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Price discovery on the way up – a bidding war over the weekend.
Price discovery on the way down – several weeks of having no offers and lowering asking price by a few percent and trying again. Rinse and repeat until you get a buyer.
Makes sense to me. See everyone at the bottom of the market in a few years.
I know that now buyers are no longer waving any contingencies including appraisal contingency. So given that there is general expectation of significant price decline, why are the banks not appraising the home way below its listed price, while handing a 95% loan in non-recourse states?
I am asking because if banks start appraising houses correctly, prices will correct faster. It will also ensure that the bank is not holding the bag thereby putting taxpayers at risk.
The fact that banks are still not appraising houses correctly seems to indicate that either they are not behaving responsibly ore they still believe in both Fed Put and Govt Put.
Banks appraise the homes based on recent comparable sales. Nuff said
“ A qualified appraiser creates a report based on an in-person inspection, using recent sales of similar properties, current market trends, and aspects of the home (for example, amenities, floor plan, square footage) to determine the property’s appraisal value.”
So SS is asking the right question.
Banks aren’t keeping the loans either
I disagree… if that were true, appraisers wouldn’t get a copy of the sale contract before they appraise the property! Nuff said!!!
Jon, so essentially according to you banks are inept at judging the collateral for a 30 year mortgage!
That makes me feel that this problem will never be fixed and the taxpayers who are on hook for most of MBS will be leached again.
“ Jon, so essentially according to you banks are inept at judging the collateral for a 30 year mortgage!”
Most housing collateral is appraised for the federal programs under AMC/AVM guidelines… Banks, these days, since they are originating the loan, don’t make the appraisal…
Research HUD appraisals for more info than you probably want…
Banks are more interested in fees and servicing the mortgages. Almost all of the mortgages are sold by banks. They never keep them.
The system is broken else banks won’t be issuing mortgages at these highly inflated rates.
Everyone is looking to make a dime.
Home owner insurance companies use replacement costs that are far beyond the average replacement costs. T hey do not use the data from the Census Bureau that has good inflation stats for rebuilding/replacement. And they don’t even include the foundation costs in their astronomical appraisal. I was told they use something different for their risk adjusted data. Home owners should be able to see all the stats that the insurance companies use, but it is not readily available. Like they are above getting this data for the plebians
@Tguy, correct banks aren’t holding the loans…2017: “Yet the landscape of the lending market has shifted dramatically over the past few years from domination by big banks to a market where more loans are made by non-banks — financial institutions that only make loans and do not offer deposit accounts such as a savings account or checking account.” I backed into one of these located in Florida and listed CEO (a retired senator)…holding trillions. I can’t even imagine what they’re Trying now.
“where more loans are made by non-banks”
making a loan = originating the mortgage. That’s what your quote is talking about.
Holding a loan = keeping the loan on the balance sheet. That’s NOT what your quote is talking about, and that’s NOT what these “lenders” are doing.
These companies you’re talking about, they’re originating loans and then selling them to be securitized into MBS. They’re only holding mortgages for a little while until they can sell it. They get paid fees to do this. They have very little risk. MBS investors (pension funds, bond funds, insurers, etc.) carry the risk, and since most MBS are backed by the US government, it’s the taxpayer that carries the risk.
Because appraisal data is retrospective and banks do not have control total control here. However, they can change the value for lending purposes. I have seen them do this to increase value on properties that did not appraise at the sales price when property values were shooting up.
Total BS. I haven’t seen any of this recently. Why would they want to do something so stupid?
I think the whole appraisal thing is sort of disconnected from anything, especially because they are increasingly foregoing live appraisers to instead to digital appraisals.
When my husband and I recently went under contract on a house in mid July (yes, I know the timing was likely bad, but we have a lot of factors we’re juggling, and got a slight price cut), the lenders all gave us appraisal waivers because their digital comp appraisal systems were giving them some green light about our good credit and the comps in the niehgborhood. I guess it was maybe good for us (didn’t have to pay $450 appraisal fee since everybody was so sure it would appraise) but it seems like a dangerous thing for the markets on the macro scale, since the lender digital appraisal system is just going to keep pumping out more of whatever the market has been doing…. no actual human eyes on the individual house. Mortgage lenders said this sort of online appraisal is likely the trend for the future.
Banks do not appraise property. Banks engage qualified, third party appraisers to appraise real estate.
An appraisal is based on closed transactions, closed as in the past, of comparable property.
An appraisal does not adjust for recourse or nonrecourse financing.
The appraisal process does have flaws. These flaws become more apparent in times of rapidly rising interest rates and market uncertainty.
