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

[hallett21]

Say what you want about CA real estate. But do you get this kind of action 4-5 times a year?

 

[monkeyswrench]

Say what you want about CA real estate. But do you get this kind of action 4-5 times a year?


View attachment 1319241 View attachment 1319242

Nope...
We don't report gunfire around here either...may be a connection there.

 

[jet496]

That's how we obtained the house we purchased in June '22. No agent, just $400 for an attorney that we split costs on and the Title Company in town handled the transaction.

Same here. No commissions, just a few thousand for their attorney to be involved because that made them comfortable and the usual escrow and closing costs, which we covered all of to incentify them to keep them from listing it. That and the standard CAR form. This day in age with Realty.com type sites, I don't see why agents are necessary. I wouldn't have even used the attorney but it made them happy. The escrow company handles everything.

 

[zhandfull]

Refinancing up 15% from year ago. Rates are close to the same. Maybe some home owner are giving up their lower rates.

 

[hallett21]

Refinancing up 15% from year ago. Rates are close to the same. Maybe some home owner are giving up their lower rates.

This will be the downfall of a lot of people IMO. It’ll be a slow bleed but 10 years from now a sub 2-3% rate will look like gold.

Now if you’re pulling equity out, have the income to back the play, and you’re reinvesting it into cash generating investments. Have at it

 

[LargeOrangeFont]

Refinancing up 15% from year ago. Rates are close to the same. Maybe some home owner are giving up their lower rates.

There were near 0 refis last year as rates were going up. These are (mostly) people that recently bought houses at those rates and they are punting. They will keep re-fi ing as rates ratchet down, and skip a payment or 2 each time.

 

[evantwheeler]

Refinancing up 15% from year ago. Rates are close to the same. Maybe some home owner are giving up their lower rates.

A friend of mine just pulled $300k on a second from their primary home, plans to split up the cash and put $150k down each on two new build apartments that will cost $450-$500k each. He can afford the additional 8% on $300k note from wages, and is buying not for immediate cash flow but for equity appreciation so he can either sell them and cash out in retirement or rely on the cash flow after the notes are paid down by the tennants. Temecula area.

 

[hallett21]

They are punting. They will keep re-fi ing as rates ratchet down, and skip a payment or 2 each time.

My concern is that if you have the scratch to make that play you wouldn’t lol. So how “on the edge” are these people?

 

[monkeyswrench]

Now if you’re pulling equity out, have the income to back the play, and you’re reinvesting it into cash generating investments. Have at it

I hope they're doing this...but I would think most of those that play in that arena would have done so a year ago. I can't see how this increase can be a good sign when matched with current trends. Those that pull to invest, I'd think, would be a near steady number. Those that may be hurt by the current effects of inflation though, they may do some things to "stay afloat". I don't know really, time will tell.

 

[Havasu blue label]

A friend of mine just pulled $300k on a second from their primary home, plans to split up the cash and put $150k down each on two new build apartments that will cost $450-$500k each. He can afford the additional 8% on $300k note from wages, and is buying not for immediate cash flow but for equity appreciation so he can either sell them

 

[hallett21]

I hope they're doing this...but I would think most of those that play in that arena would have done so a year ago. I can't see how this increase can be a good sign when matched with current trends. Those that pull to invest, I'd think, would be a near steady number. Those that may be hurt by the current effects of inflation though, they may do some things to "stay afloat". I don't know really, time will tell.

The only thing I can think of is that investors are planning on a big surge before the election. Make 10-40% on your money inside of 10 months.

My guess is by July-August a lot of people will be all cash. They’re either gonna win big or miss big. But mine as well shoot your shot between now and then.

 

[BHC Vic]

A friend of mine just pulled $300k on a second from their primary home, plans to split up the cash and put $150k down each on two new build apartments that will cost $450-$500k each. He can afford the additional 8% on $300k note from wages, and is buying not for immediate cash flow but for equity appreciation so he can either sell them and cash out in retirement or rely on the cash flow after the notes are paid down by the tennants. Temecula area.

Balls of steel, I like it.

