Gear up for the 2022 and 2023 Housing Correction: 5 Charts Highlighting the Pain Ahead for the Housing Market.
Housing is always the last sector of the economy to turn when the market enters into a recession. It should also be noted that the past is not prologue to the future but at the end of the day, people pay their housing or rent payments via income that comes from somewhere. Case-and-point is that the Great Financial Crisis of 2007 to 2009 did not lead to a housing bottom until 2012. It is worth noting that out of over 7,000,000+ foreclosures during that period, only 1,000,000+ were of the subprime flavor. The rest of those foreclosures came from vanilla 30-year fixed rate mortgages that went into negative equity situations and high unemployment made it where people could not pay their monthly mortgage. We are already seeing the layoffs starting and this time around, inflation is out of control and the Fed is running out of ammunition to curtail the price increases. I want to be very clear here, Democrats and Republicans are both responsible for this since they both enjoy spending and tax cuts when they are in power. From my vantage point, we have a day of reckoning that is going to take a few years to unwind here. Here is why I think the housing pain is only starting.
Reason #1 – Interest Rates Have no Choice but to Correct
The recent CPI “surprise” caused the markets to drop because it signaled to others that the Fed will absolutely need to increase rates to curb runaway inflation. See that chart above? Rates are now back to 2008 levels and we saw one of the most dramatic moves in rates in one week here. Just do some simple math here. Here in SoCal, a typical beat up home is $1,000,000. Say you go in with a 20 percent down payment. Let us run some numbers here:
Home price: $1M
Interest Rate: 3%
Down Payment: $200,000
Principal and Interest: $3,373
Taxes: $867
Insurance: $105
Total monthly payment: $4,344
Run these numbers again but with interest rates at 6%.
Home price: $1M
Interest Rate: 6%
Down Payment: $200,000
Principal and Interest: $4,796 (42% increase)
Taxes: $867
Insurance: $105
Total monthly payment: $5,768
This is significant here since households are already cash strapped and trying to squeak in with any extra income they have. The FOMO has already been strong for a couple of years. Low inventory, low rates, and a desperation to get a home have led to unhealthy buying habits. We are already seeing this with credit card debt soaring.
Reason #2 – Households are Maxing out Credit Cards
Given the rise in the cost of virtually everything, Americans are leaning on credit card debt and revolving debt to keep up their lifestyles:
This is very problematic since this is really covering up what is really happening – real wages are being eaten away by inflation as raging prices are slamming consumers from food, energy, and household expenses. This happened in the last financial crisis as well as you can see in the chart in that Americans were tapped out and were using HELOCs, credit cards, and other revolving debt to keep up with their lifestyles but the unfortunate outcome was that people had maxed out.
Reason #3 – Cash Out Refinances Imploding
Thanks to artificially low rates, Americans have been tapping out equity from their homes or refinancing. As you can see from the chart above (the black line) the home equity machine game is fizzling out in 2022. This has supported the economy in the pandemic but again, this was all smoke and mirrors covering up what was happening below the surface. Artificial rates, low inventory, and massive money printing have now come home to roost. There is no place to hide aside from a correction – in a way, the Fed wants this because if inflation gets really out of control, you have bigger issues to look at and we are not talking about your home value going up.
Reason #4 – Housing Values Increased Faster During the Pandemic than the Great Recession
Just take a look at this chart carefully. Remember how insane the last housing bubble turned out to be? At the peak, we were seeing nationwide 14% year-over-year annual gains. This time around we are at 20% year-over-year annual gains! And this is in the midst of a global pandemic with epic money printing. Also, the Fed has really no choice but to pop the housing bubble because inflation is a much more sinister problem but of course they cannot say that. First, take a look at the Fed funds rate here:
When the last housing bubble hit, the Fed Funds Rate (FFR) was at 5%. So it had room to navigate lower and inflation at the time was not out of control. Today the FFR is at 0.83% which is ridiculously low even with the recent tightening. What this means is that the cost to borrow to buy a home is only going to get more expensive (and since housing is a big part of the CPI, there may be some intent to smash parts of the housing growth since it is running away thanks to FOMO and easy money).
Reason #5 – Jobs and Recession
It is hard to pay your mortgage when you do not have a job. Many VCs and new companies, especially in places like crypto and tech are falling hard. Just take a look at a big player like Coinbase:
Coinbase is down a stunning 84% from its 52-week high. I’ve also seen recently, many cases like this:
These are high paying jobs in high paying areas like California. And there are more and more stories like this hitting the news every day. These were companies built on ridiculous VC valuations where sometimes people were looking at 10x, 20x, and sometimes 100x valuations! So how are those high home prices going to be supported when high income jobs contract, rates are high, and stock values get slammed because costs are so high?
Given that housing values are the last to show up in a correction since they move so slow, you will see a shift later this year and into 2023. While history does not repeat, it does rhyme.
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342 Responses to “Gear up for the 2022 and 2023 Housing Correction: 5 Charts Highlighting the Pain Ahead for the Housing Market.”
What does this mean for prospective new home buyers? Are we pretty much screwed even even if we see a 20% correction with rates moving up to 7-8%?
20% wouldn’t make much of a dent, IMO. It’d hardly roll back prices one year and not even that in some places. Where are you?
I’d be doing everything I can to scrape together as big of a downpayment as possible right now. It seems rates will continue to rise because inflation is still raging. The more cash you put in, the less the rate matters.
If prices do happen to come down in a significant way then you’ll be ready. It will be people with cash can capitalize on the “deals”. But prices could very well just sit where they are for a number of years. Who knows?
If you live in a HCOL area and ever get tired of the game, then leave! There are greener pastures where people don’t have to fret about whether or not they can ever live in a house they actually like without stressing themselves half to death.
All the best to you!
For perspective home buyers:
if you are mortgaging – your monthly payment Debt Service will NOT go down. Home prices might go down a bit to reflect reduced pool of buyers due to higher rates, but do not expect owning home to be cheaper.
If you are buying cash – you might benefit from potential lower prices. But at expense of the opportunity cost of not investing somewhere else.
It is as simple as that.
What this means is that mortgage payments are likely hover around comparable rents. Rents are going up and they are not coming down. This provides sellers with a floor on prices which will largely be controlled by rates. Two buyers buying the same house at different rates are likely to pay the same mortgage with one buyer paying more up front with a lower rate and the second buyer paying less up from at a higher rate. If you gave me the option between which buyer I would rather be, I would choose to be the second buyer that pays less upfront at a higher interest rate despite the same monthly payment. That buyer has the option to refinance down to lower rates in the future whereas the first buyer that locked in and already low rate will not have that luxury. In general, the rule of thumb is that when refi rates are one percentage point or more below your current borrow rate, then it would be worth it for the buyer to refinance. A lot of buyers, myself included, locked in a 2.6% interest rate so refinance rates would have to be 1.6 or less for me to justify refinancing. Luckily, I bought way early on during the pandemic so I was able to snag 2019 prices at 2020 rates. Price increases coupled with higher rates means that buyers that want to purchase my house today will be paying twice what I pay in monthly payments. For buyers that bought at those same low rates in late 2021, they will not be able to decrease their monthly payments since they bought at higher prices and lower interest rates. Despite all of this, those buyers are still safe because interest rates have risen two or more percentage points since then and in some markets, prices rose or at the absolute worst flattened out meaning current buyers are paying over 40% or more in mortgage payments than buyers just a few short months ago.
I have yet to see REAL price drops. A lot of people on this blog claim that they are seeing price drops which may be the case in some markets but in my market of SoCal, specifically Inland Empire, I am not seeing real price drops. What I am seeing is sellers listing their properties at projected prices based on the unprecedented price growth of 2020 – 2021 and assuming that the increasing price trend is valid today. Those sellers realize that they grossly overpriced with todays higher rates and “decreased” the price on their listing back down to a more reasonable level. The mortgage payments on these properties are still significantly more than Q4 which means the rising mortgage payments trend still continues to this day. A real price drop would be when prices drop to a level that well bring mortgage payments down to a point that is at or below the most recent all-time high that we are currently seeing. A house at $500K that was dropped from $550K is not a price drop in this market when that same house would’ve sold for $500K in December at lower rates. The payment is still significantly higher. Once that house drops to 400K at 6%+ interest and the mortgage payments drop with it, then THAT would be a true decrease.
My advice to you is to identify the area and attributes that you prefer in a house. How many square feet is your absolute minimum? What’s the oldest house that you are willing to tolerate? How big of a lot do you want? How many bedrooms and bathrooms do you need? Ask yourself as many questions as you can about what your needs are in a house. Then track what houses that meet your criteria are renting for. This establishes a reference point as to what is a reasonable amount to pay in a mortgage. Look at listings and see what similar houses are going for and what their payments will come out to at the most recent interest rates. If you find a house that is below or at the absolute most in line with comparable rent, just buy it and don’t listen to the noise. The comments section of this blog has been a cesspool of hyper pessimistic wishful thinking wannabe analysts. Just to give you an idea, a lot of these guys have been saying that the market is due to crash sense at least 2015. And each and everyone of them now would kill to be able to purchase at the same prices they claimed were overvalued. Doing your own research is the most important tool at your disposal. Keep in mind that there are more than enough buyers that are currently sitting on the sidelines and salivating at the opportunity to buy at prices that are not much lower than today’s prices. Those are the buyers that well keep the market steady-ish so do not be foolish and expect a 2008 style crash like a lot of the dimwits on this blog. The bus will come and go and you’ll still be at the bus station. Also keep in mind that wages are due to increase significantly after inflation tapers off. Wages, specifically employee wages, are usually the last thing to increase during an inflationary period and that is on the horizon. This will add more buyer competition and keep prices steady. You will not see much volatility like you did in 2008. Contrary to popular belief, most of these mortgages are serviceable and it’s only when a vast amount of mortgages become unserviceable do you see the kind of volatility did in 2008. What people fail to understand until this very day is that mortgages in 2006 had a much higher payment to income ratio because of the loose lending. Most of the buyers towards the tail end of that last boom we’re grossly unqualified to take on their mortgages which is why we saw what we saw in 2008. With today’s lending practices, this is far from the case despite higher prices today then in 2008 which is why you WILL NOT see a remotely similar result in the market moving forward.
Well said
Clearly, you have no brain.
“The comments section of this blog has been a cesspool of hyper pessimistic wishful thinking wannabe analysts.”
I’ll just remind you this blog is titled ” Dr. Housing Bubble”.
Your comments are long winded, poorly written and speculative.
Very well put. House prices follow the money supply, and the rhythm our central banks developed to transfer wealth from the poor to the rich is “more money, more money, more money, less money, repeat”. After a “more money” the chances are still high that another “more money” is next. That was the case in 2015. People underestimate the sheer printing capability of those in power.
But as of 2022, it really looks like we’re going to have a “less money” coming up, followed by lower house prices. Finally.
Well said!
I agree with what you are saying is the likely outcome with a soft landing. It is ideal.
If you are the type with freeze dried food in the basement, a pile of gold buried in the backyard, and a high paid job in the RE or mortgage industry, here is a worst case scenario:
For the pessimist:
1) The Fed screws up and we are plunged into crash landing. A recession with high unemployment with people who can no longer make mortgage payments. This happened in 2008 with massive job losses which caused home losses. It was started with loosely approved loans but as home prices fell, it affected homeowners with qualified conventional loans who had lost their jobs and mailed back the keys to their recently purchased overpaid houses. The spiral in home prices and job losses continued until 2012. 4 years.
For the optimist who is the anti-prepper and has no food in the fridge:
1) The Fed chickens out and lowers rates to 0 again. They did this in early 2019 so there is a recent precedent. If this is the case, then houses and stocks will recover and proceed to increase to the moon. If that starts failing, then there is always negative rates. Who cares about 10% inflation when you can get a -10% loan. ie you borrow money and they give you 10%. That seems like crazy talk, but Europe still has negative bank rates.
Trust the Fed! But not like you trusted them in 2008.
Excellent analysis.
good summary. When I purchased a home in LA in 2012 for $470K I was told I was ‘catching a falling knife” such moronic comments. My home is now worth $1.3M
My PIMI is now about same as a 1 bedroom apartment in downtown Santa Monica.
Now, people are talking crash, well so what the market does crash every 10-15 years, no?
@QE
Thats the power of shutting off the noise and turning on your brain. It’ll make you a lot of money. Im glad you had the confidence in yourself at that time to make that move.
As for the market crashing, people say that the market crashes once every X years but the fact is that the market is not on some timer. Markets crash when the supply vastly outweighs the demand. The bigger the gap, the steeper the prices drop. As long as demand outweighs the supply then prices will stay at or above current levels.
A couple of weeks ago, the OC Register’s columnist Lansner gave a 5 bubble rating to the current market. A local banker sent in a question about how bubbles end. He noted that bubbles can fizzle as well as burst. He felt that inflation will cause a fizzle rather than a burst. So Lansner went back into history to see when bubbles fizzled. The 1980s bubble ended in what could be called a fizzle. There was a recession, and then the OC financial crisis. That led to an 8 year dip in CA house prices while elsewhere there were modest gains.
He noted that his spreadsheet showed that the year that ended in March 2022, all states plus DC had double digit gains in percent increase of home prices for the first time in 47 years. The last time it came close to this was 1979 when 43 states showed such gains. Lansner calls this housing “sizzle”. Nationally, sizzle happened 16% of the time. California sizzle since 1975 has been a whopping 37% of the time! (That’s #1 of course.) He reckons that bursts also happen 16% of the time nationally. California has a 25% burst rate which ranks 4th. Lansner’s fizzle calculation based on slowing markets is 33% of the time nationally but only 12% of the time in California. So California is twice as likely to have a bubble burst as a fizzle.
It seems to me that fizzle is more likely in an inflationary environment such as the 70s or what we have now. But you must remember, that the numbers aren’t inflation adjusted, and if inflation is high enough, fizzle may actually be a bubble burst in constant value currency. But that does make getting out of cash and into tangible assets more attractive, and real estate fits the bill. Look for more cash offers from investors as prices drop due to increasing interest rates and market fizzle.
Agree this could be much worse than previous crashes given the extreme insanity of current prices with many middle class houses in the $2 million plus range. Unless you are making $800k per year you can’t buy these houses at 6% rates. Where is all that money going to come from?
For the first time in my 70 years, the historical relationship between interest rates and RE values may cease to be an indicator/vector to purchase or sell. I sense the die off has started, will gain pace and provide a glut of dwellings not needing buyers. Just occupants that… walk right in.
Forget about loans and rates, focus now on self preservation and the devices needed for same.
Housing will be simple.
Saving your life will be the hard part.
Prepare as best you can, especially defense.
God be with you.
I think you are correct There will be a massive die off that is accelerating. The vaxstermanation will take about 70 percent of the population
I’m unvaxxed. Don’t trust it.
But I don’t think it will kill 70% of the population. More likely, it will harm people’s immune systems, so they’ll be more likely to die of cancers and other diseases 10 or so years from now.
You people are nuts and will be the first in line to use the mRNA vaccines when they are available to treat cancer. Either that or you are going to drown from all the kool-aid that you have drank. Haha
The fact is that the mRNA delivery which trains the immune system to fight a “target” has been being worked for decades, and specifically for cancer treatment, but researchers pivoted to use it for covid once the pandemic hit.
BobC – remember you are in housing bubble blog. You know, it tends to attract a certain type of individuals.
Your sensor is too un-sophisticated for the modern world if that’s what it senses.
The End Is Nigh! Repent!
There, I said it without having to put on a ragged smock and stand on a busy street corner.
The Interwebs is awesome!
Glad you are back.
Glad we are retired.
Love the out of touch example. How many people are buying million dollar houses.?
Joel,
Enough people are currently buying million dollar homes in CA to keep the bubble rising to 1.5M dollar homes.
The real question is: Where are people buying million dollar homes getting the DP and income to support this? I suspect high down payments from stocks and bitcoin gains are still driving up prices. Gains are still up 300% from 3 years ago. Higher down payments are driving up prices and not wage growth. If the crypto and stock market deflate, then we will see a change. It has deflated somewhat, but it is still up 300%.
A few years ago, this blog predicted Millennial demand to drive up housing prices. It is happening and they have tons of cash from stock and crypto gains to purchase with high down payments.
No crash in sight while this is happening. When it ends, a crash might happen. Maybe….
I am a real estate broker specializing in foreclosure prevention in California. The current market is unsustainable and inflation is the highest it’s been since 1981. The correction is coming, and not even California will be insulated. If you own a home and have been on the fence about selling it, I’d highly advise doing it now. Your homes value will not be what it is today, a year or two from now. If you have no equity, short sale the property; it is a liability and not an asset.
Or you could just keep your home and live in it??? What the heckin
Howard, how will Clifford make a commission if you just stay in your home and live in it? You monster!
HODL your primary home.
Build up some cash/gold reserves to ensure that you don’t lose it. The banks will happily kick you out into a van down by the river and wait for the next bubble.
As people found out in 2008, renting for 7 years after foreclosing, was financial suicide.
Seriously, if you are underwater after 30% price increases over the last year, you are to blame.
Great Article!! @ JMart no, not everyone, just CYA best you can. All of us should keep in mind that a BIG reason so many went Belly Up from Great Recession was as soon as people needed to tap their capital (Mom & Pop RE Folks + Small Businesses) Banks went into CYA mode. They yanked Capital and many of us needed it, even with solid enuf renters and good paying jobs. But Many over-leveraged (admit I was). So you can do fine, just create a financial plan. It’s why I (stupidly) keep too much cash liquid but always zero debt, luxury cars & big ticket items still = Cash or can pay off in 6 months or don’t buy! Traumatized by 2011 (I held on until then) so after 5 yrs recovery, spent 5 yrs building F U fund, i.e. not beholden to anyone and a year + reserves if things do go south. I didnt get my $1.5 M McMansion we can easily afford, but retiring at 52 and will live between 2 TH (current rentals) 1 small primary + 1 vaca pad vs 1 big Bad House Dream Home (and vaca pad)…lol! Better then a sharp stick in the eye.
@ Joe R–great breakdown and I agree with much of what you said! Thankfully many of my friends have listened to my CYA and are currently getting their Finance houses in order. So all should Be as bullet proof as possible.
I’m glad I was raised Insure everything and that has always included Disabilty & General Unemployment. In last 20 years having Policies has Saved My Arse (Breast Cancer and out of work a total of 1.5 yrs over 5 yrs) Funerals for both our Parents to cover and being the higher earner between Hubs and I, I was SO Lucky to have paid (post taxes) for un-taxed policies that pay decent $$ to help cover us!
Headline: Crypto crash: Bitcoin falls to 18-month low, ether, other cryptocurrency prices today also plunge
https://www.livemint.com/market/cryptocurrency/cryptocurrency-prices-today-bitcoin-falls-to-one-month-low-ether-dogecoin-other-cryptos-also-plunge-11655088181957.html
Bitcoin price continued its selloff as part of broader declines in cryptocurrencies after a sharp rise in US inflation triggered risk-off sentiment. The world’s largest digital token tumbled as much as 7% to $25,366, at 18-month low. The most popular crypto is down more than 43% so far this year (YTD), and is trading far below its record high of $69,000 it had hit in November last year.
On the other hand, Ether, the coin linked to the ethereum blockchain and the second largest cryptocurrency, fell nearly 8% at its 15-month low to $1,340. Meanwhile, dogecoin price today was also trading almost flat at $0.07 whereas Shiba Inu also up 0.2% to $0.000011. The global cryptocurrency market cap today is $1.08 trillion, down more than 8% in the last 24 hours.
Other crypto prices’ today performance also tumbled as Stellar, Uniswap, XRP, Tron, Tether, Solana, Polkadot, Avalanche, Polygon, Chainlink, Terra Luna Classic, Cardano, Litecoin prices were trading with cuts of as much as 15% over the last 24 hours. …
============
M is right about one thing. I did miss the crypto boat. But I can’t say I’m unhappy about it.
Holy cow, it’s down to 23K now.
Everything is eroding, and somewhat quickly, except real estate.
Hang on!
I feel sorry for all the people who were talked into buying at 60K. Even converting some of their retirement savings to crypto! Just imagine their stress levels right now.
Why feel sry about BTC investors?! As long as they hold and not sell at a loss they will make money. People said “I feel sorry for bitcoinets who
Bought at 1k”. Remember those days? Yeah, years later the peak was 20k. The last peak was 60k. In a few years people say: you were just lucky that you could buy bitcoin at 60k!! Would anyone really be surprised if bitcoin hits 120k during the next bull cycle? Of course not!
M is a true believer.
My Millennial son was also when he bought at bitcoin at 1K and sold at 30K. I told him to get out at 8K and not be greedy, but since he ignored me, he now has enough for a down payment on a house.
Millennials are the luckiest generation ever!
I still don’t understand why bitcoin had risen so far and fast.
Its volatility makes it the worst currency ever.
Maybe I’m just old but I was never lured into a cult back in the day.
You can’t argue with results. I did hear that same phrase from pets.com stockholders back in 2000. They didn’t get out in time.
“Investing” in a currency. Backed by literally nothing. Absolute gambling.
““Investing” in a currency. Backed by literally nothing. Absolute gambling”
That is too simplistic, turtle. With that mentality your wealth grows as fast as a turtle can walk.
Gambling is when you go to Vegas and put your money on red or black. Investing in bitcoin and holding long term is genius. Imagine how I am smiling having bought bitcoin many years ago. I want it to go down more to buy more.
How high is your confidence level that we will see bitcoin at 100k in the next few years? I think the probability is at 98%. With that in mind, anything below 20k is cheap.
I don’t say this lightly….I should say….it’s all over!!! Going to zero!!!! Sell now!!! Because without massive capitulation I can’t get more bitcoin at a incredible discount.
>>> That is too simplistic, turtle. With that mentality your wealth grows as fast as a turtle can walk.
And yet this millennial became a millionaire around the same time as you without speculating in cryptocurrency or buying a bubbled up house with money from family. My name is Turtle because staying the course long-term is the way to go. We agree on that much, just not on what/when. But still, you’re more like a rabbit, running around here and there, doing things that risk finishing first at the line. I think that rabbit was feeling pretty good about himself at one point?
