their balance sheet
-real estate isnt the stock market
-demographics matter ALOT in real estate
-supply shortage of homes doesnt look like it can be solved, at least this decade

 

[tom1944]

I see 2 issues that might impact housing in our area.
If real estate in the Sun Belt rises dramatically that might be a disincentive for NJ retirees to leave family and move. Many people used the price in housing as a reason to go. If that difference is minimal it might change peoples outlook

Will WFH go an indefinitely. I read Amazon is being sued by an employee in California to pay for his internet and electric for the time he WFH. The law is on his side.
If he wins it might be the straw that companies use to make people return to the office. In that case you will need to be by the job centers again. A recession will also give employers more power in that area.

 

[RU to the Core]

Started a home renovation last week. Basically the whole house. Crazy expensive for everything. First thing we bought were the appliances and I thought those were expensive. Compared to the cabinets, windows and floors the appliances look like a steal. It’s nutty. Also cabinets have a 5 month lead time, windows 5/6 month lead time, and the floors we got but not in the size we wanted. That they said wait until next year. So it’s crazy but the wife wants it done and the really good crew my designer always uses was available so we had to go for it. But yeah my initial budget is shot to hell.

 

[Knight Shift]

Started a home renovation last week. Basically the whole house. Crazy expensive for everything. First thing we bought were the appliances and I thought those were expensive. Compared to the cabinets, windows and floors the appliances look like a steal. It’s nutty. Also cabinets have a 5 month lead time, windows 5/6 month lead time, and the floors we got but not in the size we wanted. That they said wait until next year. So it’s crazy but the wife wants it done and the really good crew my designer always uses was available so we had to go for it. But yeah my initial budget is shot to hell.

It may get worse before it gets better. @koleszar has great perspective. We built a house in Arizona starting in December 2019, finishing in October 2020. Supplies were getting right near the end of our build. Our total cost would probably be 50% higher if we built today.

 

[Knight Shift]

I see 2 issues that might impact housing in our area.
If real estate in the Sun Belt rises dramatically that might be a disincentive for NJ retirees to leave family and move. Many people used the price in housing as a reason to go. If that difference is minimal it might change peoples outlook

Will WFH go an indefinitely. I read Amazon is being sued by an employee in California to pay for his internet and electric for the time he WFH. The law is on his side.
If he wins it might be the straw that companies use to make people return to the office. In that case you will need to be by the job centers again. A recession will also give employers more power in that area.

Good point. In our neighborhood in Sedona, AZ, homes that were selling for $500-600K 2 years ago are now above $1M. The house we sold for $615K in a different neighborhood in November 2020 would now sell for over $800K. These prices will not hold up.

 

[mdk01]

I see 2 issues that might impact housing in our area.
If real estate in the Sun Belt rises dramatically that might be a disincentive for NJ retirees to leave family and move. Many people used the price in housing as a reason to go. If that difference is minimal it might change peoples outlook

Will WFH go an indefinitely. I read Amazon is being sued by an employee in California to pay for his internet and electric for the time he WFH. The law is on his side.
If he wins it might be the straw that companies use to make people return to the office. In that case you will need to be by the job centers again. A recession will also give employers more power in that area.

The law is on his side? I know nothing about California law but are you sure? Perhaps if he was REQUIRED to work from home, but I'd be very surprised if an office was an option.

 

[Knight Shift]

The law is on his side? I know nothing about California law but are you sure? Perhaps if he was REQUIRED to work from home, but I'd be very surprised if an office was an option.

Yeah, that is a head scratcher. What about costs saved from not having to commute? Unless one lives a few miles from the office, the savings on transportation and the value of free time far exceed any "cost" of working from home. On the same side, couldn't the employee get a tax write-off for a home office? While not residential real estate related, a.day of reckoning is coming soon on the office space market.

 

[S_Janowski]

Started a home renovation last week. Basically the whole house. Crazy expensive for everything. First thing we bought were the appliances and I thought those were expensive. Compared to the cabinets, windows and floors the appliances look like a steal. It’s nutty. Also cabinets have a 5 month lead time, windows 5/6 month lead time, and the floors we got but not in the size we wanted. That they said wait until next year. So it’s crazy but the wife wants it done and the really good crew my designer always uses was available so we had to go for it. But yeah my initial budget is shot to hell.

Doing renovations to a kitchen. Was looking at builders grade cabinets in March and when I went to purchase them in early May the price increased almost 20% in just less than 2 months.

 

[Joey Bags]

Ill add a couple things.
-Everything is fluid and dynamic
-As i said in the video, if there is one concern i do have its the unknown of the effect of the fed letting mbs roll off their balance sheet
-real estate isnt the stock market
-demographics matter ALOT in real estate
-supply shortage of homes doesnt look like it can be solved, at least this decade

I think the effect is pretty straightforward. Unwinding MBS is part of QT, which should cause 10 yr bond yields to rise which will drive mortgage interest rates higher.

I guess the unknown is how high rates go and how much it impacts buyer appetites. I know a lot of people in my age range (late 20s early 30s) who are not waiting any longer to get a home and would just downsize their target rather than withdraw from the market.

 

[anon_0k9zlfz6lz9oy]

I think the effect is pretty straightforward. Unwinding MBS is part of QT, which should cause 10 yr bond yields to rise which will drive mortgage interest rates higher.

JP Morgan made a call this past week that they believe 10 year peaks in the 3.15% range. I forget who the guy was but he was on bloomberg making the call. Also, hes not wrong in that call if during a week 10 year goes to 325 and then settles back downward.

 

[Knight Shift]

An example of market insanity. Lake Como, NJ, otherwise known as South Belmar. But hey, the property backs up to a Spring Lake park (separated by a brook that overflows during heavy storms). $2M to be surrounded by bungalows.

739 22nd Avenue, Belmar, NJ 07719 | MLS #22138349 | Zillow

739 22nd Avenue, Belmar NJ, is a Single Family home that contains 1327 sq ft and was built in 1947.It contains 3 bedrooms and 2 bathrooms.This home last sold for $475,000 in March 2022. The Rent Zestimate for this Single Family is $6,604/mo, which has decreased by $423/mo in the last 30 days.

www.zillow.com

 

[jtung230]

There are a few listings I’m following that are good indicators for the market. IMHO, it’s cooling but doesn’t mean a correction is coming or how big of a correction. The only thing I’m fairly certain is that it will not go up like the last 2 years.

 

[tom1944]

The law is on his side? I know nothing about California law but are you sure? Perhaps if he was REQUIRED to work from home, but I'd be very surprised if an office was an option.

The articles I saw indicated the law was on his side

Amazon is taking the stance that the Covid rules mandating things like WFH nullified their obligation but there is nothing in the law that provides an exception

Some people in the comments feel he is a front for Amazon to force people back to the office because he is fighting for an expense which was much less than his savings

 

[jtung230]

The articles I saw indicated the law was on his side

Amazon is taking the stance that the Covid rules mandating things like WFH nullified their obligation but there is nothing in the law that provides an exception

Some people in the comments feel he is a front for Amazon to force people back.

I think the question is, is the employee forced to WFH or is it an option to WFH?

 

[yesrutgers01]

Good point. In our neighborhood in Sdona, AZ, homes that were selling for $500-600K 2 years ago are now above $1M. The house we sold for $615K in a different neighborhood in November 2020 would now sell for over $800K. These prices will not hold up.

Yeah- I’m mahwah- sold in Jan 2020 for just under 1.4. Value now is just over 1.8