Housing market has come to a crashing stop: 1/3 of tenants not paying rents, Great Park in Irvine drops to almost no sales, and SoCal housing collapses to 6-year lows.
It was only a matter of time until housing, like every other sector of the economy took a big hit. Of course the housing cheerleaders thought somehow that a global pandemic would keep housing untouched while every other facet of the economy would come to a grinding halt. So it should come as no surprise that nearly one-third of renters (and soon mortgage holders) are having trouble making their rents. Banks are gearing up for waves of foreclosures. Only poor areas you say? In affluent Irvine, the Great Park area with a newly built section of homes went to close to zero sales from having steady sales in the past weeks. Did you also know the stay at home order hit on March 19, not even one month ago?
One-third of renters have trouble paying rent
It is no shock that renters are having a tough time paying their rents. I mean the economy just lost close to 17 million jobs in three weeks! And that is what we know of because many unemployment insurance systems came crashing down under the unprecedented volume. But of course, all is fine. Housing is only going to get a tiny cut from all of this health and economic carnage.
It is unlikely that things are returning to normal in April. Which means you have this full month ahead of economic pain.
Great Park in Irvine goes cold
In an affluent city in Orange County, Irvine you have seen new home building taking place. Recent areas of the city where bought largely by investors, and largely from investors from China. Hard to get people here with a travel ban and money is drying up.
“(OC Register). As February turned to March, the CEO of Five Point Holdings saw sales contracts at the Great Park Neighborhoods in Irvine running double the usual pace. One week, 24 homes sold. The next, 25.
Then, in mid-March, the coronavirus’ economic wallop hit. “Stay at home†orders scared house hunters and stymied sales effort.
Sales fell to nine in a week. And since then, basically, none).â€
That can’t be good right? And what do you expect? This is an economic crisis so of course poor and wealthy are going to get hit in varying degrees.
SoCal housing volume collapses to 6-year lows
See that? Housing volume has tanked to 6-year lows and it will go lower. Here in SoCal, people for the most part only started taking this serious about 2-weeks ago. And we are going to be operating in this mode for all of April and who knows how much longer.
People are leveraged up to their eyeballs here. You should see the forums with AirBnB landlords. The panic is so real you can feel it come through your screen. This is not good and housing values were already hyper inflated. The Fed can’t force people to borrow. What the Fed is doing is trying to keep the system from melting down. Same game plan as 2007-2009 and housing still got smashed.
We are just starting this and we had a mega 11-year bull run now being taken down by a virus. Housing is not immune.
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473 Responses to “Housing market has come to a crashing stop: 1/3 of tenants not paying rents, Great Park in Irvine drops to almost no sales, and SoCal housing collapses to 6-year lows.”
Yes, multi family and AirBnB landlords will get hit.
But waves of foreclosures? Just because sales volume is low doesn’t mean prices are collapsing. For a housing price crash you need the market to be flooded with inventory.
Wake me up when we see skyrocketing inventory. The opposite is the case at the moment. Sellers pull back.
And Rates aren’t going up anytime soon. I would bet my money on lower rates.
The impact on RE depends on how long we enforce the shutdown. My guess is we re-open the country gradually starting in May.
Cheers, millennial
Right on M, that’s exactly what I see also. Right now looking at buying a fixer up on the north Oregon coast. Just awaiting the price from the bank, they foreclosed on the place two years ago.
Obviously you don’t understand market dynamics. You have zero bids prices fall hard. See the stock market zero bids forced 1300 pts off the SPX in less than 3 weeks or around 35%. Sorry has nothing to do with a flood of sellers rather a dearth or zero bids.
Matt, I thought that for years….I was wrong. Zero bids means the seller will pull the property of the market. Either lives in it or rents it out. Unless you have mass layoffs of HIGH paying jobs you won’t see them selling at huge discounts. Tell me why they would if they don’t have to?
Ah yes, when there’s no demand on something its value falls to zero. I think it’s a constitutional amendment. If you ever see a property that’s on the market for years with no interest you can offer $0 and the seller must accept because he has no choice.
“My guess is we re-open the country gradually starting in May.”
What year?
2021
2020. We re-open in 1-2month gradually. Why wouldn’t we?
The flu killed 80,000 in 2017/2018. The corona virus kills old people that have already health issues. Isolate those and the rest should go back to work.
There are so any things that you forgot to mention. You are naive to think the economy is going to back to normal after this pandemic. There is going to be a huge aftershock of people not spending money and staying home because they are still scared of covid-19.
Economy being bad will affect EVERYONE. Especially those who are over leveraged which are the average Americans.
On top of that banks are putting stricter resections on loans. If you don’t have $$$ and good credit score of 700+ you will not get approved for a loan. Due to the forbearance banks and the mortgage sector is on the brink of collapse.
Shortage of goods due to the huge delays in CHINA. Which will make the economy worse and probably send us into a depression.
Foreign Money leaving. As US becomes the most severe country to be hit with COVID-19 you will expect the foreign investors AKA CHINA to start leaving in drove. They have already stop coming here for the past few years expect that to double.
There is nothing that will prop up this housing bubble.
Well you got low interest rates and low inventory and ENOUGH demand and ENOUGH people that will qualify for loans. That oughta do it.
You can look at the 5 gallon jug half empty and focus on what’s not there or you can look at it half full and see that there’s plenty of water to satisfy the thirst.
Inventory is light now, but that will change soon. What people forget is that no one HAS to buy, but many people HAVE to sell for any number of reasons. With zero buyers that inventory will start to swell.
“There is nothing that will prop up this bubbleâ€
Two errors here.
It’s not a bubble.
AND
You don’t have to artificially prop up this market since the prices are determined by supply and demand. You have little supply and historic low rates.
“I noticed our RE shills get a bit angrier each month since the bubble is slowly deflating. Now imagine how they act when we have a full on crash. It’s going to be very entertaining here soon!” -Millie
Maybe you can argue with yourself.
@M on one hand I miss our debates on the market, on the other hand I’m glad we can finally agree and prosper in RE using rational analysis based on real time market conditions and play with the cards were dealt with. Excellent insight ðŸ‘
New Age: Why do you completely ignore the fact that M is either not the same person as Millennial, and/or is/was a troll?
When the economy is facing a recession or depression how will there be a huge demand in real estate? The reason people kept buying these past few years is because they think housing prices will continue to rise into infinity. They had FEAR OF MISSING OUT. Once the housing prices start stagnated the demand will start to fall off.
If you don’t have job security and you no longer have the rising real estate wealth. On top of that the forbearance is going to cause a lot of people into huge debits that will lead to foreclosure.
Please tell me why a bad economy would mean real estate will stay the same let alone continue to rise?
Your Hero: I have no idea what the future holds with regard to real estate prices (just like everyone else). But based on recent political discussion, I think it’s possible that forbearance may not have a significant impact. From what I’ve heard, it appears that a lot of banks may just add the missed payments to the end of the loan. I’m not sure how many payments can be missed, but this might make a big difference in people avoiding foreclosure. I hope it’s all a ruse, though, because I’d love to pick up a cheap house.
Are you the same millennial that was getting ready to buy at 50-70% discount and arguing how renting is so much cheaper? Why are you arguing the opposite now, when you predictions are about to come true (partially)? Did you buy/inherit at the peak and chose a more convenient system of belief?
San Diego CPA: Because it’s either not the same person, and/or is a troll.
Now is not the time to buy. This coming November, another round of the Corona Virus. Don’t sell until we get a vaccine. Wait another 18 months before considering selling. Same goes for the stock market.
Actually there will be a lot of over-levered speculators who are selling out right now so absolutely as with Boeing being a buy at $90 US dollars a share so too is Southern California Real Estate. It’s not like the War Effort has gone anywhere and unlike Vietnam in the 1970s where funding for the War was cut off by Congress this is not true in this financial collapse. Quite the opposite. Another $500 billion just got put out by Congress today with another 2 plus trillion in infrastructure spending on tap. That makes for 5 TRILLION US Dollars going into election Year 2020 with 2.7 trillion US dollars already out the door. This excludes the trillions in Federal Reserve monies backing corporate bonds. Oddly enough the US Dollar surged today. That’s very good news for Southern California Real Estate and indeed all West Coast real estate. *Always closing!* Move along.
Yes, with currently 10% and rising of the total US workforce out of a job – record bankruptcies on both small and large businesses and a projected 50% of people planning to miss paying rent on May 1st ….. you’re totally right – housing market will be unaffected.
This is an IQ test you just failed spectacularly. Don’t worry – what does the economy and unemployment rate have to do with people holding or buying homes anyway? Dur..
Who is going to miss paying rent in May? Almost everyone is getting a $1200 check and is getting more money weekly than what they would get if they were working.
Even if people get the $1200, that’s not going to do much. I’ve read that a lot of people are still waiting and others may have to wait weeks or more. I’ve also read that state unemployment departments are massively overwhelmed and that many people have been waiting over a month for benefits (and are still waiting). The paycheck protection program is also a joke, as the spending limit has supposedly been reached and there are a ton of applicants that have received zero because of that, me included (will more spending be authorized? No idea). All in all, many people are starting to hurt more and more financially. Thankfully I can last many years on savings before I’m homeless, but I doubt that a ton of people are in such a position.
Greetings M,
Have you considered the scenario when severely over leveraged investment property owners in urban centers like SF, LA, or SD default on their loans en masse?
I am talking about those slick folks who bought up multiple properties to rent on VRBO and AirBnB for example. I am wondering how they will be able to float through the next couple of months mortgage payments when their income has been effectively terminated due to travel restrictions and social distancing protocols? And if this drags out another year to 18 months? What happens when tourism or short term renters disappear because people will be hurting financially for months to years after having to leverage themselves on credit cards just to put food on the table through this crisis?
I live in Los Angeles county, where 50% of people are either without a job or income, or severely reduced hours:
see: https://www.latimes.com/california/story/2020-04-17/usc-coronavirus-survey
Smells like massive and widespread defaults to me! Would you say that, at least in this scenario, it could force a glut of bank owned inventory onto the market?
Also, you don’t think lenders will be tightening up their home loans? JP Morgan Chase just changed their requisite minimum 5% down and 620 minimum credit score to minimum 20% down and 700 FICO this week. Not so sure banks are going to be gifting loans in the current economic conditions, even to those with sterling credit ratings as there is no precedence for these market conditions.
It really seems like a matter of how much longer and to what extent the shutdowns affect daily life. It is my assumption that RE prices will have to bend to the laws of Supply and Demand, and there are conditions in place for Lots of Supply and 0 demand.
If you are a cash buyer – its a different story of course.
Best of luck to you, Boomer!
A supply glut in what? Overpriced mutlifamily and vacation rentals? I wouldn’t call it a “glut” but I’m sure some of those will be hitting the foreclosures. That’s what happens when you overleverage just like SFH owners were overleveraged in 2007. So sure you might see deals start to pop up in that sector of RE but don’t bet on a massive crash. You said it yourself, if you have cash you’re good. You know who has boaloads of cash? Yep those property owning corporations that will gobble those properties up just like they did in 2011.
Good point. Boeing is planning to lay off 10,000 in La. So how is the Boeing buyout good for California real estate. In April lot of the layoffs were in sales and management. The real estate industry is fooling itself when several companies are layoff management for over a year. They just can refinance loans forever.
Woah! You said for past 2 years that inventory was everywhere. What changed?
Let’s pick this apart point by point:
1. “So it should come as no surprise that nearly one-third of renters (and soon mortgage holders) are having trouble making their rents.”
I’m going to assume that 1/3 figure is correct although as source would be nice. Anyways, comparing renters and mortgage is asinine. The people that lost their jobs are overwhelmingly renters. Don’t expect many defaults on the mortgage end.
2. “In affluent Irvine, the Great Park area with a newly built section of homes went to close to zero sales from having steady sales in the past weeks.”
That’s what happens when there’s a stay at home order. Who’s thinking “Oh gee let’s go look at model homes!” When the sales office is most likely closed and no one’s thinking about buying homes in this short window of restrictions. That’s like saying “Walmart sales fell to ZERO between the hours of 12 AM and 6 AM” when the store is closed for business during that time. See I can sensationalize things too.
3. “Housing volume has tanked to 6-year lows and it will go lower.”
See point #2. People are not worried about buying homes right now and sellers aren’t selling. What do you think will happen when things normalize? Not necessarily a swarm of buyers but business activity will pick back up steadily.
4. “You should see the forums with AirBnB landlords”
You should see Las Vegas casinos too. It happens when you got a pandemic that affects travel.
I cannot see how this translates to a major housing collapse. These arguments aren’t even relevant to the reality of the situation at hand. I’m not arguing that we’ll be back to the normal leaps in in YoY pricing but definitely we will not see a giant pullback in prices. The ONLY way that will happen is through an economic crisis that affects high earners and a dramatic increase in interest rates. The former is more likely to take hold than the latter once upcoming quarterly reports show less than stellar earnings and companies are forced to slash middle management jobs which are potential homebuyers. That’s why I say a 10-20% drop AT BEST. You’ll get more if and only IF interest rates shoot up to 5%+.
And for the love of God or whoever you believe in please stop mentioning 2007-2009! That era was a completely different era that was centered around RE so of course it got hit hard. Anybody with any ounce of brain matter could’ve seen that coming. This is not the same and it’s foolish to assume so.
Inb4 tHiS tImE iTs DiFfErEnT
Top response NewAge!
What will they cost when the dollar goes Wiemar ?
@Echback I’m willing to bet prices so high, it’d make the 2006 market look like the 2011. Happens with assets undergoing inflation. Might as well buy houses in gold coins at that point (which I definitely loaded up on 🙂
We’ve been hit by a different type of Gray Swan.
It definitely stopped the economic jet engine but the pent-up demand is still there for houses, dining out, Disney, Cruises, etc, etc.
Our FED pilot just made it cheaper to borrow to do all of these things when we get out of lock up.
That is something the FED pilot did not do quick enough during the 2008 Gray Swan.
Activity in large portions of the economy has ground to a halt. Those folks had jobs and spent money, and now they are not. Plus the uncertainty re: the path forward for the economy (how long do the stay at home orders last? Will there be future waves of COVID? Will the economy be able to restart like turning a key, or will it sputter?) will make investors and lenders nervous, which can have the effect creating a self-fulfilling prophecy.
Nobody knows what is going to happen. But to be so convinced that the real estate market is not going to be affected is just not defensible. There are very real and plausible pathways that lead to a real estate bear market.
Oh by the way, I work for a very large organization that is spends 10 digits a year on capital projects. We are rethinking everything.
@Steady
Good insight bit try looking at it in a different way. Instead of focusing on who’s losing their jobs why don’t you focus on who’s KEEPING their jobs? Prices aren’t affected by who CAN’T buy theyre dictated by who CAN buy and there’s plenty of those kind of people available to keep the prices steady +/-10%. The supply is even lower in an already historically low inventory market. It’s slim pickins for buyers so competition is high which means prices stay where they’re at.
And I’m not saying that RE won’t be affected, I actually do believe this will have some sort of effect the only difference is that I do not believe it will be a catastrophic collapse. You get a slight dip in prices because of uncertainty then they might freeze for a couple years so technically yes it could be a bear market but A house selling for 500K will not go down to 250 or even 350K so don’t hold your chips waiting for something that just won’t happen (at the current interest rates). My best year in real estate by far was last year when prices took a dip after interest rates shot up to 5% then immediately pulled back to sub 4. Houses were selling for 10% off which is a huge sum for flippers. I made three time the amount of my next best year because I knew how much of an impact interest rates have on our economy.
@M thanks man just trying to help people see the bigger picture and block off the noise!
1. “So it should come as no surprise that nearly one-third of renters (and soon mortgage holders) are having trouble making their rents.â€
“I’m going to assume that 1/3 figure is correct although as source would be nice. Anyways, comparing renters and mortgage is asinine. The people that lost their jobs are overwhelmingly renters. Don’t expect many defaults on the mortgage end.”
So don’t 1/3 of those renters pay 1/3 of mortgagees those rents? How does 1/3 of people not paying rent not at some point lead to 1/3 of mortgages not being able to be paid? Keep in mind lots of those renters rent homes, rent apartments in homes or even rent rooms in homes.
You could argue that many small business owners are home owners. With many of those small businesses closed or operating at a much lower capacity / profit margin, how long before they have to choose between rent / mortgage on the small business or mortgage on their home? Something has to default there. You’re not going to tell me that most can carry the cost of both for months. Some might, but you can bet most can’t.
When we get back to business, doubtful all small businesses will reopen and for those that do, doubtful all employees are hired back right away. The longer this closure goes, the more the former and latter are true. The longer those can’t pay rents, the higher the chance of defaults.
I think the fact that 1/3 of people can’t pay their rent is exactly why the mortgage defaults can go sky high. Remember it’s not just home rents, we’re talking about. It’s business rents, commercial rents,…..all of this eventually leads to some type of mortgagee default. Rents / mortgages are tied together, when the first one can’t fulfill the obligation, how does the second do so? My two cents….
Let’s ask some questions, point by point:
“I’m going to assume that 1/3 figure is correct although as source would be nice. Anyways, comparing renters and mortgage is asinine. The people that lost their jobs are overwhelmingly renters. Don’t expect many defaults on the mortgage end.”
Those who lost their jobs are overwhemingly renters? A source would be nice. Dr HB used OC as an example. Are those in the newly built developments overwhelmingly renters? If not, and the new buyers or potential buyers lost their jobs, how in the world wouldn’t there be many defaults on the mortgage end?
2.”That’s like saying “Walmart sales fell to ZERO between the hours of 12 AM and 6 AM†when the store is closed for business during that time. See I can sensationalize things too.”
I’m pretty sure Walmart counts that six hour down time when they figure the cost of the inventory while the store is closed and no one is there to buy Great Value hot dogs. However, how can a builder, with tens of millions in building loans make nut when his development is not selling and he has to make his building loan payment? I’m also pretty sure that a complete loss of home buyers for a few months was never figured into the builder’s pizza.
3. “See point #2. People are not worried about buying homes right now and sellers aren’t selling. What do you think will happen when things normalize? Not necessarily a swarm of buyers but business activity will pick back up steadily.”
Saw point 2 but it didn’t address the fact that housing volume decreased for the past six years before the Wuhan virus caused state governors to stop their economies. Normalize? What does that look like when governors can now shut down their economies in the future because they see someone sneeze? If a potential buyer, who in January, 2020 was confident that he’d be employed long enough to buy a house, what kind of confidence do you think he’ll have in the future when he believes he can at the drop of a hat, lose his job? What if that same buyer is foreclosed upon because of the Wuhan flu, or his credit is lowered after he goes back to work? So, what’s normal?
4. “You should see Las Vegas casinos too. It happens when you got a pandemic that affects travel. I cannot see how this translates to a major housing collapse.”
I think you picked the wrong city to make your point. Gaming is seventy percent of Nevada’s economy. The lion’s share comes from Las Vegas. Seventy percent of Nevada’s economy has stopped and will be stopped for months after governors lift their lockdowns. All business supporting gaming has also stopped including large percentages of police, firefighters, construction, road construction, maintenance, etc. People can live in foreclosed homes and live in rental house without paying rents when no one is employed to evict foreclosees and renters, but how in the world will there be no housing collapse in a place like Vegas? Who will be able to get a mortgage or qualify for rent even if housing prices only decrease by up to 20 percent?
One last question; will you go to Vegas, get a hotel room, go to a restaurant, gamble in the casinos, go to a show the day after the lockdown is lifted in Nevada? Didn’t think so.
My family was in Vegas in Mid-Februrary.. we all had a bad cough, nasal drip, and basically a moderate cold for a month… and recovered. We have a strong feeling we already had Corona.. so would definitely go back.. it was a nothing for us thanksfully.
Exactly LAOwner,
For most people this is a nothing burger. Isolate the sick and old and the rest needs to go back to work.
See Sweden.
That is why testing is of extreme importance.
Where are the tests? Where are the tests if you have the virus currently? Where are the tests that determine whether we have antibodies?
You might have had a common cold and the next time you visit Vegas, you will be in the hospital dying. Nobody knows. Not enough tests.
Political Rant.
South Korea had tests and a nationwide quarantine in February. They limited the virus death toll to 200.
The US, had no tests, had no quarantine, and now the US death toll is approaching 25,000. Why is our government so dismally incompetent compared to South Korea? Don’t give me a right wing rant because they have less people. True, they have 1/6 the population of the US. Why is the compensated death toll at nearly 25,000 in the US when we could have had a competent federal government with a death toll of 1200? I believed Dr Fauci in February. He was correct. Trump was saying this was a MSM Democratic hoax. Are murder charges appropriate for incompetence?
South Korea is testing everyone. The US is not. I won’t rant again.
Sweden is testing like the US and they have 13,000 confirmed cases and 1400 deaths. That’s an 11% death rate and exponentially growing. Don’t be like Sweden. with a 133M people in the US, that would leave us with 14M dead with an 11% death rate.
Testing is the key. If you test everyone and isolate only those that are contagious, we can get through this.
After a month, we are still all waiting for tests. Nobody can get tested around here, masks and bleach are still cleared from grocery shelves. but Trump tells us every night there are plenty of tests and PPE. If you say it enough times, some will believe it.
1. “So it should come as no surprise that nearly one-third of renters (and soon mortgage holders) are having trouble making their rents.â€
“I’m going to assume that 1/3 figure is correct although as source would be nice. Anyways, comparing renters and mortgage is asinine. The people that lost their jobs are overwhelmingly renters. Don’t expect many defaults on the mortgage end.”
So don’t 1/3 of those renters pay 1/3 of mortgagees those rents? How does 1/3 of people not paying rent at some point lead to 1/3 of mortgages not being able to be paid? Keep in mind lots of those renters rent homes, rent apartments in homes or even rent rooms in homes.
You could argue that many small business owners are home owners. With many of those small businesses closed or operating at a much lower capacity / profit margin, how long before they have to choose between rent / mortgage on the small business or mortgage on their home? Something has to default there. You’re not going to tell me that most can carry the cost of both for months. Some might, but you can bet most can’t.
When we get back to business, doubtful all small businesses will reopen and for those that do, doubtful all employees are hired back right away. The longer this closure goes, the more the former and latter are true. The longer those can’t pay rents, the higher the chance of defaults.
I think the fact that 1/3 of people can’t pay their rent is exactly why the mortgage defaults can go sky high. Remember it’s not just home rents, we’re talking about. It’s business rents, commercial rents,…..all of this eventually leads to some type of mortgagee default. Over the last 10 years, tons of people have bought homes / apartments as rental properties. You can bet those will start defaulting first, no amount of refi will cover the rent a tenant paid. Rents / mortgages are tied together, when the first one can’t fulfill the obligation, how does the second do so? My two cents….
New Age, our points are interesting. But some are debatable.
1. The unemployed are not just blue collar workers. No, this is affecting everybody. From the rich who have lost value in their assets and their businesses. To middle class salesmen who are no longer selling. To white collar workers whose companies are wobbly. Post Covid, we are going to see a recovery spike in employment, but tappering off to a labor market that is weaker. The economy will have to work itself out of its hole. Anyway, weak labor market means weaker housing market.
2. You’re right, people are not looking for homes right now as stay-home orders are in effect. You are also right that the market is characterized not only by less buyers but less seller. The volume of sales has been slashed. Sorry real estate brokers. It is too early to determined post-covid pricing when the market has been eclipsed.
3. Back to employment numbers. I suggested that the home buying class is not untouched economically. This will translate in some continued slowing in the market once Covid lifts. Yes, activity will shoot back up (from being shutdown) and work towards a new equilibrium. And that equilibrium will leave several holes of lower pricing. I predict luxury housing, which was overbuilt pre-virus. And marginal homebuyers will disappear as financing has tightened a bit.
4. A real estate crash, is defined by banks taking back mass quantities of properties. This time that might not happen, partially because borrowers affected by Covid may have a year of defeasance to catch up. I don’t see normal appreciation in the works for awhile. And there will be an uptick of shortsales for people that need to sell during the next two years. And yes, a sizeable uptick in foreclosures, but not an avalanche like 2009.
2.
Housing isn’t getting taken down by a virus. The virus is being used by the government to cover up an economic collapse that the central banks have engineered.
DR. SHIVA EXPOSES FAUCI, BIRX, GATES, AND THE W.H.O. COVID-19 ENDGAME
https://www.youtube.com/watch?v=zCT28MJ2edc&feature=youtu.be
You are batshit crazy if you listen to thst stuff.
PlanDemic!
The virus is used as a cover for something rotten which started to manifest in September. The FED was losing control and didn’t know how to justify their actions anymore. The virus provided the cover. It gave cover for massive bailouts and wealth transfer from the 99.99% to the 0.01% – more centralized power and control.
I agree with you, but I think it goes beyond that. I transcribed something from SGT Report the other day that sums up what I also believe is happening:
“Trump is the product of a coup d’etat. He’s not really a president. He’s a CEO in charge of managing a receivership for a bankrupt asset on the Fed’s balance sheet. That’s really what his role is. This (the lockdown) feels like we are in receivership to a group of Satanic international bankers who have called in IOU’s, and are now shutting everything down. They think they own everything anyway. They want to own the planet, these illuminati families that own the central banking printing presses. They think they own us all anyway, and we’re just collateral against the debt, and now they’re calling in the debt. I fear we’re in receivership, and the debts that they printed out of thin air, and have ensnared us with decade after decade, are being called in.” ~SGT Report, 4-10-2020
Interesting perspectives. I certainly don’t discount them.
However, with regard to Karin’s post: what would shutting down the economy do to help the bankers? It’s just punishment? It doesn’t really make sense to be honest.
Flyover, this could be happening.
This has happened before in Russia and Cuba during the 20th Century.
The people revolted. Fortunately, unlike then, we have an election process to save us and vote in a Democratic Socialist President (Like FDR) instead of a full-blown Communist.
The Illuminati don’t appear to be too bright since they don’t learn from history.
Shutting down the economy creates a situation where hard assets that are owned by the middle class and moderately wealthy are sold at a discount to the only people who still have cash available which is anyone who gets first access to the trillions of dollars that the fed is pumping out which isn’t the common person. Think of all those rental housing portfolios that were created at a discount during the last crash.
The way the “bailout” is structured creates an environment where the average person is forced to sell discounted assets because they can’t keep up with the monthly monetary cost to maintain it either due to a lost job or non-payment of rent from their tenants, or are forced to sell to keep paying other expenses, and the politically connected class with access to an essentially unlimited amount of zero interest loans can come in and buy up the assets which will be productive in a few years but just aren’t right now.
JR, I am glad you see the picture with 20/20 vision; glad I am not the only one – it gets boring being a lone wolf..:-))). Some people don’t see it because the MSM is telling them what to think, to look at the virus on the right while they steal on the left. Total distraction from what really matters. You can demonstrate against the virus and lockdown, but don’t you dare to demonstrate against the biggest wealth transfer in the US history by the Wall Street cabal. Since most economies are totally dependent on US financial system, they have to play in this scheme according to the script, more or less. Yes, the virus is real, but in the grand scheme of things, if people would get the perspective, it is nothing.
In few months, when the dust settles from this engineered economic fallout, the virus will be the least worry on the people’s minds.
19% of renters normally don’t pay their rent during any given month which seems high even in normal times.
