Point B is more the cause and A and C are effects of too much money. People who are at or near minimum wage were not incentivized/forced to work. The relief fund also put too much discretionary income in the hands of people who can’t spend it fast enough.
OT Some interesting thoughts from Real Estate Investors Conference
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Point B is more the cause and A and C are effects of too much money. People who are at or near minimum wage were not incentivized/forced to work. The relief fund also put too much discretionary income in the hands of people who can’t spend it fast enough.
this is a great strategy in the short term, but I wonder how they are hedging if the market tanks. If they aren’t, they will be exposed to massive assets impairment. Cornering a market usually backfires in the long run unless you’re OPEC and have oil lol
Been watching this thread as I just sold my primary home in the suburbs of Minneapolis (heading to warmer weather and a tax haven). Listed at $1.25, sold in one day at $100K above ask with inspection waiver. I probably could have gotten more if I wanted to do open houses and extend my timeline by a week, but I got the offer I wanted and took it. That said, out of 12 showings, only two offers came in and they were best and finals. No bidding war. Inventory here is super low, but I believe people are getting leery about the rates and what they can afford given inflation and economic uncertainty.
i also wanted to posit another reason for the lack of inventory and why it will not resolve in the near future. Many people bought their most recent home with 30-year mortgages at just over 3% interest rates. Those who cannot afford to pay cash are effectively financially locked-in to their current home due to inflated prices and higher interest rates. It also remains to be seen how return-to-work impacts demand, but I just don’t see this moving the needle at all. Those who sold in SFO and moved to Austin or Boise or Naples aren’t going back.
My crystal ball says home prices will retreat, but it varies by price range. Demand for sub $500K homes will remain very strong, maybe a slight backup of 5-10% at the most. Million plus homes could see a 20-30% retreat.
i also wanted to posit another reason for the lack of inventory and why it will not resolve in the near future. Many people bought their most recent home with 30-year mortgages at just over 3% interest rates. Those who cannot afford to pay cash are effectively financially locked-in to their current home due to inflated prices and higher interest rates. It also remains to be seen how return-to-work impacts demand, but I just don’t see this moving the needle at all. Those who sold in SFO and moved to Austin or Boise or Naples aren’t going back.
My crystal ball says home prices will retreat, but it varies by price range. Demand for sub $500K homes will remain very strong, maybe a slight backup of 5-10% at the most. Million plus homes could see a 20-30% retreat.
I think this a very realistic prediction.
I am currently seeing a large number of 900k & up homes staying on the market in the greater Pittsburgh area. While homes between 250k & 600k are literally on fire.
The renters are buying the 300k places and the 300k sellers are moving to the 500k houses.
It's always a cycle.
As of this very moment there is not one single listing from the Department of Housing and Urban Development in Allegheny, Butler, Westmoreland and Washington Counties. Not one single property listed for bidding. There would typically be somewhere in the neighborhood of 20-30 at a minimum in a normal cycle. I don't think people understand how amazing that is and how small items like that affect it all.
Just tossing out another data point for the sake of discussion. I know someone who listed their house (single ranch built in 1960) last week, only accepted showings over the weekend, wound up with 4 offers all above asking price; more offers were pending but they cut it off.
If trusting the letter they received the only offer that needed a mortgage was from a local family, has a kid, looking for a starter place etc. - and the other 3 were full cash from corps/firms. One of the corps gave a few extra grand and that's the offer they're going with. It'll likely be a rental within a couple months.
Can't fault anyone in this whole scenario but it's just sad that normal folks have no shot these days.
If trusting the letter they received the only offer that needed a mortgage was from a local family, has a kid, looking for a starter place etc. - and the other 3 were full cash from corps/firms. One of the corps gave a few extra grand and that's the offer they're going with. It'll likely be a rental within a couple months.
Can't fault anyone in this whole scenario but it's just sad that normal folks have no shot these days.
yes, that is what looks scary to me is that a huge amount of real estate now is being bought by investors as rental properties via AirBnB type arrangements and/or long term rentals. Buying a home for this generation coming is going to be very difficult if you want to live in a relatively populated location.
