Tom,

My area experiences real estate tax increases AND increased assessed vauations of the real estate.

Recently when updating my will and living bequests (forgot Latin term), my daughter said she does not want my quality acreage with house and barn on it. It's not valuable when considering her changed liquidity ratio to maintain it.

 

I hope this is true, son & DIL have their home almost ready to sell .

 

What difference would it make ?

 

AT, Ireally like your previous posts, very useful, but I respectfully disagree in part with this one. I respect you but if I come off as an A-hole, thats purely on me.

Your advice this time is potentially extremely dangerous financially because it ignores the aftermath of 2008-2014. This one has more factors in the equation but a brighter future eventually. Please dont pollyanna these ppl. They need both eyes wide, wide open.

You forgot what happened in 09, in some ways similar to the fact pattern this time. Home prices slowly settled throughout 08 with RE gladhanders maniacly assuring ppl that the good times were coming back. Meanwhile, layoffs began and ppl started filling in financial cracks with CCs. The auto repos picked up pace into and throughout the Summer. Leveraged areas started showing a quickening pace of car and CC defaults, home contracts bring cancelled enmass first. Happening on the west coast in Cali....again.

By late summer that had spread out of So Cal, Nevada, Chicagostan, to more stable markets (allegedly). More layoffs. Then October hit. By early 09 it was all the way on with hundreds of thousands of layoffs announced monthly.

I propose that we are in early 08.....right now. I remember this period well. We have less than 6 months until early October. Sell crap off now and payoff debt, without the associated mo. payment. Get liquid, get stocked up on food. Skip any trips anywhere. Get frugal. Reduce or fump payments, especially high interest or variable rate ones.

This time next year, people will be desperate and thier crap will be worth 1/3 less because many others are desperate too. Guys like me, ruthless and cashed up from saving money in good times for THIS wont care what people willfully got themselves into......we will have cash, in hand, thier lifeline but expensive.

In 3-4 years I will sell thier former stuff to someone for less than mkt but at a 20-30% profit. Ask me what a "room sale" means. Never been to one but they were allegedly quite common in larger mkts like Columbus the last time around. My morals have guardrails. Dont be them in early Spring/Summer 2024. I lived that life, profited from it, eagerly await this next round of it. My profits alledgedly bought a new roof, a great HVAC/AC system, paid for a nice wedding and a really nice cruise through the lower Antilles for a honeymoon. In 2015. Then Trump happened and padded my retirement out very nicely! I'm thinking about a nice truck in a few years..... Just saying. Thanks for your time, and patience with me.

 

AT, Ireally like your previous posts, very useful, but I respectfully disagree in part with this one. I respect you but if I come off as an A-hole, thats purely on me.

Your advice this time is potentially extremely dangerous financially because it ignores the aftermath of 2008-2014. This one has more factors in the equation but a brighter future eventually. Please dont pollyanna these ppl. They need both eyes wide, wide open.

You forgot what happened in 09, in some ways similar to the fact pattern this time. Home prices slowly settled throughout 08 with RE gladhanders maniacly assuring ppl that the good times were coming back. Meanwhile, layoffs began and ppl started filling in financial cracks with CCs. The auto repos picked up pace into and throughout the Summer. Leveraged areas started showing a quickening pace of car and CC defaults, home contracts bring cancelled enmass first. Happening on the west coast in Cali....again.

By late summer that had spread out of So Cal, Nevada, Chicagostan, to more stable markets (allegedly). More layoffs. Then October hit. By early 09 it was all the way on with hundreds of thousands of layoffs announced monthly.

I propose that we are in early 08.....right now. I remember this period well. We have less than 6 months until early October. Sell crap off now and payoff debt, without the associated mo. payment. Get liquid, get stocked up on food. Skip any trips anywhere. Get frugal. Reduce or fump payments, especially high interest or variable rate ones.

This time next year, people will be desperate and thier crap will be worth 1/3 less because many others are desperate too. Guys like me, ruthless and cashed up from saving money in good times for THIS wont care what people willfully got themselves into......we will have cash, in hand, thier lifeline but expensive.

