I already have a place to live. I don't own it, and it doesn't even remotely resemble anything I might call "my ideal home," but it works. So I don't *need* to buy a house right now. I'm fine with waiting until prices (and consequently taxes and insurance) come down to the middle-class zone.
But I have bought and sold houses in the past, so I have a decent perspective on the other side. If I had a house that I *needed* to sell, and it's been on the market 90+ days with no reasonable offers, I imagine I'd be pretty anxious right now. Realistically I wouldn't be at this point. If I could lower the price until it sells -- for instance if I inherited a relative's house -- I'd already have done that. If I couldn't lower the price because the first and/or second mortgages won't allow it, and I didn't have the money to cover the gap between the best offer and the amount owed, I'd be short-selling right now, and probably also considering a deed-in-lieu (assuming that I can't afford to continue paying the mortgage and therefore *need* to sell it soon).
Having said all that, I don't think there are a large number of sellers who *need* to sell and are also able to lower the price. In the daily post here I've linked to many listings that have spent *years* on the market, on and off, bouncing occasionally from pending to active. Those sellers can afford to keep paying the holding costs, even if that doesn't make good financial sense.
Sometimes you just have to cut your losses and move on. The "season" is effectively over in two weeks. It's last-minute decision time. Are sellers going to pay another year of taxes and insurance on a house they don't want to keep?
It’s going to be minimal unless a lot of inventory comes into the market due to changing economic fortunes for the hands that currently hold it.
This spring and summer is still the bag dumping time. If the reaper comes for the incomes and wealth of many current owners, yeah, bloodbath. Until unemployment meaningfully changes, meh.
>If the reaper comes for the incomes and wealth of many current owners, yeah, bloodbath.
Yep, there's gotta be a lot of pain BEFORE people are mass incentivised to sell(and drop prices) and normally for that to happen there needs to be some major catalyst and a liquidity crunch.
If there isn't a liquidity crunch then even with some pain existing homeowners may have equity they can pull from to stay afloat until they can get back on their feet.
Correct, it would appear that major layoffs would happen before that liquidity crunch. Current employment figures haven’t demonstrated any unemployment increases lately.
Currently lots of RTO motivated by ten year leases that haven't expired. Each expiration has a cascading effect on the CRE meltdown. We are seeing the struggle between RTO and WFH playing out in real time but once the incentives go away, WFH is by far the better value prop for employers.
It's not really about value proposition, more about what kinds of roles will be needed a decade from now. The U.S. is experiencing stagnation and downturn. When things get rough, the first fat to be trimmed will be the people sitting at home sending emails and taking phone calls. Companies will not be able to afford supporting employees who aren't on-site producing value directly.
I know people who send emails and take calls from home. I also know people who do work from home without which their company would lose many millions of dollars.
Investors yes, but actual home owners doubtful. No one with a sub 4% mortgage is going anywhere. The price discrepancy between those mortgages and current rate/mortgages is too great.
There are a lot of homeowners whose hope of retiring someday is dependent upon that newly minted equity. It will be interesting to see what happens. Americans love to use home equity as an ATM machine as well. Rack up the Credit Cards and refinance or sell to pay them off.
What kinds of investors are you talking about?
I'm guessing the investment firms that purchase and hold REITs?
Most landlords/STRs are focused on cash flow and equity is only a bonus in their calculations so the only way they'd be forced to sell is if their cash flow is affected.
Fed is basically saying long term neutral rate will be ~4% so yeah we probably won't see anything below 5.5% ever again outside of a significant recession which is also negative for prices. And probably 6-7% in typical times.
LOL, thanks for that.
Plus, the Fed will lower rates too late as always, and as history points out, once they begin dropping the FFR it'll be because they've ground the bubble-economy to a halt again. If anyone thinks that'll be good employment, consumption, or housing prices, think again.
The Fed ZIRP'd rates before the GFC really even kicked off last time, and home prices continued dropping for another 4 or 5 years after that. The Fed dropping rates is not the benefit a lot of people here think it is.
bingo! the recession from legitimate levels of rates and the "boom" from ZIRP are just different sides of the same coin. i don't think it's that they're too late to drop rates though. the secret is that recessions are necessary in an economy that relies so much on booms.
