All Forum Posts by: Account Closed

I don't think government will bail out home owners. You default - you are out. I don't recall home owners being bailed out in 2009-2011. It looks like government will bail out second mortgage/HELOC lenders and that's why Freddie Mac was approved to buy them. Last time when millions of homes were foreclosed banks sold most of them to large pools of investors. You would go chasing REO owned homes as individual investor asking asset managers to sell one to you, but at the same time banks were selling them in batches of tens of thousands per transaction, to investors who put money together and formed companies that had direct contact with the banks that foreclosed on those homes.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed.

P.S. You are right in anticipating less than 30% hit. The last time around it was 29%. Of course it was different from place to place, but 29% was a median figure. I wouldn't expect home prices to go down by 90% or 50%. They will just go back to where they were before insane post-COVID inflation, that will be the "bottom", and then they will steadily rise. Buying it when it hits the bottom and gaining from appreciation cycle that may last another 10 year will be the best bet.

There will be govt programs to protect the homeowner. Last time was completely different; we had a fundamental surplus. We're short now, and very short in the future. The government will absolutely protect the homeowner through financial stimulus or some forbearance. What happened during COVID? The times now are completely different than the GR. As much as I hate the govt meddling, they are not stupid enough to do that. The govt right now is not holding anyone's hands on CRE & other commercial debt and lettings fall. It'll create more mortgage-industry consolidation as loans get bought pennies on the dollar, not average family surrendering their house. The American economy and sentiment would never support that. Slow Joe and Immunity Donald T would never, never allow this to happen on their watch.

For the "crash", on REI, it'll fall inflation adjusted. It's not falling 30% when we are at such a crazy short, and building is halting in 2026-2027. Mind you the building is BTR, changing rental inventory not selling inventory. If there's a crash, it'll be a correction- like 10% to 20%. Obviously every market is different. And yes, you are right, when things fall it all falls at once making 1+1+1 equal 5 in the down direction.

You keep bringing the shortage up, but you miss two points. One, the shortage is temporary. Once rat-race to sell and foreclosures roll there will be a surplus. Extreme opposite of what we saw in 2021-2022. Two, you look at median income of American household which is 79K, and unless Slow Joe or Speedy Trump can double or triple it, who will buy the surpluses at the current asking prices? As to gov, there is only so much it can do. During COVID it printed trillions of dollars and we got an inflation unseen since 70-s. Can it still afford to print trillions more under current economic conditions? I guess it physically can, but what will it lead to? Your dollar will be worth less than an Indian Rupee. Then you will have a Great Depression, not just a recession. So, we will see. Right now we just share our opinions and anyone can say what they want. Pull this thread few years from now and you will see who was being realistic and who wore rose glasses in July 2024)))

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Mehehehe, everybody will see what they want. In case one is a realtor (or hedge fund manager and etc.), everyone also will want to see it certain way, so they can continue making their commission on sales and investments of client's money. Why would they care about crash and someone ending up under water , as long as commissions pile up? LOL

But the reality is what it is. Median income of US family is 79K. They can only afford homes We are about to see some major correction and once foreclosures, short sales and rat-race to sell (like rat-race to buy in 2021) sets in, there will be flood of properties in the market and the biggest home loan they can afford is $277K. https://personalfinanceblogs.com/how-much-house-can-i-afford-if-i-make-79000/ Who do you think is going to buy the foreclosed homes for $600K-800K when rat-race to sell starts? Pull of investors will surely buy them, direct from the banks, in batches of 20000 homes per transaction. Just like they did last time. Yes, those homes will appreciate back and investors will make a fortune out of the disaster. But don't think for a minute that it won't happen. Some posters suggest gov will help and bail out home owners to prevent foreclosures. Nothing is farther from truth. All gov can do, under loss mitigation laws, is give home owners extra time to scrap up some money and make some sort of arrangement to resume paying their loans. They may offer some refinancing options that make expensive home more affordable by writing a 40+ year loan term with balloon payment at the end. And anyone who can still afford it will pay until they are not under water. But once rat-race to sell starts and mortgages drown under water how many people will make sacrifices and pay their last cents to stay current in the mortgage, as opposed to letting banks to foreclose? All the loss mitigation and other gov protections can do at that point is delay the foreclosure and eviction from property by couple of year. But it will happen nevertheless. I think it will be wonderful opportunity to invest in RE. It's wisest thing to prepare for it and snatch few props when the crash occurs, like people did in 2010-2011. I know millionaires who did just that in CA. They were 9-5 employees until 2010-2011, saved a lot of cash in good time and used it as a down payment to buy 4-5 props and took off from there. Now they sit on over million dollar of assets, preparing to comfortably retire. So, while crash is painful and tragic it also presents opportunities like never before. Those who are informed and prepared will benefit from it the most. Others can do as they will.