>>> Gambling is when you go to Vegas and put your money on red or black. Investing in bitcoin and holding long term is genius.
Long-term is the way to go for traditional income-generating investments where there is an overall history of ups exceeding downs through decades and that are backed by something tangible. It’s boring but works. Crypto is none of that. If any crypto wins out (as in actually becomes functional for purchases mainstream), it’ll be a government-backed digital dollar pinned to fiat currency. Hence, no opportunity for speculation. Do you really think Uncle Sam will let an unregulated currency overshadow its own?
>>> I want it to go down more to buy more.
You’re a walking contradiction. Every situation is always great? That’s not reality. You’re either comforting yourself or you’re actually delusional. You’re on record making polarized statements like, “housing crash imminent” and “no crash ever”, “low interest rates rock” and “high interest rates are great”, “crypto to the moon” and “yay, low crypto”, “cash is for losers” and “cash is king”. Sometimes your dichotomies complete themselves within days.
>>> How high is your confidence level that we will see bitcoin at 100k in the next few years? I think the probability is at 98%.
The thing is, you’ve been saying “end of the year” things like this for a couple years now and here it is barely out of the teens, down from $65K when crypto FOMO apparently reached critical mass around January. I’m not sure there are many people left to fool into this tulip scheme so good luck with the hype going forward.
—
I had never thought you were a troll. But now I see that you are a troll, just not intentionally. And a very good one too because here I am wasting more time.
I think I figured out Turtle’s problem. It’s the same problem many perma bears have.
They don’t understand how a savvy investor can be cheering for their favorite asset to GO DOWN in price. For them it’s a contradiction.
Not for Warren B. Warren is happy for his fav stocks to go down. He loads up on them.
I am happy for stocks and crypto to go down (short/midterm). Even though i am bullish on stocks and crypto long term. You don’t get rich by buying the top. These super bearish/crash times are exciting for me because I understand:
Bull markets make you money. Bear markets make you rich.
If someone here doesn’t get that, than that person is likely a renter or non-successful investor.
I have lots of buy orders set for BTC at much lowers prices! Go crash Bitcoin! I want that capitulation candle!
Don’t forget to do the dip! Oops, I mean buy the dip!
You got it wrong pops, again. Told you many times, during a bear market you wait for a confirmed bottom and load up during accumulation phase. Wait for my signal. Buying dips during bear markets is like catching a falling knife. When will you listen and learn? 🙂
M’s Daddy is obviously a Boomer.
They missed out on this spectacular 1000% rise in stocks and bitcoin which paid for Millennial down payments on overpriced houses.
Just like Boomers benefited in the run up of equities in 2006 to purchase their overpriced homes.
We’ve seen this all before Historically, it hasn’t ended well for many buying at the peak.
Except for primary home HODLers.
People who HODL’d their primary home with enough cash to pay the payments have done well. Boomers are now retiring with their HODL’d homes with ultra-low payments. Renting is financial suicide. I hope the Millennials HODL just as well as the Boomers.
And Bob is spot on, again!
You missed the boat when it was $5000 a coin in March of 2020. That boat is still sitting pretty even at todays “crash”. That’s the flaw with looking at historical prices of things as the ultimate proving point. You only have to go back in time just far enough to make your point. Go back farther and you’re point completely “crashes.” If we’re gonna look at history to make a point then we should be able to pull any sliver in time to further validate/invalidate points being made.
This kinda ties into why I believe Real estate prices are not going to crash and are more likely to go off. If we look at prices through a narrow lens and only consider the last couple of years and it’s easy to believe that real estate is inflated. But if we took that lens and widened it up to as far back as the Middle Ages, then RE is a complete bargain right now. It’s not out of the realm of possibilities for history to repeat itself where a very small percentage of the population owns the property and the rest rent it out never to have the ability to own property themselves with unimaginable asking prices. To a medieval serf, saving up to afford a property and pigs flying are one in the same.
It’s a New Age people.
I agree with your point.
Real Estate for a primary home should be a place to live and not an investment. You should plan on living in any primary home for 10-15 years and have enough cash in savings to ensure you do not lose it back to the bank in foreclosure.
Real Estate as an investment is is also long term. It can be short term during certain periods but not reliably. Every person I know who has a rental and could stick through hard times and negative returns, eventually came out ahead. It takes effort. Manual, financial, and mental effort but they all eventually had a good return through both good and bad times. It is much easier to put your money in a long term CD and forget about it. The Fed destroyed the CD option by suppressing savings rates, so people went where the money is. Unfortunately, due to the current 14 year ramp up in RE prices, many do not realize it is long term.
I am seeing some signs of desperation in AirBnB landlords. Not enough bookings to make the mortgage and expenses. High cleaning, maintenance, fees, taxes, mortgage expenses exceeding their income. Given enough time, maybe 10 years, this will fix itself with inflation. Hang in there and lose money, but long term, it will be a good ROI. Just have enough money to hang on.
AirBnB holders might be the weak link in holding the market. If recession hits, their costs will remain the same, but their operational in-flows to support their costs might decrease significantly. Effectively, this is same as cost increase which is where liquidity issue might start.
Surge: “AirBnB holders might be the weak link in holding the market.”
AirBnB owners in Santa Monica will soon have to absorb an increase in the hotel occupancy tax.
Headline: Santa Monica City Council Approves Ballot Measure That Would Increase Hotel Bed Tax
In a vote on June 28, the Santa Monica City Council approved placing a measure on the November ballot to raise the city’s hotel bed tax to fund measures to address homelessness.
Currently, the city’s bed tax or transient occupancy tax, a tax levied on motel, hotel, and home share rentals is 14% of the total amount paid for each rental. …
…the measure “would increase the City’s Transient Occupancy Tax (TOT) rate by 1 percentage point for hotels and by 3 percentage points for home-shares …
Sorry, forgot to post the link to the above story: https://smmirror.com/2022/07/santa-monica-city-council-approves-ballot-measure-that-would-increase-hotel-bed-tax/
Tax increases are still minor and will be passed to customers.
The trouble come if number of customers will reduce/evaporate during recession (depending on how hard it is).
Well, apparently no crash in RE according to this RE agent…it takes a certain level of stupidity in SoCal to sustain this level of craziness. I believe him that people are still paying top dollar for houses out here as if all of a sudden as collective we decided there will be no more houses ever build in LA/OC and you better get in now…Herd stupidity at its finest
https://www.youtube.com/watch?v=veNftzQk1Kc
“Herd stupidity at its finest”
Not really a herd is it? Barely anything for sale and only people with excellent finances get to buy. The majority of people rents and dreams of an epic RE crash.
I think the herd is watching live what “survival of the fittest” means.
Herd mentality….. reminds me of 2005 “buy now or be priced out forever” and everyone who could fog a mirror got a loan for a house. Todays market is the opposite. I bought two houses in the last 2 years. I know. Only qualified buyers get a house.
Turns out despite all his bragging and bloviating, M did buy at the peak and will soon be house poor and probably lose his rental property
Lol. Couldn’t happen to a nicer guy.
M is just a troll. Don’t believe anything that he says here. I usually skip his comments in here.
I am not a troll. I have been pretty transparent in sharing my success story. Dont confuse success with trolling
M, honestly, you are not a success story. Success story would be owning 10 properties by your age not 2. You got to the game too late to be a success story and the only reason you got to the game is because of inheritance (external stimuli).
I couldn’t disagree more surge. Yea, time is a big factor but you can’t make blanket statements like “in your 30’s you should already have ten properties”. I am super happy and proud that I turned from perma bear to a longterm bull! It’s exiting to have my first rental already. And so far my renters are paying timely. Let’s see if they treat my property well.
Let’s give it some time and see how things go and and then buy my second rental. Life doesn’t happen in a straight line. You have to find contentment and learn from your mistakes. You also have to admit to yourself when you were wrong. It’s not easy to get out of your perma bear shell and see the light. This blog helped me a lot to make that transition. I knew many were right when they repeatedly said: “buy a house when you comfortably afford it. Don’t try to time the market. Renting long term is financial suicide.” BUT I chose to stick to my perma bear strategy for a looong time. Hopefully my story helps other to buy RE sooner and prevents them from trying to time the market.
Remember when I bought my first house during Covid (Q1 2020 and everyone told me I will lose my shirt). “Millennial bought, the peak is in”. Lol
Two years later I bought my second property and again, people telling me the crash is here/coming.
I would be kicking myself if I hadn’t bought in 2020!!!! I can’t imagine renting an apartment ever again! My life improved so much….gotta be thankful! And enjoy every moment of your life!
Remember when I bought my first house during Covid (Q1 2020 and everyone told me I will lose my shirt). “Millennial bought, the peak is in”.
Not everyone. From the start, I doubted that you bought a house.
And I continue to doubt much of your life story.
M,
When you bought your home in Qx in 2020, nobody called a peak because of you. It was pure irony. The range of opinions on this blog is wide.
Right SOL, most called the peak when I bought in Q1 2020. And I don’t blame you for doubting stuff you read on the internet.
You also don’t trust vaccines and you still use your landline., right? Nothing says boomer than a guy who still uses landlines in 2022. So I would expect you are not big into new stuff/tech like Bitcoin and other cryptos either? Deep down you wish you would own a Bitcoin but prob don’t know how to buy/transact and store it?
“When you bought your home in Qx in 2020, nobody called a peak ”
99% called the top during Covid in Q1 2020 on this blog. It shows how the masses are usually wrong.
Countless times in the last ten years Bitcoin has been deemed “dead”.
Do the opposite of what people say and invest responsible. Don’t invest more in speculative assets than you can afford to lose.
Stick to this simple strategy and you will do better than most investors who trade based on emotions.
M “Deep down you wish you would own a Bitcoin but prob don’t know how to buy/transact and store it?”
Buying Bitcoin is easy. Since before the crash, PayPal has been spamming me, telling me that I can now easily buy Bitcoin through PayPal.
If you can use PayPal (and I do) you can buy and store Bitcoin. But I choose not to.
=========
Landlines are a great backup for cell phones. Safer to have both than only one.
=========
I’ve been vaxxed, just not against Covid. I don’t trust any of the Covid vaccines. Even so, I feel fine.
A friend of mine was forced to get vaxxed — two shots of Moderna — to keep his city job. He got real sick after the second dose. He’s okay now, but who knows what the longterm damage will be?
“A friend of mine”
Ya sure. Anecdotal. I take what landline-users and anti-vaxxers say with a grain of salt.
Its 2023 in a few month. Nothing says outdated boomer like “I still have my landline”.
Kids nowadays don’t even know how a landline looks like or works since it’s obsolete. Let me guess, you still pay for cable too? And you still don’t own a single bitcoin?
you own a smart phone?
Ya sure. Anecdotal.
This, coming from the king of anecdotes. All your many claims, your whole life story, are but a collection of wild, unsubstantiated anecdotes.
Let me guess, you still pay for cable too?
Wrong.
My HOA pays for cable and internet, which is rolled into my monthly HOA fees. I have no say in the matter. I can’t cancel my cable, though I want to.
I never watch cable TV. I prefer my DVD collection and (free) MP4 movie downloads from YouTube. I have over 2,400 feature films on my hard drives, downloaded over the years. Not including short films and TV shows.
And you still don’t own a single bitcoin?
True.
But I can easily learn how, should I want to. I built my first website in 2000, and a dozen or so since then. People have been using computers since before you were born.
Yes, I know you claim to have made a million or so with crypto. But I doubt your anecdotal claims.
you own a smart phone?
I own an iPhone 13 Pro.
So what? What does that prove? Do I get a medal?
“Let me guess, you still pay for cable too?
Wrong. My HOA pays for cable and internet, which is rolled into my monthly HOA fees”
I knew you would still pay for cable!
Sry, I simply don’t trust people’s judgement if they tell me they aren’t able to progress by holding on to their landline and cable …..in 2022.
I also think you still have a flip phone. And not owning a Bitcoin is probably a big mistake. You want to be invested in profitable asset classes. Bitcoin was just a few hundred bucks a few years ago.
Buy and hold stocks, crypto and RE. Instead of buy and hold landlines, cables and flip phones.
Thank me later!
M: I also think you still have a flip phone.
And I think you lost your shirt on Bitcoin, and never bought a house.
Of course. All boomers that are jealous say that. And I own two houses, not just one 🙂
M too busy licking his Bitcoin losses. What a fool
As I recall, the one consistent thing about the guy now known as M and formerly known as Millennial is that he’s been all in for Bitcoin. Which means most of his coin was probably bought before it started fetching 5 figures.
Yep, my goal is more bitcoins and hold long term. This is my third bubble in crypto/crash. Every crash allows me to add more bitcoin and every bull market allows me to add more bitcoin because I trade my ALTs back to BTC. I am an extreme bitcoin bull LONGTERM. It doesn’t matter to me if I traded ADA for BTC and BTC loses value (for 1-2 years). I am 98% confident BTC will trade over 100k. I was wrong in predicting BTC to be at 100k this years. It’s gonna take a few more years. But if my strategy works out that just means I will have more bitcoin by the time it hits 100k versus if 100k would have happened in 2022.
Like warren B, I love when my favorite asset loses value so I can add even more. And the truth is, even the hardest crash in BTC still means I am in profit since I have been buying BTC since many, many years now. Never sold BTC. During accumulation phases I buy heavy into ALTs. And when they skyrocket I trade the Alt to BTC pair to scale out of ALTs and int BTC.
I bought in Q1 2020 and people told me I bought the peak. Now I have like close to half a million of equity gains off the purchase price. You think my house will lose that much in value anytime soon? And even if…..so what…..my mortgage is much less than what the rent would be for this house. And if Preises truly fall, great, I’ll buy a second rental.
It’s easy to be a genius when you’re using other peoples money. Obviously your inheritance was large enough to let you weather the coming storm, but that says nothing about your investing prowess. You just got extremely lucky by inheriting money. That doesn’t make you smart. It just shows you’re lucky as hell. I’d like to hear what you’d be saying without that pile of free money you were given.
“to let you weather the coming storm”
So in 2020 I was told the peak is in and we will see a huge crash. Opposite happened.
Now there is an upcoming storm? This year? Next year? Or is there always something brewing? Until the rest of our days?
My one relative really likes me and doesn’t have kids. She’s very old. Oh boy, do I inherit more money in a few years? Sounds like my RE buying spree won’t anytime soon?!
Or should I stop buying until the storm is over? Naaaah, that’s for perma bears. I buy when I can comfortably afford it…..it worked out so far!!
Lol. Couldn’t happen to a nicer guy.
Blast from the past …
M (April 14, 2022): Sheila pls don’t sound so entitled. Owning a house is not a right. … In the US you can easily buy a house if you are willing to relocate. It’s already to busy here in California (close to the coast). If you can’t afford to buy a house here move away.
Source: https://www.doctorhousingbubble.com/real-homes-of-genius-paramount-with-a-median-household-income-of-55000-but-selling-a-home-for-800000/
Sol,
“ If you can’t afford to buy a house here move away.”
That’s true but keep in mind landlords like me don’t mind life long renters! Renters exist to make landlords rich. It’s called survival of the fittest!
Debunking each of the 5 points:
1. Higher Rates: Rates are currently sitting at 5% which is still relatively low compared to historical standards. Rates peaked at almost 7% prior to the crash of 2008. Of course rates are heading higher which means you might see slight price decreases depending on how sharp and how how high rates rise But this most recent 2% or so rate increase has just simply made the market less competitive and flatline and prices. We went from bidding wars and price increases to bidding skirmishes and list price sales. Whoopti doo. It will take another 2% increase before you see any noteworthy downward price movement.
2. Households Maxing Out Credit Cards: This is a misleading point because it takes A very broad and general trend and tries to make a connection to a much narrower demographic aka potential homebuyers. If my credit card balance is $1000 in my neighbors credit card balance is $49000 does that mean that we are both out of luck because our average balance is $25,000? No it just means he is hyper screwed and I’m still financially healthy enough to purchase a home. This is the same reason why despite all time high joblessness during the onset of the pandemic did not have even the slightest effect on home sales in the months that followed. Despite an unprecedented amount of unemployment, there were still more than enough individuals that remained employed to fuel the demand. Despite an unprecedented amount of credit card debt, there are still more than enough potential buyers that are have the min necessary debt/income ratio to qualify.
3. Cash Out Refi imploding: Yes Doc, when interest rates go up borrowing goes down. Excellent observation. If anything less cash out refi‘s means less people are exposing themselves to the risk of owing more than what their properties are worth and therefore much less likely to default. If refis are imploding then so does future foreclosures numbers. And if foreclosures aren’t exploding then prices are not imploding.
4. Housing values increased faster than ever: Yes because interest rates decreased faster than ever. When you go from 5% to 2.5% then a $500K house becomes $650K with no change in mortgage. If rates went to 0% overnight I’m certain you’ll see an even sharper price growth than this recent one. It’s simple math yet you try to present it as if there’s an unexplainable arbitrary driving force.
5. Jobs and Recession: Supply is so low that the amount of potential buyers That are left employed will still dwarf the current inventory. Coin base employees aren’t the barometer for how qualified buyers are. Even tech employees as a whole. You’re doing the exact opposite of what you did in point number two. You’re taking something extremely narrow and trying to apply it to a very broad concept. You’re taking oranges and trying to make Apple juice.
Supply is very low and demand is very high. Supply is unlikely to dramatically increase enough to a point that has downward pressure on prices and demand is even more unlikely to drop to a point that sellers are forced to reduce their asking prices. And rates are not likely to increase high enough, fast enough to reduce buyer demand below the supply threshold. And rental rates are very likely to continue increasing which makes buying more attractive and therefore increasing demand. The factors that contribute to an increasing supply or not likely and the factors that contribute to decreasing buyer demand are not sufficient and the factors that contribute to increasing buying demand are very likely. Sounds like no crash in sight to me.
One thing we might not realize as fortunate Americans with a stable currency is that home prices can absolutely exponentially reach unfathomable heights if the dollar hyperinflates. My wife is from a country that experienced not only hyperinflation, but a severely imploded economy and a full scale Civil War. Her family‘s house is valued at 5 million of their local currency prior to all this and is now valued at 200 million their local currency. No change in real value dollar wise but it was their most valuable hedge because I know for damn sure wages did not increase 40x in that same time period. A true value indicator is pricing real estate in ounces of gold. It takes 291 ounces of gold to buy a house at todays prices. In 2009 it took 290 ounces, at the bottom of the crash in 2011 it took 140 ounces, in mid-2018 it took 305 ounces of gold, in mid 2020 it took 200 ounces of gold. In 2005 it took 750 ounces of gold which is unbelievable. Going back 130+ years, the average home prices is 500 ounces of gold. Do with this fact what you will.
Monday, June 13th, 30 year fixed is 6.13%, S&P500 down close to 4%.
And the 30 year treasury is 3.42% (on 13th… 3.45% today) with May inflation at 8.6%.
So a 30yr mortgage is almost twice a thirty year treasury note, and both are well below inflation. US inflation is similar to Germany, but more than 3 times higher than Switzerland, Japan or China which have had limited stimulus from the central banks. So it seem that central bank activity is more important than oil price hikes for inflation. (Not what our head of state says, but who trusts him to tell the truth?)
It’s pretty crazy to see mortgage rates double in just half a year. Inflation is nowhere near under control so apparently the Fed is just getting started.
Many who missed the crypto boat told me “you were so lucky buying at these low prices”
I call BS on “luck”. Here is why: people who say this won’t buy when it goes down. Ever! It’s the same with stock/re perma bears. They never end up buying and always hope for a bigger crash. Lol
I have heavy buy orders in to accumulate more Bitcoin. You scale in when everyone believes bitcoin is dead and will go to zero. We are not there yet. Maybe month away. We need all non-bitcoiners cheer and the majority of retail to capitulate. That’s the buying opportunity of a lifetime.
Just like good ol’ warren b, I cheer for lower prices on my favorite assets. Greed works at the top of the bubble and at the bottom the same way if you know what I mean.
My motto has been: bull markets make you money, bear markets is when the real money is made. That’s how I generated life changing wealth in crypto. Let the anti-crypto crash boys have their year of cheering. It’s all over! Going to zeeero! Bitcoin is dead! Fools! It’s snake oil! Buying digits – what could wrong?
All these comments are music to my ear. Time to get the popcorn out and wait for capitulation and then load up the new jeep with bitcoins!
M,
BTC has gotta experience more downside due to Celsius and Terra Luna. But I would think anything under 20k is a great buy long term. How about GME and AMC? They have actually been trading very strong into a tough head wind of the overall market. It just feels like a squeeze coming any day.
The FED knows housing can stand on its head and stay relatively stable even with 5-8% rates. It will certainly be slower deal flow, a real estate agent nightmare is this current market, deal volume is very low, less listings to compete for in already brutal profession for the average agent trying to get deals. Up or down 10% next 12 months depending on the property and area. No big shock to prices in 2022 or 2023, just a steady enough market that is certainly slowing but has gas left in the tank.
This is about the worst time in the world to be a long time renter. Even if rates are 5%-8%. If you can afford a down payment and come anywhere close to your rental payment matching your mortgage payment then immediately become a homeowner.
“But I would think anything under 20k is a great buy long term”
Yes, thinking we could even go back down to 10k during these bearish times. Those great opportunities don’t come often in life. I got buy orders in between 10k-20k. the next 6 month will prob be down/sideways until the next bull run starts. Lots of time to accumulate.
Can someone explain to me how RE prices will crash if no one is selling or building? And what if, despite a recession, there will still remain enough qualified and willing buyers to fuel demand? I thought that record high unemployment would mean that the buyer pool would dry up, that seems to make sense right? Well if that’s the case, what happened to the RE market after we experienced unprecedented unemployment at the start of the pandemic? The biggest RE bull run in recorded history??? That doesn’t make any sense though! What if instead of buying a home, I build it myself? Oh darn it, construction costs are too high, something to do with a 40 year high inflation and it ain’t looking like it’s coming down anytime soon. Shucks.
