For the Real Estate Drop in sales and price Naysayers HOLD ONTO YOUR HATS

[NicPaus]

Lots of people sitting on cash.

So if rates are currently at 6-7% and they are expected to go upwards of 10%.. What would be the benefit of not purchasing now?

Or are we all thinking they are going to drop down into the free money ranges again? If so how long does that cycle take? 10 years? 5 years?

RD

I ran into a Builder at lunch Monday. He is 85 still working strong. Has a house for sale currently for 2.5 he built. He reminded me how he was building in the 80s and buying houses at 22% and turning them and making money.

Another Guy same age I work for. Made his fortune in real estate. Said He was used to paying 18% on mortgages. And still making money rehabbing them. He told me anything under 5% is free money.


Who knows if it will ever drop below 7%. The current alternative for most is keep paying rent.

 

[TCHB]

This group thinks we are in for a long up ride. https://www.noradarealestate.com/blog/projected-interest-rates-in-5-years/

 

[Done-it-again]

This group thinks we are in for a long up ride. https://www.noradarealestate.com/blog/projected-interest-rates-in-5-years/

The new real estate sales tactic. "Rates are going up the next 4 years to 18% so buy now while it's low".....

 

[badgas]

I'm waiting for a drop in car prices as I need a commuter

$31K + $6K mark up for flipping Prius Prime

$38K for a 3 year old Tesla Model 3

You would think with all the doom and gloom we might start seeing deals on cars ?

Nope !

 

[Cdog]

This group thinks we are in for a long up ride. https://www.noradarealestate.com/blog/projected-interest-rates-in-5-years/

That would royally fuck the rest of the world in trade dollars. Europe is going to get it dry this winter and will emerge in a major recession next summer.

In reality the rate hikes are aggressive to get ahead of inflation and provide a point in the future where they have room to cut/pivot.

Real estate is an afterthought and likely the least of the feds concerns.

 

[badgas]

This guy is going to lose money on this flip

7000 Vicky Ave, West Hills, CA 91307 | Zillow

7000 Vicky Ave, West Hills CA, is a Single Family home that contains 1396 sq ft and was built in 1958.It contains 3 bedrooms and 2 bathrooms.This home last sold for $970,000 in December 2022. The Zestimate for this Single Family is $1,065,600, which has increased by $28,684 in the last 30...

www.zillow.com

Lot of flippers that watch a few HGTV shows and think they can flip a house. They buy too high, they pay too much to renovate , They hire a realtor to sell and then they wonder why they don't make money.

 

[Cdog]

This guy is going to lose money on this flip

7000 Vicky Ave, West Hills, CA 91307 | Zillow

7000 Vicky Ave, West Hills CA, is a Single Family home that contains 1396 sq ft and was built in 1958.It contains 3 bedrooms and 2 bathrooms.This home last sold for $970,000 in December 2022. The Zestimate for this Single Family is $1,065,600, which has increased by $28,684 in the last 30...

www.zillow.com

Has everyone noticed the buyers agent compensation being advertised on the listings since 2020 ish?

What’s everyone’s opinion on that data point? What does it indicate to a potential buyer about the seller?

Asking as a broker.

 

[hallett21]

Has everyone noticed the buyers agent compensation being advertised on the listings since 2020 ish?

What’s everyone’s opinion on that data point? What does it indicate to a potential buyer about the seller?

Asking as a broker.

As a buyer I don’t care. I’m only worried about OTD pricing. It either works for me or it doesn’t.

As a seller I have a number in my head that I’d like to achieve, as long as you can get that I’m not worried about what you make.

I’m self employed if that makes a difference.

 

[Orange Juice]

Has everyone noticed the buyers agent compensation being advertised on the listings since 2020 ish?

What’s everyone’s opinion on that data point? What does it indicate to a potential buyer about the seller?

Asking as a broker.

I see it as another area we can reduce the cost of home ownership.

 

[Cdog]

I see it as another area we can reduce the cost of home ownership.

Please explain in more detail

 

[Looking Glass]

I'm waiting for a drop in car prices as I need a commuter

$31K + $6K mark up for flipping Prius Prime

$38K for a 3 year old Tesla Model 3

You would think with all the doom and gloom we might start seeing deals on cars ?

Nope !

The incredible thing I keep seeing is when people are trying to sell their vehicles and don't even have the energy to clean the Interior, let alone the exterior. Damn, fast food wrappers, and cups along with an overflowing ashtray.