Our economy is facing adjustment and market factors that have never been experienced before. Not one person has an answer for what is ahead. The markets which are based on investors actions will bear the results
Many still trying to sell the idea that it’s not that bad and prices are not coming down. If you listen to Diana Olick on CNBC, she keeps repeating the same line that there is a shortage and mortgages are solid so no decline possible this time, I don’t know who pays her but it’s definitely not just the network that she works for.
I’m in the northeast and unfortunately we will be the last to see any decline and it would be the least amount but still it would be better than no thing.
Northeast hasn’t gone up that much as Northwest. The Seattle case shiller index for example: 1. Prices must correct 38% just to reach Prepandemic high 2.5 years ago. 2. Then it has to correct another 25% only to reach previous housing bubble of 2007. 3. Then another 30% to reach its real u-financialized value.
And we should be patient :)
Patience would be rewarded but you need to fight off the mass psychology which is home prices woyke never go down
Jon, so essentially according to you banks are inept at judging the collateral for a 30 year mortgage!
That makes me feel that this problem will never be fixed and the taxpayers who are on hook for most of MBS will be leached again.
The previous comment is in reply to your other comment about banks. I agree on the patience comment.
In Long Island, the average Levitt house in 2016 was going in the low 300s. Now they are up in the high 400s/low 500s for some. For a home with no basement and oil heat, and some with a 110V service still.
Your average 400k home is now in the 600s. And crazy taxes and high interest rates. Yet somehow people are still buying.
I’m a bit further out from NYC but most of our houses were driven up by people supplementing their NYC housing costs by buying up suburb/exhurb houses as investment properties & weekend escapes.
Was hopeful for a hot minute seeing the price drops on MLS but that was fleeting. Still seeing the same 10 overpriced sh*t shacks stagnate and little else worth even swiping through the pics much less view in person or bid on. Lots of condos available here, bit they’re all overpriced, post-WW2 tiny, outdated and in bad neighborhoods or below avg schools. My patience has been extended to the kids flying the nest before I can legally leave this horrendous state. T-11 years and counting.
I grew up in LI in a Levitt House. My old man Pd $8,000 back in the 50s
Know your regional market…….. The current prices cannot be sustained so look for a strong downward trend. Obviously very poor leadership and vision coming out of the federal reserve. The markets (in total) are wonderful in regards to showing our economic trends and money value.
What’s ominous about the increase in house prices since 2020 is that areas of the country that have been affordable for decades are no longer affordable. Places like Iowa, Indiana, Tennessee, Idaho, etc.
Prior to 1975 or so, California had cheap housing. Florida was also once cheap (prior to 2005 or so). Colorado took off in the mid 90s. Now it’s flyover country’s turn.
High prices are now everywhere. I don’t see this trend reversing.
It’s due to reckless, rampant speculation. Turning shelter into a get rich quick scheme is one of the worst ideas ever, and it’s destroying society.
Imagine the “small guy” pyramiding that is out there…. owning two, three , four rental properties…leveraged up. we’ve seen this before…. and it all sprung from the Fed buying MBSs, lending money out well below the inflation rate…for 30 yrs.
As a percentage of household assets, real estate is even higher in China than the US except there they don’t even bother to rent out the real estate they aren’t occupying.
Just wait until that crash really gets rolling.
You ain’t seen nothin yet. Wait till the Chinese start buying houses right next door to you and Blackrock starts picking up all the distress sales and marking them up 100% or turning them into rental group homes for squatters. Americans will be living in cardboard boxes before long.
“ Florida was also once cheap (prior to 2005 or so)…
Somewhat… there was a big run up until 08-09, then crashed… cheaper with foreclosures, etc, then started back up steadily until 2019 ish then to the moon for the last couple of years…
Mine was a FreddieMac foreclosure that I picked up for $95k in 2013… Nobody else wanted it….
“ High prices are now everywhere. I don’t see this trend reversing.”
Zillow estimate for my house has declined ~8% in the last month (SWFL)….
FL prices reversed HUGELY in the crash beginning in late ”oughts” Dao,, sometimes as much as 75%… Some places there bounced right back up again in just a few months,,, and then went quickly even higher for the premier properties such as ocean and GOM fronting… Other places in FL took much much longer to regain their previous high price, very similar to many other bubbles and busts in FL. Other places we were in RE over the the last 50 years, including CA, TN, AL, OR,,, have had many such severe drops in prices, both for raw land and SFR. RE was an actual ”real market”,,, and may very well become such again IF the FRB and it’s cronys will get out of the way.. NOT likely I will agree, but perhaps possible some day and in some way.
IMHO. I live in flyover country. For the past 20 years, my house has appreciated less than inflation. I think some of the places you listed were undervalued. All houses rose a lot during the pandemic, but I think prices will stick in the places you listed. They may drop in price some but not as much as some of the bubbly cities. That is if some form of WFH sticks around.