So if there is too little of something that too many people want and the people that have it wont lose it and the people that don’t have it can’t produce it, how on earth will prices crash again? Oh that’s right interest rates going up makes monthly payments go up which dries up demand, that actually makes sense! But wait one second, if the price to use it but not own it is also going up wouldn’t that offset demand loss due to interest rate increases? Also don’t wages usually rise at a much sharper pace following high inflation? Doesn’t that further offset mortgage rate increases since buyers will have more money? I’m sooo confused! I just don’t get it! I really hope the market crashes! Come on guys, let’s hold hands and make a circle and put a hex on the market! I’m certain this will work because nothing else seems to be working!
I’m not so skilled at math so please let me know how many BTC can be bought when the price is zero. I also want to know if you’ve already chosen a design to cover up your BTC tattoo. TIA
Exactly the comments I am looking for me. We need that sentiment. The Bottom is near!
M got a crypto tat?
No tat’s but digital wallets. (Trezor, ledger nano s)
“I have heavy buy orders in to accumulate more Bitcoin. You scale in when everyone believes bitcoin is dead and will go to zero. ”
You remind me of a younger me.
I invested in Lucent in 2001 when it had dropped from nearly $100/share down to $12/share.
Lucent! This is the great Bell Labs that invent the transistor among many other things!
Why are they so cheap with all of those government R&D contracts?
I was a believer!
It dropped to $3/share and I learned my lesson.
Since obviously I don’t understand BTC for use as a highly volatile currency, my opinion is biased by both ignorance and being burned in my faith.
Ha! Memories. My then coworker’s wife was sitting on 3k Lucent shares she acquired via employee performance bonuses. He, the coworker, wanted her to liquidate all so they could afford a larger house. He was upset for the longest time. I, too, suffered some financial pain in the tech wreck but not that much.
A challenge with real estate is the binary nature of the exposure. You either own or rent, own or sell, rent or buy (ignoring owners of multiple properties).
My blog from ~3 years ago offers a third solution – hedge a portion of your exposure. That can be in CME Case Shiller futures, HPHF OTC agreements, shared appreciation strategies, etc.
Further, (on the first two) one can “dollar cost average” with exposure to home prices in a similar way that you can stocks in your 401k.
https://www.homepricefutures.com/posts/reduce-the-stress-of-100-rent-vs-100-buy-decision-with-bite-sized-pieces
Wash, rinse, repeat— same as ‘01 and ‘08. Housing will correct 10-15% in desirable areas, and up to 50% in less-desirable ones. The floor though will be higher this time because of lack of supply.
This is only the beginning. On the political side, all the media is predicting that the GOP will take back both houses of congress. This won’t be bad for the Democrats. They will have someone to blame, other than themselves, for this current disaster. Let the gaslighting begin. Both parties are responsible.
MMT, Modern Monetary Theory basically states that individual countries, that control their own fiat currency, have no risk of default. This current crisis is just an extension of 2008 when QE by the Fed bailed out the banks by buying all the horrible debt they held. This occurred in other western countries and Japan. Essentially, this just kicked the can down the road. Printing trillions more is NOT going to fix the problem this time!
Raising rates is only going to cause a huge slow down in the economy, making things exponentially worse. The FED will then be forced to lower rates. The effect of this is speculative. Stand by for much pain.
The observation that Americans are carrying large amounts of debt and playing the credit card pyramid scheme is unfortunately very accurate. Anecdotally speaking, how is it that I see thousands of new expensive cars and large trucks on the road and in the parking lots when gasoline costs are exploding? The vast majority of these vehicles are financed! This is only the beginning. Someone, mostly millennials, are in for a very rude wake up call.
I can’t believe we have people looking to put huge down payments into real estate to purchase a house that’s price is grossly inflated… AT THIS TIME!
Let the games begin!
That’s right. Most people forget that run away inflation is 10X worst than a stock market crash or housing crash. With stocks/housing the FED can print and QE… Inflation is motherf**rrr. Even-though the US$ is the world’s reserve currency, if Inflation is run-away the currency is destroyed.
The US dollar is failing to the upside. This is super dangerous. Foreign countries holding US dollar denominated debt have to repay that in local devalued currency. Today we are seeing smaller countries defaulting on their debt and facing actual total economic collapse. As I write, Sri Lanka, a country of 23 million, has completely collapsed and fallen into total chaos. There are other countries, including some in South America, that are on an economic precipice and will follow. It’s just a matter of time. Southern California real estate pricing is an ancillary issue when a general collapse occurs. In 2008 the incredible trillions in bad RE loans were never resolved, but bought up and put on the Fed’s balance sheet. This done with newly printed money. (QE) In this way the M2 money supply was not greatly effected, keeping things stable for awhile.
Today, car loans are in default to the tune of 2.8 million loans in the first six month of 2022. This is ‘huge’ and a leading indicator to anyone who has half a brain. Credit card debt is a true Ponzi scheme to the tune of 1.4 trillion dollars. Inflation is screaming. So what does the FED do? Raise rates 75 basis points, and threaten more tightening. This appears to me to be a policy error with grave consequences. We’ll see.
Recently the millennial oligarch, Zuckerberg, announced that his company is going to lay off employees! Others Silicon Valley behemoths are sending out similar signals. It’s just a matter of time. Wall Street earnings season declarations are right around the corner. Prepare yourself for some big numbers to the downside. Since January the stock market has dropped about 25%. Even Bezos of Amazon lost billions of his personal fortune.
Yes, these insane BS inflated real estate prices are going to take a hit. RE is usually the last to drop, but it will happen. Don’t get caught holding he bag. There’s a ‘huge’ economic storm heading our way. it will be followed by a renaissance. This will take time.
Meantime, let’s hope the Federal Reserve and politicians don’t screw up things even worse than they already have. Every bit of this is man made and self induced.
My Dad took a train from Paris to Warsaw in the early 1920s, and in German rail stations there were people begging for food coupons issued by the railroad. German Marks were basically worthless. You think Germany is a backward country like Zimbabwe? And it can’t happen here?
BTW, the two best things to own in 1920s Germany were gold and real estate.
In Venezuela, where their currency is toilet paper, people are paying for food, products and services with flakes of gold. Some stores are listing their products ad services labels in gold increments.
I remember all the debunks in the early 90s and again in the mid-2000s. This thing is going to crash hard. I’m thinking 30% or more in LA/OC. and 40% in the IE.
But that would only take prices back to last Tuesday. 😛
Stats and fundamentals are cited by everyone from seasoned economists to basement millennial trolls. But everyone forgets the one aspect that has the greatest affect. How people react to fundamentals and stats. Human emotion cannot be predicted or measured. FOMO is quickly transitioning to FOLE, fear of losing everything.
So a $1M IE homes is gonna cost $2900/month and refinancable down to $2100 a month according to your seemingly arbitrary and unsubstantiated 40% drop guessing game. Do you have to smoke drugs for that to make sense to you or are you naturally gifted?
Well well well, looky here – The Los Angeles Times. “‘The market is not the same as it was a month ago even,’ said Lindsay Katz, a Los Angeles agent at Redfin. On Covello Street in Van Nuys, the owner of a four-bedroom house recently cut the price by $50,000 to $949,900 after the 1950s tract home sat on the market for three weeks. Other homes in the area are listing even bigger price reductions: a $78,000 cut for a two-bedroom home, and a house with an accessory dwelling unit first listed at $1 million now for sale at $860,000 — a $140,000 price cut.”
“The share of homes listed for sale that took recent price cuts has more than doubled since last year. During the four weeks that ended June 5, 16.2% of listings in L.A. County had at least one price cut, up from 7.5% during the same period last year, Redfin data show. In Orange, Riverside and San Bernardino counties the share of price drops rose to more than 20% of listings, up from about 7% a year earlier. Nationwide, there haven’t been this many price cuts since 2019.”
“Carl Izbicki, a real estate agent at RE/MAX Estate Properties in Los Angeles, said homes that used to get about 15 to 25 offers now get three to five. When the market was on fire, one of Izbicki’s clients, a couple, lost out on about eight homes despite bidding well above the asking price. Last week, Izbicki sent them a list of properties that have been on the market for more than 30 days. ‘If they like one of these homes, we are going to offer less,’ he said.”
Well, you’ll always have ur magic coins 🙂
Got popcorn 🙂
Realist, I like that you predict the end of times and back it up with data.
Let’s look at the data:
https://www.zillow.com/homes/17141-Covello-St-Van-Nuys,-CA-91406_rb/19953469_zpid/
5/3/2019 – Sold 615K
3/1/2022 – Sold 865K +40% over 3 years.
6/15/2022 – Pending 950K +10% over 3 months. True, they had to drop the price from 1M
Yawn! Wake me up when the crazy price increases are over.
Also, wake M and I up when bitcoin drops below the 7K it was 2.5 years ago. +300% increase today.
There is still too much demand and cash sloshing around currently to cause a crash. We’ll see what happens after a year of inflation eats up all of that extra money.
“ Also, wake M and I up when bitcoin drops below the 7K it was 2.5 years ago. +300% increase today.”
That’s right. The strongest support line is around 10k but many will front run it. In other words we might see a bottom somewhere between 10-20k. As of now too many people are cheering for lower prices to buy bitcoin at a discount. That doesn’t sound like despair/capitulation too me. We still need this bear market to last a while and change sentiment. Once people talk about “bitcoin is dead”, “bitcoin will go to zero”, etc. that’s when I get more bullish. For the next 3-6Month we are in crash times. Stack cash, wait and enjoy this summer. We are getting ready for our Tahoe vacation!
Looking at Bitcoins previous boom and bust, it topped of at $20K and bottomed at the tail end of 2018 at around $3K. Applying the same principle to this boom and bust would put BTCs floor to $11K. Whats funny is people say “it’ll go to zero” but wont say how they think it’ll go zero. When the internet stops existing? I think we’ll have bigger problems if that ever happens.
That’s weird. I just clicked on the Zillow link above for the Covello home.
The house was sold for $1M after the sale was pending at $950K.
This is a 16% increase from the last time it sold 3 months ago.
During normal times, I’ve seen the sold price drop after the inspection.
What would cause the price to increase after the sale was pending? I thought after the sale was pending that there couldn’t be any other bidders. Maybe it fell out and another bidder came in at full price?
RE seems to be still very hot.
I also wanted to thank Realist for finally pointing out real examples instead of predicting doom with no evidence.
Housing prices per Realist real data are UP 16% in 3 months in the LA area!!!
Keep it up Realist and we will let you know when your predictions of Doom are achieved.
Keep the faith! It may happen! However…., not yet.
I’m hoping for a soft landing with RE prices up slightly for several years with prices being eaten away by massive inflation that the Fed is half-heartedly saying they are tying to deal with. At least they haven’t caved and dropped rates to zero like they did in early 2019. Inflation is a serious problem.
However, millions of people giving their homes back to Freddie and Fannie if housing crashes again like 2008 would be an even worse problem.
As I have said above, this is a better drama than anything aired on Netflix today.
Drama can mean short-term pain to some. I have no control over it. The Fed has also handed out millions to some during the pandemic in 2019. I also had no control over that but these are the consequences.
Is it insane to think the simplist solution to the CA housing shortage is simply to limit the number of homes a person can own?
Does a person really need to own more than 3 homes? 5? Where is an appropriate cut off?
If a person owns more than 1 home, he is most likely renting them out. So it does not add or substract from the housing stock. This is more housing ownership concentration.
lots of large companies own thousand of units providing viable housing options to millions of people.
And a person who owns a 20 unit apartment house should be forced to turn it into a condominium complex? Or the government just takes it and converts it to public housing?
No thanks. Sovietizing housing leads Soviet conditions. Like in Soviet Armenia, where an earthquake killed more people a remote area than the stronger Mexico City quake did in one of the world’s largest metropolises. I own 2 houses (and half of a third with my Brother), two of which we rent out and one I live in. We built the rental houses ourselves. It’s called sweat equity. Like squirrels saving nuts for the winter. If someone were to make me a good offer, I’d sell either of the two rentals, but for now I’m not listing them. And the only offers I’ve ever gotten were from people who wanted me to carry paper on the house. I’m not a bank, but I know that there’s a reason for banks; to weed out bad credit risks.
“…Simplest solution to the CA housing shortage…”
What almost nobody truly understands that there is no shortage of California homes, only a shortage of homes for *sale*. The housing shortage mythology has been manufactured by the REIConplex and by speculators, who believe / want to believe the price of California Real Estate only goes up.
Of course, someone will always chime in and say “But what about all those new families moving into California” Well, what about them?
Here is a reality check from Google:
In 2020 alone, nearly 650,000 people left California for other states — about 210,000 more than moved to California from elsewhere in the U.S. This phenomenon of departures exceeding arrivals isn’t new. Every year since the 1990s, more people have exited California than have moved in from other parts of the country.
Net net more homes are available than ever before.
The amount of housing square footage per individual may rise, (the trend to larger homes that has been going on for the last 70 years), but that is a different discussion.
Take out the speculation (which will/is happening due to rising interest rates) and problem will solve it self.
Economics always wins, always.
Yeah, it’s funny. There’s a shortage… until there’s not! It’s called PEOPLE STOP BUYING because PROBLEMS. High interest rates, paycheck-eating inflation, recession / job losses, etc.
Rather than government control, ie limiting the number of houses owned, rent control, higher taxes, I think the solution is less control by government.
!) The Fed must stop suppressing rates. If anyone has a choice to make 6% in a CD or 6% in a rental property, most will choose the CD. Housing prices will fall. Both corporations and private landlords will not invest. Higher mortgage rates that are not suppressed will lower prices eventually.
2) Stop stimulating the rental market with tax incentives. Our last President put in some nice loopholes for landlords (Funny that he is one) but took away loopholes for primary homeowners (SALT). SALT does not not apply for a rental property so landlords get the full deduction. It is great that renters now have a doubled std deduction for taxes. You’d think that they would be doing better, but landlords smell extra money so rents have gone up (Among other reasons).
3) This crazed FOMO mentality of I’ll overbid 50% on a house somehow has to stop. Like with any fad, (ie Beanie Babies)It will stop eventually but it still exists now. It will take a small price drop to stop it.
4) The 300-1000% gains in the stock market will have to diminish. Too much money in system is driving up the cost of everything. Too much demand with money and not enough supply is inflating everything.
I have been on the receiving end of individuals such as DOZZ complaining about myself and others owning more than one house. Tes, I own multiple SFH all rented out to individuals driving ( or leasing ) high dollar vehicles, just keeping up the appearance of doing well financially. These follks need to get a job in the circus with their ability to keep their financial obligation debt balls in the air. They appear to be doing well until an unexpected bill comes due, and since we are in the same financial ocean, we never know who is swimming naked until the tide goes out.
I can’t believe people are still under the impression this correction is going to be minimal. Today, Jerome Powell mentioned the vast amount of homes which will be going on the market at the same time the QT is going on. He tried to walk it back, but people in the industry know its the truth. Its going to be 2008 on steroids folks.
“It’s going to be 2008 on steroids.”
Let’s go down history lane. In 2005 house prices peaked. And inventory was sooooo much higher than today.
NINJA loans were given to anyone who could fog a mirror.
I am giving you already two facts that show the 2005 market was completely different than 2022.
I suggest you read up on the 2008 housing crash and what led to it before making those remarks. I don’t want you to be set up for disappointment.
So what you’re telling is that your source that an incoming massive oversupply enough to offset demand is “some guy in a suit that has a track record of lying said so.” I cant believe that words coming out of the mouth of someone thousands of miles away from you is enough to convince you that what your seeing right in front of you is not reality. Did you even stop and think how this will come to fruition? Are homeowners on the verge of losing their homes? No their rates are too low and their payments are serviceable enough to get them thru potential job loss. Is their overbuilding going on that im not aware of. No, permit data suggests otherwise. What about buyer demand? Is that going to come to grinding halt? No, that not the case seeing how buyer activity is still strong despite increasing rates. So then what is it?
Blast from the past …
M (Sept 17, 2021): “The amounts I have staked with Cardano are astronomical. On paper I am already a crypto millionaire…”
Source: https://www.doctorhousingbubble.com/more-housing-inventory-is-coming-850000-borrowers-will-exit-forbearance-between-august-and-october/
Cardano is one of my favorite crypto assets besides bitcoin and Ethereum and to an extent Polkadot (dot).
My targets for ETH are 300-600
My targets for Cardano are much, much lower from todays prices
Same for dot.
I think this crypto crash will see a capitulation within this year and after that a re-accumulation phase. That will be the opportunity of a lifetime. I am hyped.
I bought bitcoin a long time ago and sold a long time ago. Made some money, not big bucks.
Ended up taking the profits and investing in real crypto technologies that actually provide a service that is useful (AMD and BR).
I have done really well although sold AMD a while back.
As far as I could tell, Bitcoin was basically a tulip investment. If someone could explain to me how BTC and ETH are not tulip investments, I am all ears.
Does BTC license its crypto technologies that are developed? That would be great service that justifies investment. Other than that, I don’t get it.
“If someone could explain to me how BTC and ETH are not tulip investments, I am all ears.”
*crickets*
“ If someone could explain to me how BTC and ETH are not tulip investments,”
My favorite subject. It’s self explanatory for the savvy investor but I always like to help out the guy in the back:
First, I gotta explain what the tulip bubble did not have:
Longevity. It was a very short bubble.
Bitcoin has been around since a decade despite the fact that it was called dead for uncountable times. The other major difference here is the fact that Bitcoin prints higher highs and higher lows since inception. It started with basically zero.
I remember when I first looked into it and people told me it’s not worth a few hundred bucks. Than it crossed a thousand usd and people said my BTC will go down to a few hundred. When it crashed people told me it will never be over 1k again.
Bitcoin investments. Beanie babies. AMC. Stocks and RE speculation.
All have one thing in common that will never change:
As long as people exist, some will always look for a shortcut in life (get rich quick). They don’t care what the thing is they speculate with as long as it keeps their dream alive to be rich quick.
Banks, Wall Street, institutions, savvy investors (like me) know this and also understand how valuable those get-rich-quick people are since they are the exit-liquidity.
Someone will pay 100k for a bitcoin when I sell. Mark my words.
And it’s likely that this someone is the same person who told me years and years ago that bitcoin is overpriced at 1k. It’s likely that this is also the same person who believed in buy now or be priced out forever.
““The amounts I have staked with Cardano are astronomical. ”
Cardano:
Sept 17 2021 – $2.50/share
June 17 2021 – $0.49/share
80% astronomical loss.
At least M will have a huge loss to counter those BTC gains.
80% astronomical loss.
Well, as late as Jan 2020, M was still predicting an EPIC CRASH in real estate. So he was half right. An EPIC CRASH did occur. Just not in real estate.
That’s correct. And ALT’s can easily drop another 80-90% from here on. They go down much more than people can imagine. The re-accumulation phase of a life time awaits for savvy investors!
A housing crash won’t occur anytime soon. Maybe a correction me thinks. But we will see. It would be nice if a RE crash happens…..would like to buy more rentals. One can only dream 🙂 but since we have crashes in crypto that allow us to load up on super discounted coins, money won’t be an issue in the future (if history rhymes again and ALTs make a 50-100x in the next bull phase).
Cardano is down 67% along with all the crypto ETFs he touted a year ago. What happened to all the rocket ship emojis and this thing is going to the moon talk? BTC was supposed to go to 100K this year I thought? Loooooooooool.
Loss aversion- people think they haven’t lost anything because they haven’t sold the asset. If you had an “astronomical amount” staked in Cardano and it went down 67%, you’ve lost 67% (i.e. an astronomical loss).
I can buy that same asset today without incurring the loss you did so please explain how you didn’t lose money? Does it make it more real if you sold that asset today (realizing the loss) and then turn around and immediately buy it for the same price?
Fine, you bought BTC at $5K so you’re still up. But it an actuality you’ve lost a boat load from when it was at $60K (and you could have sold). You just got greedy thinking $100K was on the horizon.
A house can go down in value but you at least you can live in it. You can’t live inside your crypto wallet.
I guess people have to play psychological games to keep themselves from jumping off a cliff. Inherited money to buy a house (supposedly) and then as a financial guru your resume shows a 67% loss YoY. L-0-S-E-R
I fully expect Cardano to make me over a million again. I don’t have anymore Cardanos as of now but I hope to pick them up again between 2-20cents. Can’t say how low it will go yet. Way too early. ALTs bottomed in the past 6 months after bitcoin bottomed. Just be prepared (stack cash for now)
During a crypto bear market you want to stick to cash and bitcoin. My bitcoin hodl position won’t get sold of course. I am hoping to buy more. My buy orders go from below 20k all the way down to 10k.
Guys, this is a buying opportunity of a lifetime for crypto and stocks SOON.
We have further downside ahead of us so keep your powder dry and be greedy when others are fearful! And, enjoy your summer.
If a crypto and stock market crash makes you nervous you are clearing doing it wrong!!
Embrace the crash and buy low. Don’t ever over extend. These are the best times. Be bitcoin and cash heavy and soon the accumulation phase for ALTs will come. (Generational buying opportunity). Similar to stocks, once the fed pivots and we have inflation under control I will buy heavily into stocks again.
Enjoy your summer. Will spend two weeks in Tahoe soon!!
M: I fully expect Cardano to make me over a million again. I don’t have anymore Cardanos as of now…
You were still claiming to own Cardano in September 2021. I guess you just “happened” to have sold them at the top?
You certainly lead a fantastical and magical life story.
My crypto strategy is pretty good and made me over a million during the last cycle.
BTC Leads the way. Once you believe BTC has bottomed you load up on BTC. When ALTs bottom AGAINST BTC you trade BTC to ALTs (I assume here that people know that you don’t have to sell to USD in order to scale out of positions, you can trade crypto within pairs, ADAETH, ADABTC and vice versa). During the mania phase you scale out on positions but never all-in / all-out. Once the charts signal you are in a bear market you trade ALTs back to BTC and ride out the storm while stacking cash and waiting to DCA back in. I always scale in and out > you can never time the bottom and top in any market.