In 3-4 years I will sell thier former stuff to someone for less than mkt but at a 20-30% profit. Ask me what a "room sale" means. Never been to one but they were allegedly quite common in larger mkts like Columbus the last time around. My morals have guardrails. Dont be them in early Spring/Summer 2024. I lived that life, profited from it, eagerly await this next round of it. My profits alledgedly bought a new roof, a great HVAC/AC system, paid for a nice wedding and a really nice cruise through the lower Antilles for a honeymoon. In 2015. Then Trump happened and padded my retirement out very nicely! I'm thinking about a nice truck in a few years..... Just saying. Thanks for your time, and patience with me.

Very thoughtful response.

My assessment is what we know today, things can and likely will change drastically. When Covid first happened and everything started shutting down I thought the market would slow down a lot but the things I didn't factor in is our government would start paying people not to work and flood the economy cash. It's hard to predict what hasn't happened before.

You may very well be right when "markets" start crashing (like crypto) they have an effect on other markets (like banking) and we may see a deep recession or depression then all bets are off.

We bought a bunch of homes from 2009 till now, Obama was horrible for the country but great for our finances, if or better yet when this happens again it will be much worse. It's hard to know what will happen next. If in 3-4 years that "starter" home goes back down by 20-30% that won't be horrible, being homeless is horrible.

I couldn't agree with you more we need to pay off debt, reduce expenses and be ready for the next big thing but I'm not sure that selling your primary residence is the right thing to do unless you're selling the "fancy" home for something that's paid for (been there). One thing we know for sure is that we are in for a bumpy ride (I read that in a book) no man knows the day or the hour.

 

The scary thing to consider is, even as high as it is, the demand is STILL "artificially" low because lots of families have doubled up to combine households and split or hopefully at least offset expenses. The available multi-family housing inventory is lagging way behind and alot of existing apartment complexes are way behind on updates, maint, and renovation due to labor shortage,and plandemic scam material shortage. To say nothing of lingering effects from rent forebearance.

But what I'm waiting to see is how they mitigate the fast rising homeowmers insurance costs. That is going to push the mortgage industry into a default crisis almost as quick as anything.

 

It is inevitable that real estate will crash along with everything else. Few are looking forward to it but the policies in place can only result in chaos. Lets hope the timing negatively effects the fewest people.

 

Agreed, one thing I didn't account for is the willful destruction of our economy and our country.

 

Yep

Paying ON it anyway, why I'm hoping they get more than enough to pay this one off and have a nice "nest egg" afterward . The other house is in a town and much larger- worth some decent $$$

 

Yep

Paying ON it anyway, why I'm hoping they get more than enough to pay this one off and have a nice "nest egg" afterward . The other house is in a town and much larger- worth some decent $$$

If they can afford two houses then whatever happens they don't have any money worries.

 

My take:
1: Starter/lower homes are not going to drop much if at all because:
A. There IS a housing shortage, especially in the lower end/starter home spectrum. Many houses we consider starter homes (1000 ft, with 10x10 bedrooms, etc) were built from 1930s-1970s when we were booming and building. Now many of these are in need of extensive renovation if not knocked down. Since the 80s few houses like this have been built as new builds grew to twice that size.
B. As stated above, massive money printing has resulted in wealthy having a lot of cash (the whole SVB collapse was because they had too much money to invest well, so they put it in treasuries whose values tanked as interest soared). This means there are a lot of wealthy people looking for places to put their money in a time of inflation....what better hedge than RE. This results in many people looking for those lower end purchases, keeping prices high.
C. As the economy tanks and foreclosures start on the mcmansions, those folks will need a place to live.

2. Upper end houses (suburban mcmansions) are going to drop in value as the economy tanks and people are laid off.

 

My take is that soon nobody will want to sell their houses for worthless dollars.

 

Here in Florida prices are still going up. Redfin (for whatever that’s worth) said my home value went up 1.2% last month. I don’t know why people are so hot to buy at inflated prices, and on top of that, they are getting gouged by homeowners insurance. But whatever, not going to complain about rising equity.

 

OK how is my wanting them to get a good price hinting they're having money worries????

