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Updated almost 2 years ago, 01/14/2023
Housing crash deniers ???
Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions.
However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.
Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct.
Quote from @James Hamling:
Quote from @Greg R.:
Quote from @James Hamling:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Carlos Ptriawan:
so update from me, there's this desktop automation software.
So here's what this software telling me.
Peak is at June 2022
Market is reaching -3% from Dec 2022 to Dec 2023
Bottom is Q4 2023, and the price going to reach the range of June 2022 somewhere around 2026.
This is for our local market though, meaning in 2023 is a quite good time to buy at the bottom before we sell it in 2026/2027.
@Carlos Ptriawan what you are seeing is mostly what I’m seeing. The deals are slight adjustments but for the most part prices are flat or a few % points down locally for me (nationally is closer to 8% or so). Volume is way down as expected but inventory is flat.
@John Carbone it's funny but my STR are doing very well even brand new ones in FL. I would have been happy with less than what I'm achieving (expected a downturn) but just not seeing it yet. Which is a pleasant surprise. That said I wouldn't call it a blue chips market but more like upper middle class markets. Which has been fairly stable and still a lot of cash on hand.
That said the next 6 months will be telling. So many variables with Covid in china (ukraine/russia is silent in news these days funny enough) and other global levers that could hurt us. I’m expecting inflation to slow about March/April as housing will be at their peaks. I’m curious what happens when the markets see that in the inflation numbers.
I’m personally not seeing it yet either, but I’m seeing it in the competition by looking at calendars.
real competition though? Or people who "heard" you could jump in and make easy money on STR? It's amazing how many times people cut corners like not having beach chairs when near a beach, not having a high chair / pack in-play for family oriented homes or even just adding snacks. Not saying it's as simple as that but to your point around you managing ahead of time, strategy does matter.
Yeah, the listings with no bookings are not operated or set up properly. However, last year at this time those places were renting out at a good clip going into 2022. So there is clearly a strong shift in demand going into 2023 relative to 2022. This could be a short blip though, and I hope it is as I don’t have bookings beyond Memorial Day.
That makes sense to me. Markets ar definitely slower just not a lot out there so prices are not holding strong but not dropping much so to speak. Generally obviously a few big markets got hit nationally.
On the rental side - people seem more cautious - so those not setup right I’m not surprised are hurting. On the flip side on a brand new property, I’m still seeing last minute rentals and long ones - and as reviews have been coming in bookings are jumping quick. So I feel like the market is there just selective.
Will it hold? Right now my concern there is china/fed. CHina Covid impact no supply chain has not been felt yet. Will be interesting.
I see very good things coming in manner of supply chain via a pivot to S. America.
The whole run to China was an abortion of an idea in the first place, the outcome was inevitable. But S. America, it's multiple solutions in 1.
A N/S American trade pact is simply liquid gold. We have proven out the path on how to develop such via what was done in China, now it's just a pivot to apply all lessons learned in S. America. The geo-political risks of enriching S. American nations is next to nil. It's just a no-brainer.
So I say go riddance China, thanks' for the Beta run on it all, now it's time for Alpha in S. America.
Anyone have any idea how far $1m USD will go in Guatemala? Far, very very far. Want farmers to stop growing coca in Columbia, hello chip-plant. Economic stability in Nicaragua, "Yo quiero Apple manufacturing".
South America is the future of manufacturing. Mexico become "the" logistical hub of the American continent. All win.... except China, they lose, big time. Good luck funding that military expansion when western commerce has gone to S. America.
Cool idea bud, but it's not going to happen. The current admin is deeply beholden to China. To think they are going to pivot to Honduras and El Salvador is beyond far fetched. Plus, manufacturing will cost WAY more in South/ Central America. China uses forced/ slave labor/ child labor/ and other really sickening practices that wouldn't fly in South/ Central America (these practices are the primary reason for low cost). Plus there is a wayyyyy larger workforce in China. Central America AND South America population combined is roughly 600 million. China?? 1.4 BILLION.
I do business in SA & CA, and while pay rates are much lower than the US, they are way higher than China. What does that mean? Higher prices for American consumers & less profits for corporations.
Again, not going to happen, so you can stop it with this idea.
So your saying, when we are at WAR with China, no-way no-how is manufacturing and trade relations going to shift to S. America? That is, yet again, one heck of a ignorant thought path.
Not to burst your bubble but the shift has already begun, FYI. Conflict with China is inevitable, and this is a rather universally known fact.
The statement that China is a slave & child labor nation, is bordering on racist in it's degree of ignorance and stereotyping. The statement does not merit a response beyond that and that you may need to get out and experience the world a bit more so to stop broadcasting from your own bias's and shift to a bit of experience based instead.
S. America's primary export at this time is it's people. Let's just hang on that for a moment.
Logistics' of S. American import has opportunity of cost savings vs China, that cancels out some of pricing differentials. S. America presents a Geo-Political diversification that has emerged as an issues with China trade relations, not to mention presenting a cure for that primary export shifting from PEOPLE too goods, there is significant savings in that isn't there?
I agree, the powers-that-be are in bed with China rather considerably, but time of reconning is at the door so a shift is pressed, it's non-optional now, only questions is where to and with whom. A developing American continental trade relationship is long over-due, and now it stands as last option because China beat the world too Africa.
