Housing crash deniers ???

[Greg R.]

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. 

[Wale Lawal]

@Jay Hinrichs

Great comment.

[Carlos Ptriawan]

The Fed is following their grand-pa theory and never actually conducts any international business.

https://www.cnbc.com/2022/09/2...

El-Erian says the Fed has made a ‘policy mistake of historical proportions’

[James Hamling]

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

@Joe Bertolino

hot off the press.

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

https://www.cnbc.com/2022/09/2...

I thought sellers wouldn’t sell, prices wouldn’t drop, and theres no inventory?

I posted the math here a few days ago about how all the equity during Covid was phantom here: https://www.biggerpockets.com/...

this is just getting started folks, this is July data…rates are up almost 2 percent since then. unless rates come back down fast, the winter numbers are going to look abysmal. 

Did anybody say the rate of growth wouldn't stop? overall still up, but slowing growth (which is beyond expected). Are people actually saying that there will be no slowing to the growth?  Or are people just saying the market won't crash which would be 20% reduction or more? All this says is it's slowing (and not even that much all things considered). 

 I don’t know if he actually read the story or if he thrives on click bait.  

I lost my desire to debate him when he “couldn’t remember” the subdivisions in Dallas he was claiming had hundreds (if not thousands) of completed homes sitting in standing inventory. 

 you must be thinking of someone else, I never said anything about dfw subdivisions.

Also, showing historic data being released is not click bait, they are facts based on real data in markets all across the country. What you say in your replies is click bait based on false assumptions of reality. While you can still live in your fantasy land there thinking prices won’t drop, there’s no supply and prices won’t drop..they already are, and it’s just getting started. What positive spin do developers and realtors get out of the article? That data is 2 months old, it’s already much worse now than it was then. Take off your tunnel vision blinders 

 Fact is, it is the biggest drop ever in a month, and the first drop in over a decade. But sure, nothing to see here all is well. 

 Obviously If rates stick at 9% for an extended period of time the market activity will grind to a halt. Will it drop 20%+ year over year nationwide.  I don’t think so.  I don’t see how it can.  There is not enough inventory.   3.7 months in my area with very little standing inventory from builders.  The BIA hot list has 17 homes.  I predict people just won’t do much.  They will stay put until numbers start to pencil out again.  Considering most homes have a ton of equity and rentals are extremely expensive,  unlike 15 years ago,  people won’t be walking away from their homes in mass.  

@Joe Bertolino @james hamling 

Seems like despite the data released today which shows:

1) people are listing homes (there is inventory)

2) prices are dropping 

3) largest drop in history 

So your saying this is just temporary and not indicative of what is to come despite rates being 200 basis points higher now than august (when this data is from) 

Neither of you think a 20 percent peak to trough drop is possible, so I guess we actually have to see official numbers of 20 percent drop for you to realize it.

the likely outcome here is 20-30 percent drop. Fed cuts rates and housing goes back up to reinflate the bubble eventually like they always do. But prices needed to drop while rates are high, and they officially are now. 



 

 Joe, those of us who want to understand what's happening use things like median pricing. And no, it will not drop by 30%. You've clearly decided the whole storyline and are just going to find anything to help support your decided position, so i see no point in this. 

Will there be a drop from the absolute highest sold, yes, it is a little thing many of us call winter, it tends to come around once per year. 

So if your looking at month-over-month as you said before, ignoring YOY like the rest of industry, yup, your going to see this "crash" happening most years in the highest sold in given month vs lowest in given month. These are called seasonal variances. 

You might as well also call out a school session "collapse" while at it, given the MOM highest vs lowest solds in connection to school start. 

Again, variances. 

My question is, how many properties are you selling right now? If your so certain there is a 30% drop coming without doubt, you must be happily selling everything now then, right? Taking advantage of these "high prices"? 

[Jay Hinrichs]

Quote from @Bruce Woodruff:

Quote from @Greg Scott:

The market may correct, but I firmly believe there won't be a crash.  The reason is simple, equity.

There is no  house of cards here to come tumbling down.

I respectfully disagree. The house of cards is this - too many people....millions.....bought houses with hugely inflated prices in the past few years. This is especially true in certain areas. It's gonna suck to own a home that you bought for $800k that is only worth, say, $500k....especially if you bought that with any type of adjustable loan.....

I do agree that it will not be a full-on 'crash', but more a serious correction. It has already started. look at the stats...

 keep in mind that if those 800k houses drop 20% they are now selling for less than replacement costs and builders will simply stop building.   At least at todays prices for lots and materials.. you will need lot values to drop a ton and materials and labor.. pretty tough to get all of those to drop.. I know being a land developer .. those farmers that control a lot of the land for new development will just hold on before they sell the land for less than what they think its worth.. Most have no debt and owned it forever etc.  we stop building and well you know what happened in AZ last time building came to a halt.  Not good for the area at all. 

[Greg R.]

Quote from @Michael Wooldridge:

Quote from @Greg R.:

Quote from @Bruce Woodruff:

I think it would be incredible if we could at least start moving in the right direction. My cynical mind says no it's too late. Even if those morons all agreed, I think the ship has sailed. The citizens of this country would object anyway, too many people on benefits that would take to the streets.

Just my .02.....?

Unfortunately I'd have to agree. Feels like the economical damage that's been done is irreversible. In my mind the only way to "right the ship" (or at least attempt) would be to slash the federal government by at least 50-75%. The existence of these massive governmental agencies is antithetical to a thriving economy. The amount of money needed to "feed the machine" is quite overwhelming. I'd love to see an extremely lean government without all the "fat". Very hard to explain what 337,683 employees do at the Department of Veterans Affairs. The vets would be way better off if the government took 50% of the combined salaries of those employees and evenly distributed it amongst the vets. How about the 100,000 employees at the Department of Agriculture? Just way too much fraud, waste, and abuse to quantify. 
Virtually all of the politicians are part of the problem. Almost none of them would vote to reduce or abolish any of these agencies. Regardless of party, the politicians seem unified on this - staying in power and growing the power & authority of the government. 