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Quote from @James Wise:

Quote from @Account Closed:

@Dan H.: >>That does not define a shortage. That defines a supply/demand constraint. The shortage is because the country is short a significant number of housing units where people want to live. <<<

LOL. Are you saying that shortage does not define shortage?))) Ok, you want to lighten up and try to crack a joke. I get it. But that set aside, my point is not to define shortage (it is what it is, lack of supply), rather to explain WHY it exists. One of the main REASONS is that homeowners don't want to sell homes. Why? Because they are locked into low APR. If you think about the main reason WHY there is a shortage it's obvious that it is circumstantial and that reason will evaporate with changed circumstances.

>>a buyer does not need $400k to $800k. using owner occupied loans can get 96.5% LTV. At that LTV, $35k can purchase a RE worth $1m. 7% apr is historically moderate and why home were statistically less affordable in the 1980s. <<

Wrong. Even if you get 100% LTV , with $35K you can't purchase a 1m home at 7% APR, unless the banks will write you a 1000 year loan. $35K can afford to pay around $1000 on housing. How long will it take you pay off 1 mil loan with 7% APR with $1000/mo installment. I mentioned earlier that I still remember 8% APR on mortgages back in 1990's. But I also noted that the exact same homes that fetch $600K today were priced at $140K back then, and they were in much better shape being 30 years younger. Current prices and APR are not sustainable, it will inevitably crack and crash.

>>In addition to the affordability not being at a worse case, the information to educate on home buying options has never been greater. There are programs like NACA, FHA, VA, etc. There are finance options like owner financed, assumable, sub-to, DSCR, lease to own. there are alternate rent options such as STR, MTR, rent by room. There are numerous property types such as self storage, Mobil home parks, office, industrial, commercial residential, non commercial residential, etc. There are numerous value adds such as traditional rehab, development, change of zoning, TIC, etc. then there is taking a role in the financing such as hard money lender or notes. There is flipping, BRRRR, and rent ready units and turn key. <<<

You do you. If you don't like what you hear plug your ears and do as you wish. Your decisions and glasses you wear are none of my business. But none of what you say will avert impeding crash.

>>>my point is there are so many paths in RE. To believe that at anytime there is not a viable path mostly points to needing more education. <<<

One of us certainly needs some education and I don't think it's me. You can talk about STR, MTR, BRRR, NACA, FHA, VA and etc. all day long, none of it will avert the market crash and correction.

Of course there is always a path to make money. Even and especially crashing market presents the best opportunity in decades to make most of one's investment. Study history, learn a bit about it, you may need it.

FYI, I said banks would have to write a 1000 year term loan to let someone with 35K income pay off 1 mil loan in 1000/mo installments. It's inaccurate. One with 35K income will NEVER pay off 1 mil loan, even in million years. Simply because the interest payment alone at 7% APR will be in excess of $3K, the total gross income of the earner you mentioned. At ZERO APR (suppose home owner finances it), it would take borrower 75 years to pay off 1 mil debt if they paid in $1100 monthly installments. $1100/mo being the maximum installment they could realistically afford with 35K income. Since they have to also eat, pay utility bills and other expenses. And that doesn't account for taxes, insurance, maintenance costs. So, what you propose doesn't work in a world we live in.

With a $35k yearly salary, Banks will let a borrower do a loan around $100k-$115k. What kind of drunk maniac thinks Banks are handing out $1 Million Dollar Mortgages to people making $35k?

I hope you read the comments on the thread before responding (to put things in proper context) and are aware that it was the poster above who suggested it.

@Dan H.:

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Quote from @Account Closed:

@Dan H.: >>That does not define a shortage. That defines a supply/demand constraint. The shortage is because the country is short a significant number of housing units where people want to live. <<<

You do you. If you don't like what you hear plug your ears and do as you wish. Your decisions and glasses you wear are none of my business. But none of what you say will avert impeding crash.

>>>my point is there are so many paths in RE. To believe that at anytime there is not a viable path mostly points to needing more education. <<<

One of us certainly needs some education and I don't think it's me. You can talk about STR, MTR, BRRR, NACA, FHA, VA and etc. all day long, none of it will avert the market crash and correction.

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@Dan H.: >>That does not define a shortage. That defines a supply/demand constraint. The shortage is because the country is short a significant number of housing units where people want to live. <<<

You do you. If you don't like what you hear plug your ears and do as you wish. Your decisions and glasses you wear are none of my business. But none of what you say will avert impeding crash.

>>>my point is there are so many paths in RE. To believe that at anytime there is not a viable path mostly points to needing more education. <<<

One of us certainly needs some education and I don't think it's me. You can talk about STR, MTR, BRRR, NACA, FHA, VA and etc. all day long, none of it will avert the market crash and correction.