We let corporations do whatever they want because they fund legislators campaigns. It's sad and pathetic.
I know a lot of townhouse and condo complex's are now putting rules that you have to live in the place you buy such that this cannot occur. But for single family homes, I don't think a whole lot that can be done.
You bring up an interesting concept. I wonder if that can be applied to single homes through HOA's - if so my views on HOA's may change drastically.
The last place I purchased a townhome in had an HOA rule that homes could not be rented until after 1 year of ownership and that rentals were only permitted so long as no more than 18% of homes in the HOA were being leased by the owners. So even if you passed one year and and the rental were at community capacity you still wouldn't be able to rent it.
You could add a "luxury" tax to properties that were purchased by LLC or corporate names as opposed to individuals. This would hurt me but I'm always for the betterment of mankind.
There are answers.
I often attend conferences and meetings where successful real estate investors speak. I like to learn something new, enrich my knowledge, and develop my skills. Investors who have achieved high results in their field can share their invaluable experience and point me in the right direction. In addition to attending conferences, I read a lot of literature on investing correctly and achieving good results. One of my most recent sources of information was transfs.com. There I found interesting information about the 1031 exchange. I would like to put this knowledge into practice. Perhaps this step will be the beginning of a great journey.
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I went through this process of selling and buying real estate. Almost every realtor works only for themselves, without giving a percentage to the firm. But he must have great qualifications. When I had to sell real estate, I tried to get it ready for showings. I always tried to go tenancy cleaning to visually transform the property. I was ashamed that there were traces of previous people who wanted to see the house but did not buy it. It was a big waste of time and money, but I knew it gave me a chance to buy. And as a realtor, I would get a big percentage without the company involved.
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By law, a realtor in Pennsylvania cannot act on their own. If they do they will lose their license (period). If a realtor takes money independent of their broker for real estate services, the will lose their license (suspended at a minimum) if their local realtor board is informed of such an incident. A realtor MUST be affiliated with a broker (brokerage) otherwise their local Realtor Association will not issue their license. The broker takes a portion of their commission every time. The lowest amount I have ever heard of is $800 per transaction but typically it is a percentage of the percentage. Top agents have very low splits some are 90/10 or thereabouts. Any agent telling you they act independent of a broker is lying. Their whole schtick is marketing and propoganda. Typically what they tell you is standard practice in the industry even though they sell it as if they are the only ones doing that particular thing.
Just had 2 teaching colleagues in their 30s decide to bail on Education and go into Real Estate.
A 30ish mother quit to join another former colleague as a real estate sales team within an established local agency. Her kids are young, her husband has a good income w benes, so she could likely easily rationalize the exchange of daycare for the ability to be with her own kids and try out a new career with more flexibility. Not sure it will work but logical.
Our hot shot Principal quit 2 weeks ago while he was a candidate for a District Office job. Timing was odd, maybe he was passed over, but it is also apparent that these past 3 years have gutted him. Our district plemented numerous changes for our high school this year after the 2 Covid chaos debacle. Dude was put in a tough spot by the higher ups and fried. He has a house flipping buddy who has been wanting him to join him for years. Apparently he also has done/studied day trading since 2014 with some success. July 1st he starts with no insurance, salary or benefits. Much, much more risky move. Emotionally he feels great. Has 3 young kids and the event and meeting schedule was killing him. Rumors of unhappy marriage were floated too..which seems reasonable. His leap of faith is just that. Real estate in Southern Chester County will likely stay hot, but the margins will shrink as competition increased.
I'm glad I'm not either of them...but at 38 I burned out of a Sports Marketing career and changed to education. Godspeed.
A 30ish mother quit to join another former colleague as a real estate sales team within an established local agency. Her kids are young, her husband has a good income w benes, so she could likely easily rationalize the exchange of daycare for the ability to be with her own kids and try out a new career with more flexibility. Not sure it will work but logical.