 

[LargeOrangeFont]

My concern is that if you have the scratch to make that play you wouldn’t lol. So how “on the edge” are these people?

There is no scratch needed if the rate goes down by .5% and you are less than 2 years into your mortgage. You just restart the 30 year clock again and get a month or 2 free. The payment is probably a little lower.

I did 3 refis on my last house with 0 out of pocket each time as rates went down. 2 of those were within 1 year. My payment dropped each time. I kept the same term though.

With rates the way they are, I'd expect a lot of refis this year as rates drop.

 

[hallett21]

There is no scratch needed if the rate goes down by .5% and you are less than 2 years into your mortgage. You just restart the 30 year clock again and get a month or 2 free. The payment is probably near the same.

I did 3 refis on my last house with 0 out of pocket each time as rates went down. 2 of those were within 1 year. My payment dropped each time. I kept the same term though.

Same for us from 2018 to 2021 ish I can’t remember. 4.75% to 2.99%.

My point was that people pulling cash for a higher rate are guys like you and me. They’re making an investment/gamble on other properties hopefully. If you’re a millionaire making big plays the rates sorta matter. But not by a lot. It just means you need to put more down for the investment to pencil.

Honestly the higher the rate the better the play (for a 7+ figure buyer) because there’s less “peons” bidding on a property.

 

[BHC Vic]

I’m in a weird spot. We switched to a 15 year loan because I want to pay the house off quick. Payment is high though. Everyone told me I should have stayed 30 and just sent extra. I know I wouldn’t have… oh well once this one is laid off I can focus on the next. I’m like a 2.8 or something going back to a 30 would be rough.

 

[LargeOrangeFont]

Same for us from 2018 to 2021 ish I can’t remember. 4.75% to 2.99%.

My point was that people pulling cash for a higher rate are guys like you and me. They’re making an investment/gamble on other properties hopefully. If you’re a millionaire making big plays the rates sorta matter. But not by a lot. It just means you need to put more down for the investment to pencil.

Honestly the higher the rate the better the play (for a 7+ figure buyer) because there’s less “peons” bidding on a property.

I was speaking specifically to refis there, not necessarily the cash out aspect.

But yea you are right. If you are going to pull some out and make a move this is the time to do it. They are telling you rates are going down this year, and you can refinance the debt as they drop. By fall, all the peons will be doing it. and prices for property will have gone up. If you are doing it for an investment, great. Everyone has a different level of risk.

You can be certain the same people will be on the sidelines, lecturing with furrowed brows waiting for the conditions of the 2010s to come back "in 18 months".

 

[evantwheeler]

but I would think most of those that play in that arena would have done so a year ago.

I agree with this sentiment, it didn't really make much sense to me why he waited to do this. I suggested it 2 years ago when rates were still low and he had just refinanced his house, and he even commented to me recently he wished he had followed my advice. As inflation was eminent, I told him he should leverage himself with the cheapest money he would ever have access to. I personally did not have the income or balls to support that kind of behavior and follow my own advice, but he had the income to do so. I think what everyone has come to realize, is that since these rates haven't killed home values, any downwards trend in interest rates is only going to drive demand and prices higher so he is taking a risk that as time goes on, the value will increase with demand and lower interest rates. And the notes can be refinanced if rates fall. If they don't, he can still afford it.

 

[BHC Vic]

I always heard what goes up must come down and nothing can go up forever. Crazy to watch this and it’s honestly starting to look like re will just keep going up. Just different from what I’ve always heard

 

[rivrrts429]

I always heard what goes up must come down and nothing can go up forever. Crazy to watch this and it’s honestly starting to look like re will just keep going up. Just different from what I’ve always heard

That does apply in most things but real estate has always gone up decade by decade.

Sure there are periods of retraction in the market but unless you’re selling in the dips you haven’t lost anything.

Real estate will always be a safe investment when you’re betting consistent long term growth.