 

[dribble]

Lot of flippers that watch a few HGTV shows and think they can flip a house. They buy too high, they pay too much to renovate , They hire a realtor to sell and then they wonder why they don't make money.

Exactly what a close friend couple did. Their fourth flip was a disaster. Looked at it at 11:00 at night in the middle of winter. Hard money loan, house had a kitchen add on that wasn't on a concrete foundation, one wall covered in termites, hard money lender would not release funds, so they couldn't pay their contractors but the lender was getting $4,500 a month in interest. Finally got it done after nine months and ended up selling it for a 90K loss. Filed bankruptcy shortly after.

 

[PaPaG]

So if rates are currently at 6-7% and they are expected to go upwards of 10%.. What would be the benefit of not purchasing now?

Or are we all thinking they are going to drop down into the free money ranges again? If so how long does that cycle take? 10 years? 5 years?

RD

Once Red HOPEFULLY wins in a few days and takes over in January they should be able to stop many of the socialists money wasting spending agenda, and if in 2024 we get DJT or even DeSantis in office things will change for the better rapidly. (within 6-12 months) I doubt that interest rates get up to 10% in the short future but you never, I am thinking max of 8.5-9% if the Fed keeps raising at .75 for the next 2-3 meetings. If DJT or DeSantis wins in 2024 I am thinking that rates could go back down to 3.5-4.5%....... 7% today seems like a good deal vs 10% but I would just wait it out til we see what the political climate results are.

 

[Cdog]

lol

 

[Englewood]

So if rates are currently at 6-7% and they are expected to go upwards of 10%.. What would be the benefit of not purchasing now?

Or are we all thinking they are going to drop down into the free money ranges again? If so how long does that cycle take? 10 years? 5 years?

RD

I don’t see rates going that high. If mortgage rates hit 10% the market will drop 50%.

 

[Looking Glass]

The incredible thing I keep seeing is when people are trying to sell their vehicles and don't even have the energy to clean the Interior, let alone the exterior. Damn, fast food wrappers, and cups along with an overflowing ashtray.

You have to think if this is how they treat the interior, what does the maintenance history, really look like? I have been looking for the late 90s to early 2000's Chevy PU and the asking prices with 200,000 miles and up are Nuts. There are many if they dropped 50%, they would still be High. There is a "Correction" coming!!

 

[LargeOrangeFont]

But the needle that popped the bubble was sub prime loans kicking into extremely high interest rates that people could not afford nor refinance out of.

So what’s gonna pop this “bubble”?

It’s gonna be a slow deflate. The people in this thread said the drop in prices would be double or triple that 10% drop by now. That’s because no one has lost their jobs at this point.

There will be no pop unless lots and lots of people lose jobs. The higher rates go the more people will stay put. If people arent losing their jobs, they will
keep happily paying their 3% mortgages, which they will now have have a huge incentive to keep, not walk away from.

If there are not heavy job losses, the only beneficiaries will be cash buyers. No one else will be able to move.

 

[Ace in the Hole]

I don’t see rates going that high. If mortgage rates hit 10% the market will drop 50%.

Fed rate went up today again. I know on my morning call today we are forecasting 2 more hikes which is going to have a ripple impact on far more than just housing. Jerome Powell and the entire Biden admin need to go...but we're stuck with them and they are going to drive this ship into that iceberg come hell or high water.

 

[Havasu blue label]

My first home was 9 percent interest rates will go back down to 4 and 5 per all buyers that qualify at that rate will gain

 

[77charger]

Our first house in 2000 was 8 percent on a 30 year loan 190k price. Our current is about 3 percent on a 15 year only a 60k loan. Ain’t going anywhere for a long time.

My parents had 12-18 percent loans before that on homes they bought 70s80s

 

[Sportin' Wood]

A few random thoughts open for debate:

• The SEMA show today was FN crazy busy. Apparently, they did not get the memo we are all doomed.
• If rates go to 10%, what does the number look like for eligible buyers? I imagine this would drive prices downward rapidly since middle-class dual-income people may have a problem with the debt ratio for even a $450k mortgage. I have seen pending homes go back on the market; I assume it is because, with rate increases, the buyer no longer qualifies for the mortgage.
• Is it better to have a $200K 30-year mortgage at 10% or a $400k 30-year mortgage at 5%, Same house, same income? I'll take the more expensive rate for a significantly reduced home price: less required down payment to get 20% down and less debt.
• Would you rather be in a hyperinflationary period or a recession?
• What happens when the Boomer's death rate accelerates?