So now you are so stubborn that you refuse to accept the truth that's smacking you in the face that the market is declining with almost every economic indicator is flashing DANGER. And yet, you are asserting that we're going to be at war with China soon - WITH NO EVIDENCE - 100% speculation. This is why you can't be taken seriously. Your takes lack merit and are purely speculative.
But it gets better. Once I thought your arguments couldn't get any more stupid, now you claim that my points are racist!! wow. This is a clear indicator that your argument has zero merit, you try to invoke the race card to silence those who challenge your nonsense.
I guess the UNITED STATES STATE DEPARTMENT and the UNITED STATED DEPARTMENT OF LABOR are racist as well. They even recognize the forced labor in china.
https://www.state.gov/forced-l...
https://www.dol.gov/agencies/i...
10 FACTS ABOUT CHILD LABOR IN CHINA
"Millions of children across China are laborers"
"Traffickers often buy child laborers who receive commissions and finders’ fees. Child labor can be a form of human trafficking where employers buy and sell children as employees. Parents sell their children to traffickers while traffickers either kidnap or lure others to drop out of school with the promise of a lucrative life. The United Nations Action for Cooperation against Trafficking in Persons works to prevent trafficking by raising awareness of the tricks and trade techniques that traffickers use to recruit children. These methods are more appealing to children living in poverty because it involves the promise of money and resources that they could otherwise not afford."
James I guess you know better than the United Nations, US Department of Labor, US Secretary of State, and any investigative journalist who have documented IN VERY FINE DETAIL about what is going on in China.
Your ignorance and arrogance is really astounding.
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Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Nicholas L.:
just as a reminder, here's what you said in your 5th post to this thread:
"I would say take the 10 years prior to the bubble and get the average rate of appreciation. Use the same rate of appreciation for 2021 & 2022, once you get to where values are at that point, that's the market correction. Crash is beyond that."
i haven't done the math to see what that would be. and i think you'd agree that it's not the case that every single market corrects to that... right?
Without the bubble these properties still would have appreciated +/- 4%, so one would need to calculate that out to see that amount compared to the current amount. I don't think it will necessarily be exact, but it should be somewhat close IMO.
Except you forgot calculate inflation.
And there are still booms on housing. one of the big ones for your period, which is why TX, FL have seen such big booms.Is work from home becoming more standard. That cause a lot of the boom in many places even if they weren't moving long distance people relocated for backyards, pools etc.. How much is that impact though?
Which is why generally thinking I think we will fall some where in the middle.
And I agree re: remote work. However, a lot of that is starting to become frown upon. Many companies are wanting a return to the office because of decreased productivity and an unsavory work environment due to everyone working from home.
This is now getting down a rabbit hole of economics comprehension but i will try to simplify best I can.
Inflation is a mono-directional item. The only measure of inflation is to the degree of it's increase, there is no "negative" inflation.
"Negative inflation" is DEFLATION.
To simplify what your saying here is that since there was a significant inflation event that occurred, now deflation will happen simply because there was inflation. It simply does not work that way.
Inflation is the result of specific inputs, actions done that "inflate". For example, adding a few trillion to the U.S. money supply, which then makes every existing dollar worth a little less, that result from that "watering down" of the money supply is called INFLATION. Now, in this example, there is nothing to DEFLATE, the $ is there, one would have to REMOVE $ from the supply to them make every remaining $ worth a little bit more, which we call DEFLATION.
Inflation is a constant int he U.S. for 3 primary, and related, causalities. First, MORE PEOPLE. As every year there is more people in the U.S. then the year before, if the $ supply stayed static, it would mean the existing $ supply get's split by more hands, and that would cause a DEFLATIONAYRY event in the $supply, which would cause restriction in access too $, slowing economic activity and, cause INFLATION to the cost of $, resulting in INFLATION to all items due to this restriction, from simple demand-supply relationship.
When there is "too much" $ kicked out into they system, say some F.Gov. action to send $ to every American for a year or two.... the value of the $ is diminished but also economic activity goes red-hot, and again supply-demand cycle presses INFLATION into the forefront.
So on both extremes of the pengalum is where the "INFLATION zone" lies. It is only by maintaining in the middle where equilibrium is found.
Real Estate is a fundamental human NEED. Shelter is not optional.
We have a "perfect storm" in housing from '08' event where we lost a decade of supply creation. This has primed the market for the net unit shortage we have today. Of course there is localized deviations from this but we are talking on national scale here and in general U.S. terms.
This net-unit shortage has created a support level for real estate against deflation because there is more demand then supply.
In addition the inputs to create new housing units has grown dramatically, eliminating that ready potential for deflation.
To achieve any significant DEFLATION in real estate housing prices there MUST be some catalyst for significant DEFLATION in demand, which today would require about 30 million people dying, tomorrow, poof just like that. OR a significant DEFLATION to ALL input costs to produce new housing units. That means BOTH material and labor, dropping by 20%+. That means the Electricians taking 20% less, lumber, concrete, steel, aggregate, flooring, gypsum, HVAC, ALL the hundreds of inputs DEFLATING there billing by 20%+ which would require there supply chain all also DEFLATING by 20%+.
This is unrealistic at best, a economic wide DEFLATION of 20%+.
The drop in volume of sales does NOTHING to these underlying factors. It ONLY reduces volume. Remember, significant net-shortage. So builders will throttle back and build LESS. Existing home owners will stay in there home LONGER.
