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

[anon_0k9zlfz6lz9oy]

Interesting . What is the feeling on mortgage rates short term (next 5 years ) and that impact ?

Real estate is obviously super rate sensitive. Im not gonna pretend I can predict mortgage rates. For example, last years fed’s own dot plot around this time showed a 1% fed funds in 2022 followed by 1.5% in 2023.

Mortgage Bankers Association of America says 5.2% by end of 2023 on mortgage rates and 4.4% by q3 2024. Reality is, no on fvcking knows haha.

I will say this though, it may sound counterintuitive but the higher mortgage rates get, the lower new listings will continue to drop as those homeowners who have 3.5% rates aint selling only to buy something more expensive at a much higher rate. Inventory will grow from the demand hit, not new listing growth aka homes should sit a little longer allowing aggregate total listing volume to grow.

However, we have the most 30-35 year olds alive ever on record (peak household formation age) and were already down at 2008 purchase application data on mortgages. So the question is how much lower can demand drop? I dont think much personally

 

[Morrischiano]

I will respectfully disagree. Think the Fed will do their job by over correcting. employment market will tank and sentiment will follow. People will be forced to sell due to unemployment or relocation.

The employment picture is not quickly deteriorating. We are not going to 6%, let alone the almost 10% that followed the financial crisis when real estate sh!t the bed in 2008-9

 

[yesrutgers01]

The employment picture is not quickly deteriorating. We are not going to 6%, let alone the almost 10% that followed the financial crisis when real estate sh!t the bed in 2008-9

If employment drops to where people are forced to sell, who is then left to buy?

 

[jtung230]

The employment picture is not quickly deteriorating. We are not going to 6%, let alone the almost 10% that followed the financial crisis when real estate sh!t the bed in 2008-9

I agree. That’s why I think the Fed will overreact to get the job done. Can’t turn the cruise ship on a dime. I also don’t think it’ll be anywhere near 08-09.

 

[fg7321]

Inflation still hot / Unemployment still historically low and retail sales still going up.

Goldman talking about 3 more rate hikes.

Fed is still wanting to get to 2% inflation.

This is not a recipe for a rising stable housing market or the stock market. Second half of 2023 is when things get really interesting.

Right now I'm getting almost 5% on a nice chunk of change in a Fidelity Govt. Money Market account. Why should i put money to work now in the market now in this environment?

 

[jtung230]

Inflation still hot / Unemployment still historically low and retail sales still going up.

Goldman talking about 3 more rate hikes.

Fed is still wanting to get to 2% inflation.

This is not a recipe for a rising stable housing market or the stock market. Second half of 2023 is when things get really interesting.

Right now I'm getting almost 5% on a nice chunk of change in a Fidelity Govt. Money Market account. Why should i put money to work now in the market now in this environment?

Because MM rates can change quickly

 

[fg7321]

Because MM rates can change quickly

Yield keeps going up as the Fed raises rates. I'm good till September maybe December then look at where the market is at that point

 

[RUTGERS95]

Yield keeps going up as the Fed raises rates. I'm good till September maybe December then look at where the market is at that point

Time in not timing

 

[Morrischiano]

Some of the hottest markets of the last 3 yrs are experiencing 10-20% price declines, BUT OVERALL prices inched up in most regions in Q4 of 2022.

https://www.cnn.com/2023/02/19/homes/housing-prices-2022-fourth-quarter/index.html

 

[jtung230]

Wall Street has purchased hundreds of thousands of single-family homes since the Great Recession. Here's what that means for rental prices

Corporations backed by private equity groups such as Blackstone and Pretium Partners bought tens of thousands of homes across the U.S. Sun Belt.

www.cnbc.com

 

[fg7321]

Wall Street has purchased hundreds of thousands of single-family homes since the Great Recession. Here's what that means for rental prices

Corporations backed by private equity groups such as Blackstone and Pretium Partners bought tens of thousands of homes across the U.S. Sun Belt.

www.cnbc.com

and they pay cash and freeze out individuals trying to buy their first homes and then they rent them and increase rents . 60 minutes did a big expose on this in Florida. Their behavior is very predatory and needs to be regulated

 

[jtung230]

and they pay cash and freeze out individuals trying to buy their first homes and then they rent them and increase rents . 60 minutes did a big expose on this in Florida. Their behavior is very predatory and needs to be regulated

It was for the OP that said this was not happening

 

[RU205]

It was for the OP that said this was not happening

It's not good.

 

[RUTGERS95]

and they pay cash and freeze out individuals trying to buy their first homes and then they rent them and increase rents . 60 minutes did a big expose on this in Florida. Their behavior is very predatory and needs to be regulated

agreed

 

[DanRU]

agreed

This is different than buying and renting but several months ago, Zillow ended the practice of buying homes, rehabbing and then reselling. They ended up losing millions because they underestimated the cost of and time to repair properties before selling.

