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

[Singleton]

Condo in Carlsbad, huge home on a lake in Tenn. or Texas. Claim 51% residency in Texas, save on taxes.

You're be surprised how many well known names in business here in San Diego are residents of other states now.

That is an option as well. We are looking at where will the grandkids have the most fun when they are with us.
Carlsbad is great, but someplace by a ski resort opens up winter and summer activities on the mountain.

 

[Englewood]

Yes I sure am, are you?

You stated "since we already Doubled interest rates as was originally posted resulting in doubling the payments on a newly financed home of the same value"

600k @ 3% = $2,529
600k @ 6% = $3,597

600k @ 9% isn't even double the payment.

 

[Englewood]

Could be dead in a couple years.

In a few years I'd much rather have 500k than a lot in the foothills.

Id take that 500k, buy a 1-1.5m multifamily in Havasu. Your 500k will now be producing "mailbox money" as opposed to being a stale asset. I personally think the foothills is being overbuilt now. They just keep cutting more and more lots. Just my personal opinion.

 

[530RL]

No mention of case shiller in here this morning?

+14% YOY for the 3 months ended July.

https://twitter.com/i/web/status/1574746220731531265

"Home prices in July were still higher than they were a year ago, but cooled significantly from June gains. Prices nationally rose 15.8% over July 2021, well below the 18.1% increase in the previous month, according to the report."

There still is home price appreciation for the last year, but not at 18.1 percent but 15.8%. Yet the sky is falling?

 

[RiverDave]

I agree sounds like the lot wasn’t purchased at rock bottom prices and I have heard some people in the foothills have decided not to build on there lots?

Why not remodel the current house and bank money and wait to buy low.

The lot was bought as good as it was gonna get.. even now it’s a 25-50% gain in less than a year. It has a few things that most others don’t that are desirable.. including an offroad trail that leads right to where the back of where the rv garage would be.

 

[RiverDave]

You know I originally posted some of that stuff as a joke, but some of you guys got my wheels turning now..

RD

 

[Gonefishin5555]

Buying a lot long term with cash usually results in a below avg return. So either build it if it pencils out or sell it. I would expect a real estate guy would want the cash to pick up some stuff on the cheap over the next couple years. It’s gotta be a super pain in the ass to build right now anyway.

 

[c_land]

"Home prices in July were still higher than they were a year ago, but cooled significantly from June gains. Prices nationally rose 15.8% over July 2021, well below the 18.1% increase in the previous month, according to the report."

There still is home price appreciation for the last year, but not at 18.1 percent but 15.8%. Yet the sky is falling?

I have my own opinions about the direction of prices, but I am trying to remain objective... lol.

July YOY looks great, MOM looked different.

 

[MSum661]

I have my own opinions about the direction of prices, but I am trying to remain objective... lol.

July YOY looks great, MOM looked different.

RE Data always lags real-time and always will. You know the saying...few understand this.
I think notes from Bloomberg earlier said it best in the simplest fashion.

 

[retaocleg]

all it takes is a slight drop of prices in a rate hike enviro......nobody wants to buy peak, so sales start dropping faster, adding fuel to the peak talk, creating a self fulfilling prophecy

 

[RCDave]

all it takes is a slight drop of prices in a rate hike enviro......nobody wants to buy peak, so sales start dropping faster, adding fuel to the peak talk, creating a self fulfilling prophecy

Yup....

 

[hallett21]

All of these charts seem to use 08 as the reference point. They zoom out just enough to encompass the rise of 03-07.

If you were zoom further out, it wouldn’t appear to be such doom and gloom.

Same goes for the stock market. Everyone is comparing 2020-22 to 07-12.

I’m not saying we’re not going to see a pull back but I’d be shocked if we dip below 2019

 

[MSum661]

All of these charts seem to use 08 as the reference point. They zoom out just enough to encompass the rise of 03-07.

If you were zoom further out, it wouldn’t appear to be such doom and gloom.

Show the crowd a chart of what your talking about.

