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

[Knight Shift]

Why not re-lever and buy more properties?

Enough is enough for us. We have enough. Plus we are DIY on the 2 rental properties (4 units ). We don't want more to do, plus my job still pays well and I like what I do. we figure we could retire now with no worries and live well off of rental income and interest on accounts.

 

[Section124]

Very few people pull money from 401K and IRA unrealized gains to buy homes fyi

Investment account generally means after tax brokerage accounts. Mine is down over 20% this year. That's money that could have been used for a downpayment.

 

[ru66]

I'm calling it a bubble. The rising interest rates, comtinued inflation, plus I predicy a drop in consumer confidence that is coming will bring prices down. Feel free to call me out next year at this time if I am wrong,

Predicting a decline in consumer confidence? You're a little late

 

[RuSnp]

Less than 10%. It doesnt make sense to do so. Tax + early withdrawal penalty makes it a dumb decision https://www.cnbc.com/amp/2019/09/11...ped-a-retirement-plan-to-buy-their-house.html

This is correct but there is a rule (or at least there used to be a rule) where you could take ira money out without penalty for certain expenditures like purchasing (a first?) home. That said it was a pretty nominal allowable amount - 10k or so.

 

[anon_0k9zlfz6lz9oy]

This is correct but there is a rule (or at least there used to be a rule) where you could take ira money out without penalty for certain expenditures like purchasing (a first?) home. That said it was a pretty nominal allowable amount - 10k or so.

Yup, $10K which in reality A) isnt much and B ) doesnt help much towards a winning bid downpayment

 

[ru66]

I truly hope some of the "positive thinking" posts are not regretted in the future. Being paranoid about the markets and less delusional about how quickly things can go down the shitter may be a good lesson.

 

[anon_0k9zlfz6lz9oy]

Investment account generally means after tax brokerage accounts. Mine is down over 20% this year. That's money that could have been used for a downpayment.

Granted this is anecdotal but we require proof of funds for downpayments on our listings. I rarely get investment accounts. Almost always savings accounts, would be curious if theres data on this

 

[anon_0k9zlfz6lz9oy]

I truly hope some of the "positive thinking" posts are not regretted in the future. Being paranoid about the markets and less delusional about how quickly things can go down the shitter may be a good lesson.

Wouldnt call this positive thinking but rather data base evidence. Data is always changing and it could change down the line but this is the data at this very moment

 

[anon_0k9zlfz6lz9oy]

Wow. This is one of many reasons i believe rental rates still have significant room to run.

 

[RUBlackout]

Wow. This is one of many reasons i believe rental rates still have significant room to run.

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Or home prices have to come down, which they will, to help with affordability

 

[mdk01]

Investment account generally means after tax brokerage accounts. Mine is down over 20% this year. That's money that could have been used for a downpayment.

You can have a fixed income/money market component to a brokerage account. And that part can be boosted when a down payment is on the horizon.

 

[anon_0k9zlfz6lz9oy]

Or home prices have to come down, which they will, to help with affordability

I personally believe very few markets come down. Nationally average annualized appreciation doesnt come down but rather comes back to earth

 

[mdk01]

I personally believe very few markets come down. Nationally average annualized appreciation doesnt come down but rather comes back to earth

Where were you between 1988 and 1998?

 

[anon_0k9zlfz6lz9oy]

Me

Where were you between 1988 and 1998?

Median home sale prices in US between that time rose from $110K to $153K, about 40% increase https://fred.stlouisfed.org/series/MSPUS

 

[Morrischiano]

As many of you know, im in real estate. And a question i keep getting bombarded with is, is this market a bubble. I did a webinar last night going over 50+ charts on why we are not and the data that backs it up. Posting here in case its of interest to anyone

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I think that bubble discussion are wrapped around 2 things:
- overly inflated values not supported by current fundamentals
- a rapid repricing of a market that is overinflated

Clearly, the first factor is in place. This last leg up in the tristate real estate marketplace started 2 yrs ago when rates were at 3% and people were fleeing NYC because of the pandemic and riots and continued during a period of tame inflation, lowish interest rates and outsized equity market gains. What happened to real estate values in those two years? Average gains of 20-30% in two years.

