All Forum Posts by: Michael Wooldridge

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@John Carbone

@John Carbone

I still don't think I understand the big deal around phantom equity.  I probably had some myself.  I bought a new primary in 2019.  Refinanced into a low, fixed rate.  So if my primary jumped up from what I paid for it in 2019 to something silly in 2021 or 2022 and is now back down... so what?  I didn't tap it, don't need it, and am not a seller.

Is this just a sign of the reduction in prices?  Or a cause for concern?  Or both?  Won't the biggest 'losses' be in primary residences that are above or significantly above the national median?  Will it hurt investors?  

It's just pointing out the facts. Over the summer it was assumed everyone had the equity they thought they had, but once rates increased sharply, it instantly vanished. We are now slowly seeing that realized in the market with declining home values. HELOC's have been a big contributor to inflation, so having values drop and rates rise virtually nobody will be doing them anymore which is good for the fed. The biggest concern is for peak buyers who panic from the drops or are forced to sell. There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it's worth 350-400k for an average primary owner. Logically they are better off staying put, but to those people You can see some irrational decisions up to and including handing back the keys. I just read recently up to 70 percent of homebuyers regretted their purchase during Covid already…. We won't see the end of this until likely next year, but I do know values won't be higher a year from now.

Agree with the psychological aspect. But where are you seeing properties that fit this: 

"There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it’s worth 350-400k for an average primary owner."

That's 20-25% on essentially median values. I don't think there is a market in the country that has hit that, not even close. The big hits have been on the higher end as called out and certainly not to that degree. 

Or is this just back to what you are predicting because the above example hasn't' come into play.... at least yet. 

Yeah, next year. The stage is already set with the buyers remorse already. Once they realize they can’t pull equity from it, and next year when they see the value is negative 20 percent, it could trigger additional sell offs from the fear which is why I don’t rule out upwards of 30 percent drops due to the final wave of irrational people pushing values too low. 

So I’ll just say 30% on essentially median ($500k is only slightly above median) would mean essentially 40% drop if you factor in inflation. You don’t think that’s a bit out there in left field? Almost 50% drop on the most stable asset in history? 
 

 dude october data is out. 

active inventory: -5% YOY
active new listing: -25% YOY

There're more buyer than seller, most likely price is either flat or slow growth, Mr. market has been tested with 7% rate, surprisingly it's doing well. 

That's a single data point. I haven't seen the data yet post on Redfin or other sites that provide analytics. 

You're starting to sound like a day trader who claims the market is making monumental moves based on real-time shifts that you're watching. 

As I've been saying, this isn't going to happen over night. This market is going to take a while to show the impacts of rates in the 7s. 

So I agree. However the initial data point is showing less people selling. Which is the first behavior you would expect. As far as time, how much time? By Junish I expect the fed to start announcing changes to rates and once it’s directionally happening good luck pushing down prices. 

I don’t think you have a very big window if you all want/expect 25-30% drops down, which I’m going to keep calling out is really more like 35-40%….. 

So your prediction is built on the cornerstone of the fed making certain moves in 8 months. These guys don't know what the market is going to do or look like in a a few weeks. But we're supposed to believe that we can predict, with precision, what they're going to do in almost a year. 

No my prediction is based off of data. It has been all along. With an election coming it would be nuts to think they won’t trend back down if inflation is under control. Given the direction of that….

Do I expect rates to be lower this time next year than they are now? yep. Why wouldn’t they be?

 

Quote from @Greg R.:

Quote from @Carlos Ptriawan:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Nicholas L.:

@John Carbone

I still don't think I understand the big deal around phantom equity.  I probably had some myself.  I bought a new primary in 2019.  Refinanced into a low, fixed rate.  So if my primary jumped up from what I paid for it in 2019 to something silly in 2021 or 2022 and is now back down... so what?  I didn't tap it, don't need it, and am not a seller.

Is this just a sign of the reduction in prices?  Or a cause for concern?  Or both?  Won't the biggest 'losses' be in primary residences that are above or significantly above the national median?  Will it hurt investors?  

It's just pointing out the facts. Over the summer it was assumed everyone had the equity they thought they had, but once rates increased sharply, it instantly vanished. We are now slowly seeing that realized in the market with declining home values. HELOC's have been a big contributor to inflation, so having values drop and rates rise virtually nobody will be doing them anymore which is good for the fed. The biggest concern is for peak buyers who panic from the drops or are forced to sell. There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it's worth 350-400k for an average primary owner. Logically they are better off staying put, but to those people You can see some irrational decisions up to and including handing back the keys. I just read recently up to 70 percent of homebuyers regretted their purchase during Covid already…. We won't see the end of this until likely next year, but I do know values won't be higher a year from now.

Agree with the psychological aspect. But where are you seeing properties that fit this: 

"There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it’s worth 350-400k for an average primary owner."