 

[hallett21]

A few random thoughts open for debate:

• The SEMA show today was FN crazy busy. Apparently, they did not get the memo we are all doomed.
• If rates go to 10%, what does the number look like for eligible buyers? I imagine this would drive prices downward rapidly since middle-class dual-income people may have a problem with the debt ratio for even a $450k mortgage. I have seen pending homes go back on the market; I assume it is because, with rate increases, the buyer no longer qualifies for the mortgage.
• Is it better to have a $200K 30-year mortgage at 10% or a $400k 30-year mortgage at 5%, Same house, same income? I'll take the more expensive rate for a significantly reduced home price: less required down payment to get 20% down and less debt.
• Would you rather be in a hyperinflationary period or a recession?
• What happens when the Boomer's death rate accelerates?

1. Custom off-road, boat and plane buyers of a certain caliber can always make it happen. Shows like Sema prove it

2. I think 10% lessens the affordability for a lot of people. But why would owners want to sell for a discount when they could rent the property? Obviously there will be those that need to sell. But will they out number those who can weather the 5-10 year “storm”?

3. Personally looking at real estate long term, id take the cheap rate. Especially if we are looking at a 30 year note. 600 pages ago I think we all agreed that within 10-15 years you’ll break even on any real estate purchase. 3-5% in 20 years could be the best thing you ever did.

4. Recession

5. I think as more Boomers pass away a lot of millennials will inherit paid for property. Which will exacerbate the supply issue (so cal specifically). Now you’ll have people inheriting paid for property that they can rent for almost any price and make money on it.

Now maybe they just cash out, and take a short term gain

 

[pronstar]

IMHO we tend to label significant price drops as “the housing bubble is bursting!”

But is it a bubble, or is it just foretelling of the very real possibility that the entire economy is tanking?

Look around, read “not the mainstream media”. Banking sectors and entire economies are on the verge of collapse. Political uprisings. WWIII…

If everything gets clobbered, then I suppose everything’s in a bubble.

There’s so much more going on, blaming it on “a bubble” is just lazy. Look at the causes, don’t focus entirely on the effects. There’s stories in the data, and it’s not looking good.

 

[HTMike]

The nice thing about ultra high interest rates is my idle cash will be making a nice easy 10+ %.

This group thinks we are in for a long up ride. https://www.noradarealestate.com/blog/projected-interest-rates-in-5-years/

 

[PRORACER7474]

how long before the cd rates go up to match the interest rates on loans, thinking if I could get 6% on a 10 year cd I might just go all in

 

[HTMike]

My local bank is offering 3.5% 12 month CD. Any amount over 25k..

 

[arch stanton]

i am the executor on a relative's estate when she is gone both paid for homes will go on the market within 3 months and we will get what ever the market is at the time the houses are about a mile apart there is no provision to rent them until the market improves and i’m sure the beneficiary’s will want the money sooner than later this is the kind of thing that helps to cause the values to decrease as the economy slows and the interest rate goes up

 

[LuauLounge]

In California, huge housing shortage even with everyone bailing. Builders are caught with high everything and interest rates that are limiting the buyers.
Seeing developments that are built to rent, nice single family homes all landscaped and maintained. Make your monthly payment and play evenings and weekends. Something breaks, phone call and it’s fixed. Same sell as that new BMW on a lease.

 

[boatnam2]

My local bank is offering 3.5% 12 month CD. Any amount over 25k..

Fidelity is 4.7%, even doing fractional for $100

 

[mesquito_creek]

4. Recession

Isn’t that saying you would rather be unemployed than take a 10-15% paycut?

I personally do not prefer a recession. I can move investments into higher yield interest accounts, buy bonds and invest in business that do well in high price/higher cost environments. Can’t do any of that when there are no businesses due to recession…

I paid 9.25% for my first house that I still live in that is now at 0%. Looking forward to a healthy job market and fixed income investments of 6-8%

 

[whiteworks]

Inflation is one of the best things that can possibly happen for long term RE investors with fixed mortgages on investment portfolios. Rents go up, payments stay the same, anyone sitting on 3% investment debt is laughing all the way to the bank right about now. Creating self liquidating debt situations is one of the most brilliant forms of passive income that even the most simple minded of our species should be able to figure out and accomplish with a little bit of determination and will power. The basis of all wealth is land, these “market adjustments” are how fortunes are made and maintained. If you’re not in the game this round pay attention and make it happen next time

 

[HB2Havasu]

Powell just said in Fed Speak that they will continue to increase rates going forward at levels needed to get us down to 2% inflation. Definition: I am guessing another rate increase of .75 in December and another possible .75 at the following meeting if things do not slow down. I was hoping for .75 this round, .50 next two or three and then .25 for the next few.. I doubt that is going to happen.