Remember, more then 70% of mortgage holder sin the U.S. are sitting with a sub 4.25% mortgage right now today. They have every incentive to stay put.
This is NOT '07', there is NOT a mass of resetting mortgages ticking away that would force people out. '08' happened because people were forced out of there homes, FORCED, via resetting rates doubling, tripling, quadrupling there monthly payment, this simply does NOT exist today. Also, mortgages were handed out on the review of a person having a pulse, today that also does NOT exist.
Real Estate has been coined the #1 hedge against inflation for generations, it has stood the test of time and why any think that will just magically flip to the opposite today is beyond me. Yes, 100% real estate WILL remain the #1 hedge against inflation.
We are now into STAGFLATION, I have been very clear on this fact for a long time now. I have also detailed exactly what this means so I have no interest in doing it yet again. Why Greg want's to twist things to say if the sky isn't falling then the only alternative is skyrocketing prices is beyond me, I have seen NOBODY saying that.
STAGFLATION.
And my bet is the F. Gov. is not going to have patience to work through this Inflation Correction period, not going into election cycle. I foresee the F.Gov. meddling with things of issuing out more "stimulus" under the cloak of some "Inflation Recovery Act" BS or something to that tune. IF/when they do that, YES, prices WILL rocket up, absolutely.
BUT, if they don't meddle with things, leave things to those who know what there doing, STAGFLATION for the next 18 - 48 months with local market specific deviations, and settling into a standard and stabilized rate of appreciation.
As I presented for over a year now, there could be a national average consolidation of as-much-as 15% step back in median home prices. This is a consolidating event NOT collapse, crash or "correction". And there WILL be localized market specific deviations of this. For example CA, in the negative or FL in the positive. Again, specific to and coming from specific factors unique to those specific markets, like CA being a hot mess without water.
- James Hamling
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Nicholas L.:
just as a reminder, here's what you said in your 5th post to this thread:
"I would say take the 10 years prior to the bubble and get the average rate of appreciation. Use the same rate of appreciation for 2021 & 2022, once you get to where values are at that point, that's the market correction. Crash is beyond that."
i haven't done the math to see what that would be. and i think you'd agree that it's not the case that every single market corrects to that... right?
Without the bubble these properties still would have appreciated +/- 4%, so one would need to calculate that out to see that amount compared to the current amount. I don't think it will necessarily be exact, but it should be somewhat close IMO.
Except you forgot calculate inflation.
And there are still booms on housing. one of the big ones for your period, which is why TX, FL have seen such big booms.Is work from home becoming more standard. That cause a lot of the boom in many places even if they weren't moving long distance people relocated for backyards, pools etc.. How much is that impact though?
Which is why generally thinking I think we will fall some where in the middle.
And I agree re: remote work. However, a lot of that is starting to become frown upon. Many companies are wanting a return to the office because of decreased productivity and an unsavory work environment due to everyone working from home.
My point is the 10% correction I’m calling won’t hit the full 20-25% because we are also seeing 10% inflation top of it. I’m saying when you start factoring in inflation + remote work + a 5-10% correction - it’s actually a larger “correction because of inflation. I’m saying housing prices won’t drop as much because dollar values has changed. I.e. real impact of inflation everything gets more expensive.
As to remote work you have to be in the room with the c-suite and policy. yes some companies are forcing back. I know of health sciences companies (Fortune 500) who ar telling people to return to work 2 days a week. And yet in leadership meetings it’s ok if you turn a blind eye as long as they come in once a week.
I also know of other companies saying return to work but meanwhile they are closing leases everywhere they can. Remote work is here to stay and will only accelerate as companies can end leases and close properties to realize cost savings.
Middle management would like to get back to office because it helps with their jobs but the reality is middle management is getting axed more than anybody
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Nicholas L.:
just as a reminder, here's what you said in your 5th post to this thread:
"I would say take the 10 years prior to the bubble and get the average rate of appreciation. Use the same rate of appreciation for 2021 & 2022, once you get to where values are at that point, that's the market correction. Crash is beyond that."
i haven't done the math to see what that would be. and i think you'd agree that it's not the case that every single market corrects to that... right?
Without the bubble these properties still would have appreciated +/- 4%, so one would need to calculate that out to see that amount compared to the current amount. I don't think it will necessarily be exact, but it should be somewhat close IMO.
Except you forgot calculate inflation.
And there are still booms on housing. one of the big ones for your period, which is why TX, FL have seen such big booms.Is work from home becoming more standard. That cause a lot of the boom in many places even if they weren't moving long distance people relocated for backyards, pools etc.. How much is that impact though?
Which is why generally thinking I think we will fall some where in the middle.
And I agree re: remote work. However, a lot of that is starting to become frown upon. Many companies are wanting a return to the office because of decreased productivity and an unsavory work environment due to everyone working from home.
My point is the 10% correction I’m calling won’t hit the full 20-25% because we are also seeing 10% inflation top of it. I’m saying when you start factoring in inflation + remote work + a 5-10% correction - it’s actually a larger “correction because of inflation. I’m saying housing prices won’t drop as much because dollar values has changed. I.e. real impact of inflation everything gets more expensive.