Where are we in the cycle? Well I think within the next 6-12 month ish we will see a BTC bottom. It’s much easier to invest and trade in bear markets. And the best thing is the haters will get disappointed once again. “BTC to zero” “the end of Bitcoin”
Notice how they never mention that BTC was a few hundred bucks 6-7 years ago? We need all this FUD these days to get my buy orders filled at much lower prices!
To be fair:
Cardano:
Dec 20, 2019 – 3 cents when M purchased a house.
June 17 2022 – 49 cents.
16X gain. 1600%
Crypto companies are so unstable but true believers likely made millions.
Cardano has been the most profitable investment by far for me. Can’t wait to accumulate again. Not yet though, I expect Cardano to go down by another 70% or so from todays prices. During a bear market you only want to hold BTC and cash. After BTC bottoms ALTs will bottom. Hoping to pick up ETHEREUM at 400ish dollars a d Cardano at a few cents. Buying opportunity of a lifetime.
We are going towards sellers market in many areas in SoCal.
Yet inventory is still historically low. Our mortgages with locked in rates below 3% look really sexy. Nobody is walking away from in order to buy a new house with 6-7% rates.
In our neighborhood a seller just got an all cash offer for their house at asking price. What an epic crash this is!
Any advice that you give, I will run to do the opposite!
As a landlord this is music to my ears! We need life-long renters!!
30% drop in housing prices around the corner with unemployment hitting 9% in 2023
“30% drop in housing prices around the corner with unemployment hitting 9% in 2023”
My prediction:
1) If housing prices drop 30%, (There was a 30% gain during the last year)
2) If unemployment rises to 7% (Typical is 5.75%. Unemployment rate was 10% in 2009 when people were foreclosing. ) (Unemployment is currently at 3.6%)
If either of these happen, the Fed, which is run by the banks do not want to have the massive foreclosures seen during the GFC due to a 30% drop in prices and high unemployment, will lower rates very quickly. They lowered rates in 2019 and the boom resumed. IMHO, they did not lower rates fast enough in 2008. That was an emergency and they reacted too slowly. The pandemic was also an emergency but they reacted too aggressively and lowered rates to the point of getting us into a massive bubble. There was no excuse for forcing rates to near zero when the economy was doing well in 2019.
Everyone was employed and making money in stocks in 2019 so nobody complained.
However, a true conspiracist might suspect that like in 2008, the banks really do want to take your house away and sell them in bulk to Blackstone who will turn them into rentals and create a rental society where people will own nothing. I do not own a tinfoil hat.
My stepson bought an 8 unit apartment building with investors. His promise was to refi in a year (8 months now) and pay them back. With rates increasing that’s not gonna happen. My question is what happens to prices and rent amounts to income properties like this in a high rate environment?
If the total combined rents cover the mortgage payments, taxes and misc expenses then your stepson should be okay because rents are definitely not coming down. Incomes are set to rise so that helps support the currant rent and provides him with upside to increase rents moving forward. His return on investment might not be all that great now but it will get better. Your stepson isnt in the best of situations but hes not in the worst of situations either. What he’s giving up by holding that property is the opportunity to invest that money elsewhere with higher returns but since his money is locked up in the complex, he has to settle with little to no return in the short term.
1) True shortage of housing is not measured by number of homes available for sale, but rental vacancy rate
2) For prices to drop, lots of people need to start selling or pool of buyers to shrink significantly.
3) If prices drop 2x, all of the sudden your rental asset is producing 2x ROI. Less inventive to sell.
4) Inflation will further reduce incentives to sell property.
5) rents are not coming down (99% probability) unless we have significant stoppage of economic activity.
Hence, the downward pressure on prices will come from liquidity issues of the owners. Reduced pool of buyers will not cause significant amount of price pressure, because as long as owner does not have to sell, it is very attractive to keep the property.
in 2008, the problem was liquidity of the owners (special loans). Right now, I do not see this as a problem due to underwriting standards. Even if potential buyers pool is shrinking, it does not create problems for sellers.
Does not apply to large players as they have specific strategies laid out for years in advance.
Its refreshing to see someone on this blog that has some common sense.
Seems well thought out.
I agree it is silly to compare a pending crash now to 2008 for no other reason that no NINJA loans.
This blog is running so behind the curve. It’s going to be obsolete soon. Follow the action at Housing Bubble Blog. Every day brings new news of a crumbling economy and real estate market both here and abroad. Interest Rates??? They’ll be higher tomorrow. Homes on the market? They’ll be lots more tomorrow. Price of gasoline? It’s breaking new records tomorrow. Food shortages? On the horizon.
INFLATION?? LOL!! There’s no inflation, says Brandon. The only reason to come here is to read the trolls and shills who still believe that RE only goes up and that California is a “special” place. Homeless crisis? It’s going to be worse tomorrow….
Ain’t all that sunshine wonderful? Let’s get some live reports from the U-Haul lots as people leave the Golden State.
Everybody on this blog used to comment like you. Back in the day.
My friend works for U-Haul in SoCal. The situation is way worse than any posted reports.
Oh no, the UHAUL posts are back. lol
U-haul 15′ Truck, July 9
San Diego to Dallas: $3,625.00
Dallas to San Diego: $1,305.00
Turtle,
Right numbers, wrong conclusion. Losers use Uhauls, Winners use moving companies.
1) San Diego – Dallas, losers escaping cali with tails between their legs, cheap and hence Uhaul
2) Dallas – San Diego, winners who have money to hire a moving company
Surge is correct.
Anyone with money moving to CA does not use U-Haul.
They hire the best and can still afford a CA house.
>>> Turtle,
>>> Right numbers, wrong conclusion.
@Surge What? I didn’t even share a conclusion. I just posted data in reply to Charlie’s comment. Getting a little ahead of yourself there.
But anyway, California is shrinking. I wonder who will serve the food and clean things up after all the “losers” trek out in their U-Hauls. Oh wait, poor people are staying. They can’t afford to leave! And why would they with all the freebies? So, good news for the “winners” from Dallas driving in ahead of their fancy moving companies!
I’ve never actually heard of a Texan moving to California (okay, once, but it was like 30 years ago). Maybe Elon Musk will move back and use a fancy moving company himself. Probably moved to Texas with a U-Haul. What a loser!
Wrong, Surge. The same rate situation is occurring with professional movers. I know many white collar, high earning individuals that were charged a premium by professional movers to move out of California. Some were scammed with last minute rate adjustments after their belongings were on the truck.
I am surprised you did not counter by saying that people moving in California actually have no belongings since they are poor and contribute to making Cali a 3rd world country.
Currently, CA RE prices are still rising.
That means demand is surpassing supply.
To me, this reflects a cognitive dissonance. If people are moving out of CA, how can house price demand be rising?
The reasonable explanation is that the majority of poorer low-wage earners that use U-Haul are moving out. They cannot afford to purchase a house so are moving. Higher wage people who are being hired, (ie doctors, lawyers, engineers, computer scientists) are moving in for the climate and higher wages. With this imbalance, I guess the higher wage earners will have to wait in line and pay more to manicure their lawns and toenails.
In fact, people with money might not even move their stuff. They move to Cali and keep their original belongings where they were (2nd homes, etc….). Just hop on the plane and buy new stuff once they get here. I dunno
Point is: the Uhaul “data’ is useful to prove already established viewpoint.
Its no mystery that Californians are moving to other states and driving up home prices in those destination states. That would indicate those moving are not low income renters but owners with significant equity.
https://www.movebuddha.com/blog/california-exodus-migration-report/
Yes some people with significant equity afforded by horrible state of california.
There is a good proportion of people who are house rich, operational income poor.
Many people have bought but are squeezing by. For them it is a win to use that equity to buy cash in other states to reduce mortgage housing expenses.
Headline: Bitcoin plunges below $20,000 to its lowest price in 18 months as slide in value from its record high of $69,000 shows no sign of stopping
https://www.dailymail.co.uk/news/article-10929641/Bitcoin-plunges-20-000-lowest-price-18-months.html
Bitcoin plunged below $20,000 today to its lowest price in 18 months, as the slide in value shows no sign of stopping.
The biggest cryptocurrency was down 7.1% to $18,993 at 9.06am this morning, having earlier touched $18,732, its shortest price since December 2020.
It has lost around 28% since Friday, more than half of its value this year, and is down 70% from a record high $69,000 in November.
It comes after Hong-Kong based crypto-lender Babel Finance yesterday suspended withdrawals amid a wide-scale downfall in the market, saying in a statement it is ‘facing unusual liquidity’. …
Time for M to buy.
Spot on, some buy orders filled but I am not putting much cash in now. I am hoping for 14-17k. And if that breaks too I will buy even more. Let’s see what happens. The nice thing with buy orders is that you can enjoy your summer and be greedy while others are fearful without putting in any work. Love it. We live during incredible times. It’s never been so easy in history to become rich as a normal dude.
I posted too soon. Bitcoin is now below $18,000.
As M might say, “Holy Cow!”
Headline: Cascading Liquidations Send Bitcoin Below $18,000 As Daisy-Chained Margin Call Contagion Sparks Record Selling
https://www.zerohedge.com/markets/cascading-liquidations-send-bitcoin-below-18000-daisy-chained-margin-call-contagion-sparks
For crypto investors, June is the cruelest month ever and the pain just won’t go away.
Bitcoin, and the broader crypto sector, are getting crushed – again – for a record 12th day in a row, with the largest token tumbling below $20,000, below $19,000 and even below $18,000, tumbling as low as $17,629 on Saturday afternoon, having lost nearly 50% of all its value in just the past two weeks and plunging 75% from an all time high of $67,734 in November, taking out support after support, even the most important of all: the $19,511 high from the previous bull cycle (throughout its brief, 12-year trading history, Bitcoin has never dropped below previous cycle peaks… until today). …
Bitcoin’s closest peer, Ethereum, broke below $1,000 for the first time since January 2021 and tumbled 19%, to a low of $884 before modestly reversing losses.
According to data from Coinglass, total liquidations in the crypto market were $435 million in the past 24 hours, with Bitcoin and Ether at around $202 million and $144.5 million respectively.
Altcoins also suffered the brunt of soured investor appetite, with every token on Bloomberg’s cryptocurrency monitor trading in the red. Cardano, Solana, Dogecoin and Polkadot recorded falls of between 12% and 14%, while privacy tokens such as Monero and Zcash lost as much as 16%.
M has claimed to have “invested” in Ethereum, Cardano, and Polkadot.
Yep, Bitcoin, Ethereum, Cardano and dot (polkadot).
Remember, bull markets make you money, bear markets make you rich.
We are probably just month away from an accumulation phase. That’s when you load up for the next bull run! Exciting times! Enjoy your summer!
I got a newsletter today that states “The Second Housing Bubble Is Upon Us”.
The author from Stansberry Research (Dan Ferris) told of his reading the WSJ last Wednesday. There were articles about the Fed rate increase, stock valuation and falling retail sales an a bold headline “US Home Equity Hits Highest Level on Record – $27.8 Trillion”. This headline jolted the author to write on the housing situation because financial headlines are often contrarian indicators.
He believes that the pace of home price increase since the Fed juiced the economy has been such that the prices won’t level off but will stall out and crash. A similar plunge to the last bubble would wipe out $11 trillion of real wealth. The last bubble wiped out $6.1 trillion, which the US Inflation Calculator says would be worth $7.8 trillion today.
One week ago MBS (mortgage backed securities) went to “no bid”. That means the status was heading to junk. This happened before in 2008. In the ’70s, housing prices beat inflation. They did it again last year. The article says that institutional and business buyers are a bigger force than ever before. Redfin says they bought 93000 homes in 2021 Q3, 88000 in 2021 Q4 and 78000 in 2022 Q1. The last number was 20% of all sales in that quarter. He says that institutional investing is no different than individual buying in that higher prices and rates slow buying. The Mortgage Bankers Association says mortgage applications are down 16% year over year, and refis are down 76%.
Speaking of the excuses made by Biden & Co., The author has this to say:
“It’s all nonsense.
Inflation is one thing – and one thing only. This definition is true in all times and places. And it isn’t higher prices for goods and services. Higher prices are the result of inflation.
In actuality, inflation is a decline in the value of money. It is “always and everywhere a monetary phenomenon,” as economist Milton Friedman famously put it.”
Governments use inflation to expand their power monopoly and they don’t care about the suffering they cause if they get more power.
The author says:
“Prepare, don’t predict.
I’ve counseled holding plenty of cash too many times to count.
Sure, cash suffers from inflation. But as I’ve said before, the proper bear market strategy is about survival. And having a lot of cash on hand is the essence of survival at the end of a bear market. It’s how you recover from those dark days when the sun shines again.
But unfortunately, I fear that day is a year – or more – into our future.”
I agree with this article for the most part but I do believe that markets for tangible assets will behave differently under inflation. See my post of June 12 (thanks for the kind words on that post Jenny!). We’ll see if gold and silver outshine crypto soon. (Is crypto tangible?)
It can be hard to hold cash when inflation is raging. But if your cash is intended for real estate and real estate is leveling off or possibly dropping, it’s not really affecting your spending power there.
It is foolish to think your spending power is not impacted by inflation, even if you are holding out to buy for a potential crash.
You buy cash and benefit from lower price. But you are paying in terms of not leveraging for the up-cycle and opportunity costs associated with higher rates.
You loan. Yes, price of property is lower, but your mortgage costs will increase due to a higher rates.
This is why acceleration in inflation is very bad (while steady inflation by itself is just a property of any modern monetary policy).
Cash is king during this high inflation / risk off environment because the alternatives suck even more: stocks are not done falling. Crypto isn’t done falling. Gold sucks since ten years. And real estate has just put in another 20% yoy while the RE market will cool off for the next year(s), aka not a great time to buy RE.
Keep your powder dry and wait for epic buying opportunities in stocks and crypto.
Stansberry – any company that wants you to listen to their vidoes about buying gold without being able to hit the pause button are not worth listening to.
aren’t they they guys who say a recession is just around the corner every year since 2010?
This wasn’t a video. Stansberry has several different commentators who sometimes disagree with each other, e.g. about crypto and how much and how soon the stock market will go down. This article was about real estate, and I found a lot of useful information in it. I pick and choose what I read from all the financial opinion sites. I like gold long term, but if interest rates go way up, there will be a drop in gold prices in the short term. As long as there is the tendency to inflate, gold will be a haven.
For someone who is cash and bitcoin heavy these are exciting times.
Stack cash, stack cash and wait for stocks and crypto to bottom.
Generational buying opportunity is coming within the next 12 month.
This is a gift guys!
If you buy low (crypto and stocks) you probably don’t have to worry about house prices as you will make a ton of money.
Look at me. I am in my 30’s and own two houses. During the next stock and crypto bull run I can probably buy more real estate and pay off my existing mortgages.
Be patient, stack cash and wait for inflation to peak. Don’t fight the FED. The SP500 will likely bottom when inflation peaks. Thats when the fed will pivot. Be ready, don’t freak out and enjoy your summer.
All I saw was “Look at me.”
That sums you up really well.
Passing on your comments like RL from now on.
All the best.
This post reminds me of late night Carleton Sheets testimonies. Thanks for jogging my memory and a good laugh!
“Look at me. I am in my 30’s and own two houses.”
Because of your Inheritance! Not because of your smarts! Quit taking credit for something you had nothing to do with. You were given free money. Period.
Bawahahahahaah
This post needs to be re-posted 12 month from now.
I will have loaded up on cheap stocks and crypto while the perma bears keep talking about the upcoming crash!
History rhymes! Perma bears never end up buying while people like me get wealthier and wealthier. I earned your jealousy by investing in a smart way!
Some people start off on second base and think they hit a homerun. I don’t like to critique others on a forum but his lack of humility warrants a rebuke (because he’s telling people who can ill afford to take idiot risk to follow him) – he’s neither as smart as he pretends to be nor as impressive as he thinks he is. Biotech industry going through some pains now. How much are those options worth? The get rich crypto path just short circuited.
You can call it what you want hero.
When I bought bitcoin many, many years ago for the first time people said it’s not worth that. I was told I will lose everything as it goes to zero! Lol. I won’t tell you the avg price I paid because you wouldn’t believe it 🙂 it’s so low that people can’t allow themselves to believe it :p
When I bought Cardano and eth many years ago for the first time, most people didn’t even know those currencies existed. The price gains from accumulation phase to bull market are so parabolic that people shut down. Here an example (ADA hit a bottom six month ish after BTC bottomed, at 2 cents. During the accumulation phase it bounced between 2-10 cents. During the last bubble, ADA topped at close to $3. Just 2-3 years after the accumulation phase! I am waiting patiently for ada to bottom again to load up. It might even hit a new ATH during the next bull market (2-4 years from now).
During bear markets altcoins can easily lose 80-90% of their value (measured from the previous peak). What most investors or gamblers don’t expect is that after losing 80-90% they can easily go down another 50-80% from there. In other words, ALTs can go down much lower than people can even imagine.
Hence I say, bull markets make you money, bear markets make you rich.
I will surely tell you guys again when it’s time to load up on ALTs (re-accumulation phase).
None of you will buy. And after 50-100x-ing my money again nobody wants to hear it, again 🙂
As soon as the next bubble pops everyone will come out and cheer.
History doesn’t repeat itself but it surely rhymes. You never time a bottom or can predict how low or how high it goes but you scale in during accumulation phases (BTC to Alt pair) and scale out during parabolic runs (alt to BTC pair). I don’t worry about the BTC to USD value at all. We know it trends up over time and we know about the diminishing returns each cycle. Cut the noise out (it will go to 1M vs it will go to zero) and play the macro cycle. If BTC is at or below it’s previous cycle top (below 20k) I DCA in. That doesn’t meant it can’t go much lower. We might see BTC bottoming at 11k. But if history is any indication, it was always the best time to buy BTC with USD during those phases (at or
Below previous cycle tops).
Hoping/planning on ALTs getting obliterated within the next 6-12month. I am thinking the bitcoin dominance needs to go up significantly. Time will tell. And it’s time to sit back and Enjoy your summer!
OC Register columnist Lansner has a column on inflation and interest rates today. He starts the article with a statement that the last time inflation was as high as it is today, the mortgage rate was almost 10%. Lansner says that the pandemic era’s Fed economic bailout is now over. with the latest rate hike. The last time sticky inflation was above 5% was in 1991, and and mortgage rates were 9.5%. Borrowers paid a 4+ % premium for money. Today’s rates are a bargain compared to the 90s. Even so, the rate hikes made Lansner reduce his bubble rating to three bubbles. But in order to be reasonable historically relative to sticky inflation, the mortgage rates will need to rise to 10% at this time.
Would you be surprised if they do reach 10%? Uncle Sam is out of ammo.
I agree. Historically, mortgage rates have always been higher than inflation.
We purchased our first small house in 1987 in S. CA. Inflation was near 4.5%. Our 30 year fixed mortgage was 10.5%. Housing prices were relatively flat YOY during that time.
I considered that a normal market. We offered 5% under the asking price based on comps, and the seller accepted and added an allowance for an older roof. There wasn’t any RE crash at these higher rates during the late 80’s or 90’s.
Today, we have 8% inflation, and 6% mortgage rates. IMHO, there is still pressure to inflate the housing market and there is still a bubble. There isn’t enough downward pressure on inflation so inflation will continue.
With 8% yearly inflation and if housing prices flatten, the housing bubble will effectively deflate without foreclosure pain at 8%/year.
Between 1978 and 1981, existing-home sales fell by -50%, from 3.986 million homes in 1978 to 1.990 million homes by 1981 (data here), and new home sales and building permits fell by similar amounts. Unemployment rate for construction workers peaked at 22.6% in October 1982. Simply put, the housing market crashed under the weight of the 17-18% mortgage rates.
https://www.aei.org/carpe-diem/housing-market-1981-vs-2009/
@Charlie When I look at sale prices during that period, I don’t see a crash: https://fred.stlouisfed.org/series/MSPUS. Volume may have collapsed but apparently not prices? Who freaking knows what will happen with prices, ever!
Good Article, Charlie.
Existing home number of sales crashed but home prices increased.
US median existing home prices increased 36% from 1978-1981. The opposite of a crash. Ref the link in this article. I consider this a boom and not a crash. Considering inflation was averaged 11% per year during this time, 4 years of high inflation was comparable to a 45% real loss in value. The house actually lost value due to inflation but went up in price.
It is possible the same effect will happen this time. Back then, who would sell their house with a 6% mortgage rate when new 30 year loans were at 13%? Similar to 1978-1981, house prices could be flat or rising and inflation will eat away at any real gains.
In 2008, with low or negative inflation, housing prices crashed 30-50%.
Today, the situation is very similar to 1978-1981 so I expect home prices to be flat or rise, home supply to be flat or fall, and inflation adjusted home prices will fall.
@Turtle, No, not a crash but a 6% drop in the median.
Bob, Similar if you only focus on a few fundamentals. The 1978-1981 period lacked QE, low interest rates and a pandemic that abnormally skewed supply, demand and therefore prices. I see prices returning to the mean trend line or slightly lower. Home prices remaining flat or rising from current is not sustainable with current wage and employment levels. There is already downward pressure on prices. Todays hyperactive social media and MSM will continue to influence buyers that now is not a good time to buy. Not sure if the internet existed in 1978 either. I have a call in to Al Gore. Will let you know.
https://en.wikipedia.org/wiki/File:Consumer_Sentiment_Index.webp
https://www.cnbc.com/2022/05/04/is-it-a-good-time-to-buy-a-home-no-most-americans-say.html
https://www.fanniemae.com/research-and-insights/surveys-indices/national-housing-survey
https://amp.cnn.com/cnn/2022/06/19/investing/bitcoin-price/index.html
“Bitcoin had dropped on Saturday to as low as $17,592.78”
We might see bitcoin’s price between 10k-16k again soon (within the next few months). Keep your powder dry and be prepared!
Dude, give it up. You were right about real estate, but no one can predict the price action of BTC or anything else. It’s something that is unknowable. If you’ve made money “trading” crypto in the past, it was by luck. It’s actually no different than day trading in general. This is well established in the literature. Long term, no one really knows what will happen to cypto, like any other nascent technology. There is no bragging rights for something like this, making a blind guess correctly is not a skill. Read Nassim Taleb’s Fooled by Randomness for basic primer on this.