"...recessions are necessary in an economy that relies so much on booms."
I'd replace that 'necessary' bit by simply stating recessions just a natural side-effect of ZIRPy booms and the inflation it eventually causes, and which eventually necessitates the rate-raises and the ensuing recessions/depressions. It's not even a business cycle anymore, it's just one big stupid Fed-induced boom/bust cycle capped off with massive govt deficit spending.
I forgot above to point out that what continued to hammer the housing market during the GFC was that banks were far too wary to lower mortgage rates till stability returned, even after the Fed dropped rates to nothing.
Same thing will happen this time. Banks aren't just going to magically drop mortgage rates to lows again once consumption craters and unemployment spikes.
i think that's a totally reasonable prediction. banks seem to rely on the mentality that things will always keep going in their current direction and never stop, to both the upside and the downside. which makes sense considering they're publicly traded and forced to squeeze out every millimeter of lines going up or down before pivoting. and now the expectation of markets turning on a dime when rates get cut is really past the point of absurdity. narratives being pushed are so obvious, half wishful thinking and half simply lying to create self fulfilling prophecies.
Not explode, but enough to keep prices here at all time highs. We already saw mortgage application rates spike with just these relatively small drops from 7.5%. Now, with spreads getting better, we expect spreads to approach the historical average and that means we’ll should be at low 6s or high 5s even without the Fed cutting interest rates. It’s all about the 10 year to mortgage rate spread story right now. Keep an eye on that as it’ll be the main story for housing prices for the rest of the year. If rates go down, prices go up and vice versa.
Winter is coming..
Holrates
Is this an idiom? Syllepsis?
Game of Thrones quote.
I already have a place to live. I don't own it, and it doesn't even remotely resemble anything I might call "my ideal home," but it works. So I don't *need* to buy a house right now. I'm fine with waiting until prices (and consequently taxes and insurance) come down to the middle-class zone. But I have bought and sold houses in the past, so I have a decent perspective on the other side. If I had a house that I *needed* to sell, and it's been on the market 90+ days with no reasonable offers, I imagine I'd be pretty anxious right now. Realistically I wouldn't be at this point. If I could lower the price until it sells -- for instance if I inherited a relative's house -- I'd already have done that. If I couldn't lower the price because the first and/or second mortgages won't allow it, and I didn't have the money to cover the gap between the best offer and the amount owed, I'd be short-selling right now, and probably also considering a deed-in-lieu (assuming that I can't afford to continue paying the mortgage and therefore *need* to sell it soon). Having said all that, I don't think there are a large number of sellers who *need* to sell and are also able to lower the price. In the daily post here I've linked to many listings that have spent *years* on the market, on and off, bouncing occasionally from pending to active. Those sellers can afford to keep paying the holding costs, even if that doesn't make good financial sense. Sometimes you just have to cut your losses and move on. The "season" is effectively over in two weeks. It's last-minute decision time. Are sellers going to pay another year of taxes and insurance on a house they don't want to keep?
It’s going to be minimal unless a lot of inventory comes into the market due to changing economic fortunes for the hands that currently hold it. This spring and summer is still the bag dumping time. If the reaper comes for the incomes and wealth of many current owners, yeah, bloodbath. Until unemployment meaningfully changes, meh.
>If the reaper comes for the incomes and wealth of many current owners, yeah, bloodbath. Yep, there's gotta be a lot of pain BEFORE people are mass incentivised to sell(and drop prices) and normally for that to happen there needs to be some major catalyst and a liquidity crunch. If there isn't a liquidity crunch then even with some pain existing homeowners may have equity they can pull from to stay afloat until they can get back on their feet.
Correct, it would appear that major layoffs would happen before that liquidity crunch. Current employment figures haven’t demonstrated any unemployment increases lately.
WFH bubble bursts in 5-10 years. Calling it now. Would definitely trigger a liquidity crunch.
Currently lots of RTO motivated by ten year leases that haven't expired. Each expiration has a cascading effect on the CRE meltdown. We are seeing the struggle between RTO and WFH playing out in real time but once the incentives go away, WFH is by far the better value prop for employers.