As to remote work you have to be in the room with the c-suite and policy. yes some companies are forcing back. I know of health sciences companies (Fortune 500) who ar telling people to return to work 2 days a week. And yet in leadership meetings it’s ok if you turn a blind eye as long as they come in once a week.
I also know of other companies saying return to work but meanwhile they are closing leases everywhere they can. Remote work is here to stay and will only accelerate as companies can end leases and close properties to realize cost savings.
Middle management would like to get back to office because it helps with their jobs but the reality is middle management is getting axed more than anybody
I want to "back of the envelope" a scenario. 400k house that usually appreciates 4% a year. (prior 10 years).
2020: +4% = $416,00
2021: +4% = $432,640
2022: +4% = $449,945
Now, lets do same thing with 15% appreciation
2020: +15% = $460,000
2021: +15% = $529,000
2022: +15% = $608,350
With the "bubble" appreciation, the house is 608k as opposed to 449k with normal historical appreciation.
If we apply the 10% correction you're projecting, that puts us back to $547,515. Which is about 18% above the normal appreciation. This is still quite a bit more than 10% inflation you cited. I personally don't think you can attribute the remaining 8% appreciation remote work. In my mind I think it's more of a nominal amount 2-3%. Also, this would not apply everywhere, only certain locations. Every location can't get a premium for being a remote work destination.
Again, just a quick back of the envelope exercise, I might have overlooked something.
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Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Now, lets do same thing with 15% appreciation
2020: +15% = $460,000
2021: +15% = $529,000
2022: +15% = $608,350
With the "bubble" appreciation, the house is 608k as opposed to 449k with normal historical appreciation.
If we apply the 10% correction you're projecting, that puts us back to $547,515. Which is about 18% above the normal appreciation. This is still quite a bit more than 10% inflation you cited. I personally don't think you can attribute the remaining 8% appreciation remote work. In my mind I think it's more of a nominal amount 2-3%. Also, this would not apply everywhere, only certain locations. Every location can't get a premium for being a remote work destination.
Again, just a quick back of the envelope exercise, I might have overlooked something.
In the long term, real estate appreciation is equal to Money supply growth which is typicaly growing between 5-8% year.
Why we have 2020 crazy real estate appreciation is because we have abnormal 40% money supply growth.
In 2022, the money supply growth is negative 1 percent , as result real estate growth is flat or stagnant.
Moving forward especially by 2024 we have slow modest growth thus slower home price appreciation.
Quote from @Carlos Ptriawan:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Now, lets do same thing with 15% appreciation
2020: +15% = $460,000
2021: +15% = $529,000
2022: +15% = $608,350
With the "bubble" appreciation, the house is 608k as opposed to 449k with normal historical appreciation.
If we apply the 10% correction you're projecting, that puts us back to $547,515. Which is about 18% above the normal appreciation. This is still quite a bit more than 10% inflation you cited. I personally don't think you can attribute the remaining 8% appreciation remote work. In my mind I think it's more of a nominal amount 2-3%. Also, this would not apply everywhere, only certain locations. Every location can't get a premium for being a remote work destination.
Again, just a quick back of the envelope exercise, I might have overlooked something.
So if money supply was increased is what caused prices to rise then they should respond similarly when money supply is decreased. Feds have and are continuing to apply Quantitative Tightening. If they added 9 trillion and now they take it back then prices would drop in tandem to the increase associated with the same amount of $ when easing was being applied in the market. So this will depend on how far the Feds go on tightening.
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Quote from @Kevin Maher:
So if money supply was increased is what caused prices to rise then they should respond similarly when money supply is decreased. Feds have and are continuing to apply Quantitative Tightening. If they added 9 trillion and now they take it back then prices would drop in tandem to the increase associated with the same amount of $ when easing was being applied in the market. So this will depend on how far the Feds go on tightening.
#1 Market Trends & Data Contributor
Quote from @Kevin Maher:
So if money supply was increased is what caused prices to rise then they should respond similarly when money supply is decreased. Feds have and are continuing to apply Quantitative Tightening. If they added 9 trillion and now they take it back then prices would drop in tandem to the increase associated with the same amount of $ when easing was being applied in the market. So this will depend on how far the Feds go on tightening.
Yes but focus should be in M2 growth. The M2 growth in 2022 is "-1%", first time in history it's going negative. In 2023 we will go back to slow low positive M2 growth.
#1 Market Trends & Data Contributor
Quote from @V.G Jason:
Quote from @Kevin Maher:
So if money supply was increased is what caused prices to rise then they should respond similarly when money supply is decreased. Feds have and are continuing to apply Quantitative Tightening. If they added 9 trillion and now they take it back then prices would drop in tandem to the increase associated with the same amount of $ when easing was being applied in the market. So this will depend on how far the Feds go on tightening.
So this is interesting, the effect of money growth is very noticeable in the stock market and highly appreciated markets like CA. Once QT started, home prices went down--that fast-, it happened in 2018 and also happened in 2022. During the massive QE of 2020-2021, home prices exploded. This is not noticeable in a cash flow market like Ohio LOL.
If one wanna do flip in CA one should do it when Fed is flattening the rate or reducing the rate. This is the easiest window timeframe to make money.
There's been a lot said on these threads that I agree with and some that I disagree with. I must say that my overwhelming takeaway from this thread is your thoughts, such as:
"In the long term, real estate appreciation is equal to Money supply growth which is typicaly growing between 5-8% year.