Dean,
Yes, no one can predict the bottom and the top for bitcoin or crypto in general. But you generally know when it’s time to accumulate and when to sell.
If history is any indication, below the 200w has been a great time to accumulate bitcoin. When it’s far extended from the 20w is not a bad time to take chips off the table.
Give it some time to play out. In a risk off environment, high inflation AND the dxy going parabolic, one has to expect a bear market/long accumulation phase for bitcoin.
When nobody talks about bitcoin and the majority things it will go to zero it’s time tk heavily accumulate again. Give it time and never give up on Bitcoin. Bull markets make you money, bear markets make you rich.
I live in the Boston area, and all the million dollar and up homes are on sale on Zillow now.
I know they are trying to cash because they realize the top is in, but where will they live?
Just a thought but many well to do people were buying second homes as investment.
According to the chart the amount of credit card debt ALONE is one trillion one hundred billion dollars. Chump change for this economy according to the Biden administration.
Millennials have NEVER seen a full fledged recession. The 2008 economic debacle was bailed out by the FED using Quantative Easing, ie; printing billions and buying the banks bad loans and putting them on the FED books. It sent a message that these economic downturns are easily dealt with. They just kicked the can down the road. QE ain’t gonna happen again! Maybe Joe and the FED have another trick up their sleeve? I WOULDN’T COUNT ON IT MILLENNIALS!
Our perma bears and bitcoin haters are now able to invest in a Bitcoin SHORT ETF
https://www.cnbc.com/amp/2022/06/20/proshares-is-launching-a-short-bitcoin-etf-this-week.html
Since bitcoin will go to zero and is just snake oil…..Would that not be a great opportunity for you guys?
What’s stopping you from Shorting bitcoin?
Credit is going to get painfully expensive, which will equate to severely reduced consumption. The Fed is going to keep raising the FFR. This is not insignificant but it is secondary to the Fed’s QT which few talk about but which will have an even bigger effect on stocks, commodities, RE, jobs and wages.
We are not in for a few hours of choppy water, it’s going to get rough and stay rough. The recent plunge in the market is just the appetizer. RE likely topped in the Spring selling season and its devaluation will lag into 2023-2026 era. Lots of jobs and wage inflation now, guess what it won’t last. Once there are signs of weakness in employment /wages, once people get a little spooked, look out below.
“Credit is going to get painfully expensive, which will equate to severely reduced consumption”
No doubt, but your crystal ball is as broken as anybody’s!
Why can’t we just watch and then comment after the fact? LOL
Turtle,
“Why can’t we just watch and then comment after the fact? LOL”
I don’t know about you, but this economic drama is more fascinating than anything currently on Netflix.
I have my healthy air-popped popcorn, and I am watching.
I expect the evil villain that caused all this will eventually ride in on a white horse claiming to be a hero.
The Fed will lower rates and save the day when the situation becomes extremely dire.
Unlike J Powell, I have no insider information on the script. I just have my popcorn.
This blog should be renamed “doctorcryptobubble” since most comments are about crypto not RE.
Since M and my son pulled their RE investment money out of the Crypto Bubble, this is relevant.
When the Crypto and Stock bubble finally deflate, it will no longer be relevant for RE. M and Crypto hyping will disappear. Similar to Mr Landlord.
Where is Mr Landlord? He had some good cliches.
Bob 🙂
Didn’t Mr landlord disappear during the Covid stock market crash as well? He will will be back as soon as the stock market hits a new all time high. Maybe years from now?!
Housing, stock market and crypto are tied. Pretty simple: stock market and crypto are doing well means people can buy overpriced crapshacks in a bidding war.
There is no shortage of housing in California. As defined in people have no shelter.
There is shortage of housing that people can buy and own and live in. The housing where your costs are fixed (for the most part) and you are somewhat insulated against inflation.
While there is no shortage of housing to have a roof over your head, what everyone is really concerned with is increased concentration of housing ownership and reduced opportunity for average folk to own a real estate.
“There is shortage of housing that people can buy and own and live in.”
STRs limit supply as well. Some California cities are implementing restrictions but the numbers are too small to be effective.
The OC Register had an article about Chapman University economists predicting a 14% haircut to OC RE prices and a 20% drop in sales. But they are also predicting a 5.1% increase in job growth. But this is shy of pre-pandemic levels. James Doti is the source of this news.
“Back in ’05-’06-’07 you had financial institutions throwing out mortgages to people who really shouldn’t have one,” says Doti, noting loose lending standards let that era’s price appreciation go too far. “With bank regulation, you don’t have that now. Banks aren’t going to come and play the white angel. They’re simply going to tell these people, ‘Sorry, we can’t issue a mortgage’ and that will lead to a further reduction in prices.”
Some have been saying that crypto is getting too much attention on this site. I checked all 9 of my posts for this current article and only one was specifically about crypto, and that was to comment on M’s consistent devotion to it in both his incarnations. One made a joke about crypto at the end of a discussion about an article on the prediction of a housing bubble, and one mentioned it in an answer to a criticism of a source for an article I posted. (I said the source had published varying views on crypto). Most of my posts are on RE or interest rates tied to RE. Sometimes also on the general economy especially as it relates to RE in SoCal or the US in general. My advice is to stop commenting on other people’s posts on crypto. I’ll try to take my own advice.
OC Register columnist Lansner has done research on what a million bucks will get you in a house (by sq ft). His spreadsheet used $950K to $1.05M as the price range. In Q1 of 2022, you got 1887 sq ft in SoCal (median). Nationally, it’s 2528 sq ft. In LA Co., it was 1684sq ft (!) and in OC it was 1687 sq ft. Riverside Co. was 3032 sq ft which is 20% larger than the national average. SB Co. was only 2582 sq ft. In CA’s 10 metropolitan areas, those that were coastal could get 1725 sq ft, while inland ones got 2786 sq ft. The houses were older in the coastal area too: 54 yrs vs 22 yrs for inland.
Amenities are cheaper outside CA. In non-CA metro areas:
4000 + sq ft in Minneapolis-StPaul, Virginia Beach, Atlanta, Colorado Sprs. or Provo; 5 bedrooms in Salt Lake City, Provo, Baltimore, Atlanta & Colo. Sprs.; 4 bathrooms in Myrtle Beach, Orlando, Charlotte, Raleigh, Virginia Beach, Atlanta, Colo. Sprs., Baltimore or Detroit; a newer house (under 15 yrs) in Prescott, Boise, Charlotte or Provo.
Be content with an old tract house and with your million, you’ll be OK in our beloved coastal CA. We’ll see how the coming interest rate storm hits this by Q4 2022.
Does $1,000,000 put you in Santa Ana yet?
I love OC but it’s hilarious that a cookie-cutter two-story is like $1.5M.
I saw one of the Lakers player’s houses once and was like, whaaat? That’s normal. I grew up next to one of those. LOL
I found a 1500 sq ft 3 Br 2 BA in Santa Ana’s Fisher Park neighborhood on Zillow for $999K. South of there in Floral Park, there’s almost nothing for sale. All of this is west of Broadway and north of 17th St. Zillow has almost all houses in that section estimated above a million, many over two million. I once toured one of the mansions there a long time ago, and you can’t find anything like it elsewhere in OC. It was built in the ’20’s or ’30’s. I can’t remember if it was on Victoria or Heliotrope.
Santa Ana: A tale of two cities!
An article published yesterday in the OC Register (columnist Lansner) discusses new housing projects in Orange Co. Brookfield Residential is now selling planned 400 residences at the Landing at Tustin Legacy. Irvine Pacific will be building 309 single-family houses in Portola Springs. Tri Pointe Homes is starting construction of 48 houses in Silverado off Santiago Canyon Rd.
The Tustin project has sold about 90 homes so far. There are 3 new neighborhoods. Terra will have 154 flats and townhomes of varying sizes from $600K to $900K+. Luna will have 129 townhomes all with 3-4 BRs, from $900K to over $1M. Cira will have 117 detached single family homes of up to 3400 sq ft, with 4-5 BR and 4.5 to 5.5 bathrooms, and 2 car garages. Cost will be $1.2M to $1.5M.
The irvine Co’s project will build 3 neighborhoods. Two will have ~2000-3200 sq ft houses with 3-5 BR and 2.5 to 4.5 baths. The third (Cielo) will have ~3200-3500 sq ft homes with 4-5 BR & 4.5-55 baths. All Cielo homes will have a 2 car garage. Prices have not been announced, but expect in the millions in my opinion.
Tri Pointe’s Silverado development is described as 38 single family homes at a 65 lot community. Presumably, the 48 homes mentioned in the opening part of the article includes 10 more for next year. That would still leave 17 vacant lots. The lots are described as large (average ~ 18000 sq ft …. 44000 sq ft = 1 acre) and the houses will be ~4200 -5000 sq ft with 2-5 BR, 3.5 – 4.5 bath and 3 (!) car garages. Sales start in the Fall at about $2M!
I don’t think that any of these developers will go broke. There are enough well-off Orange Countians who want to move up, and the Tustin project also has some priced for younger, less affluent up-and-comers.
Last year in April, poster “realist” was telling us the market will soon crash.
A year later, the market went up 20%.
Epic crash I say!
https://www.marketwatch.com/articles/case-shiller-home-prices-april-report-51656368384?mod=markets
“Home Prices Climbed 20.4% Higher in April”
I really suggest you start listening to folks who have been around the blog, own real estate and have been successful investors. I have been telling perma bears that a market crash can only occur when you see inventory levels skyrocket. We are still at history low inventory levels. That’s why people like me are not surprised to learn that House prices are trending higher. Some people learn the hard way…..it’s your choice, gonna listen to zerohedge and the sky is falling or people who know what they are talking about?
LOL
The least amount of inventory that triggered a flat line in prices throughout the RE markets history was 6 months. Once we hit 6 months of inventory, we can stsrt to talk about prices moving the other way. We’re at 2.6 months.
I just sold my last property. Phew.. This time is different, blah, blah blah. The crash this time will be different, but I’m seeing a sharper and swifter crash than any we have seen in the past. There is a tremendous amount of inventory that will hit the market in the next 6-12 months as supply chain constraints subside. “It takes years for housing to correct, blah blah blah” The current administration along with the Fed are poised to put this market into a freefall worse than the mid 2000s. If you plan to sell anytime in the next two years, get it on the market now! You’ve been warned.
“ There is a tremendous amount of inventory that will hit the market in the next 6-12 months as supply chain constraints subside.”
You gotta love when everyone on the internet becomes a housing expert.
So Jack, tell us, how much inventory was there on the market in 2005-2007 and how much inventory is there today? And how much do you expect to be “tremendous”?
Not expecting a cogent answer.
How’s that magic coin working out for yah ???? lmao I’ve been through a few bull n bear markets, ALWAYS made money because I’m tight with a $ and always lived below my means. Housing is taking a shit, but you will tell everyone how you are up (lmao) you are the new Casey Siren, got my popcorn ready :)))))
If you tell a lie enough, even you will start to believe it
“ ALWAYS made money”
Yet, you rent and have to hope for a crash that somehow only helps you to get a dream house at a 60% discount, right?
You made money with what? Are you talking about having invested the 600 dollar stimmi, little jimmi?
Point is, professional RE people are making deals in all markets. If you think you have to wait until market “tanks” you will NOT be able to capitalize on if/when market really tanks.
Or the market drop will not be sufficient enough for you to make money due to all transactional costs.
And living beyond your means has nothing to do with it.
Ooooooopppssss, it just got worse, but you probably know this and prepared for it, right ?
The 11 minute Sacramento video:
Sacramento, CA: 40% of New Listings getting price drops
Jun 29, 2022 Sacramento, CA: 40% of new listings are seeing pricing drop within 2 weeks of being on the market.
https://www.youtube.com/watch?v=w5afsrMtFAU
Got popcorn 🙂
The Sacramento housing market is up 13.0% YTD aka in only the last 6 months. A 5% price drop doesn’t mean anything after a much bigger run up. Wake me up when any market in CA ends the year lower than it started. Hasnt happened yet with absolutely no indication its going to happen. Put your stale ass popcorn away buddy, you’ve been hanging on to that bucket for years now.
Realist Logic:
Walks into store, finds item for $50…no deal
Walks into other store finds same item for $60 but on sale for $50…WhAt A StEaL!!
New age,
This made me laugh out loud. Perfect description of our last perma bear “realist”
>> “Put your stale ass popcorn away buddy, you’ve been hanging on to that bucket for years now.
Realist Logic:
Walks into store, finds item for $50…no deal
Walks into other store finds same item for $60 but on sale for $50…WhAt A StEaL!!”
Sure, we will have price reductions and a correction. Maybe 10% or 20%
it happens roughly every decade.
yawn
California is sending out “inflation relief checks” to most residents. That’s exactly the kind of thing that helped cause this inflation in the first place!
I wonder how many people will “invest” their handout in Bitcoin.
It seems to me that the market conditions are perceived differently by every commenter here. Everyone sees a slice of the true situation but not the entire picture the USA is facing. Maybe someone could lay it all out so that we could all see this disaster from bottom to top? Because this time is different. It’s so different that I can say that without feeling foolish and without being ironic.
The national debt we have is married to the inflation we are facing. Unlike the past when the Fed could raise interest rates in order to tame inflation, such an appropriate move is impossible. The interest rate would need to exceed the inflation rate. And I am talking about the real inflation rate, not the cooked up inflation rate of 8.6%.
But for the sake of argument, let’s play fantasy land inflation. With a rate of 8.6% per year, we should have a 10% or so federal intrabank lending rate. Such a rate will ensure that the entire federal budget becomes dedicated to servicing the debt. “In 2021, the U.S. government spent 392 billion U.S. dollars on interest for debt held by the public.” The inflation rate was 1.5% at that time. Do the math for when the inflation rate is 8.6%.. The debt service will be $2.3 Trillion per year.
There will be no national budget. There will just be debt payment and repayment. That means massive Federal cutbacks and layoffs…or inflation is allowed to destroy the nation as it will grown out of control.
Surely, all of this will impact millions of people in federal jobs being forced to sell their homes in order to make ends meet?
I have another article from commentator Dan Ferris. He comments on what he calls “The Everything Bubble”. That is bubbles in stocks, bonds and real estate. That is different than 2008 where bonds weren’t in a bubble because interest rates weren’t rising.
He is reminded of the 2000s when the house flipping mania was growing. First quarter 2022 ATTOM Data Solutions (a housing data firm) said flipping accounted for almost 10% of the market. In 2005, flipping was a little below 9% (the peak). They also reported that flipping profits declined to their lowest level since 2009. MBA reported a 24% drop in mortgage applications last week, and refis are down 80%. MBA also reported the average loan dropped from $460K in March to 413.5K last week. Case-Shiller price index (2 months behind, April data) is at an all time high.
He notes that there is still one bullish data area, where rents are going up because people can no longer afford to buy. Also he notes that housing crashes are rarer than stock crashes. Corporate homebuyers are still around picking up houses with cash at lower prices. These buyers plus the high inflation buoy the housing market at this time.
He says “I still have to ask… is it such a stretch to believe the same problems scaring individual buyers away will eventually plague the corporate buyers? And is it so crazy to suggest that flipping activity is simply the meme stock trading activity of the housing market, with sellers turning quick profits as long as the market holds out? And it never, ever holds out forever. When anybody in any market is making easy money, you know it’s only a matter of time before that market sees a correction.”
Headline: Former ‘Cryptoqueen’ is now one of 10 most-wanted fugitives
https://www.washingtonpost.com/nation/2022/07/01/cryptoqueen-ruja-ignatova-fugitive/
Ruja Ignatova, a founder of OneCoin, is accused of running a $4 billion pyramid scheme.
…The FBI on Thursday added Ignatova to its list of Ten Most Wanted Fugitives — a notoriety normally bestowed on suspected cartel leaders, terrorists and killers. Ignatova, meanwhile, is accused of spearheading a pyramid scheme that defrauded investors of over $4 billion, one considered to be among the largest in history.
Defrauded “investors” of over $4 billion.
As M might say, Holy Cow!
Holy shib!
In remembrance of shiba inu!
She’s almost as big a scammer as Madoff, and she’s smarter than him because she knew when to split. She was educated in Germany at the University of Konstanz on the Swiss border at Lake Constance. It is German “Ivy League” ranked in the top 100 worldwide. She has a PhD in private international law. Therefore she knows where all the “bodies” are buried. This is not as much a crypto issue as a financial scam issue. Madoff had a legitimate business along with his Ponzi scheme. Her OneCoin was sold through recruiting meetings and could only be traded on her exchange. This is different than common cryptocurrencies which trade on multiple exchanges (I found a list of over 1500 exchanges). They issued a two-week maintenance closure in 2016 and then reopened. In January 2017 it shut down without notice. Some insiders were caught and convicted but Ruja was long gone. It looks to me like this business was run as a multi-level marketing scam with Ruja on the top. This isn’t a story about crypto but about such multi-level investment scam schemes which have involved all sorts of “investments”. Believe me, there have been plenty of Real Estate marketing scams. Here’s a link:
https://www.krislindahl.com/real-estate-scams-fraud-and-misleading-tactics/
I found this exhaustive list of Crypto on-line:
https://coinmarketcap.com/all/views/all/
$909 Billion in recognized traded cryptocurrencies (over 20,000 in all). Bitcoin is 42% of the market and Ethereum is 15%, together they are over half. That leaves the other 20,000 “coins” with the other 43%. I am sure there are both scams and “legitimate” coins in that mix. How good an investment any of them are (including the top “dogs”) I can’t be sure of. I do think there’s a good chance that the top 2 will survive and be useful in a world of fiat currencies and financial repression but I wouldn’t bet the farm on it (a 1% to 5% of your investments is manageable risk). I know I said I wouldn’t comment on crypto in the future, but this post is about financial fraud utilizing a fake cryptocurrency. If it’s sold at a slick marketing conference, BEWARE! (That includes, crypto, timeshares, gold coins, vacant land in foreign countries, stocks of small caps, etc.)
OC register columnist Lansner has an article on renting vs buying in the current environment. He says that over the next five year, renting will be a much better deal than buying. He based his numbers assuming a 4% increase in rents per year over the next five years. He estimates $3190/month for renters vs $5054/month for buying. From this he gets a saving of $112000 over five years. He makes some questionable assumptions, chief of which is a 5.5% fixed rate no money down mortgage. Unless you’re going VA, I think that is probably a fantasy. He gives numbers for San Jose, San Francisco, LA/OC, San Diego, Sacramento and Inland Empire. He says the IE comes out as a tie with minimal appreciation, but the others require 10% to 23% appreciation over 5 years to break even. The two highest cost markets, San Jose and San Francisco, are in my opinion a rent-not-buy no brainer for anyone not in a high level job. You couldn’t possibly make it with two middle class incomes. The other markets he lists are not as out of reach. Of course I advocate at least $100K in savings to start with. My Daughter and her fiancé did better than that 15-20 years ago. Of course they were extremely frugal, and very busy with studies, and then with demanding jobs. The real problem with Lansner’s thesis is best summed up by a previous poster, Picapoi:
“I own multiple SFH all rented out to individuals driving ( or leasing ) high dollar vehicles, just keeping up the appearance of doing well financially. These folks need to get a job in the circus with their ability to keep their financial obligation debt balls in the air.”
If you rent that $3000+/Mo apartment or house somewhat equivalent to what you buy, you’ll probably also go the route of Picapoi’s tenants. Living cheaply at your folks’ house or with multiple roommates works, but that gets old. But 7 years of that worked in our family.
One more article in the Register shows the futility of todays rent to save cycle. According to the article, 15% of US renters aren’t caught up with their rent according to the Census Bureau survey from June 1-13 this year. In CA, the percentage of responders who say they will leave during the next two months due to a pending eviction is 14%. And 10% of all CA renters got a $250+/month rent increase in the last year. So if you’re paying $2500/Month, that’s a 10% increase!
My summary is that without frugality, sacrificing standard of living and some help from family, it’s next to impossible to get out of the rent/debt trap that has been laid for the young adults of this country. So be nice to your parents, and make sure that they approve of your choices. (Applies only to people with solvent, solid parents who were in the same situation as you before.)
Popcorn is ready and the show is starting :))))) (paid for with me “inflation relief checks”) lmao
From KTLA in California. “The RE/MAX study shows the total number of homes sold dropped drastically over the last year compared to the year previous. The study shows that nearly 25% fewer homes were sold in Los Angeles from May 2021 to May 2022, compared to that same timeframe the previous year. That 24.4% year-over-year decrease in homes being sold is the biggest decline among all metropolitan areas in the nation, according to the RE/MAX study. May is one of the busiest months for homebuyers according to RE/MAX, but despite this, the entire nation saw an 8.5% decrease in homes being sold this year versus last May.”
“James Sander, owner of RE/MAX Estate Properties in Los Angeles. He says the frenzy of appreciation on the housing market was ‘not sustainable’ and says he expects the market to become more stabilized. ‘The rising interest rate environment has returned the LA housing market to a more typical real estate market,’ Sanders said. ‘We’ve seen a drop in demand from 10 to 15%. Our inventory is up 36% from last year but still more than 75% below our typical pre-pandemic levels.’”
“The decrease in home sales isn’t limited to Los Angeles. Just down south in San Diego, home sales declined by 20.4% during that same timeframe.”
Magic coin to the rescue 🙂
My house appreciated 22% yoy, according to todays email by zillow. And houses in the neighborhood still sell for those elevated values. However it takes much longer and bidding wars stopped. No crash here in north county San Diego.
These “Inflation Relief Checks” are liable to make inflation worse. It’s a Catch-22.
Having lived through the COLA (Cost of living allowance) pay bonuses in the 1980’s, it may help or hurt inflation.
1) For working people:
a) It will help the employees survive during high inflation when wage increases are
lagging.
b) It allows employers to not increase wages immediately. An increase in wages is
permanent and the Fed doesn’t want that. It raises the bar on inflation permanently.