Now look at current fundamentals;
-rates are 2% higher. The last exhaustive rally in the regional real estate market took place in Jan-March of this year where people were getting in crazy bidding wars before the Fed aggressively raised rates.
-Work from home is ending. Everyone I know who works in the city is back at least 2 days a week. Fewer people are fleeing NYC.
-The stock market is down 20% since the start of the year. It will be down 22% by the end of today. Most of the losses occurred in the last 3 months. People are feeling less flush with cash because that is the truth. People are thus less likely to get into bidding wars because their financial confidence is shaken.
-Inflation has affected everyone’s monthly budget leaving you to decide if you want to have financial flexibility or be house poor.

So yeah the fundamentals of this latest RE market surge are evaporating in thin air. What happens to house prices in our area depends on other market fundamentals hold up: demand for housing at all price points, new home supply, construction costs, overall economy.

If the economy starts tanking and layoffs follow then you will start to see short sales in a couple of years competing with other listings. If a 4,000 sq foot 4 BR new construction house that sold for $1.5 in your town in 2022 is now a $1.2 short sale in 2024, that will drag down the value of the listing price of houses in your town.

So to the second factor: will the market pop and will we see 30-40% home value declines like we saw in 2008-9? No one knows; not even the OP who is wish casting that the market stays hot because his livelihood depends on it.

Can the market decline 10-20% over the next 2 years? Absolutely! And if you use Q1 2022 as the market frenzy top as a reference point, I would argue that the 10-20% may have already begun: using market inventory, days in the market, % of listings with price reductions as leading indicators for the start of a decline.

 

[mdk01]

Me

Median home sale prices in US between that time rose from $110K to $153K, about 40% increase https://fred.stlouisfed.org/series/MSPUS

That's of little comfort if you were buying a condo in Hoboken or JC.

 

[Knight Shift]

Same, I swore it off. The OP's posts there were reprehensible.

That being said, I listened for the first 60 seconds of his link. He must have said "you know' at least 10 times in the first minute. He needs to work on that verbal tick if he's going to present professionally. I couldn't listen to him any longer.

 

[theRU]

Wouldnt call this positive thinking but rather data base evidence. Data is always changing and it could change down the line but this is the data at this very moment

Lol - can you acknowledge that there are bulls and bears?they all see the same data. And nobody knows exactly what will happen.

Up until 2008 the bulls were right then before you knew it the bears were. So who's correct?

 

[Morrischiano]

I personally believe very few markets come down. Nationally average annualized appreciation doesnt come down but rather comes back to earth

2007-2012 say hello

 

[theRU]

I think that bubble discussion are wrapped around 2 things:
- overly inflated values not supported by current fundamentals
- a rapid repricing of a market that is overinflated

Clearly, the first factor is in place. This last leg up in the tristate real estate marketplace started 2 yrs ago when rates were at 3% and people were fleeing NYC because of the pandemic and riots and continued during a period of tame inflation, lowish interest rates and outsized equity market gains. What happened to real estate values in those two years? Average gains of 20-30% in two years.

Now look at current fundamentals;
-rates are 2% higher. The last exhaustive rally in the regional real estate market took place in Jan-March of this year where people were getting in crazy bidding wars before the Fed aggressively raised rates.
-Work from home is ending. Everyone I know who works in the city is back at least 2 days a week. Fewer people are fleeing NYC.
-The stock market is down 20% since the start of the year. It will be down 22% by the end of today. Most of the losses occurred in the last 3 months. People are feeling less flush with cash because that is the truth. People are thus less likely to get into bidding wars because their financial confidence is shaken.
-Inflation has affected everyone’s monthly budget leaving you to decide if you want to have financial flexibility or be house poor.

So yeah the fundamentals of this latest RE market surge are evaporating in thin air. What happens to house prices in our area depends on other market fundamentals hold up: demand for housing at all price points, new home supply, construction costs, overall economy.

If the economy starts tanking and layoffs follow then you will start to see short sales in a couple of years competing with other listings. If a 4,000 sq foot 4 BR new construction house that sold for $1.5 in your town in 2022 is now a $1.2 short sale in 2024, that will drag down the value of the listing price of houses in your town.

So to the second factor: will the market pop and will we see 30-40% home value declines like we saw in 2008-9? No one knows; not even the OP who is wish casting that the market stays hot because his livelihood depends on it.

Can the market decline 10-20% over the next 2 years? Absolutely! And if you use Q1 2022 as the market frenzy top as a reference point, I would argue that the 10-20% may have already begun: using market inventory, days in the market, % of listings with price reductions as leading indicators for the start of a decline.