Why we have 2020 crazy real estate appreciation is because we have abnormal 40% money supply growth.
In 2022, the money supply growth is negative 1 percent , as result real estate growth is flat or stagnant.
Moving forward especially by 2024 we have slow modest growth thus slower home price appreciation.
If one wanna do flip in CA one should do it when Fed is flattening the
rate or reducing the rate. This is the easiest window timeframe to make
money."
It makes total sense to me as it seems pretty intuitive, it's something that I never would've conceptualized on my own without you pointing it out, and it's something that I definitely plan to keep my eye on in the future. Thank you for the insight!
#1 Market Trends & Data Contributor
Quote from @Chris John:
There's been a lot said on these threads that I agree with and some that I disagree with. I must say that my overwhelming takeaway from this thread is your thoughts, such as:
"In the long term, real estate appreciation is equal to Money supply growth which is typicaly growing between 5-8% year.
Why we have 2020 crazy real estate appreciation is because we have abnormal 40% money supply growth.
In 2022, the money supply growth is negative 1 percent , as result real estate growth is flat or stagnant.
Moving forward especially by 2024 we have slow modest growth thus slower home price appreciation.
If one wanna do flip in CA one should do it when Fed is flattening the
rate or reducing the rate. This is the easiest window timeframe to make
money."
It makes total sense to me as it seems pretty intuitive, it's something that I never would've conceptualized on my own without you pointing it out, and it's something that I definitely plan to keep my eye on in the future. Thank you for the insight!
If one wants to see the parallel between S&P , chase-shiller index and M2-chart, one could find similarities.
So to cut the story short, as US Dollar is a major reserve for the world, USD needs to be printed more and more for the stability and liquidity
of the advanced world. The position of USD is hard to be replaced but that's a different story. The thing is since USD is the default currency, other countries would try to lower its value against USD as the US is importing country by the trade balance, and it's almost impossible for US to be
a net positive economy. The consequence of all these is that the productivity sector would not be growing to be similar to a
country that's export-oriented (like China or SE Asia). Since 1971 there's disrepancy between wage and productivity in US.
It however creates a unique phenomenon where in a most developed country and the major reserve currency country, the hard asset such as real estate would be inflated following the currency growth. That includes the stock index as well.
This is why becoming a real estate investor is the easiest way to make money in long-term basis (rather than owning a Hamburger joint for example).
That's my plan now to buy houses this year. It's bit speculative but I agree now is a good time to buy when people has fear on the street LOL
Ok, so you're saying that it's a good time to buy, but that you don't expect prices to get back to where they were a few months ago until late '25/early '26. A couple of questions:
1. Wouldn't I make easier money buying mutual funds/stocks?
2. Or do you feel like real estate would be a better investment for you since you appear to be in the Bay Area and that market seems to have dropped more than others. So, obviously with real estate being regional, are there specific markets that you're focusing on?
In the end, putting 20% down on a 350k property, plus fees, plus light renovation that always seems necessary (around 80-90k total) in the central valley and waiting for it get me 40k in equity a few years (that would be EXTREMELY difficult and expensive to access assuming it did happen) sounds pretty risky to me as I'd probably be cashflow negative that entire time.
Sorry, I just feel like I'm having a little trouble following your logic and timeline on still wanting to purchase over just putting money into the market since it seems like it's already dropped so much...
Thanks!
#1 Market Trends & Data Contributor
Quote from @Chris John:
Ok, so you're saying that it's a good time to buy, but that you don't expect prices to get back to where they were a few months ago until late '25/early '26. A couple of questions:
1. Wouldn't I make easier money buying mutual funds/stocks?
2. Or do you feel like real estate would be a better investment for you since you appear to be in the Bay Area and that market seems to have dropped more than others. So, obviously with real estate being regional, are there specific markets that you're focusing on?
In the end, putting 20% down on a 350k property, plus fees, plus light renovation that always seems necessary (around 80-90k total) in the central valley and waiting for it get me 40k in equity a few years (that would be EXTREMELY difficult and expensive to access assuming it did happen) sounds pretty risky to me as I'd probably be cashflow negative that entire time.
Sorry, I just feel like I'm having a little trouble following your logic and timeline on still wanting to purchase over just putting money into the market since it seems like it's already dropped so much...
Thanks!
To understand my logic is easy, buy low sell high LOL. Now is "low" moment LOL.
First of all, not all bay area city experience the same price movement. SJC has rebounded, much better than SF. Typical very rich neighborhoods in East bay also do not see price drops that much, but there're cities like Tracy or Livermore that do not receive that much of a bid.
1. easier would be just to buy a stock index, in one year we would reach S&P previous high anyway.
2. So the opportunity is this, there are these bottom 10% of houses that experiences 20-30% discount from "assumed June high". For example, in SJC we see house that could be sold for $1.6-1.7mil. ; it is finally sold for "only" $1.05mil. I checked the owner of the house has to leave in hurry. So if one wants to flip and do BRRR or live in this house and then sell in the 2026-2027 timeframe, this is easiest timeframe to make money at least 300-400k in few years.
However, for good / showroom condition houses, they're still being sold sometimes above listing price. In Maui it's even worse, it's like there's no recession there, there's nothing to sell even for a lousy 1 BR condo it's still $1600/sqft lol lol
In Livermore, an 1950's neighborhood is sold for 650k recently. It's a pretty hefty discount.