Are you willing to give up medicare or SS? And is it good for the country if we do? Otherwise you really aren’t scratching the federal budget. 
 

We're in a terrible place economically. We either have to make some hard choices or we let the US dollar fall and adopt a world currency under control of global leaders. Cutting back on some social programs would be tough but would pale in comparison to the collapse of the US dollar. 

[Greg R.]

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

Quote from @Greg Scott:

The market may correct, but I firmly believe there won't be a crash.  The reason is simple, equity.

There is no  house of cards here to come tumbling down.

I respectfully disagree. The house of cards is this - too many people....millions.....bought houses with hugely inflated prices in the past few years. This is especially true in certain areas. It's gonna suck to own a home that you bought for $800k that is only worth, say, $500k....especially if you bought that with any type of adjustable loan.....

I do agree that it will not be a full-on 'crash', but more a serious correction. It has already started. look at the stats...

 keep in mind that if those 800k houses drop 20% they are now selling for less than replacement costs and builders will simply stop building.   At least at todays prices for lots and materials.. you will need lot values to drop a ton and materials and labor.. pretty tough to get all of those to drop.. I know being a land developer .. those farmers that control a lot of the land for new development will just hold on before they sell the land for less than what they think its worth.. Most have no debt and owned it forever etc.  we stop building and well you know what happened in AZ last time building came to a halt.  Not good for the area at all. 

But a "800k house" right now was a 500k house a couple years ago. In many of those scenarios it was purchased for +/- 450-500k and with a 4ish rate. I don't think it's unrealistic to see prices correct to pre bubble prices. If something peaks so quickly, why would we believe it can't return close to it's pre-peak price in an equal amount of time?

From a very basic/ simplistic standpoint. How can someone who was able to afford an 800k house a year ago afford it now that the rates have doubled? 

Someone going in w/ 10% down  on 800k purchase is a 720k loan balance, how much would it cost to get a 30 year fixed down to the mid 3's or low 4's? a single point in this scenario is $7,200? I'm not a lender so perhaps someone could help shine light on this situation and how many points would be needed. In any event, who is going to eat the cost, the buyer or the seller. The current market conditions require someone to take a big hit if the other is going to benefit as if the market conditions were the same as a year ago. 

[Jay Hinrichs]

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

Quote from @Greg Scott:

The market may correct, but I firmly believe there won't be a crash.  The reason is simple, equity.

There is no  house of cards here to come tumbling down.

I respectfully disagree. The house of cards is this - too many people....millions.....bought houses with hugely inflated prices in the past few years. This is especially true in certain areas. It's gonna suck to own a home that you bought for $800k that is only worth, say, $500k....especially if you bought that with any type of adjustable loan.....

I do agree that it will not be a full-on 'crash', but more a serious correction. It has already started. look at the stats...

 keep in mind that if those 800k houses drop 20% they are now selling for less than replacement costs and builders will simply stop building.   At least at todays prices for lots and materials.. you will need lot values to drop a ton and materials and labor.. pretty tough to get all of those to drop.. I know being a land developer .. those farmers that control a lot of the land for new development will just hold on before they sell the land for less than what they think its worth.. Most have no debt and owned it forever etc.  we stop building and well you know what happened in AZ last time building came to a halt.  Not good for the area at all. 

But a "800k house" right now was a 500k house a couple years ago. In many of those scenarios it was purchased for +/- 450-500k and with a 4ish rate. I don't think it's unrealistic to see prices correct to pre bubble prices. If something peaks so quickly, why would we believe it can't return close to it's pre-peak price in an equal amount of time?

From a very basic/ simplistic standpoint. How can someone who was able to afford an 800k house a year ago afford it now that the rates have doubled? 

Someone going in w/ 10% down  on 800k purchase is a 720k loan balance, how much would it cost to get a 30 year fixed down to the mid 3's or low 4's? a single point in this scenario is $7,200? I'm not a lender so perhaps someone could help shine light on this situation and how many point would be needed. In any event, who is going to eat the cost, the buyer or the seller. The current market conditions require someone to take a big hit if the other is going to benefit as if the market conditions were the same as a year ago. 

 I have sold 8 750k to 850k homes I built this spring .. no one put 10% down 3 paid cash and the others put 30 to 50% down.. I agree the high leverage buyer is in a tough spot.. depends on market right ?

My point is new construction.. with lot prices basically set .. unless lot prices crash and labor and materials crash . basic spread on new construction is 20% so today to build a 800k home its gong to cost  620k to build.. if market for new builds that were 800k come down to 620k there will be no new houses built.. banks wont fund them builders wont do it for practice.. the hangover inventory will get liquidated and those props wont see much of a profit.  Once new construction comes to a halt you will see rents start to soften a lot most labor rents and if they are not working then what .. this is what happened in AZ NV FLA GA and Parts of CA when new construction stopped in 07 to 2011. 

[Greg R.]

Quote from @Jay Hinrichs:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

 I have sold 8 750k to 850k homes I built this spring .. no one put 10% down 3 paid cash and the others put 30 to 50% down.. I agree the high leverage buyer is in a tough spot.. depends on market right ?

My point is new construction.. with lot prices basically set .. unless lot prices crash and labor and materials crash . basic spread on new construction is 20% so today to build a 800k home its gong to cost  620k to build.. if market for new builds that were 800k come down to 620k there will be no new houses built.. banks wont fund them builders wont do it for practice.. the hangover inventory will get liquidated and those props wont see much of a profit.  Once new construction comes to a halt you will see rents start to soften a lot most labor rents and if they are not working then what .. this is what happened in AZ NV FLA GA and Parts of CA when new construction stopped in 07 to 2011. 

Makes sense. Thx Jay. 
I'm curious to see how this shakes out w/ cash buyers. Cheap cash has been overly abundant over the last year or two. Will be interesting to see the next 6 months to a year. 