Housing is DONE, stick a fork in it. JP Morgan Chase, the nation’s largest lender, announced that effective Tues. homebuyers will need FICO scores of 700 and 20% down payments to qualify for a mortgage. Housing prices will have to crash so most buyers, especially 1st time, can afford to put down 20%. Look out below!
https://twitter.com/PeterSchiff/status/1249154974749282305
AirBnB is about to crash the US housing market. Thousands of super-hosts who bought 10, 20, 30 properties with mortgages and are heavily levered…are all about to default.
Without travel there is no rental income to pay these mortgages.
In 2-3 months – 2008 all over again
Boom
https://twitter.com/govttrader/status/1244845607627501571
WSJ: No rent was paid in April by nearly a third of American renters
https://www.marketwatch.com/story/no-rent-was-paid-in-april-by-nearly-a-third-of-american-renters-2020-04-08?link=MW_latest_news
Realist,
Nothing has to crash. The only way to get lower prices is if inventory increases dramatically. Tell us how inventory will skyrocket?
Right now you have less demand and less supply. Lower sales volume doesn’t mean prices go down. Sellers are pulling back and will re-list when the country opens again.
Simple. No one HAS to buy a house, but a great number of people HAVE to sell for any number of reasons from financial to societal. With pretty much zero buyers inventory will grow.
Zero buyers? How come houses go into “pending†daily? Do you track data?
I really wanted to reply with a well formulated response but then I saw “2008 all over again” which tells me you don’t understand or completely ignored the factors in THIS market and there’s nothing I can say to change your bias mind so yep hold on to your cash that will rot in your bank and wait for that epic crash! It’ll be spectacular, I get you’ll get Newport Beach front mansion for $400K! Just keep holding that cash and whatever you do, don’t buy because your day will come and you can all tell us that you told us so while we’re all drowning in mortgage debt.
“JP Morgan Chase, the nation’s largest lender, announced that effective Tues. homebuyers will need FICO scores of 700 and 20% down payments to qualify for a mortgage.”
I need to point out that when the tide went out this month, an alarming number of irresponsible mortgage holders didn’t have enough savings to cover even one mortgage payment.
20% down and a 700 (Good) credit score should be a requirement.
None of us want any of these yahoos to be able to gobble up multiple homes in the next few weeks with zero down loans while having bad credit scores. It will just make things much worse.
Good. That means slight discount coming up that will vanish when things pick back up and banks revert back to their old lending.
Bob, I finally agree with you. You are right on this one.
All those AIRBNB loans are guaranteed by the GSEs. Nobody will take a loss on the bonds. MBS are one of the safest places to be as 98% of all mortgages since 2009 are backed by the GSEs. Who cares if people default, the bond holder will still get paid 100%.
The GSEs will just hand over the ownership of these properties to someone on Wall Street. They can use the playbook established after the real estate bubble.
No wave of foreclosures…
https://www.ocregister.com/2020/04/06/coronavirus-california-halts-lender-foreclosures-renter-evictions/
Cheers, millennial
The terms of forbearance are, you don’t have to pay for three months, but in the fourth month, FOUR payments are due. Anyone who hasn’t had a job–and won’t have one for at least two months–isn’t going to have four months of payments on the 1st of the fourth month. Sorry to say, lots of foreclosures coming down the pike.
Blame our legislators who drafted the law so sloppily.
Laws can be changed. Forbearances can be extended.
From Santa Monica: https://s3.amazonaws.com/smdp_backissues/040920.pdf
City Hall issued an order Wednesday strengthening a temporary moratorium on evictions enacted last month in response to the economic impacts of the coronavirus pandemic.
The original order City Manager Rick Cole signed March 14 protects renters from eviction if they prove with documentation that they cannot pay rent because they have been financially impacted by COVID-19. The order requires that tenants repay all deferred rent six months after the crisis is over. The moratorium was later broadened to protect businesses and prohibit Ellis Act evictions. …
“The order requires that tenants repay all deferred rent six months after the crisis is over.”
That just kicks the can down the road. Does anyone really think that the person who couldn’t pay their rent right now for however many months will magically be able to pay all past due rent within 6 months of the crisis being over? Or are they just going to keep saying that we’re in a crisis so the ultimate reckoning never happens but ends up flooding the market with now worthless rental properties as landlords desperately try get rid of a depreciating asset that has a monthly cost to maintain but doesn’t produce any income?
The terms of forbearance are, you don’t have to pay for three months, but at the fourth month, FOUR payments are due. Anyone who hasn’t had a job–and won’t have one for at least two months–isn’t going to have four months of payments on the 1st of the fourth month. Sorry to say, lots of foreclosures coming down the pike.
Blame our legislators who drafted the law so sloppily.
SoCal,
That’s not what I have heard from the lenders I know. The payments owed will be added to the END of the loan.
It can vary from lender to lender though as the legislation isnt specific on this.
Obviously, if the terms say you have to pay it all in the 4th month you would be in trouble. Do you happen to have a link?
Same with renters that can’t pay their rents within the next 3 month. No way they will just magically come up with the accumulated rent.
From the quoted OC Register Article:
“The state legislature is expected to address issues such as terms for repayment plans for missed housing payments during the coronavirus crisis when it reconvenes later this month.”
With a Democratic majority and a Democratic Governor, the ball is in the Democrats’ court. I’m with M on the chances of generous repayment terms.
I’m with M on this on too. I’m pretty sure the banks will just restructure loans in a way that the missed payments will be factored back in after a generous amount of time is granted to people who’ve lost their jobs. There might be more interest involved so banks don’t get shorted but it’ll be in a way where everyone wins.
Why didn’t they do that back in 2008 you ask? Because not even God himself can save borrowers with no income that never HAD income payback a bank that loaned them a mortgage on a house worth 1/3 of what they bought it for. There are certain circumstances where there’s room for compromise and there are certain circumstances where it was doomed from the start. This market is definitely the former.
Don’t really care about the RE market right now! I do, but don’t. I bought my properties for monthly lease income. All are paid for. No monthly mortgage to worry about. Use to worry about my renters. But they are all good because I give them a good deal. Really laughable watching all lines of home buyers in 2008-9.
Bully for you.
See that’s smart. Give someone a good deal and i do believe they will take care of your property
It is foolish to think housing will not be affected. Mortgages are paid by incomes, incomes are paid by jobs, jobs are paid by businesses, and jobs have stopped and are hemorrhaging. When this stops is unknown at this point. And when it stops, we will see how our economy reacts. How long can the government support individuals as things get back to ‘Normal� Will businesses use this as a way to restructure getting new employees to work for less in an employer’s market with so many applicants? You know government will protect businesses from a legal standpoint about having to “rehire†everyone who has been laid off. Social Darwinism will prevail. We are In un chartered territory with a pathological narcissist driving the boat. Time will tell, as the handling of the virus 🦠dictates our future. If history is a teacher, than our future is worrisome.
It is foolish to think housing will not be affected. Mortgages are paid by incomes, incomes are paid by jobs, jobs are paid by businesses, and jobs have stopped and are hemorrhaging. When this stops is unknown at this point. And when it stops, we will see how our economy reacts. How long can the government support individuals as things get back to ‘Normal� Will businesses use this as a way to restructure getting new employees to work for less in an employer’s market with so many applicants? You know government will protect businesses from a legal standpoint about having to “rehire†everyone who has been laid off. Social Darwinism will prevail. We are In un chartered territory with a pathological narcissist driving the boat. Time will tell, as the handling of the virus 🦠dictates our future. If history is a teacher, than our future is worrisome.
The point about inventory and Airbnb that the good doc is trying to make is;
Landlords will have to sell if they can’t make their monthly nut or be foreclosed on. Saw the crash in 80’s 90’s and 2000’s and will doom see another. Just the way the things go
OverLEVEREGED landlords will have to sell. The more landlords leverage their cash the more they have to gain but the more exposure to risk. So when things hiccup like now, it’s amplified into their whole portfolios. So I do agree with you there. Where we may disagree is that there are not enough landlords that did overleverage themselves to flood the market with foreclosures and the current demand should fill what little supply that will result.
Real estate is definitely taking a hit the only question is how big. It may not be that big, but with a freeze in credit which is happening and probable long term economic changes there will be an impact. Plus our governor already extended social distancing till May 15, acknowledging it may get extended again. We are still deep in the unknown at this point. However even if you just bought and this market crashes hard, take heart because we know it will rebound.
Right now I’m waiting until next week for my monthly statement from my rental management company. Last month I had a deposit of the full amount. One tenant is in healthcare and one gets government checks. If there is no money deposited to my bank account, then I’ll start to worry.
PS with no debts on the out-of-state properties I co-own, I’ll be OK for a while.
The statement came today. I guess I’m in the 2/3 not the 1/3. All is well!
It is foolish to think housing will not be affected. Mortgages are paid by incomes, incomes are paid by jobs, jobs are paid by businesses, and jobs have stopped and are hemorrhaging. When this stops is unknown at this point. And when it stops, we will see how our economy reacts. How long can the government support individuals as things get back to ‘Normal� Will businesses use this as a way to restructure getting new employees to work for less in an employer’s market with so many applicants? You know government will protect businesses from a legal standpoint about having to “rehire†everyone who has been laid off. Social Darwinism will prevail. We are In unchartered territory with a pathological narcissist driving the boat. Time will tell, as the handling of the virus dictates our future. If history is a teacher, than our future is worrisome.
God help us! A “pathological narcissist” to possibly be replaced by a serial groper and sniffer with family members on the payrolls of foreign political opportunists.
Haha. I’d rather have the pathological narcissist at the helm compared to the alternative. Uncle Joe has a hard time putting sentences together now, I can only imagine 4 years from now. Maybe we could put Hunter on the corona virus task force since he knows the ins and outs of China business. 🙂
Live near the city and you will not be hit as bad,if you live on the outskirts of town you will be pounded down a lot more.
Hi, Doc, and thanks for your continuing informative and insightful coverage over all these years. Will we now be seeing the rise of other sites online like the past’s Santa Monica Distress Monitor…perhaps a Culver City Calamity? Some properties I’ve been tracking show a rough 10% or so decline in asking prices from March. And as “Realist” pointed out, J.P. Morgan wants a 700 score and a 20% down payment for most borrowers. However, let’s all remember how CASH BECAME KING during the last downturn. Even a 20% down payment ultimately meant bupkis as the all cash vultures descended upon coastal California devouring any short sales/foreclosures/even “normal†sales with reduced prices. Will the locusts be reappearing?
Housing is done, stick a fork in it- All It Takes Is One Fire Sale Of A Comparable Home In Your Neighborhood
http://housingbubble.blog/?p=3163
Two million dead from Covid-19 might be preferable to locking down the economy: http://www.enterstageright.com/archive/articles/0420/natlockdown.html
We’ve heard much during the Wuhan flu crisis about a “worst case scenario†of two million dead Americans, a staggering number. But missing from the national conversation is something equally important:
What’s the worst case scenario given our present course of action, largely locking down the country and freezing life like an insect stuck in amber?
What if worse coming to worst means a great depression, descent into tyranny, millions more dead from other causes and a permanently impoverished nation? …
“ What if worse coming to worst means a great depression, descent into tyranny, millions more dead from other causes and a permanently impoverished nation? … we’ve already descended into tyranny…government tyranny.
When this is all said and done, Governmental reactions (probably based in good intentions) will have caused more harm than good.
9/11 brought us Patriot Act and TSA.
Let’s see what 3/11 will bring – my feeling is that Cov1d-19 is 91-1 on steroids.
Thank you for the post SOL. The issue is not life vs. dollars. That is how the MSM is trying to frame this for evil reasons.
The real issue is lives lost in both scenarios, and I agree that we are going to lose more lives if this lockdown continues vs. lives lost due to CV.
The way MSM is reporting is sick. They fabricate data, tell half truths or outright lies. Recently MSM announce that a newly born baby died of CV. I was surprised in light of all other data and I called my son who is a doctor. He said that the baby was born premature at 22 weeks. With or without CV, for a baby to survive at 22 weeks, chance are slim to none. The mom tested positive for CV with no symptoms. Therefore, the MSM reported the baby as dead from CV. This is just an example out thousands. For example, if a 95 year old has a heart attack and tested positive for CV, the death certificate says that he died of CV. Most likely, the 95 year old would have died with or without CV.
The virus is real but used as a cover for the greatest wealth transfer in US history. Like we need even more concentration of wealth and power in the hands of the 0.01%!!!!….
Not sure what MSM said. But the mother from Louisiana went to the hospital exhibiting covid-19 symptoms. She had shortness of breath/high fever and was placed on a ventilator. The oxygen deficiency as a result of the respiratory infection caused her to go into premature labor (22 weeks). So while a baby born that prematurely would likely have died, it was in fact a direct result of the mother’s symptoms. It’s officially reported as covid related.
Don’t worry.
We now have Trump Socialism.
It turns out it is better than Bernie or Yang Socialism. Not only does everyone get a check but all businesses, banks, and Wall Street get a massive bailout.
We’ll balance the budget when Biden gets elected in 2020. He’ll raise the taxes on businesses and the 1% to make it all back.
Bob, not sure if you got the memo, but Biden’s entire career has consisted of working for the 1%, especially including doing the bidding of credit card companies in Delaware. He’s the quintessential corporatist democrat who will undoubtedly further enrich his corporate overlords just like every other president, but worse. Unfortunately (for him), his apparent dementia will probably derail his aspirations for the presidency. I would feel sorry for the guy (Jill et. al forcing him into it maybe?), but he’s such a creep that I can’t.
When the Gravey Train STOPS, the ride is OVER- Earlier this week when we reported that JPMorgan has quietly halted all non-Paycheck Protection Program based loan issuance for the foreseeable future, we said that we didn’t buy the stated reason namely – the bank was drowning in (government-backstopped) applications and would be willing to forego millions in easy, recurring net interest income and that instead the real reason why JPMorgan would “temporarily suspend” all non-government backstopped loans such as PPP, is if the bank expects a default tsunami to hit, coupled with a full-blown depression that wipes out the value of assets pledged to collateralize the loans. We went on:
Furthermore, why issue loans that will default in months if not weeks, just as bankruptcy courts fill up with millions of cases (assuming the coronavirus clears out by then, as the alternative is simply unthinkable – a default tsunami without any functioning Chapter 11 or Chapter 7 process) when JPM can simply stick to the 100% risk-free issuance of government-guaranteed small-business loans which pay a handsome 1% interest, especially if it makes JPM look patriotic by doing its duty to bail out America.
Over the weekend our skepticism was confirmed when Reuters reported that JPMorgan, the country’s largest lender by assets and which will kick off earnings season tomorrow, will raise borrowing standards this week for most new home loans as the bank “moves to mitigate lending risk stemming from the novel coronavirus disruption.”
Starting Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value (something which we thought was the norm after the last financial crisis, but apparently lending conditions had eased quite a bit in the past decade).
https://www.zerohedge.com/economics/jpmorgan-scrambles-raise-mortgage-borrowing-standards-ahead-biggest-wave-defaults-history
Powerful stuff: https://www.theburningplatform.com/2020/04/12/the-road-to-perdition-is-paved-with-evil-intentions/
… The scare tactic death total was 2.2 million if we did nothing. In their own “expert†narrative, if we followed all social distancing protocols perfectly, the death toll would be 110,000 to 220,000. The country hasn’t followed the protocols perfectly and now their worthless models are saying 60,000 deaths – soon to be downgraded to 50,000. These are death figures on par with deaths from the annual flu. …
Just as the 300-page Patriot Act was sitting in a drawer waiting for the right crisis to come along, the 800-page, again ironically named, $2.2 trillion CARES Act was already written by corporate lobbyists waiting for the next crisis.
It’s a potpourri of mega-corporation goodies and bailouts for terribly run companies who spent the last decade wasting trillions of dollars buying back their stock with cheap debt provided by the Fed. The crumbs for the little people and dying small businesses is being distributed in a sloth-like manner, while the corporate and banking pigs have been gorging themselves at the government/Fed trough for a month. …
50%+ of infected don’t have symptoms. Social distancing measures have helped greatly. I wouldn’t be surprised if the fatality rate of covid19 will be similar to the seasonal flu. Back in business by summer!
Cheers, millennial
M: I wouldn’t be surprised if the fatality rate of covid19 will be similar to the seasonal flu.
I’ve been saying that for a month.
M: Back in business by summer!
Not necessarily. You’re assuming that Covid-19 is the reason for the shutdown, rather than a pretext.
@SOL – “Just as the 300-page Patriot Act was sitting in a drawer waiting for the right crisis to come along, the 800-page, again ironically named, $2.2 trillion CARES Act was already written by corporate lobbyists waiting for the next crisis.”
I am sure you never saw a government entity moving with the speed of light like when they had to distribute trillions to the 0.01%. On the other hand, they had time to prepare for this since September when they realized that they lose control of the system if they don’t do something radical to save the bond market (10 times bigger than the stock market).
My gut feeling is telling me that they played with fire and the hundreds of trillions of dollars derivative market could explode anytime into a supernova collapsing with it the bond market, stock market and RE market. I hope I am wrong, because these days the derivative market acts as a weapon of mass destruction – nobody will escape it.
If I am wrong and they can control the derivative market, for now it seems that they can control the bond market. We’ll see for how long they keep the lockdown in place. If they don’t open up the economy to the working healthy individuals very soon, the derivative market will explode. We’ll see only wreckage behind it, making the Great Depression a walk in the park (back then they government and corporations did not have so much debt as they do today and there was no derivative market).
We live in interesting times. For know I tried to avoid debt as much as possible (zero debt as of today) and if I borrow, it is only for investments, small amounts and only for very short term. I still bought lots of blue chip stocks when the market went down a lot.
Inevitably the economy we have will be fought tooth and nail regardless of who maintains it as long as humankind advances from a tribal system. Maybe when that happens future generations will look back at what the fuss was all about FIAT and depressions.
Unfortunately the 2.2M dead isn’t even near reality and comparing it to flu is just stupid: 100* more deaths and 6* faster/more effectively spreading disease.
Even in countries with good health care for everyone, death rate *in population* is between 1 to 3%. In US 40% of population has no health care at all, so it’s easily double. That means 7 to 22M deaths overall. Current situation isn’t even a begin yet, with 2k deaths per day. Lock down is biting though, it’s not growing exponentially daily anymore.
2.2M deaths is really serious understatement in that light: That amount will be reached in April/May and this will continue (assuming no cure/vaccine) to summer 2021. At least.
GOP using this as a tool to establish dictatorship is, on the other hand, easy to see: Major voter/voting suppression is already going on and >90% of “stimulus” goes to top 0.1%
GOP using this as a tool to establish dictatorship is, on the other hand, easy to see …
You mean that Pelosi, Cuomo, the media — they’re all fighting to reopen the economy? News to me.
Trump wants to reopen the country. Cuomo is fighting to extend the lockdown.
Trump initially asked for $1 trillion as a bailout. Pelosi wanted way more than the $2.2 trillion that was passed. And AOC wanted the bailout to include her Green New Deal.
And no sooner was the $2.2 trillion passed than Pelosi — not Trump — was demanding a second bailout of equal or larger size. Cuomo recently said the states need an additional half trillion.
The Democrats and media are far more aggressive in pushing for more wealth transfers, and police state lockdowns, than is Trump.
The majority of people who have the virus have mild or no symptoms. The fatality of covid19 rates are way overblown and continue to be revised downward. People who have no symptoms aren’t going to get a test, so they aren’t being counted and part of the fatality rate calc. People who like to sensationalize this virus for political reasons are cherry picking examples (and often we don’t have enough info on those examples). The deaths are tragic but you didn’t sensationalize the seasonal flu that killed 80,000 in 2017/2018, didn’t you?
All 3 governors on the West Coast are extreme liberals. Now, in their spat with the president, they claim the Constitutional state rights to lockdown and open their economies when they want. On this I agree with the governors, not the president. I am for state rights and against centralized power but I don’t agree that healthy people should be under house arrest (that is called TYRANNY). However, to assume the power and claim state rights and then to accuse the president for the consequences of the lockdown is disingenuous and that is the objective truth.
This crisis, like all the crises, will be used to strip the citizens of even more rights and freedoms than after 911 and the president is not the only actor; the governors are just as guilty and in the pocket of the same billionaire class. For example, Jay Inslee in WA is working hand in hand with Bill Gates who pays large amounts for his political campaigns. Bill Gates has some really nasty plans to treat people like cattle and Jay will comply.
Personally, in this crisis I don’t trust either the president or the governors.
It seems that the countries with “good health care for everyone” are the ones that are failing patients and the elderly. Italy and Spain being the 2 prime examples.
Banks stress test Version 2.0. The real thing. Domino effects may crash real estate market. Not sure anything can be done at this time. No demand for housing and payments missed results in cash flow issues.
31 Percent of Rents not paid in April”. This is misconstrued. 31% of rents were not paid between Apri 1-5. YOY in 2019 19% of rents were not paid between April 1-5. This is much different than how some are taking this. Still very significant, but represents an 11% increase. I guess a lot of people pay later and this year more did.
I do agree this housing market will have to fall at some point. Baby boomers have significant RE equity needed to fund retirement. There are not enough new market participants that earn the money needed to replace the boomer generations’ homes. Unfortunately, looks like all these deferments will just kick the can down the road until who knows when. Seems like this moral hazard of home ownership of non-payment is the new norm. Mortgages provide security as you can just not pay. sad
Them percentages again.
Increase from 19% to 31% isn’t 11%, it’s 63%. That is a very significant increase.
We are at war with China and Iran so it will take at least one or two decades to settle this war. The COvid-19 is similar to the Spanish Flu and it takes a few years. Please stay safe and stay strong.
Prices CAN’T collapse without sales.
Sales NEVER go to Zero. The can slow down a lot, but at any given moment there will be a sale and that price gives the new value for everything the appraisers use. It is the same for stocks – you might have a very low volume, and the new price per share which exchanged hands gives the value for the company. Those who don’t need to sell, take the property off the market; however, there are ALWAYS some properties which MUST sell for whatever price they can sell (forced sales).
Fulton County Sees 1,000 Eviction Filings Even As Court Halts Hearings
Stick a fork in it, Housing is done!
https://www.wabe.org/fulton-county-eviction-filings-coronavirus-pandemic/
M has been preaching 50% cut in Ca. real estate for a year or more at the same time claiming to be a real estate expert but until recently appears to have never bought any except at the top and yes this is the top, New Age who knows? likely bought at the top as well is likely highly leveraged to believe there will not be a huge downturn is big time Denial .
Housing is in a massive bubble in Ca. and this was due to happen as almost the entire economy it appears very few had or have 6mos. of savings to carry them through any severe problems it appears many carry huge debt loads and few if any can go without a paycheck for a month or more sorry about that but you are screwed.
A lot of us are from the old school : pay down debt, save and have cash reserves including physical gold and silver , live modestly , think and act opposite to the herd.
True capitalists ( not many here) to believe that the fed and the government will bail you you out because of poor planning on your part and a lack of discipline or responsibilty!! Good luck the fed and the treasury would have to spend trillions weekly to cover the defaults ,bailouts ,foreclosures and unemployment checks !!Deflationary spiral down on its way!!
I don’t see a problem with buying at the top as long as I can easily afford it.
If the market falls by 5-15% I buy an investment property.
Rates are historic low. If they continue to fall I refi.
My monthly payment for my Dream home can only go down not up.
People can change their views and admit they were wrong. I made my choice.
I couldn’t be happier with my purchase. It doesn’t matter to me if my house value goes down for the short term. That just opens opportunities to buy more stocks at discounts and/or a second house.
Cheers, millennial
Millie gets it. Only buy a home if you plan on owning long term and you can comfortably afford the monthly payment. Unlike an investment property, owning a primary residence is much more than tallying numbers on a spreadsheet and I consider it almost a requirement in socal. As I have said umpteen times, CA has a massive housing shortage, short millions of homes. Until this supply/demand imbalance gets addressed, rents go up and prices remain sticky.
I’m in same boat as Millie. If RE prices crater, I swoop in and buy an investment property. I could care less about the value of my primary residence since I don’t plan on selling and my carrying costs are similar to renting a 1 bedroom apartment. Have a diversified portfolio and tune out the noise. Hunkering down in an apartment low term and staying in cash sounds like a horrible strategy going forward.
🙂
“My monthly payment for my Dream home can only go down not up.”
And that’s exactly what RE prices has become. The monthly payment NOT the purchase price. And that’s why I say interest rates are what dictate which direction the market is heading in. Because they hold the most weight in the mortgage. Interest rates go up, prices fall and vice versa but the only constant is the mortgage because that’s what tells a buyer if it’s worth renting or buying. The only difference is that renting prices go up, your mortgage is locked in for 30 years so with time, it becomes less burdening on your monthly income (as wages rise).
So M did the perfect move in buying and building an asset over time that he really won’t lose out on. And now that he has his first he doesn’t care where the market goes. If it goes up, he wins since his asset goes up in value too. If it goes down, he buys cheap and now expanded his portfolio at bargain prices. This is 2006 where mortgage prices are two or three times the rent for the same property. We’re not even there yet!
There are those who think that the Corona Virus stimulus programs will translate into massive inflation when the virus is under control and the economy re-ignites. Some Billionaires are going to cash and some are buying assets and getting out of cash (like Mark Cuban vs Ray Dalio). So M may be having the last laugh or may be sitting in a badly deflated asset that he can still afford for a while if he’s working.
I can’t speak for Millennial but I assure you he did not buy at the top just because he changed his outlook on the market. I will, however, speak on myself. First off, I am not highly leveraged at all. All my rentals are in prime areas bought with 25% down currently netting me 3x my mortgage. The rental market can completely collapse and I’ll still be profitable. My risk tolerance is actually quite low in that sector of RE! I have no vacation rentals and don’t really plan on owning any unless I want a personal vacation home that I would rent on the side (haven’t any that suits me yet). All of my flips have been extremely profitable as well. I buy all cash to save time and money and if the market flops, what do I lose if I’m not upside down on a loan? As a matter of fact, around this time last year when home prices were dropping because interest rates peaked at 5%, everyone on this blog was telling me how foolish I was to buy flips and that it was all going to crash soon and the result? The most profitable year since I got into the business! I added a ton of physical gold to my portfolio at $1200 an ounce in 2018 so I can tolerate a little added risk in 2019 but to be honest, I saw no risk. My stock portfolio jumped 40% so I went all in in RE in 2019 and reaped the most rewards of my life! I know exactly what I’m doing trust me and I’m literally giving my secret sauce on a platter for free because I enjoy this blog and have been a contributor for years. And speaking of this blog, people have been so bearish for the last 6 or 7 years of my readership and what has that resulted in? Missed opportunity after missed opportunity. Keep doing you, though.
This is the top 22 million unemployed in weeks temporary maybe but many businesses are not coming back I have 90 acres I recently sold just outside a major city luckly just before the collapse happened ,that I bought in 2016 at a super bargain and got it back in shape on a major highway Shell recently built 2 miles from my property .Traded stocks long and short and did well but stepped back in 2017-18 went long volatility last year and have done quite well not setting in an apt or just setting on cash .Have many investments and some partnerships in RE outside the country as well ,nice making an assumption that I am hoarding cash and hunkering down waiting for the end ,ain`t happening but the reserve of cash is necessary and the deflation is coming in particular in RE believe what you want no jobs or reduced jobs and to listen to M god help me he will flip flop again in another year.
And you are right this will have to be long term it will take 5-7 yrs to recover though I am looking at very upscale area near the beach not in S Cal with about 10 acres not because I believe it will appreciate in the next 5yrs ( it won~t) but because I know how to increase the value through my own efforts . and it is area I have wanted to build and develope for my use with some rentals for income as it appears many of my pension benefits may be compromised in the near future and last I also bought gold and silver coins and stocks on a monthly basis for 4-5 yrs previous.
