All Forum Posts by: Michael Wooldridge

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3) 40% of homeowners own their houses free-and-clear and another 30% or so locked in 30-year fixed rates in the 3-4% rate and are unlikely to sell or let their houses go to foreclosure for the next 20 years.  I don't see much room for a crash with those stats alone.  

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This has been discussed before. If #3 is true, then we would not see an increase in active inventory.
See housing market and equity market works in a similar fashion. The market needs liquidity. Liquidity comes from the buyer.

Currently, 100% of market in US has a negative YoY of new listing. Good, the theory is right. BUT. for those who has to sell, they don't see enough buyer so in about 75% of the market, there's positive increase in active inventory. Literally we have more seller than buyer.

Active Inventory increases by 25% YoY.
New Listing decreased by -10% YoY. 

 That's an interesting idea, problem is how do you know the actual # of buyers in a market? How do you know if it's growing, declining? 

I think the only way to get any read on such is using listing times, % of listing to pending. That will show the velocity and velocity is a reflection of buyer volume. 

Would be a great metric to have of "buyer vectoring". Very interesting. I wonder how MLS data could be utilized to build this.....

 Here's more data so we have a complete picture :

January 2022
Active Inventory YoY -31%
New Listing YoY -8%

May 2022
Active Inventory YoY 10%
New Listing YoY 4%
(Most inventories increased in Austin, Phoenix and Florida)

August 2022
Active Inventory increases by 25% YoY.
New Listing decreased by -10% YoY.

Bottomline: there's a crack in the housing market STARTING from May 2022 as there are more sellers than buyers.
If we want to make a balanced market where # of buyers equal to #seller, the mortgage rate has to adjust to March-April 2022 timeframe.  

This is from aggregated MLS data James. I found this is the easiest method to check the balance between # buyer and seller.

So the bold is interesting. I would have assumed, and maybe it happen in May, but that Califronia has the most inventory increase.  PHX isn't surprising to me at all nor Texas.

That August data are you able to see Cali/AZ and maybe Washington? Those 3 states have particularly been hit and seeing valuation changes last 3 months. IF the inventory isn't coming from there (well PHX is one) but if CA isn't driving up inventory are people coming off market and/or still selling. 

 Found this for LA County: https://fred.stlouisfed.org/se...
LA county has the largest houses in the state. Inventory regressed to July 2020.

It seems the trends are the same, the leak in the housing market started in April-May 2022. 
We really need to adjust mortgage rate to April's rate to bring back the liquidity. 

If we remain 7% too long there's potential for GFC-like crisis.

This pretty much sums everything up right here. The longer rates stay high, the more damage is done. 

 For Cali sure. And some of the other states like AZ, Washington, parts of Oregon. I'm not sure if SLC has shifted yet but I'm sure it will also given that it's silicon sloped and had some pretty big run ups also. I expected to see that it's why I asked. Look at markets east coast. There are a lot of variations across country. Cali alone has the population and median values to shift the national median in a big way (08 FL, AZ, CA and just LAS Vegas caused a massive amount of shifts in the median values). 

Seems that DFW values are starting to dip pretty fast. From what I'm seeing on the ground, this is mainly impacting mid-to-high level homes at this point, which is expected. Lower priced homes in the $300-400k range still have plenty of buyers.
One home I came across yesterday is in Rockwall, TX. This is a very nice neighborhood, and most houses go for +/- 1m. 
The property I'm referring to just slashed the price by 76k, in what appears to be an act of desperation to sell the house. As these listings hang for longer and longer, sellers are getting anxious. How bad will rates get? Can they reach 8, 9, 10, more? Seems that this seller is thinking, "I'd be better off getting 750-800k now, than 600-650k in six months."

I know Zillow estimates are not scientific, but even their estimated value of this home is showing a huge drop down of about 200k from the peak. 

 I'm starting to see more and more of these kinds of listings out there. In my opinion we're going to see a lot more of this in high-migration areas such as TX, FL, AZ, TN, etc. People flooded to these locations when given the freedom to work remote. When mass amounts of people started flooding in w/ $ from their sold home or cheap $, the inventory quickly dried up and prices shot through the roof. 

At least in the DFW area things are slowing incredibly fast. Prices are beginning to sink back down to reality and inventory is slowly increasing. Competition is not longer a concern for buyers. We still have a ways to go from my perspective, but we're definitely on that trajectory. 

So we obviously need more than a few. I will say this though. Now would be the time to potentially panic/sell. You can still get reasonably high. 

Long term though I still don't see it. It will be people forced to move. Rates are too high, you are literally going to have people who have $500k homes with payments the same as $750k home - and that's if they can put down the same 20%. There just won't be a reason for people to move unless they have to. 

Inventory is up but still low. I'd love to see how many homes are being pulled off the market in last 60 days without a contract. August/September should be very telling to the whole scheme.

Also Florida - if enough homes were damage might keep inventory/prices level on it's own with this past hurricane. 

I’ve done business with friends and family all the time. They can be some of the best partners.

That said I only do business with some friends and family. Like anything in life you have to choose your partners carefully. And I’ve not known too many long term business partners who don’t become family/friends.

PA/NJ/NT already passed 51 of median american salary. Not new either. People kept buying.

Prices are dropping but Cali, AZ, and some of those markets are driving it at median level.
 

 I'm entering into arms now (7 primarily) on new pruchases but most of my portfolio is 30 yr fixed. I have 2 in 15 years fixed 

  More curious about rented out vs sold. To me thats the big question how does that market shift. Rented keeps inventory high. Sold could bean interesting scenario. I can't even begin to figure out how that would impact things. It's 48% of market about to change hands over next 20-25 years. That's well impactful. not to mention all the other money that will change hands as well. 

In just the great wealth transfer alone we have a massive amount of factors that could impact housing nationally. 

 For Cali sure. And some of the other states like AZ, Washington, parts of Oregon. I'm not sure if SLC has shifted yet but I'm sure it will also given that it's silicon sloped and had some pretty big run ups also. I expected to see that it's why I asked. Look at markets east coast. There are a lot of variations across country. Cali alone has the population and median values to shift the national median in a big way (08 FL, AZ, CA and just LAS Vegas caused a massive amount of shifts in the median values). 

 That's more what I expected. We know a lot of the cali led run up - mix of money/tech stocks and the impact on homes is big for that locality so to speak. So high valuations already that have only gone higher and west coast is seeing a lot more valuation reductions than say east coast today. And obviously it's spread outside Cali, Austin is feeling it, Arizona, Washington and Oregon has parts where Californians or tech in general have relocated and caused big run ups. 

Cali also happens to have a massive population and those things paired with big rate increases equal big swings. The national impact a state like that has on all median home valuations is big. 

I'm by no means saying it won't play out that way else where but those markets have very specific reasons to be more extreme. 

Which actually brings me to Florida I know there are variations across the state but May-July when median home prices were swinging down 0-10% west coast. Florida has been doing 0-10%. Again big population, lot of large growth, I'm kind of curious to see how that state swings valuations in the long run also or if it does as it hasn't quite reach that Cali level nor probably quite Austin. 

Anyway I was expecting to see cali jump - LA county is a great example just given in how damn large it is (miles and people/homes). Thanks for sharing.

 True but on the flip side they are about to inherit a massive %  of the homes out there. So the question is what do they do with it?