[Bruce Woodruff]

Quote from @Nicholas L.:

@Bruce Woodruff

I think one of the interesting things is that the federal employee workforce is actually at a historic low as a percentage of the total population, while spending is up.  Government contractors love, love, love those federal dollars, and it's actually more expensive to hire a contractor than an employee.  I'd love to cut some of those contractors so that the employees can focus on mission.

But I don't think we're going to get to agreement on the size of the federal government when we can't define "crash" =-)

Oh I agree...the private contractors would largely go bye-bye if we actually cut spending as drastically as is being proposed...

[Jay Hinrichs]

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

 I have sold 8 750k to 850k homes I built this spring .. no one put 10% down 3 paid cash and the others put 30 to 50% down.. I agree the high leverage buyer is in a tough spot.. depends on market right ?

My point is new construction.. with lot prices basically set .. unless lot prices crash and labor and materials crash . basic spread on new construction is 20% so today to build a 800k home its gong to cost  620k to build.. if market for new builds that were 800k come down to 620k there will be no new houses built.. banks wont fund them builders wont do it for practice.. the hangover inventory will get liquidated and those props wont see much of a profit.  Once new construction comes to a halt you will see rents start to soften a lot most labor rents and if they are not working then what .. this is what happened in AZ NV FLA GA and Parts of CA when new construction stopped in 07 to 2011. 

Makes sense. Thx Jay. 
I'm curious to see how this shakes out w/ cash buyers. Cheap cash has been overly abundant over the last year or two. Will be interesting to see the next 6 months to a year. 

 closed one yesterday ( rental houses in the mid west it was a 1031 for 4 of our homes all cash) and frankly ( and not to jinx it) but I think we have about had a record September in payoffs well over 20 deals paid off all as agreed.  I personally was predicting a slow down back in 2018 I even did a power point on it called the pivot.. I missed that one LOL.. but we did start in those years reducing our debt risk by a ton.. so for our little company we are in a spot that we can ride out a market.  We might have to rent some of our new builds for a year or two.. I have done it in the past.. Better than  marking to market we all saw how that worked out in 2008 to 2010 when feds were making banks mark to market.  

[Greg R.]

Quote from @Jay Hinrichs:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

 I have sold 8 750k to 850k homes I built this spring .. no one put 10% down 3 paid cash and the others put 30 to 50% down.. I agree the high leverage buyer is in a tough spot.. depends on market right ?

My point is new construction.. with lot prices basically set .. unless lot prices crash and labor and materials crash . basic spread on new construction is 20% so today to build a 800k home its gong to cost  620k to build.. if market for new builds that were 800k come down to 620k there will be no new houses built.. banks wont fund them builders wont do it for practice.. the hangover inventory will get liquidated and those props wont see much of a profit.  Once new construction comes to a halt you will see rents start to soften a lot most labor rents and if they are not working then what .. this is what happened in AZ NV FLA GA and Parts of CA when new construction stopped in 07 to 2011. 

Makes sense. Thx Jay. 
I'm curious to see how this shakes out w/ cash buyers. Cheap cash has been overly abundant over the last year or two. Will be interesting to see the next 6 months to a year. 

 closed one yesterday ( rental houses in the mid west it was a 1031 for 4 of our homes all cash) and frankly ( and not to jinx it) but I think we have about had a record September in payoffs well over 20 deals paid off all as agreed.  I personally was predicting a slow down back in 2018 I even did a power point on it called the pivot.. I missed that one LOL.. but we did start in those years reducing our debt risk by a ton.. so for our little company we are in a spot that we can ride out a market.  We might have to rent some of our new builds for a year or two.. I have done it in the past.. Better than  marking to market we all saw how that worked out in 2008 to 2010 when feds were making banks mark to market.  

That's awesome. Sounds like you're doing great. I'm assuming you are keeping the same strategy going into the winter months? Or are any of the market conditions going to make you adjust? Sounds like worst case scenario for you just to hold & rent if you're unable to sell?

[Jay Hinrichs]

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

 I have sold 8 750k to 850k homes I built this spring .. no one put 10% down 3 paid cash and the others put 30 to 50% down.. I agree the high leverage buyer is in a tough spot.. depends on market right ?

My point is new construction.. with lot prices basically set .. unless lot prices crash and labor and materials crash . basic spread on new construction is 20% so today to build a 800k home its gong to cost  620k to build.. if market for new builds that were 800k come down to 620k there will be no new houses built.. banks wont fund them builders wont do it for practice.. the hangover inventory will get liquidated and those props wont see much of a profit.  Once new construction comes to a halt you will see rents start to soften a lot most labor rents and if they are not working then what .. this is what happened in AZ NV FLA GA and Parts of CA when new construction stopped in 07 to 2011. 

Makes sense. Thx Jay. 
I'm curious to see how this shakes out w/ cash buyers. Cheap cash has been overly abundant over the last year or two. Will be interesting to see the next 6 months to a year. 

 closed one yesterday ( rental houses in the mid west it was a 1031 for 4 of our homes all cash) and frankly ( and not to jinx it) but I think we have about had a record September in payoffs well over 20 deals paid off all as agreed.  I personally was predicting a slow down back in 2018 I even did a power point on it called the pivot.. I missed that one LOL.. but we did start in those years reducing our debt risk by a ton.. so for our little company we are in a spot that we can ride out a market.  We might have to rent some of our new builds for a year or two.. I have done it in the past.. Better than  marking to market we all saw how that worked out in 2008 to 2010 when feds were making banks mark to market.  

That's awesome. Sounds like you're doing great. I'm assuming you are keeping the same strategy going into the winter months? Or are any of the market conditions going to make you adjust? Sounds like worst case scenario for you just to hold & rent if you're unable to sell?

a lot of my clients BRRR so I get payoffs on the refi about 30 % are BRRR the rest are sales to new investors which from what I see is still going pretty good in the 7 states i work in for rental real estate I am not in Texas or the deep south right now .. just fly over country and East coast were the market is still pretty robust given the rent to price ratios..

if things are gong good we are closing 2 to 3 new builds a month.  