When purchasing, try to buy the property use cash as much as possible, and live in the flip.
Btw your rehab cost is too high for me, I can do rehab way way way lower than your number. Maybe because I've bribed the contractors w/ something else :)
Quote from @Carlos Ptriawan:
Quote from @Chris John:
Ok, so you're saying that it's a good time to buy, but that you don't expect prices to get back to where they were a few months ago until late '25/early '26. A couple of questions:
1. Wouldn't I make easier money buying mutual funds/stocks?
2. Or do you feel like real estate would be a better investment for you since you appear to be in the Bay Area and that market seems to have dropped more than others. So, obviously with real estate being regional, are there specific markets that you're focusing on?
In the end, putting 20% down on a 350k property, plus fees, plus light renovation that always seems necessary (around 80-90k total) in the central valley and waiting for it get me 40k in equity a few years (that would be EXTREMELY difficult and expensive to access assuming it did happen) sounds pretty risky to me as I'd probably be cashflow negative that entire time.
Sorry, I just feel like I'm having a little trouble following your logic and timeline on still wanting to purchase over just putting money into the market since it seems like it's already dropped so much...
Thanks!
To understand my logic is easy, buy low sell high LOL. Now is "low" moment LOL.
First of all, not all bay area city experience the same price movement. SJC has rebounded, much better than SF. Typical very rich neighborhoods in East bay also do not see price drops that much, but there're cities like Tracy or Livermore that do not receive that much of a bid.
1. easier would be just to buy a stock index, in one year we would reach S&P previous high anyway.
2. So the opportunity is this, there are these bottom 10% of houses that experiences 20-30% discount from "assumed June high". For example, in SJC we see house that could be sold for $1.6-1.7mil. ; it is finally sold for "only" $1.05mil. I checked the owner of the house has to leave in hurry. So if one wants to flip and do BRRR or live in this house and then sell in the 2026-2027 timeframe, this is easiest timeframe to make money at least 300-400k in few years.
However, for good / showroom condition houses, they're still being sold sometimes above listing price. In Maui it's even worse, it's like there's no recession there, there's nothing to sell even for a lousy 1 BR condo it's still $1600/sqft lol lol
In Livermore, an 1950's neighborhood is sold for 650k recently. It's a pretty hefty discount.
When purchasing, try to buy the property use cash as much as possible, and live in the flip.
Btw your rehab cost is too high for me, I can do rehab way way way lower than your number. Maybe because I've bribed the contractors w/ something else :)
Rent and write offs need to be factored in also to add to what Carlos said. And the rehab cost sounds crazy at $90k. I just did 2 bedrooms 2 full bath and ripped out everything from floor to light fixtures to bathrooms to kitchen + new appliances and an hvac. Did it for under $40k. A 3rd bedroom isn’t going to add that much more (just flooring costs.
Oh also had to do whole new closet and door setup.
Haha. Gotcha and makes sense.
Kn fairness, my 80-90k number includes the 20% down (70k) and fees (5-7k) leaving around 3-15k for the light renovation. I'm not looking at an 80-90k renovation, just some paint, tile, maybe a new shower stall, vanity, etc. We don't do high end flips. We do blue collar LTRs, so our budgets for renovations aren't like full gut jobs or anything. I leave that kind of stuff to other people. If you're saying that you do your renovations for less than that, you definitely have me beat! haha.
Quote from @Carlos Ptriawan:
I get the idea but how do you explain the timing? At least in my local market, it seems like we are just starting to see prices that make sense again. Mostly the prices are still too high but they are coming down from being completely unreasonable. You think this will all be over my the middle of 2023? That's what I'm contemplating. Things always seems to take much longer than I anticipate but I'd hate missing the train at the same time.
I would imagine the interest rates will go up another 2 times this year (I think that's what the fed has said they plan to do). Will it affect mortgage rates? Not sure, but I think we'd see a little more of a rate increase and a decrease of prices until AT LEAST the middle of this year. I wouldn't be surprised to see some good deals come Q3/4 2023. I almost feel we hit the bottom late this year, then start coming back up early 2024. I don't know though lol
I took some flack for mentioning this back in 2021/2022 - we know the reason for the price increase is supply relative to demand. Here's the thing - we didn't have a massive supply change in the last 2 years. It's not as if 30 million houses vanished and that was the catalyst for the price increase. What we had was a demand increase - due to interest rates. 100% due to interest rates. Here's the other thing - demand moves MUCH faster than supply. Supply can't keep up with it. So you get a quick massive increase in demand (due to interest rates) and virtually no change in supply and you end up with an imbalance that drives the price increase. I somewhat believed it then, but I fully believe that's what cause the massive price run-up now (not only in RE but in just about everything else too).
I will tell you this though...at my local costco a bag of chicken used to be 16.99, it went up to 19.99, and my last trip there it was priced at 18.99. Now I don't know if a bag of chicken relates to real estate prices but it was an odd thing to see that price come down nonetheless
#1 Market Trends & Data Contributor
Quote from @Jeremy H.:
Quote from @Carlos Ptriawan:
I get the idea but how do you explain the timing? At least in my local market, it seems like we are just starting to see prices that make sense again. Mostly the prices are still too high but they are coming down from being completely unreasonable. You think this will all be over my the middle of 2023? That's what I'm contemplating. Things always seems to take much longer than I anticipate but I'd hate missing the train at the same time.