Following history then the Fed will continue to raise Interest Rates until they are higher than the Inflation Rate. (This is what they did in the early 1980's to finally get inflation in check) Therefore, if Inflation continues in the 8% range you could see 11% Mortgage Rates by this time next year. Personally, I think the Fed realizes that until Brandon stops printing money like a drunken sailor no matter what they do it's not going to stop the inflation train. So I would guess they will likely start curbing back increases to 0.5% at the next meeting then 0.25% after that for a few more times. (unless inflation blows up even more, then all cards are off the table)

 

[stillhustlin]

Century homes laid off 40% of their staff in Utah yesterday. They are a top 10 national builder. I think California won’t be effected due to limited supply and how much entitlement/permitting sucks in a lot of jurisdictions. We are a semi regional builder doing about 400-500 homes a year and our owner is feeling the pain. Land prices are down 30-40% here already. From what I can see any market that booked from Covid without sustainable jobs will feel this.

 

[Sportin' Wood]

Isn’t that saying you would rather be unemployed than take a 10-15% paycut?

I personally do not prefer a recession. I can move investments into higher yield interest accounts, buy bonds and invest in business that do well in high price/higher cost environments. Can’t do any of that when there are no businesses due to recession…

I paid 9.25% for my first house that I still live in that is now at 0%. Looking forward to a healthy job market and fixed income investments of 6-8%

Right now, I prefer recession. I am praying for it. I spent the last ten years preparing for it so that I can hopefully gain from it.

Cycles are healthy.

Count me in the pile of people that 2008 chewed up and spit out. Right or wrong, I am trying to win back losses from that time in my life and, with any luck, get any chance of a decent retirement back on track. Otherwise, it's cat food and the homeless shelter. Best case cardboard box under a bridge. If this plan does not work out, I will go democrat and join the haters of capitalism. Maybe turn to a life of crime? Most definitely drugs.

 

[Nord]

how long before the cd rates go up to match the interest rates on loans, thinking if I could get 6% on a 10 year cd I might just go all in

I believe ibonds are over 9% at 2 years. I’m checking into it.

 

[DrunkenSailor]

I agree with that... that is the saving grace, IF people can continue to make those payments.

rents will go down, when people can no longer pay their rents. So you might see people walk away and rent in a less desirable area or city.... or move out of state.

I think banks will be quicker to foreclose this time around as well, on someone with a 2.75% rate... who is a few payments behind... in order to get someone else in @ a 7% + rate. They'll take a hit on the value, but make it up on the interest side. we'll see... things can get interesting very fast. Things have already drastically changed in the last 6 months alone.

I've been keeping an eye on used ford raptors, and they are dropping pretty quick now, or sitting for sale. Car lots starting to fill up with inventory. The offroad toy market is pretty stagnant, barber shop next door... parking lot was empty last Thursday and Friday. ... people are starting to spend a lot less money, whether they are forced to... or just voluntarily being cautious. who knows?? but when that happens, businesses start to feel it.

This one is tricky. The loans that had been originated up until 2022 were packaged into highly profitable securitizations. This is due to the bond rate on the deal being so far below the weighted average coupon on the loans within.

For example a nonqm loan originated in 2021 had a coupon of 4.5% and a bond rate of .5% the issuer is earning a 4% return per annum On just the interest spread. This doesn't include excess cash flows that pump the irr into the teens.

A mortgage securitization written today has an excess spread of zero.

This will even out eventually as the market stabilizes but we are going to go through a period of illiquidity first. Guidelines will tighten and the credit box is gonna get smaller.

There is a coming wave of default but it's not what you think. Most commercial loans in America are written at an adjustable rate. This is done to force the business to refi every few years and reduce risk to the note holder. The index on these rates has risen at the same rate as mortgage interest rates. As the economy shrinks and corporate debt becomes more expensive there are going to be layoffs closures etc... That's when the housing market will really be affected and the shit hits the fan.

 

[J&k beer can]

i am the executor on a relative's estate when she is gone both paid for homes will go on the market within 3 months and we will get what ever the market is at the time the houses are about a mile apart there is no provision to rent them until the market improves and i’m sure the beneficiary’s will want the money sooner than later this is the kind of thing that helps to cause the values to decrease as the economy slows and the interest rate goes up

Make sure you do not pay out a penny till all taxes are paid.
Past n current from sale of said properties..