But this not a hiccup this is a disaster that will not end well to many people out there particularly in So Cal are highly leveraged with no cash reserves that will not make 1-2 mos without pay check and will never catch up same with many small businesses.
Good stuff: https://www.takimag.com/article/go-big-or-stay-home/
COVID-19 is the coveted excuse the global elite have been looking for to push through their agenda.
Washed-up former leaders sensing a second opportunity to rule, such as Gordon Brown and Mikhail Gorbachev, have already said the crisis means it is time “to create a temporary form of world government,†and to “revise the entire global agenda.â€
Our would-be world rulers are on a deadline. Failure to act immediately threatens to give more power to recent populist movements and turn the globalization project into The Tower of Babel: Part Deux. Henry Kissinger articulated this fear recently in The Wall Street Journal …
This is what makes the coronavirus pandemic the ideal vehicle for global government: It is the unprecedented, universal enemy of all nations.
The 20th-century political philosopher Carl Schmitt (who is incidentally experiencing a revival amongst China’s intellectuals) observed that “the notion of a world-state is absurd as long as humanity is not at war with an alien force.†Perhaps that is precisely what COVID-19 is now. …
Good post, SOL!…
A one world government = One world slavery with no individual rights and freedoms.
People will be treated like cattle and tracked like cattle. I don’t want to live in a world like that; I did already for decades of my life, but at least I had a place to run at least for few decades. Those people pursuing this agenda and those supporting them should be hanged from lamp posts.
It looks like even those who pretend to be populists are in fact globalists in sheep clothing.
Quarantine is when you restrict movement of sick people.
Tyranny is when you restrict the movement of healthy people.
Every person has learned a harsh lesson about social distancing. We don’t need a nanny state to tell people how to be careful. The government cannot guarantee a risk free life.
Tyranny is very detrimental to RE prices and to the economy in general. Ask the Russians how their economy faired under tyranny.
“Quarantine is when you restrict movement of sick people.
Tyranny is when you restrict the movement of healthy people.”
Yes and how you know who is healthy?
“No symptoms” is common even on those people who have tested positive for virus and are spreading it. Some sources say up to 50% of infected has no symptoms.
Reality is that you don’t know, so you have to quarantine everyone. Or no-one.
Sweden tried that, it was going *very badly* just in few weeks when amount of deaths was doubling every 3 days. Then they locked everything down, just like the others.
Those who trade freedom for safety, will lose them both.
I would rather die free than living a slave.
Your need of safety stop when you want to enslave me. House arrest is not safety and it tramples all the freedom guaranteed to me by the Constitution and Bill of Rights. If you want to live in a bunker, I’ll let you live there. You also have to let me live free – if I die, I die – none of your business. You can live under a jar, to be safe, for all I care.
After this PlanDemic, America will never be the same – mark my words.
That’s fake news Thomas. Businesses are open in Sweden. They practice social distancing but are open for business. Social gatherings/events like concerts etc have been cancelled.
I don’t come to this site very often anymore, but when I do, it’s to get Flyover’s take on things. Thus far on this article, each comment exceeds the other. After reading the following, I had to post:
“Your need of safety stop when you want to enslave me. House arrest is not safety and it tramples all the freedom guaranteed to me by the Constitution and Bill of Rights. If you want to live in a bunker, I’ll let you live there. You also have to let me live free – if I die, I die – none of your business. You can live under a jar, to be safe, for all I care.”
Love it.
As for America never being the same, you got that right. This is the NEW America. The old one will never come back. I knew as soon as the shutdowns were announced that this would never be over. I call it 9/11 2.0. “Ah, the virus may come back in the fall.” “Expect waves of pandemics forever.” Etc. It was a beta-test, just like in 2009 with the H1N1. Back then, America still had a pair, and resisted. Not anymore. Now they just ask, “please, sir, how far shall I bend over for you?” Too many Americans have become weak sisters, literally, and they drag down the ones that know what’s going on via social conformity and pressure, just like in Nazi Germany. I live in Sonoma County for now, and everyone around me is responding to each new edict by enforcing even stricter rules on themselves than even the government can think of. They’re mostly sheep, engaging in contests of who can bend over far enough for the government to give them a stamp of approval. It’s sickening beyond belief. I was looking for Republican-dominated counties when the lockdown happened, and so am stuck for now. But as soon as we get a temporary respite, I’m outta here.
Question for Flyover: what country DID you escape from? My family escaped East Germany.
In a world of corona virus hysteria, Sweden stands out. They are not shutting down the country, and the rate of deaths and infections is not all that dissimilar to other countries. Some say that Swedish culture is not as huggy as many other countries, and fewer Swedish households are multigenerational. Sweden has a strong welfare state mentality, so one would think that the government would have imposed restrictions quickly. But the Swedes may not worry as much about the consequences of getting sick. If you feel sick, it is easy to get the time off work there with full benefits. Politically, Sweden does not have a Presidential system like ours, but rather has a parliamentary system more like Britain.
Right now, Sweden has a liberal/left coalition government with about a third of the members supporting the government. The hard left party has abstained from voting so as to not cause new elections. The center parties will not form a coalition with the right party, the Sweden Democrats, which is trying to change Sweden’s immigration policies. In every election the Sweden Democrats gain strength. They even get immigrant votes especially from Middle Eastern Christian refugees. So the government is paralyzed. That and not some Swedish libertarianism is probably the real reason the Swedish Social Democrats are doing nothing. And a large percentage of Swedish corona virus cases are supposedly in the Muslim immigrant communities, leading to hand-wringing on the Left but so far, no action.
“They are not shutting down the country, and the rate of deaths and infections is not all that dissimilar to other countries”
You have obsolete information. Number of infections was low as they didn’t test anyone. They still don’t test anyone outside of hospitals.
When the amount of deaths started to be tens of people every day, they shut down everything, just like all the others. Currently >900 dead.
Too late, they’ll get hit very badly in April and May.
Thomas, why don’t you show us a link that supports your fake news so we can all have a good laugh?
Michigan 1768 deaths, Sweden 1203 deaths (as of today). Michigan 10.1 million, Sweden 10.1 million populations. I rest my case. Not too different, eh? You need to check your facts, not me.
The Swedish government doesn’t enforce a shutdown because it trusts its citizen to follow guidelines like social distancing, remote work and travel reduction. It’s been working except for areas that are populated by mostly immigrants (high density living).
I believe social gatherings with more than 50 people are prohibited but business and schools are still open except for higher education (online classes).
It’s essentially what we should do as well. Start with a soft opening in May.
I still think that the political impasse in Sweden has a lot more to do with the way it is being handled there than any trust the Socialist government has “in the people”. Almost anything that gets taken before the Parliament could cause a collapse of the government, with the Sweden Democrats licking their chops at the prospect of a new election. And if a no confidence vote comes from the current regime overstepping their authority, the center plus right majority would vote together to bring down the current government, each hoping to emerge on top.
It would be nice to know if some of you, besides your incredible RE expertise, have some (and only some) knowledge of economy. Cheers!
If derivatives start to implode, the only solution for all major banks in the world will be immediate nationalization, much to the ire of the Goddess of the Market. Deutsche Bank, also in major trouble, has a 7 trillion euro derivatives exposure, twice the annual GDP of Germany. It is interesting that Deutsche Bank was also the trigger of the Great Depression with a leverage of 31:1 (Lehman was 30:1).
No wonder New York business circles are absolutely terrified. They insist that if the US does not immediately go back to work, and if these possibly quadrillions of dollars of derivatives start to rapidly implode, the economic crises that will unfold will create a collapse of the magnitude of which has not been witnessed in history, with incalculable consequences.
To all that predict that things will go back to normal when the economy reopens:
1) It won’t fully reopen for a while, as full reopen will mean new peaks in COVID-19 infections and deaths, followed by new shut downs. Just look at model by major investment banks. The Fed artificially floating stock market means nothing. They are just doing what they have to do to try and avoid bank and food runs.
2) Even assuming the economy reopens fully due to vaccine or everyone just letting go of all dead old people, still you are all about to witness a phenomenon the economists call “negative multiplier effect” which will take couple months to fully unfold. The spread of the Coronavirus is causing many negative economic effects: a decline in travel – leading to falling revenue for airlines and travel companies, a decline in trade and firms running out of spare parts, a fall in confidence causing a decrease in travel and a decrease in investment. These effects all cause a fall in demand and lower economic growth. However, they will be exacerbated by a negative multiplier effect which affects people not directly linked to the virus. For example, airline companies may have to lay off staff. People working for Vegas casinos lose their jobs and therefore there will a fall in consumer spending in these areas and a lot will default on mortgages. Leading to further falls in demand elsewhere in the economy – hard to even count. If there is a fall in global trade, all firms connected to trade and travel will see a fall in demand.
3) Because of 1) and 2), IMF today predicted the world will ‘very likely’ experience worst recession since the 1930s.
I am sitting in cash and gold, feeling pretty smart right now to have been saving for a rainy day. I work in management for a large healthcare organization but even I feel scared for my job right now. I rent and I plan on doing it, until this flushes through. And when it does, if I still have savings I will look again at RE as a place to put my saving. But right now? HELL NO!
Good luck with that real estate investment!
Excellent post. Things the permabulls always fail to take into account.
I completely disagree with you.
There is going to be incredible hotel/travel deals in the new several weeks/months that the World has ever seen after the reopening as summer months come. This virus does not do well in heat so it will quickly fizzle out by June. Families locked up for weeks/months now are itching to get out of town for vacation. Actually, life will go back to normal in a rapid fashion, I predict. The Federal Reserve and government is putting the economy on hold for now and all of it on credit cards. The stock market will actually continue to recover and in a month from now will be back at its previous highs. By late June, I predict Dow will be at 35,000 points! Remember, the Feds are printing trillions of dollars and buying up stocks by proxies to prevent a collapse. Fears of inflation. Will talk about that in a bit.
My only concern is that the democrats need to extend forgivable small business loans as soon as possible. Pelosi is playing politics and this will cost democrats to lose by a landslide in November. I almost think that she wants the economy to crash. She is desperate to get Trump out of office and is willing to crash the economy and believes voters will elect Biden to save us. Ha. She is one stupid woman. Trump has a plan b but I don’t know what it is.
One last note, the $2 trillion stimulus bill put the Federal Reserve under the control of the U.S. Treasury. Who is the head of the Federal Reserve now? It is Donald J. Trump. I predict that Trump will cancel all that money created out of thin air by the Federal Reserve just before the November election. Remember, it is money created out of thin air.
Matt, I would like to have these beautiful dreams you have, but you are a far more optimistic guy than me. Let’s live and hope!…:-))) My practical personality doesn’t let me dream like you, but hey, dreams are free!..
I’ve bought 2 properties in my life. All cash. One was a 1800 sq ft condo in New York for $32K in 1997 that was $300K but taxes were 12K. Sold for $280K in 2005 and the second was a house in SW Florida for $60K in 2010…prior to the virus, maybe worth $275K? I do all my own work. I used to sell insurance. I’m 62 now. Everyone here argues from experience, i share mine to let you judge for yourself. Meh.* shrug* But I think covid-19 will put us into a new world…socially, politically, economically. The changes will be profound. People have have been granted a powerful thing called “social permission” almost like a self proclaimed ‘jubilee’. I am sympathetic to both sides of this issue. But to the guys who are market bulls…the only model I’d get into a this point is a ‘SRO’ paid weekly. Good luck.
Hello everyone,
Have been following this blog for about 5 years. I have both, learned a great deal and have been entertained by some of the comments. Thank you everyone.
My wife and I have been interested in buying a house, have stable and well above average income, stable employment, and a solid down payment. So far the crazy prices of anything decent in Sherman Oaks, Encino, Tarzana, etc. areas have simply been untouchable. I know the stock market is going bonkers with all the free (printed) money, but how in the world this situation does not lead to deflation, I simply don’t know.
Through the years there have been plenty of housing cheerleaders and housing bears posting on this blog. Why now, with the interesting situation we have going on in housing (and stock market) have the amount of comments decreased?
What do you think is the most realistic outcome of this whole situation…I mean post COVID, with still higher unemployed than after the GFC, small businesses simply ceasing to exist, stock valuation skyrocketing beyond what they were worth in Feb 2020, not too many people having 20% down and a stable job?
I think you see two theories here. One camp here thinks that we are headed into deflation that will take down everything. Economics is on their side — there’s a ton of debt out there and jack all for consumer demand. The other camp, of which I am one, believes that there has been complete capture of the Federal Reserve and Treasury by corporate America. In this view, dollar-debasement will be used to keep asset prices high.
In truth, either side could be correct. America has really never been in a situation like this before.
Brixton, it is true that both situations are possible – deflation and inflation.
If you look at the 95%, the most likely scenario is deflation – they lost and are still going to lose far more than the government gives them.
If you look at 0.01% at the top, it all depends on what they do with the trillions they received. If they pay some of the debts, then deflation is the outcome (money disappear from the economy). If they start investing, then inflation is the outcome. They might pay down debt for now to be safe (deflation) and borrow later to buy assets for pennies on the dollar (inflation).
In conclusion, the only unknown is what the 0.01% will do with the trillions they received. At least for the next 2 years, the deflationary trend is enormous (most people are inclined to save, pay down debt and not too much to buy). That destroys the money supply in circulation. I see US in Japan situation for the near future.
You need to have patience, the housing market won’t change fast.
If you can wait until 2022 or 2023 to buy that should be a good time with 10-20% off prime areas and 20-50% off less desirable areas.
-Formerly NoTankinSight, Stay Healthy All
Very true! Patience is key. The inheritance went into housing. My cash war chest goes into discounted stocks and investment RE when the market goes down. Right now with super low inventory and low mortgage rates the RE market hasn’t moved much.
Cheers, millennial
I would say, hold your cash for now.
No one knows what will happen to home prices.
I cant fathom that they will increase this year.
Many people are saying this will blow over in a month or two – it wont.
Some sociopaths are saying we need to maintain social distancing until a vaccine is ready. That is insane but if State of Calif orders this, then the economy is in deeper trouble and so are home prices.
I think we need to see what happens with commercial properties. Small Business and large corporations are not paying rents. We need to the trend in theses markets which will definitely tell us where the market is heading besides unemployment. The commercial market reacts much quicker than the residential market. Also need to watch if consumer spending will increase in the 3-6 months. This will set the stage on what direction we are going! It’s funny how everyone looks at the residential side of things but never the actual business side
FWIW, Harry Dent said today to get rid of your real estate immediately and in about a year, you’ll be able to get the best deal of a lifetime on real estate. He said we’ll be in a depression worse than the Great Depression by then and that foreclosures will cause a deflation avalanche. I would tend to agree just because right now there are 22 million who have applied for unemployment and that is no where near the total amount of people who have lost their jobs in just four weeks. In addition, we just printed 10 trillion in new currency, promised by Congress to help business until August. It lasted less than a week. Just ask United Airlines whose bailout lasted one day. Obama took eight years to print 10 trillion and add that to our debt. We did it in less than four weeks and are about to print another two trillion. I’m no finance guy nor economist but I’m pretty sure that’s going to be bad and will effect housing in a bad way. Also, please read the “it’s never been a better time to buy” folks and their arguments to what I just said, and try to ignore their ad hominems. They might be right and Harry Dent might be wrong.
Harry Dent….hasn’t he called the collapse in 2013, 14, 15, ….19,20,21?
I mentioned Harry Dent in a previous post as the prognosticator who lost a bet on the price of gold during the first crash. (By a mile…his prediction of a gold crash never even came close.) He’s probably doing the same thing right now. But the Government is working overtime to render his predictions nonsense. We may see minor deflation, but like with greek bonds, the governments of the world are working in unison to prevent massive deflation and substitute inflation instead. Whether they can keep it under control or wind up like Jimmy Carter is for the future to show us.
Stock market keeps going up. Just buy whatever Jerome Powell and Black Rock tell you to buy, and shut up. America is a command economy now, like China. There is no “market” picking winners and losers.
As for real estate, you’ll get some small discounts, but nothing big. When home owners default or small landlords with debt go belly up — corporations with freshly minted dollars will hoover that right up. They just got trillions for play money.
Mr. Market has merged with the Fed, and he’s got his foot on the neck of 95% of Americans. This is gonna be an unholy blood bath for the little guy — 2008-9 but meaner and faster — the Foreclosure King (Steve Mnuchin) is actually running things.
This guy Brixton doesn’t get enough credit. He knows the game is rigged and knowing is the first step to winning. When there’s plenty of money to go around, it can only flow in one direction and that’s straight into assets. And yes I do agree, you might see a slight dip or stall in the market but you’re fooling yourself if you think that the market will go down more than 20% in this low interest rate environment. If the market falls below 20% that means that mortgages will be well below rent and there’s plenty of buyers salivating at the thought of owning AND saving on living expenses. It’s a no brainer. That’s why I’m telling everyone here for the sake of their financial security, if you’re in the market, snap up a property that you see at a 10% discount. Don’t get greedy and try to wait for more discounts because you’re not getting it and then you’ll miss the train and that property will be +30% in 5 years time guaranteed.
Millennial changing his name to M and now a bull??
Wow that’s amazing stuff…. so Millennial is a housing bear for all these years while housing goes UP UP UP.
Then he buys a house, unfortunately right before COVID19.
Now M or Millennial is a housing bull in the face of COVID19? Wow that truly is priceless.
It’s finally official. Today I change my name from:
NoTankinSight
to “Big Recession in Sight”
I was planning to change my name to “RecessionCorrectoininSight” but COVID19 changed that. Should have done that a few weeks ago.. but this blog was not a top priority obviously.
Good luck to all and stay healthy.
I knew M (Millennial) buying a house would signal the top.
Housing is in for a rough 3 years. Prime areas will go down 10-20%, less desirable areas 20-50%. It will take time, you need patience, the patience Millennial claimed he had.
That really is priceless, isn’t it?. I’ve been reading these comments for years but haven’t posted until now. I usually agreed with Millennial. Would he really buy now, seeing all that is going on with the economy? I guess he got tired of waiting for a deal. Purchasing at any price is fine so long as the buyer is comfortable with it. All the best to him.
I still feel the same. People act like SoCal is a place with high paying jobs that make a $600K median home price a nothing burger. Not so. Incomes are just average when figuring in taxes and all the other money-sucks not present in many other parts of the country.
Buyers in CA have been using their average income to buy expensive homes for some time now. Their house payments eat up a dangerously high percentage of their incomes. Now people all over the country are losing their jobs. How long will that continue and how many will be rehired after coronavirus settles down? This is the question that matters most.
The CARES act will help the 2/3 with federally backed mortgages delay payments for up to one year. This will certainly help for a time but no doubt many unemployed will see it as a time to sell and cash in gains before it’s too late. That will increase inventory. And how much equity is there anyway? So many of the homes I see on Zillow are remodeled ultra-deluxe. It’s clear that many buyers have spent their gains in advance.
1/3 of borrowers will be at the mercy of their banks if they cannot make payments. And of the 2/3 who get a “free” year, CARES does not say they don’t have to repay immediately. That will be up to the lender which should make borrowers concerned. Some lenders may tack 12 months onto the end of the mortgage. How many borrowers will have to come up with a huge sum of money in a short time or foreclose? This would add more inventory.
And what’s this about Chase now requiring 20% down and a good credit score? If this wise requirement becomes the industry norm again, it won’t matter how low interest rates are. Few first-time buyers have $200K in cash on hand. This would certainly reduce buyers and affect inventory / prices.
I expect to see more supply and less demand in 1 – 2 years unless the ob market makes a near full recovery in the next year. If prices don’t drop then it’s worth considering that M was right in changing his mind and we should all just accept that California is impossibly expensive for the average family. Such fine weather.
Turtle,
It was a no-brainer. I inherited money and bought a house with such an awesome floor plan. Commute to my tech job isnt bad (25min). Not that I have kids but the school district is highly rated. Will be important in case I rent it out later. And it’s brand new, no headaches and it looks beautiful as you can imagine.
I bought the largest floor plan with a built in granny flat. (Builder calls it multigen).
I can easily afford the monthly payment with one income.
If house prices fall, fantastic, i will buy an investment property. If houses go up in value, fine. Please let me know when you see 5% decreases in prices YoY.
Cheers, millennial
Milli keeps talking about his wonderful house. He used to mock others who talked that way. “Why buy a wonderful house at peak, when you can buy a wonderful house at 50-70% off?” he’d say. “Why refinance a house bought at peak, when you can refinance a house bought at 50-70% off? If you buy at 50-70% off, you’ll have even more money left to invest in stocks. Buy low, sell high, that’s how you make money. It’s easy.
Yes, Milli’s about face is priceless.
True! I changed my view. You can’t go wrong buying a house in SoCal if you can easily afford it. Long term you are going to be just fine.
I could see a 50-70% crash if the corona virus turns into a zombie apocalypse or if we get an alien invasion.
Cheers, millennial
Good to hear from you!!
I am totally with you bigrecessioninsight!
Yes I bought a beautiful house (new construction with built in granny flat). I inherited money that I decided to invest in my first home! Couldn’t be happier with my purchae!
I don’t think we will see a big housing crash but hey, what do I know 🙂
If housing goes down by 5-15% I buy an investment property.
Cheers, millennial
Could not help but laugh at your comment on M:
“I knew M (Millennial) buying a house would signal the top.”
It is pretty funny. NoTankInsight used to be bullish and flipped due to the covid-19 recession. Apparently he thinks it will be a big one and housing can fall up to 50% lol. I am very bullish long term. Also, a year ago, i wouldn’t have thought to be living in a brand new house and become a landlord (renting out the granny flat). Things can change so quickly!
Cheers, millennial
Millennial buying a house would signal the top. Lol so true. They made sure to get every possible sucker didn’t they?
Josh, If thats how it feels like to be a sucker (living in a new beautiful house in SoCal) than I hope I will be sucker for life. Muahaha
Playing with numbers: NYC has drastically increased the official number of coronavirus deaths: https://townhall.com/columnists/larryoconnor/2020/04/15/new-york-death-count-spikes-after-govt-alters-methodology-n2566967
The newly revised death count of 10,367 could very well be accurate. And, of course, it could be wrong. The previous number of 6,589 was the official number right up until the moment it wasn’t because government officials decided to widen their definition of a coronavirus death.
The problem – and this is a pretty big problem – is that we are making extraordinary and unprecedented decisions that infringe on our dearly held individual liberties and are stifling our once-burgeoning economy. …
Instead of solid, reliable data, our leaders have constantly moved the goalposts and even the rules of the game. The models shift, the predictions are memory-holed and now even something as seemingly solid as an accurate tally of how many people have died as a result of this virus is being fudged. And it’s being fudged in the middle of the game. …
Regardless of what becomes of the housing market the virus did not stop the economy. Our governments stopped it. If we want to get back to some normalcy I guess you need to take it back.
https://www.clickondetroit.com/news/local/2020/04/15/thousands-protest-michigan-governors-stay-at-home-order-government-overreach-on-steroids/
Homerun, if all people in US would follow the example of those in Michigan, the whole country would open tomorrow. Since they don’t do it, the Great Depression is just the warm up for what follows. On that ground of massive poverty, there will be more people dying than what the virus would have killed. Also, massive poverty is a fertile ground for dictatorship and totalitarianism – people will sell the rights and freedoms for a fake safety and a bowl of rice. That is how Bolsheviks came to power.
Vendetta comes to mind.
Exactly Flyover!
We agree again. Even before Covid 19, 1% of the people in the country owned 80% of the wealth.
As I pointed out before, this makes the US ripe for a Bolshevik Revolution.
What is causing this wealth disparity? I think you finally admitted crony capitalism.
I agree. Trump and the Republicans are their leaders.
Bob, we both agree on what we see and we don’t like it. We agree that concentration of power and wealth (they always go hand in hand) leads to totalitarianism. Where we diverge is on solutions.
You believe that the solution to avoid Bolsheviks to get in power is to elect Bolsheviks, get a bigger government and centralize even more power in the hands of central government. In my opinion that makes everything worse. It is the same as when the government sees they have a problem with debt and the solution is always to increase debt and create even a bigger problem.
I believe that concentration of power in the hands of central government and increasing the size of the central government is the problem and will never be the solution. I believe that more debt never solve a problem created by too much debt. I believe that when someone finds themselves in a hole, they have to stop digging. I believe in federalism and power of the states. Why I believe that? Because anyone with power can be an idiot. However, an idiot in power at state level destroy only that state and we can vote with our feet by moving to another state. If you can not find an alternative, you are doomed – a prisoner, a slave with no escape. Even worse than a big central government is a de facto world government – world wide slavery, with no rights, no freedom and no assets. These are the trends that I see and worry me. When the idiots and psychopaths are at the local level, you have ways to escape. That is how I escaped the communists where I was born and raised. Yes, they destroyed everything but by then I was no longer there – I saw the writing on the wall.
None of us like the bailout in trillions given to the banks and I am sure that 99% of the people hate them (R and D, rich and poor). That did not stop both, R and D, to do it when their life as a party was on the line – parties think in terms of their financial survival first and then about getting in power; what is good for you and I is the last thing on their mind. I am not worried for and I don’t envy the top 10% rich (for the most part they worked hard to get there). What I am afraid of, are those 0.01% who have most of the power and wealth and who get there by using the power of the big central government to steal all the assets in this country. When they propose higher taxes for the rich, they mean, those in the top 10% who are not part of the 0.01%. They don’t want competition to their power. In order to do that, they give crumbs to the lazies to buy votes, and most of what they steal from the top 10%, they pocket till everyone is equally poor, there is no incentive to produce and work hard and you have a society that resembles feudalism. They make the laws and always give themselves loopholes from taxes – they don’t tax themselves.
It looks like other states are taking action to the streets…
https://www.sacbee.com/news/local/crime/article242198781.html
Housing inst this issue you need to fear- “Get Ready For Social Disorder”
https://www.zerohedge.com/geopolitical/jim-rickards-get-ready-social-disorder
“I knew M (Millennial) buying a house would signal the top.”
The irony. People who bought within the last 2-3 years definitely overpaid.
Possible! I can’t say I am unhappy. I was able to pick up some heavily discounted stocks in the last few weeks. It looks like trump is opening the economy soon….we might snap back hard. It’s also possible that housing prices will be softer in the next couple of years. I would be happy to buy my first fixer and rent it out. I’ll probably ask NewAge for some advice. Cheers millennial
If prices do drop dramatically over the next 2-3 years, I’m looking into picking up a cheap cabin up in Big Bear or Arrowhead as a personal vacation home with some Airbnb activity to offset the costs. Anybody have experience in socal mountains real estate?
I would like to add that the market I operate in (Inland Empire, CA) has a bunch of properties that have been in the market for less than a week and are already pending. If the demand is still steady at this price range, can you imagine what the demand will be at -10% or even -20%? Just because some people on this blog think that housing is expensive doesn’t mean that other people do as well. Clearly, the activity in the market is strong and it’s not letting up anytime soon.
NewAge,
That is so true! People who think this is the top can probably hardly afford the house they like. In my situation, I bought a beautiful new construction with built in granny flat and great school district. I won’t ever sell this house but rent out in case I plan on moving in the future.
I haven’t regretted buying it but love every minute in my new house 🙂
If housing really goes down by 10% I will jump and buy a second one.