 

[Cole Trickle]

I agree with this sentiment, it didn't really make much sense to me why he waited to do this. I suggested it 2 years ago when rates were still low and he had just refinanced his house, and he even commented to me recently he wished he had followed my advice. As inflation was eminent, I told him he should leverage himself with the cheapest money he would ever have access to. I personally did not have the income or balls to support that kind of behavior and follow my own advice, but he had the income to do so. I think what everyone has come to realize, is that since these rates haven't killed home values, any downwards trend in interest rates is only going to drive demand and prices higher so he is taking a risk that as time goes on, the value will increase with demand and lower interest rates. And the notes can be refinanced if rates fall. If they don't, he can still afford it.

This makes me realize I will never have the balls to be rich. I hate gambling with money I can't afford to loose.

With that said I will never loose everything and be poor either.....lol

 

[LargeOrangeFont]

That does apply in most things but real estate has always gone up decade by decade.

Sure there are periods of retraction in the market but unless you’re selling in the dips you haven’t lost anything.

Real estate will always be a safe investment when you’re betting consistent long term growth.

This. I don’t know how anyone can straw man the argument to bet against RE in a medium to long term time frame.

If you are a house flipper, sure you might get burned.

 

[BHC Vic]

That does apply in most things but real estate has always gone up decade by decade.

Sure there are periods of retraction in the market but unless you’re selling in the dips you haven’t lost anything.

Real estate will always be a safe investment when you’re betting consistent long term growth.

This just happened a lot faster this time right? When we bought our home I kept thinking about my parents. They bought their Phillips ranch home for 190 on a short sale in the 90’s. Million dollar home now. I kept thinking man how lucky. In 2018 600k was crazy to me. I told my wife we shouldn’t do it we can’t afford it blah blah blah. She’s the boss so we did it. In my head I thought well ok I have 30 years. If in 30 year we can be worth a million I’ll be stoked and we will have done well. It took 5 years… wtf happened and I’m so glad I let my wife make that call

 

[LargeOrangeFont]

This just happened a lot faster this time right? When we bought our home I kept thinking about my parents. They bought their Phillips ranch home for 190 on a short sale in the 90’s. Million dollar home now. I kept thinking man how lucky. In 2018 600k was crazy to me. I told my wife we shouldn’t do it we can’t afford it blah blah blah. She’s the boss so we did it. In my head I thought well ok I have 30 years. If in 30 year we can be worth a million I’ll be stoked and we will have done well. It took 5 years… wtf happened and I’m so glad I let my wife make that call

As a percentage, values rose faster from 2002-2006 than this most recent period. But not by much.

 

[HNL2LHC]

This. I don’t know how anyone straw man the argument to bet against RE in a medium to long term time frame.

If you are a house flipper, sure you might get burned.

Right there with you. Our son talks every now and then about flipping Homes while it seams like easy money….if you have to set up trades it could kill you. I always say go for a buy with intent to flip every 2 years OR even a spec build that you’d live in if you had to. Then time the market to sell. Much less risk since you have to hav e a place to live anyway. Worst case you could just rent the house Until market changes for your exit. But then again the wife and I have never sold a home that we have bought in our adult lives…..

 

[Bigbore500r]

So how long before November will they wait to drop interest rates and fuel prices? Gotta go into Biden's re-election home stretch looking like he's a winner......

 

[LargeOrangeFont]

So how long before November will they wait to drop interest rates and fuel prices? Gotta go into Biden's re-election home stretch looking like he's a winner......

Probably March will be the start.

 

[EmpirE231]

I’m in a weird spot. We switched to a 15 year loan because I want to pay the house off quick. Payment is high though. Everyone told me I should have stayed 30 and just sent extra. I know I wouldn’t have… oh well once this one is laid off I can focus on the next. I’m like a 2.8 or something going back to a 30 would be rough.

at the end of 2021 I was in talks w/ tamalewagon (Scott) here on the boards about a refi. was close to pulling trigger on a 30yr at 2.8% w/ a cash out

My old school mindset of paying off the house got the best of me, and I didn't do it. Wife was all over it and wanted me to do it.

Hindsight 20/20, I should have done it. But at the same time, still in my 2.75% 15yr fixed with only 8 years left or so on the house? considering home values today, I barely owe anything on the house. Should have taken a little more risk given the way things played out..... but having grown up moving all over the place as a kid and on the lower end of the income scale, I wanted a solid foundation for my family.... and to never "have to" move.