 

[jtung230]

This is different than buying and renting but several months ago, Zillow ended the practice of buying homes, rehabbing and then reselling. They ended up losing millions because they underestimated the cost of and time to repair properties before selling.

They watched too many episodes of flipper shows on HGTV

 

[RUDead]

""

 

[Caliknight]

Lol

 

[Plum Street]

The prices in jersey seem to be holding and it’s a sellers market . Probably because inventory is low. At least that’s what I see

 

[RU at the shore]

Just found something I liked in Toms River. Quality inventory very low here. 11 offers within a 6 day listing. So , I reached deep and bought it 50k over asking.

 

[yessir321]

It's funny- I live in what many call the most desirable neighborhood in Franklin Lakes- Urban Farms. A handful or real mansions, 18k sq foot+ and a ton on mini's- 7k sq ft. Mostly an older established neighborhood. The past couple of years- for sale signs everywhere and houses sell in weeks with no open houses and well over asking. House next to me was on for 1.45 and sold for 1.9 with no open house.
But now, just a couple of homes for sale and they just are not moving.
We have been renting since the pandemic started, right after we sold our house. Hate wasting the money(rent) but also just can't bring ourselves to over spend and pay those 6-7% rates.

See that’s the biggest issue the market is having right now. Rates were so low for the last decade+ that 3-4% became the new ‘norm’ to many buyers. Reality is historically 6% is still a good rate, and while I expect them to dip into the 5’s at some point, we aren’t seeing sub 5% again for a long time… probably 4-5 years if I had to guess

 

[yessir321]

Interesting . What is the feeling on mortgage rates short term (next 5 years ) and that impact they’re certainly going to continue to be higher than what people have gotten used to, a lot of the projections show the rates hovering in the mid 5’s by the end of the year if all goes to plan.

It’s gonna take a little while for the market to correct, it’s plateaud at this point. People are still accepting the fact that these rates are the new norm, rates were 4% and lower for almost a full decade, people became used to that and expect that.

Now, that’s going to slow down the massive free for all in sales that occurred, however I can’t tell you how many people I have met who sold at the top of the market and are now staying in rentals or with family ‘waiting for the market to come down’. There’s simply not enough inventory to cause the market to stall though and houses are still selling in my area within 2-3 days of listing. A remarkable number of folks still ‘sitting on the sidelines’ as well waiting for the dam to break. Problem is it isn’t breaking and people don’t want to accept that.

We just listed a spec (home builder I work for) in Baltimore county for $599k, 13 showings and 3 offers over asking in the first weekend. Interestingly enough it’s the millennial buyers who are so gung ho as well. Had multiple boomer buyers come in and complain about the price and rates meanwhile like I said, 3 offers over asking the first weekend. Some folks simply don’t want to accept reality

 

[jtung230]

Just found something I liked in Toms River. Quality inventory very low here. 11 offers within a 6 day listing. So , I reached deep and bought it 50k over asking.

Congrats. Spoke with another parent in town and heard the same story. They also paid over ask in Toms River.

 

[Plum Street]

It's funny- I live in what many call the most desirable neighborhood in Franklin Lakes- Urban Farms. A handful or real mansions, 18k sq foot+ and a ton on mini's- 7k sq ft. Mostly an older established neighborhood. The past couple of years- for sale signs everywhere and houses sell in weeks with no open houses and well over asking. House next to me was on for 1.45 and sold for 1.9 with no open house.
But now, just a couple of homes for sale and they just are not moving.
We have been renting since the pandemic started, right after we sold our house. Hate wasting the money(rent) but also just can't bring ourselves to over spend and pay those 6-7% rates.

I wonder how area and income specific this is? The neigborhood you describe is not going to attract Milennials or first time buyers looking to get into the game. In this market, a 400k house may move a lot faster than a 1.4 million house in jersey.

 

[NotInRHouse]

I wonder how area and income specific this is? The neigborhood you describe is not going to attract Milennials or first time buyers looking to get into the game. In this market, a 400k house may move a lot faster than a 1.4 million house in jersey.

it depends. Are the millennials getting money from the house bought by mom and dad in Toms River for 250k that sold for 50k over the 800k ask? That's what is changing the game.

 

[Plum Street]

it depends. Are the millennials getting money from the house bought by mom and dad in Toms River for 250k that sold for 50k over the 800k ask? That's what is changing the game.

I don’t know , are they ? Interest rates high, inventory low. I still think it’s advantage sellers in the middle class spots. But I am no real estate expert like kyk and others here.

 

[RU at the shore]

Congrats. Spoke with another parent in town and heard the same story. They also paid over ask in Toms River.

Jtung : Do you live in Toms River ?

 

[jtung230]

Jtung : Do you live in Toms River ?