In fact most parents want good things for their children I'd say.

 

Not al all, it's that you said they owned two houses that gave me the impression they had no money worries.

 

I guess I really suck at posting stuff clearly

 

Ace,

Not at all.

Even in conference room meetings, stuff said can frequently be subject to different interpretations.

The web is worse since we don't know the non-verbal language accompanying the statement.

For the record, I do not write clearly here.

The best place, at least in my experience, for discussions are around camp fires.

 

Home prices have ALREADY come down In many markets.

Prices down the most from their respective peaks (ranging from May to July 2022) in these metros:

• San Francisco Bay Area: -17.1%
• Seattle: -16.3%
• San Diego: -11.5%
• Phoenix: -10.5%
• Las Vegas: -10.1%
• Denver: -9.5%
• Portland: -8.6%
• Dallas: -8.5%
• Los Angeles: -8.3%
• Boston: -5.7%

 

You would expect prices to fall in cities like those an more that are similar to them,they are all crap holes,unlivable cesspools where people live in constant fear...IMO....

 

Nothing is coming down with the exception of the dollar, anything fiat, crypto too.
One can invent something other than reality and it will be received a good number simply out curiosity.
Here most importantly is fiat currency.
If they required you to use it, the issuers should have been good custodians of the present. They have not.
Your rug is shifting and your feet should too.
Good luck all.

 

As everything is priced in fiat everything is coming down with the exception of Gold.

 

the only thing I’ve seen from every real estate investor I know is nothing but massive wealth building from it. You buy a house and your set for life for most people, it’s the lifestyle that is their downfall.

I bought 5 houses in 2009, all getting foreclosed on, one owner had a huge boat in the driveway and another had a brand new Hummer, most likely taking out the houses equity and paying cash for these toys or they’d of been repossessed as well

 

In 2004 I found a home online, 2 bedrooms and a study, one bath, 900 square feet. My husband and his 3 siblings were raised by both parents in a similar home.

When I asked why the seller was selling my agent said "Well they are pregnant (with a single baby) and need a larger home". A family of 3 could not make a 3 bedroom home work.

As it turns out she got laid off and they had to move into a 1 bedroom apartment for about a year before they could requalify for a new mortgage.

 

It gets a little hard to guess where the residential real estate market will go because it has been so thoroughly diddled by the gummint. That said, I can tell you one thing very, very clearly that will be extremely important to where the economy and asset prices in general go: as of about a month ago, we are in a credit crunch. Banks aren't lending, non-bank lenders are having trouble getting financed. Lines of credit are getting cut. New loans are darned hard to get. Good luck if you need to refinance, as so many borrowers will need to in coming months. This will have a huge impact. Be ready. Cash is king.

 

Agree to disagree. It's already happening in many places. For the area's with prices still going up growth has dramatically slowed. Days on market is rising steeply. Total closed deals are down. Home prices like inflation are a severely lagging indicator. We have a lot more room to fall in most markets until we revert to the long term mean.

I agree the top end will fall a higher percent than the starter home end. A 400k start might only go to 350k, but an 800 might drop to 550.

There's only a few levers that change things. Home price, real wages, and fed rates are the biggest ones. Unless real wages start to rise very quickly there is just not enough money to support the current prices of houses. People can't pay with money they don't have and thankfully there is a limit to how much most (reasonable) banks will actually lend. Yes it's way too high but the limit exists.

Pretty graphs for anyone interested: Home Prices Drop Year-over-Year for First Time since Housing Bust 1. Sales Bounce from Deep-Dismal to just Dismal

 

It may fall somewhat for those multi-million $$$ mansions of the One Percent. But that's a very niche market, when it comes to houses.

Your ordinary suburban family dwelling may slow down in the price increase area. And maybe not increase as much as it has in the double-digit last couple of years. But the demand will still be good.

 

When the recession hits, and it will, unemployment is going to rocket up and people who over extended themselves will have to sell. I am looking to buy a winter home in Vegas and I can tell you prices are dropping weekly. One house I had on my list dropped by 700K!

sorry but I don’t think you could be more wrong.