Our hot shot Principal quit 2 weeks ago while he was a candidate for a District Office job. Timing was odd, maybe he was passed over, but it is also apparent that these past 3 years have gutted him. Our district plemented numerous changes for our high school this year after the 2 Covid chaos debacle. Dude was put in a tough spot by the higher ups and fried. He has a house flipping buddy who has been wanting him to join him for years. Apparently he also has done/studied day trading since 2014 with some success. July 1st he starts with no insurance, salary or benefits. Much, much more risky move. Emotionally he feels great. Has 3 young kids and the event and meeting schedule was killing him. Rumors of unhappy marriage were floated too..which seems reasonable. His leap of faith is just that. Real estate in Southern Chester County will likely stay hot, but the margins will shrink as competition increased.
I'm glad I'm not either of them...but at 38 I burned out of a Sports Marketing career and changed to education. Godspeed.
Crazy about the principal, are you in Howard county Maryland? Because a principal there resigned and that’s the rumor is that they’re going into real estate.
Some signs of strongly weakening real estate market from the ground up. 1. I know an interior designer/stager who said last week that all of a sudden her phone started ringing off the hook several weeks ago -- not gradual. 2. I got a call out of nowhere from a mortgage loan agent I hadn't talked to for about 4 years and who asked me whether I needed a loan. My supposition is that loan demand has declined precipitously and the Savings & Loan was telling its employees to not sit around doing nothing and make cold calls in the hope of drumming up business.
1) There are hedge funds that do specialize in real estate but many invest in REITS rather than individual properties although some do purchase underperforming properties in areas of the country where RE prices have been escalating. I can all but assure you that hedge funds are not in business to earn just 5% returns since their hurdle rates for earning their typical 20% commission is usually much higher.
2) Coronavirus economic relief efforts aided money supply growth. That coupled with fewer transactions made throughout the economy due to savings increasing from economic uncertainty ultimately decreased money velocity. Unlike in the past, the Fed is now unwinding its balance sheet. Mechanically, the Fed will reduce its securities holdings by not reinvesting the funds it receives from maturing securities thereby taking money out of the economy. People chasing less money translates to higher interest rates. Simple supply and demand.
3) Depends what asset classes you're going to take that borrowed money and invest in. For me it wouldn't be RE. Interest rates are going to go through the roof as the Fed continues to unwind its balance sheet.
We are another example...empty nester in a 1969 colonial w 2.6 acres. Too much house and maintenance. We've played the downsize or relocate game for 5 years. Out of nowhere a young man who grew up in our home contacted us to buy. Deal should've happened but didn't...a hurdle was us having to rent for a year due to lack of inventory. Now there is lots of inventory in our range but we decided to stay.
Like your designer exame above, we had put aside $25 k for a lower end full owners bathroom upgrade. Couldn't get a contractor. Given all the economic uncertainty we decided to "polish the turd." My wife has been on Tik Tok and Etsy and we are doing some funky things like painting the metal of our old shower doors black and adding privacy cling stickers to hide the water stains. New faucets, some cheap Ikea furniture and hiring a carpenter to add some beadboard. I'm finishing painting today. Total cost should be about $3,500 all in.
The decision we made was that in 5 years we may have an "as is" buyer again in the young man who made an offer (in the interim his wife is now pregnant with twins...they are lucky they held off). That would save us about $80k in commissions and upgrading our septic (his family is a leading septic company in Pa/Del/Md).
In 5 years we may retire, but until then we will keep doing small upgrades ourselves. His eldest kid will be heading to Middle School and he would want to get out of DE and into PA public schools. As our town gets cuter demand from general public is still strong as we are only 2 miles outside of town. Last month a couple was knocking on doors asking if people were interested in selling...and they found an elderly couple who sold to them!