 

[hallett21]

Show the crowd a chart of what your talking about.

 

[hallett21]

Here’s a fun interest rate chart

 

[hallett21]

And another

 

[MSum661]

View attachment 1158552 View attachment 1158553

So elaborate how this correlates to the Case-Schiller 20 City Composite. You post home prices for Southern California.
Also, your interest rates chart stops at 2020. This is the Year 2022, September 27, 2022 to be precise.
And...so does your rent to home prices chart stops at 2020.

Everything your posting is meaningless.

 

[hallett21]

So elaborate how this correlates to the Case-Schiller 20 City Composite. You post home prices for Southern California.
Also, your interest rates chart stops at 2020. This is the Year 2022, September 27, 2022 to be precise.
And...so does your rent to home prices chart stops at 2020.

Everything your posting is meaningless.

How do you figure?

I’m looking at the big picture. Sure if you want to time the market from 2020 till today you should have sold 6 months ago.

But when you look back to a time when there was gas rationing, Cuban missile crisis etc. The fact is real estate and rent continues to increase. We’ve had disasters and issues and we will continue to do so.

Unless you’re a broker or realtor that can fudge the numbers on commissions I don’t even know how well you’d make out flipping a home inside of 2 years with capital gains taxes.

Live within your means and purchase assets that either generate cash flow or gain equity.

I’ve yet to hear a solid doom and gloomer investment strategy. All I’m hearing is get ready.

 

[MSum661]

How do you figure?

I’m looking at the big picture. Sure if you want to time the market from 2020 till today you should have sold 6 months ago.

But when you look back to a time when there was gas rationing, Cuban missile crisis etc. The fact is real estate and rent continues to increase. We’ve had disasters and issues and we will continue to do so.

Unless you’re a broker or realtor that can fudge the numbers on commissions I don’t even know how well you’d make out flipping a home inside of 2 years with capital gains taxes.

Live within your means and purchase assets that either generate cash flow or gain equity.

I’ve yet to hear a solid doom and gloomer investment strategy. All I’m hearing is get ready.

Ok, Thank you hallett21.

 

[Lower river sludge]

I do think we're in for a long stretch of minimal growth or modest drop.

But these charts show why it is different than last time

3 charts showing that we’re not repeating the housing bubble: Morning Brief

What to watch in markets on Tuesday, September 27, 2022.

finance.yahoo.com

 

[HNL2LHC]

I do think we're in for a long stretch of minimal growth or modest drop.

But these charts show why it is different than last time

3 charts showing that we’re not repeating the housing bubble: Morning Brief

What to watch in markets on Tuesday, September 27, 2022.

finance.yahoo.com

Thanks that is an interesting story and charts. We bought our first home in 95 and they were pushing ARMs to all of the buyers. One of those charts show 95 as the highest ever for ARMs.

 

[bk2drvr]

Time will be the slow price killer. The longer the market is stagnate the more downward pressure there is on home prices. From a resale perspective, people do have to make moves and holding out for a high price isn't always an option so people start selling at lower prices and so begins the fall of "market value" New construction/developers have cash flow issues, they hold out as long as they can with incentives but not lowering the home price but eventually have to make adjustments to the home price to attract buyers. Again the longer this goes on the more the prices will drop. Takes years to get to the high prices we are at now and it will take years for them to come down too. Big swings in prices don't happen overnight.

 

[regor]

30-Year US Mortgage Rises Above 7% For The First Time Since 2000; Fastest Surge In History​

Two weeks ago the average 30Y mortgage hit 6% for the first time since 2008. It just crossed 7%

TUE SEP 27, AT 6:41 PM

 

[Racer56]

You know I originally posted some of that stuff as a joke, but some of you guys got my wheels turning now..

RD

Bullshit, you are going to build a house in the Foothills that out does BSB and your wife will be a happy camper!

 

[2FORCEFULL]

Buying a lot long term with cash usually results in a below avg return. So either build it if it pencils out or sell it. I would expect a real estate guy would want the cash to pick up some stuff on the cheap over the next couple years. It’s gotta be a super pain in the ass to build right now anyway.

lot money is made on the purchase...