That's 20-25% on essentially median values. I don't think there is a market in the country that has hit that, not even close. The big hits have been on the higher end as called out and certainly not to that degree. 

Or is this just back to what you are predicting because the above example hasn't' come into play.... at least yet. 

Yeah, next year. The stage is already set with the buyers remorse already. Once they realize they can’t pull equity from it, and next year when they see the value is negative 20 percent, it could trigger additional sell offs from the fear which is why I don’t rule out upwards of 30 percent drops due to the final wave of irrational people pushing values too low. 

So I’ll just say 30% on essentially median ($500k is only slightly above median) would mean essentially 40% drop if you factor in inflation. You don’t think that’s a bit out there in left field? Almost 50% drop on the most stable asset in history? 
 

 dude october data is out. 

active inventory: -5% YOY
active new listing: -25% YOY

There're more buyer than seller, most likely price is either flat or slow growth, Mr. market has been tested with 7% rate, surprisingly it's doing well. 

That's a single data point. I haven't seen the data yet post on Redfin or other sites that provide analytics. 

You're starting to sound like a day trader who claims the market is making monumental moves based on real-time shifts that you're watching. 

As I've been saying, this isn't going to happen over night. This market is going to take a while to show the impacts of rates in the 7s. 

So I agree. However the initial data point is showing less people selling. Which is the first behavior you would expect. As far as time, how much time? By Junish I expect the fed to start announcing changes to rates and once it’s directionally happening good luck pushing down prices. 

I don’t think you have a very big window if you all want/expect 25-30% drops down, which I’m going to keep calling out is really more like 35-40%….. 

 

Quote from @Carlos Ptriawan:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Nicholas L.:

@John Carbone

I still don't think I understand the big deal around phantom equity.  I probably had some myself.  I bought a new primary in 2019.  Refinanced into a low, fixed rate.  So if my primary jumped up from what I paid for it in 2019 to something silly in 2021 or 2022 and is now back down... so what?  I didn't tap it, don't need it, and am not a seller.

Is this just a sign of the reduction in prices?  Or a cause for concern?  Or both?  Won't the biggest 'losses' be in primary residences that are above or significantly above the national median?  Will it hurt investors?  

It's just pointing out the facts. Over the summer it was assumed everyone had the equity they thought they had, but once rates increased sharply, it instantly vanished. We are now slowly seeing that realized in the market with declining home values. HELOC's have been a big contributor to inflation, so having values drop and rates rise virtually nobody will be doing them anymore which is good for the fed. The biggest concern is for peak buyers who panic from the drops or are forced to sell. There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it's worth 350-400k for an average primary owner. Logically they are better off staying put, but to those people You can see some irrational decisions up to and including handing back the keys. I just read recently up to 70 percent of homebuyers regretted their purchase during Covid already…. We won't see the end of this until likely next year, but I do know values won't be higher a year from now.

Agree with the psychological aspect. But where are you seeing properties that fit this: 

"There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it’s worth 350-400k for an average primary owner."

That's 20-25% on essentially median values. I don't think there is a market in the country that has hit that, not even close. The big hits have been on the higher end as called out and certainly not to that degree. 

Or is this just back to what you are predicting because the above example hasn't' come into play.... at least yet. 

Yeah, next year. The stage is already set with the buyers remorse already. Once they realize they can’t pull equity from it, and next year when they see the value is negative 20 percent, it could trigger additional sell offs from the fear which is why I don’t rule out upwards of 30 percent drops due to the final wave of irrational people pushing values too low. 

So I’ll just say 30% on essentially median ($500k is only slightly above median) would mean essentially 40% drop if you factor in inflation. You don’t think that’s a bit out there in left field? Almost 50% drop on the most stable asset in history? 
 

 dude october data is out. 

active inventory: -5% YOY
active new listing: -25% YOY

There're more buyer than seller, most likely price is either flat or slow growth, Mr. market has been tested with 7% rate, surprisingly it's doing well. 

 I’m shocked…. :) 

You know where I stand on this. 

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Nicholas L.:

@John Carbone

I still don't think I understand the big deal around phantom equity.  I probably had some myself.  I bought a new primary in 2019.  Refinanced into a low, fixed rate.  So if my primary jumped up from what I paid for it in 2019 to something silly in 2021 or 2022 and is now back down... so what?  I didn't tap it, don't need it, and am not a seller.

Is this just a sign of the reduction in prices?  Or a cause for concern?  Or both?  Won't the biggest 'losses' be in primary residences that are above or significantly above the national median?  Will it hurt investors?  