Otherwise, most jobs are in the big cities. Small cities have seen little house appreciation the past 20 years. The value of house you can get is crazy compared to big cities.
We listed a house in Payson that is too far from our office, so OK to sell. Got two offers for pretty close to what we listed it for which I think was a fair price. Payson hasn’t been as hot as Phoenix in terms of price, but I guess there is demand there.
And then we are somewhat buying Casa Grande, but the Duplex we saw listed at $370,000 that we thought would be OK at $310,000 got a cash offer at $345,000 — so I guess someone is buying — or it will come back around soon.
I’m not sure how dead it is. Every month we collect rents. Those rents need to go somewhere. And I guess someone else has money coming from somewhere to spend on rentals.
But, speaking to the title company — closings for July were 50% of what they were in June. So, it’s not an up market just YET. I also don’t see a ton of stuff coming through the auction. Some people out there have money.
A point I always bring up though (if you know me), our pawn shops are doing very well. Probably 25% of pawn shops in Phoenix have closed over the past 7 years. We kept our stores open — more than a few made no profit. And then COVID cut the loan book by maybe 40%. COVID is gone, gas and food are expensive. Rents are way up. Pawn is back — $150 loans for gas and food are really hot. So, if you’re a renter — these are very bad times.
If you own a house, your rate is low and your payment is fixed. You’re staying in place. It’s not 2008, but maybe I will be able to get construction workers to show up again — those workers were so happy to see us in 2008. So hard to motivate in 2022.
I’m not sure what your point is, other than talking about yourself.
I think the point is that he’s doing just fine, not that anyone asked.
Thought Payson was a hot market filling up with California expats, the way my family tells it. Great area but it’s got its issues. I think developers there smelled money from the fixed income community that was there and have been doing what they can to exploit that.
“I’m not sure what your point is, other than talking about yourself”
Right on. Tough enough times for most people , without listening to landlords and pawn shop owners tell us how well they’re doing at the expense of us “little” people.
Typical that the peons will freak out about a guy doing well offering people a service they don’t have to use, while ignoring the profiteers with government contracts and a world class propaganda machine at their disposal.
The last 2 paragraphs are right on. This is a very bad time to be a renter, and a lot of people have mortgages locked in at rates we likely won’t see again.
“Those rents need to go snow where” – at 10% inflation some of those rents are going into the QT money furnace. Inflation just hurts less when you’ve already got money to burn.
Couple good points AL,,, especially about trying to get trades folks to even show up,,, and most are SO overpriced, thinking $1000.00 per day for semi-skilled, that even if they do show up to do the ”estimate”,,, there is NO way to afford their help. Actually do NOT remember this being part of the problem in prior bubbles seen since 1956, so, perhaps, just maybe IT IS Different this time,,, Actually IT IS different each time, but only in some of the details… OK,,, Wright or someone similar in the construction biz said quite clearly that either ”God” or ”The Devil” is in the details,,, so, either way, just more fodder for the fun that’s clearly coming our way!!!
Yeah in 2008 the contractors turned on a dime. Part of that is the labor market now is much tighter. Immigration has been in decades long decline. Add Covid deaths, disability. US needs workers and we aren’t even allowing asylum seekers.
Just 60% off and I’ll feel good about buying.
I think your SOL on that wishful thinking….
So many different macrotrends at work in certain markets – who can say what the net effect in prices will be? For example, the state demographer in Colorado is estimating around 500,000 new residents to the Front Range (Denver, Colorado Springs, Fort Collins, Boulder, etc.) in the next 8 years… Let me tell you, there is no way home building is going to keep up with this pace. That’s going to be roughly a 10% increase in population.
So those people coming are leaving someplace which means that someplace should have more vacancies, right?
This is what I don’t understand: why is the vacancy rate so low everywhere, but the population isn’t increasing that much? In Los Angeles, for example, population has been declining for the last few years, yet rents are up. It doesn’t make any sense except when you factor in the fact that corporations have been buying and holding properties. Now that makes sense as an explanation because what they’re doing is creating a false scarcity. I know that’s happening in lots of cities in the US.
The vacancy rate is not accurate. I’ve been saying that for a long time. If a homeowner doesn’t define his empty property as “vacant,” it’s not vacant, even if it’s vacant. And suddenly it’s on the market and vacant, surprise surprise!
The most recent US census indicates that more than 16 million homes are sitting vacant across the U.S., 10.6% of all homes, of which 5.7 million are vacation homes.
The Homeowner vacancy RATE per Census = 0.8% in the US. That’s what I was referring to as inaccurate. It has been declining since 2012, going from record low to record low. At this pace, the vacancy rate will be negative in about 7 years, which would be a hoot and prove my point
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
There are estimated to be 40,000 housing units in San Francisco which as vacant, but not by the Census measure. That’s well over 10% of total housing units.