 

[Havasu blue label]

i guess I learned something today

 

[monkeyswrench]

If you build in the Foothills what would it cost to build? When complete what do you think that property would sell for, would it sell for more/less than what you put into it? We are almost in the same position in Prescott, not sure it's the right time to build but when will it be?

From what I'm hearing from some of the trades, spring is looking good. A lot of work on the books, but new permits are slowing quite a bit. Still slammed, but the horizon is looking a bit more open. The spec guys have all but stopped on customs, but the owner builds are still going with "Cali money". The cookie cutter tracts are still rolling along, grading and utilities going in on another.

 

[CarolynandBob]

So I asked a simple question back on page 48..

Is it time to buy / sell / sell and build?

I didn’t get an answer.. so I will ask for myself.

I have my house - 4 bedroom - 3 1/2 bath - RV - Pool / Spa - Lake view built in 2010.. I bought for 310 I can get realistically 850’ish pretty handily.

I have a Lot in the foothills that I just paid cash for for 415. I’m not sure what it would actually sell for but I’d guess low to mid 500’s right now. Stacy thinks closer to 600.

Do I sell my house and build up there to keep up with the Jones’? Do I sell the lot and ride out whatever comes next?

Do we sell it all and live in a rental and fill the bath tubs with cash and swim Around like Scrooge mcduck? Even though that paper is getting less and less valuable by the day?

What say the magic crystal ball?

Sell the land and put cash in T-Bills. Sell house and rent a house if you can. Wait for prices to come down. Purchase another lot and build your dream home with cash when building prices are much lower. . Just my .02

 

[TCHB]

So I asked a simple question back on page 48..

Is it time to buy / sell / sell and build?

I didn’t get an answer.. so I will ask for myself.

I have my house - 4 bedroom - 3 1/2 bath - RV - Pool / Spa - Lake view built in 2010.. I bought for 310 I can get realistically 850’ish pretty handily.

I have a Lot in the foothills that I just paid cash for for 415. I’m not sure what it would actually sell for but I’d guess low to mid 500’s right now. Stacy thinks closer to 600.

Do I sell my house and build up there to keep up with the Jones’? Do I sell the lot and ride out whatever comes next?

Do we sell it all and live in a rental and fill the bath tubs with cash and swim Around like Scrooge mcduck? Even though that paper is getting less and less valuable by the day?

What say the magic crystal ball?

I

Sell the land and put cash in T-Bills. Sell house and rent a house if you can. Wait for prices to come down. Purchase another lot and build your dream home with cash when building prices are much lower. . Just my .02

Put some cash aside for medical schools.

 

[J&k beer can]

edit.
Just thinking out loud In daves shoes....
500k in equity to build.(rent one)
Lot paid for.
Young kids( not going anywhere for years)
could build dream home to store all your stuff and have a loan under 300k.
I would be all over this now..

just for example..
what would a house be worth like this.. 1.5-2mil

 

[LargeOrangeFont]

Just thinking out loud In daves shoes....
500k in equity.
Lot paid for.
Young kids( not going anywhere for years)
could build dream home to store all your stuff and have a loan under 300k.
I would be all over this now..

That loan under $300k loan will be the same today or in a few more years with lower rates and lower prices.

The equity part does not matter as he is already in the market and his house was bought cheaply.

 

[DUNEFLYER]

This from a major new construction national tract home builder.

"
Dear Trade Partners,



As we prepare to make bid award decisions for this very large subdivision, it is necessary for us to share with you the state of the market. We are looking at a dramatically different 2023. Our sales sign-ups have decreased more than 60-70% in the last 3 months, and we have greater headwinds as interest rates continue to rise. This has already translated into significantly reduced starts. Pulte, as well as every other builder, is re-rolling their 2023 business plan to reflect a much lower closing count versus that of today. Pulte’s business model is to maintain a monthly cadence of starts. This allows for predictability, consistency, not only in manpower but also in your cash flow. The greater the number of communities you have with Pulte, the greater the efficiency and benefit. We need to continue to build at a monthly pace, thus Pulte is forced to make more immediate and necessary incentive and pricing adjustments to ensure we have the backlog necessary to slot/release. In down cycles, it becomes all the more critical to align strategically with builders who can offer such volume, pace, commitment.