Cheers millennial
Thanks for the post. I was worried about the millions of jobs and trillions of dollars lost, but New Age says a couple homes in his neighborhood just went pending. So don’t worry people everything is fine, New Age said so.
Remember when the permabears said that prices wouldn’t come down unless there were massive job losses? Now we’re facing 30% unemployment and Great Depression 2.0, and these sociopaths are still clinging to this notion that prices can’t go down. What an amazing social experiment this is.
Great Depression 2.0.
Mhm, maybe. Maybe if the lockdown lasts until end of 2021 but it appears we are gradually opening the country again.
Trump just announced to re-open the country!!
Stocks will skyrocket.
Real estate:
3% for a 30y with good credit.
Prices have NOT adjusted to 3% yet since there wasn’t much selling/buying happening lately. Also buyers hesitated – understandably- due to the uncertainty. Now the US is back in business!
Inventory is mega low! The shortage we already had got even worse due to the virus as sellers pulled back.
It’s seems pretty clear to what’s happening but you decide for yourself 🙂
Cheers, millennial
Trump just announced to re-open the country!! … Now the US is back in business!
That would be nice. But I doubt it. The Deep State want’s the economy tanked, at least until after the election.
SOL, again you are right on that one. Trump left it up to the state governors as he should. Left to democrat governors, things will just muddle along at least till the end of October. By then, I doubt it will be too much left of an economy to open. Faced with the loses, the Deep Sate used the nuclear option this time.
Just think about this. Texas already announced its back in business. South Korea and Sweden never implemented a lockdown. Germany announced to reopen next week.
https://www.wsj.com/amp/articles/germany-to-begin-gradually-reopening-its-economy-next-week-11586989014
There is no way in hell that democratic governors can just keep their states under lockdown until Q3 while the world around them is open for business.
Obviously, this will be a SOFT/gradual opening. It doesn’t happen over night.
M, you underestimate the level of idiocy of the 3 governors from the W. Coast and their totalitarian tendencies. They derive a tremendous pleasure to ruin small private enterprises. They think that only the big billionaires and the unions from Seattle, Portland, SF and LA should stay in business; the rest could die since they don’t provide votes or money for their re election.
I can write a book of idiotic rules and regulations they come up with – zero logic and everything emotions, but I digress.
If you work for a government project as a construction worker it is OK – virus doesn’t come to you or from you, because you are a union worker. If you do exactly the same work for a private business you’ll be fined. It is ALL about control and zero logic. Small businesses has to stay closed even if they sell the same products like Amazon or WalMart. However, if you have deep pockets you can stay in business but all small businesses, without too much money to survive, has to close. It is all agenda driven, and it doesn’t have anything to do with the virus. Adding the Greatest Depression on top of the pandemic is not going to save lives; it will kill far more. Lots of hospitals will close because they don’t make any more money and counties don’t have any more money to subsidize them. ER rooms are open but empty. The rest of the hospital personnel is laid off. Who is going to provide money for all the hospitals in US???!!!
Unless you have state wide protests or riots that would scare the governments back into action as they would lose control of the populace. Unions would also be on shaky ground as all government worker positions would be expendable.
People should not fear their government. Governments should fear their people.
Millie, quit trolling. No one believes your story of inherited money
You were so proud of paying a grand a month in rent to your old lady landlord and sneaking into your neighbor’s pool. You also chanted “buy low, sell high†and how you made a fortune in crypto.
If you just bought a home recently, you are about to lose a ton of money.
You only lose money when you sell.
Our Millennial will follow our advice and stay in his dream home for 10 years and then he can make a modest profit. Just like it was when economic times were sane.
Bob, you are right but in fact I don’t plan on ever selling. If I need to move or want to move I will rent out the house and buy the next one.
Cheers, millennial
SoCalGuy, you are correct.
Over the years i invested in stocks and crypto currency.
Yes, over the past few years I rented a cheap apartment for less than 1500 a month.
I don’t miss living in it. I bought a brand new construction and I don’t mind what the book value does within the next five years or maybe ten years. The house you live in isn’t necessarily an investment. It can be once you rent it out or sell it.
I cannot lose a penny unless I plan on selling my new house for less than i bought it for. Why in the world would it want to sell it? First of all we love every minute in this house. Second, why not rent it out in case I have to move for whatever reason?
I put a lot of money down. I could rent it out and make a profit. My PITI is lower than people rent for a comparable house! Sure, I tied up money but so what. I am a long term bull in housing.
Don’t confuse “buy low sell high†with your primary residence! If RE prices go down I want to buy an investment property because I want to make money on it right away.
On my primary residence, you don’t think of it as an investment. You enjoy living in it. Create good / fun memories. Very different from buying stocks or RE investments.
Btw, I do hold bitcoin and other crypto currencies as well. Same with gold. It’s part of my diverse portfolio.
New Milli: On my primary residence, you don’t think of it as an investment. You enjoy living in it. Create good / fun memories.
Old Milli: Why create good / fun memories in a primary residence bought at peak, when you can create good / fun memories in a primary residence bought at 50-70% off? In the meantime, create good /fun memories in a beautiful rental.
Love being new Millie.
Another beautiful sunny day in SoCal enjoying me
New house.
Millie,
“Higher rates is the best thing since sliced bread. Let’s you buy a house at a cheaper price. Cheaper price is what matters. Nothing else matters.”
” I prepared and saved lots of money. Now that the market is crashing I am ready to invest when a great deal comes up. Many who believed the lies from RE cheerleaders bought high and are stuck now. ”
“Yep, waiting 5 or ten years for the bottom is a nothing burger. You save several hundert thousand dollars. Why wouldn’t you have the luxury of waiting? What could possibly a reason that forces you into buying high? I asked the question many times and nobody ever answered?!”
These are just some of the hundreds of statements YOU said repeatedly on this blog. I really don’t even think you’re millie. Just another troll.
SoCalGuy, you seem to live in the distant past. 🙂 My situation and views have changed and I am a proud SoCal home owner (and landlord – renting out the multi-gen unit) now. Best decision I have ever made. I am sry that’s hard to accept for some.
M: I am a proud SoCal home owner (and landlord – renting out the multi-gen unit) now.
You’ve already rented out your unit? You just recently bought it. You work fast. And you managed to rent it out during this lockdown?
M, no one really cares that you bought a house. People buy and sell houses all the time. People care about inconsistency. You previously claimed on numerous occasions that you were an expert, and that people should defer to your advice (which was to wait for a 50-70 percent drop in real estate values before buying). So what happened to your expertise? It evaporated? It was magically reversed? Does this mean you were never an expert and were always fabricating your purported expertise this whole time? What other explanation can there be? Experts don’t completely abandon their field of expertise at a moments notice.
The foregoing are all rhetorical questions, of course, because anyone with half a brain knows you’re trolling.
SoCal, have you rented out a multi-gen unit to a working person with good credit before? Here in SoCal we have a housing shortage and as long as your asking rent is slightly below market and you own in a good location it shouldn’t take you 6 month to rent it out. Doesn’t take a genius.
Responder, I believe you can’t go wrong with buying in California as long as you can comfortably afford it. People can change their views. I don’t necessarily view my primary residence as an investment even though I do generate some income with it. I like lower prices just like the next guy and would love to pick up an investment property within the next couple of years.
For now, I am enjoying my first home. It’s a beauty and in my case buying made total sense. I have a long term outlook and don’t care what happens to the market in the short term. I had a very large downpayment. Interest rates are very low and probably go below 3% soon. The property is in a good location with great school district. I can make the PITI easily work with one income. It’s a no brainer. Sure, if we see discounts I am seriously looking into buying a second home to rent out. Probably a fixer upper. Buying my first house was life changing and I enjoy every minute of it.
Where is the real Millie? I’m worried. Lol
M … are you still using the other people’s pool? Or do you suddenly find that distasteful?
How is your wife enjoying the inheritance? Or did you trade her in for a younger generation?
Thanks for the question rock paper,
My wife has always been much younger than me. No reason to trade yet 😉
She’s a beauty and loves, loves, loves the new house/ neighborhood.
What they say is true: happy wife happy life!
Regarding the pool Situation: it gets hot in SoCal and so I miss the pool in my previous adjacent neighborhood. It was very tasteful to be able to use a pool and not have to pay for it.
I guess that’s one of the disadvantages owing a home. I would have to get my own pool in my backyard 🙂
Usually, pools aren’t a good investment but since my piti is pretty low and interest rates are incredibly low and since I don’t plan on ever selling this nice house I should look into it. Please share if you know of any good companies building pools in SoCal! Thanks!
Cheers, millennial
New Milli: My wife … loves, loves, loves the new house/ neighborhood.
Old Milli: My wife is frugal, like me. That’s why I married her. It’s important to marry a smart wife, who’s frugal.
Everything about Milli’s story — from his own opinions, to his alleged wife’s opinions — has changed a full 180 on a dime.
You can buy a brand new beautiful house and still be frugal no?
Plus, the builder threw a ton of upgrades/options at us and interest rates are historic low.
Buying new construction in a great location was a no brainer. That doesn’t mean I buy 20dollar avocado toasts.
Some millennials could easily buy if they would save some money and don’t buy 20dollar avocado toasts and 7 dollar lattes. Not to mention the new 1k iPhone each year.
Long time lurker on the blog. Originally from the Midwest and moved out here 4 years ago for a job, wife and I are in our early to mid 30’s with a 1 year old. We live in downtown San Diego in an apartment so need to purchase a house for an expected growing family. Started reading last year as we wanted to get a better sentiment on what the over priced housing market was doing. As soon as COVID hit we got prequalified as we figured this was our best chance to get a house. From what I have seen there have been a few things that have occurred in the SD housing market over the past 4 weeks:
1. Houses that were listed but didn’t have to be sold by owner were left at their current price or pulled from the market.
2. The expected influx of housing for the spring season has been significantly lower then previous years.
3. The houses that need to be sold (job loss/relocation or new constructions that can’t sit empty) are taking a price cut. The price cut has not been huge, maybe 5-10%, but enough to get the houses back to ~2018 prices.
We’ve made an offer on a new construction for about $100k (7%) less than what it would have sold last year and it got accepted. Maybe we pulled the trigger too quick and housing will continue to drop but I honestly don’t think you’re going to see the >25% drops in prices that we saw at time of recession. I think for the next several weeks there will be some opportunities to get some good deals on houses (10-15% drop) in which people need to sell for whatever reason. However once we move into Summer and businesses open back up, which they will, then housing prices are going to normalize and we will continue on the over priced path that we’ve been on for the last several years.
Hope you are right HaroldB, however, I think the dominos will be falling for several months and no one will know what happens to home prices.
I think Flyover country will get killed and even here in LA, everything east of La Cienega (everything east of the Westside) will take a serious beating.
If you want some good RE guidance, I would follow the blogs of Logan Mohtashami, Bruce Norris RE and Robert Shiller.
QE Abyss, I think you are right. I see that and saw it it long time ago. It is due to concentration of wealth. I have a good chunk of my cash flow coming from big cities. I like living in Flyover country for many reasons – not crowded, close to nature, money goes a long way (lower prices for everything, less taxation), so everything I am making has purchasing power and that gives me quality of life. I don’t have to compete with the supper wealthy for resources, therefore, I don’t have to borrow. Debt free life is a wonderful life regardless of what the economy is doing. The debtor is a slave to the lender and it is no fun to live the life of a slave although everyone is free to chose the life they enjoy.
You are delusional or stone, but certainly fooked, enjoy negative equity within 30 days after closing. “California house sales plunged 11.5% in March from February levels, the first double-digit, month-to-month drop in more than nine years and the largest since August 2007, the California Association of Realtors reported. And since the outbreak didn’t fully hit the local economy until the middle of the month, April sales and price figures are likely to show even deeper declines. ‘The fast deterioration of the economy, the steep decline of the financial market and record-setting job losses have not been factored into March’s closed sales, but will become obvious in coming months,’ said said CAR Chief Economist Leslie Appleton-Young.â€
HaroldB, you killed it! Congrats on your purchase.
I see the same thing and had a similar experience. The builder didn’t negotiate much on price (compared to 2018 it’s cheaper though). But the builder threw a lot of upgrades/options at us. Plus we got very lucky with rates continuing to drop after we locked in the price.
Welcome so Socal! We love the new house and the area.
Cheers, millennial
Millie,
What??? You preached a thousands times that rates don’t matter.
“I expect to buy at a 50-70% discount within the next two years.” –
Looooooooooooooool.
As a homeowner I will take advantage of lower rates. If rates continue the downward trend I will refi. 30y rates should be below 3% (10y treasury is below 1%) especially for people with 800+ credit scores. Imagine you bought at a price that was adjusted to 3.7-3.8% and refi in a couple of years at 2.5%. Muahahha
Rates are a huge part of the equation and it’s by far more likely they will continue to go down.
Cheers, millennial
Demand Destruction
One of the most important thing inflationists miss is demand destruction accompanied with or followed by credit destruction.
Corporations will allow more people to work from home on a continual basis. That means reduced need for gasoline and fewer people eating out for lunch.
Corporate travel will give way to more teleconferencing. That also means less travel, fewer hotels, less dining out.
Due to loss in wages, demand for cars will plummet.
Mortgages are harder to get and more boomers will seek to downsize their homes. That means more supply and falling prices.
States will raise property taxes to meet revenue needs. That will further reduce demand for houses.
Some people cutting their own hair will keep doing so.
The same lifestyles of eating out, buying expensive coffee, etc, etc. will pressure prices at restaurants, bars and coffee houses.
Credit Destruction
Many small businesses will go bankrupt as a result of the above demand destruction.
$15 minimum wages will be icing in on the bankruptcy cake given falling demand.
Some people will lose their houses in default.
Malls were already in trouble but now even more people are tuned into buying things online. Those people will not go back to mall shopping. Expect more store closures and more bankruptcies as well.
Only economic illiterates believe the Fed’s balance sheet expansion outweighs those things. This is why I stress: pay attention to what matters.
Credit Destruction
Many small businesses will go bankrupt as a result of the above demand destruction.
$15 minimum wages will be icing in on the bankruptcy cake given falling demand.
Some people will lose their houses in default.
Malls were already in trouble but now even more people are tuned into buying things online. Those people will not go back to mall shopping. Expect more store closures and more bankruptcies as well.
Only economic illiterates believe the Fed’s balance sheet expansion outweighs those things. This is why I stress: pay attention to what matters.
Deflation is not really about prices. It’s about the value of debt on the books of banks that cannot be paid back by zombie corporations and individuals.
That is what the Fed fears. It takes lower and lower yields to prevent a debt crash. But it is entirely counterproductive and it does not help the consumer, only the asset holders. Fed (global central bank) policy is to blame.
Those expecting a massive surge of inflation missed the boat. We HAD a massive surge of inflation primarily reflected in asset prices, not consumer prices.
Bubbles are inherently deflationary.
It’s asset asset bubble deflation that is damaging, not routine price deflation.
When asset bubbles burst, debt deflation results. People cannot pay back the loans they have taken out. Bank loans go sour and banks are reluctant to lend. Credit dries up.
The Fed can offer cheap money, but it cannot forces businesses to expand or hire. Due to demand destruction there will not be a quick rebound.
Finally someone telling the truth in here. Thank you for this brilliant post.
All good points. To add discretionary spending will likely have dried up as people are using all their money to maintain food on their plates and pay other bills. In addition, with everyone slowly getting back to work a majority of the employed will not be eating out as much or never in order to get their savings up and paying down debts.
Even if this three phase re-opening of the country happens it will not be everyone back to work. Likely companies that were responding to the change in how you service your clientele by offering delivery service or take out will survive and other stores as well.
Since we won’t be at full capacity in every business, show, stadium, etc. companies will not be expecting normal profit streams. A large majority of businesses will be gradually testing to see when they could get back to normal profit levels.
Smaller businesses may fold or they will likely be working with a skeleton crew.
“More boomers will seek to downsize their homesâ€
Wrong, Boomers will sit tight, just like they have been doing for the past decade.
No change there. They don’t need to sell and they won’t.
Excellent post but I do disagree with you on one point. Deflation among consumer goods has been happening for a while now and will probably continue it’s trajectory. Inflation among assets has also been happening but will also continue it’s trajectory. Things will only accelerate faster and faster on both ends. Americans will be able to consume but not invest which sounds like a utopia for the wealthy that pull the strings and that’s where I believe we’re headed.
Housing is done, stick a fork in it- “California house sales plunged 11.5% in March from February levels, the first double-digit, month-to-month drop in more than nine years and the largest since August 2007, the California Association of Realtors reported. And since the outbreak didn’t fully hit the local economy until the middle of the month, April sales and price figures are likely to show even deeper declines. ‘The fast deterioration of the economy, the steep decline of the financial market and record-setting job losses have not been factored into March’s closed sales, but will become obvious in coming months,’ said said CAR Chief Economist Leslie Appleton-Young.â€
This time it’s different, yah it’s not 2008
I really think it won’t be till summer before we know the level of impact. With so many borrowers not paying their mortgage it can’t end well.
Here is a chart of the interest on Greek bonds (Greece is in the Eurozone):
https://tradingeconomics.com/greece/government-bond-yield
Talk about making a silk purse out of a sow’s ear! The EU worked financial “magic”!
Here’s a chart for the last 2 years of a High Yield Bond ETF vs a 7-10 year Treasury bond ETF:
https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=HYG&time=9&startdate=1%2F4%2F1999&enddate=4%2F19%2F2020&freq=1&compidx=aaaaa%3A0&comptemptext=IEF&comp=IEF&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=64&style=320&size=4&x=40&y=15&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=13
Note the big dip in the last couple of months for HYG high yield fund, and the steady climb of the treasury fund. Eventually, they will reverse:
https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=HYG&x=48&y=16&time=100&startdate=7%2F4%2F2007&enddate=1%2F4%2F2010&freq=1&compidx=aaaaa%3A0&comptemptext=IEF&comp=IEF&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=64&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=13
From mid 2007 to early 2010. This may be repeating in the coming year.
On the Greek bond chart you can bring up different news. The default is 1 yr but the 10 yr view is the most interesting.
Despite Covid-19, some people are still buying. Check out these westside properties:
Accepted an offer on April 17: https://www.redfin.com/CA/Santa-Monica/1144-Chelsea-Ave-90403/unit-A/home/6767826
Accepted an offer on April 17: https://www.redfin.com/CA/Los-Angeles/1169-Wellesley-Ave-90049/unit-301/home/6760596
Accepted an offer on April 14: https://www.redfin.com/CA/Santa-Monica/650-Pacific-St-90405/unit-8/home/6779209
Accepted an offer on April 1: https://www.redfin.com/CA/Santa-Monica/2501-28th-St-90405/unit-1/home/6765256
People with money and secure jobs are buying — though we don’t yet know if those above properties received their asking prices.
I have money and secure job but I am not buying but I was planning to buy.
Most of my friends have shelved their plan to buy as well.
Honestly, I think, anyone buying home in highly inflated market like socal is a fool to buy.
I was planning on putting my SoCal house for sale in spring 2021 and leaving California permanently. I bought only two years ago at about 1.5 and figured I would break even to maybe a digestible loss after Re fees upon closing in mid 2021.
At this point I assume my house is down at least 20%, and could be down by a third by 2021. The economy is going to tank, and it will take years to recover. So I am thinking of Plan B, which is to buy super low outside CA and rent – but now that we know the governor can just waive away rental payments, why would I do that? Why would anyone buy rental property knowing that? Plan C is to take the $500K loss, which I can digest assuming that I can buy super cheap outside of CA and not really miss it since whether my paid off-house is worth $1.5 or $800K is only relevant to my estate after I die. Plan C is to wait and wait in CA, but the politics of the state, a population 35M people with deaths barely over 1K with a peak of 2K! – show that everyone here is insane.
My sister is trying to do a reverse mortgage at this time. She can no longer make her payments. Will this be a trend again like 2008? And is it better for her to sell or to get a reverse mortgage? She lives in Woodland Hills in a small but nice house very close to. Enthralled Blvd.
Whether or not a reverse mortgage is the correct solution depends on her age – her current debt:equity ratio, and the other expenses she must meet on the house, like the property taxes and insurance.
Keep in mind, though, that reverse mortgages are tricky instruments that come with many fees, and of course, interest, and that interest will continue to accrue and compound for the life of the mortgage. Worse, if her house falls in value and her debt against it grows too large relative to her equity, she could be foreclosed, under the terms of some reverse mortgages. And she must also continue to pay her property taxes and homeowner’s insurance, or she will be foreclosed.
If, as you say, she cannot afford her payments- which means that she still owes a lot of money on her mortgage- she is better off ditching the place, and downsizing to a small condo, or to a cheaper area.
Personally, I hate and fear reverse mortgages, as I’ve heard of too many people losing their homes to them, and too often at a very advanced age. So make sure she and you thoroughly understand what you’re stepping into. Speaking strictly for myself, I’d sell.
Karin, as you know from your mother, it is irrelevant where you were born in Eastern Europe. I traveled in most of them, and there was no difference – socialism produces misery regardless of the language or culture; they were all equally poor and with no freedom. I just leave at that – Eastern Europe (not Russia). It is part of EU today.
I am afraid that with each passing day, US will look more and more like the old Eastern Europe. It is going to be a rude awakening for many who never experienced that before. I already bought a nice property in one of the most conservative states in US, just in case; I am not sure for how long I can continue to live under our communist governor. On top of that, the worse it will get, the higher the chance for US to fracture in multiple independent countries – US will not be conquered but it has a good chance to implode like the former Roman Empire. At that time, I want to live in the most free of all with a culture to support those freedoms. I like to plan ahead when I see the writing on the wall. 3 years after I left Eastern Europe, everything collapsed there. I see a total collapse here soon. I am not afraid financially too much; I can build wealth anywhere if I am left free even if I start from scratch. The only thing I hate is dictatorship and totalitarianism and that is what we witness.
There were few steps taken in the wrong direction in US history (watershed moments): trample of state rights by Lincoln (centralization of power), the forming of the FED and IRS in 1913, 1972 decoupling from gold, 911, 2008 and now. These waves come more often and bigger and bigger like a tsunami.
FO-
Your knowledge of the Civil War and the issues surrounding it that Lincoln had to face is sadly lacking. Neo-Confederates excoriate Lincoln for suspending Habeus Corpus, but Jefferson Davis also did this, so it is a bit hypocritical. Hundreds if not thousands of Union sympathizers were lynched including 41 in Gainesville Texas. The Confederates attempted to form militias in states that had refused to secede including California. The Los Angeles Mounted Rifles unit was formed by Confederate rebels, but were stopped by federal forces. Many left for Texas to fight for the Confederacy. California voted for Leland Stanford as Governor in the next election, when the Democrats split between pro- and anti-secessionist factions. When all is said and done, the Confederate’s treatment of people who were in essence the descendants of kidnapping victims (the slaves) was far worse than anything Lincoln did. The closest thing to a plantation today are the North Korean labor camps where the descendants of the regimes original political opponents are still kept as slaves.
See photo:
https://en.wikipedia.org/wiki/Gordon_(slave)#/media/File:Scourged_back_by_McPherson_&_Oliver,_1863,_retouched.jpg
In the Confederate states, slave owners got representation in the legislature proportional to the number of slaves they owned. So even though most of the population was not in favor of secession (e.g. in Tennessee), the slaves couldn’t vote, and the Unionists were stuck in districts where there were relatively few slaves and therefore they had disproportionately few representatives. Missouri (a slave state) had a Unionist majority. Anti-secession candidate Stephen Douglas won the state in the 1860 election for President, and the Secessionist candidate came in third in a four-way race. But after the election, Confederate militias terrorized the state (Jesse James was in one of these).
Joe R, I am not going to enter into a historical dispute, although I can, but I do not have the time for it and you are still going to believe what you want to believe. I like history and I read a lot. Although both Lincoln and I detest the institution of slavery, that was not the REAL cause for the war. It was a pretext and a byproduct for it. The REAL issue was state rights. The institution of slavery was on the way out with or without the North because of the technological advances in the farming of cotton (like horse pulled wagons vs. cars). It would have been obsolete and unprofitable. If you don’t believe me, listen straight from the source:
“On August 22 the Tribune published Lincoln’s response, in which he explained, “… If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone, I would also do that….”
Critical Thinking – Abraham Lincoln Papers – Collection Connections …www.loc.gov › abraham-lincoln-papers ›”
What more clear explanation do you want than from the mouth of Lincoln???!!!!….I can give lots of quotes from Lincoln, but it is beyond the scope of this blog. State rights on the other hand affect RE tremendously.
If you enjoy history as much as I do, you will notice that always, without exception, concentration of power leads to massive corruption, impoverishment of the average people, and eventual removal of liberties (Tyranny). We see that today in real time. If you don’t learn from history, it will repeat itself. We can continue on this subject if you like, about a year from now and I will listen to you then after you will learn some valuable lessons from real life.
The extreme “states right” Southerners threatened to secede under Southerner Andrew Jackson (over a tariff), and he let them know how he would deal with them. They stopped the secession talk until it became apparent that their hopes of expanding slavery into the territories would end with Lincoln as President. The Southern slaveowner militias were aggressively fighting settlers in Kansas before the war started and they were also threatening border slave states whose economic interest lay more with the Union. No President had the authority to end slavery, and Lincoln acknowledged this. The real reason they bolted when the doughface Buchanan was replaced by the free soil advocate Lincoln is that the Homestead Act was guaranteed to pass and not face a veto under Lincoln. The South had a plan of conquest of US territory and also planned to re-open the African slave trade. They were supremely arrogant in their abilities to wage a war without actually having a manufacturing base to support it, and the mismanagement of the Union Army in the early days of the war gave them an opening. I think that the thing they didn’t count on was the degree of support in the South for the Union, particularly in the border states that didn’t vote for secession. Here is a link to the list of Kentucky Union units in the Civl War (which greatly outnumbered Kentucky Confederate units):
https://en.wikipedia.org/wiki/List_of_Kentucky_Union_Civil_War_units
Kentucky was invaded by Confederates in September of 1861, and were eventually repulsed. The legitimate government of Kentucky never planned to secede, and elections in 1861 went for Unionist candidates. (Note that Unionist did NOT mean abolitionist.) The Kentucky legislature passed a resolution for neutrality but once the Confederate forces invaded, the legislature voted to support the Union ending neutrality.
The conquest of Union territory was always a goal of the Confederacy, and driving out Unionists with Lynch law was always a big part of it. If your country was being invaded and undermined by aggressive slaveholders eager to expand their holdings, you would have fought back too, regardless of their “right” to be an independent state in their home states.
As for states rights today, that’s what Gov Newsom claims is his right when dealing with the people rushing the US-Mexico border to get in here. And like the “states rights” advocates in 1861, he’s a Democrat.
Joe, like I said I’ll stop here with the history debate. The historical documents are in far greater amount than Wikipedia and Wikipedia does not have the final word in historical matters. It just expresses the opinion of those who wrote it.
The constitution has delegated functions to the federal government, all others being the responsibility of the state. In CA case, the federal government has jurisdiction over immigration, not the governor. For closing the state economy, it is debatable because of the individual freedoms and the constitutional rights of the citizens the governor is trampling. Another thing is this – if the governor wants to bankrupt the state economy, then make sure you don’t go to the federal government begging to take from the red states to bail you out. If Newsom wants to bankrupt his state and the CA citizens support him in his insanity, then don’t say it is my right to make whatever decisions I want but the red states have to bail me out from the consequences of my decisions; yes, all the democratic governors and politicians want the federal government to bail out the democratic states. So the liberals want to increase their pay and the government workers pay and pensions as much as they want with no regard to the high taxes they demand and then, the ants have to pay for the grasshoppers.