Agree that vacancy rates are bogus. 90% of the properties we appraised in the Swamp over the past year were vacant.
I have a friend who rents an ADU in a nice beach community, her rent is still low, but she is worried that if the owner sells, the new owner will wants that extra room back as part of the house. Then she faces a stiff inflation shock, either higher rent, or eviction. A lot of people living on the kindness of strangers, but if 1970s are a guide, the duration of this inflation will prove to be very painful indeed for consumers. A drop in home prices will only put more supply on the market and push the cycle to another level.
“People coming are leaving someplace”? Yeah they are leaving Central America, South America, Mexico and who knows where else. Something like 250,000 a month streaming across the border. How does housing magically appear for all of these people? Guessing that single family houses or apartments are suddenly becoming multiple family (multiple generation). No really. Somebody explain it to me. Mayors of NY and DC squawking when a busload or two show up?
I live in Texas near the border and no, there are not 250,000 a month coming across regardless of what some handicapped idiot says. Of course you need that number for your narrative.
It doesn’t take much to get Mayor Adams in front of a camera. Its getting him off the camera that’s the challenge.
Metro and suburban NYC has long and quietly welcomed and exploited immigrant labor to do what the locals won’t: bus tables, kitchen work, housekeeping, landscaping, construction, etc. Many are skilled workers getting exploited doing hard labor until they weave in and finally make it (a friend of mine is a Guatamalan diamond cutter who went through hell getting his family here legally). The real issue is they’re now showing up announced, in broad daylight, on nice buses, coming from a Red state.
They aren’t tying up housing around here either. Piling 10-20 into a 2 bedroom Tarrytown apartment was the norm for decades. Most of the ones I know work their butts off to get off the system. Its been a despicable situation for them all around. They’re pawns first and humans second.
Well said , culprit is corporate greed ,none of those thing media siad and saying about real estate hight price justification don’t make sense,this is the play book big player had played for last seven decades, every twenty years happens, they sell highest price , then could years later but lowest and in the middle Americans get screwed over and over and over.
Please show me the water to make this possible!
“The Big Boys Leave, Waiting for Reset”
This is the problem right now – too many cashed up pigs waiting for a housing crash so they can run prices up again. There’s just too much money in the system. We need to get to a point where nobody wants to touch real estate with a 10 foot pole because it never appreciates and needs lots of work – kind of like the past.
AGREE TOTALLY DC: And really and truly looking forward to the day when I can rent or buy a ”flat” in SF,,, even a RR flat 12 feet wide and 50 feet long, for $50.00 per month as friends did a few decades ago… Far Shore you will want to know that I am NOT holding my breath!!! LOL Looking at this point that USA will have to ”RE-SET” our money before any such thing can happen, eh Bee Prepared is the scout marching song for a very good reason, eh
You just need to buy your stuff (housing, automobiles) when you need it. Pay no attention to markets and timing. I bought my house on the wrong side of town in ’89 for 29k. I bought my new retirement car 5/20 for 25k. I was worried that I made mistake at that time. No worries today, both those decisions paid off. I paid off my house decades ago and the affordable housing let me retire comfortably at 62. Now I think I will be able to afford a New Orleans rental over this winter. Brush up on my swing dancing skills for the jazz swing revival…
Sounds like a good plan, past and present.
“Pay no attention to markets and timing.” Heh. Reminds me of that scene from the Wizard of Oz. “Pay no attention to that man behind the curtain….”
Glad to hear your house and auto purchases paid off despite the changes in the markets. However, it did not work out that way for many other people. If an unexpected life event forces a sale (such as job loss, divorce or long term illness) the comparative condition of the market will swiftly become very important.
I remember the many “underwater” stories from people who needed to sell their homes during the great recession. Not pleasant to have your house be worth substantially less than your mortgage.
So I think there is value in assessing the condition of the market prior to making a large purchase. And many asset classes now (including real estate) continue to be overvalued courtesy of the Fed’s hyperstimulation of the economy.
“I’m not sure what your point is, other than talking about yourself”
With all due respect Jake, this sounds very much like “Just buy the S&P index steadily and don’t worry about it.” That might have worked from 1981-2021, but I strongly suspect that it won’t be in the future.
People need to come to terms that the factors that led to a bull market in bonds are unlikely to repeat, and that we don’t really have growth the way we used to.
You sound pretty clueless about the extent to which these timing issues can really help or hurt people who are trying to get up and running in life. That’s nice you are so old and so set financially. But if you are a 30 yr old making $60K and $30K, have two kids in daycare for $10-20K each per year, and you’re looking at all the single-family homes listed at 400K at 5.5% interest rate… then yes, the timing matters a lot.