Different to other market recessions, we recognize that there are global dynamics in play. Material may not have yet adjusted through the supply chain, nor have labor rates softened with such high inflation. This will not likely happen until such time they both feel the significant drop of demand. I encourage you to utilize the attached data to help negotiate and paint the picture of what’s to come with your suppliers. Pulte has had significant margin erosion over the last 4 months, as we attempt to hold buyers in backlog as well as drive incremental monthly sales. It becomes incumbent upon the builder and contractor to tighten our belt to weather this cycle, until such time the supply chain can begin to reset and once again normalize. "

 

[Gonefishin5555]

This from a major new construction national tract home builder.

"
Dear Trade Partners,



As we prepare to make bid award decisions for this very large subdivision, it is necessary for us to share with you the state of the market. We are looking at a dramatically different 2023. Our sales sign-ups have decreased more than 60-70% in the last 3 months, and we have greater headwinds as interest rates continue to rise. This has already translated into significantly reduced starts. Pulte, as well as every other builder, is re-rolling their 2023 business plan to reflect a much lower closing count versus that of today. Pulte’s business model is to maintain a monthly cadence of starts. This allows for predictability, consistency, not only in manpower but also in your cash flow. The greater the number of communities you have with Pulte, the greater the efficiency and benefit. We need to continue to build at a monthly pace, thus Pulte is forced to make more immediate and necessary incentive and pricing adjustments to ensure we have the backlog necessary to slot/release. In down cycles, it becomes all the more critical to align strategically with builders who can offer such volume, pace, commitment.



Different to other market recessions, we recognize that there are global dynamics in play. Material may not have yet adjusted through the supply chain, nor have labor rates softened with such high inflation. This will not likely happen until such time they both feel the significant drop of demand. I encourage you to utilize the attached data to help negotiate and paint the picture of what’s to come with your suppliers. Pulte has had significant margin erosion over the last 4 months, as we attempt to hold buyers in backlog as well as drive incremental monthly sales. It becomes incumbent upon the builder and contractor to tighten our belt to weather this cycle, until such time the supply chain can begin to reset and once again normalize. "

It could be possible that the numbers just won’t work on these houses by next year. They have a cost for the land development and the subs are going to need to get paid for their material and labor and then there is corporate overhead and selling costs to cover. So if it all adds up to 500k per unit and they can only sell them for 400k what happens then? Who is going to eat the shit sandwich? Subs are in a tough spot here.

 

[bk2drvr]

This from a major new construction national tract home builder.

"
Dear Trade Partners,



As we prepare to make bid award decisions for this very large subdivision, it is necessary for us to share with you the state of the market. We are looking at a dramatically different 2023. Our sales sign-ups have decreased more than 60-70% in the last 3 months, and we have greater headwinds as interest rates continue to rise. This has already translated into significantly reduced starts. Pulte, as well as every other builder, is re-rolling their 2023 business plan to reflect a much lower closing count versus that of today. Pulte’s business model is to maintain a monthly cadence of starts. This allows for predictability, consistency, not only in manpower but also in your cash flow. The greater the number of communities you have with Pulte, the greater the efficiency and benefit. We need to continue to build at a monthly pace, thus Pulte is forced to make more immediate and necessary incentive and pricing adjustments to ensure we have the backlog necessary to slot/release. In down cycles, it becomes all the more critical to align strategically with builders who can offer such volume, pace, commitment.