Stock Market and economic manipulation by the Fed, banks and government are evident. Last week we get a 3% rally for the DOW and we’re told by the media “They’re buying based on pure optimism, forget the facts.” This really just means that the market is being manipulated by the Fed, banks and government.
The CARES act had more tax cuts for the rich in it too. Trump’s tax cuts allowed the rich to write off 80% of losses. The CARES act slipped in tax cuts saying they can write off 100% of losses.
I’d suspect these rallies in the market aren’t about optimism. These rallies are about pumping the market up and being able to dump for a huge profit. Either way the rich win and everyone else loses. They really have nothing to be optimistic about. The coronavirus antibodies aren’t proof of immunity according to WHO now and some scientist say a vaccine may be impossible to create due to coronavirus getting on a person rather than in a person.
As for landlords thinking they’re going to get back at renters not paying rent I must ask if your best renters are unable to pay why do you think you’re going to find a better replacement after you evict them?
https://www.cnbc.com/2020/04/17/who-issues-warning-on-coronavirus-testing-theres-no-evidence-antibody-tests-show-immunity.html
Landlords with any debt or high property taxes will be fed to the corporations. In the very short run, lots of renters stop paying and soon there will be a number of real estate businesses going upside down. Large corporations are swimming in an ocean of cash that they just received from the Fed and some of that liquidity will go to real estate.
If you bought rental properties in the 1970s (Prop 13 safety), have a lot of savings, and no debt, you’ll be able to ride this out just fine.
If you bought rental housing in the last five years (both debt and high property taxes), you will soon be taken out back and shot.
Dude, please. It’s just not 70s era boomers who have benefited from socal RE price appreciation. Anybody who bought at the low of the last cycle (2010-2012) is swimming in equity, minimum 50% appreciation, benefited from the lowest rates ever, prop 13 protection and have seen rents skyrocket up.
And it all depends who your rental clientele is. Section 8 lowlifes or responsible people who actually aspire to own one day. I would be ecstatic if beach close prices dipped 25% so I could finally pick up a rental property. One could only hope…
Bought 5 plex in 2018 for $260K. Total rent between the 5 units is now at $4400/month. One renter can’t pay so I struck a deal with her (deferred plus reduced rent). The rest are still paying. Offers on my table right now as I type for $375K. Decline. I was born well after 1970 and I’m still sitting pretty.
NewAge
“
Bought 5 plex in 2018 for $260K. Total rent between the 5 units is now at $4400/monthâ€
Holy crap. Congrats man! Where did you buy? You are going to be very wealthy with those kind of deals…..
Columnist Lansner in the OC Register gave the statistics for new listings from Mar 1 to Apr 5 for 35 major metro areas in the US. LA/OC was #9 on the list with a 19% drop. Riverside/San B. was #16 at -9%. SF had the biggest drop in CA with 39%. Detroit was #1 at -62%, Pittsburgh next at -55% and NY down 49%. Phoenix (+18%), Atlanta (+16%) and Sacramento (+14%) were the top 3 in gains of listings. So the trend is national and corresponds to the economic and social damage from Corona virus to some extent. Lansner has raised his bubble scale to two bubbles (scale of 0-5). The best thing about the new conditions is that there is no rush to sell. California is not a special case in this mess.
Rush not to sell yet. Still HOPE for Mortgage relief which will never happen as it would be extremely unfair to non-homeowners unless Rents would also be forgiven/subsidized.
Focus on the price of oil as the truth behind the smoke and mirrors of Fed Activity and government stimulus. The world still runs on oil and the price of it reflects the real economic outlook.
New listings are down 27% in San Diego county.
https://www.kpbs.org/news/2020/apr/09/new-san-diego-real-estate-listings-down-amid/
Let see, historic low rates and mega low inventory equals housing crash, right? Keep waiting bubble boys, just a little bit longer for that mega crash.
Cheers, millennial
Before people start attacking you (yet again) for now having a bullish position on RE, I will say that a successful investor is realistic and invests with logic rather than emotion. People will make stupid comments but that’s because they are missing their confirmation bias that they got last year when you had a different outlook on the market. In reality, they’re clinging on to the hope that maybe 2011 is right around the corner but 2011 is exactly where it needs to be, in 2011. Clearly you’re using real time market indicators to assess the market moving forward while the only thing that these bubble boys seem to bring to the table is the constant recycling of phrases like “This time it’s different” and “Real estate is done, stick a fork in it.” All hot air with no substance whatsoever. We’ll circle back next year fellas when my accountant is done tallying up my 2020 gains. Just don’t forget, I told ya so.
When you lose everything, hopefully you still have internet access to tell us how wrong you were.
I will keep waiting, thanks for that irrelevant piece of information about new listings during the lock down. You understand that this situation will take several months to unfold right? Drop in demand, then lay offs, then more drop in demand, then more lay offs, them more drop in demand, then more layoff and defaults, only then the hit to real estate when there are too few incomes left to create sustained demand for real estate while the supply ramps up as many real estate players are on the clock to sell (highly leveraged). I am totally seeing new construction deal 50% off from the peak, if this unfolds as bad as many predict.
“I am totally seeing new construction deal 50% off from the peak, if this unfolds as bad as many predict.”
It’s pretty amazing how much new construction there is in some areas. Go to New Home Source and type Temecula, CA. 121 new home communities within a 25 mile radius? That’s insane considering the relatively small size of the area.
More like layoffs in sectors irrelevant to real estate demand (c’mon you really think a bartender in Socal is buying property??) then a slight drop in prices because RE is not on everyone’s mind right now, drop in supply because people want to hold onto their assets, people that can’t hold on will get a second wind from the Feds via mortgage extension, drop in demand when middle management employees get laid off, new housing starts grind to a halt further constraining the supply, foreclosures start ticking up after the grace period is up, don’t bet on too much though because of strict lending in the last ten years! Market activity still stable because the employed and cash hoarding corps still buying and satisfying the demand on the sparse supply.
It comes down to basic economics. You want a home? Either build one or buy one. Building is going to cost you at least $100-150 PSF plus land for a standard home. That automatically eliminates 90% of the country as most homes are priced below that. California homes are mostly higher. But you know what else CA has? DEMAND and HIGH RENT. So those $200-$400 PSF properties get gobbled up by those high wage earners. But you know what really affect the price of just about anything? A supply glut. Look at oil, a drop in demand ticked the index from 65 to 45 but the Saudi/Russian supply glut got it into the negatives. Want a more realistic example? Look at 2003 to 2006 RE market. Easy, accessible predatory lending led to a surge in demand which led to a surge in pricing which led to a surge in building then when the cards folded we were left with tons and tons of homes sitting on the market which led a crash in prices. That is not the case nor will it ever be the case in this market. Builders weren’t really speculative during the last ten years were they? Nope. Lenders weren’t really lending loosely in the last ten years were they? Nope. Have interest rates gone up during this crisis? Nope. Will this crisis be relevant in 2 years? Nope. Is there an oversupply of existing homes on the market? Nope. Are the overwhelming majority of people who lost their jobs potential homebuyers? Nope.
Interest rates peaked December 2018 and by Jan I was seeing deals left and right. This crisis has been going on for two months now and what do I see? A few withdrawals and but way more pulling out on the sellers end and no where near the drop in prices as that last major RE event. You are wishful thinking and looking at this with way too much emotion. Switch on the logic and see the bigger picture.
Just got off the phone with a big RE in the LA area after I saw that he listed a house for $80K under market price. He was the first RE agent during the COVID era that went that bold. He calls this listing “RBID homes” a term I just learned today which means listings that are extremely under market in an effort to test the market. He told me he got 50+ calls and three offers and it’s only been on the market for 2 days! So much for the sky falling huh? I’m telling you guys, do yourselves a favor, take advantage of the hiccup and you’ll never regret your decision. The demand is lower (I get that) but still enough to satiate the market. I’m honestly going all in like I did Q1 last year and that paid off for me BIG TIME (contrary to people’s opinions on this blog).
Re: New Age – “More like layoffs in sectors irrelevant to real estate demand (c’mon you really think a bartender in Socal is buying property??)”
Do you really think it is just the low earners that are out of work. My clients are dentists. All Dental offices in California are shut down. That means that I am out of work, the Dentists are out of work, all their employees are out of work – the dental labs that supply them are out of work etc.. If you think it is just bartenders and wait staff that is going to be affected, you might want to rethink that. This thing is going to trickle through the entire economy.
Median Sales Price of Houses Sold in the U.S.
https://fred.stlouisfed.org/series/MSPUS
The trend is down…lower lows and lower highs.
Median Sales Price for New Houses Sold in the U.S.
https://fred.stlouisfed.org/graph/?id=MSPNHSUS
The trend is down…lower lows and lower highs.
The trend has been going on since 2017. All real estate is local but you can’t fight the overall trend forever.
Thanks Barlow!!! I have been telling people the peak happened already in 2017. In 2017 we saw multiple offers across the board above asking prices. Those days are gone for now except in some areas we see it it again due to very, very low inventory.
I will save those charts for future posts.
People always tell you “now is the peak†because it’s easy to say without looking at data.
I recently bought and it feels like the perfect time. Got a mega low interest rate while prices were lower than in 2017/2018 and builder threw an significant amount of upgrades/options at me for free.
Now, due to Covid, inventory is historic low. I have never seen such low inventory levels in SoCal. Combine that with mega low rates and you know what’s up.
M: I recently bought and it feels like the perfect time.
You bought at the literal peak. But I don’t expect you to admit it.
Not at all, prices in 2018 before the interest rates went up were actually higher.
Btw, for your primary residence the price actually doesn’t matter as long as you can comfortably make the payments. What do I win if I buy and my home goes up by 35%?
Absolute nothing. It’s just book value. I don’t plan on ever selling this dream home but might rent it out and buy another house. Forget about the price of a primary residence. It doesn’t matter that much.
The super-rich oligarchs are lining up for their bailouts. Ivy League has billions in endowments, gets millions more in bailout money: https://www.campusreform.org/?ID=14742
The Wall Street oligarch$ have certainly not let this crisis go to waste. The lockdown is hurting the lower and middle classes, but reaping great profit$ for the elite.
In one of the posts above I mention the danger of derivatives for the bond market, which directly influences the RE market. Below is a comment Graham Summers made which explains this with a clear picture from the oil market:
“Is Oil the Canary in the Coal Mine for a $640 Trillion Derivatives Disaster?
Let’s talk about what just happened with Oil prices.
Yesterday, Oil dropped to -$40 per barrel. That is not a typo. Oil was priced at NEGATIVE $40.
On Friday, it was priced at $27 per barrel.
How is this possible?
This is possible because of derivatives: financial instruments that trade in opaque markets, with little oversight, and which regulators, including Congress, have permitted to become a systemic problem.
In its simplest rendering, yesterday oil traders who owned oil derivatives realized that if they continued to hold these derivatives, they (the traders) would have to actually take delivery on the physical oil they owned. We’re talking thousands and thousands of oil barrels being delivered.
The traders don’t want the actual physical oil. They simply want to be able to trade oil prices. So, they dumped their derivatives at any price… including PAYING someone to take the derivatives off of their hands.
This is how you get NEGATIVE oil prices. And it reveals the degree to which the financial system has become totally overrun with derivatives, leverage, and financial trickery.
Even worse, Oil is not the only asset class that has been overrun with derivatives. The bulk of trading in every commodity, including gold, involves derivatives. The same is true of BONDS.
Derivatives are used to hide losses, manipulate prices, and even fake profits. They are a massive problem that nearly blew up the financial system in 2008… and as oil’s implosion yesterday revealed, remain a major problem today as well.
How big a problem are we talking?
The last official data on the global derivatives market puts it at $640 TRILLION, or over SEVEN TIMES GLOBAL GDP.
What happened in oil is a signal that this financial monstrosity is once again rearing its head. The question now is just how horrific the carnage will be.”
No, things are not going to be ‘normal’ after we turn switch on for the economy. We’ll just see then the wreckage done to it.
But, but, but if no one lists their home then real estate prices can’t crash… Interest rates are low and it’s cheaper than renting…
Great post, man. Keep the truth coming. Most of us here, other than the small handful of permabulls and trolls, appreciate it.
Excellent post, Flyover.
“Yesterday, Oil dropped to -$40 per barrel. That is not a typo. Oil was priced at NEGATIVE $40.” – SCARY!
This is where Capitalism is failing the US. The Ultra-wealthy are gambling at a rigged casino and winning Huuugely. Nobody expected that Mother Earth would disrupt the game and expose this.
This would never happen under true Communism. The government would set a price and that would be it. The .1% wouldn’t be making trillions with gambling with the price 99% of the US citizens are paying at the pump. That price under Communism would not be sustainable either but 99% of the people would benefit.
Both are horrible.
That is why we need Democratic Socialism. That would shut down this rigged casino with regulations and kick out those Republican rigged casino owners.
Bob: This would never happen under true Communism. The government would set a price and that would be it.
That would not be it. Under True Communism, the official economy was a sham. The black market was several times as large as the official economy. Black market prices were the real economy.
Real estate bulls have been correct so far. There have been absolutely no asking price drops so far in my Orange Co. neighborhood. 7 homes were sold here in March and April. 5 out of the 7 sold for more than their asking prices. The last one. which sold this week, was only on the market for 1 day. The 2, which sold for less than the asking prices, were the most expensive with asking prices of $925,000 and $965,000. They both sold for only $10,000 less than their asking prices–that is a whopping 1% discount!
Will home prices drop in coming years? Yes, homes will eventually begin declining until about 2023 or 2024. But those homes, declining in prices, will probably be concentrated in the cheaper, less desirable neiighborhoods/cities.
Gary, I like your balanced view. I am also bearish for the next 2-3 years, but bullish long term, at least for nominal values. More and more, the RE “market” resembles a casino, like all the other “markets”. High volatility will become the norm.
The vast majority of people will become poor. That means that lower priced houses will have higher volatility – drop a lot in price when economy suffers, and have higher increase when economy recovers – they will behave like small company stocks.
More and more will see higher concentration of wealth. In my opinion, that will cause the high end RE behaving like blue chip stocks – less drop percentage wise and less increase percentage wise. When I say, high end RE, I am not talking necessarily of McMansions, I am talking about high end locations – i.e. BelAir, Jackson Hole, WY, Aspen, etc.
For those places with high volatility, people should be very conservative financially – large down payments, large amounts of emergency funds.
Really! bullish long term? The fact the Fed is constantly providing these stimulus programs tells you they do not have FAITH in the economy. Trying to stabilize an economy with socialist programs will have dire consequences! But hey what do I know. As I stated in earlier posts we need to see how the commercial markets reacts!
Bootz, I defined “long term” as 3 years and more. For the next 2-3 years I am bearish. I also mentioned “NOMINAL” values, not values adjusted for inflation. If the dollar is getting smaller and smaller, you need quite a bit more of them. If you get just a little bit more, that means you lost REAL value.
If you would pay attention to the words I used, then you would probably agree with me.
I am mega bullish long term. Where else in the world would you want to invest in RE? Compared to Europe, Canada and some Asian countries real estate in the US is very reasonably priced. You can even buy turn key close to the coast in SoCal, put 20% down and rent out at break even. You can’t lose long term. If you buy a fixer and put some sweat equity in you will make a killing. Down the road you refi at a lower rate while rents keep going up.
We have a housing shortage in SoCal and have high paying jobs plus the weather and the ocean. Beaches in San Diego county open on Monday (walking only).
Why are there no homes for sale? It is the mortgage forbearance plan. If a homeowner has to make no loan payments for a year and has unemployment insurance for at least that long, they would be under no pressure to sell their home. People would naturally just stay in their rent free home rather than try to find a place to rent.
There will be no surge in foreclosures because debt holders cannot foreclose on anyone. Therefore, real estate prices of family homes cannot drop for at least a year. All of us on this board may be dead before the government will allow home prices to fall.
The only potential sellers might be the investors who purchased single family homes for rental purposes in the last past 10 years. I am not certain if the law protects real estate investors/speculators for foreclosure? Perhaps, MR LANDLORD can answer that question.
Yes, investment properties are protected from foreclosure per the CARES act if you meet the criteria.
“You can no longer afford the mortgage payment on your home due to a reduction in household income from COVID-19 related circumstances. This includes owners of single-family residential rental properties if they are unable to collect rent from tenants because of COVID-19, and as a result can no longer afford the mortgage payment on their rental property.”
Your loan also has to be backed by the govt i.e. fannie, freddie, FHA, etc.
Stick a fork in real estate, it’s done- US New Home Sales Have Never Dropped This Much In March… Ever
It’s different this time, yah, it aint 2008!
https://www.zerohedge.com/economics/new-home-sales-crash-most-7-years
Hasnt Zerohedge been debunked for their constant pessimistic hysteria?
QE, blaming the messenger for what is obvious to all economists and average person, is disingenuous. It is not just Zerohedge saying that; it is pretty much any publication from the left to the right. You can argue on the causes for falling in the number of sales, but not on the actual number of sales. The drop in sales is a FACT. The causes are debatable, although it is a combination of factors – drop in supply, drop in demand, lower consumer confidence, more reluctant lenders, etc.
New Age,
I agree with what you are saying about the market fundamentals. However, one possible issue is that people always try and time the market, even in real estate. If the perception is that prices are going to drop many prospective buyers might hold off making a purchase, even in desired areas. This may force the hand of some owners. As you said, many of them are sitting on a lot of equity, so it is not illogical to think they might agree to take a slight cut off 2019 prices to make the sale. If this happens the cycle could become self-perpetuating.
Covid-19 is having a big impact on the housing market: it’s suppressing inventory. Big time here in SoCal.
Don’t worry, the coming tidal wave of defaults and foreclosures will change that.
Realist, Who are those people filing for unemployment? Low paying jobs. People who have several part time jobs and no benefits.
Our company (huge tech company) hasn’t laid anyone off.
In fact, by working from home it’s kind of a pay raise. No commute, no eating out, less entertainment but same pay plus some people get a stimulus.
Compare inventory in 2008 with today’s inventory. It’s night and day
M: Our company (huge tech company) hasn’t laid anyone off.
You never said what kind of tech company you work for. Many tech companies (Facebook, Google) rely on ads. Advertising revenue is way down. I expect they will downsize.
And if you work for a hardware firm (e.g., Intel), I expect orders will be down, because businesses will be belt-tightening or closing.
Yes, Q2 and Q3 will be below plan but in Q4 we should see a huge spike in revenue.
Most hardware and software tech company stocks are up for the year.
When 330M people in the US are at home not eating or dancing out, they are buying the latest games, laptops, video cameras, TVs, etc. Including me.
dollar cost averaging is my friend. But I did max out my 401k and made some significant stock purchases Within March/April. Who knows if we retest that level or go below. The tech company I work for is close to making a new ATH.
Bob: When 330M people in the US are at home not eating or dancing out, they are buying the latest games, laptops, video cameras, TVs, etc. Including me.
Well, no. A lot of those 330M people are suddenly unemployed, and are worried if they’ll be able to afford food next month. So they’re not buying new laptops, TVs, and video cameras.
I’m sorry, my comment was heartless and not entirely correct. The unemployment rate is currently around 5%.
Only 95% of the population are buying new tech toys. Well, if they are not in the hospital dying of Covid 19 thanks to an incompetent Federal Government.
The question is: Does the 5% of 330M really affect the housing market? These are low wage earners who are likely renting. Can a person making 30K/year afford a Los Angeles house? Do the landlords have 2-3 months in savings to ride out renters not paying? If the landlords can’t cover 2-3 months, this Trump economy appears to be all an illusion.
We’re going to have record low inventory for quite some time. I can’t see a massive price decline when record low inventory is combined with a giant housing shortage. As usual, the people who are going to get hit the hardest aren’t the ones lining up to buy 700K socal crap shacks.
I agree for now especially when there is a moratorium and foreclosures and evictions on renters
From the LA Times:
The Southern California housing market has seized up.
The coronavirus outbreak has closed businesses and kept people hunkered down in their homes. Perhaps unsurprisingly, it’s also resulted in a market that experts describe as essentially frozen.
Data released Thursday from real estate company Zillow show the number of deals entering escrow has fallen off a cliff since mid-March. But so too have the number of owners who are listing their house or condo for sale.
Because the market isn’t being flooded yet with listings, lower demand is being met with lower supply, and prices are holding relatively steady.
Jeff Tucker, an economist at Zillow, summed it up as such: “Like a canoe being carried by two people who drop both ends simultaneously, the market slowdown may not tip clearly in favor of buyers or sellers.â€
That surely could change as the pandemic progresses. On Thursday, the U.S. Labor Department reported that 4.4 million Americans filed for unemployment benefits last week, bringing the total since mid-March to about 26 million people.
As more homeowners struggle to pay their mortgage, more homes could be forced onto the market.
In the week that ended April 19, home buyers in Los Angeles and Orange counties signed sales contracts for nearly 60% fewer homes than the same period last year. Similar declines were seen a week earlier.
Traditional housing market indicators are based on closed deals, meaning that March sales data mostly reflect deals that entered escrow in February and even January — a time before stay-at-home orders and widespread concern over death tolls.
The data from Zillow covers so-called pending sales — when a buyer enters escrow — and provides a more current look into the virus’ effect on the housing market.
Judging by the sharp drop-off in listings, not only are fewer owners putting their homes up for sale, but also some have outright pulled them off the market.
Real estate agents say some sellers don’t want people touring their home during a global pandemic. Others simply don’t need to sell and are holding back to see how the current situation evolves.
The number of homes on the market during the week that ended April 19 fell nearly 31% from a year earlier, according to Zillow.
There are signs that prices are softening. The median list price in Los Angeles and Orange counties was $856,575 in the week that ended April 19, according to Zillow. That’s down about 7% from mid-March but still 7% higher than the same period last year.
Normally, when the housing market slows, sales are the first shoe to drop because owners are hesitant to take less money. As homes go unsold, inventory swells and sellers eventually give in, forcing prices downward.
But unlike the crash of 2008 or the relatively minor slowdown in 2018 and 2019, inventory isn’t rising. It’s falling.
“These are really unusual times,†Tucker said. “This external force that is driving buyers out of the market is also a pretty good reason for sellers to hold off from selling. People are literately worried about the health of having a bunch of strangers and real estate agents come through their home.â€
In some cases, as in the city of Los Angeles, in-person showings of homes is banned, to stop the spread of COVID-19, the disease caused by the coronavirus. Home sales can still continue, but the pool of people willing to buy a house without first walking through it is limited.
Research from Zillow indicates a similar situation played out in Hong Kong in 2003 during the outbreak of severe acute respiratory syndrome, or SARS. Home prices didn’t fall much, while the number of transactions plunged as people kept their distance from one another to save lives. The market, along with the economy, then bounced back once the epidemic was over.
SARS lasted several months in Hong Kong and killed 774 people worldwide. In the United States alone, almost 50,000 have lost their lives to COVID-19 so far. And social distancing edicts, or surges in the death count from relaxing measures, could roil the economy for many months to come.
The federal government has stepped in to provide relief in the form of cash payments and mortgage forbearance. But if people remain out of work for long, more would probably be forced to sell their homes or even enter foreclosure. In that case, supply would rise at a time of depressed demand, raising the prospect for full-scale price declines.
Interestingly, although demand has temporarily decreased due to the virus, it appears
that supply has followed suit. Resulting, of course, by the law of Supply and Demand in price stability in most markets here.
Vanishing inventory props up SoCal home prices – The Real …therealdeal.com › 2020/04/24
Before the virus, inventory was at a 3.8 mos. supply, and will eventually return to that
low number if the lock down doesn’t persist long term. How long before demand returns depends upon job returns.
Rental wise tenants are protected via eviction moratoriums. But short sighted Pols won’t acknowledge that landlords, many mom and pop, also need moratoriums on property taxes, utilities, mortages… Bailouts are generally borne by all taxpayers not just by one segment. Except, of course, in the minds of socialist leftists, i.e.- Cali Dems.
If I were renting right now and unemployed, I would try to pay some rent or at least let the landlord know I’m doing what I can, and then catch it up when the jobs return. Later on when normalcy returns, who wants an eviction on their credit in a tight rental market. That can result in moving out of state or homelessness.
So, predictions of a crash greater than 2008 aren’t borne out by current data. What happens in the next few mos. or a year is up for grabs.
Millennial was the last bear on this website. How ironic. He bought at exactly the moment that the long-awaited real estate top finally arrived. Now that the 2nd great real estate crash has begun, there are few if any bears left on this website. Real estate crash will begin in earnest in the fall and continue for many years. Most of the decline should be over with by late 2022. After that, foreclosures should keep prices down but only reduce prices marginally more.
I hope become rich enough during the crash to buy homes for all of my family members, who do not presently own one. I should be able to do this during the foreclosure period of the housing decline–about 2023-25.
Yep! Some people have to hope for a crash in order to afford real estate. Some people buy the houses they love because they can (me included).
Wake me up when real estate falls by a significant percentage and I will seriously looking into buying investment property. (Probably a fixer).
Love my new house and can’t wait to go to the beach this week (San Diego county is opening up again) 🙂
Cheers, millennial
Well said, Gary. Millennial capitulating and buying a home without a doubt signaled the top. He’s even saying he “doesn’t care” if real estate prices drop lol. That’s the sure sign of a true believer. I’m in your same boat and I agree with your timeline. Saving all I can to hopefully help out my family members buy homes in the next 4-5 years once prices bottom out.
Josh, if you had any clue about RE you would know we had the top when we saw multiple offers on properties across the board (bidding wars). That was back in 2017/2018. Don’t worry though, I enjoy you believing the top is now and waiting for that mega crash. While you wait for housing to come down to YOUR affordability level I enjoy living in a brand new house. Good luck!
In my case buying was a no brainer. I am surprised new construction is relatively cheap compared to existing homes. Add all the incentives and credits the builder and preferred lender throw at you…. Not many people get that. Luckily we have prop13 so My PITI can only go down (refi down the line) while rents go up over time.
Rate are barely above 3% for conventional, 30y 🙂
I see myself already refinancing for under 3% soon 🙂
Easy to see this is a no brainer. And if valued really go down I will go in and buy my first investment property. See, market goes up I win, market goes down I win big.
Milli: Luckily we have prop13 so My PITI can only go down …
But until now, you were predicting that Prop 13 would soon be repealed.
Milli: … while rents go up over time.
And until now, you were claiming that rents can’t go up, because wages won’t support it. Tenants’ wages, not the landlords’ expenses, determine the rent. Or so you said.
TWO other positions you’ve completely changed your mind on. (Assuming you actually believe anything you say.)
@ Homerun: “People should not fear their government. Governments should fear their people.”
When governments fear their people you have democracy; when people fear their government, you have TYRANNY.
Banks are running out of money.
Leaked memo shows Bank of America’s talking points for staffers on how to handle the next round of PPP loans — and warns that funds likely won’t meet ‘extreme need and demand’
https://www.businessinsider.com/bank-of-america-borrowers-how-to-apply-for-ppp-loans-2020-4?r=rr
Fewer than half of working Americans will have a paycheck in May as devastating coronavirus layoffs persist, economist says
https://www.businessinsider.com/layoffs-coronavirus-less-than-half-american-workers-paycheck-wage-may-2020-4
For those who say the lockdown won’t affect housing, because waiters and bartenders are not home buyers:
https://foxsanantonio.com/features/coronavirus/muted-and-vacant-las-vegas-struggles-to-survive-shutdown
Victor Chicas, a restaurant server in the Mandalay Bay casino-hotel, was facing foreclosure on his home before the virus shut down the city and the 54-year-old was laid off. …
He’s still waiting to find out if his home loan modification will be approved and if he’ll get a chance to try to keep his house, while also supporting his sister and her two children, who immigrated to the U.S. from Guatemala.