[James Hamling]

Quote from @Carlos Ptriawan:

The Fed is following their grand-pa theory and never actually conducts any international business.

https://www.cnbc.com/2022/09/2...

El-Erian says the Fed has made a ‘policy mistake of historical proportions’

 Oh my friend, you must read "The Creature From Jekyll Island". The Fed is so much more then you think it is. 

[John Carbone]

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

@Joe Bertolino

hot off the press.

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

https://www.cnbc.com/2022/09/2...

I thought sellers wouldn’t sell, prices wouldn’t drop, and theres no inventory?

I posted the math here a few days ago about how all the equity during Covid was phantom here: https://www.biggerpockets.com/...

this is just getting started folks, this is July data…rates are up almost 2 percent since then. unless rates come back down fast, the winter numbers are going to look abysmal. 

Did anybody say the rate of growth wouldn't stop? overall still up, but slowing growth (which is beyond expected). Are people actually saying that there will be no slowing to the growth?  Or are people just saying the market won't crash which would be 20% reduction or more? All this says is it's slowing (and not even that much all things considered). 

 I don’t know if he actually read the story or if he thrives on click bait.  

I lost my desire to debate him when he “couldn’t remember” the subdivisions in Dallas he was claiming had hundreds (if not thousands) of completed homes sitting in standing inventory. 

 you must be thinking of someone else, I never said anything about dfw subdivisions.

Also, showing historic data being released is not click bait, they are facts based on real data in markets all across the country. What you say in your replies is click bait based on false assumptions of reality. While you can still live in your fantasy land there thinking prices won’t drop, there’s no supply and prices won’t drop..they already are, and it’s just getting started. What positive spin do developers and realtors get out of the article? That data is 2 months old, it’s already much worse now than it was then. Take off your tunnel vision blinders 

 Fact is, it is the biggest drop ever in a month, and the first drop in over a decade. But sure, nothing to see here all is well. 

 Obviously If rates stick at 9% for an extended period of time the market activity will grind to a halt. Will it drop 20%+ year over year nationwide.  I don’t think so.  I don’t see how it can.  There is not enough inventory.   3.7 months in my area with very little standing inventory from builders.  The BIA hot list has 17 homes.  I predict people just won’t do much.  They will stay put until numbers start to pencil out again.  Considering most homes have a ton of equity and rentals are extremely expensive,  unlike 15 years ago,  people won’t be walking away from their homes in mass.  

@Joe Bertolino @james hamling 

Seems like despite the data released today which shows:

1) people are listing homes (there is inventory)

2) prices are dropping 

3) largest drop in history 

So your saying this is just temporary and not indicative of what is to come despite rates being 200 basis points higher now than august (when this data is from) 

Neither of you think a 20 percent peak to trough drop is possible, so I guess we actually have to see official numbers of 20 percent drop for you to realize it.

the likely outcome here is 20-30 percent drop. Fed cuts rates and housing goes back up to reinflate the bubble eventually like they always do. But prices needed to drop while rates are high, and they officially are now. 



 

 Joe, those of us who want to understand what's happening use things like median pricing. And no, it will not drop by 30%. You've clearly decided the whole storyline and are just going to find anything to help support your decided position, so i see no point in this. 

Will there be a drop from the absolute highest sold, yes, it is a little thing many of us call winter, it tends to come around once per year. 

So if your looking at month-over-month as you said before, ignoring YOY like the rest of industry, yup, your going to see this "crash" happening most years in the highest sold in given month vs lowest in given month. These are called seasonal variances. 

You might as well also call out a school session "collapse" while at it, given the MOM highest vs lowest solds in connection to school start. 

Again, variances. 

My question is, how many properties are you selling right now? If your so certain there is a 30% drop coming without doubt, you must be happily selling everything now then, right? Taking advantage of these "high prices"? 

It’s the first monthly drop in over a decade. The data is seasonally adjusted, so it takes into account what you are speaking about. 

im not selling because I don’t care about phantom equity, and it’s too late to sell to realize peak equity. If I list now I’ll just be cutting prices, and eventually the fed will pivot and housing prices will reinflate. There’s also ridiculous closing costs associated with selling a home. It’s crazy to think people like yourself make 6-7 percent on transactions with values this high. Can’t wait for the techies to advance blockchain technology so real estate closing costs can be a fraction of what they are today. 20 percent minimum median real estate decline is a lock (unless fed pivots to lower rates) the peak was June 2022.

@Jay Hinrichs makes good points. The supply chain issues during Covid are being worked out though. Lumber prices will drop, it takes several months to work through the system. Once people start losing jobs, the cost to build will drop substantially. It will take some time, but as rates stay high there will be a fed induced reset. 

[James Hamling]

Quote from @Greg R.:

Quote from @Jay Hinrichs:

Quote from @Bruce Woodruff:

Quote from @Greg Scott:

The market may correct, but I firmly believe there won't be a crash.  The reason is simple, equity.

There is no  house of cards here to come tumbling down.

I respectfully disagree. The house of cards is this - too many people....millions.....bought houses with hugely inflated prices in the past few years. This is especially true in certain areas. It's gonna suck to own a home that you bought for $800k that is only worth, say, $500k....especially if you bought that with any type of adjustable loan.....

I do agree that it will not be a full-on 'crash', but more a serious correction. It has already started. look at the stats...

 keep in mind that if those 800k houses drop 20% they are now selling for less than replacement costs and builders will simply stop building.   At least at todays prices for lots and materials.. you will need lot values to drop a ton and materials and labor.. pretty tough to get all of those to drop.. I know being a land developer .. those farmers that control a lot of the land for new development will just hold on before they sell the land for less than what they think its worth.. Most have no debt and owned it forever etc.  we stop building and well you know what happened in AZ last time building came to a halt.  Not good for the area at all. 