 

[bentprops]

how long before the cd rates go up to match the interest rates on loans, thinking if I could get 6% on a 10 year cd I might just go all in

last week you could have got 9.62% on a 1 year IBOND, you can get close to your target on 3 month T Bills now. what are you waiting for?

 

[c_land]

https://twitter.com/i/web/status/1588185370373804033

 

[angiebaby]

i am the executor on a relative's estate when she is gone both paid for homes will go on the market within 3 months and we will get what ever the market is at the time the houses are about a mile apart there is no provision to rent them until the market improves and i’m sure the beneficiary’s will want the money sooner than later this is the kind of thing that helps to cause the values to decrease as the economy slows and the interest rate goes up

When my parents pass on, we plan to sell their home. There is no plan whatsoever to rent it out. I think that is the case with many situations if siblings are involved. As I browse daily for real estate, I would guess that probably about 25-30% of the properties I see are clearly vacant with old-style furniture (think flowered lazyboy chairs and green, blue, or pink carpet). It looks like anything valuable has been removed and they left the big stuff so that it doesn't look empty.

 

[Cdog]

A few random thoughts open for debate:

• The SEMA show today was FN crazy busy. Apparently, they did not get the memo we are all doomed.
• If rates go to 10%, what does the number look like for eligible buyers? I imagine this would drive prices downward rapidly since middle-class dual-income people may have a problem with the debt ratio for even a $450k mortgage. I have seen pending homes go back on the market; I assume it is because, with rate increases, the buyer no longer qualifies for the mortgage.
• Is it better to have a $200K 30-year mortgage at 10% or a $400k 30-year mortgage at 5%, Same house, same income? I'll take the more expensive rate for a significantly reduced home price: less required down payment to get 20% down and less debt.
• Would you rather be in a hyperinflationary period or a recession?
• What happens when the Boomer's death rate accelerates?

The thing about this kinda work is it books out a year + in advance if you’re good at what you do.

I’m an Art Morrison dealer & most popular items are 3-4 months out. A 1st Gen Camaro IRS is out 8 months due to supplier issues at Strange.

Much like healthcare this industry caters to the only generation with money. Boomers.

 

[PaPaG]

Following history then the Fed will continue to raise Interest Rates until they are higher than the Inflation Rate. (This is what they did in the early 1980's to finally get inflation in check) Therefore, if Inflation continues in the 8% range you could see 11% Mortgage Rates by this time next year. Personally, I think the Fed realizes that until Brandon stops printing money like a drunken sailor no matter what they do is going to stop inflation. So I would guess they will likely start curbing back increases to 0.5% at the next meeting then 0.25% after that for a few more times. (unless inflation blows up even more, then all cards are off the table)

I hope you are right on the pull back. Fed is not happy that these increases have not curbed inflation yet.

 

[boatnam2]

I believe ibonds are over 9% at 2 years. I’m checking into it.

I bonds are 6 something now, you may want to try website, it blows.

 

[Cdog]

https://twitter.com/i/web/status/1588185370373804033

Toll bros is offering a 100k resort style pool with a new home purchase In Scottsdale east of Pima.

I lost a buyer to the palm desert area last year because of that tracts wait list shenanigans

 

[FROGMAN524]

Compare Today's 30-Year Mortgage Rates | Bankrate

Find and compare 30-year mortgage rates and choose your preferred lender. Check rates today to learn more about the latest 30-year mortgage rates.

www.bankrate.com

This trend isn't helping things. When will it top out and come back? 2024?

 

[Done-it-again]

Toll bros is offering a 100k resort style pool with a new home purchase In Scottsdale east of Pima.

I lost a buyer to the palm desert area last year because of that tracts wait list shenanigans

100K "resort style" pool, ha ha ha .... 100k and resort style shouldn't be used in the same sentence.

 

[HNL2LHC]

100K "resort style" pool, ha ha ha .... 100k and resort style shouldn't be used in the same sentence.

So true!!! We looked into pools and the price was up in the low 100s. Let me tell you it was not “resort” style. LOL

 

[LargeOrangeFont]

So true!!! We looked into pools and the price was up in the low 100s. Let me tell you it was not “resort” style. LOL

Depends on where the resort you are basing it off of is

 

[Cdog]

100K "resort style" pool, ha ha ha .... 100k and resort style shouldn't be used in the same sentence.

They sure make it look nice. LOL!

 

[hallett21]

They sure make it look nice. LOL!

View attachment 1168948

I think they’re showing you 250k and saying they’ll kick in 100k lol