We are going to watch the market but are officially on the sidelines...one less distraction. We got a new 5 year teachers contract which makes working at least that long worthwhile. It will be interesting to see how things shake out- but IF we would've sold and rented like I wanted to we'd be in a very favorable position right now as cash buyers....I think that will only get better
I am 77 years old and by experience know that this prices will come down. Drastically! They always do. The Florida Market is insane because people who don't have grandchildren or who can afford it are moving to Florida in record numbers. This is the largest mass migration in American history. No one can sustain this growth. There is a crash coming just like 2008.
Real estate is highly location dependent and what applies to one area may have zero impact elsewhere. Prices to not "always" come down. If they did, housing prices today would match those of 50 years ago after being adjusted for inflation and that certainly isn't the case.
In my market housing prices have been on a steady climb for decades. Even in 2008 when most of the country saw a big decrease in price, prices here basically leveled off for a short time before resuming increases 1-2 years later. I suspect 2022 prices here will drop a little bit until the new normal is found, because the massive increases of the last few years were atypical and there are still listings hitting the market priced like those huge gains are still happening. Once this settles, my market will in all likelihood continue the upward trend again since it's an extremely popular destination to live with high growth.
2008 was a completely different situation, lenders no longer hand out money to unqualified buyers like they did back then. If there's a crash, a big if, it will be completely unrelated and dissimilar to what happened in 2008.
Not sure about that Mary. Many of these “inflated” properties were purchased in cash, by investors or those who are highly qualified. I just don’t see mass foreclosures coming like in 2008. There is a major housing shortage in this country. Prices will stabilize eventually, but go down significantly? Seems unlikely.
As the FED keeps raising interest rates, the housing market will go down. The other issue in housing is/was lack of building materials and lack of labor. So again, as the interest rate goes up and the housing market starts to cool a little, some of those bottlenecks will start to alleviate. Then the overall economy going into a recession will decrease the people looking to move. So I think here in Q3 and Q4 we will start to see all of the above start to push housing prices down in most locations. Depending on how high the interest rate goes, how deep the recession is, and how well the supply chain starts to replenish, I could see housing in 2023 continuing to go down as all of those factors really take effect.
I agree unlike in 2008 that there won't be this massive amount of foreclosures, but as a recession hits, there will be some foreclosures coming. And if I am not mistaken, Covid rules did not allow some foreclosures to occur which should start to be unwound as well.
I agree unlike in 2008 that there won't be this massive amount of foreclosures, but as a recession hits, there will be some foreclosures coming. And if I am not mistaken, Covid rules did not allow some foreclosures to occur which should start to be unwound as well.
There are some blue states experiencing mass exodus as a result of their policies. They will certainly fall. But you are right that many inflow locations will simply stabilize or see more reasonable price growth.
You also had work from home go from a dream to reality for literally millions of people which was another major driver of people leaving cities and high priced areas to more rural and lower cost locations. Some of that will continue but a large amount of people that did that won't be in the market either.
So a lot of factors that drove housing won't be in play over the next year.
Very true and similarly they’ll be things like in the county that I live in. overall it is exceptionally liberal but when the county redistricted the schools you had a lot of upset people, specifically Asians, who did not like being redistricted to one of the poorer schools. So they are buying or renting anything they can out here in the rural part of the county where there’s thousands of acres of preserved farmland and no building allowed.
I wonder, in this new digital world (where an employee doesn't have to be tied to a physical location) that people have better options on where to live. So instead of paying $3m for a manhattan/LA apartment or having to take a 1.5 hour commute from a more reasonable location, you can simply move to Kiahwah, St. Augustine, or Apple Creek Ohio (where you can get a great 2000 sq foot ranch on a trout stream for $150k).
Perhaps it is time to move out of large cities (expense, crime, cost of living, schools, quality of life, pollution) and back to the countryside.
Perhaps it is time to move out of large cities (expense, crime, cost of living, schools, quality of life, pollution) and back to the countryside.
I think this is an emerging trend. Alot of young professionals still like being in the city and around lots of expensive entertainment. Give me the acreage and views and a much lower cost of living please!