His thoughts unfortunately are typical of that time. “I paid my way through school, so can today’s students!” They forget though that a part time job waiting tables could actually pay tuition in those days. Now it cannot. It was also easy to brag about buying a house when interest rates were 12% but house prices were 1/10th the amount.
I just wish they would realize that the world they handed today’s young people is not the same world they inherited.
Most of the people suffer from these biases. Recency bias.
Always local differences to regional and national home prices. The article was quoting a nationwide home buyer and builder who then rents the portfolio. Without weak employment we don’t get the drop in price of many areas but vacant homes probably have lower mtg values and owners were making payments before and will continue. Price drops take time and won’t be in the inflation numbers yet but will be as valuations drop and we get deflation.
This time the real estate bubble is not local because cheap money was available to all localities.
‘While prices for detached homes have dropped steeply in most regions of the GTA, the prices in King have plummeted, according to data released by the Toronto Regional Real Estate Board (TRREB) Thursday. The township, known for green rolling hills, large, mansion-like homes coupled with suburban amenities amid idyllic country life, has had the average selling price fall from $3,218,42 in February across 38 home sales, to $1,664,046 across 20 home sales in July.’
That’s a 48 per cent price drop in just three months.
That would qualify for “popped” for sure.
King township is in the middle of nowhere.
Right now the Fed is still reinvesting prepayments into new MBS (they should, for the 200+ basis points versus their current portfolio). That ends in September.
At that point, it will be up to the primary dealers (JPM et al) to absorb new MBS issuance. That will presumably be easier (than it would have been two years ago) since issuance is falling rather dramatically with interest rates going up, so less $ to absorb.
It is an open question whether the Fed are going to sell their shitty 2% MBS into a market that is at 4.5% or more. But it seems unlikely they can shrink their MBS balance sheet any other way; MBS reinvestment was only $6B in the second half of July. Since everyone sane has refi’d, there won’t be any mortgages maturing for a long time, so forget that.
So that means the Fed is going to have to take a loss and sell their MBS into the market. Not a problem for the Fed (they just book the loss as a “deferred asset,” which means they can print cash against that loss later; it’s good to be the Fed).
The primary dealers will, of course, take a bit of spread between what the Fed pays and what the market offers. It’s even better to be JPM.
I wonder what kind of lies Kunal is telling himself right now…
I think he’s on another site posting under the name “Depth Charge”…. :)
The big displacements in real estate are always finance related. It’s always an efficient market unless that happens. I was a big developer in industrial RE in Ontario CA 1991 S&L crisis. 2008-2009 bought a $2.5m home for $875k cash short from bank in Seattle area. Inefficient home prices always require illiquidity from financial system being gummed up.
I’m not sure that San Diego got the memo. Maybe it was redacted. There are some corrections here and there but things are still being listed and sold for stupid amounts
I have news for you. In June, sales in San Diego collapsed by 30.5% year-over-year, according the California Association of Realtors. I don’t have July yet, but from pending sales in June, it’s likely worse.
The median price was down 2.1% for the month, but was still up year over year. As I discussed in the podcast: price discovery! Sellers cling to their aspirational prices, and buyers are saying, f**k it, and there is no meeting of the minds and far fewer deals, and sales collapsed 30%. Eventually sellers will drop prices enough to find some buyers, but it will take time and much lower prices to get sales volume back to normal.
+ a bunch for the new acronym 2b!!!
I listened to the whole podcast and got the point of it. Just saying that things here are still goofy, despite price corrections. Peak price followed peak sales back in 2005/6 and I’m sure the same thing will and is happening here but we seem to be arriving late to the party. Folks with money are still moving here in droves and I attribute it mostly to the work from home revolution. Just yesterday my wife and I met a nice couple who had recently moved from Ohio. They pulled up in a new bmw and definitely weren’t posers. This has been a regular occurrence of late. There’s an obvious money demographic shift going on in this country right now and it seems folks with dough want out of some areas and into others. I realize I tend to get into trouble here with anecdotal observations but it is what myself and others are seeing here in San Diego. Don’t forget, it was me who back in May of 2020 pointed out that there seemed to be a strange uptick in housing pricing and I even pointed out a specific house (and got flagged for it). At the time I didn’t realize how big that uptick was going to be, nobody did, but it sure happened. All that being said, I’m not saying I’m right about this, nor am I saying you’re wrong, just pointing out strange things I’m seeing here in San Diego.