But a "800k house" right now was a 500k house a couple years ago. In many of those scenarios it was purchased for +/- 450-500k and with a 4ish rate. I don't think it's unrealistic to see prices correct to pre bubble prices. If something peaks so quickly, why would we believe it can't return close to it's pre-peak price in an equal amount of time?

From a very basic/ simplistic standpoint. How can someone who was able to afford an 800k house a year ago afford it now that the rates have doubled? 

Someone going in w/ 10% down  on 800k purchase is a 720k loan balance, how much would it cost to get a 30 year fixed down to the mid 3's or low 4's? a single point in this scenario is $7,200? I'm not a lender so perhaps someone could help shine light on this situation and how many points would be needed. In any event, who is going to eat the cost, the buyer or the seller. The current market conditions require someone to take a big hit if the other is going to benefit as if the market conditions were the same as a year ago. 

 It's just not that simple Greg. 

Just because 2yrs ago a home was say $500k, it does not mean tomorrow it can be $500k. 2 years ago the inputs to build that $500k were totally different. Cost of living was different. You have to take things in context. The entire economy is not going to regress 2 years. 

What you describe in buyer capacity is market compression. A buyer who was able to buy at say $700k, now via rate increase, is pressed into looking at the, say $600k market level. As the rates shift buyer capacity downward, it add's additional stress on the lower level of say $200-$300k level. Pressing a "glut" of buyers into the lower rung actually drives UP the prices in lower strata, as demand is driven up unless inventory can rapidly grow to meet which that also raises those prices. Compression.     

Builders at the top strata of builds are not over building today, there being smart about it, so it looks like supply is self-regulating to adjust to demand. This insulates against significant drops in that strata. 

[James Hamling]

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

@Joe Bertolino

hot off the press.

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

https://www.cnbc.com/2022/09/2...

I thought sellers wouldn’t sell, prices wouldn’t drop, and theres no inventory?

I posted the math here a few days ago about how all the equity during Covid was phantom here: https://www.biggerpockets.com/...

this is just getting started folks, this is July data…rates are up almost 2 percent since then. unless rates come back down fast, the winter numbers are going to look abysmal. 

Did anybody say the rate of growth wouldn't stop? overall still up, but slowing growth (which is beyond expected). Are people actually saying that there will be no slowing to the growth?  Or are people just saying the market won't crash which would be 20% reduction or more? All this says is it's slowing (and not even that much all things considered). 

 I don’t know if he actually read the story or if he thrives on click bait.  

I lost my desire to debate him when he “couldn’t remember” the subdivisions in Dallas he was claiming had hundreds (if not thousands) of completed homes sitting in standing inventory. 

 you must be thinking of someone else, I never said anything about dfw subdivisions.

Also, showing historic data being released is not click bait, they are facts based on real data in markets all across the country. What you say in your replies is click bait based on false assumptions of reality. While you can still live in your fantasy land there thinking prices won’t drop, there’s no supply and prices won’t drop..they already are, and it’s just getting started. What positive spin do developers and realtors get out of the article? That data is 2 months old, it’s already much worse now than it was then. Take off your tunnel vision blinders 

 Fact is, it is the biggest drop ever in a month, and the first drop in over a decade. But sure, nothing to see here all is well. 

 Obviously If rates stick at 9% for an extended period of time the market activity will grind to a halt. Will it drop 20%+ year over year nationwide.  I don’t think so.  I don’t see how it can.  There is not enough inventory.   3.7 months in my area with very little standing inventory from builders.  The BIA hot list has 17 homes.  I predict people just won’t do much.  They will stay put until numbers start to pencil out again.  Considering most homes have a ton of equity and rentals are extremely expensive,  unlike 15 years ago,  people won’t be walking away from their homes in mass.  

@Joe Bertolino @james hamling 

Seems like despite the data released today which shows:

1) people are listing homes (there is inventory)

2) prices are dropping 

3) largest drop in history 

So your saying this is just temporary and not indicative of what is to come despite rates being 200 basis points higher now than august (when this data is from) 

Neither of you think a 20 percent peak to trough drop is possible, so I guess we actually have to see official numbers of 20 percent drop for you to realize it.

the likely outcome here is 20-30 percent drop. Fed cuts rates and housing goes back up to reinflate the bubble eventually like they always do. But prices needed to drop while rates are high, and they officially are now. 



 

 Joe, those of us who want to understand what's happening use things like median pricing. And no, it will not drop by 30%. You've clearly decided the whole storyline and are just going to find anything to help support your decided position, so i see no point in this. 

Will there be a drop from the absolute highest sold, yes, it is a little thing many of us call winter, it tends to come around once per year. 

So if your looking at month-over-month as you said before, ignoring YOY like the rest of industry, yup, your going to see this "crash" happening most years in the highest sold in given month vs lowest in given month. These are called seasonal variances. 

You might as well also call out a school session "collapse" while at it, given the MOM highest vs lowest solds in connection to school start. 

Again, variances. 

My question is, how many properties are you selling right now? If your so certain there is a 30% drop coming without doubt, you must be happily selling everything now then, right? Taking advantage of these "high prices"? 

It’s the first monthly drop in over a decade. The data is seasonally adjusted, so it takes into account what you are speaking about. 

im not selling because I don’t care about phantom equity, and it’s too late to sell to realize peak equity. If I list now I’ll just be cutting prices, and eventually the fed will pivot and housing prices will reinflate. There’s also ridiculous closing costs associated with selling a home. It’s crazy to think people like yourself make 6-7 percent on transactions with values this high. Can’t wait for the techies to advance blockchain technology so real estate closing costs can be a fraction of what they are today. 20 percent minimum median real estate decline is a lock (unless fed pivots to lower rates) the peak was June 2022.

@Jay Hinrichs makes good points. The supply chain issues during Covid are being worked out though. Lumber prices will drop, it takes several months to work through the system. Once people start losing jobs, the cost to build will drop substantially. It will take some time, but as rates stay high there will be a fed induced reset. 