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Quote from @V.G Jason:

Quote from @Account Closed:

Quote from @Dan H.:

Quote from @Account Closed:

Quote from @Dan H.:

Quote from @Account Closed:

Quote from @Edgar U.:

Ever since BP started someone always posts crash this, crash that, crash this year. The only thing crashing are the ones not getting involved in this market, a lot of money to be made! Adjust strategies, be the best at it, and move on. Should a "Crash" does happen, just adjust again until you figure out what is working and move on, adjust, etc. If one follows the news, there is crash almost every month, if one follows the money, there is money in every month!

Impeding crash can be an opportunity for anyone who can leverage it. A lot of people bought homes in CA after last crash, at a good discount, and if they were smart would sell those homes in the past few years and moved their investment (with huge equity) elsewhere. It will also be a great loss for those who paid full retail when market reached the pinnacle, they will be upside down and their homes will go on foreclosures. It's good to think about it and try to foresee it, so one is not victimized by it at very least.

As to people saying things, people will always say what they want and think. That's why we have Freedom of Speech, versus tyranny where people get their heads cut off if they speak unpopular things. But all the empty talk set aside, there is a reason to expect a new crash. Dodd Frank was good at keeping it at bay until the COVID pandemic hit. Ever since, with hyperinflation, rising RE prices (in part fueled by historically low rates in 2021, before feds started to hike them) and massive cash flow from hedge funds, foreign investors and etc., the RE prices skyrocketed far beyond what US buyer can afford to pay. With US median household income in upper $70K, there is no way your regular 9-5 worker can afford to buy homes at the prices they were selling recently. Once tide changes, investors pull, foreclosures roll things will get ugly. At this point it is not a question of if, but it's a question of when. Most certainly you can thrive in roller coaster if you are well informed and can make the right decision as to when you should buy and when you should sell your RE, just like any other commodity on the market.

Simple question: can you list any item ever that crashed when there was less supply than demand? If you can, what was the item and when did the crash occur? All studies show a shortage in housing where people want to live.

It is tough to predict a crash of a commodity that has a shortage. Many people may never be able to afford to purchase their own home but as long as demand exceeds supply I question if it matters.

I do think we are in a tough market for RE investors. Recent purchases are almost universally cash flow negative. Without rent growth or appreciation, these purchases produce terrible return. Buy the buyer qualified for the loan with the poor cash flow implying they can handle the poor cash flow.

Best wishes.

Same to you, best wishes and all. The reason for crash is what I have mentioned above. Commodity is not worth what it is sold for, the only reason it is so high is the abundant flow of the cash from hedge funds, financial management companies, foreign and domestic investors who pay cash to purchase 32% of existing inventory. But there is no perpetuum mobile and this will not continue infinitely, just as housing boom of early 2000's didn't last forever. There will be a breaking point, and once investors pull out and lots of underwater homeowners go in foreclosure, things will change. It will likely be accompanied by lower interest rates, with Feds bringing them down to stimulate growth post apocalypses, which will further increase the affordability of houses. One once the chain reaction sets there will be a flood of people existing RE, just as there was flood of people buying in during 2021 rat-race. I think it will be a good time to buy RE when the market crashes. Those who will have cash at such juncture will have an opportunity to gain big time.

I notice you did not answer if you could think of one commodity that crashed when demand exceeded supply. I am assuming that you could not.

At the great recession there was years of significantly adding to the housing supply. There was not a shortage of housing where people want to live like today.

So in your scenario the houses are too expensive so people stop purchasing them and investors sell a commodity in short supply at a loss? But people have to live somewhere. They can increase occupancy a certain amount but that has limits. The prices today have not reached the point that investors are not still Buying. So what would cause an investor to sell a commodity in high demand and short supply at a loss?

Note I am not saying it cannot happen but I would not count on it. I have done my underwriting last 2.5 years reflecting no near term appreciation but my market has appreciated on average over $100k in that time span. Was I too conservative? Possibly. Those who sat the sidelines for the last 2.5 years need $100k of depreciation to maybe be close to same as if they purchased 2.5 years ago. I say close to the same because those that purchased 2.5 years ago still would have the equity pay down.

Sitting on the sidelines has risk. It is a different risk than the risk of purchasing RE. I guarantee that historically the risk associated with sitting the sidelines has impacted at a higher rate than the risk associated with an RE crash.

By the way 2.5 years ago going back to GR I was hearing similar stuff about price of RE in my market being too unaffordable but statistically it was more affordable than most of the previous 60 years. Today my market is still more affordable than it was in the 1980s.

Sit the sidelines and take the risk or purchase RE and take the risk. I plan to continue to purchase.