Or more like San Diego got the memo but then threw it away two weeks ago. After getting a big bump in recent months. Active listings have been levelling off in the last two weeks, July 23 to August 6, (SFH, SD county, raw numbers, daily). Percentage of price reductions have also been holding for the last week or so. Given that SD also has one of the fewest upcoming new home inventory, SD appears poised to skip this upcoming housing correction.
Multiple price reductions in asking price in San Diego. Sellers are coming down fast from their aspirational asking price.
Market has slowed down considerably.
Real estate is a slow moving train.
You need to wait for at least a year I guess.
You are wrong that all the institutional finds have stopped buying. They have reset their pricing and are still buying at a slightly slower pace. Pricing doesn’t have to adjust much more for them to really accelerate buying. I have seen with price adjustment, the funds are able to execute at the higher cap rate.
You are off on the 9 months of new home inventory. Only a .4 of a month of move-in ready homes. The rest are in some form of construction and many are on pause or delayed.
It will be interesting to see if the inventory can get up to 6 months for a balanced market. We have a lot more homes to go before getting there. A lot, around 700K+ homes.
What data do you have to support the story about all these home sellers who bought a new house and kept their old one? Seems very unlikely that this is a enough homes to move the market.
I follow your content and appreciate your insight. I feel like you use too much acdotal evidence and take data out of context..
1. “You are off on the 9 months of new home inventory.” BS. New house inventory = 9.3 months, spread over various stages of construction. GO LOOK UP THE DATA!!!!
2. “Only a .4 of a month of move-in ready homes” = total BS squared. Just a blatant lie, really. Here are the Census numbers: 41,000 completed homes were for sale in June. Sales of completed homes = seasonally adjusted ANNUAL rate of 155,000 in June. For an average monthly sales rate of 12,900 houses per month. Applied to an inventory of 41,000 houses = 3.2 months’ supply
Either you’re trolling my site with lies or you’re just ignorant. If it’s the latter, listen to DR Horton’s earnings call. It will open your eyes.
“ANNUAL rate of 155,000 in June”
This implies that one person out of 1000 buys a home each year. Seems low, given that 8.4% of the US population changes residence ach year. 8.4% of households is about 120 million, so that’s about 10 million households turning over each year. If you assume 90% of that is renters moving, that would still be a million a year. There is a glaring disconnect in the math somewhere.
Meant to say 8.4% of movers with the number of total households being about 120 million, comes to about 10 million residence changes a year. Sorry for the garble.
I guess most moves are existing home swaps, and only 10% are new home puchases?
This is all public record. If you don’t like the stats, you can’t replace them with back of the envelope calculation if the data is wrong, then we’re all deluded.
Also, I think you’d be surprised how often renters actually move.I have a friend who’s on his 3rd residence this year so far.
I followed up and found the data vs my guesstimates above. 11% of homes are new purchases, and renters are responsible for about 80% of the moves.
1. After watching this website and learning how to collect data at zero cost I have been following the housing prices on Zillow (retail homeowners), Realtor.com (three price data trackers over time), and the best of all being RealtyTrac.com which shows the value POTENTIAL for investors/buyers (note: ATTOM Data, curator of nationwide real estate data for land and buyer, just sold RealtyTrac and HomeFacts which are the best of all three as you can see the maximum values factors by a credible source and I hope they don’t change much).
2. Now that the regional home price differentials are becoming more dominant I am trying to put together a simple math algorithm with all other quantitative and qualitative factors on a one page analysis sheet that would include property taxes, state taxes on retirement income, medical cost/quality, fuel prices, all utilities, demographics especially political in anti tax, anti liberal, anti socialist, anti property tax, anti liberal educations from K to PhD, then, add are they pro small business(less regulation), pro law and order, pro religious freedom and more….
3. Then, once I have completed this personal preference sheet compare what the % differential in housing price is to determine the value of choose to buy elsewhere.
4. Of interest to me is how the liberal professors I have encountered all love their social policies but last week one moved to conservative Indiana to buy a house on one acre. So, he left the sh*t hole L.A. area to live with the Conservatives he so disdains.
5. Freedom to enterprise means must be able to jump into the “testosterone pit” and give and take the hits and rewards a not be a “p@$$e about it. Freedom of speech means I can tell you I do not like how you think and why as long as you have the bxyz to let others tell you the same. William Buckley did this, respectfully and quite well and it is the best modern representation of the Western Civilization traditional systems of political discourse. I am disappointed the young woke sheep can’t take it as I know them well as I am at the UC system school about 5 times a week.
6.Quantitave factors are dominant in importance but qualitative is much harder to gauge and even MORE important not matter if you are a home buyer/investor.
Changes that were are seeing are happening so fast that most of use can’t see it like Wolf and if not for this website I would not get the kind information your financial whiz brother would give to save your ass. Years ago I told my doctor to talk to me like a brother; not like doctor/patient. This get interesting when he asks meet what my cholesterol is get my immediate reply of “what’s your cholesterol.” We have interesting talks just like the one’s I have seen here over the years.