 

[Cole Trickle]

Right there with you. Our son talks every now and then about flipping Homes while it seams like easy money….if you have to set up trades it could kill you. I always say go for a buy with intent to flip every 2 years OR even a spec build that you’d live in if you had to. Then time the market to sell. Much less risk since you have to hav e a place to live anyway. Worst case you could just rent the house Until market changes for your exit. But then again the wife and I have never sold a home that we have bought in our adult lives…..

I think flipping would have been very scary over the past couple years with the cost of materials and labor and bidding wars.

You better be really smart , really lucky or be able to handle all the upgrade's and repairs yourself.

 

[HNL2LHC]

I think flipping would have been very scary over the past couple years with the cost of materials and labor and bidding wars.

You better be really smart , really lucky or be able to handle all the upgrade's and repairs yourself.

My thoughts exactly. Plus if you watch the purchase price and sell price there is not a lot of meat on the bone here is Havasu. To make 6 figure in income will require a lot of units per year. That is why I say buy, fix, hold, rent and repeat. Throw in a complete build/sell spec from time to time. Live in the spec as needed if an owner builder. In 10 years you could be sitting pretty. 20 years and you would not have to work……

 

[Havasu blue label]

at the end of 2021 I was in talks w/ tamalewagon (Scott) here on the boards about a refi. was close to pulling trigger on a 30yr at 2.8% w/ a cash out

My old school mindset of paying off the house got the best of me, and I didn't do it. Wife was all over it and wanted me to do it.

Hindsight 20/20, I should have done it. But at the same time, still in my 2.75% 15yr fixed with only 8 years left or so on the house? considering home values today, I barely owe anything on the house. Should have taken a little more risk given the way things played out..... but having grown up moving all over the place as a kid and on the lower end of the income scale, I wanted a solid foundation for my family.... and to never "have to" move.

Very smart

 

[EmpirE231]

Very smart

Not sure if it's very smart or just very safe.

The days of sound financial decisions seem to be over, after 2 decades of QE, artificially low interest rates, record debts etc etc. The whole system is sold out and a mess.

 

[angiebaby]

These are (mostly) people that recently bought houses at those rates and they are punting. They will keep re-fi ing as rates ratchet down, and skip a payment or 2 each time.

You know this how? Where did you find data that the current refis are mostly people who purchased in the last year-18 months rather than those who have owned for a few years now? I'm sure it's out there somewhere, I'd be interested to see it.

 

[LargeOrangeFont]

You know this how? Where did you find data that the current refis are mostly people who purchased in the last year rather than those who have owned for a few years now?

Up until a couple months ago one of my clients was a nationwide publicly traded mortgage lender and it is my job to know about their business.

Between that and historical data like this, it is logical conclusion.

Refinance in a Rising-Rate Market

With mortgage rates declining to ever new lows during 2020, the mortgage market had the largest number of originations in 17 years. The volume was driven by no-cash-out refinance: more than one-half of the originations, and 4-in-5 refinance loans, were no-cash-out during 2020.

www.corelogic.com

From the article -

“When mortgage rates reach new lows, no-cash-out refinance dominates the market as homeowners seek lower payments or shorter terms.”

When rates drop, and if RE prices go up over the next 12 months, cash out refis will be a thing again, mostly for those with rates currently above 5%, but not all.

 

[evantwheeler]

From the article -

“When mortgage rates reach new lows, no-cash-out refinance dominates the market as homeowners seek lower payments or shorter terms.”

When rates were low in 2021 and I refinanced, I talked to the notary that came to the house to do the signatures. She said she had never been busier in her life. I asked her based on what she was seeing, were people cash-out refinancing to take advantage of the equity and low rates, or just were folks just lowering payments by getting lower rates. She said very very few were cashing out from what she was seeing. That made me feel good, that maybe people had learned a lesson in 08 crash.

 

[angiebaby]

Up until a couple months ago one of my clients was a nationwide publicly traded mortgage lender and it is my job to know about their business.