I would imagine the interest rates will go up another 2 times this year (I think that's what the fed has said they plan to do). Will it affect mortgage rates? Not sure, but I think we'd see a little more of a rate increase and a decrease of prices until AT LEAST the middle of this year. I wouldn't be surprised to see some good deals come Q3/4 2023. I almost feel we hit the bottom late this year, then start coming back up early 2024. I don't know though lol
I took some flack for mentioning this back in 2021/2022 - we know the reason for the price increase is supply relative to demand. Here's the thing - we didn't have a massive supply change in the last 2 years. It's not as if 30 million houses vanished and that was the catalyst for the price increase. What we had was a demand increase - due to interest rates. 100% due to interest rates. Here's the other thing - demand moves MUCH faster than supply. Supply can't keep up with it. So you get a quick massive increase in demand (due to interest rates) and virtually no change in supply and you end up with an imbalance that drives the price increase. I somewhat believed it then, but I fully believe that's what cause the massive price run-up now (not only in RE but in just about everything else too).
I will tell you this though...at my local costco a bag of chicken used to be 16.99, it went up to 19.99, and my last trip there it was priced at 18.99. Now I don't know if a bag of chicken relates to real estate prices but it was an odd thing to see that price come down nonetheless
what really matter is forward looking indicator like dollar and 10 year note, future interest rate is already priced into 2 year to 30 year bonds. This notes create the demand of money supply.
BBeen telling again for thousand times, what makes the price gone up is primarily not the house demand/supply but the cheap money, that money is always goes to hard asset. When dollar distribution goes to normal it raise to the old peak within a year.
I'm now in greed mode now which one I could buy with my cash position, to sell in 2027. And I'm not even realtor, only realtor that always bullish in BP here lol
#1 Market Trends & Data Contributor
Here I give the actual screen shots of how to forecast home price appreciation based on M2 growth, this is real time data LOL :
This home in Zillow in 2022 is exactly do like predicted, Zillow estimate is ..... $830,000 ; still within one sigma deviation of M2 growth prediction of 850k.
average M2 growth between 2010-2020 is 5%. Average annual inflation is 2.87%. For CA, usually the appreciation is between the M2 and double inflation rate (so between 6-7% that's one sigma dev.).
That's why I kept saying, forget everything, buy anything with discount now. I started to see M2 supply is going to be normalized by the Fed soon.
| appreciation_ | |||
| Year | M2_growth | house_val | based_on m2 |
| 2009 | 3.70% | $360,000 | $13,320 |
| 2010 | 3.60% | $373,320 | $13,440 |
| 2012 | 8.90% | $386,760 | $34,422 |
| 2013 | 4.77% | $421,181 | $20,090 |
| 2014 | 5.92% | $441,271 | $26,123 |
| 2015 | 5.67% | $467,395 | $26,501 |
| 2016 | 7.01% | $493,896 | $34,622 |
| 2017 | 4.87% | $528,518 | $25,739 |
| 2018 | 3.66% | $554,257 | $20,286 |
| 2019 | 6.68% | $574,543 | $38,379 |
| 2020 | 25% | $612,922 | $153,231 |
| 2021 | 12% | $766,153 | $91,938 |
| 2022 | -1% | $858,091 | -$8,581 |
Quote from @Greg R.:
Quote from @Russell Brazil:
The Last 2 housing crashes were 75 years apart. They are incredibly rare occurrences. Each of which were largely driven by a lack of the availability of credit and debt.
Not only do we not have a lack of availability and debt, we have 100% exactly the opposite problem. A rapid increase in the money supply in Spring of 2020 has created large inflationary preasure. This has happened before in the early 1970s. The same result that happened then, is happening now....high inflation. High inflationary environments typically take about a decade to work themselves out.
You are welcome to form your own opinions, but the only market crash we need to look at is 2008. The economy, geo-politics, property rights, regulations, taxation, investing, banking, the stock market, and currencies (to name a few), were completely different "back in the day". Credit scores weren't even a thing until 1990. These aren't the same times when grandpapi was paying $.05 per gallon of gas. Makes no sense to look at ancient days when trying to analyze a modern-day housing crisis.
And yes, in 2008 we know lending was lose, there were appraisal problems, etc. But there are also similarities. In addition to those similarities, there is a new set of problems associated with the upcoming crash.
With that, I believe that we're going to see housing market crashes on a fairly regular basis going forward. not every few years, but definitely not once every 75 years.
Quote from @Mel D.:
Quote from @Greg R.:
Quote from @Russell Brazil:
The Last 2 housing crashes were 75 years apart. They are incredibly rare occurrences. Each of which were largely driven by a lack of the availability of credit and debt.
Not only do we not have a lack of availability and debt, we have 100% exactly the opposite problem. A rapid increase in the money supply in Spring of 2020 has created large inflationary preasure. This has happened before in the early 1970s. The same result that happened then, is happening now....high inflation. High inflationary environments typically take about a decade to work themselves out.
You are welcome to form your own opinions, but the only market crash we need to look at is 2008. The economy, geo-politics, property rights, regulations, taxation, investing, banking, the stock market, and currencies (to name a few), were completely different "back in the day". Credit scores weren't even a thing until 1990. These aren't the same times when grandpapi was paying $.05 per gallon of gas. Makes no sense to look at ancient days when trying to analyze a modern-day housing crisis.