I’m seeing small business shut down at strip malls in my town. This must have caused some business owner to not be able to pay their rent or mortgage payment. This house that was remodeled in my neighborhood has been on the market for about a year and this is in a nice beach city in southern California. If things don’t change soon it’s going to get a lot worse.
Guys, I called my old landlord lady to see if she already rented out the apartment I have been renting from her in the past and most importantly I wanted to know how much she charges. When I moved out and bought a beautiful new construction I told her she needs to increase the rent as she has been giving me an absolute steal. She said she got a ton of demand and rented it for 450more a month! Insane!! Rents have and continue to skyrocket! That’s what a housing shortage does….
Cheers, millennial
I hope your alleged former landlady doesn’t get stiffed.
If I had a vacant apartment, I’d leave it vacant until this moratorium on evictions passes.
It’s actually common in New York City for landlords to leave apartments vacant for years on end. It’s called “warehousing.” Landlords often do this before converting their buildings into co-ops. The fewer tenants you have, the easier and cheaper to get the co-op conversion approved. The fewer rent controlled tenants you have to “buy out.”
NYC’s onerous rent control laws have made it more profitable, in many cases, to keep apartments vacant. One of rent control’s unintended consequences.
My late father converted two of his apartment buildings into co-ops. That’s how he got rich.
I’m curious as to why rental buildings in NYC convert to co-operatives, and not condominiums.
We have co-operatives dating from the pre-war era here in Chicago, but every building either built since WW2, or converted from rental, has become a condominium, not a co-op, and as a condo owner who very briefly considered a couple of co-ops but passed, I wonder why ANYONE would buy into a co-operative, because the co-operative arrangement is the most disadvantageous there is. The buyer of a co-operative unit does not buy a separate property, as with a condo, but buys shares in the co-operative association, and pays it rent, while the buyer of the condominium is buying a separate property with its own PIN number. The Board of Directors of a co-op has vastly more discretion than the Board of a condominium, under Illinois laws governing these association, and while laws differ from state to state, co-op Boards have the authority to do owners grave financial injury, that would not be possible in a condo association. For example, a co-op board can levy a special assessment without the 75% ownership approval that is required in a condo association. This happened at an elegant old co-op in Chicago’s Hyde Park neighborhood, in which special assessments that exceeded the market value of the unites were levied by the Board, resulting in the complete financial ruin of many owners, a number of whom were forced to just turn in their keys and move away, having lost whatever they had paid for their units. The only reason so many old co-operatives remain in Chicago is because the cooperative-to-condominium conversion is said to be the legally most complex and expensive conversion there is. However, it is just as easy to convert a rental building to a condo, and the units sell more easily, and for higher prices, so I wonder why anyone still converts to a coop.
M,
I guess I’m confused if you are joking about the real estate situation with such confidence, or are just lost in your own self promotion that you are unaware of the 30+ million unemployed. There is nothing coming from the current economic climate, and anyone still saying real estate is not going to take a hit in the next few months is either a lying real estate agent or an idiot.
I guess I am confused too. Should I call you Jack or Diane?
Anyways, the number of unemployed part time workers, hospitality staff, waiters, retail workers etc are not your homeowners and they are not your potential homebuyers.
For a housing crash you need a sharp increase in supply (“more homes†or more “Inventoryâ€).
The market price is determined by supply and demand.
Right now the housing market is on pause (sharp drop off in demand and supply). But, the RE market is about location/local markets. We see multiple bids in the suburbs for quality housing. I guess people want to avoid high density living in the city.
People aren’t abandoning the “farm†because of covid. Sellers pull listings off the market. Combine low inventory with low interest rates and one of the biggest home buying demographic patches in history (millennials).
Lower sales volume doesn’t mean lower prices. Think about it. Rents skyrocketed in the last 8-10years. Why should a homeowner who pays LESS than someone renting a comparable house sell their house?? Is that homeowner going to rent all of a sudden and pay the same or more than he paid for his mortgage?
You are assuming this is similar or worse than 2008? Compare inventory and the debt profile of owners today with 2008. Lending has been much tighter and we never had so many high quality buyers (good credit etc). And we have way, way, way less inventory than in 2007.
Sellers don’t have to sell at the present time and they aren’t as over leveraged as in the previous recession. Obviously, the longer we have a shutdown, the bigger the damage.
Jack or Diane. Why have you been laid off? Maybe the employer thought he hired Diane but got Jack?
If you really want to make your head spin, take a look at the NY Federal Reserve foreign liquidity swaps. The American taxpayer is now funding Mexican oil bond buybacks that just happen to be denominated in dollars. (Greedy American speculators getting paid.)
If you think Jerome Powell will not blow this equity bubble to moon, you are delusional. He’s declared outright war on cash savers and wage earners. Equity prices must be maintained or increased, and millennial wage savers must be crushed. It is the Boomer way.
Enjoy your 10-20% housing discount, but be prepared to pay all cash — the big boys are loaded with fresh new green for equities.
“It is the Boomer way.”
It is not the Boomer way, it is the banksters way (the FED). The Boomers are taken to the cleaners as much as everybody else. The FED cares about the boomers as much as they care about millennials. Everything is about the biggest banks assets. The biggest banks own the FED. There are millions of boomers forced to work to 70-75 just to put bread on the table. What the FED is doing these days is participating on the biggest wealth transfer in the history of the the US – from the 99.99% to 0.01%. 99.99% of the boomers are not in the small club of the 0.01%. With the massive inflation coming for food, prescription drugs, medical expenses, property taxes and utility prices, do you think it is easy to be a boomer on fixed income?!!!…
The average boomer does not have more control on the US economy than the average millennial. Be realistic!…Put the blame where it belongs – to those few who make these decisions. I am a boomer, and all the politicians and the bankers care exactly zero for my opinion or 99.99% of us.
I stand corrected. As someone a little younger, it always seems like older people are plunging the society into ruin, but you are obviously correct — it is the .01% doing this.
This past Monday, someone put in a offer for a $3 million house in Santa Monica’s North of Montana neighborhood: https://www.redfin.com/CA/Santa-Monica/254-17th-St-90402/home/6770883
Those who have money — them who can afford a $3 million house — are still buying.
In OC and San Diego, quality homes below 600k fly off the shelves.
I know that neighborhood well, as I own a rental 1 street over.
That is a great price actually. The seller must have some urgency to sell.
Its right near San Vicente and Georgina Ave – hot streets.
Further, if that house was on the market 1 year ago, the 7,500 sqft land value would have been $3.4Million.
Wow, just wow. That someone would pay that much (or rather, borrow that much) money for sooo little just blows my mind. That house should be worth maybe 1/4 of the ask and that’s being tremendously generous. Its old, its tiny and its in Clownifornia!
Cant imagine living amidst such insanity.
@Bob: “That is why we need Democratic Socialism. ”
Democratic Socialism – a fancy word for Communism. By the way, all the communist countries called themselves “socialist” (they still do) because that word is more palatable to the useful idiots. In reality, that word “socialist” is an euphemism for NAZI (NAZIs were actually socialists). The other word “Democrat” is an euphemism for “mob dictatorship”. That is why our smart founding fathers created a Republic, not a democracy.
See, if you define the words, you get a better picture. That is why propaganda does not work too well on me – when I lived under communism or if I am forced to listen to Pravda (I mean CNN). I can listen or read between the lines. Don’t worry, that I detect BS from republicans, too; some of them are wolves in sheep clothing. My BS detector is very sensitive.
Nazi Germany socialist ? lol. Go read a history book, Flyover. You’re embarrassing yourself.
Nazi was a derogatory nickname for the National Socialist German Worker’s Party. They were anti-Capitalist (which they associated with Jews), anti-Communist (which they also associated with Jews..surprise!) and anti-Foreigner (Jew or Gentile). They followed Mussolini’s Fascist model of economics. Mussolini was a high ranking member of the Italian Socialist Party, but broke with them over Italian nationalism. It’s all Socialism, whether National Socialism or International Socialism (Comintern).
The key word was Nationalist for the Nazis.
A Nazi like Hitler convinced his people to do atrocious things to Make Germany Great Again. Read history we have seen it all before.
Does this sound familiar?
Also, FDR, the greatest Democratic Socialist ever, was elected at the same time Stalin and Hitler took power. FDR is more like Bernie. The US had elections, Russia did not so had a revolution.
Your comparison of Democratic Socialists and Communists is typical right wing media propaganda. Are you really saying FDR was like Stalin???? Don’t be a sheep.
You are losing credibility.
The US had elections, Russia did not so had a revolution.
Russia had elections. Russia’s first democracy, the Provisional Government of Alexander Kerensky, came to power in February 1917.
The Bolsheviks overthrew this democracy in the October Revolution of 1917.
Son of a Landlord,
The people did not elect Kerenski. You know that. Just go a way.
In San Diego county (where I live) a push to reopen non essential businesses has been made for May 1st. States across the US are opening up.
Sorry, Great Depression 2.0 has been postponed. Maybe next time.
lol, you actually think the Depression can be stopped at this point, that’s so cute. You, your “house” and whatever investments you have made, are about to take a serious beating, and there is nothing you can do about it. Welcome to adulthood homeowner, now bend over 😮
It’s different this time, it ain’t 2008!
Agreed. “M” has to be trolling. Or bipolar.
Or we might see a huge snap back in Q4. And new ATH’s in stocks. I could care less. I sit back and enjoy. If prices fall I buy more stocks and an investment property.
Or we might see a huge snap back in Q4. And new ATH’s in stocks. I could care less. I sit back and enjoy. If prices fall I buy more stocks and an investment property.
Should a buy a fixer, condo or small detached?
I believe that voting in a Republican controlled Federal government will likely crash the economy.
1) They de-regulate and allow their crony thieves to take advantage of the middle class and poor. Do you need examples? I can give plenty for the 2008 crash and for the current oil crash.
2) They claim the economy is the best ever in the US but when the times get tough, like now, a huuuge percentage do not have any savings to cover 1-2 month of rent or mortgage payments. We’ve all been gaslit about the economy for the last few years. Yes, we are all suckers and as a great Republican once said, There is a sucker born every minute.
Remember this in November.
A nearly $2.6 million house goes pending — on April 28 — in Santa Monica’s Sunset Park: https://www.redfin.com/CA/Santa-Monica/2312-27th-St-90405/home/6764635
The rich are still buying houses.
Stick a fork in Real Estate, it’s done! Pending Home Sales Plummet By Record In March, Lowest Level Since 2011
https://www.zerohedge.com/personal-finance/pending-home-sales-plummet-record-march-lowest-level-2011
It’s different this time, it ain’t 2008
“The Orange County Register in California. “A routine report released Tuesday, April 28, paints a picture of a housing market that might have been, but thanks to the coronavirus outbreak, is no more.â€
– Stick a fork in it. Housing market 2020+ (read housing bubble 2.0 already popped, it’s just more apparent now).
“Holly Danna, an agent with Douglas Elliman in Manhattan Beach. ‘Then with the pandemic, it kind of changed everything. It stopped everyone dead in their tracks.’â€
– Might want to consider a different phrasing on that… Don’t want to scare away potential buyers with that death thing.
“Danna said she is advising her clients not to drop their prices. ‘Sellers have to dig their heels in and hold on because there are many opportunistic buyers who are going to price gouge,’ she said.â€
– Let’s see,
a) Suddenly, high unemployment
b) Suddenly, (much) tighter lending standards
c) Suddenly, STRs (aka Airbnb, etc.) with no income and needing an out, will try the LTR path, but many will likely be forced to sell, since LTR income is much less vs. STR income.
d) Suddenly, consumer sentiment about purchasing big ticket items is in the crapper.
e) Suddenly, pending home sales (PHS), a leading housing indicator are also in the crapper. NHS too.
f) All of this (and more), in spite of record low mortgage rates and the peak selling season
– and yet, we get this kind of advice from a Realtor…
– Finally, “joke of the day†article from Diana O. Hope springs eternal.
https://www.cnbc.com/2020/04/29/pending-home-sales-tank-nearly-21percent-in-march-but-realtors-claim-prices-will-hold-up.html
Pending home sales tank nearly 21% in March, but Realtors claim prices will hold up
Published Wed, Apr 29 202010:00 AM EDTUpdated Moments Ago
Diana Olick
Signed contracts to buy existing homes, referred to as pending home sales, fell 20.8% compared with February and were 16.3% lower annually, according to the National Association of Realtors.
“The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts,†said Lawrence Yun, NAR’s chief economist.
The average rate on the 30-year fixed mortgage fell to a new low of 3.43% last week, according to the Mortgage Bankers Association
“The spring season will still be anemic, though, and even potential pent-up demand released in the fall will not be able to make up for the losses.â€
“Yun is now predicting total home sales for 2020 will be 14% lower annually. He does not, however, predict big losses for home values.â€
“In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high,†he added,…â€
<u<“Danna said she is advising her clients not to drop their prices. ‘Sellers have to dig their heels in and hold on because there are many opportunistic buyers who are going to price gouge,’
Holly Danna is illiterate. Buyers can’t “price gouge.” Only sellers can “price gouge.” The word Danna was seeking is “lowball.”
Redlands, CA housing market remains unaffected by the coronavirus. I’m still losing out on homes to folks bidding higher than the listing prices. Homes are still receiving multiple offers. I don’t see any end in sight to this tough housing market.
Warrne Buffett said, “The stock market is a device to transfer money from the impatient to the patient.â€
The same is true about investing in real estate: The real estate market is a device to transfer money from the impatient to the patient. WillProbablyNeverOwn, you just need to have a little more patience. Home prices will start falling within 6 months and go down for many years after that. Investors/flippers will be the first to sell, then those who need money or who are retiring and finally those who are forced to sell because of foreclosure.
Wait 6 months before making any more offers. You have very little to loss by waiting and a lot to gain potentially–if I am correct. The Fed doesn’t have enough money to bail out every one, in every country in the world. Don’t be the last one to buy just before home prices start to crash.
It’s Highly ironic that if Mille would have followed his own advice he could have bought his house for a 50-70% discount. Lol. Just had to wait a mere few months.
That’s what I call Bad Timing.
Thanks for the words of encouragement. We stopped looking and already told our realtor we’re taking a break.
Rick,
It’s funny you reference a 50-70% crash.
This can very well happen but first the covid virus must mutate and infected people must turn into aggressive zombies.
WillProbablyNeverOwn: You have (or had) a realtor? Why? Just let the listing agent double end the deal. Unless your realtor knows of some magical listings that aren’t on the MLS (unlikely), then I just don’t see the point. The listing agent would be much more likely to consider your offer if they got 6% commission instead of 3%.
Stick a fork in it, Real Estate is done! – From Sandiego.com in California. “The city of San Diego has been hit hard by the coronavirus pandemic. Landlords who still have mortgages on their rental properties are in a pickle. There are mortgage companies offering financial relief, but this barely scratches the surface for landlords who have multiple properties (not to mention, their own) to manage.â€
“Many landlords who are behind on their mortgage are in a dangerous situation as property prices are going down, they are risking to go ‘underwater’ or ‘upside-down’ on their mortgage. This means that they will not be able to sell their property for enough money to pay off the debt to the lender and avoid foreclosure.â€
“For those interested in investing in real estate, there are now more opportunities than ever. It’s a buyer’s market as property values drop to an all-time low. Investors could stand to get properties in some of San Diego’s hottest and most prominent neighborhoods at a very good price. For those who are looking to take advantage of the situation and acquire a duplex or triplex near the beach for a lower price than usual, this period might be a good opportunity. The prices are going down, specifically in Hillcrest, North Park, and City Heights.â€
Enjoy that depreciating asset Millenial, it’s headed for a 20-30% haircut.
Enjoy that depreciating asset Millenial, it’s headed for a 20-30% haircut.
Milli has said that it’s great if his house depreciates, because then he can refinance at a lower rate.
No matter what happens, Milli always gleefully claims that it’s the best thing that could have happened to him. The world economy can collapse, an earthquake can devastate the west coast, and it’ll mean a jackpot win for Milli.
Which is one reason people think he’s a troll and his tales about his house (his wife? his neighbor’s pool? his landlady?) are fabrications.
ding ding!
Of course it’s all BS. I wish there was an ignore feature on this blog.
Ignore button. Lol!
Hahaha
Wrong blog buddy 😉
Hard facts here….115k active listing in 2007….yesterday 31k active listings. Rates are historic low.
You gotta wait a little bit longer for your epic crash 😉
Cheers, millennial
Real estate always goes up over time. Once you buy a nice house it doesn’t matter if the value goes down by 5 or 6.3% percent in the short term. You need a longer time horizon.
Should real estate go down by 10% people like me buy investment property.
“ The next crash will be beautiful. 50-70% discounts are waiting. We will see it within the next few years. As we all know the market crashes every ten years on average. Experts like me know it’s all about timing and nothing else.
If you think now is a great time to buy why share your secret and waste your time trying to convince us? Go out and buy buddy.†– Millie
ALL TIME LOW???
Honestly I’ve had enough of you, I cannot take you seriously anymore, you are just trolling at this point. I’d rather listen to hot garbage rotting in summer heat because that’s much more insightful than anything you’ve said on this site 🤣🤣🤣
With some tenants unable to pay rent, small landlords ask for help.
Unemployment is continuing to grow during this pandemic, and people are struggling to pay their bills.
The challenges have some tenants calling for a rent strike, but small landlords say they’re also fighting to survive.
Washington State has an eviction freeze until June 4, but some tenants unable to pay rent worry they’ll be kicked out of their homes as soon as it’s over.
Content Continues Below
It has signs like “rent moratorium now†showing up all over Seattle.
“We rely on our rents to support ourselves at this point in our lives. It pays for our health insurance, it pays for our groceries,†said Leslie H, a Seattle landlord on a Zoom meeting Tuesday afternoon. Several dozen landlords met on the call to discuss their concerns.
Mom and pop landlords say are struggling.
“As their savings drain, as our savings drain,†said MariLyn Yim, another landlord in the area.
Many said they’re already trying to help their tenants as much as possible. Some are working with tenants on delayed payment plans.
https://www.kiro7.com/news/local/with-some-tenants-unable-pay-rent-small-landlords-ask-help/BE4N5TZ4SNA7FGVEOZGFR4O64U/
With May rent looming, some Seattle tenants eye ‘rent strikes’ as coronavirus continues to upend lives.
https://www.seattletimes.com/seattle-news/politics/with-may-rent-looming-some-seattle-tenants-eye-rent-strikes-as-coronavirus-continues-to-upend-lives/
The folks in the house next to the house across the street were renters, and the owner now supposedly wants to sell. I can’t find it for sale or for rent in an internet search, but the renters just moved out last weekend, so maybe it will be listed tomorrow (May 1st)?
The owners moved out of state about a year ago, and were waiting to see if they liked it in their new state. Apparently, things are going well there so they’re selling the house. There is a real estate lock box on the door now. I’ll keep an eye on it.
IN my neighborhood in san diego, I am seeing multiple reductions in asking price with no takers.
During last downturn, it took 4 years for real estate to find its bottom. The show has just begun.
I have no idea which direction san diego real estate prices would go but it’d be interesting to see how would it fare with already bubblicious price and with 20% un employment rate
My friends who have multiple properties say prices can never go down
other friends who have no property says it’d go down
realtor always say best time to buy or sell
BTW: I have 2 SFRs in SD and I can see prices softening.
Not sure how would it fare in next few years
Still no yard sign or on-line listing. What we were told by the next door neighbor and what the leaving renters told us is that it will be for sale soon.
There are over 3000 homes on the market in San Diego County at a first-time buyer price of under $500,000, with no buyers.
Too bad, so sad!
There’s quite an inventory dump of $1+ million homes underway in San Diego…over 2000 of them ($2+ billion in “valueâ€), and many of them marked as “newâ€.
“Ladies and gentlemen let the San Diego Real Estate Investor Hunger Games begin! And may the odds be ever in your favor.â€
Step 1: go on Redfin
Step 2: search San Diego
Step 3: filter pending/under contract only and “less than 30 days” on the market
Viola 357 homes across all price ranges that have been on the market for less than a month in escrow. You are either stupid or flat out misconstruing facts. It’s ironic your name is realist because there’s nothing real about anything you’ve said this far.
Demand is picking up right now but rates hit record lows. Unfortunately some people will miss out by waiting for lower prices. Prices actually went down since 2018 but rates went way down. So glad I bought recently and took advantage of such low rates and prices.
Milli: So glad I bought recently and took advantage of such low rates and prices.
Now you claim that, right before Covid-19, we had “such low prices”?
Almost! We had lower prices since 2018 when bidding wars Ended and interest rates increased (4.5% in 2018). Since then prices went down and during this covid time interest rates went down significantly to historic lows. After I bought, inventory disappeared due to Covid. I got lucky with my timing.
The price on a house is one thing but an interest rate drop from mid 4% to 3% is the real killer here. Plus, rates will likely continue to go down with the ten year below 1%. Can’t wait to refi when rates are below 3%!!
A gift for homeowners like me. On top of that you have an inflation hedge and locked in property taxes!! So much to be thankful for.
Rofl
Per Steven Thomas, San Diego: demand up 6%, inventory down 40%.
Crash must be around the corner. Any day now
If you take advice from Jim Cramer, Steven Thomas, and Lawrence Yun, you’ve probably have been through this before and lost.
Stick a fork in it, Real Estate is DONE!
Per Steven Thomas, San Diego: demand up 6%, inventory down 40%.
Crash must be around the corner. Any day now
@M : you go from one extreme to another…Regardless of the situation. You were an extreme bear in a bull market and now an extreme bull in a bear market.
Extreme bull?
Housing bull long term yes. Short term I don’t really care. If I see prices drop the next few years I can patiently wait for a nice deal and buy my first investment property.
M, wait another year!
For sure another year. San Diego county at 82days expected market time (slight sellers market). Keep waiting. Next year it is.
Prices won’t crash until a few months after the end of the mortgage forbearance. You need foreclosures and short sales to have a price crash.
You now act as if the only factors that matter are supply and demand. Does ability to pay matter? 30% unemployment matter? And before you say “well those people weren’t going to be buying homes anyway,” YES THEY WERE. There are millions of homeowners who can’t pay their mortgages right now because of the shutdown. Once that 30%+ unemployment becomes more permanent, the deflation trend will start. The only thing that will save the market at that point is negative interest rates, and even then those have shown to have little effect on keeping asset prices high.
What’s most sad about your “transition” from bear to bull is that you’re ignoring how bad high asset prices are for the average person. Artificially inflated asset prices are TERRIBLE for the average person. It means they must pay a huge percentage of their income (rent or purchase) just to have a roof over their head. It’s not sustainable nor good for the average person. But since you got an inheritance and bought a nice home, you don’t care about these facts anymore?
Shame on you, “M.”
Josh,
“But since you got an inheritance and bought a nice home, you don’t care about these facts anymore?â€
Semi-true!
But the facts that the avg person can’t buy is true for the majority of western countries. Look at mature economies like Europe. In the US the avg person can still buy. You can put almost nothing down buy a smaller house and rent out a room. After some time you refi and lower your payments. The fact that you can just keep refi’ing (without bringing money to the table, after 6 month of making payments) for a low 30y fixed rate is a great tool many countries don’t have.
Add to it prop13 and the peace of mind that your taxes won’t go crazy. Plus, during a severe housing shortage you can rent out rooms for a pretty dime or buy a house with some land and place an ADU in the BY.
Milli: Add to it prop13 and the peace of mind that your taxes won’t go crazy.
So you’re going back on your prediction that Prop 13 will soon be repealed?
Milli: Plus, during a severe housing shortage you can rent out rooms for a pretty dime
And you’re going back on your claim that rents are capped by wages, and can’t keep on increasing?
Millie used to chant how prop 13 was a scam.
Quit trolling.
Prop 13 is the best thing since sliced bread. You cannot trust governments. Prop13 caps your property increases at 2% per annum.
Can you imagine during these times of lost tax revenue (in the 50 billions for California) what would happen to your property taxes if we don’t have protection like prop13?
Prop13 is here to stay. Like it or not it’s here to stay and that’s a good thing. Proud homeowners need to know my piti can only go down not up over time.
Milli if you’re being serious then you’re a douchebag. One extreme to the other. Nothing you say can be taken seriously.
Extreme?
Extreme would be if I predict a 10% increase in house prices this year. I think it will be flat or maybe 1% increase. It all depends. For prices to fall significantly you need either interest rates to rise significantly or inventory rise significantly. Prices can’t fall without sales. Smart buyers like me tool advantage of historic low rates. That should tell you something. Don’t miss out.
“ Taxes for most homeowners are wayyyy to low. The rich and the old don’t pray their fair share in property taxes thanks to the scam prop13. We desperately need to eliminate this scam.†– Millie
Oh, so now it’s not a scam? You’ve said almost this identical thing repeatedly. Your words.
Renters will have 12 months to repay unpaid rent under new city of Santa Monica order:
https://www.smdp.com/renters-will-have-12-months-to-repay-unpaid-rent-under-new-city-of-santa-monica-order/190304
As I said previously, these rent and mortgage moratoriums can be extended, and re-extended, indefinitely.
We do live in a mobocracy, where the majority can vote away the property rights of the minority
@Bob “If the landlords can’t cover 2-3 months, this Trump economy appears to be all an illusion.”
How can the property owners pay when the communist Governor Newsance has zero respect for property rights guaranteed in the Constitution? The communist governor of CA is buying votes using the private property of CA citizens.
How can the renters pay the rent when the fascist governor took the right to work away from the the citizens???!!! Trump said – “free MI, free Minnesota” …and I should say, liberate CA, liberate WA and other fascist states. I am sick and tired of these totalitarian despots. Do you enjoy your chains much??!!!!….
The economy was the best in decades, with record low unemployment and maximum employment for minorities. Now thanks to these communist governors we’ll have the Greatest Depression ever – the nuclear option in their hopes to take back the White House. After all their impeachments failed they use now this scorched earth approach, playing with people’s lives living destitute millions of people. These communist psychopaths you support are sick minded. I have few more years where I am and I’ll move out of this communist state of WA. I run away from the communists in Eastern Europe, then from the communists in CA and now I have to move away from the communists in WA.
Flyover,
What do you call an economy where 1/3 of the renters don’t have enough savings to even cover one month rent?
What do you call an economy where over 15% of mortgage holders don’t have enough savings to cover one month’s mortgage payment? Do you think lending standards are too tight?
When you think about that, I think we all agree the Trump economy was an illusion created by a con man.
Tsar Trump will fall in the same way that Tsar Nicholas fell. The Emperor has no clothes.
I think we all agree the Trump economy was an illusion created by a con man.
Trump did not “create” this economy. It’s been the same for decades. Maybe since Wilson established the Federal Reserve.