Between that and historical data like this, it is logical conclusion.

Refinance in a Rising-Rate Market

With mortgage rates declining to ever new lows during 2020, the mortgage market had the largest number of originations in 17 years. The volume was driven by no-cash-out refinance: more than one-half of the originations, and 4-in-5 refinance loans, were no-cash-out during 2020.

www.corelogic.com

From the article -

“When mortgage rates reach new lows, no-cash-out refinance dominates the market as homeowners seek lower payments or shorter terms.”

When rates drop, and if RE prices go up over the next 12 months, cash out refis will be a thing again, mostly for those with rates currently above 5%, but not all.

I guess I'm not logical. My husband will be the first to agree. Please mansplain it for me. The article you cited is from June of '21, and explains why people were refinancing at that time. Nothing we don't already know.

Mortgage rates are not reaching "new lows." They are just down from recent highs. So that doesn't really explain the no-cash-out refi surge according to your quote.

I'm not disputing that some folks will trade in their 7-8% loans for a 6 - 6.5% one. But there IS a cost in doing that. So unless you are taking money out, as some have stated, for other investments (I would seriously doubt that is more than a small percentage of borrowers), that is not really a smart move. Sure, there are no out-of-pocket fees, and you get a couple of months with no mortgage payment, but the fees go into your new mortgage balance, and those couple of months get added on as well as the 12-18 you've already paid. Seems like a pretty desperate move to me to save $400/month in the short term.

I'd like to see some hard data rather than just your logical conclusion to back up your statement that most of the recent surge in refis are people who recently purchased a home. If true, my logical conclusion would be that a lot of people are struggling to make their payments and are trying to get some breathing room. If not true, and it's people giving up lower interest loans for whatever reason, that would also be interesting.

FWIW, I did read through a handful of articles and found no specifics about the refinance demographics.

 

[hallett21]

I guess I'm not logical. My husband will be the first to agree. Please mansplain it for me. The article you cited is from June of '21, and explains why people were refinancing at that time. Nothing we don't already know.

Mortgage rates are not reaching "new lows." They are just down from recent highs. So that doesn't really explain the no-cash-out refi surge according to your quote.

I'm not disputing that some folks will trade in their 7-8% loans for a 6 - 6.5% one. But there IS a cost in doing that. So unless you are taking money out, as some have stated, for other investments (I would seriously doubt that is more than a small percentage of borrowers), that is not really a smart move. Sure, there are no out-of-pocket fees, and you get a couple of months with no mortgage payment, but the fees go into your new mortgage balance, and those couple of months get added on as well as the 12-18 you've already paid. Seems like a pretty desperate move to me to save $400/month in the short term.

I'd like to see some hard data rather than just your logical conclusion to back up your statement that most of the recent surge in refis are people who recently purchased a home. If true, my logical conclusion would be that a lot of people are struggling to make their payments and are trying to get some breathing room. If not true, and it's people giving up lower interest loans for whatever reason, that would also be interesting.

I’d say the vast majority look at the monthly vs gross loan amount. 2 months of no payment and a $400 a month savings with no out of pocket money sells itself.

It’s a pretty easy sales pitch when the broker shows the net savings over 12-48 months. But yes you are paying for it

 

[LargeOrangeFont]

I’d say the vast majority look at the monthly vs gross loan amount. 2 months of no payment and a $400 a month savings with no out of pocket money sells itself.

It’s a pretty easy sales pitch when the broker shows the net savings over 12-48 months. But yes you are paying for it

Yes. Like I said, basic logic dictates this is what people are going to do, and have already started doing. It just makes sense. The saving $400 a month over 30 year part makes the costs nothing. These people don’t care they are paying an extra couple years. Odds are they won’t even be in the place that long anyway.

People that recently bought will likely refi multiple times over the next 2 years if the rates are going to drop as predicted.

 

[rivrrts429]

I’d say the vast majority look at the monthly vs gross loan amount. 2 months of no payment and a $400 a month savings with no out of pocket money sells itself.

It’s a pretty easy sales pitch when the broker shows the net savings over 12-48 months. But yes you are paying for it

True but what’s the average time of home ownership? These people aren’t sticking around for long.