Keep up the good work WOLFMAN….
While housing price corrections are inevitable in a lot of markets over the coming months, strength in the job market should provide at least some relative floor as it will prevent a huge spike in forced/distressed home sales. However, if the only means at achieving lower inflation is through a “controlled demolition” of the job market, this could lead to a domino effect of increased inventory and weaker demand resulting in a full implosion of the housing market. The fed has already achieved a cooling of the market by increasing rates; compounding this with a weaker employment situation could spell disaster. Rather than a “soft landing”, Powell and Co will achieve a “hard splatter”.
Lays off news becoming more and more prominent especially in tech sector.
Also job market is not as strong as numbers are showing. A huge demand for $20/ hr job can’t sustain this grotesquely over priced housing market
Wolf, where on earth are you getting the idea that people who bought second homes to live in are not renting them out, but rather leaving them vacant and eating the carrying costs? Do you have anything resembling actual evidence of this?
You’ve made this claim several times over the last year but you never supply any data to back it up, even when asked. Are there surveys? County or state data? Anything at all?
…not renting the first homes out, that is.
He talks about vacancy rates above. I expect that some of this shows up on AirBnb or longer term rentals. I was doing property management up until about 3 years ago, one place I managed was that exact situation until the owner got an offer that he couldn’t refuse. Seemed crazy to me at the time but I didn’t expect the last couple years to happen either.
As I have mentioned before in my condo complex in San Antonio of 105 units, at least 25 to 30 are vacant and owned by Mexicans parking cash or laundering money. Tons of empty single family dwellings here as well.
So…. I finally started looking at houses again. Called up my old relator from a few years back about one I was interested in. I went to go see it alone yesterday with the wifey- drive by style. Was blown away when realtor got back to me after talking to listing agent that the house has been vacant for about 3 years. Place was immaculate, albeit outdated, but clean as a whistle. So, there’s one anecdotal piece of evidence.
This is everywhere. It’s huge. And you’re now seeing those homes come on the market — which is proof of how it works. The NAR last year also did a thing on second-home buying, not-selling – but it thought that those homes would come on the market starting late 2021. This didn’t happen, but it’s happening now.
I know several people who did this. It has been a very profitable strategy over the past two years. But now they do want to sell.
When someone puts that moved-out second home on the market, that’s a net addition of 1 home to the inventory, without subtraction because they already have a home and won’t buy another one. So that’s why the inventory numbers are going up.
But someone buying a house while selling the old house has no net impact on inventory (+1 -1 = 0).
An interesting analysis would be of these second homes, how many are in the money vs. have to pay back a mortgage. If folks are walking away with 100s of thousands in cash then that money goes into other investments. If they are paying off a loan then not so much.
They’re walking away with money, the buyers has to put in the exact same amount of money, and the net effect = 0.
In terms of loans, you also need to look at both ends of the sale.
That’s not data, Wolf. I understand that people are buying new houses and not selling the old one–that’s obvious and happening everywhere. But I find it hugely implausible that they’re not renting the old one out. “Just rent it out” and “Just Airbnb it” have become mantras on real estate forums. Why would anybody leave their house vacant and absorb those significant carrying costs when they could rent it out? Where’s the data to suggest that people are doing this in significant numbers?
I’d say 1 in every 20 open houses I attend in SoCal actually appears to have a homeowner or renter currently living in it.
There is a real need for smart designed small homes coming in at about half price of current median home price. A lot of young couples and retirees need a better option than what is out there.
Small homes yes, but they don’t need to be “SMART.”
The cost of building a home keeps going up and so do the development fees ($100K here). I’d rather sit on the property and rent it than sell below replacement. If you can’t rent it then you have a big problem!
In the greater Toronto area there is no land and no severing. A piece of dirt is a million+ bucks now if you can find it.
What’s with the 50-100 year mortgages in Japan and UK?… in Canada we are 25 max. Are the banks going to reach in the tool box?
Personally I would like to see the market crash, but I won’t put it past the fascists to employ capital controls like they did during Covid. . . .free market price discovery is fading away and we need defaults with liquidation to correct the market.
IMO – The ruling class want’s to keep people in their payment systems at all costs.
Home prices are not determined by cost of building and other cost. Only one thing determines home prices: monthly payment affordability.
If you want to build a custom home…. the builder is going to price the cost of the build plus his fee period or it’s not going to get built. Monthly payment has less to do with the base cost of a new build but it has a lot to do with liquidity and inflation/deflation of existing dwellings.
I am not talking about custom homes. This is about run of the mill sfrs.