Good luck

I see no point in arguing about something that , to me, is certain to occur. But since it had no occurred yet, there is no evidence of it happening at the moment. So, it would be futile to argue this back and forth. I just set out my reasoning, why I believe it will happen. Feel free to ignore it and do as you wish. I don't owe you fiduciary duty and , frankly, don't care how you manage your own affairs.

As to question you asked, we have a shortage at this very moment because house owners who locked low APR loans are unwilling to sell. They know they will get less house and very high APR to finance their next purchase, so why sell now? With home values either appreciating or holding, it does not make sense at present time to sell if you are one of those homeowners. And construction can't catch up with demand. Besides, new constructions are selling for astronomical price out of the reach of ordinary Americans (why would they sell for less than a current marker value? It's better to sell fewer home for retail than build homes at loss. Builders are not charitable organizations to deliver below market cost houses). When I say current housing prices are beyond affordability of average Americans I refer to median household income of ~$79K. 32% of the homes bought not by your average Joe Six Packs, but paid in cash by high equity individuals, hedge funds and investors. Median household earning $79K/year doesn't have $400K-$800K cash in a bank to buy the houses, much less finance it with 7% APR. But circumstances will change. On June 21, 2024 Freddie Mac got approval to purchase second mortgages on SFH occupied by primary residents. Why do you think they were approved to do that? And what do you think will happen with housing market when people who can't afford to pay their bills take HELOC and max out LTV? Where will they get money for food and other necessities once HELOC is depleted? What do you think will happen to their homes once they no longer can afford them? It's coming. I don't know when, but housing market will crash. And it's good to know and anticipate it ahead of the time, so that you don't make mistakes that others do. I have almost 50% equity on my current home and have opened HELOC line on it just before rates skyrocketed, just to have a back up cash for emergency purposes. I haven't touched it since, my HELOC balance is ZERO. I would rather cut my expenses than touch it, especially now when I know what is coming. And my HELP rate is just under 10%. How many home owners do you think do the same and not using their HELOCs to pay their bills or to maintain lifestyle that is suddenly out of reach due to crazy inflation we saw in the past 3 years? Once these homes start going to foreclosure, en masse, they will drag down the prices of homes in general. With prices going down all the hedge funds and financial account managers will start dumping the RE. Since any mortgage becomes an instrument , those will be dumped as well. Then you will have more housing that anyone will have means to buy (and those who have means won't be touching something in freefall). That's when things will change. I know it and I am prepared for it. I hope to have good credit, good money at hand and ability to purchase homes when the correction occurs. It will be the best time to invest in RE.

So you reasons for things will go into foreclosure are interesting. I don't think it'll happen exactly that way, but if remotely does you bet the government will bail out homeowners. So I don't think it'll be a tangible concern. With that said, when foreclosures come the private money will not be sell side but buy side. Home ownership will get more concentrated.

Also, if/when a crash happens, you got to take into account where does it bottom. Same decision with equities. We can use VOO, Vanguard's S&P 500 index, as an example. In Oct of 2022, it hit sub $330 after trading north of $430 within the 1 year window. This weekend it rolled off just south of $510. Do you see a crash taking us back to that $330 level? That's a 35% hit. For akin results, go check RE in Sep-Dec 2022. Same things in most markets, they traded 15 to 30 less than they are now. How deep does this "crash" hit, more than 30%? The crash in my opinion already happened in H'2 22. The correction has yet to come. Of course this is market to market and case by case.

As to reason, there is not one specific reason, I just described one. When things crumble multiple variables are at play and come down together as dominoes. I just see where it's headed.

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Quote from @Dan H.:

Quote from @Account Closed:

Quote from @Dan H.:

Quote from @Account Closed:

Quote from @Edgar U.:

It is tough to predict a crash of a commodity that has a shortage. Many people may never be able to afford to purchase their own home but as long as demand exceeds supply I question if it matters.

Best wishes.

I notice you did not answer if you could think of one commodity that crashed when demand exceeded supply. I am assuming that you could not.

At the great recession there was years of significantly adding to the housing supply. There was not a shortage of housing where people want to live like today.

Sit the sidelines and take the risk or purchase RE and take the risk. I plan to continue to purchase.

Good luck

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https://noradacapital.com/faq/

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Just out of curiosity I pulled an old thread from 2 years ago, with raving reviews of Norada, and was shocked to discover that people invested $50K-$100K knowing that they were buying just a piece of paper (promissory Note), with no assets to secure their investment. Norada was basically borrowing and owing unsecured debt, like a revolving credit card debt. If someone promised me to return 24% on money borrowed and gave me a piece of paper I would make a counter offer to sell them a Brooklyn bridge. Why anyone thought this was a good investment is beyond my comprehension. You would think someone in possession of $100K+ cash would be wiser in managing their money.

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All Forum Posts by: Account Closed

Account Closed has started 4 posts and replied 133 times.

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