Great summary - different market but here in Southern CA we're seeing more inventory and days on market in the specific area I'm focusing on than we have in the past 3 years. It's also a fairly affluent part of OC so I think it can be a leading indicator or how those with money are reacting. I maybe mistaken but I feel like the area is generally the first to prosper in good times and first to anticipate bad times and is a good predictor of things to come nationally

 

[theRU]

I also think all the young (foolish) people who had nothing to do over the covid break but day trade in stocks and crypto are going to get a harsh lesson in it's easy to make money when the markets are rising (rocketing abnormally) and hard in the reverse. That's really going to put some of these overnight millionaires in a pinch as they see their instawealth vanish

 

[RUBlackout]

Great summary - different market but here in Southern CA we're seeing more inventory and days on market in the specific area I'm focusing on than we have in the past 3 years. It's also a fairly affluent part of OC so I think it can be a leading indicator or how those with money are reacting. I maybe mistaken but I feel like the area is generally the first to prosper in good times and first to anticipate bad times and is a good predictor of things to come nationally

Article just hit Bloomberg:

Property Values Fall Across US, Europe on Bite From Inflation

• Hines CIO warns of impact of rising rates and prices
• US office market hardest hit, Europe following US path

 

[anon_0k9zlfz6lz9oy]

That's of little comfort if you were buying a condo in Hoboken or JC.

You have data on that?

 

[anon_0k9zlfz6lz9oy]

Lol - can you acknowledge that there are bulls and bears?they all see the same data. And nobody knows exactly what will happen.

Up until 2008 the bulls were right then before you knew it the bears were. So who's correct?

There are bulls and bears and then theres data. Im begging for the bear data and no one can produce it

 

[anon_0k9zlfz6lz9oy]

2007-2012 say hello

What happened between 2007-2012 (hint its mentioned in the video).
1) forced credit selling aka funny money loans. We dont have that right now. All time low delinquency and all time high demand (you should watch the video).
2) demographic dip
3) supply greatly exceeding demand, got up to about 10 months supply, were at 2.2 months now
4) we were overbuilt.

all of this is laid out in charts in the video but you dont wanna watch so i cant help you

 

[anon_0k9zlfz6lz9oy]

Article just hit Bloomberg:

Property Values Fall Across US, Europe on Bite From Inflation

• Hines CIO warns of impact of rising rates and prices
• US office market hardest hit, Europe following US path

Heres a link to your article.
1) my post is about residential real estate
2) the article you post is about office which has taken a bath for years and will continue to. I wouldnt put a dime into office or retail

Property Values Fall Across US, Europe on Bite From Inflation

The US and European real estate markets are experiencing a downwards shift in prices as buyers fall away, according to the global chief investment officer of Hines, one of the largest closely held real estate investors in the world.

www.bloomberg.com

3) had rates stayed low prices would be higher right now, that does not mean prices have gone negative though, rate of appreciation is slowing despite case/shiller index saying its not. Case/shiller is a lagging indicator. I do believe had rates stayed lower prices would be 5-10% higher at the moment but again this doesnt mean prices have dropped, it means rate of appreciation has slowed

 

[ru109]

Heres a link to your article.
1) my post is about residential real estate
2) the article you post is about office which has taken a bath for years and will continue to. I wouldnt put a dime into office or retail

Property Values Fall Across US, Europe on Bite From Inflation

The US and European real estate markets are experiencing a downwards shift in prices as buyers fall away, according to the global chief investment officer of Hines, one of the largest closely held real estate investors in the world.

www.bloomberg.com

3) had rates stayed low prices would be higher right now, that does not mean prices have gone negative though, rate of appreciation is slowing despite case/shiller index saying its not. Case/shiller is a lagging indicator. I do believe had rates stayed lower prices would be 5-10% higher at the moment but again this doesnt mean prices have dropped, it means rate of appreciation has slowed

What are your thoughts on Hedge Funds buying single family homes? I heard something over the weekend that it's a huge number.

 

[theRU]

There are bulls and bears and then theres data. Im begging for the bear data and no one can produce it

It's not about data, it's about how you interpret it and then generate a thesis. If your thesis is that long term real estate is a good investment I'm not going to disagree with you.

 

[anon_0k9zlfz6lz9oy]

What are your thoughts on Hedge Funds buying single family homes? I heard something over the weekend that it's a huge number.