Trump merely inherited the illusory economy from Obama, who inherited from Bush, who inherited from Clinton, and so on …
Bob, the economy was an illusion since 2008. We no longer have free markets. We have “mark to fantasy” instead of “mark to market”. The only “market” cycles left are those created by the FED via QE. That, in case you did not notice. It is all a joke. Everyday is looking more and more like in the the former Eastern Block – government tyranny and the FED/government picking winners and losers. The only wealth transfer is from the 99.99% to the 0.01%. The $1200 is not wealth transfer; it is just a bribe for sheep to go to sleep and pretend they don’t see pilferage taken place. In the communist states from the West Coast it is even worse than in flyover country. The tyranny is unbelievable. Constitution is trashed, contract law means zilch, private property respected as much as in N. Korea, no more a free market – we are in a neo feudalism. What we see does not have any resemblance with the old capitalist America – economically, socially or personal freedom and rights. Shortly we’ll be like in China with social scores, no human rights, traveling from state to state (that if we’ll still be allowed) with a vaccination card (the new passport), tracked everywhere like cattle, you get the picture!……
The president and governors are simple puppets controlled by bankers.
Don’t forget Donny constantly leaning on Powell to keep lowering rates.
All smoke and mirrors while fueled by record debt.
Tsar Nicholas was ultimately replaced by someone truly horrible, and his entire family was murdered. His first replacement was a muddle-headed Socialist who was quickly steamrollered by Lenin. So is Joe Biden Kerensky?
Why would anybody listen to M who 1st claims to be a RE expert but until recently never bought any RE and also preached for a year or more to wait for the 50-70% reduction in values ( which will happen as it will in the stock market) but bought at the top of the market . Any present stats that you look at related to housing are meaningless to both sides . What is impt is 30 million unemployed a very large % with above average income and 1000s of big businesses and millions of small businesses that will not survive.
The fed is pushing trillions into the market as I have said over and over there will be a V shape recovery in the stock market likely for 3-6 mos but after that the SHTF big time as landlord , renters and mortgage holders all have to pay up and employment does not recover enough to really help, 2-3x the debt of the previous recession with 10-11%unemployment at the same now it will likely peak at 25 % hopefully no higher.
The denial is obvious but before the end of this year the drop will occur in stocks ,real estate etc. deflation and depression the reset is here to offset years of fed stupidity and wall street corruption and to maintain a status quo would take trillions /wk the dollar and our debt financing would never survive that.
Live in denial but reality is finally coming like it or not even Musk is being realistic not a good sign for the markets!
50-70% crash. LOL. Maybe if there is an alien invasion?
Mr Lansner’s OC Register column today is on Corona Virus and home values. He is looking to the Recession of the early ’90s when unemployment peaked at 9.8% in 1992. Aerospace employment was particularly hard hit. Prices bottomed out in 1995. Not a crash but a lingering slump. In the early days of this decline, prices rose due to mortgage rates dropping to 8% (!). The rate had been 11% two years earlier.
Today we are seeing really low mortgage rates. Even builders are taking advantage by borrowing. According to the article, Tri-Pointe has recently borrowed $500 Million! The CFO said that the liquidity gave them “peace of mind”.
Lansner confirms pending sales down over a year ago but saw a recent increase in Inland Empire sales in a recent week. Some economic forecasters are seeing little effect on prices, but Lansner feels that is a best-case scenario, and history doesn’t necessarily support that view.
Depending on how long the shutdown lasts, I think we could be in for either a hiccough or a relatively mild case of Corona virus going to something worse. The low interest rate medicine wouldn’t be enough to save a market in need of an economic ventilator if this shutdown goes on and on. The 1990s model definitely is one to think about, as this event is more about job and income loss than shoddy lending practices.
Logan posts his Pending Home Sales Index
Today we got the first AD ( After The Disease) report on Pending home sales, which came in worse than expected, but the trend is not surprising. The previous release had shown growth month to month, but that didn’t really capture the effect of Covid19.
“The Pending Home Sales Index (PHSI),* http://www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, decreased 20.8% to 88.2 in March. Year-over-year, contract signings declined 16.3%. An index of 100 is equal to the level of contract activity in 2001.â€
https://loganmohtashami.com/2020/04/29/ad-data-pending-home-sales-purchase-applications-the-compound-interview/
“Landlords are bracing for a wave of rent defaults” CNN:
https://www.cnn.com/2020/05/03/success/landlords-rent-may-coronavirus/index.html
“Many landlords and property owners are looking with concern toward August. By July 31, the majority of eviction moratoriums will have expired and the $600 supplemental payment to unemployment benefits is set to end.”
California is re-opening This week. Just like I said they would
https://www.sfchronicle.com/politics/article/California-economy-can-start-reopening-this-week-15245743.php
Okay. I live in the mid west so there are probably not many AIRBNB to drag the market down. But in my area, house prices are shooting up like crazy. Prices have risen 13-15% since the beginning of the year.
Inventory for anything under $250k is almost zero. Just a side note, 6 months ago I could find close to 50 houses in my city under $150k and probably 300 under $250k. Now I can find about 50 under $250k. I only started looking the past couple of days for a friend. When I am on the redfin or zillow, and do a search under $200k, I see close to 150 houses, it is just that about 125 are all pending.
In the past 2 months, I have also received more cold calls, text messages, and letters offering to buy my house. The number is larger than the past 4 years combined.
Of course, these are investors trying to scoop up as many properties as they can with these low interest rates. That is my guess because we know there are about 30 million unemployed people who would not qualify for a loan right now.
Inventory is at an all time low. I expected such as people who were thinking about selling may not want strange people who may be contagious walking through their house.
This is crazy. If there is a game changer drug that is announced in the next few months….will we see some crazy inflation with all the money that has been printed.
Will we see some crazy inflation with all the money that has been printed?
Yes, likely!
Inflation only happens if more people get more money and then chase a fixed supply of something. That’s not how it works in the USA. In the USA we give more money to rich people, and nothing to working people. Think of the country as a supply-side cult.
So, with this new money, the price of things that rich people buy will go up (stock, real estate, art, etc), but consumer staples, not so much. Also, cost of labor will decline in the future as American workers get ground down harder and harder.
Agree, stocks and real estate will continue to push higher due to inflation. And even if RE or stocks would drop temporarily people with money step in. See that v shape in stocks?
100% agree especially the inflation part. This is happening right now and you are using real time market analysis and basic economic principles to form an educated response. I wish more people were like you but that’s okay, they’ll get burned not you.
Last year this time SoCal had 42k homes listed for sale. Wait for it….today we have 31k for sale! Not going in the right direction bears, does it?
I know I know. The millions of foreclosures are starting next month and we will see the 70% crash soon. Just wait a little bit longer.
Now you’re mocking 5 years of your own quotes. I think you’re more of an internet performance artist than you are a troll. All those years and useless pixels presenting your 50-70% off theory flushed Dow the drain after a (seemingly) single real estate transaction. Wow!
Rick, if you believe someone that says RE in the US will fall by 70% you might want to consider staying off the internet for a while.
US RE may fall by 70% but for that to happen you would need aggressive aliens to arrive vaporizing mainly buyers. If they vaporize sellers too than you run into low inventory which won’t allow prices to fall. So 1. Aliens need to arrive that are hostile and 2. These aliens must target buyers, lenders and real estate agents. 3. Aliens cannot target sellers.
If those conditions are met I am with you on the 70% crash.
Another small little fact for you…in 2007 we had 115k homes for sale!
Mind blowing but hey who cares about stats when it’s so easy to say now is the top and tomorrow it will crash!
Milli brags that because he works in tech, his job is safe.
Yet consider: https://www.vox.com/recode/2020/5/5/21248381/airbnb-layoffs-brian-chesky-startups-coronavirus-pandemic-revenue
Airbnb, seen until recently as one of Silicon Valley’s most financially secure unicorns, is laying off a quarter of its staff. It’s an ominous sign for the tech economy.
Brian Chesky, the company’s founder and CEO, told staff on Tuesday that the company’s revenue would be halved and that it would terminate about 1,900 of its 7,500 staff members — one of the largest layoffs in total that Silicon Valley has seen since the Covid-19 pandemic struck. …
Of course, this economy will leave Milli’s job unaffected. (Perhaps because all his posts are fictional?)
Son of a landlord,
No, I am bragging about having a high paying tech job. Yes. But I never said all tech jobs are safe. It’s obvious to me that some UBER jobs for instance would be lost.
Other tech companies are busy 24/7….those that support the healthcare sector, dna sequencing or the stay-at-home economy for instance.
Son of landlord wouldn’t know. He has never worked for a tech company. 🙂
Son of landlord … has never worked for a tech company.
True. But for all we know, neither have you.
Thanks for confirming! I guessed but I was very sure you haven’t and won’t work for a tech company. I do since a decade.
If you believe that or not is your choice.
You are correct, and so is M.
My customers are in the Mil-Aero market. They can’t hire enough people. There are 500 6 figure open job reqs in S. CA to hire people for what I do. Trump’s military budget is driving this. Working welfare.
The gaming chip business in Silicon Valley is BOOMING. Everyone is buying games. Nvidia, AMD, Intel.
The 5G cellphone market chip makers are booming. Qualcomm
The storage market is booming. Broadcom.
Medical engineering is the same way now as Our Millennial said.
Uber, Tesla, automotive, not as much. Nobody is going anywhere or buying cars.
Despite Uber and Tesla, the NASDAQ holding these booming markets is still near record highs.
CA has most of these booming companies so tax revenues should be excellent.
Thanks Bob, you are spot on
Just a thought “Consumer Financial Protection Bureau, published May 1, offered some clues as to what to expect during the recovery: Between the first and last week of March, auto loan inquiries had dropped by 52%, new mortgage inquiries dropped by 27%, and revolving credit card inequities dropped by 40%.“
Stick a fork in CA market, its toast- From Bloomberg on California. “Tesla Inc. Chief Executive Officer Elon Musk listed two of his California homes for sale Sunday, days after announcing that he would get rid of most of his possessions. He’s seeking a combined $39.5 million for the Bel Air properties, according to the listings on Zillow. Both are for sale by owner. As for high-end Los Angeles real estate, it’s not exactly a seller’s market at the moment. Sales of luxury homes already were suffering from a supply glut and weak demand before the coronavirus pandemic stopped most showings.â€
The Real Deal on California. “The pandemic has slowed down Los Angeles’ housing market, but there are still buyers and sellers looking to transact. 25175 Jim Bridger Road | $8.1M | Hidden Hills. The home was listed for just under $9 million as recently as a year ago, and the price dropped to $8.6 million in late April. 7847 Torreyson Drive | $8.3M | Laurel Canyon. It last sold for $11.4 million in 2015 and was listed in July of last year asking $9.5 million.â€
From The Sun on California. “A mega mansion once owned by a newspaper tycoon has been put on the market for $70 million less than its asking price. But the 18-bed luxury home, with capacity for a whopping 400 guests, will still set you back a cool $125 million. The house is three blocks away from Sunset Boulevard and boasts an Olympic-size swimming pool, tennis court, cinemas and colossal terraces. It was originally put on sale for $195 million.â€
The Orange County Register in California. “We’ve seen this scenario before. A sudden shock to the economy. Jobs lost. Lenders in trouble. Some early reports on April activity suggest discounting may have begun already. Zillow looked at listing trends for existing homes and condos and found the median asking price in Los Angeles and Orange counties, as of April 19, was $856,575 — down 7% in a month. Yes, it’s up 7% in a year but this same metric was growing at an 18% annual pace as of mid-March.â€
“As for new homes, the Meyers Group is now polling homebuilders on a weekly basis. Its latest survey shows 60% of Southern California division presidents are offering ‘concessions’ — buyer incentives that can range from helping with financing costs to paying agents to bring in customers. Short-run price fluctuations can be volatile and, at times, tricky to read. They can vary by price niches (luxury homes are weak sellers today) or neighborhoods (think, beach-close). And some price cuts aren’t always seen in market stats, such as sellers picking up repair bills, upgrade expenses or closing costs that they’d otherwise skip.â€
“The pandemic is putting cracks in the residential real estate game. Look at the ailing rental market. Some Southern Californians can’t pay their rent. In turn, local landlords are lowering rents to keep units full. This could dull the investment appeal of local homes.â€
If you bought a house in 2020, you are about to LO$E BiGLY
Sorry Realist. Here is why you’re wrong:
Blackrock CEO is advising Trump and the Fed. Guess who will get great real estate deal at Tax payer expense?
BlackRock Inc. Chief Executive Officer Larry Fink had a stark message for a private audience: As bad as things have been for corporate America in recent weeks, they’re likely to get worse.
Mass bankruptcies, empty planes, cautious consumers and an increase in the corporate tax rate to as high as 29% were part of a vision Fink sketched out on a call this week. The message from the leader of the world’s biggest asset manager contrasts with the ebullient tones of a stock market that has snapped back from recent lows.
Even among Wall Street luminaries, Fink speaks with particular clout. He has been advising President Donald Trump on how to navigate the effects of the coronavirus pandemic. And BlackRock is playing a key role in the Federal Reserve’s efforts to stabilize markets, helping the central bank buy billions of dollars in assets.
I believe realist doesn’t own stocks or real estate. If he would he would understand that you can only lose if you sell below your purchase price.
In order for me to sell my house I would need someone to offer me at least double of what I have paid. Never sell real estate. It can only go up over time.
New Mille: Never sell real estate. It can only go up over time.
But you said RE always goes in CYCLES. A crash every 11 years or so. Like clockwork.
As a “real estate expert” you guaranteed crashes to come.
Like I said, If You Bought Real Estate in 2020, You are about to LO$E BiGLY
This is a life lesson that will keep on teaching you long after you are done paying it off, LONG AFTERWARD$.
One financial lesson you can’t buy, experience. Enjoy your financial mi$take.
Always
Perma bears: it’s a bubble, it’s a bubble! Now is the top.
People with money: the best time to buy (stocks and RE) was yesterday. The second best time is today.
I think this is really amusing.
M, formerly “Our Millennial” is parroting EVERYTHING Mr Landlord, and Son of a Landlord said from 2016-2019.
Now Mr Landlord and Son of a Landlord were completely wrong??
Gasp! No wonder Mr Landlord has disappeared.
Yes, M is trolling us, but with the exact comments we have heard from the Housing Bulls over the last 4 years. He learns well.
The truth is somewhere in the middle. I am grateful for both the Bears and the Bulls over the last few years on this blog. They all have great points, but like me, their crystal balls are broken.
Personally,, I think Covid is a temporary thing. There will be a vaccine within the next 1-2 years or 3.5M elderly and weak will die in the US. 1-2 years is temporary for buying a house or equities.
Your house is your castle. During a pandemic people hunker down. Sellers pull off listings and demand is rising due to a housing shortage and historic low rates. It makes sense to be a bit bullish. Waiters and stewardesses will be hired back as we open. And those people weren’t necessarily in line to buy a home anytime soon anyways.
+14% unemployment just means the FED will print and pump more money into the economy. Companies bought back shares during the March lows. Some of the REITS I bought get you 15% dividend yield. P/E ratios way below 20.
A vaccine is on the way. Just a matter of time. A virus can’t bring us down. Especially if the entire world is printing like there is no tomorrow. Don’t miss out further on these buying opportunities. What are good inflation hedges? RE, gold, stocks and Bitcoin
M, formerly “Our Millennial†is parroting EVERYTHING Mr Landlord, and Son of a Landlord said from 2016-2019. … Yes, M is trolling us, but with the exact comments we have heard from the Housing Bulls over the last 4 years.
I’ve not heard M repeat any of my comments.
For years, I predicted we were about to plateau, and was surprised that I was wrong. That housing prices kept rising.
I said that Prop 13 would likely be repealed, but over the course of decades, bit by bit, beginning with commercial rent control.
M has taken extreme positions on both sides of every issue. But the truly troll like aspect to M is the joyful glee in his dishonesty and others’ misfortunes.
His glee at trespassing into his neighbor’s pool.
His glee in fooling his landlady about how poor he is, so she won’t raise his rent.
His glee at the people who will lose money when housing crashes (“We need somebody to buy at the top, so the rest of us can profit when there’s a 50-70% crash.”).
His glee at the many Boomer homeowners about to die, bringing a 50-70% crash.
His glee at the impending repeal of Prop 13, and Boomers losing their homes.
And then … a complete reversal, and joyful glee in all the opposites. In the benefits of Prop 13, in high home prices, etc.
I think for some people it would be healthier to stay off the internet for a while or they just have too much time during the stay at home orders 🙂
I never trespassed my neighbors pool.
My friend who lived in an adjacent community gave me the key code for the gate so I could use their pool. It was nice during hot summer days.
Now, as a homeowner I will get my own pool and as a good neighbor I will invite nice neighbors to party with me.
I would even invite son of a landlord. 🙂
Bob and SOL, good job on breaking down Millies ridiculous performance art. He gets a private kick out of out of his “performance.†Best to now ignore him completely for he has completely given himself away.
“The next crash will be beautiful. 50-70% discounts are waiting. We will see it within the next few years. As we all know the market crashes every ten years on average. Experts like me know it’s all about timing and nothing else.
If you think now is a great time to buy why share your secret and waste your time trying to convince us? Go out and buy buddy.â€
“ I love my old landlord lady. I am not a big fan of boomers as they seem entitled and selfish. They have gotten too many freebies.
But my landlord lady is an exception. She hasn’t raised my rent and she believes all the sob stories that I can barely afford to buy food. Don’t tell her I have no debt, a six figure tech job, a large downpayment and a working wife. 😉 I call it househacking.â€
“ RE cheerleaders hate rental parity math or any housing related math because it shows that buying at the peak never works out. You save in good times and buy houses during the ten year crash. Overpaying 50-70% for a house is the dumbest choice one can make in life. Every RE expert knows that housing is all about timing. Obviously a RE shill can’t agree because they need the greater fool to buy at the top to keep on order to keep the bubble going.â€
-Millie
And don’t forget the numerous messages bragging about sneaking into the pool.
Our Millennial, or M was probably on the debate team in high school. He can defend any side of an argument. Economics is not a hard science so there are many conflicting theories with good justifications and arguments for all of them.
Engineers tend to like facts and proven science. There is no rational debate possible with Newton’s Laws of Physics so it is entertaining for an engineer to take a soft science like economics and take a side and defend it. To some, it is called trolling.
If he wasn’t an engineer, he’d probably be a lawyer.
Either the explanation above, or he has a multiple personality disorder, “M” and Our “Millennial” that switches depending on how the economy is doing. 🙂
Bob, Or people can just change their mind.
I am just a guy who is excited about his first house purchase and about the future of buying more real estate (first investment property).
It’s doesn’t have to be overly complicated:
In SoCal, you buy RE when you comfortably can afford it
If you run into a position where RE is at or below rental parity (considering 20% down) you add to your RE portfolio and become a landlord
I became both by buying a house with built in granny flat but I am not a big fan of having strangers in my house. It pays more than a third of my PITI and I figured the risk is low since we have no kids. It feels great that someone pays you for living in your asset but I don’t necessarily want that person in my kitchen.
I tasted blood and consider to buy a SFH fixer and make it a sweat equity project
The good deals still go fast In SoCal and I am not in a hurry.
It’s always good in life to look at the other side of the argument and sometimes you have to switch. Avoid the extremes (left and right). Often, the truth is found somewhere in the middle. I appreciate sites like this where a variety of opinions can be found.
M,
Good points. Humans rationalize their decisions based on their current condition.
Stereotypically. engineers tend to change opinions over time and determine them to be hard truths.
You inherited a money and that changed your condition. You could have:
1) Invested all of your money in airline stocks and lost 80% of the value by now.
2) Invested in Bitcoin in january and be up about 5% now.
3) Buy a house to live in that you could afford and enjoy it. Never having to worry about rent again and some rental income as a bonus.
Good choice.
You are like most of us. We rationalize our decisions based on our conditions.
However, being the realist that I am, I realize nothing is predictable.
10 years from now if you want to sell:
1) Your house could be worth 10X what you paid today
or
2) Santa Barbara was decimated by earthquakes in 1812 and 1925. About every 100 years. Just like pandemics. 1918 and 2020. We are overdue. Your house in 10 years may be worthless and flat as a pancake at that time. I wouldn’t bet on an earthquake but I never would have bet on a pandemic either. You might have been better off renting.
3) Most likely, your house will be up on average the rate of inflation. Whatever that is.
Nobody has a crystal ball that works. Mine broke in the Northridge quake in 1994 but my house was OK.
My point is that nobody knows the future but we all are betting and rationalizing on hopes and dreams of what the future will be.
This blog helps us all with points of view that help us make our decisions. You were providing the only Bear view for many years. That was valuable. Thank you.
“If you bought a house in 2020, you are about to LO$E BiGLY”
Hi, “M!”
Josh, Rofl!!
Another one that doesn’t own equities.
Tell us, how do you lose money buying a house? Do you know what book value means?
I’ll explain. Besides stocks and real estate, I own a shit ton of cryptocurrency. Sometimes the market price goes down by 50,60,70%. So? Did I lose money? Not a dime. The book value went down.
You can only lose when you SELL. In order for me to sell bitcoin, cardano, lite coin etc I need to see bitcoin at a 100k per coin. Its just patience.
Same with stocks and real estate. I welcome the doom and gloom because it’s a buying opportunity.
You are using a blanket statement. It all depends where the house is located, this will tell you how bigly the decline will be. To expect a massive decline in ultra desirable coastal CA is a pipe dream. Declines in not so desirable areas will likely happen. Just look back at the 2007 timeframe, this will give you a good indicator of what type of declines you will see. In those 13 years, the supply/demand imbalance has only increased, rent has skyrocketed and the rich have gotten filthy rich. To think you will get a firesale in some of these areas is ludicrous. Even if I got a 20% off sale for a beach close home, I would be doing cartwheels.
“Book value” Loooooooooooool. Of course you lost money. You sound like a total noob or rather a bag holder in denial when you make such statements.
Lets say both of us buy a share of ABC stock for $100 (insert your favorite stock or equity) and it drops to $50. You hold hold onto your shares. I sell my share for $50 and immediately turn around and buy a share for $50. We both lost 50% on that investment. It doesn’t matter if you “sold” or not. Not selling = buying at the price that day. Any actual investor, not an internet troll, understands that premise. The things you say keep the noob from jumping off a cliff and dumping his index funds when the market drops 30% like it did last month.
So when (in your world) do you lose money? What if that stock (or bitcoin) drops to a penny? What if it stays there for a decade? Did you lose money yet?
You supposedly bought a home with actual cash. If your home drops 50% in value (like you predicted) explain to me how to you didn’t lose any money if I buy a comparable house on your street for half off? Yes, you might buy an investment property but that doesn’t negate the fact that I can buy your home (or one on your street) for half the money you spent. I can also turn around and use that money that I didn’t “lose” and buy even more investment homes that you cannot with less leverage. I can then turn around a sell such properties and realize those gains that you cannot on paper or otherwise.
Whether you choose to “realize” your losses is a mental exercise. You lost money if you believe it or not. Don’t believe me? Even the IRS allows you take losses without actually selling a stock. So how can that be? How can I claim a loss to the government based on your philosophy? You think you know more than the IRS when it comes to gains/losses? LOOOOL!
When your net worth drops in half whether it be from real estate or equity losses, bitcoin, gold, pork bellies, try going to the bank to get a loan based on the value of your “net worth” when they were purchased (not book value)- you’ll get laughed out the door.
“But Mr. Bank, my equities were worth a million a a year ago so you should give me a loan based on that amount. I know my stocks are worth a penny today but they might be worth $10 million in 50 years!” Looooooooooooooooooooool!!
Stick to tech. Your finance knowledge is C+ at best. Congrats on your supposed home purchase. The fact that you can buy an investment home if the market drops doesn’t negate the fact you lost money. Your home is the place you live, not an investment. But when you talk about being an “investor” then I’ll say you lost money if the market tanks.
The things you say sound like the recycled garbage from financial investors to keep their clients from blowing their heads off when the market crashes.
I stopped reading when he said “drops to a pennyâ€
I have heard bitcoin will go to zero for 5+ years now 🙂
Now, are you telling us it still will got to zero?
And stocks and RE as well?
Stocks and RE can only go up over time. Small corrections along the way are buying opportunities.
A decrease in book value temporarily won’t even be noticeable! How can you be so silly and think that equals losing money?
I could only lose if I sold at a lower price? It’s unbelievable people don’t get these basicsZ for me to sell this dream house someone would have to offer at least double of what I paid
“ I must have hit the spot ;)after all you told me I understand why you have to be a RE cheerleader and wanting to sucker in the last fool before it all crashes again.
I still can’t believe you would actually post this. After 8 years such a pathetic gain. I saved more money by doing nothing but renting cheap. Rofl.
And the stuff that is invested can be liquidated tomorrow if I want to. Try that with a house. You are one of those that think that house bookvalue is yours to keep. No wonder you are Have to tell yourself and others there won’t be a crash.
Hopping fences lol. That’s your best shot? Come on, you can do better. It’s actually a Wall.
When the gate code changes to the adjacent community with he beautiful pool I am just a text message away from getting in 😀â€
Millie, here’s your own words about book value from a couple months ago. Go ahead, contradict yourself some more you douche.
What has me visiting my old neighbors pool to do with our conversation about book value and that you can’t lose money by buying real estate unless you plan on selling below your purchasing price? I believe the answer is nothing.
“ RE cheerleaders always make up stories and numbers. The truth is most people overpay for real estate and need it to keep going up. But that’s not how the world works. People who went to college know that economies move in cycles. Your made up book value vaporizes during the downturn. Most houses that were bought during the last peak in 2005 crashed in 2009-2013 and haven’t even recovered yet. It’s pathetic to think that people are that dumb and believe that it is always a good time to buy. Smart investors like me get rich buy waiting for the crash and buying low. If you don’t Listen, then you have to learn the hard way. Keep buying at the peak and see what happens during the next crash. Just don’t complain when I buy next door for 50% off.
“Made up book value†Loool your words from the “distant past†2 months ago.
Real estate in SoCal always go up over time. It doesn’t matter when you buy. Buy and hold for the long term. Investment property is a bit different. I am looking for a deal and take my time. Looking for a fixer upper in the 450-500’s that sell in the 600’ as “turn keyâ€.
Planning on renting it out.
More bad news for tech. Uber is cutting staff: https://www.businessinsider.com/uber-announces-layoffs-3700-job-cuts-14-percent-employees-coronavirus-2020-5?op=1
Uber said on Wednesday that it would cut 3,700 jobs, representing about 14% of its global workforce, as the coronavirus pandemic ravages ride-hailing revenue.
This is the future of RE in S. Cal:
https://www.foxnews.com/us/la-city-council-votes-to-name-hotels-that-refuse-to-house-homeless-may-commandeer-them
Keep paying top dollar for RE while electing communists in power – what can go wrong???!!!!…
When is your premium 5 million property going to be “commandeered”? You think your property is immune? Think again! These guys paid as much 42 million to live in a structure along with hundreds of homeless drinking and using drugs!!!… In SF the city provided those.
Yes, keep believing in “social distancing”!…In the next fabricated crisis they will put these homeless in the same room with you. In some western european countries, they want to have 2 people per room. If your family does not have that, they will force you to rent to additional people, of course at government set rents. You can not discriminate – if the government wants you to take newly arrived people from Somalia, you have to virtue signal and say “yes please”. Oh! I forgot about the “New Green Deal”; say bye to personal car and welcome to public transportation. Also, to save fuel (low carbon foot print), you will be squished like sardines with all those homeless who receive free pass, supported by your taxes.
