All Forum Posts by: Paul Sofia

Quote from @Greg Scott:

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

Recently, prices have been surging.  Given the laws passed after the Great Recession, appraisals and lending is highly restricted.  

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

Ok, so I don't deny the amount of regs re: lending, but let's be honest. Good lenders are able to manipulate DTI and bend the numbers to get people into loans that they can barley afford. Let's not pretend that all the people who purchased in this over-inflated market are super stable and can't foreclose. I personally know people who are living check to check and who bit off more than they could chew thinking that they had to buy during the recent housing craze. 

So I respectfully disagree... there is a house of cards that will come tumbling down.

Quote from @Collin Hays:

Quote from @Luke Carl:

Much bigger yield with No property manager. Which is how you win big in short term 

 Different topic altogether.  

 I just hate to see you so down on your own market all the time bud! 

Quote from @John Carbone:

Quote from @Luke Carl:

Quote from @Collin Hays:

Quote from @Luke Carl:

Much bigger yield with No property manager. Which is how you win big in short term 

 Different topic altogether.  

 I just hate to see you so down on your own market all the time bud! 

Being honest and upfront about the reality of the situation isn't a bad thing. If I were to use a property manager (and a realtor!) in the smokies I'd want to use someone who tells it how it is, as opposed to selling a fantasyland. Didn't you say last week that you outsource your STR to a group of people who handle everything? You essentially have your own PM company for your own properties, not apples to apples of the people you train to self manage. As you see, it makes sense for you to not self manage as your time is better off doing other things.

I think Colin and I have been predicting this since last year with the McMansions cabins and pools.  Builders only want to build them because of the huge profit margins on them. Those 5 beds will go back to 2019 levels in due course, and likely will have annual income around 2019 income when the dust settles on these. The oversupply of these cabins has become comical. I personally know a local builder who has been building 5-7 bedroom cabins and profiting 500k plus on them. It’s a laughing joke amongst all the locals, they are willing and able to eventually bring these prices down from their nosebleed levels, and that first domino has already fallen. 

That’s not to say the smokies won’t continue to be a great investment. the spec builders will no longer build like they are now, but there will be a lot of pain for the people they have been unloading these properties on to at the prices they have been getting. 

 I definitely see the cabin prices coming down, but I don't think the nightly rental prices will go down much if any. 

One thing I have seen over the years is rental prices keep going up over time.

Quote from @Chris Seveney:

Quote from @Micah Casey:

Has anyone done a cross collateral loan before? There is land that I am trying to purchase and build a house on. From what I'm hearing from a couple lenders is that I will need 25% down for the land purchase which of $600K and another 25% down for construction cost of about another $600K. So all in I would be at $1.2 mil land and construction. I only have enough for 25% down on the land ($150K). I was just informed that I could cross collateralize my current residence which I have equity of about $400K so I would not need to come up with the 25% down for the construction. Does this mean that my current home and new build home would be connected in a way that would not be able to sell one with out the other down the line? Any advice on this would be great. 

 If this is a primary residence then more difficult. Why not take a line of credit on your existing home. As it appears you only need $300k 

 I actually do have a helco on my primary for $100K that I have already maxed out on another investment that I took out a few years ago. Now that my home value almost doubled since then I might just consider doing that to pull out  the remaining equity of about $400. Thank you for helping me think through this. 

The Fed information is factual. House price over valuation is national from economic research firm Rosenberg Research & Associates.

I provide my economic and financial opinions based on my education and experience to all clients – residential, commercial, investment. A prospective home buyer with a large down payment, significant cash reserves, and long-term employment has very little financial risk when there is home price deflation. If they should or shouldn’t buy a home is complex analysis. Home price deflation is a risk for someone at risk of default. Those are not my clients.

real estate markets are mostly local. Seattle is not boom or bust as is historically Las Vegas, Phoenix, and Miami.

I don’t know what experts you are referring to in your statement “I know the experts that screamed about the 20-30% decline in 2020 and again in 2021”. I don’t know any economic research or credible financial research that was claiming those declines in 2020 and 2021. I told my clients our hot market was going to get hotter. Nationally, the US is short 4 million units of housing of all types. Seattle has had a supply problem since the early 2000s. There is the supply constraint. There is the demand outstripping supply which not the same as the supply constraint. Those two economic problems persisted over the last two years causing home price inflation (not appreciation. Not the same) and rent price inflation.

Each ¼ point increase in 30 year fixed mortgage rates decreases home buyer purchasing power by 2.5% to 3%. When mortgage rates hit 5% the cumulative decrease in purchasing power is 17% to 20%.

The Federal Reserve definitely does not want continued hyperinflation. home price inflation makes up a large part of US GDP.