I’m an anomaly amongst my circle of friends having bought my home in 2003. I also only owe $100k on a $700k property which is also an anomaly amongst my circle of friends lol

 

[hallett21]

True but what’s the average time of home ownership? These people aren’t sticking around for long.

I’m an anomaly amongst my circle of friends having bought my home in 2003. I also only owe $100k on a $700k property which is also an anomaly amongst my circle of friends lol

I want to say 7 years is the average?

 

[PlanB]

So how long before November will they wait to drop interest rates and fuel prices? Gotta go into Biden's re-election home stretch looking like he's a winner......

Last I heard (on the news about a week ago) we are now drilling more oil than any time in our history. The Biden administration is trying to get fuel prices lower as we head towards November.

 

[zhandfull]

Nationally home median price is down across the US.

Not sure many buyers over the last year would have the equity to refinance. Maybe you don’t need any now days.

But lenders learned their lessons from the 2008.

 

[LargeOrangeFont]

Nationally home median price is down across the US.

Not sure many buyers over the last year would have the equity to refinance. Maybe you don’t need any now days.

But lenders learned their lessons from the 2008.

View attachment 1319445 View attachment 1319446

Yet prices are up 6% from a year ago. That’s enough to refi for a lower rate.

Great deals around the corner

Home Affordability Remains Difficult Across U.S. During Fourth Quarter Even As Prices Dip Downward

ATTOM's Q4 2023 Home Affordability Report shows that home prices remain less affordable compared to historical averages in 99% of counties.

www.attomdata.com

 

[prorider]

Last I heard (on the news about a week ago) we are now drilling more oil than any time in our history. The Biden administration is trying to get fuel prices lower as we head towards November.

Biden isn’t making it easier to drill. It’s almost all on private property. He is begging foreign countries to produce more to help democrats in the election.

 

[RiverDave]

Last I heard (on the news about a week ago) we are now drilling more oil than any time in our history. The Biden administration is trying to get fuel prices lower as we head towards November.

No.. they issued a lot of leases to explore for drilling.. sounds great right? But then they put a bunch of red tape across the application and actual drilling processes effectively making the leases useless.

 

[RiverDave]

So at the end of the day since this thread (and the ones before it) were started home prices have gone up.. (not down). When rates drop (if they drop). Can we all agree we are going to see yet another price hike?

RD

 

[zhandfull]

So at the end of the day since this thread (and the ones before it) were started home prices have gone up.. (not down). When rates drop (if they drop). Can we all agree we are going to see yet another price hike?

RD

IMO, since the thread started the market absolutely shifted from a sellers market to a buyers market. I would argue that market prices did go down. Although it was brief and is greatly influenced by rates. For many sellers in the last 18 months they have had to make concessions resulting in less profits. The days of bidding wars and no conditions on purchase offers are mostly gone, at least for the time being.

If rates drop below mid 5’s it’s going to be another shit show with limited supply and price appreciation. Not sure that is what the Fed is looking for though. Interesting times in an election year.

 

[HTMike]

So at the end of the day since this thread (and the ones before it) were started home prices have gone up.. (not down). When rates drop (if they drop). Can we all agree we are going to see yet another price hike?

RD

If they cut rates 1-1.5 %, housing will sky rocket again. That's why I am jumping in now.

 

[LargeOrangeFont]

If they cut rates 1-1.5 %, housing will sky rocket again. That's why I am jumping in now.

Truth. We’ve got 2-3 months. The time is now.

Or sit on the sidelines..

 

[DWC]

1 1/2yrs of arguing when it’s going to fall and we’re taking bets on when it’s going to explode.

 

[stillhustlin]

Market seems much more resilient then anyone would have expected. Our forecast for 2023 was to build/sell 100 homes and we ended up doing 140. This last December was hot and our materials cost are significantly down and we’re raising prices in several of our communities. $650-900k stuff is moving aggressively. On a side note lot inventory is down and it’s a battle to find finished buildable lots. We’re seeing a lot of cash buyers and families getting creative to help their children into homes.