Yes, Bob, keep electing communists, promote open borders, fight for bigger and bigger government – what can go wrong? Of course you don’t want the tsar removed….LOL. Too bad you are old and you are not going to taste what you are promoting. Also, too bad for Millennial – he will see all of it and remember what I said. As for me, I saw all that before! I still remember that nightmare!…
For those who say the lockdown won’t affect housing prices, because waiters and bartenders don’t buy houses:
https://www.seattletimes.com/business/real-estate/coronavirus-wallops-seattle-area-home-market-knocking-down-sales-and-prices/
Linda Sikora bought her Bryn Mawr house in 2017. When the pandemic hit, most of the clients at her market research firm backed out of their contracts. Sikora’s wife has been furloughed from her job as a pet groomer.
Until Sikora is approved for a federal small business loan, “we have no income coming in,†she said. Her lender, First Savings Bank, agreed to defer her mortgage payments for three months, but told her that “on the first day of that fourth month, I would owe all three months of mortgage plus the current balance,†Sikora said — $11,000, an amount she knows she can’t pay.
Yes, pet groomers have bought houses in the Seattle area. And now they can’t pay the mortgage.
My question is:
1) She has an 11,000/4 month mortage (33K/year)
2) In sane times, that should be 1/3 of her income. (100K/year)
3) Do pet groomers really make 100K/year or is this another case of loose lending practices that caused the 2008 crash?
If pet groomers make six figures, I want to become one. Dogs only though.
This is the future of RE in S. Cal:
https://www.foxnews.com/us/la-city-council-votes-to-name-hotels-that-refuse-to-house-homeless-may-commandeer-them
Keep paying top dollar for RE while electing communists in power – what can go wrong???!!!!…
When is your premium 5 million property going to be “commandeered”? You think your property is immune? Think again! These guys paid as much 42 million to live in a structure along with hundreds of homeless drinking and using drugs!!!… In SF the city provided those.
Yes, keep believing in “social distancing”!…In the next fabricated crisis they will put these homeless in the same room with you. In some western european countries, they want to have 2 people per room. If your family does not have that, they will force you to rent to additional people, of course at government set rents. You can not discriminate – if the government wants you to take newly arrived people from Somalia, you have to virtue signal and say “yes please”. Oh! I forgot about the “New Green Deal”; say bye to personal car and welcome to public transportation. Also, to save fuel (low carbon foot print), you will be squished like sardines with all those homeless who receive free pass, supported by your taxes.
Yes, Bob, keep electing communists, promote open borders, fight for bigger and bigger government – what can go wrong? Of course you don’t want the tsar removed….LOL. Too bad you are old and you are not going to taste what you are promoting. Also, too bad for Millennial – he will see all of it and remember what I said. As for me, I saw all that before! I still remember that nightmare!…
This is the future of RE in S. Cal:
https://www.foxnews.com/us/la-city-council-votes-to-name-hotels-that-refuse-to-house-homeless-may-commandeer-them
Keep paying top dollar for RE while electing communists in power – what can go wrong???!!!!…
When is your premium 5 million property going to be “commandeered”? You think your property is immune? Think again! These guys paid as much 42 million to live in a structure along with hundreds of homeless drinking and using drugs!!!… In SF the city provided those.
Yes, keep believing in “social distancing”!…In the next fabricated crisis they will put these homeless in the same room with you. In some western european countries, they want to have 2 people per room. If your family does not have that, they will force you to rent to additional people, of course at government set rents. You can not discriminate – if the government wants you to take newly arrived people from Somalia, you have to virtue signal and say “yes please”. Oh! I forgot about the “New Green Deal”; say bye to personal car and welcome to public transportation. Also, to save fuel (low carbon foot print), you will be squished like sardines with all those homeless who receive free pass, supported by your taxes.
Yes, Bob, keep electing communists, promote open borders, fight for bigger and bigger government – what can go wrong? Of course you don’t want the tsar removed….LOL. Too bad you are old and you are not going to taste what you are promoting. Also, too bad for Millennial – he will see all of it and remember what I said. As for me, I saw all that before! I still remember that nightmare!…
In Italy, they commandeers hotels to house African migrants. The hotel owner didn’t want them, so the Italian govt forced the hotel to take them. Turned a nice hotel into a Third World migrant shelter.
Europe had and continues to have massive problems with millions of immigrants from the Middle East. Without papers you have no idea who these people are.
the vast majority of those people don’t share the same values as you and they have no motivation to adapt to your standards and values.
That is one of the reasons why even liberals turn to extreme right wing parties in Europe. It’s an issue of an existential threat than anything else. You think we have issues in our country? Wait until millions and millions of Middle Easterners arrive.
More people who’ve bought houses (who are NOT doctors, lawyers, or tech workers):
https://www.pnj.com/story/news/2020/05/04/coronavirus-florida-lawyer-says-hoas-using-loophole-foreclosures/3065363001/
His house is going up for auction Thursday, and with COVID-19 social distancing cutting his hours as a smoking cessation coach, Leitch said there’s virtually no chance he’ll be able to pay off what he owes in time.
https://www.nola.com/news/coronavirus/article_4730b4b4-8fda-11ea-be8a-ef72eaeea63a.html
In Baton Rouge, yoga teacher and massage therapist Noura Skakri has been making partial mortgage payments as best as she and her husband can, even though forbearance was approved by their lender. She’s doing some online sessions but mostly is out of work because of the state-imposed shutdown of nonessential businesses and stay-at-home order issued in mid-March to contain the spread of the coronavirus pandemic.
Looks like there WILL be a wave of foreclosures.
I think we can all agree that Millie is just a troll. Where’s JT by the way?
California Coronavirus Update: Governor Gavin Newsom Predicts “Depression-Era†Unemployment Rates in State. People brace Yourself it’s about to get real bumpy.
Governor Gavin Newsom
PredictsHopes for “Depression-Era†Unemployment Rates in State. People brace Yourself it’s about to get real bumpy.I don’t think it’s “hope forâ€. Nice sarcasm though!!!
All that free Fed cash is flowing into funds set to snap up any distressed assets. JPMorgan’s Strategic Property Fund just expanded its single family home purchasing from $250 to $625 million. Giant corporations armed with 0% financing are on the prowl in the housing market. The fantasy of a 50% housing drop is just that, a fantasy.
Most Americans will not understand what giant finance corporations have taken from them — their land, their economic freedom. Americans were so worried about big government, that they completely overlooked Big Capital. Now it owns them, and it will work them to death — more and harder work for less, and shorter lifespans. Already wealthy Americans live on average 12 years longer than poor workers. That trend will accelerate now.
and if you Purchased or Own a Home in CA- YOU ABOUT TO TAKE A SERIOUS BEATING, Stick a Fork in it, Housing is DONE!
San Diego Unemployment Rate Nearly 27%, Breaking County Record Set During Great Depression
https://www.zerohedge.com/economics/san-diego-unemployment-rate-nearly-27-breaking-county-record-set-during-great-depression
You are missing what has changed since 2008, what really is different this time — corporate America has captured control of the money supply at the Federal Reserve. Jerome Powell is a Carlyle guy and the American money supply is now being directed to the interest of private equity only.
The stock market spiked up again on Friday because foreign liquidity swaps are hitting — the Fed is swapping dollars to other Central Banks on the understanding that those CBs will buy U.S. equities. So, functionally, the Fed is already buying American stock. All that new money will put a floor under housing prices, as it has for stock.
Bottom line, Mr. Market doesn’t care about the unemployment rate because his money is coming from the source — the Central Banks. Sure, it will be better when the wage slaves start earning again, but Mr. Market will float through this storm just fine. He has friends at the Fed. The American worker? Not so much.
Brixton,
Great analysis. “Wage Slavesâ€. Lol. Very sad but very true. And whatever it takes to defy natural economics and create their own version of economics. There is no historical data to compare. Artificial inflation of asset prices and keep cheap money circulating. Insert wage slaves where needed to help cause.
“Del Mar at 21.5 percent.”
So much for this only affecting people with low wage jobs.
Some commenters are in denial about the likely long-term impact. Of course prices haven’t reacted yet. This is real estate. It takes time. Congress is not going to print money forever. Mortgages forbearance will not last forever and in many cases it will not be tacked onto the end of the mortgage (30% of mortgages aren’t even eligible for forbearance to begin with).
The fact is that few households making $60K can comfortably afford the mortgage on a $600K house and a crises with employment has just begun. I hope jobs come back, but how long will that take? Businesses are spooked. Many are finished (pretty sad that Soup Plantation is closing every single location in every state, permanently).
Thanks for tracking the market Steven Thomas!
San Diego demand is up …..17%!!!
Active listings are up 3%.
Expected market time is below 90 now and in a slight sellers market territory! You heard that right, a market that favors sellers. Housing shortage everyone?!?!
I am going to have fun with those perma bears telling us the crash is near.
Please don’t go away!
HISTORIC low rates combined with HISTORIC low inventory….that’s the reality.
and NO word on CLOSINGS ???? lol
San Diego demand is up …..17%!!!
Active listings are up 3%.
If you Own a Home in CA, You Are LO$ING Equity by the Day and will LO$E 30-40% in Valued over the next 12-24 months.
Stick A Fork In The CA Market, It’s DONE.
What about mortgage forbearance? 30% not eligible. Many others will have to repay immediately after 12 months.
Are you thinking that jobs will come rushing back? 21% unemployment in Del Mar. Those aren’t folks working in movie theaters or hotels.
It’s going to come down to jobs. Will they recover fast enough to save real estate?
For real estate to fall this year you need inventory to skyrocket right now.
It’s not though…..compare inventory levels from today to 2007. Night and day
I don’t think some of you are thinking of the ripple effect that is about to occur. Did anyone note the California will be in the red of about 29 billion. City, state and county employees will be furloughed real soon. Those same people will then stop buying Unnecessary items.
Cares act 2.0 is coming. Prepare for a stimulus packet and direct payments to citizens in a form that you haven’t seen before. Powell said “go bigâ€.
In other words, there is no end to money printing.
If it’s possible that there can be “no end to money printing” then I wonder why they didn’t send checks to the upper middle class and I wonder why they’re tightening up PPP.
That’s easy. Working and so-called middle class people in the USA don’t own anything worth taking. They are the American walking dead. So, now comes the squeeze on the upper-middle class people who deluded themselves into thinking that their white collar status would protect them from Big Capital.
Doctors with student loans and house debt — boom. Leveraged small entrepreneurs with debt — boom. Then, as those folks lose homes, Big Capital will come in and scoop up those houses, and turn those owners into renters.
This is 2008 all over again, but the population of people who are about to get eaten is a little more upscale. That said, as American faux-capitalism runs out of Americans to destroy, it is getting harder to blame the victims. Young doctors made bad choices! LOL
Eventually, everyone is going to see the vampire in the room, which is our deregulated banking system that privatizes profit and socializes risk.
@Brixton: “This is 2008 all over again”
What you say, it is true. However, based on how much the democrat governors drag their feet to open their states economies, in my opinion the fallout of this lockdown is going to make 2008 a walk in the park. No amount of stimulus can compensate for the closing of the economy; therefore, expect massive deflation.
Given this background, even those who received trillions will be afraid to invest (see Warren Buffet sitting on over 100 billions in cash). If they pay down some of their debts, the money supply will decrease and a major deflation will take place. Yes, inflation can happen but it takes confidence for people and businesses to borrow. The FED can make funds available, but can not force anyone to borrow. What they sent to the people as stimulus funds, in the grand scheme of things, it is a drop in the bucket.
I believe that at least for the next 2 years we’ll see deflation for almost everything except some food products late in the year due to broken supply chains.
“Have you seen what happened in Japan or Europe? They have negative yielding ten year bonds. Mortgage rates are close to zero there. Still, you can’t push asset prices into sky. Prices will decline. Here in the US we will see a massive crash and you will be able to buy RE 50-70% lower.“ -Millie
So glad I bought real estate recently. Perfect inflation hedge beside my bitcoins and stocks!
Pelosi, Trump and Powell want to go big! Print baby print!
Purchase applications increased 25%!!
So, we had low demand and very low supply which is now changing to more demand and very, very low supply.
Loomis, CA Housing Prices Crater 11% YOY As Double Digit Price Declines Ravage Sacramento Area
https://www.movoto.com/loomis-ca/market-trends/
As one noted economist questioned, “Why buy a house when you can rent one for half the monthly cost?â€
If You Own Real Estate in CA, You Lost Equity Today, Tomorrow and in 2021.
Stick a fork in CA, it’s done!
I am so glad US government was putting money aside for a rainy day! I did not get any CARES 1.0, but I hope they include some of us middle class guys in the Handout 2.0 this time. I will buy a nice mountain bike for my kid with it. Got to stimulate local economy.
On a more serious note, these stimulus checks don’t even cover monthly rent in high cost zip code like San Diego. Once the economic multiplier unfolds and the demand drops for durable goods, the layoffs will hit middle class folks – tech sector included. You think unemployed bartenders and waiters will buy a lot of new iPhones? Eventually, this wave will reach real estate and you will realize you would saved couple hundred thousand dollars if you followed your own damned advice and waited to buy RE.
I am following the advise from the previous the old M.
RE falling by several hundred thousands? Sure, I will be my first investment property when that happens! For starters, wake me up when real estate falls just by 5%.
I cannot believe the irony in Millennial’s big home purchase. This is literally the moment he’s been waiting for. The last month or so, homes have gone pending at lightning speed. He’s right, inventory is low because sellers decided to wait for the dust to settle. But I’m already watching homes sit longer, new listings flooding the market, and seeing significant price reductions. 3 weeks ago, we thought this will all be over soon, it’s not that bad, and interest rates are at an all time low. However, it’s becoming clearer by the day that unemployment will continue rising, lenders are tightening their standards, and fewer people will be able to buy homes. Fewer buyers who are able to qualify for less and are making less, brings home values down. Our budget rose over the last few years of saving and wage growth. However now I’m considering quitting my career because schools may continue remote learning and it’s not feasible to work and be a homeschool teacher. Multiply this by everyone else in my shoes (millennials with young families and dual income aka a large share of buyers) who may also consider shifting careers to support their family and those astronomical home values of 2017-2019 are nothing but a memory. Hopefully the school districts do not continue remote learning as this would not only have an enormous impact on families, but also for teachers with young children at home, as well. Also – San Diego CPA – Yes, a handout for the “upper middle class” would have been nice. The biggest group of contributors and spenders. Love seeing our money managed so poorly. SMH.
Team millennial, I wish you the best.
I changed my view. I don’t have to wait until prices go down further.
I bought a beautiful new house with built in multi-gen unit. What better investment is there for My excess cash? I think I will do great over the long term.
Very good commute, not too far from the beach, fantastic school district and lots of parks in the area.
I don’t mind if prices go down and more people can afford to qualify. I know I will be seriously looking to add to my portfolio and buy my first investment property.
https://www.foxnews.com/politics/california-democrats-say-10-year-rent-relief-plan-not-a-giveaway
CA is 54 billion in a whole and is buying votes using the landlord’s assets. Communism all the way! Who cares about contract law, eminent domain with due compensation and other capitalist constructs?!!!…10 years! How much will those rents buy 3 years from now?….What a sick bunch of people CA has in power! A true reflection of those voting for those sickos….A landlord must be missing marbles to buy a property in CA unless you are BlackRock with direct access to the FED and having top lawyers and judges in your pocket.
You can’t squeeze blood out of turnip.
With wages so low during this horrendous Trump/Bush economy. 10 years may be what it takes for landlords to be eventually paid.
Otherwise, gasp! The peasants may revolt and vote in a commie for President.
Bob, are you just ignorant of the history the policies you advocate for have or just to stupid to realize that the results won’t be different? Or are you part of the government worker aristocracy so don’t really care if the rest of the population suffers because you won’t be the one suffering.
You may not like it but the facts are, capitalism has moved more people out of poverty than any other system. Socialism on the other hand has had the effect of making everyone a lot poorer, but they’re all equally poor, except for those who work in government who are the new wealthy, so we celebrate this?
What could possibily go wrong M ,4 million in Ca unemployed in weeks almost every major stock market player is sending out the alarm of extreme over value. ???????????????????? Deflation !!!!!!!!!!!!!
Deflation? Nope, we are going to see slight inflation. There will be more money printing. Good for home owners and stock holders. And bitcoin holders 🙂
“Yawn, now he’s coming again with the “inflation is coming inflation is comingâ€!
We heard that BS for years now. People aren’t that dumb anymore tank in sight.
They don’t buy your overpriced crapshacks. Just get a real job and stop trying to find the next sucker for a commission check.” – Millie
This economy and RE are not going to rebound for a very long time due to liberal governors changing the meme from “flatten the curve” to “flatten the economy” in an election year. The 2-3 weeks lockdown became 2-3 months with extensions to November 4, if they win the WH; if not, for the next 2-3 years.
Today, governor Gruesome decided to cut all state employees wages by 10%. While applaud this, it is only a small beginning. Soon he will make cuts not only 50% in salaries but 50% in workforce. Why? Because no bank is going to lend to a bankrupt state and no sane CEO will keep the business in CA to become a milking cow for gov. Gruesome.
Well the governor acts this way, because contrary to what he says, he cares exactly zero about lives and businesses destroyed as long as as he can act as the tyrant he is and someone else will pay for the consequences.
On the bright side, the Californians will become so sick of electing totalitarian communists that the democrats will not get in power for a generation unless they steal and falsify all votes (based on their history I would not be surprised).
Flyover / Cali is and becoming a further disaster , the Gruesome never read Atlas Shrugged or understands free markets or democracy. The huge difference in policy can be seen in how Texas and Florida have reopened.
And for all those out there who will cry about the increase in deaths different stats have shown that over 90% of the deaths from the virus are with those that have existing illnesses or health complications .
I am 71 I will take my chances anytime with freedom of choice than lockdown welfare , Musk is right a move Cali to a state where freedoms are still honored !
Those that will give up their freedom for security deserve neither to paraphrase
Flyover,
The CA government cares about the people and the workers. Are you against that??
If you don’t like that, be prepared for a full-on Communist Revolution.
Please stop backing the crony Capitalists. You will lose and the results will be even worse than what you experienced in Russia.
Bob, another communist liberal governor (Inslee of WA) decided in his great wisdom to ask for personal ID for all who go to restaurants but no need for that for those who vote. ACLU sued him and he backed down but not before he showed to all the voters what a NAZI he is. Like the poor small business owners need another government interference when their demand plummeted since the lockdown. Those frequent patrons can also get a “yellow star” for faster service.
It makes me sick not because these types of NAZI get in power but also because there are people like you supporting them.
Yet red states will take a fed gov’t hand out for a natural disaster such as hurricanes and tornadoes. Then all the people working at Walmart for minimum wage in red states get food stamps and housing assistance from the Fed Gov’t and the red states enjoy that help because they don’t have to pay a living wage. But all you can do is complain about blue states, so fake.
Kent, if you enjoy a bankrupt state, you can keep your bankrupt state.
If you enjoy the chains of totalitarianism, you can keep your chains. If you enjoy safety more than freedom, you’ll lose them both.
CA is projecting a debt hole this year of $54 billion. Did you ever think how much your taxes at every level will have to be increased?!???….Unlike the federal government, CA can not print dollars. If they can’t, they are left with 2 options: borrow or tax. If they raise taxes on businesses, most of them will leave state and they have to raise taxes so much that they will bankrupt those still left. Don’t you ever think that they will increase only income taxes; they will increase all the taxes and create new ones. Nobody will escape them, not even you. They have a vast array of taxes and fees and they will create new once.
If you think that the federal government will bail out the state, think again. They will create a competition among the state who can spend money the fastest – moral hazard.
If you think the state will borrow, think again. Who is going to lend to a state who can not manage their finances? If they do, at what interest (they have to cover the risk of default). If taxes were not enough before, with low interest, how will they be enough with higher interest?
If other states fail financially, how would that help CA? The governor can not expect to ruin the economy by keeping it closed forever and expect the other states to pay for his decisions. Initially he said 2-3 weeks to flatten the curve. He did that. All he is accomplishing now is to flatten the state economy.
Flyover is worried about California being a bankrupt state, yet ignores Trump increasing the national debt $4 trillion dollars in a few months time. You’re so fake.
Holy crap!!!
Numbers just came out by Steven Thomas!
SoCal inventory
In 2007 we had 115k for sale
In 2019 we had 43k for sale
Yesterday we had 31k for sale!!!!
Based on SoCal data: 41% increase in demand! Wish I could show you the chart. A fuc**** v shape in demand!!
Expected market time to completely blow your mind:
2 weeks ago 105 days was the expected market time.
Now….76 days!!!!!! We are going towards a hotter sellers market!!
“Everything is going wrong for our RE cheerleaders. Sales volume is down, price reductions left and right and people have no issue waiting it out because they stay at their parents home – FOR FREE” – Millie
Freakin San Diego….
Expected market time 63 days!!
Below 60 is considered a HOT Sellers market!
If you believe we will see a price crash soon you are smoking crack.
Do these mega perma bears actually look at data? I highly doubt it.
“he cares exactly zero about lives and businesses destroyed as long as as he can act as the tyrant he is and someone else will pay for the consequences.â€
… please back slowly away from your computer. Now sit and strike a meditative pose and slowly breathe in and out. Btw, your description is a perfect summary of your current president.
The house in my neighborhood that the owners were going to sell just came up on line less than an hour ago! They want $690K. 1300 sq ft 3 Br 2 Ba 7000 sq ft lot. I’ll keep you informed on the progress of the sale. It is currently unoccupied and has been staged for the sale. I think the over under on this (50:50) is $675K. We’ll see!
My Wife who spotted the sale on line gave her prediction at $635K and then after doing some calculations raised it to $645K. I’m sticking with $675K because a dollar is not a dollar anymore.
Joe, thanks for the info. For context, could you please give us a bit more info about the location. How are schools? How far from the beach? Are there good companies in the area? Thanks.
The realtor already has an offer for it. Presumably at full price. Three days on the market!
I’ll keep watching to see if it falls through.
This Santa Monica house’s price HAS to be a mistake. If not, it’s the ultimate House of Genius: https://www.redfin.com/CA/Santa-Monica/2017-S-Centinela-Ave-90404/home/6764529
* 3 bed/1 bath
* House is 1,212 sq ft.
* Lot is 5,871 sq ft
* Located in Pico District, on Centinela, near the 10 on ramp.
* Price: $3,495,000
Perhaps if the lost were zoned commercial, so the SFH could be torn down?
Listing says: Look no further for a great location and unique opportunity, Absolutely charming Santa Monica single-family home located on 5,872 square foot on a prime corner Lot, features 100 plus lineal feet of Centinela Ave, frontage across street from the newly constructed USC Medical Campus in one of the most desirable highly demanding and rare to find location. This home is centered among every thing, close access to 10 & 405 Freeways and Pacific coast Highway. …
Yet the listing continues, touting the benefits of the house itself.
horrible location due to freeway, but that corner probably allows a 4 unit or 6 unit apt building. and it is all commercial use across the street.
The number of delinquent mortgages backed by federal agencies jumped by half a million in April, according to a study by Inside Mortgage Finance, a financial news and statistics company.
Delinquent mortgages backed by Ginnie Mae — which includes FHA and VA loans — surged the most, more than doubling to 818,657 in April from 352,397 loans in March. Overall, 7.02% of the 11.7 million Ginnie mortgages were 30 to 60 days past due. The delinquency numbers may also include those who have applied for forbearance.
I am pulling for all of you greedy SoCal property owners to absolutely lose your ass this year. Long time overdue.
I am one of those socal property owners you speak of, not sure why I’m greedy. I could care less if my primary residence value decreases. I don’t plan on selling and continuing to own is much cheaper than renting an equivalent property.
Be careful what you wish for. Just like last time, any meaningful decline is just another opportunity for the wealthy to buy up more socal properties and likely rent them out. I have been saving for a beach close investment property but would not buy at today’s prices. Call me when we have a 20-30% off sale.
Owning a house is now considered greedy?
And how will a home owner lose anything if they choose to not sell their house? Or maybe you are rooting for people to lose their livelihoods so they are forced out of their home, only for you to buy it in foreclosure at a discount?
Mind1, I really think a significant amount of people are too silly to understand it. No matter how often you explain it to them.
I asked the same question Many times…how do you lose money if you are not selling your home. Who cares about book value of your house in the short term. I don’t.
One clown here said you still lose money even if you don’t sell because it can go to zero and because the IRS allows you to claim unrealized stock losses on your return. I laughed so hard.
Well let’s just hope for your sake, Karma isn’t a thing.
CA dreaming if you think your real estate market isn’t going to CRASH HARD.
‘Tidal Wave’ Of Delinquent Mortgages Set To Surpass Great Recession
https://www.zerohedge.com/economics/tidal-wave-delinquent-mortgages-set-surpass-great-recession
Powell says “no limitâ€. That doesn’t sound like deflation to me. They will throw whatever they have against it to avoid deflation. Don’t fight the FED.
A house is your castle and during a pandemic homeowners see the benefits. I love working remotely in a nice house. During these hot days I have been looking into getting a pool. A house is where you create fun memories, throw parties and invest in your future. In places like SoCal, buying a house is a must and in the long run you can only win. It’s most likely the best investment you will ever make.
No wonder that during this pandemic demand for sub urban housing is going up. Combine that with historic low interest rates and historic low inventory. On top of these perks, you are protected from exorbitant tax increases thanks to prop13 and protected from ever increasing rents.
We don’t know what the future holds but buying a house is also an inflation hedge.inflation means your income is likely to rise while your debt remains stagnant and becomes less “valuableâ€.
New Milli: A house is where you create fun memories, throw parties …
Old Milli: Why buy an overpriced house to create fun memories and throw parties, when you can buy a house to create fun memories and throw parties at 50-70% off? Until then you can create fun memories and throw parties in a nice rented house.
Every argument you make Milli can be countered with your old, standard response.
New Milli: Buy a house to do X.
Old Milli: Why buy an overpriced house to do X, when you can buy a house to do X at 50-70% off? Until then, you can rent a house to do X.
The problem with millies is that they are the closest thing to a perfect random noise generator I can think of. Inconsistency, scattered thoughts and very little to zero awareness of reality are what distinguish them from other humans. Sad what society did to that generation.
I think the difference is that certain people think that if you have one opinion you must stick to it until the rest of your days.
I don’t see it that way. I was wrong in the past and finally did the right thing: I looked at data and bought a beautiful house at the right time. I enjoy being a homeowner and real estate bull! And I feel sry for people who can’t get out of their shell.
Buying a house was the second best thing in my life! Buying an investment property will be the third best thing.
Wow – stocks are up big time today. Glad I bought a lot in March and April.
As an aside, your own home can never be an investment.
Most people don’t even know the difference between an investment, a speculation and gambling. The consensus opinion is that the latter is riskier than the former which is totally false.
An investment produces a cash-flow (higher the better).
A speculation produces a gain. Success is based on recognition of a previous price anomaly.
Gambling also produces a gain when successful and is based on probabilities.
Consequently, you could have a gambling bet that’s less risky than some investments. On that note, a home is a commodity. It can never be an investment unless you rent it out to produce a cash-flow. Otherwise, it’s a negative cash-flow asset. It can however, be a speculation.
The problem with the housing bubble theory is inflation is a bigger driver than almost anything else…and with the money supply increasing over 20% in 2020, we should see inflation of around 5%. Homes are where people park money. Even in the higher end neighborhoods of such as the homes for sale in Newport Beach, Corona Del Mar, and Newport Coast we see the opportunity for wealthy people to fight inflation with home ownership.
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