I remember back in the 1980’s, I received 3-4% COLA which helped with defraying rent/food increases for that year. The company saved money by not making the increase permanent which would have driven inflation.
Like the stimulus money, it is temporary (hopefully), and it will cause inflation but not permanent inflation.
Hopefully, it only keeps people fed, housed, and able to drive to work. It should not allow people to buy boats and bitcoin.
“Whenever you see vertical home-price growth over a period of time, it’s never a good thing. This either means you had a massive supply shortage or you had a credit boom.”
Or maybe both.
https://www.housingwire.com/articles/how-home-price-growth-has-damaged-the-housing-market/
I’ve been reading this blog for the better part of 10 years now, together with Zero Hedge, and John Hussman and about 4 years I stopped consuming bear content altogether. The problem is that the bear case is very seductive. It’s smarter, better reasoned, more thoughtful, and most of time completely wrong. It’s really set my retirement back by 5-10 years in my estimation. It turned out Jeremy Grantham was totally wrong and Jeremy Siegel was the one you should have been listening too.
Here’s the bull case: Ukraine war winds down in the next 6 months, hiring slows, tech bubble bottoms out, crypto bottoms out, inflation moderates, mild recession hits, rate hikes end ahead of schedule and there you are. The only times we’ve seen national home prices fall significantly is with massive unemployment. There’s just no indication of that right now at all. The labor market is still extremely tight.
Tech companies with no cash flow are the one exception, they have been hammered. And of course they deserve to be, no one is crying for those guys, many of those companies shouldn’t exist. But back to housing, what’s likely to happen is that people stay in their houses longer, sales activity plummets, home price appreciation drops to single digits and a bunch of realtors find other jobs. The problem with the housing crash porn is even though it “feels” like it could happen, so many things need to go wrong and wrong at the same time for that scenario to play out. And we’ve all seen the lengths the government and the Fed will go to prop up asset prices, home prices in particular. They are clearly more constrained now than ever, but I don’t see that dynamic ever changing, and we clearly don’t face the same headwinds as 2008 where there really was a systemic risk that had to be dealt with. So sorry guys, the best advice on housing is still the same, it’s the same under any market condition, save as much as you can for a down payments and buy the cheapest house in the best neighborhood you can afford. Someone told me that 20 years ago and they were 100% right. It was a lawyer who bought the cheapest house he could find in Manhattan Beach, CA. I think he’s doing ok right now.
Funny how so many bears keep spouting off crash and use 2008 (NINJA’s) as the reference point.
Like you said – no massive layoffs, no crash.
On top of no massive layoffs is the fact that qualifying for a mortgage is probly the toughest in modern history. ie: NINJAs will never return like they did before.
On top of this is after the great resignation, mid level engineers, and managers are fetching very high salaries (due to demand caused by great resignation).
On top of this is the huge swatch of 24-35 yr olds in this country in need of their first home. I recommend following Logan Mohtashami (Housing Wire and his own blog) for his insights on how bears ignore DEMOGRAPHICS that favor the housing market.
I say the bears keep me alert, but that is all.
Spot on dean. 5 out of 5 stars.
“save as much as you can for a down payments and buy the cheapest house in the best neighborhood you can afford.”
I’m all for that argument because there are no crystal balls. But right now in a place like SoCal, the “best” neighborhood that most of the middle class can afford is something like National City. And even that is a huge stretch when median household income is $80K and the crapshack they have their eye on is $800K.
No idea what will happen but with inflation rising, interest rates must keep going up and that means less spending. Less spending means less profit and that means real possibility of recession and eventually job losses. Now maybe it won’t be a real bad recession but this time around the Fed is out of ammunition, unless they want us to become Argentina.
2008 was caused by Ponzi financing. Madoff’s Ponzi scheme was #2 to the Ponzi financing in Real Estate. That is, in order to profit you must have capital appreciation because you cannot meet either principal or interest. I agree with you that we don’t have this now.
Your bull case has several assumptions that I feel are unlikely. Ukraine will still be a problem a year from now unless Putin is gone (unlikely). He will not give up and neither will the Ukrainians. Putin can take the Donbas and the sea of Azov area with heavy casualties. He has totally pissed off the Ukrainian people, and they will fight for every inch. As long as the West sends weapons, the war will go on. The inflation will not abate without a substantial change in policy from Washington. A Republican takeover of both houses would help, but I can’t say it will happen. The Fed is controlled by the regime in power and they are using faulty economic models. Interest rates aren’t going to 10% because the administration needs negative real rates. And if they do go to 10% it will be because real inflation’s > 12%! The employment situation is a good point, and we are seeing steady employment possibly because the peak of the Baby Boom is reaching 66 next year. This will cause a big increase in Social Security spending when it all hits the fan.
Housing prices in poor areas are based on profits from rentals. Interest rates affect profits. Housing prices in middle class areas are based on the monthly payment that the population base can afford. Increased rates lead to lower prices. Prices for estates and mansions are based on assets and liquidity of the very wealthy ($10 Million incomes/year and more). If they are liquid enough to afford the price, they will buy. But as you know, economic downturns hit liquidity. Not all rich people are like Warren Buffett.
I agree with your case for buying if you can, and the neighborhood is the #1 consideration, not the amenities in the house. The area I live in has seen a steady progression upward in the social class of people who can afford to buy here. That means that the upper middle class is now living like the lower middle class did 30 years ago in SoCal.
A final word to the wise:
“Markets can remain irrational longer than you can remain solvent.”
John Maynard Keynes
Dean, that is sound advice. I know a few people who had every opportunity to buy in the last decade, but didn’t for whatever reason. We’ve spoken on a few occasions about RE and they agree that they made the wrong call. That wrong call will likely mean another decade of work or being forced to uproot and move to somewhere cheaper.
I’ve been pounding the table on this blog for years that if you comfortably afford to buy and plan on owning for the long term, go out and buy. South bay homes have essentially doubled in value from a decade ago. Long time owners are swimming in equity and likely have 2.X mortgage rates. These people will be your competition if we see any sizeable downturn in RE.
The problem with “Bear Market Porn” is that it preys on people’s wishful thinking like actual porn and most consumers of this kind of content refuse to shift their mindsets because they fear and existential crisis since their life goals on attaining homeownership was a lie so they keep doubling down. They find comfort in engaging with the hive mind and aggressively lash out to people with alternative viewpoints. They use “All Time High” statistics to reinforce their ill informed viewpoints while failing to account for factors like inflation and basic supply and demand economics that tell another story. They also fail to account for timeline unique factors of today and ignore the fact that this timeline is different from the previous timelines they draw their comparisons from. They have a false view of the world with their narrow lenses and paint the entire state of the RE market with their own day to day experiences. “Well I sure can’t afford a house and I personally don’t know anyone that can so no one’sgoing to buy these homes.” “Well I’m seeing a lot of overbuilding and price cuts in my specific part of the country and some talking head on Youtube told me that there is an incoming wave of expiring forbearance/moratorium related foreclosures so supply will exploding in numbers just like 2008.” There’s a reason why the fastest growing content creators on YouTube during the pandemic were RE doomers because there is no shortage of audience and their echochamber comments section provide viewers with a forum to spread and reiforce these false ideas.
Thank you for pointing this out and providing your input on this Dean, very well said.
That essay did not include pandemic induced hyper-escalation of home prices, a flood of stimulus, low consumer sentiment or high consumer debt. The economy is 70% consumer spending and budgets are shrinking for many reasons. Sinking home prices and recession are being blasted from all corners of the internet to consumers. Fear of catching a falling knife is front and center in the mind of those on the RE side line. Maybe wipe those smudges off your crystal ball and take another look. And maybe not focus labeling yourself a bull or bear. Be somewhere in the middle and learn from both viewpoints. Might be able to retire earlier. : )
Refreshing to see non-infantile post and responses on this blog.
OMG! IKR!!!
Very sound advice. Thank you!
“So sorry guys, the best advice on housing is still the same, it’s the same under any market condition, save as much as you can for a down payments and buy the cheapest house in the best neighborhood you can afford.”
I’d also add that you should plan on keeping that house for the long term. (10-15 years) and have savings to allow you to keep it during tougher times. I’d also only buy a home that I could enjoy living in for 10-15 years.
The 2008 crash started with NINJA loans but it escalated into conventional conforming mortgages when house values fell far enough. The number of Prime mortgage foreclosures was OVER double the number of Sub-Prime foreclosures in 2010. Rents also fell during that time.
I worry about a case of a hard landing.
If home prices drop 30-50% and people become underwater, it could cause panic just like in 2008.
Homeowners who have a mortgage have a few options.
1) Treat it like a business and cut losses. Turn the house back to the bank and not be responsible for the loan or the house. If rents drop also, then there is further incentive to walk away and rent. Other than a 7 year ding on your credit score, banks cannot come after you for any losses.
2) Panic and run away. I think this happened at the bottom in 2010-2012.
3) Hang in there and continue paying on a house that is underwater with the hope that it will eventually recover. I recommend this. It has always eventually recovered. However, I wouldn’t treat my stock investments this way so the temptation to sell or walk away would be high. I would have to be enjoying my house that I am living in to keep me there.
Psychologically, the motivation to dump the house to remove the pain is high if the house is underwater.
As you mentioned, what happens if you also lose your job and either cannot find one locally or have to sell and move? More motivation to run away from the mortgage.
High unemployment similar to 2008-2012 will cause an escalation in foreclosures.
For this reason, I think the Fed does not want to repeat 2008, so they will:
1) Drop rates if home prices drop 20-25%.
2) Drop rates if unemployment reaches 5-6%.
Otherwise, the Fed will continue to raise rates until inflation is stomped down to 2-3%
Headline: Bloodbath: Mortgage industry keeps cutting staff
https://therealdeal.com/2022/07/07/bloodbath-mortgage-industry-keeps-cutting-staff/
Sprout folds, adding to 4,000 layoffs as demand for loans hits 20-year low.
The giant sucking sound in the home loan industry grew louder Wednesday when Sprout Mortgage told employees it’s going out of business.
The company broke the news to its more than 300 staffers during a conference call Wednesday, according to HousingWire. A former employee of the Long Island-based mortgage lender told the publication that Sprout had already slashed its workforce several times.
Sprout’s closure comes a week after Texas-based First Guarantee Mortgage essentially shuttered operations when it laid off most of its staff, according to ex-employees. Many other companies have shed workers as demand for mortgages hits record lows.
Rising interest rates, high home prices and a shortage of listings have sidelined some buyers and slowed sales, which means fewer purchase loans, and the rate hikes have ended a spate of refinancing. As a result, lenders no longer needed — and in many cases could not afford — the large number of people they had hired to handle applications.
Other companies that have been forced to reduce their mortgage workforce include …
Strong jobs report in June. What an epic crash this is! Any day now you will be able to buy RE at a 50% discount. Keep up that hopium.
Glad you search long and hard to find a positive in this mark. Those are most likely summer jobs though.
Prices dropping in AZ?
https://www.youtube.com/watch?v=_bdD2IJlKZk
I wish prices would drop yoy in AZ. I can’t wait to buy another rental. It’s great to collect this monthly rent check 🙂
Two good articles in the OC Register today.
One article is on credit scores and real estate buying. Freddie Mac is adding a score for on-time rent payment to the Loan Product Advisor (LPA). One must have rented for a year, and then your mortgage broker submits your bank account data showing on-time rent payment. The bank data comes from third party service providers, thus avoiding the risk of doctored documents. They can also access Zelle, Venmo or PayPal data. This will help employed younger workers with good rent payment records get loans at better rates, since rent payment is a major part of their credit history, and might not figure in a FICO. Bad FICO history is not the same as no FICO history, but it might as well have been the same until now.
Cash or money order users are not included, but they can use a manually underwritten loan file with direct verification of rent from the landlord. The author does not think many lenders will want to do this, though. This leaves out the day laborer class.
Columnist Lansner has an article on housing industry reluctance to be realistic and not constant cheerleaders for rising prices. He states that the obvious benefits of falling prices for buyers are ignored. (“Would drivers care if cheaper gasoline hurt the energy industry’s profits?”) He gives an analysis of “investment” vs “shelter” motivations. Since 30% of home purchases recently have been investors, the industry has been leaning in that direction. Their chief analyst talks about how housing doesn’t drop (he says “dissipate”) like the stock market, ignoring the long term reality that since 1970, the S&P 500 has gone up 8%/yr vs 5%/yr for home prices. In other words, stocks and housing both go up and down short term, but up long term. And cashing out of housing has much bigger costs than modern discount brokerage trades. Plus funds like Vanguard’s Total Market (VTI) have a 0.04% load. Compare that to the cost of maintaining a house!
Lansner also remarks that the greater leverage in home transactions is a two edged sword. If the amount of money hypothetically put in the stock market vs the same amount put into a downpayment on a house (Lansner has 10% down on a $300K house), the $30K put into the stock fund goes down the current 22% (to ~ $23K), while a 22% correction in the housing market wipes out $66000 in value, completely “dissipating” the original $30K, and if you have to unload the property, even greater losses with selling costs!
I agree with Lansner, that for non-investment buyers, shelter at a long-term reasonable cost should be the goal. When you ditch the landlord and owe the bank, you have ways to further lower costs that no renter has. I’m assuming that the monthly payments will not drop much in the coming 6 months, but the prices will drop due to higher interest rates. So if you buy at a lower price, your Prop 13 base is better. And when interest rates drop again, you can refinance your now more valuable home at a much better rate, and have more equity, plus a lower monthly payment in dollars (not inflation adjusted). Inflation adjustment will make the deal even better.
So take Dean’s advice, save up and research neighborhoods you like thoroughly. Price drops due to rising interest rates are your friend.
The US dollar is failing to the upside. This is super dangerous. Foreign countries holding US dollar denominated debt have to repay that in local devalued currency. Today we are seeing smaller countries defaulting on their debt and facing actual total economic collapse. As I write, Sri Lanka, a country of 23 million, has completely collapsed and fallen into total chaos. There are other countries, including some in South America, that are on an economic precipice and will follow. It’s just a matter of time. Southern California real estate pricing is an ancillary issue when a general collapse occurs. In 2008 the incredible trillions in bad RE loans were never resolved, but bought up and put on the Fed’s balance sheet. This done with newly printed money. (QE) In this way the M2 money supply was not greatly effected, keeping things stable for awhile.
Today, car loans are in default to the tune of 2.8 million loans in the first six month of 2022. This is ‘huge’ and a leading indicator to anyone who has half a brain. Credit card debt is a true Ponzi scheme to the tune of 1.4 trillion dollars. Inflation is screaming. So what does the FED do? Raise rates 75 basis points, and threaten more tightening. This appears to me to be a policy error with grave consequences. We’ll see.
Recently the millennial oligarch, Zuckerberg, announced that his company is going to lay off employees! Others Silicon Valley behemoths are sending out similar signals. It’s just a matter of time. Wall Street earnings season declarations are right around the corner. Prepare yourself for some big numbers to the downside. Since January the stock market has dropped about 25%. Even Bezos of Amazon lost billions of his personal fortune.
Yes, these insane BS inflated real estate prices are going to take a hit. RE is usually the last to drop, but it will happen. Don’t get caught holding he bag. There’s a ‘huge’ economic storm heading our way. it will be followed by a renaissance. This will take time.
Meantime, let’s hope the Federal Reserve and politicians don’t screw up things even worse than they already have. Every bit of this is man made and self induced.
“Don’t get caught holding he bag.”
https://www.cnbc.com/2022/07/11/homebuyers-are-canceling-deals-at-highest-rate-since-start-of-covid.html
Consumer confidence keeps falling.
https://www.foxbusiness.com/economy/americans-inflation-expectations-hit-11-year-high-june-new-york-fed-says
Yes we are headed for rougher times on all fronts.
I am in the maritime ocean transport industry and some strong concerns that the ocean trnsport supply chain is wekening, along with war in Ukraine, we can expect serious food shortages coming soon.
In ann honesty as a backstop, I have 2 months worth of non perishable foods in my home. forwarned is forarmed.
Oh hell yeah. The starvation paranoia is back on housing bubble blog.
It’s never happened before, but anyway, The End is Nigh! Stock food for mass starvation!
My white smock while posting is getting worn out from all of the typing. Good thing I don’t have to stand on a busy street corner with a sign like I did in the 70’s. I couldn’t grow a long straggly beard back then because I was 6 but Pops handled it and us kids were decoration to prove a point.
The End of Times has been predicted multiple times. I always pencil it in on my calendar just in case.
Big housing correction in the wings…huge material prospective buyers back out !
“RE is usually the last to drop”
Nearly every market has taken a nose dive in the last couple months. It would be surprising if real estate doesn’t do that same, especially given the rising interest rates. Real estate is always slow so it’s useless for people to say, “Look, no change last month!” this early in the game. Of course there’s no significant change just yet.
But maybe this time it’s different. Really. Nothing at all has made sense since COVID.
PS. In my niche of the tech industry, I’m seeing the bigger players lay people off in preparation for a difficult recession. Not startups but established companies with profitable products and a growing user base.
Today, July 13, USA CPI rate is at 9.1%! We all know that this number is bogus and that it is double that amount, say even 20%. We are in a severe crisis with huge price increase on everyday regular consumer items. The FEDS will not raise interest rates much as it will crash the markets. They are in a severe bind. Democrats and Republicans are to blame for overspending and allowing the FEDS to buy up all Treasury notes. How this will end, no one knows. The only solution is to peg the US Dollar to the Gold Standard.
If only we knew what the Fed will do. We don’t. I’m hanging on to my house….need a roof over our heads and unlike pretend-to-be-rich people, monthly costs are very low. My husband and I were born in the early 80’s but act very frugally.
It only makes sense to sell if you live in a super HCOL market like SoCal and move to a relatively low cost market (Midwest or South). Great opportunity, actually.
Pretty much one-way ticket.
I think it is possible with a bit of luck and careful saving to come back to S. CA after leaving.
Here is a scenario.
1) Purchased S. CA house in 1987 for 200K
2) Sold house in 1996 for 300K to move to Texas
3) Purchased house in Texas in 1996 for 100K and raised your family.
4) Put the 200K profit in an SP500 ETF in 1996 @600. The BogleHead approach.
5) Sold the ETF @4.8K in 2022 (8X) and pulled out 1.6M.
6) Sold your TX home for 400K in 2022.
7) You now have 2M cash to buy a S. CA home. You could likely buy your old S. CA cr*pshack back with cash.
I neglected taxes and neglected any other amounts that you put into your S&P500 ETF.
Headline: Celsius becomes third major crypto firm in two weeks to file for bankruptcy
https://finance.yahoo.com/news/celsius-files-bankruptcy-113020738.html
Crypto lender Celsius Network has initiated bankruptcy proceedings, the company said Wednesday night, marking the third high-profile crypto firm to do so in the last two weeks.
The New Jersey-based firm filed bankruptcy under Chapter 11 with the Southern District of New York, stating it has $167 million in assets on hand to fund operations during restructuring.
“I am confident that when we look back at the history of Celsius, we will see this as a defining moment,” Alex Mashinsky, Celsius’ co-founder and CEO, said in a release.
After the collapse of Terra’s algorithmic stablecoin UST, crypto lending and brokerage firms have faced solvency issues with common failings coming from directly investing in Terra coins (LUNA, UST), lending money to firms who did – such as now bankrupt hedge fund Three Arrows Capital – or simply losing out from other risky positions involving leverage.
The firm joins Three Arrows Capital as well as another lender, Voyager Digital, in the list of major crypto firms filing for bankruptcy protection. …
Everybody wants to know:
Are we repeating 1980 or are we repeating 2008? Or will something worse happen?
I personally see more of a 1980, except for no Presidential election. A Republican congressional victory would force more strong reaction from the Fed. The Left in the Democratic Party really wants a Venezuelan solution (just print more money). They seem to like the idea of running a Banana Republic on a massive scale. Biden’s Wall Street friends want a fantasy soft landing with judicious interest rate hikes. There is no Volcker waiting in the wings at this time.
So the choices are vote Democrat and get runaway inflation or vote Republican and force massive rate hikes when the money valve is tightened by Congress. Either way there will be pain. Since Volcker is dead, that leaves Larry Summers as Biden’s only hope in his party for financial sanity (he is in his late 60s). Yellen and Powell should go. They both have been thoroughly discredited.
It does look more like 1980 at this point.
Powell has been a disaster. He held rates too low for too long. It’s basically his fault that homes and markets inflated to insanity. And now we have inflation on everything else which is making life hard for the lower half of the middle class and below. GREAT JOB! HOW ABOUT KEEP YOUR HANDS OFF THE SWITCHES NEXT TIME, JEROME?
But at least now my savings account is yielding 1.25%. LOL
I just got an essay by economics writer John Mauldin titled “Forgotten Lessons”.
He interviewed former KC Fed Chair Tom Hoenig. Hoenig felt that the actions of the Fed were basically in place to bail out hedge funds (i.e.the wealthiest people in the country).
“I think we all kind of knew what was happening, but it’s still startling to hear this inside description. Fed officials knew full well their policies were creating asset inflation—higher stock and real estate valuations, etc. They thought that was fine as long as it didn’t become broader price inflation. Which it wasn’t, at least according to the Fed’s benchmarks.”
Here’s an excerpt from Mr Hoenig’s biography the Federal Reserve History website:
In the aftermath of the 2007 recession, Hoenig was thrust upon a national stage as he spoke out frequently about the financial crisis and its causes, as well as the response to the crisis in terms of both regulatory changes and monetary policy. He cast the lone dissenting vote against the FOMC’s easy money policies at each of the eight FOMC meetings in 2010 and was troubled by the FOMC’s stated promise of keeping the federal fund rates at a historic low for “an extended period.”
Now we know who wasn’t to blame. All the Presidents and Treasury Secretaries from the time Greenspan took over the Fed until today must take a bow and say, “yes it was me”. A handful of Republicans in Congress who flat out oppose the Fed, and a few Democrat economists who still admire Volcker (“fix the Fed”) are off the hook.
Joe R.
You have excellent points.