 How will block-chain walk seller/buyer through a transaction contract?    How will block-chain devise a marketing strategy, deploy and manage that?  The notion that block-chain will replace agents is just being drunk on the Cool-aid at the worship of tech..    

And there is mitigation for 6-7%. Not everything is 6-7%, you clearly have not bought or sold anything in some time, or of any pricing level because it's rather common and standard for those fee's to move downward as gross sale $'s move upward. Not to mention 6-7 is for BOTH sides, seller and buyer agency. It's not uncommon to get into a combined 4% agency fee's depending on price level. Then there is all the alternative options which go as low as 1% per agency side. 

I don't understand why your dead set that people will have to sell. Increased rates have a direct relationship with volume, not sold $. Reduced volumes are what can have a relationship with reduced sold $. "Can" being the operant term. People can choose to simply, not sell, if the choice exists. Does that choice exist today?     

What is "Phantom" equity? Equity is equity. If your saying it's not real until it's realized, that's ALL equity. That premise would also make all home values "Phantom" home values until time of closing. 

First drop in over a decade. Not sure what market your talking about because I know of many drops and adjustments in median home price since 2012, a lot. 

20% drop in median home price, at MINIMUM..... well ok, we will see. By what time are you willing to commit that these will come to pass by. And are you willing to come back on B.P. and make a post entitled "I WAS SO WRONG, ADN THEY TOLD ME SO" if/when that date comes and goes and there is NOT a minimum 20% drop to median home prices?     I am still waiting to see just 1 of those posts from all who were screaming in '21' how it was all about to crash, huge drop about to hit "any day". Not a 1 has owned up to being dead-flat-wrong in the doomsday preaching. 

[Tony Kim]

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

@Joe Bertolino

hot off the press.

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

https://www.cnbc.com/2022/09/2...

I thought sellers wouldn’t sell, prices wouldn’t drop, and theres no inventory?

I posted the math here a few days ago about how all the equity during Covid was phantom here: https://www.biggerpockets.com/...

this is just getting started folks, this is July data…rates are up almost 2 percent since then. unless rates come back down fast, the winter numbers are going to look abysmal. 

Did anybody say the rate of growth wouldn't stop? overall still up, but slowing growth (which is beyond expected). Are people actually saying that there will be no slowing to the growth?  Or are people just saying the market won't crash which would be 20% reduction or more? All this says is it's slowing (and not even that much all things considered). 

 I don’t know if he actually read the story or if he thrives on click bait.  

I lost my desire to debate him when he “couldn’t remember” the subdivisions in Dallas he was claiming had hundreds (if not thousands) of completed homes sitting in standing inventory. 

 you must be thinking of someone else, I never said anything about dfw subdivisions.

Also, showing historic data being released is not click bait, they are facts based on real data in markets all across the country. What you say in your replies is click bait based on false assumptions of reality. While you can still live in your fantasy land there thinking prices won’t drop, there’s no supply and prices won’t drop..they already are, and it’s just getting started. What positive spin do developers and realtors get out of the article? That data is 2 months old, it’s already much worse now than it was then. Take off your tunnel vision blinders 

 Fact is, it is the biggest drop ever in a month, and the first drop in over a decade. But sure, nothing to see here all is well. 

 Obviously If rates stick at 9% for an extended period of time the market activity will grind to a halt. Will it drop 20%+ year over year nationwide.  I don’t think so.  I don’t see how it can.  There is not enough inventory.   3.7 months in my area with very little standing inventory from builders.  The BIA hot list has 17 homes.  I predict people just won’t do much.  They will stay put until numbers start to pencil out again.  Considering most homes have a ton of equity and rentals are extremely expensive,  unlike 15 years ago,  people won’t be walking away from their homes in mass.  

@Joe Bertolino @james hamling 

Seems like despite the data released today which shows:

1) people are listing homes (there is inventory)

2) prices are dropping 

3) largest drop in history 

So your saying this is just temporary and not indicative of what is to come despite rates being 200 basis points higher now than august (when this data is from) 

Neither of you think a 20 percent peak to trough drop is possible, so I guess we actually have to see official numbers of 20 percent drop for you to realize it.

the likely outcome here is 20-30 percent drop. Fed cuts rates and housing goes back up to reinflate the bubble eventually like they always do. But prices needed to drop while rates are high, and they officially are now. 



 

 Joe, those of us who want to understand what's happening use things like median pricing. And no, it will not drop by 30%. You've clearly decided the whole storyline and are just going to find anything to help support your decided position, so i see no point in this. 

Will there be a drop from the absolute highest sold, yes, it is a little thing many of us call winter, it tends to come around once per year. 

So if your looking at month-over-month as you said before, ignoring YOY like the rest of industry, yup, your going to see this "crash" happening most years in the highest sold in given month vs lowest in given month. These are called seasonal variances. 

You might as well also call out a school session "collapse" while at it, given the MOM highest vs lowest solds in connection to school start. 

Again, variances. 

My question is, how many properties are you selling right now? If your so certain there is a 30% drop coming without doubt, you must be happily selling everything now then, right? Taking advantage of these "high prices"? 

It’s the first monthly drop in over a decade. The data is seasonally adjusted, so it takes into account what you are speaking about. 

im not selling because I don’t care about phantom equity, and it’s too late to sell to realize peak equity. If I list now I’ll just be cutting prices, and eventually the fed will pivot and housing prices will reinflate. There’s also ridiculous closing costs associated with selling a home. It’s crazy to think people like yourself make 6-7 percent on transactions with values this high. Can’t wait for the techies to advance blockchain technology so real estate closing costs can be a fraction of what they are today. 20 percent minimum median real estate decline is a lock (unless fed pivots to lower rates) the peak was June 2022.