It's just pointing out the facts. Over the summer it was assumed everyone had the equity they thought they had, but once rates increased sharply, it instantly vanished. We are now slowly seeing that realized in the market with declining home values. HELOC's have been a big contributor to inflation, so having values drop and rates rise virtually nobody will be doing them anymore which is good for the fed. The biggest concern is for peak buyers who panic from the drops or are forced to sell. There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it's worth 350-400k for an average primary owner. Logically they are better off staying put, but to those people You can see some irrational decisions up to and including handing back the keys. I just read recently up to 70 percent of homebuyers regretted their purchase during Covid already…. We won't see the end of this until likely next year, but I do know values won't be higher a year from now.

Agree with the psychological aspect. But where are you seeing properties that fit this: 

"There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it’s worth 350-400k for an average primary owner."

That's 20-25% on essentially median values. I don't think there is a market in the country that has hit that, not even close. The big hits have been on the higher end as called out and certainly not to that degree. 

Or is this just back to what you are predicting because the above example hasn't' come into play.... at least yet. 

Yeah, next year. The stage is already set with the buyers remorse already. Once they realize they can’t pull equity from it, and next year when they see the value is negative 20 percent, it could trigger additional sell offs from the fear which is why I don’t rule out upwards of 30 percent drops due to the final wave of irrational people pushing values too low. 

So I’ll just say 30% on essentially median ($500k is only slightly above median) would mean essentially 40% drop if you factor in inflation. You don’t think that’s a bit out there in left field? Almost 50% drop on the most stable asset in history? 
 

Quote from @John Carbone:

Quote from @Nicholas L.:

@John Carbone

I still don't think I understand the big deal around phantom equity.  I probably had some myself.  I bought a new primary in 2019.  Refinanced into a low, fixed rate.  So if my primary jumped up from what I paid for it in 2019 to something silly in 2021 or 2022 and is now back down... so what?  I didn't tap it, don't need it, and am not a seller.

Is this just a sign of the reduction in prices?  Or a cause for concern?  Or both?  Won't the biggest 'losses' be in primary residences that are above or significantly above the national median?  Will it hurt investors?  

It's just pointing out the facts. Over the summer it was assumed everyone had the equity they thought they had, but once rates increased sharply, it instantly vanished. We are now slowly seeing that realized in the market with declining home values. HELOC's have been a big contributor to inflation, so having values drop and rates rise virtually nobody will be doing them anymore which is good for the fed. The biggest concern is for peak buyers who panic from the drops or are forced to sell. There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it's worth 350-400k for an average primary owner. Logically they are better off staying put, but to those people You can see some irrational decisions up to and including handing back the keys. I just read recently up to 70 percent of homebuyers regretted their purchase during Covid already…. We won't see the end of this until likely next year, but I do know values won't be higher a year from now.

Agree with the psychological aspect. But where are you seeing properties that fit this: 

"There is a lot of psychology of someone paying 500K for a house last summer and being told by banks it’s worth 350-400k for an average primary owner."

That's 20-25% on essentially median values. I don't think there is a market in the country that has hit that, not even close. The big hits have been on the higher end as called out and certainly not to that degree. 

Or is this just back to what you are predicting because the above example hasn't' come into play.... at least yet. 

Quote from @Bruce Woodruff:

Quote from @Wendy Thurst:

@Bruce Woodruff

Looking at ARMs 3-5 years out now.

So you're saying to buy with ARM and then assume it will drop 3-5 out? As opposed to buying fixed and ReFi'ing?

 I just did a 7 year arm on the last property. Trying to get rate similar on fixed (this was a month ago) required a ridiculous amount of points. 7 years is plenty of runway personally and I'll still refi. Saved me 1% and points on $500k. 

Quote from @Carlos Ptriawan:

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

Quote from @Nicholas L.:

@Greg R.

So i no longer have to predict Stagflation, it's here, it's come to be, this is our new norm. STAGFLATION. 

to make it more precise:

Sector-based stagflation.
Regional-based sector-specific recession.

 is it even sector? people are talking about big tech dying. And there is some truth to that but then tech is doing well in some places also. Or Twitter is laying off yes (as well as a few other small silicon companies) but MS is pretty much in retain mode (maybt not hire) but full speed ahead with current staff and retaining them as much as possible.

I said this today in a few customer calls and internal calls - it's just going to be a weird 12 months. But I think that weird is mostly going to be stagnation/flatness. Which is fine. Better than big pain. 

 Dude, what the heck. Tech is going strong.

Okay lets divide industries.

*The following industry are under recession :

Construction
Finance
Mortgage Lending
Housing
Realtor/Real Estate

*The following industry are under booming period

Oil Industry
Coal Industry
Gas
Solar
Commodity
Healthcare
Service/Hospitality industry
Anything related to service for Oil and Gas
Alcohol / Whisky related company lol
Weapon company, military equipment

*The following industry are under pressure
new field sector within Tech industry that doesnot generate money (Meta/VR/etc)


*The following industry are stable
Tech in hardware equipment
Telecommunication company
Software company that does generate cash-flow.