Thats a conspiracy theory. They only own about 2% and theyre not buying individual homes but rather single family rental communities off of sellers who own the entire community (PUD’s). In other words imagine a brand new townhouse/condo/apartment community built for rental purposes but instead theyre single family homes

 

[Morrischiano]

What happened between 2007-2012 (hint its mentioned in the video).
1) forced credit selling aka funny money loans. We dont have that right now. All time low delinquency and all time high demand (you should watch the video).
2) demographic dip
3) supply greatly exceeding demand, got up to about 10 months supply, were at 2.2 months now
4) we were overbuilt.

all of this is laid out in charts in the video but you dont wanna watch so i cant help you

So you look at the chart below and you’re confident that prices continue upward against new strong headwinds, just at a less steep slope.

Yeah, ok. Like I said, wish casting.

Average Sales Price of Houses Sold for the United States

Graph and download economic data for Average Sales Price of Houses Sold for the United States (ASPUS) from Q1 1963 to Q2 2024 about sales, housing, and USA.

fred.stlouisfed.org

 

[jtung230]

Thats a conspiracy theory. They only own about 2% and theyre not buying individual homes but rather single family rental communities off of sellers who own the entire community (PUD’s). In other words imagine a brand new townhouse/condo/apartment community built for rental purposes but instead theyre single family homes

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Not true. PE is buying up SFH for rental purpose. It’s not a large percentage because it’s difficult to scale up, but not because lack of effort.

 

[Knight Shift]

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.

When Cardi B says a recession is going to happen, look out.

 

[anon_0k9zlfz6lz9oy]

Not true. PE is buying up SFH for rental purpose. It’s not a large percentage because it’s difficult to scale up, but not because lack of effort.

Theyre buying entire communities. They are not hiring realtors and going to open houses and buying individual homes in spread out neighborhoods on scale.

what they do: 200 single family home rental community: buy

john and jane doe selling their $500K 3 bed/2.1 bath stand alone home= they dont buy

 

[anon_0k9zlfz6lz9oy]

So you look at the chart below and you’re confident that prices continue upward against new strong headwinds, just at a less steep slope.

Yeah, ok. Like I said, wish casting.

Average Sales Price of Houses Sold for the United States

Graph and download economic data for Average Sales Price of Houses Sold for the United States (ASPUS) from Q1 1963 to Q2 2024 about sales, housing, and USA.

fred.stlouisfed.org

1) rate of appreciation is going to slow
2) 2nd half of every year historically home prices come down from the summer peak but remain positive yoy (see chart)
3) why dont you watch the video in OP? Theres 52 separate charts you can poke and prod

 

[RUDead]

Can't wait to see this thread bumped in six months because the OP topped ticked the residential real estate market almost to the day.

 

[anon_0k9zlfz6lz9oy]

Can't wait to see this thread bumped in six months because the OP topped ticked the residential real estate market almost to the day.

In 6 months prices will be down from where they are today but up on the year. But again, that happens historically every single year as prices peak in the summer before dipping fall headed into winter. (Hint: if you ever sell your home list in april) Heres a chart showing that.

 

[theRU]

Mortgage apps down to near covid lockdown lows?

 

[Scarlet_Monster]

Yup, $10K which in reality A) isnt much and B ) doesnt help much towards a winning bid downpayment

We utilized this option as a first time home buyer back in April.

We are outside of Charlotte, NC where the market is absolutely ridiculous. We lucked out in finding our dream home it was listed for 300k, after going back and forth we got it for 309k, appraised for 315k.

NC is a different beast with the Due Diligence fee. What used to be a nominal 500 to maybe 1k has ballooned to people putting up 50k to win houses. We put up 10k.

 

[RUDead]

We utilized this option as a first time home buyer back in April.

We are outside of Charlotte, NC where the market is absolutely ridiculous. We lucked out in finding our dream home it was listed for 300k, after going back and forth we got it for 309k, appraised for 315k.

NC is a different beast with the Due Diligence fee. What used to be a nominal 500 to maybe 1k has ballooned to people putting up 50k to win houses. We put up 10k.

What is a due diligence fee?

 

[Scarlet_Monster]

What is a due diligence fee?

It's pretty much a non-refundable deposit that you put in on a house.

It's like Earnest Money, but with next to no way to get the $$$ back.

It's to show the seller how committed you are to buy the house, and in return they agree to take the house off the market for usually a 14 day period so you can have inspections and what not completed.

The only way to get the money back is for the seller to back out. Whatever due diligence fee you paid is rolled into your down payment/closing costs.

What you are seeing now especially in NC are sellers taking the offer with the highest DD Fee even if it's not the highest overall bid, because they (the seller) get to keep the funds no matter what inspections find wrong with the house.