@Jay Hinrichs makes good points. The supply chain issues during Covid are being worked out though. Lumber prices will drop, it takes several months to work through the system. Once people start losing jobs, the cost to build will drop substantially. It will take some time, but as rates stay high there will be a fed induced reset. 

Blockchain is not going to reduce real estate closing costs. It's just a method of payment, not a comprehensive set of services associated with a real estate transaction. 

I purchased my home in April of this year. A similar house one block away that will need a full rehab just sold for $288K more. I'm not seeing a 20% decline in my area. Too many cash buyers right now.....higher interest rates will have an effect, but I think it'll have just as strong an effect on limiting inventory as folks will not want to relinquish their 2.875% mortgages.

[Carlos Ptriawan]

I have been thinking about the same, but in Bay Area market is different again. What's funny in this area is, from 2019 to 2021, by average market shifted to $300K regardless it's San Francisco, San Jose or Redwood City. But the baseline of each city is different. San Jose baseline was much lower than San Francisco. So it's not surprising if San Jose experienced more pullback now compare to San Francisco.

However what interesting is, the upper and lower SJ price home experience the same 100k price reduction, so the price is reduced more on the lower side rather than the upper. It seems the buyer didn't want to move 'cheaper' neighborhood per-se when they have money.

Comments about the builder: you are pretty much right. If you see the builder SF new permit, there's already a decline from last year. The permit increase is pretty much on Multifamily units mainly in South region.

[Carlos Ptriawan]

Yes. What I'm confused about is why people are expecting tech. to replace realtor commission. They're entirely different problems.
There're  already so many new discount brokerages, the charge for commission is only 1% for seller agent or flat fixed fee.
It's common now in CA.

[Carlos Ptriawan]

Do you know why everything is expensive post covid? and this is actually the largest root cause of inflation/price hike.
The shipping freight charge went 4x - 5x times during Covid. 

Here's the chart:
https://unctad.org/news/shippi...

But it's already going down by now.

[Denise Brown-Puryear]

Quote from @Bill B.:

Thank goodness they bought a home then or they’d be homeless. Rents are up 20-30% while their payment stayed the same. Sure they could sell and walk away with a pretty healthy gain. But rent would eat that up within a year or two and then back to homeless. 

You cant count the number of people who didn’t buy for the last 2 years because they were promised a housing crash was coming. Now prices are 30% higher and interest rates have doubled. They’ll never be able to buy a home, even if prices did drop 20%. They’re pretty much screwed for life. 

The “experts” have been predicting a crash for at least 12 years. They want to make sure they get credit for predicting it this time. The news made hero’s out of those who saw it last time and everyone wants to be a hero. So they runaround yelling fire fire fire. Go ahead and search BP for housing crash coming. Your computer will probably crash with the number of results. 

 I so agree.  All of these "pundits" and "experts" crying wolf all day long..... There's no need to pay attention to them, focus on what works for you and go for it.  Prices may stabilize, but nothing goes totally back to what it once was..... anyone remember when gas was $1.25 gallon or less (with the exception of the oil embargo in the 70's?)....yes, I'm dating my self  c:)

I remember telling many of my home searching buyers back in the 90's when I had my brokerage in Brooklyn, NY to purchase now because in a few years (less than 2) they will not be able to afford to purchase in Crown Heights or Bed-Stuy; especially if they wanted a brownstone.  Those few who did were certainly glad; the others....could not afford to purchase years later, let alone rent.  If the numbers work, as I always say, go for it.

[Bruce Woodruff]

Quote from @Tony Kim:

True Tony, but you are in LA, probably in a really nice area (?) So the prices are not coming down yet for you, but they will have to soon, even cash buyers will start to wait out the market peak and try to get that 'bargain'

[John Carbone]

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @John Carbone:

Quote from @Joe Bertolino:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

@Joe Bertolino

hot off the press.

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

https://www.cnbc.com/2022/09/2...

I thought sellers wouldn’t sell, prices wouldn’t drop, and theres no inventory?

I posted the math here a few days ago about how all the equity during Covid was phantom here: https://www.biggerpockets.com/...

this is just getting started folks, this is July data…rates are up almost 2 percent since then. unless rates come back down fast, the winter numbers are going to look abysmal. 

Did anybody say the rate of growth wouldn't stop? overall still up, but slowing growth (which is beyond expected). Are people actually saying that there will be no slowing to the growth?  Or are people just saying the market won't crash which would be 20% reduction or more? All this says is it's slowing (and not even that much all things considered). 

 I don’t know if he actually read the story or if he thrives on click bait.  

I lost my desire to debate him when he “couldn’t remember” the subdivisions in Dallas he was claiming had hundreds (if not thousands) of completed homes sitting in standing inventory. 

 you must be thinking of someone else, I never said anything about dfw subdivisions.

Also, showing historic data being released is not click bait, they are facts based on real data in markets all across the country. What you say in your replies is click bait based on false assumptions of reality. While you can still live in your fantasy land there thinking prices won’t drop, there’s no supply and prices won’t drop..they already are, and it’s just getting started. What positive spin do developers and realtors get out of the article? That data is 2 months old, it’s already much worse now than it was then. Take off your tunnel vision blinders 

 Fact is, it is the biggest drop ever in a month, and the first drop in over a decade. But sure, nothing to see here all is well. 

 Obviously If rates stick at 9% for an extended period of time the market activity will grind to a halt. Will it drop 20%+ year over year nationwide.  I don’t think so.  I don’t see how it can.  There is not enough inventory.   3.7 months in my area with very little standing inventory from builders.  The BIA hot list has 17 homes.  I predict people just won’t do much.  They will stay put until numbers start to pencil out again.  Considering most homes have a ton of equity and rentals are extremely expensive,  unlike 15 years ago,  people won’t be walking away from their homes in mass.  