IN the end, it is all about affordability.
I have seen many homes being sold for less than the cost to build.
Real Estate is one of the most illiquid of all markets… all buyers one day….. zip the next.
Real Estate accounts for 62% of household assets held in China compared to 23% for the US. Way too much capital has been sunk into this speculative bubble…..a liquidity crisis from Fed hikes is brewing.
The number of active listings in my town has been increasing since January. There are more homes under construction. Prices are too high.
Population growth seems to be shifting to Texas. They have a border problem. Habla Espanol? Part of California moved to Texas. Elon Musk mandated a 40 hour/week work in the office policy.
I have seen this even in the last sub prime BS.. circa 2008ish.
I used to be an exclusive closer notary for Ameriquest Mortgage thru a title and signing company.
As soon as the sub prime market hit the fan so did my relationship with ameriquest which was very profitable although I did not sell loans I just serviced them then came the subprime BS.
Here we are in 2022 with a worse calculation of what the market is I have no clue but it doesn’t make sense to me I need to buy a small country house and I’d like to pay for it with my equity meaning in full.
I think it depends on your geographical location and a lot of other factors but I think banks in the Federal reserve need to get their act together no matter what then lend money fairly to most people when that happens maybe we’ll have something that makes mathematical sense.
Housing market? First of all, there is no “free market”…it’s all just a fixed-up game based in bad assumptions that things do not change…like looking at Russian tanks parked on your border and assuming they won’t be driving through your tomato garden next week because the seed packet had not reached its’ expiration date when you planted! I don’t see guys with briefcases full of actual cash money coming to the site of the product for sale and laying down bids for what they want. It’s all just BS projections of a stream of money that doesn’t even exist yet. All made up by unamused’s FIC, which has itself become The State. Secondly, this is no more “housing” than a boxcar or gondola sitting in a railyard can be equated to “transportation”. Show me a place where you walk in and toss your blue national jumpsuit in the vaccum chute in exchange for your alloted “apartment pants” payamas next to the sleep chamber and I might accept that this is housing. In lieu of that, this is “warehousing” for all that stuff you aren’t using while you’re off at the job. A museum without patrons. To assume that none of this is likely to be going away in the future is like being in 1985 and thinking the malls will be here forever. The product here is warehousing, and the market will be whatever the clowns running this state sponsored shtshow thinks it must be while they extend further controls over how you should exist to serve their ass fattening on a daily basis.
Wolf….thank you for your analysis and reporting.. It takes a strong person to tolerate the bozos 🤡🤡 that comment without even reading or listening to you work. Thanks again 😉👍
Most, but not all, commenters do RTGDFA or LTTGDFP. Some not only read the comments too, they re-read them and try to make sense of what constructive fallacies others are believing. And oddly enough, a few can even spell “your” correctly before hitting that post comment button, irregardless of the spellchicks tendency to polish her fingernails while on the clock. Other than that, Have a Nice Day!
In use since 1795. Might be non-standard, but certainly not non-traditional.
The big boys(hedge funds) are supposedly still short this market. Sometime the big boys are wrong.
Food for thought: In 1970, per FRED, the national median home sales price was $23,900. By 1980, it had grown to $63,700 (2.7x)! From 1980 to 1990, it doubled again to $123,900. So in 1990, the median price was over 5 times what it was in 20 years prior in 1970!
The 90’s saw prices only up about 35% over the decade. Then in the 20 year period from 2000 to 2020, prices “only” doubled. Think about this… House prices nearly tripled in the inflationary 70’s despite massive interest rates, but they “only” doubled in a more recent 20 year period.
Sure, house prices could soften or even collapse (but the job market has to weaken significantly first). Anything could happen, but the idea that this is a bubble that HAS TO pop is nuts. Look, 1/3rd of all dollars ever created were conjured into existence in 2 years! It’s such an unimaginably large amount of money, and so much of it is still looking for ways to be spent or stored. It has skewed every market and changed everything. The real value of everything has become impossible to pin down. And if that new money is left in the system (and most of it will be), prices of everything will continue to go up. RE will remain local, but the nation-wide median price will likely be higher in 2032 than it is here in 2022.
Lots of folks took out a lot of low interest debt to buy an asset that inflated a lot in a short period of time.
Maybe it will all turn out great this time! Shortages! Well qualified buyers! Generations coming of age!
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The educational-industrial complex is laughing all the way to the bank.
They’re praying for a recession to “force” the Fed to pivot. But it’s tough to have an official recession with employment growing, wages surging.
What the Fed did in details and charts.
Forbearance and pandemic cash run out. But a lot of fun was had by all.
Buy-Now-Pay-Later (BNPL) Lenders Face Tougher Reality.
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