However, you neglect to mention that that last Republican President and Republican Congress lowered rates to zero before the pandemic in early 2019. Why? I think to keep the party rolling so they would be re-elected.
They behaved like Democrats. I didn’t expect that. Democrats typically step in and force rate drops to recover from Republican disasters like 2008. Republicans then get elected to stop government spending and taxation when normal returns.
Our current President is acting like a Republican (Reagan) and trying to raise rates to tame inflation. The Fed is complying at the moment, but I expect a point like 2019 when the Democrats will behave like Democrats again just like our last President and rates will fall for political survival.
I guess you may have posted your comment before my latest comment in this thread was posted. See this quote:
“All the Presidents and Treasury Secretaries from the time Greenspan took over the Fed until today must take a bow and say, “yes it was me”. A handful of Republicans in Congress who flat out oppose the Fed, and a few Democrat economists who still admire Volcker (“fix the Fed”) are off the hook.”
I think I’m being fair to both parties. Inflation hawks have existed in both parties, but that doesn’t mean that regimes, Democrat and Republican, aren’t under a lot of pressure from big donors to bail out big money mistakes with easy credit. Volcker was a Democrat who received the support of the Republican Reagan for his serious crackdown on inflation. I’m with Walter Bagehot that the central bank should not give it away. Until the interest rates are at least 3% above the rate of inflation, there will be credit bubbles. And retirement savers will either lose value from inflation or be tossed about by successive swings in the stock market. I do think that in 2023, it will matter if the Democrats control congress, because there are almost no fiscally responsible Democrats left anywhere in positions of power (Proxmire is long dead). And the Republicans, both inflation hawks and doves, will have an incentive to stick it to Biden.
Every so often I like to revisit the comments from much older Doc posts just to see what the arguments and sentiments were back then and how that applies to today. I stumbled across an old comment of mine that seems pretty relevant to today:
http://www.doctorhousingbubble.com/housing-market-slowing-down-inventory-prices-mortgage-rates/#more-9242
August 7, 2018
“The way I see it, the market is irrational and does not agree well with rational people. The threefold increase in commentary from a year ago tells me that there are a bunch of people salivating at the thought of a housing crash that they join a forum so that they can circle jerk each other into “waiting it out.” Unfortunately, waiting it out is a rational thing to do which doesn’t agree with an irrational market. At the moment, I believe that the factors involved are perfect for steady, sustainable growth. It took years of trial and error in the form of booms and busts but what we’re left with now are all the elements in place to keep the circus going for quite some time. Low interest, low inventory and a regulatory framework that makes it difficult to deviate from this norm until this low down payment scam comes into fruition (your income still has to qualify so the effects aren’t going to be as spectacular as 2008).
What we need for a bonafide bubble to occur is a change in the factors that are keeping the market together. Interest rates must rise which increases FOMO and locks out buyers (this is very likely to happen but I can’t see 10%+ anytime soon), developers must get greedy and build en masse which increases supply (this one is definitely coming, just you wait) and regulations must loosen (Trumps last hoorah possibly?) to allow those buyers back into the market but to a feeding frenzy of hyper inflated real estate. Lots of people buying over-priced property in a high inventory market…the perfect conditions for a bubble.
The fact of the matter is that 2008 is still fresh in people’s memories. Everyone wants to wait for a crash so no one’s going to get it. Once those memories fade and the factors I mentioned come into play, then we can talk bubble. So the real question is what’s the market outlook? Here’s my best guess. Stagnant prices for a few more years until wage catches up or growth that’s in line with inflation, if at all. If foreign investing dries up and/or boomers flood the market with supply, then you may have a 15% drop from relative peaks but I wouldn’t bet on it. Don’t be surprised if prices continue like this for the next 10+ years.
Mark. These. Words.“
The developers unfortunately didn’t come haha but everything else seemed to be on point for me. Inflation is finally here and with low inventory, we will see prices continue to climb up at least in line with inflation, just ask the 1970s. Rates are rising but still below inflation and homebuyers WILL have the option to refinance down because in the grand scheme of things, rates are trending down with the exception of a few points in time where rates were temporarily elevated before coming back down to ATL’s.
Buying now SEEMS like catching a falling knife but you would really be setting yourself up for prosperity by the end of the decade. I saw a house in Riverside that would rent for $3300/month for $500K. At 5.5% rate it is gonna cost you $110k cash in down payment and fees and $2900/month putting you a little below rental prices accounting for homeowner expenses.
So why should you put down a six figure sum like a glorified rent deposit only to be at or near rent? Because time does what time does best and regenerates wealth. I’m watering rates dropping to LOWER than Covid rates and I wouldn’t rule out 0% rates (Japan and parts of Europe have been doing this for years) but assuming rates revisit their lows, a refinance will get you a $2200 payment by year 5 according to my prediction and rent will increase to $4200/month (at a conservative 5% annual rental increase). During that period home prices will increase in line with rental parity and explode when rates drop. A buyer approaching you in year 5 to buy your house with their 2.5% note will easily pay $850,000 for the house because a $3700/month payment on a house that rents for $4200 is a no brainer for them. In this market, you have to give a little now to get a lot in the future.
Mark. THESE. Words.
“The way I see it, the market is irrational and does not agree well with rational people.”
Totally agree with that! Who knows what will happen. Nothing has made sense for a while.
$500K gets you something pretty crappy even in Riverside these days and what’s the point with how hot summers are there? Or you could go and blow $1,000,000 on an “adorable cottage” closer to the ocean. Complete with a 360 degree view of utility lines! Poor value there too. Get the heck out of California and start living, I say to first time buyers.
Coming from someone who would like to live in California but can’t afford it. So everyone else should leave too?
A million bucks gets you a nice house in north county San Diego. Ocean is not far and the breeze still reaches you! And you would live in my hood, not a bad idea? Btw., California isn’t as liberal as many think. Sure we have too many BLM and anti-gun radicals here but you can still can buy a civilian version of the ak47 (with this stupid juggernaut to make it CA compliant). I’d never sell my beautiful house in ca. In 10 years it will be worth 3M dollars at least. The key to be a wealthy man when you retire is buying RE in CA. For a decade they told us about uhaul rates and how people leave CA in droves. It’s all BS and comes only from people who regret moving away from the most beautiful land on this earth. God bless CA and the United States! And pls bless the founder of bitcoin too. Satoshi nakamoto is his name I believe. Dude’s probably dead, but if not, I owe him lunch. His crypto idea made me rich. What an Awesome human. We should have a statue of a bitcoin symbol and his name…located in Point Loma.
Turtle,
Isn’t it 105 in Dallas now with high humidity? It was a couple of weeks ago when I was there for business.
Wouldn’t it be nice to wake up and take the dog for a walk when it was 65?
You can achieve better quality of life if you buy now in coastal S. CA.
Every place has it’s value. That is the coastal CA value.
If you can afford it like the Texans who are overbidding on CA coastal Cr*pshacks, well, that shows you value quality of life over 105 Deg and a huge house.
Somebody is driving up S. Ca real estate to spectacular highs. I suspect it is rich Texans who value quality of life. Aren’t you a rich Texan? Please join the club. You’ll live longer with that morning walk. What is life worth?
Hey M, now you’re being antagonistic with me. But I don’t blame you. I was pretty harsh on you a while back and I apologize for that. I was in a bad mood and saying too much.
But I do want to point out that being able to afford something doesn’t equate to thinking it’s a wise purchase. I can afford $1,000,000 in Escondido these days (thanks in part to Texas, mind you) but I don’t feel good about trading that much for the lifestyle I’d get in return. AreaVibes shows Escondido as being better than only 34% of the U.S whereas where I live now is outscores 94% of the U.S. Why should I spend $5,000+ extra every month for that? The income tax and the way CA treats business is a huge turn off for me.
I did mention I’d consider Canyon Lake [if there is a price drop] because if I’m going to blow a fortune for bondage (aka mortgage), put up with obnoxious laws/government and possibly swim in sewage then the lifestyle I get has to be ENTIRELY SUPREME and certainly not a downgrade. Hence, waterfront living. But the the lake is smallish, has a speed limit (probably because it’s small) and appears to be somewhat crowded (because it’s small). I’m not sure we’d have as much fun as we do on our not-waterfront-but-very-close, much bigger lake now.
There’s not any other part of SoCal I’m interested in now. I had fancied big lot in Temecula but the traffic is horrendous (and my wife doesn’t like the city at all). Lake San Marcos is pretty cool but what a dinky “lake” and 10 mph speed limit? For sure, Carlsbad and Escondido are tip-top and I like Sunset Cliffs but a great home in those hoods is a stretch even for a millionaire today, unless there is an epic crash (like your old 50% – 70%), which I won’t count on.
So, never say never but it doesn’t look like I’ll be interested in actually moving back to California in this lifetime short of that fabled epic crash because Escondido or Vista… or Oceanside – they just don’t do it for me. They’re below average living for seven figures. That’s unwise. But you enjoy. I’ll keep visiting. I just hope next time my beachfront hotel will tell me the water has sewage in it before I spend $700/night. And yes, I absolutely do recommend middle-class first-time buyers get the heck out and choose a better life.
PS. When I left California 15 years ago, I used to tell people in Texas that California isn’t as liberal as they think it is. Ditch LA and SF and it’s basically conservative! Well, that’s not true any more. South Riverside, three neighborhoods in OC, a few thousand people in SD and all manner of hick towns in NorCal are conservative. That’s it now. My parent’s street was LINED with Democrat signs last time I visited in October. It shocked me, because it was new to me.
I should have added:
Come to the Dark Side, Turtle. Buy now in S. CA or forever miss out.
Please take all of my comments in semi-serious jest.
Just a sec’, Bob. Let me get into debt (that’s what a mortgage is) for one of those “sweet” National City flips by the bay. Raise me some lifestyle! Nevermind the crime, traffic, total lack of freaking rain (rain is a good thing, by the way). Can’t wait to swim in sewage! It’s not just Imperial Beach like when I was in SD for 20+ years. Now it’s Silver Stand and even La Jolla Cove has an AVOID WATER CONTACT advisory right now.
But yeah, Texas is hot. Now, I could trade one bad thing for nine but that wouldn’t make sense. I like swimming in a warm lake. I like boating (ya’ll aren’t even allowed to touch the water in your lakes). We have these things called air conditioners that we run all day long for less than your electricity costs without much air conditioning. Swimming pools, patio covers with fans. Spring, Fall and Winter.
Sorry, but YOU PEOPLE ARE INSANE!
Love,
Turtle
Ex-Californian
Hello NEW AGE
more along these lines from Logan Mohtashami in SoCal. he writes for Housing Wire
A short history of the housing crash narrative
2012: What they said: Shadow inventory will cause prices to fall. The reality: Inventory broke down in 2012, and the monthly supply data got below 6.0 months.
2013: What they said: Because mortgage rates were rising and the Fed was tapering, housing would crash. The reality: The 10-year yield shot up from 1.60% to 3% (sound familiar?), making housing cool down noticeably.
2014: What they said: Housing would crash because purchase application data was down 20% year over year; adjusting to the population, it was the lowest ever.
2015: What they said: This was the start of the Silver Tsunami. The first baby boomer turned 62 in 2008, and thus 2015 was the start of what they said would be a mass downsizing that would collapse prices because nobody could buy a home from the Boomers
2016: What they said: Because manufacturing was in a recession, and stocks pulled back 15%, people were pushing a general recession premise.
2017: What they said: Because home prices were back to the housing bubble peak, prices had to crash. The reality: Inventory fell again and home prices rose.
2018: What they said: With mortgage rates rising to 5% and the new home sales sector getting hit hard, housing would crash.
2019: What they said: Housing would crash because Inventory was up year over year on the monthly supply data for a few months, and the sales trend was still falling.
2020: What they said: COVID would lead to a housing crash.
2021: What they said: After failing with another housing crash call, what do all crash call boys and girls do? They move the goal post to next year and the theme was
forbearance —all the people coming off of forbearance would crash the housing market. The reality: Data was stable and most people making over $60,000 a year got their jobs back by October of 2020.
What do we need to see before home prices fall?
Traditionally, people believe you need six months of monthly supply because that happened during the housing bubble crash. That was a forced selling period, and the credit stress data from 2005 through 2008 isn’t here.
American homeowners are in an excellent financial position, and they’re not going to sell their homes at 30%, 50%, or 70% off the market bid prices to get out at all costs.
We are in June now, and the market inventory data inventory is nowhere close to 2018 levels nor 2014 or 2010 levels. Looking back at total inventory data going back to 1982, when I was seven years old, the only panic selling we saw was forced credit stress selling.
The homeowners now don’t have exotic loan debt structures they need to recast, and their cash flow is good.
I think we need to differentiate between price increases due to massive speculation with Ponzi financing (can’t meet either interest or principal) and price increases due to inflation and financial repression (interest rates held well below inflation). The first is a true financial bubble, and those always pop. The second is a reflection of central bank policy, not individual financing of speculation. Instead of going mostly into asset bubbles, our current inflation driven by helicopter money and cheap interest is spread throughout the economy, a true inflationary situation due to too much circulating money for the economic output. The only way to cure this (without total economic collapse) is to make the cost of money reflect the rate at which it is being devalued.
The middle range housing that is where the majority are either owning or wish to own has been drifting upward in price, based on the monthly payment that the buyers can afford at the artificially low interest rates. With rising interest rates, the monthly payment cannot go up because there aren’t enough people who can afford it. The overwhelming majority of wage earners are not keeping up with the ~10% rate of inflation, so the price has to go down to where the payment at the higher interest is affordable. Anyone who denies this is happening is nuts. While it is true that most homeowners will try to ride this out, there are always enough who must sell (estate sales, bankruptcies, moving out of state, etc.) to have a market at the lower prices. For people in the market to buy with a lot of cash, this can be a very exciting time.
You are logically correct, but you are omitting 1 detail. You need to look not only at buyer’s ability but also sellers motivation.
Prices can go down if there are sellers. In described scenario, homeowners almost have no motivation to sell (unless they have to move). They are in good financial situation, cannot afford to upgrade, have low interest rate.
Shrinking buyer’s pool is accompanied by shrinking seller’s pool.
Surge, I DID take that into consideration:
“While it is true that most homeowners will try to ride this out, there are always enough who must sell (estate sales, bankruptcies, moving out of state, etc.) to have a market at the lower prices.”
You are just stating my case in other words. It is implied from what I said that there will be fewer sales going on at the lower prices. But the interest rates do drive prices in the middle market. Cash buyers can benefit from this more than others. And they won’t be paying more than what the non-cash buyers can qualify at.
You know I’ve become a pay no interest ever person but it is hard to imagine anybody voluntarily going from a 2% mortgage to a 6% mortgage. Those low rates are seen by people as the gift that keeps on giving and who can blame them? Only a recession that takes out a huge swatch of jobs will force people out of their low rates.
And that’s not out of the question with how inflation is raging!
Turtle,
“it is hard to imagine anybody voluntarily going from a 2% mortgage to a 6% mortgage. Those low rates are seen by people as the gift that keeps on giving and who can blame them? Only a recession that takes out a huge swatch of jobs will force people out of their low rates.”
I agree.
We have seen it before. My parents purchased a house in the early 70’s at a 6% mortgage rate. When inflation raged in the late 70’s and early 80’s, mortgages were over 15%. They were fortunate enough to keep their jobs and HODL their home.
Even though they could have paid off/down off their mortgage, they took that cash and put it into high yield insured saving accounts paying 13%. They paid off the home in the 1990’s when saving rates fell.
I’d do the same. I’d hunker down and HODL my primary home at 2.5-3% mortgage rate and put extra savings into IBonds at 9.6% (capped at 10K/person/year). I’d wait to see if 10-30 year treasuries yield above 6-8%. Despite Dave Ramsey’s advice, there is currently no point in paying down your mortgage. The cash can make more elsewhere safely. I’d make sure I have the cash to continue paying the mortgage if I became unemployed.
I love to see the Baghdad Bob announcements here on how the housing market in California is still strong. As the rest of the nation, China, Canada and Worldwide real estate markets are crashing in Epic Fashion, we can be sure that “It’s Different Here” in California!!!!
BTW, where are all of those rich buyers from China who are supposedly snatching up properties in OC with cash?
LOL!
I only report facts at the time.
If you want to ignore facts, please do so at your own peril.
At the moment. housing listing prices have dropped. Unfortunately they are still up 16% from March 2022. Selling prices show this. Realist tries to point this out but whenever someone posts reality, he is proven wrong. (ie, Price Drop 50K!!!, Closing is actually at list. )
I predicted flat or slightly up for RE prices this year due to inflation and demand. So far, it is up more than I expected.
You need to look at the facts.
Crazy times.
Headline: ‘He wanted to play doctor on us’: Terrifying stranger secretly lived in our home
https://nypost.com/2022/07/18/phrogging-hider-in-my-house-stranger-secretly-lived-with-us/
…The couple and their two young sons had been away from their Honolulu home for about a week. They returned home on September 20, 2019, to find something terrible.
James went to open his home’s front door, but found he couldn’t. A stranger was inside, pulling it closed.
“There is a man peeking through the door. He’s trying to hold it shut and the man says, ‘this is not your house’ just very calmly,” James, 36 and who is in the US Navy, recalls in the new Lifetime true crime show, “Phrogging: Hider in My House.” “I am just floored.”
The show, which premieres July 18, examines the crime known as “phrogging,” in which a stranger sneaks into someone’s space and secretly lives there for days, weeks or even months. The first half of the series’ premiere focuses on the Campbells’ harrowing ordeal. …
At least M only trespassed into his neighboring building to use the pool.
Phrogging? M called it “househacking.”
M (January 8, 2020): “Is there something wrong with utilizing a nice, well maintained pool next door and not paying HOA fees? … You sound very jealous of my househacking skills.”
Source: https://www.doctorhousingbubble.com/millennials-home-ownership-rate-home-buying-young-americans-california/
Good grief, that’s creepy.
Remember that guy in Riverside who squatted the house he sold, for a whole year? The owners came with a locksmith and this psycho came at them with a tire iron! The police were like, “Sorry, nothing we can do.”
Now *that* is househacking!
I would like to return to comments/ analysis by Dylan Ratigan who I saw on the Jimmy Dore show in 2019-2020 (appr.) These adjustments in the housing market and interest rates are part of a carefully coordinated plan to repeat the 2008 theft of property by the rich. He claimed at that point in time that the likes of wealth management companies like Blackrock intended on bankrupting people out of their homes as part of a grand scheme to make every America a renter. Once you are a renter, you will have no recourse should the property manager be a slumlord, and make you live in deplorable conditions, or just raise rents and other needs like you must have more insurance to live here. Imagine a leaky roof or radon infested basement that you are unable to escape.
Ever heard of the Great Reset? “You will own nothing and you will be happy”(by 2030). Well welcome to the near future baby as every financial hallmark seems to be blown past and the situation declining at an ever impressive rate. I am so lucky to have heard from Dylan back then because I love my family home. My grandparents built it in 1955 and the most important thing to me is having the ability to feed and house my family.
What will people do when they own nothing? That means not even the government has to care about you. Property owners and business owners are who have the say in the economy. This is a return to serfdom of medieval times and they fooled millions into false gains in home values. These financial masters are sinister and they will absorb lands as the likes of bill gates has been.
We need to assess this for the sinister plan it is part of. If we just use common sense logic and observe the rhymes of history, the shroud falls.
Consider how many people couldn’t help but take an opportunity to make a bunch of cash on unrealized home values. Many of these people will lose everything, again. The middle class is f’d. Then millions more living to death, as any warm place to stay is barricaded and burned to the ground. We are heading for real dark times, not the false fear state we have been forced to live in since 911, but with the pain of a failed empire, and a populous so divided we may as well be entering the civil war period again. The wealthy will be impacted but will as usual be the last to fail. No American wealth will be completely insulated this time.
I hate to be so pessimistic but old wealth really do control almost everything now, except for maybe Russia and China which doesn’t help us at all.
We are living through the largest theft of wealth from the middle class in history. Dylan Ratigan explains on The Jimmy Dore Show how wealth management companies are using these crises in addition to unfair rules written because of their donations, to make every American possible a renter. If you think you have no independence now, once “You will own nothing, and you will be happy” per the World Economic Forum, welcome to complete slavery.
As Bill Gates and others swallow up all the land in America, expect to be much happier (hahaha), as you lose all independence and control over your life.
https://youtu.be/jvYRVZf4FEU
“Homebuyers are seeking out less expensive locales like Tampa and San Antonio, partly because the surging cost of housing and other goods is limiting their ability to buy homes in many U.S. cities.”
So many left/leaving LA for less expensive markets like SD. I have definitely seen more Dodgers hats around SD this past year. SD will sadly be the new LA.
https://www.redfin.com/news/q2-2022-housing-migration-trends/
SD isn’t much cheaper. It actually used to cost a bit more, years ago – if I remember right. Just wait until unlimited ADU’s are built and leased! Sunday afternoon gridlock might be a thing just like in LA. Good thing so many work from home now.
“SD isn’t much cheaper.”
It was until remote workers escaped LA and SF. Traffic is already worse than before the pandemic. ADUs aren’t needed. The homeless population has exploded.
I’ll be happy when the housing market takes an 80% collapse so I can buy some land at fair value. All you home owners upset at this need to take a look in the mirror. What do you see? Greed.
Bob, when you buy your land at fair value after 80% collapse, take a look in the mirror and tell me what do you see? Greed
If houses are selling at 80% off, there will be far greater concerns afoot. Probably nuclear war. Keep dreaming, man.
I think that’s the biggest prediction anybody has made here.
But yes, greed is alive and well in America. Not everybody, though. Not every homeowner.
If RE falls just 8-10% smart investors like me and big players like Blackstone will buy like there is no tomorrow. Bears who dream of 20% haircuts in housing will just miss out again. It’s capitalism. The smart and wealthy ones get richer, the poor will rent forever. Survival of the fittest.
BTC gets a 67% haircut. I guest its the smart investors and big players that are keeping it propped up around $21k.
My buy orders for bitcoin are at lower prices. Just have some patience. IMO we haven’t seen capitulation yet.