Nope, in Summit.

 

[fg7321]

January Inflation up more than expected. Rate increases will continue. Stock futures showing negative and this wont be a positive for Mortgage rates.

Stock market news today: Stock futures sink as key inflation report comes in hot

U.S. stock futures languished ahead of the open Friday as Wall Street awaited a fresh print on the Federal Reserve's most closely watched inflation measure for further guidance on the trajectory of interest rates.

finance.yahoo.com

 

[NotInRHouse]

I don’t know , are they ? Interest rates high, inventory low. I still think it’s advantage sellers in the middle class spots. But I am no real estate expert like kyk and others here.

Idk what's middle class in NJ now. To me that's a lot of money to be 1.5 hours from NYC with kind of ok schools, but maybe I am mistaken.

 

[Plum Street]

Idk what's middle class in NJ now. To me that's a lot of money to be 1.5 hours from NYC with kind of ok schools, but maybe I am mistaken.

I got no idea . I am not a real estate expert or person. But the couple realtor and lawyer friends I have - doing business in Hudson, Union and middlesex - still say it’s a sellers market. Not sure how true this is or just pertains to them. Problem is inventory

 

[Plum Street]

Idk what's middle class in NJ now. To me that's a lot of money to be 1.5 hours from NYC with kind of ok schools, but maybe I am mistaken.

I would say middle class purchase in jersey is 400k to 600k. Just a guess. But it’s all relative

 

[NotInRHouse]

I got no idea . I am not a real estate expert or person. But the couple realtor and lawyer friends I have - doing business in Hudson, Union and middlesex - still say it’s a sellers market. Not sure how true this is or just pertains to them. Problem is inventory

It's even more of a seller's market in the shore region.

 

[NotInRHouse]

I would say middle class purchase in jersey is 400k to 600k. Just a guess. But it’s all relative

It does depend. That could be a nice house in South Jersey, but a condo up North.

 

[fg7321]

Rate hikes taking out demand in the housing market.

New home buyers are backing out of deals. Why?

As mortgage rates inch closer to 7%, hundreds of thousands of inflation-weary homebuyers across the U.S. are backing out of deals. Nationwide, the number of newly pending contracts to buy a home plunged from 58,000 to 55,000 during the week ending Feb. 17, Altos Research found. That’s its first...

finance.yahoo.com

 

[Plum Street]

Rate hikes taking out demand in the housing market.

New home buyers are backing out of deals. Why?

As mortgage rates inch closer to 7%, hundreds of thousands of inflation-weary homebuyers across the U.S. are backing out of deals. Nationwide, the number of newly pending contracts to buy a home plunged from 58,000 to 55,000 during the week ending Feb. 17, Altos Research found. That’s its first...

finance.yahoo.com

That makes sense.
It’s gonna be interesting as low supply and low demand.

 

[fg7321]

That makes sense.
It’s gonna be interesting as low supply and low demand.

The real question is how to increase supply. Long term Baby boomer generation dying off is going to provide supply. There's over 4 million in each year starting in 1946 @ 77 years old. US birth rates are down as well. How many people do you know who don't have kids or only one kid? I'm sure household formation is down which will weaken demand.

Another factor is companies requiring workers to return to the office. Folks living at the beach / mountain may not be to work from the beach/mountain 100%. That could lessen demand in the far off suburbs.

How to increase supply in the short term is the real issue.

 

[NotInRHouse]

The real question is how to increase supply. Long term Baby boomer generation dying off is going to provide supply. There's over 4 million in each year starting in 1946 @ 77 years old. US birth rates are down as well. How many people do you know who don't have kids or only one kid? I'm sure household formation is down which will weaken demand.

Another factor is companies requiring workers to return to the office. Folks living at the beach / mountain may not be to work from the beach/mountain 100%. That could lessen demand in the far off suburbs.

How to increase supply in the short term is the real issue.

More places have to stop NIMBYism. CA recently got rid of SF zoning. Unless people can work remotely, people need to be close to where others are or they can't work. That or pay teachers, nurses, cops, firemen deep into six figures.

 

[Plum Street]

The real question is how to increase supply. Long term Baby boomer generation dying off is going to provide supply. There's over 4 million in each year starting in 1946 @ 77 years old. US birth rates are down as well. How many people do you know who don't have kids or only one kid? I'm sure household formation is down which will weaken demand.

Another factor is companies requiring workers to return to the office. Folks living at the beach / mountain may not be to work from the beach/mountain 100%. That could lessen demand in the far off suburbs.

How to increase supply in the short term is the real issue.

Yep, all good points . Also, the days of builders building “starter” homes are long gone.

 

[T2Kplus20]

Yep, all good points . Also, the days of builders building “starter” homes are long gone.

Haven't had any "starter" homes built in my town in about 20 years.