Different to other market recessions, we recognize that there are global dynamics in play. Material may not have yet adjusted through the supply chain, nor have labor rates softened with such high inflation. This will not likely happen until such time they both feel the significant drop of demand. I encourage you to utilize the attached data to help negotiate and paint the picture of what’s to come with your suppliers. Pulte has had significant margin erosion over the last 4 months, as we attempt to hold buyers in backlog as well as drive incremental monthly sales. It becomes incumbent upon the builder and contractor to tighten our belt to weather this cycle, until such time the supply chain can begin to reset and once again normalize. "

This speaks to and aligns directly to what I wrote above.

 

[stillhustlin]

This from a major new construction national tract home builder.

"
Dear Trade Partners,



As we prepare to make bid award decisions for this very large subdivision, it is necessary for us to share with you the state of the market. We are looking at a dramatically different 2023. Our sales sign-ups have decreased more than 60-70% in the last 3 months, and we have greater headwinds as interest rates continue to rise. This has already translated into significantly reduced starts. Pulte, as well as every other builder, is re-rolling their 2023 business plan to reflect a much lower closing count versus that of today. Pulte’s business model is to maintain a monthly cadence of starts. This allows for predictability, consistency, not only in manpower but also in your cash flow. The greater the number of communities you have with Pulte, the greater the efficiency and benefit. We need to continue to build at a monthly pace, thus Pulte is forced to make more immediate and necessary incentive and pricing adjustments to ensure we have the backlog necessary to slot/release. In down cycles, it becomes all the more critical to align strategically with builders who can offer such volume, pace, commitment.



Different to other market recessions, we recognize that there are global dynamics in play. Material may not have yet adjusted through the supply chain, nor have labor rates softened with such high inflation. This will not likely happen until such time they both feel the significant drop of demand. I encourage you to utilize the attached data to help negotiate and paint the picture of what’s to come with your suppliers. Pulte has had significant margin erosion over the last 4 months, as we attempt to hold buyers in backlog as well as drive incremental monthly sales. It becomes incumbent upon the builder and contractor to tighten our belt to weather this cycle, until such time the supply chain can begin to reset and once again normalize. "

We are loosing money in at least 2 subdivisions right now. Owner basically said it’s not gonna get easier to sell these home so just start off loading. I think this winter trades will start to feel the pain.

 

[c_land]

It could be possible that the numbers just won’t work on these houses by next year. They have a cost for the land development and the subs are going to need to get paid for their material and labor and then there is corporate overhead and selling costs to cover. So if it all adds up to 500k per unit and they can only sell them for 400k what happens then? Who is going to eat the shit sandwich? Subs are in a tough spot here.

We are loosing money in at least 2 subdivisions right now. Owner basically said it’s not gonna get easier to sell these home so just start off loading. I think this winter trades will start to feel the pain.

Tri-Point in the inland empire is re-plotting entire phases right now with smaller product that they can build/sell at cheaper price points.

 

[Havasu blue label]

Shea homes as well future projects on hold

 

[stillhustlin]

Shea homes as well future projects on hold

Multi family developers are gonna get hit as well. Most projects under construction in the last 2 years are over budget and with rates rising unless they had rate options they will be locking in the 6-7% range when done instead of the 3-4% range. A lot of these developments will be underwater once completed. Cap rates rising will kill commercial market appraisal values.

 

[530RL]

I have my own opinions about the direction of prices, but I am trying to remain objective... lol.

July YOY looks great, MOM looked different.

I have no idea what is going to happen to pricing but the one thing I do know for sure is that I would not sell my house, pack all my shit up, give up my 3% mortgage, live in some shitty rental at high tax disadvantaged rents, pay 6% commissions and transaction costs in an attempt to "time" the market to buy something x dollars cheaper at double the interest rate.

Quality of life is way more important than a few bucks.

With respect to lots, unlike 30 years ago, it is very hard to entitle land now in Ca, Nv or AZ especially given all the state and local government regulations combined with the improvement costs and the water issues.

I suspect builders without a lot of debt will just sit on their lots knowing full well that if they blow them out, the cost to replace them will be significantly higher than the cost of holding them. And that is a major difference compared to just ten years age. You could develop a subdivision in 12 or 14 months, now it is 3 years in AZ or NV and 5 to 8 in California.