And yes, in 2008 we know lending was lose, there were appraisal problems, etc. But there are also similarities. In addition to those similarities, there is a new set of problems associated with the upcoming crash.
With that, I believe that we're going to see housing market crashes on a fairly regular basis going forward. not every few years, but definitely not once every 75 years.
Definitely at the early stages. Prices have come down some (really depends on locality). However, we've seeing the bottom fall out of sales volume, which happens before price drops. Plus, I don't see rates easing any time soon. If anything I think we may see J Pow raise rates some more. He recently said that the US housing market is in a bubble. He also said that the housing market needed a "difficult correction" and "reset".
Quote from @Greg R.:
Quote from @Mel D.:
Quote from @Greg R.:
Quote from @Russell Brazil:
The Last 2 housing crashes were 75 years apart. They are incredibly rare occurrences. Each of which were largely driven by a lack of the availability of credit and debt.
Not only do we not have a lack of availability and debt, we have 100% exactly the opposite problem. A rapid increase in the money supply in Spring of 2020 has created large inflationary preasure. This has happened before in the early 1970s. The same result that happened then, is happening now....high inflation. High inflationary environments typically take about a decade to work themselves out.
You are welcome to form your own opinions, but the only market crash we need to look at is 2008. The economy, geo-politics, property rights, regulations, taxation, investing, banking, the stock market, and currencies (to name a few), were completely different "back in the day". Credit scores weren't even a thing until 1990. These aren't the same times when grandpapi was paying $.05 per gallon of gas. Makes no sense to look at ancient days when trying to analyze a modern-day housing crisis.
And yes, in 2008 we know lending was lose, there were appraisal problems, etc. But there are also similarities. In addition to those similarities, there is a new set of problems associated with the upcoming crash.
With that, I believe that we're going to see housing market crashes on a fairly regular basis going forward. not every few years, but definitely not once every 75 years.
Definitely at the early stages. Prices have come down some (really depends on locality). However, we've seeing the bottom fall out of sales volume, which happens before price drops. Plus, I don't see rates easing any time soon. If anything I think we may see J Pow raise rates some more. He recently said that the US housing market is in a bubble. He also said that the housing market needed a "difficult correction" and "reset".
I just don’t understand why someone would want to bet against the guy in charge of raising rates. The auto market has already rolled over and may even be in “crash” mode. Lumber prices are down now and it’s being reflective in the cost at the lumber yards now. A contractor I know has a full calendar open for the next several weeks with no jobs. I’m taking advantage of this opportunity and expanding my property with the cheaper lumber and lower rates for the carpenter. I even called around to get an asphalt paving on a super long driveway, 6-8 months ago I had quotes for 40k, called back same people they were at 33k, and I ended up getting another one to come back out and they quoted me 22k…..a full almost 50 percent drop from last spring. It’s obvious to see what is happening…. Higher rates means no more helocs to do expensive home improvements or new purchases and big ticket items on vehicles. Powells high rate approach is working, it’s taking time to fully reflect in home prices (which ARE dropping) but the full drop is in sight, the foundation is cracking and it’s very obvious to see it. The longer we stay at high rates the more cracks we get. We have hit the iceberg, but @James Hamling is in his presidential suite (financed with cheap fed money over the last decade) and is still drinking the spiked kool aid unaware what’s happening in the basement.
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are we actually all that far apart in terms of predictions for what is going to happen? to be clear, @James Hamling thinks prices are going to come down - here's what he said:
"there could be a national average consolidation of as-much-as 15% step back in median home prices. This is a consolidating event NOT collapse, crash or "correction". And there WILL be localized market specific deviations of this. For example CA, in the negative or FL in the positive. Again, specific to and coming from specific factors unique to those specific markets..."
so - do you think prices will come down even further than that?
are we still disagreeing about what "crash" means 10,000 posts into this thread? =)
Quote from @Nicholas L.:
are we actually all that far apart in terms of predictions for what is going to happen? to be clear, @James Hamling thinks prices are going to come down - here's what he said:
"there could be a national average consolidation of as-much-as 15% step back in median home prices. This is a consolidating event NOT collapse, crash or "correction". And there WILL be localized market specific deviations of this. For example CA, in the negative or FL in the positive. Again, specific to and coming from specific factors unique to those specific markets..."
so - do you think prices will come down even further than that?
are we still disagreeing about what "crash" means 10,000 posts into this thread? =)
@James Hamling is waffling all the time and changes his prediction like the weatherman. I get it, circumstances change so you need to adjust with the market, but it’s easy to change predictions after stuff already happens. He’s very inconsistent on his prediction, we did a yin and Yang analogy on someone buying 3 months ago vs someone waiting until end of 2023 to buy and he was saying how great it was to buy then at 7-8 percent interest. But yes, if he truly believes now 15 percent correction then that’s in line with my 20-30 percent. My whole point has always been there’s no rush to buy after the fed raised rates. At a minimum prices will not be going up so you are getting a freeroll waiting to see what happens for 99 percent of deals. 20-30 percent correction. My new word will be correction going forward to appease the rulebook Larry’s on technical definitions.
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well, we should run this whole thread through ChatGPT and it can plot us all from most bearish to most bullish.