What the heck with tech is dying ? My 19 year old son is just accepted as Software Engineer at Zillow.
Tech is dying ? maybe you had too much booze lately LOL LOL

It's impossible tech is dying because our sector is having record backorder revenue worldwide. 

Your tech co. maybe dying now if your company doesn't generate cashflow. But if your company is self sustainable you would be okay.

Was multitasking but mostly meant tech was hurting not dying poor choice while doing things. And I’m specifically talking against the swings in markets and to some extent revenues. 

IN the rest of the post I happened to point out there was plenty of tech doing well.
 

Telecommunications is doing well eh? Tell that to VZ (3 billion restructure to cut costs just announced) and ATT who have both done lay offs and fallen dramatically in market cap and behind Tmobile. Oh BTW TMobile also did some lay offs. Long term telecom is going to be very healthy with the business big up in Edge/IoT etc… BUT I don’t know if I’d sa that industry is doing great. 

Anyway I had only meant to point out that Meta, Twitter etc are giving appearenced for tech not doing well that thye are reading into. Outside of the cash flow hurting tech companies (of which there are many) they are all doing well. Still the reshuffling on valuation has hit pretty much all of them including Google and Amazon. Big new story lately is how Apple is worth more than Google, Amazon, and Meta combined.

There are reasons behind that but it’s nuts to think about.

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

Quote from @Nicholas L.:

@Greg R.

So i no longer have to predict Stagflation, it's here, it's come to be, this is our new norm. STAGFLATION. 

to make it more precise:

Sector-based stagflation.
Regional-based sector-specific recession.

 is it even sector? people are talking about big tech dying. And there is some truth to that but then tech is doing well in some places also. Or Twitter is laying off yes (as well as a few other small silicon companies) but MS is pretty much in retain mode (maybt not hire) but full speed ahead with current staff and retaining them as much as possible.

I said this today in a few customer calls and internal calls - it's just going to be a weird 12 months. But I think that weird is mostly going to be stagnation/flatness. Which is fine. Better than big pain. 

Quote from @Carlos Ptriawan:

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

A recession is now more likely - https://www.msn.com/en-us/mone...

 If we see the bond / stock volatility like the one displayed in the article eventually it's 100% a signal for a recession.
But if we follow standard US fundamental economic indicators like ISM, job market, it's still an okay market.

There're divergences in the economy between the fundamental real economy and wall street economy. 
Wall street is saying recession , real economy saying we're still okay. Very strange indeed. 

My company has the biggest record backlog order means need for tech equipment industry is so large. My friend at Exxon has the largest bonus ever, how could there be just too many disagreements right lol.

 The cheap money to expensive money aspect is hitting those stocks / bonds hard. Job market is still fairly strong and earnings aren't even bad.

Also there is still so much cash out there in both wall street, including big companies, and the consumer. VC is sitting on more cash than ever and still investing or planning to. The fundamentals are changing (more cash flow less about market share) but there is still a lot going on. 

 I also like to see the job number. Do you see the latest job report issued a few minutes ago? 261K jobs added beyond the estimated 195k job. Hourly wage is also increasing more than expected.

This is more like an economy that's during the expansion phase, but the money authority doest like it and would like to crush it (which I found weird lol). There's no recession when job market is expanding lol 

Fed vs market literally .....

 Yep. The fed will win eventually but they are trying to slow it is all. So the moment it slows they will back off. Because it's so strong I feel like they won't overshoot for a change on it. 

Jobs are strong and will continue to be. Even in tech some companies are being hit but not all. And most are just freezing. They might not be adding but they aren't reducing near as much as people expected. 

Anyway I've been calling for stagnation and it's feeling and looking more and more like that is what will happen. Still remained more concerned about activity outside the US such as Credit Suisse and other foreign markets. 

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

A recession is now more likely - https://www.msn.com/en-us/mone...

 If we see the bond / stock volatility like the one displayed in the article eventually it's 100% a signal for a recession.
But if we follow standard US fundamental economic indicators like ISM, job market, it's still an okay market.

There're divergences in the economy between the fundamental real economy and wall street economy. 
Wall street is saying recession , real economy saying we're still okay. Very strange indeed. 

My company has the biggest record backlog order means need for tech equipment industry is so large. My friend at Exxon has the largest bonus ever, how could there be just too many disagreements right lol.

 The cheap money to expensive money aspect is hitting those stocks / bonds hard. Job market is still fairly strong and earnings aren't even bad.

Also there is still so much cash out there in both wall street, including big companies, and the consumer. VC is sitting on more cash than ever and still investing or planning to. The fundamentals are changing (more cash flow less about market share) but there is still a lot going on.