 

[HNL2LHC]

Tri-Point in the inland empire is re-plotting entire phases right now with smaller product that they can build/sell at cheaper price points.

That was the sub division we bought 27 years ago. First part of street “market” homes second and where we bought “Affordable“ homes. Back then Market homes $300k affordable $200k. Fast forward 27 years market homes $950k affordable $850k. Crazy to see how things have panned out for the owners of the two types of homes. The market home owners we kind of pissed of the affordables. Those in the affordables were much more neighborly and kids were playing in the street.

 

[mesquito_creek]

I have been trying to perfectly time the market for 26 years in the first house I bought…. never have got it right, so at this point I just have to rent it from the state (property taxes and insurance). Interest rates? What are those? What I really need to know is when does wood grain cabinets and travertine come back in style? I am hoping not to have to remodel it for the third time.

 

[LargeOrangeFont]

I have been trying to perfectly time the market for 26 years in the first house I bought…. never have got it right, so at this point I just have to rent it from the state (property taxes and insurance). Interest rates? What are those? What I really need to know is when does wood grain cabinets and travertine come back in style? I am hoping not to have to remodel it for the third time.

It is all 30 year cycles… by design

 

[c_land]

I do know for sure is that I would not sell my house, pack all my shit up, give up my 3% mortgage, live in some shitty rental at high tax disadvantaged rents, pay 6% commissions and transaction costs in an attempt to "time" the market to buy something x dollars cheaper at double the interest rate.

What? Has anyone in this thread advised someone to do what you described?

 

[Cdog]

I have been trying to perfectly time the market for 26 years in the first house I bought…. never have got it right, so at this point I just have to rent it from the state (property taxes and insurance). Interest rates? What are those? What I really need to know is when does wood grain cabinets and travertine come back in style? I am hoping not to have to remodel it for the third time.

I did a moderate remodel from 2017-2019. Spent about 100k. Wasn’t going to spend booku bucks changing everything over to the latest trends and worked with what I had.

By the time I sell inn10 yrs from now the trend will be different so all that money spent for the latest & greatest would have been wasted/depreciated anyway.

We bought a Toyhauler with the farm house motif to cure that desire

 

[530RL]

What? Has anyone in this thread advised someone to do what you described?

Sure, see below.

And to be fair, they could be totally right from purely an economic standpoint.

Sell the land and put cash in T-Bills. Sell house and rent a house if you can. Wait for prices to come down. Purchase another lot and build your dream home with cash when building prices are much lower. . Just my .02

 

[mesquito_creek]

I did a moderate remodel from 2017-2019. Spent about 100k. Wasn’t going to spend booku bucks changing everything over to the latest trends and worked with what I had.

By the time I sell inn10 yrs from now the trend will be different so all that money spent for the latest & greatest would have been wasted/depreciated anyway.

We bought a Toyhauler with the farm house motif to cure that desire

If I sold it now some wanna be designer/flipper would come in and paint my custom knotty alder cabinets that match throughout the house… and I would die a little bit inside.

 

[Cdog]

If I sold it now some wanna be designer/flipper would come in and paint my custom knotty alder cabinets that match throughout the house… and I would die a little bit inside.

I am personally not upgrading or changing anything in our home until I get these two leeches/I mean kids off the payroll.

 

[FishSniper]

You stated "since we already Doubled interest rates as was originally posted resulting in doubling the payments on a newly financed home of the same value"

600k @ 3% = $2,529
600k @ 6% = $3,597

600k @ 9% isn't even double the payment.

Exactly. Can’t wait to hear what the self appointed gurus rebuttal is to this.

 

[mesquito_creek]

I am personally not upgrading or changing anything in our home until I get these two leeches/I mean kids off the payroll.

My kids are adults and gone… I replaced them with a flatbottom and a vintage day cruiser!

 

[Englewood]

Bullshit, you are going to build a house in the Foothills that out does BSB and your wife will be a happy camper!

BSB’s house is incredible. I’d need some alone time if I had that much storage!