My assumption is that the fed is going to have to drastically interest rates maybe 3 or 5 times the present level. That will pawn a sell off especially by those who bought it for investment. A 10000 ft² lot in the poorest part of Mt Dora is selling for $70000. A 2 bedroom hovel of 900 ft² is selling for 200000. Common sense says reality will set in at some time.
It’s been long known that cities are the playgrounds for young singles and young couples. But as soon as their first child hits three years old they start looking to the suburbs for good schools and a yard for the kids to play in. This is now being amplified by technology and the work-from-home movement. People can now live 50-100 miles away if they need to be in the office once or twice a week. For many, they can live anywhere and log in via internet.
One thing I would like to see is how many work from home people run two or three jobs simultaneously. Bet a substantial number do so, getting primary job done in 4-6 hrs and then 4 on a different job. Even working both at same time juggling emails and zoom meetings.
two jobs, huge issue. Saw an article where some polling data had 33% of people working from home who are now doing a side job. We fired one guy and didn't hire a second when we found out that they had second jobs (full time in the same field, so literally double dipping). So a legit issue out there.
I had a job opportunity in Manhattan a few years ago and it didn't pan out. But I started to look at a place to live and was kind of shocked. Even with all I know, a 900 sq ft place could often cost well over $1m.
At the time, there were about 8,000 properties for sale. That went up to ~ 14,000 at one point. Today it is at 13,524.
www.realtor.com
At the time, there were about 8,000 properties for sale. That went up to ~ 14,000 at one point. Today it is at 13,524.
Manhattan, NY Real Estate - Manhattan Homes for Sale | realtor.com®
View 13525 homes for sale in Manhattan, NY at a median listing home price of $1,395,000. See pricing and listing details of Manhattan real estate for sale.
www.realtor.com
Inventory levels increasing, but the problem for buyers is that most sellers aren’t in panic mode. They have low interest rates and can afford to play the waiting game. Worse, they’re mentally anchored to the selling price they could’ve gotten 6 months ago but cannot now.
3 months ago in this thread I predicted a 20-30% price retreat on $1m+ homes, and 5-10% on the $500K and below segment. I still think that’s true, but it’s going to take some time to shake out. I still believe we have a significant recession ahead, but the economy is sending confusing signals. Gas prices seem to be easing for now, Q2 earnings are surprisingly strong, and the job market is still hot. Yet inflation is still ripping along at 9%, coronavirus restrictions are mostly gone, consumer confidence is shaken, rates are rising, our 401Ks have taken a hit, we have supply chain issues, and one of the largest nation states is at war. I think Americans are enjoying their summers with their heads in the sand. It’ll take more Fed rate increases and a weak holiday season - both of which are coming - for reality to set in. 2023 is setting up to be ugly. Plus, we will have the uncertainty of an upcoming election. Back half of 2022 is slightly down, 2023 will be the biggest impact, and 2024 could be the earliest relief economically.
Until then, I’m RVing with my remote job and money in the bank, waiting until we bottom out to pounce on a new primary and several rental / investment properties.
3 months ago in this thread I predicted a 20-30% price retreat on $1m+ homes, and 5-10% on the $500K and below segment. I still think that’s true, but it’s going to take some time to shake out. I still believe we have a significant recession ahead, but the economy is sending confusing signals. Gas prices seem to be easing for now, Q2 earnings are surprisingly strong, and the job market is still hot. Yet inflation is still ripping along at 9%, coronavirus restrictions are mostly gone, consumer confidence is shaken, rates are rising, our 401Ks have taken a hit, we have supply chain issues, and one of the largest nation states is at war. I think Americans are enjoying their summers with their heads in the sand. It’ll take more Fed rate increases and a weak holiday season - both of which are coming - for reality to set in. 2023 is setting up to be ugly. Plus, we will have the uncertainty of an upcoming election. Back half of 2022 is slightly down, 2023 will be the biggest impact, and 2024 could be the earliest relief economically.
Until then, I’m RVing with my remote job and money in the bank, waiting until we bottom out to pounce on a new primary and several rental / investment properties.
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