People juggling between cash and crypto and whatever don’t win forever. It’s just market timing and that’s go-nowhere strategy long-term. They feel good sometimes and like crap other times. Most of the crypto crowd feels like crap after that 67% haircut but few will admit it.
“I feel good, I feel fine, I feel wonderful!”
Everything’s always good all the time, no matter what? Yeah, right.
Exactly what separates the ones that are rich from those that are poor but think they are smart. >>>>
“ Most of the crypto crowd feels like crap after that 67% haircut but few will admit it.”
A 60+ haircut doesn’t mean anything. Not even a 95% haircut means anything.
You buy during phases where nobody has interest in crypto and sell when everyone talks about it. The perma bears never mention to you that bitcoin was a few hundred bucks just a few years ago.
Watch me making a few millions when I buy Cardano and eth at the lows and sell in a few years. It worked once….why should the next time be different?
What made me rich is this philosophy:
Bull markets make you money, bear markets make you rich.
Easier said than done. You have to have the opposite strategy than people like turtle, son of landlord or realist.
The run up in crypto was induced by the pandemic and injection of helicopter money. Quite obvious in this graph. Party is over.
https://www.google.com/finance/quote/BTC-USD?hl=en&window=MAX
Bob, It has always been hard to purchase in S. CA.
We purchased a house in Santa Barbara in 1987 for 200K with a new engineer salary of 30K (6X). This was at 10.5% mortgage rate.
The same house now is listing for $900K. New engineers are starting at about 120K ( 7X). This is at 6% mortgage rate.
There were some dips. ie 2012 when the house dropped in value to 500K (from 700K in 2005) when starting engineers were making 80K (6X )
From an engineer’s perspective, it has always been hard to afford a house and it hasn’t changed. However, it was doable with co-signers and living off free Taco Tuesday Happy hours waiting for inevitable pay raises, inflation, and mortgage refi’s.
“Musk seems to have timed the market well, as a rough calculation implies Tesla lost only around $162 million from its initial Bitcoin investment” – Forbes
Only? I hope you other Bitcoin gamblers do better than the genius! At least he got ditching California for Texas right. Invest in real assets, not failed currencies. Tulip bulbs! Stocks, real estate, etc. Though buying real estate right now looks a bit of a gamble.
But what do I know? I thought the real estate market was reaching peak years ago! It’s pretty futile to make predictions and try to time the market. You win some and lose some so just make a plan and stick to it. Bogle was so right. Good luck, my friends.
Less than 200M loss is pennies for TSLA. They invested 1.5B usd into Bitcoin. It’s very likely they will just buy more bitcoin at a much lower entry value.
In addition, Bitcoin isn’t gambling. I am 99% certain that Bitcoin will easily be over 100k in the next few years. You can’t print more bitcoin. It’s digital gold. Even companies and countries invest in it. It’s the best thing since sliced bread. A sure way to get wealthy as long as you DCA below the 200w and hold for a few years. You can’t go wrong. Mark my words.
M: You can’t print more bitcoin.
But you can always issue new cryptocurrencies. And all of them compete with Bitcoin.
Yes, scarcity of BTC is a myth.
https://www.thetechnologyletter.com/the-posts/bitcoin-and-the-myth-of-scarcity
Thanks for confirming. You cannot print more bitcoins 🙂
No wonder even countries invest in it now.
It’s basically all “printed” money anyway. I’d rather have tulips bulbs. At least they are tangible. Backed by the hope of something beautiful sprouting! Even if you overpaid 100 fold and it will die in a couple months. Crypto is even worse than that.
Anybody who’s feeling the crypto FOMO (which there isn’t so much of now), try out the Crypto Spaniards or other simulator to see how well your strategy works. You can’t time the market and expect to win. No need to go all out Vegas with real capital on a whim. And if you’re thinking HODL, good luck. That bus was missed years ago.
Of course a boomer would say he rather owns a tulip than a bitcoin.
Whoever says that doesn’t know:
A tulip dies eventually. Even in a nice vase.
A bitcoin stored safely on a trezor (your own bank) doesn’t die. Unless you put it in a water filled vase. The great news is, you can recover it as long as you hold your own keys/recovery phrase code.
M should know that crypto is not scarce. He claims to have also bought Ethereum, Cardoano, and Polkadot. All of which compete with Bitcoin.
And what idiot “invests” in some fake “currency” called “Polkadot”?
That’s correct. Bitcoin is scarce. Only 21M can be created.
You can print as much fiat as you won’t. Not with Bitcoin.
That’s the reason why it’s also known as digital gold.
Nobody should therefore be surprised that bitcoin was just a few hundred books years ago. Now it’s about 20k!! Good for savvy investors like me who had the foresight.
But it’s not too late. If you buy now you will make a 5x during the next bull run IMO.
Thank me later 🙂
Maybe El Salvador will gamble Polkadot next, whatever that is.
Wait, did someone just call me a Boomer?
I’m waiting for Semper Augustus Coin.
“Translated from Latin for “always majestic”. The Semper Augustus was the most rare and valuable of the tulips during the Tulipomania in 1630’s Holland. At its 1637 peak, a single Semper Augustus bulb sold for the dollar equivalent of fifty times a laborer’s annual wage, or enough to purchase a nice townhome in Amsterdam.”
Tulips are perennials and re-grow to their former majesty for a brief time every year. I’ll buy the dips.
Epic housing crash in America! Breaking news!!!!
Housing fell yoy by *drum roll* …….
Well, actually house prices didn’t fall….:
https://www.cnbc.com/amp/2022/07/20/june-home-sales-fall-5point4percent-from-may-as-prices-set-yet-another-record.html
June prices show a 13.4% INCREASE yoy.
Wow, epic, this housing crash! Just epic!
Just like Realist pointed out above with his real Covello home example!
Thanks again Realist for providing real examples!
Blackstone is competing with RE bears.
Who will win?
https://www.wsj.com/amp/articles/blackstone-puts-finishing-touches-on-record-real-estate-vehicle-11658349652
Blackstone has north of 30B USD ready for upcoming RE deals. The bears on this blog seem to believe that they will soon be able to buy beautiful houses at prime locations for a huge discount.
Have the bears considered that institutions might do the same? And if Blackstone rolls in, they will buy entire neighborhoods, not just the house you wanted.
Good luck out there!
$30B / $450k = 67,000 homes
Homes in USA: 140,000,000
With those funds, Blackstone will gain .05% of the homes available. Maybe more in certain regions.
During the next buying frenzy Charlie will bring his napkin math to the bidding war. That will teach em! At the end, Charlie’s walking home with the napkin and the investor with another house.
Blackstone and IBuyers have been gobbling up 20% of the available homes for sale over the last 4 years.
How much do they own now?
How many more homes will 30B buy at flat prices? CA is now seeing more forbearance foreclosures. I’m sure Blackstone is salivating over buying these.
The Fed needs to return the market to normal capitalism. We need a decent savings rate
to lure investors away from investing in IBuyer companies and putting cash back into higher yield savings accounts. Letting rates rise to market values is a good first step.
1) They might pull out cash (leverage) after favorable cash deal.
2) You cannot compare to overall number of houses. You need to compare to overall number of houses on the market (which is a small proportion of total housing). Then 30B is not that tiny.
Albeit impact of blackstone is indeed overstated.
Blackstone must be salivating at the prospect of a housing market crash. A lot of the elite are. Jerome needs to raise rates a bit faster to help his buddies out! Then we can repeat this whole pattern again over the next 15 years.
“Albeit impact of blackstone is indeed overstated.”
My point exactly. I’ll make it easier to understand in the future. My apologies.
Large investors purchased 24% of homes last year and will purchase less moving forward.
https://www.msn.com/en-us/money/realestate/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents/ar-AAZUcEz
https://www.bloomberg.com/news/articles/2022-07-18/investors-slow-purchases-as-uncertainty-looms-over-home-prices#xj4y7vzkg
Investment writer Corey McLaughlin has an article about an e-mail he got from Robinhood:
Introducing Stock Lending
“Hi Corey,
More than 215,000 Robinhood customers have already signed up for STOCK LENDING, an opportunity for extra income requiring no extra effort. It’s simple — you start earning interest immediately if we find a borrower for your stock. The value of your shares is fully protected, and you can still sell them whenever you want.
All you need to do is sign up in the app, and we take care of the rest.”
Mr McLaughlin says this: “First off, what’s the point? Just buy some great dividend stocks instead and enjoy the compounding over time”
He also questions who the “we” is. He signed up for it to see what would happen, and got a message that they hadn’t chosen to lend his stocks yet, but that they would list them when they did. He compared this to what the crypto platform Celsius did with their clients’ crypto. (Over leveraged and in Chapter 11.) So Robinhood is taking your assets and treating them like the company’s cash. So are you confident enough in Robinhood to lend them your money? In the fine print there is a warning that Robinhood could default and fail to return your security. And then you can’t trade them. Robinhood came close to the edge during the meme stock craze. This is high risk low reward. So always read the fine print.
OC Register columnist Lansner’s article today is about June 2022 house sales. Sales in SoCal are down 25% over a year ago. The buying power of a house hunter has dropped 5% in a month and 24% in a year. He based his figures on the assumption of a 20% down payment. So for many potential buyers, the market is even more grim.
Yet median house prices are still high: LA Co = $860K, OC = $1.025 M, Riverside Co = $595K, SB Co = $518K, SD Co = $825K and Ventura Co = $830K. He factored in inflation and found that for all the counties combined, the payments were pricier than 94% of months since 1988. LA, OC and SD were particularly pricey(98%). So if there is going to be a bubble pop, it hasn’t hit yet. Remember, since this is based on monthly payment, prices could drop and the houses could get even pricier if interest rates go up more. Don’t even think of buying without a good down payment.
Home of Genius or valuable land?
The house is crap. But it’s in Malibu, though not on the beach.
https://www.redfin.com/CA/Malibu/3864-Las-Flores-Canyon-Rd-90265/home/160967891
Is that all? You should see the crap in North Park San Diego and vicinity for $1.x million. Little shacks draped in utility lines across the street from makeshift apartment complexes. It’s pathetic. I can’t for the life of my understand why anybody would plunk down that much for such an urban disaster zone. Just because the craft brewery is walkable?
People have lost their minds. They’ll regain them when they’re 50% underwater. If that ever happens. Maybe they will get to live in their acid trip permanently? It almost looks that way but it’s easy to see the market’s erosion has begun; just how far will it go. Interest rates to jump again in September, but still below inflation.
Definitely a tear down. Or maybe the next quake will take it down.
I’d say “Valuable Land” to anyone who absolutely must live in Malibu with a few million in the bank to make it livable. I mean why do they have an unplugged fridge and dryer in the living room along with dirt and trash for the RE photos? Most of the lot 7K sq feet is vertical which gives great privacy, but…. The front door is 6 feet from a double yellow line road.
I see a lot of trash but no trash cans so I’m not sure this qualifies as a RHOG.
For $1.5M, I don’t think the photos help. (Other than to send to Zillow Gone Wild or to your relatives in the Midwest warning them away from California )
I’d pass, but I don’t need to live in Malibu to satisfy my bucket list.
I blew up the map and had a good look at the area. The RE ad says 1000 ft from the beach. I agree that it is is an easy 5 minute walk to the beach. And it is far enough from the Coast Highway. One little problem: it is next to McCormick Ambulance Service. They are a private paramedic/ambulance service that covers Malibu and the canyons. If you are a sound sleeper, no problem. It’s almost like being next door to a fire station.
Land. Very nice and cozy spot, road seems quiet. For big boys, not for lurkers on this blog
Just an interesting bit from Wolf Street’s latest article:
“The index value of 428 for San Diego means that home prices shot up by 328% since January 2000, when the index was set at 100, despite the plunge in the middle (CPI inflation amounted to 75% over the same period). This crowns San Diego the most splendid housing bubble on this list, followed by Los Angeles and Seattle.”
I’d say the writing is on the wall for SD but I won’t because I’ve done that before and been wrong. 😉
https://wolfstreet.com/2022/07/26/the-most-splendid-housing-bubbles-in-america-july-update-whittling-down-the-crazy-price-spikes/
SD was “underpriced” prior to pandemics (compared to LA and BA) given the quality of life it offers. It was “discovered” during pandemic by transplants from other parts of California and country during covid
“I’m a Bay area techie who moved to San Diego and purchased a home in Dec 2020. I love the beauty and friends in the Bay area, but consistently felt unsafe and abused by the gov’t there. The upped level of anxiety and social posturing was too much for me. Most of my friends have now also left.”
“The quality of life in San Diego simply better than other high-earning cities in a new economy where remote work is permissible. And you get to live in a state that seems reasonable with respect to what’s going on in the rest of the country.”
“I tried to find a “good” rental at the premium end in 2020 ($2500 1bd), and It was easier for me to buy a home and pay the $4200 PITI for a 3bd.”
I suspect SD will continue long term to draw high-earning remote workers. This particular individual bought not because he had to, but because it was easier.
I have lived in San Diego since 1982 and bought in 2020. I think this city was undervalued relative to other CA cities until after 2000. IMO San Diego has a much nicer climate, vibe, beaches, and even traffic than just about any other city I have visited in this state or even the country. Of course I am biased and none of us can predict what housing prices will do. I was very bearish and upset to be a renter in 2008. I learned a lot reading the OC Housing blog from 2009-2014. I committed to not to making any more housing predictions and decided to be happy if I never bought a house or even had to move somewhere cheaper. That was the best decision I ever made and brought me so much peace. Shortly after that a perfect housing opportunity showed up without even looking.
BeKind,
That is a great philosophy.
1) Have patience to wait until you buy your Forever Home at a comfortable price. If you still had a job in 2012, this was a great time to buy. Housing prices crashed down to the CPI inflation gain level measured since 2000. If the value of house is only going up with inflation, it is a good time to buy and also buy rentals.
Or
2) Stretch and buy your Forever Home for the long term. This is riskier, but as long as you can cover it for the long term, it is better than renting.
I believe with high inflation (that the Fed is half-heartedly trying to suppress), housing prices will flatten and inflation will eat away at the prices from the bottom. Eventually, the home price and CPI curves will intersect again. That is the ideal time to buy. I think this is the Fed’s plan. If they really wanted to tame inflation, mortgage rates would be at least 10% by now. That would be too painful and would cause a recession. Soft landing is the goal. Massive money printing and driving interest to zero prevented a huge recession during the pandemic, now it will be a slow slightly painful process to recover.
There’s some pretty bad traffic in big cities but San Diego is 2 out of 10 at best. Holy cow, you must live next door to Costco and work at home. Ten years ago when we lived along Interstate 8 in San Diego we could never go out after 5 pm on a weekday because it would be a total nightmare getting back home. And that was 15 years ago!
I’ll never forget the time it took 2 hours to get from La Jolla to Del Mar. Freaking Dalai Llama was speaking at UCLA. That’s worst case scenario but truly a “20 minute” drive takes an hour on any given afternoon. And start off to work after 7:30 am? Good luck! It’s 10 miles per hour half the way. Don’t be late! Terrible.
Work from home is a blessing, ya’ll. Hope it’s you.
Yeah, 15 years, not 10. And UCSD, not UCLA. Not too much difference any more as SD is the new LA… kind of, according to some people — maybe. *wink*
yeah, turtle, listen to some people. Open up your bunny ears
Gnarly waves dude! The next trough will be epic!
https://www.longtermtrends.net/home-price-median-annual-income-ratio/
CA Real Estate = Anchor on the Titanic
“this sucker could go down”
Headline: Bitcoin investor who ‘accidentally threw away £149m worth of digital currency in Welsh landfill’ asks to scour the site for hard drive using robot dogs and AI powered mechanical arm to sift 100,000 tons of rubbish
https://www.dailymail.co.uk/news/article-11070469/Computer-engineer-accidentally-threw-away-149m-Bitcoin-plotting-10m-hunt-hard-drive.html
Maybe he could earn some extra money by extracting all of the recyclable aluminum cans and glass in the landfill while he is looking for his drive.
Win-Win!
Crypto and RE are well represented in this list of headcount reductions.
https://finance.yahoo.com/news/microsoft-google-latest-tech-giants-232957843.html
Not huge numbers but enough of a core to get the snowball rolling.
Wonder how many of these unlucky soles bought RE in the last few years…
Headline: Homeless, suicidal, down to last $1,000: Celsius investors beg bankruptcy judge for help
https://www.cnbc.com/2022/08/02/celsius-investors-owed-4point7-billion-beg-judge-to-recover-life-savings.html
Celsius Network, once a titan of the crypto lending world, is in bankruptcy proceedings and facing down claims that it was running a Ponzi scheme by paying early depositors with the money it got from new users.
Some of the 1.7 million customers ensnared by the alleged fraud are now directly pleading with the Southern District of New York to help them get their money back.
Christian Ostheimer, a 37 year-old living in Connecticut, wrote in a letter included in court exhibits that he trusted Celsius with his retirement savings and has lost more than $30,000, which has brought him into “unsurmountable tax complications.” …
30k retirement savings?
30k is my downpayment for the rubicon. 13M would be more realistic when talking retirement.
As savvy investors like me have mentioned many times, “not your keys not your crypto”
If you plan on having your crypto on an exchange or centralized website you run the risk of losing it. Store it on your own bank (trezor or ledger nano s).
Unfortunately, examples like this dude who lost his crypto are needed so people learn and listen.
You’re going to pay interest on a Jeep?
Pretty sure Blackstone just bought the foreclosed house next door. Tree company hired to mow the lawn and clear junk out of the garage. There’s, like, a fresh half-inch layer of mulch that will disintegrate and reveal the weeds about 5 minutes after it’s leased.
I’m going to install a forest of bamboo between us and this thing. Or maybe I’ll do some “house hacking” and plant a couple crape myrtles in their side yard. That would look nice from our windows. It’s clear the owners will never lay eyes on this property.
How much did this foreclosed house sell for?
How much rent is it generating?
This will tell us whether Blackstone is still making money gobbling up houses.
I’m sure you could move the lot line and gain more land for planting bushes. Just do it between tenants and Blackstone would never notice. They will have other things to worry about. Just joking, of course.
Headline Ongoing Solana Hack Hits 8,000 Wallets, Draining $5.2 Million So Far
https://www.zerohedge.com/political/ongoing-solana-hack-hits-8000-wallets-draining-52-million-so-far
Approximately 8,000 digital wallets have been hit by hackers to the tune of $5.2 million in digital currency – including solana’s SOL token and USD Coin (USDC), according to CNBC, citing blockchain analytics firm Elliptic. The hack was confirmed by Solana Status via Twitter.
“Engineers from across several ecosystems, in conjunction with audit and security firms, continue to investigate the root cause of an incident that resulted in approximately 8,000 wallets being drained,” tweeted the account, which added “This does not appear to be a bug with Solana core code, but in software used by several software wallets popular among users of the network.” …
Headline: The Bitcoin Field Guide exudes pre-crash optimism
http://www.enterstageright.com/archive/articles/0622/bitcoinfieldguide.html
… We’re told that Bitcoin is a deflationary asset, because it’s limited to 21 million coins, but (even better) there’s really only 18,483,118 coins, because people often die before revealing their passwords to anyone. Thus, their Bitcoin accounts can never be accessed by anyone. And so, because the supply of Bitcoin is limited, and even shrinking, while demand increases, its value always go up.
If you die without a will, the state, not you, decides who gets your assets. With the exception of your Bitcoin, which simply disappears into the ether.
Alas, The Bitcoin Field Guide suffers the misfortune of having been completed shortly before the Bitcoin crash of 2022. Yes, the supply of Bitcoin is limited. But the supply of cryptocurrencies is unlimited. New coins are being issued all the time, and Bitcoin competes with all of them. Bitcoin is not deflationary. …
Headline: Bloke robbed of $800,000 in cryptocurrency by fake wallet app wants payback from Google
https://www.theregister.com/2022/08/04/google_wallet_crypto_lawsuit/
Four important articles in the OC Register’s RE section today:
1) Columnist Lansner writes about shrinking foreign deals in RE. Last year 99000 US deals by foreigners were the lowest since the trade group started tracking them in 2009. International buys were 51% below the average from 2018 to 2020. In CA , foreign purchases were 11 % of the national total, down from 16% the year before. But CA is still #2 after Florida in total purchases by foreigners.
2) Financing columnist Lazerson writes about the collapsing reverse mortgage market. Ted Tozer, the Ginnie Mae president under Obama, says “The reverse mortgage business is teetering on collapse because there is not enough loan volume”. Rising interest rates and rising fees and insurance reduce the amount of money that older homeowners can tap. The upfront cost of mortgage insurance on a typical OC house could be over $19K.
3) Writer Jeff Collins writes about soaring rent due to low vacancy rates. Vacancy in OC is 2.5%, 2.7% in the IE and 3.2% in LA Co. The average for the region during the decade preceding the pandemic was 4-5%. One of the reasons for low vacancy rates may be the government programs to assist renters during the pandemic. Rates for vacant apartment soared 18.5% in the last year. This is echoed in other SoCal counties, with the lowest rise in LA Co (14%). Rents on single family houses are also up big time with the highest rate in OC and the lowest in LA Co. Priced out homebuyers is creating a larger pool of tenants.
4) Michael Casey and Carolyn Thompson write about investor interest in mobile home parks around the US. Older parks owned locally are being bought up by national companies. Renters at one park in Montana had space rents raised by as much in two years as over the previous 20 years.
Median price in SF dropped by $300K from April to July. But what’s really interesting is that there was a 9% price drop YOY from July to July (38% drop in sales volume will apparently do that). Higher interest rates are causing the expected – much less interest. A shortage is only a shortage until it’s not. Easy come, easy go… right? But SF is wacky, so is this just a blip on the radar or a picture of what’s to come for SoCal? But holy cow, 9% YOY. Fo’ real!
Surprised by nothing,
Turtle
Somebody wake me up when price drops are YOY instead of month to month. I truly thought COVID and the lockdowns would destroy the markets. Boy was I wrong.
I’ll open my popcorn when we are down 20% YOY on sale prices, no sooner.
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