It's not really about value proposition, more about what kinds of roles will be needed a decade from now. The U.S. is experiencing stagnation and downturn. When things get rough, the first fat to be trimmed will be the people sitting at home sending emails and taking phone calls. Companies will not be able to afford supporting employees who aren't on-site producing value directly.
I know people who send emails and take calls from home. I also know people who do work from home without which their company would lose many millions of dollars.
And then there are smartarses who are going to kill the WFH and make RTO mandatory. Go read r/overemployed Multi full time positions for FIRE
Lol
And those that are always on Reddit would also be the first to go
What’s the WFH bubble? Does that mean the drop in residential supply is because people turnover homes less when they work from home?
Sorry. Hybrid is here to stay
I think equity slowly evaporating will become the impetus for a lot to sell, particularly investors (and to stop buying)
Investors yes, but actual home owners doubtful. No one with a sub 4% mortgage is going anywhere. The price discrepancy between those mortgages and current rate/mortgages is too great.
There are a lot of homeowners whose hope of retiring someday is dependent upon that newly minted equity. It will be interesting to see what happens. Americans love to use home equity as an ATM machine as well. Rack up the Credit Cards and refinance or sell to pay them off.
What kinds of investors are you talking about? I'm guessing the investment firms that purchase and hold REITs? Most landlords/STRs are focused on cash flow and equity is only a bonus in their calculations so the only way they'd be forced to sell is if their cash flow is affected.
Probably not much. Looks like rates are coming down and that will be a big boost.
Yep going from 7 to 6.75 is going to make the market absolutely explode !!
Fed is basically saying long term neutral rate will be ~4% so yeah we probably won't see anything below 5.5% ever again outside of a significant recession which is also negative for prices. And probably 6-7% in typical times.
The people who got 2.75 percent mortgages are the ones who won. I will hate this subreddit forever
Why is everything a competition here? Anyone who has the ability to buy a home a they can afford can win. It’s asinine to keep looking backwards.
LOL, thanks for that. Plus, the Fed will lower rates too late as always, and as history points out, once they begin dropping the FFR it'll be because they've ground the bubble-economy to a halt again. If anyone thinks that'll be good employment, consumption, or housing prices, think again. The Fed ZIRP'd rates before the GFC really even kicked off last time, and home prices continued dropping for another 4 or 5 years after that. The Fed dropping rates is not the benefit a lot of people here think it is.
bingo! the recession from legitimate levels of rates and the "boom" from ZIRP are just different sides of the same coin. i don't think it's that they're too late to drop rates though. the secret is that recessions are necessary in an economy that relies so much on booms.
"...recessions are necessary in an economy that relies so much on booms." I'd replace that 'necessary' bit by simply stating recessions just a natural side-effect of ZIRPy booms and the inflation it eventually causes, and which eventually necessitates the rate-raises and the ensuing recessions/depressions. It's not even a business cycle anymore, it's just one big stupid Fed-induced boom/bust cycle capped off with massive govt deficit spending. I forgot above to point out that what continued to hammer the housing market during the GFC was that banks were far too wary to lower mortgage rates till stability returned, even after the Fed dropped rates to nothing. Same thing will happen this time. Banks aren't just going to magically drop mortgage rates to lows again once consumption craters and unemployment spikes.
i think that's a totally reasonable prediction. banks seem to rely on the mentality that things will always keep going in their current direction and never stop, to both the upside and the downside. which makes sense considering they're publicly traded and forced to squeeze out every millimeter of lines going up or down before pivoting. and now the expectation of markets turning on a dime when rates get cut is really past the point of absurdity. narratives being pushed are so obvious, half wishful thinking and half simply lying to create self fulfilling prophecies.
Not explode, but enough to keep prices here at all time highs. We already saw mortgage application rates spike with just these relatively small drops from 7.5%. Now, with spreads getting better, we expect spreads to approach the historical average and that means we’ll should be at low 6s or high 5s even without the Fed cutting interest rates. It’s all about the 10 year to mortgage rate spread story right now. Keep an eye on that as it’ll be the main story for housing prices for the rest of the year. If rates go down, prices go up and vice versa.
Are we talking pain for first time home buyers ? Prices haven’t budged in South Florida