 

I think most people are over estimating the percent housing prices will drop.

Commercial properties will have the biggest drop in value. Probably atleast 25%.

Currently there is less than 50 properties for sale in my county and that includes land, homes, multi family, and trailer park trailers that are listed on the MLS. Neighboring counties are roughly the same. Demand is out stripping supply to much for large price drops.

 

I think most people are over estimating the percent housing prices will drop.

Commercial properties will have the biggest drop in value. Probably atleast 25%.

Currently there is less than 50 properties for sale in my county and that includes land, homes, multi family, and trailer park trailers that are listed on the MLS. Neighboring counties are roughly the same. Demand is out stripping supply to much for large price drops.

Small and midsize banks do 80% of the commercial real estate lending in the US. They are all under the gun to survive runs and regulatory scrutiny. This asset class will be a bloodbath.

 

Seattle area is down about 10%, however inventory is dropping again and a few homes are beginning to sell for over the asking price.
Source , real estate today on KIRO radio about an hour ago.

 

Yeah, totally disagree. Housing will and is coming down. You're mostly right about inflation, but as daily necessities become more expensive, people will have even less money for housing. The fed is actually making a pretty big dent in inflation already, but when they break something big enough and have to pivot, inflation may come roaring back.

I don't agree that there is a housing shortage either, but there are lots of people who are holding on to their house that really want to move. If they move, they will dump their 3% mortgage and have to get one at 7%. This could be viewed as a synthetic shortage, but just wait until the job losses start rolling in real numbers. People holding on will have to sell, and that will drop the market even faster.

IMHO, ones biggest prep though this **** show is not gold, it's the ability to keep your income. If you keep your job, you'll be seeing a lot of wonderful deals. If you lose your job, you're more likely to be contributing to all the wonderful deals.

 

If you have 100k in the bank, figure it the value of 50k in todays system.

 

I hope you are wrong I am looking for a vacation home. Been sitting on it for about 6 to 7 years now.

 

Despite what you may think or want, prices aren't coming down anytime soon. Here are the reasons prices will be slow to come down.

Our government has increased the amount of cash in the economy by 30% in the last few years leading to inflation.

What we have now is a lot of people that bought their homes when the market was a lot more affordable then we had historically low interest rates. A large portion of the home owners have an interest rate between 2-3%, if you bought when rates weren't that low a lot of people refi'd into a low rate.

In the last few years the median sales price has gone up by nearly 50%. If you bought that "starter" home in 2020 for $200k your payments are under $850 +taxes and insurance but if you want to upgrade to that home that you "should have bought" for $300k it's now $450k(ish) and if you were to finance the whole amount today you'll be paying $2700 +t&i. If you wanted to take the appreciation and use it as a down payment you'd still be mortgaging around $365k and have a payment of $2200+, that's a huge hit to your budge to have a nicer home.

Between the much higher price and interest rates there is a huge disincentive to get out of the home/loan that you're in and people will stay in their homes much longer than we've seen in the past. Obviously we'll see areas in the country the will see depreciation and pockets that will experience appreciation but as a whole don't expect prices to come down much, we will still see people that need to move due to life changes BUT the "recreational buyer" that buys a home because of a modest pay increase or the family that has a newborn will stay in their current home a little longer reducing inventory and propping up current prices.

I can also make a compelling argument for why prices will fall but that's not my thought process today

FHA just ok'd 40 year mortgages. Sprinkle in 8 year car notes and we CLEARLY have an issue.

 

ALL of this was in evidencevin early 2008, mortgages and loans beingvextended, interest rates, everyone asking the same is it cooling off/ over/ on a lull? Lots of arguement. 12 months later, shellshock, job losses, falling home and car prices......yadda, yadda, yadda.

You have 6 months to clear your decks voluntarilly, at full value. After that, re-sales drops by 1/3 from ppl who are buying. 1/2" off if you go under. I'm banking every penny for that day.

 

Austin and Fort Worth are not good places to sell median or above properties right now. On the ground knowledge… afraid with rates this high, prices barely matter. Nobody building out my way, was very fast growing. Shortage and rates in my conversations with builders