@Joe Bertolino @james hamling 

Seems like despite the data released today which shows:

1) people are listing homes (there is inventory)

2) prices are dropping 

3) largest drop in history 

So your saying this is just temporary and not indicative of what is to come despite rates being 200 basis points higher now than august (when this data is from) 

Neither of you think a 20 percent peak to trough drop is possible, so I guess we actually have to see official numbers of 20 percent drop for you to realize it.

the likely outcome here is 20-30 percent drop. Fed cuts rates and housing goes back up to reinflate the bubble eventually like they always do. But prices needed to drop while rates are high, and they officially are now. 



 

 Joe, those of us who want to understand what's happening use things like median pricing. And no, it will not drop by 30%. You've clearly decided the whole storyline and are just going to find anything to help support your decided position, so i see no point in this. 

Will there be a drop from the absolute highest sold, yes, it is a little thing many of us call winter, it tends to come around once per year. 

So if your looking at month-over-month as you said before, ignoring YOY like the rest of industry, yup, your going to see this "crash" happening most years in the highest sold in given month vs lowest in given month. These are called seasonal variances. 

You might as well also call out a school session "collapse" while at it, given the MOM highest vs lowest solds in connection to school start. 

Again, variances. 

My question is, how many properties are you selling right now? If your so certain there is a 30% drop coming without doubt, you must be happily selling everything now then, right? Taking advantage of these "high prices"? 

It’s the first monthly drop in over a decade. The data is seasonally adjusted, so it takes into account what you are speaking about. 

im not selling because I don’t care about phantom equity, and it’s too late to sell to realize peak equity. If I list now I’ll just be cutting prices, and eventually the fed will pivot and housing prices will reinflate. There’s also ridiculous closing costs associated with selling a home. It’s crazy to think people like yourself make 6-7 percent on transactions with values this high. Can’t wait for the techies to advance blockchain technology so real estate closing costs can be a fraction of what they are today. 20 percent minimum median real estate decline is a lock (unless fed pivots to lower rates) the peak was June 2022.

@Jay Hinrichs makes good points. The supply chain issues during Covid are being worked out though. Lumber prices will drop, it takes several months to work through the system. Once people start losing jobs, the cost to build will drop substantially. It will take some time, but as rates stay high there will be a fed induced reset. 

 How will block-chain walk seller/buyer through a transaction contract?    How will block-chain devise a marketing strategy, deploy and manage that?  The notion that block-chain will replace agents is just being drunk on the Cool-aid at the worship of tech..    

And there is mitigation for 6-7%. Not everything is 6-7%, you clearly have not bought or sold anything in some time, or of any pricing level because it's rather common and standard for those fee's to move downward as gross sale $'s move upward. Not to mention 6-7 is for BOTH sides, seller and buyer agency. It's not uncommon to get into a combined 4% agency fee's depending on price level. Then there is all the alternative options which go as low as 1% per agency side. 

I don't understand why your dead set that people will have to sell. Increased rates have a direct relationship with volume, not sold $. Reduced volumes are what can have a relationship with reduced sold $. "Can" being the operant term. People can choose to simply, not sell, if the choice exists. Does that choice exist today?     

What is "Phantom" equity? Equity is equity. If your saying it's not real until it's realized, that's ALL equity. That premise would also make all home values "Phantom" home values until time of closing. 

First drop in over a decade. Not sure what market your talking about because I know of many drops and adjustments in median home price since 2012, a lot. 

20% drop in median home price, at MINIMUM..... well ok, we will see. By what time are you willing to commit that these will come to pass by. And are you willing to come back on B.P. and make a post entitled "I WAS SO WRONG, ADN THEY TOLD ME SO" if/when that date comes and goes and there is NOT a minimum 20% drop to median home prices?     I am still waiting to see just 1 of those posts from all who were screaming in '21' how it was all about to crash, huge drop about to hit "any day". Not a 1 has owned up to being dead-flat-wrong in the doomsday preaching. 

What happened during Covid? Wasn’t everything done virtually or mostly Virtual for the most part? Are we forgetting that everything happened during Covid with how it has changed the way business is done. I didn’t say it will replace agents, I said much lower commissions and outsourcing, there will be fewer realtors that are needed. Perhaps the agents who don’t stay in the business can transition to “real jobs” like you mention to help lower the labor costs for new construction that this country needs.

when I say 6-7 percent, that’s what the majority of citizens pay. I’m not talking about the small bubble all of us are in here on BP. Of course there are ways to reduce and cheaper alternatives, but I’d estimate 90 percent of transactions are still using legacy commissions and systems. Blockchain isn’t just a payment method, it stores records, title companies, all the ridiculous paperwork that’s needed that can just be stored on a blockchain. That’s the future. 

people are already selling at lower prices.I’m dead set on it because it’s already happened. Peak housing was June 2022, the data and stats prove that people are selling and median values are already on the decline. Even if there’s less inventory, there’s way less buyers to bid it up. Those transactions are real. Price drops are real. Fewer transactions are leading to lower prices. It’s a myth that you need heavy sell volume to lower prices, you just need fewer buyers, which is what we have because the prices are too high relative to interest rates 

its phantom equity because once interest rates went from 3 to 7 percent that “equity” is not real. It was real when rates were 3 percent), it’s just going to take several months for the market (people like you) to realize it. 

did you not see the article today? We are talking about median home values across the whole country. No cherry picking markets. 

I guarantee prices will not go higher until the fed cuts rates again. I base my guarantees on what the fed does. If they aren’t lying and keep rates high like they claim them within a year prices will be down 20 percent. I’ll guarantee it. Eventually the fed will cave in, and prices will rise again. I’ll come Back and admit I’m wrong if that happens.
this is the first time I’ve come on here proclaiming this. Don’t fight the fed. 

[James Hamling]

Curious what everyone has to say on this data point.......

You can find this tool at https://www.inflationtool.com/... 

[Bruce Woodruff]

People talk about inflation as if it were some paranormal activity or something. Inflation is natural and normal. Times passes by, prices and values rise. As simple and undeniable as gravity.

People just need to learn how to take advantage of it instead of letting it take advantage of you....

My .02