***Official Real Estate Thread***

[Muscles]

Use the above example for the home I just bought. If interest rates are what they are today- Id have not been able to afford it. But does that mean I would stop buying a home? No. It would just push my budget down lower increasing competition at a lower price point. But I still only want to live in a certain area. So that still keeps competition but increases it for people at the top and lower end of their budgets.

The mental gymnastics here is amazing. You wouldn't be able to afford it but somehow the prices stay high?

Places where the median sale price is $1.5M for the simple fact that money was cheap. It wouldn't be $1.5M if the rates were higher.

7% mortgage pmt for a 1.2M mortgage is ~$8K per month.
2.5% mortgage pmt for a 1.2M mortgage is ~4.75K.

That's a $3.25K difference for the same house and mortgage.

Now the current argument in this thread is this delta between payments won't be enough to push prices back down because there is enough people who will still pay the difference even when the economy is in a recession.

 

[rice]

$225K household income would put you in the 89th percentile in California. I am not under the impression that the population centers are Riverside and Bakersfield.

I don't know; that's weird.

 

[Random Guy]

Somewhere around 30% of house sales are cash
thats a lot of pressure from buyers who dont give a fvck about the cost of money

 

[Muscles]

Somewhere around 30% of house sales are cash
thats a lot of pressure from buyers who dont give a fvvk about the cost of money

How many of those sales were by people cashing 401Ks that sky rocketed because of monetary policy?

How many of those sales were from people selling homes in California or Hawaii at record highs and moving to lower priced markets?

I know multiple people who did a cash sale and then cash out refi simply because rates were so low.

 

[casa_mugrienta]

Somewhere around 30% of house sales are cash
thats a lot of pressure from buyers who dont give a fvvk about the cost of money

They are going to give a fvvk about the cost of money. Real fvvking soon.

 

[Random Guy]

How many of those sales were by people cashing 401Ks that sky rocketed because of monetary policy?

How many of those sales were from people selling homes in California or Hawaii at record highs and moving to lower priced markets?

I know multiple people who did a cash sale and then cash out refi simply because rates were so low.

Maybe, I don’t know where they’re coming up with their bags of cash

 

[casa_mugrienta]

I think saying that no one paying would be paying these prices is somewhat unfair. Simply no way of knowing.


Do you think these people like doctors, lawyers, tech workers who are pulling in 300-400k a year all of a sudden no longer want to own a home in the desirable areas when interest rates go up? They still need a place to live and still make a lot of money.

To them, they may not want too rent and will stay pay more. If they plan to be there for 3-5 years minimum it still makes more sense for them to buy.

Renting is extremely high cost and many of these make enough money to just buy instead.

3 years of rent on an nice home in Coronado will run you at least 5k a month so ~60k per year. Thats 180k gone you will never see again.

Just makes sense to buy even if interest rates are high to alot of people in these areas.

Use the above example for the home I just bought. If interest rates are what they are today- Id have not been able to afford it. But does that mean I would stop buying a home? No. It would just push my budget down lower increasing competition at a lower price point. But I still only want to live in a certain area. So that still keeps competition but increases it for people at the top and lower end of their budgets.

And here's where you go off the rails.

There are only two choices in the present state of the economy.

#1. Raise interest rates sky high and get inflation under control - which will not only dump the economy but severely limit the ability of the class of individual you are referring to to make money (this type of person and/or their associates make money by using the bank's money and they won't be able to afford those interest rates). The economy will be in the shitter, to put it mildly.

#2. Stop the rate hikes, go back to QE, and let inflation run away. Worse than scenario #1.

What do you think the Fed will do when the market tanks and we're officially in a recession?

This is not going to be a joke - it's going to be a bloodbath - and the Fed will not have stimmy checks to mail out because those are inflationary, and you can't stimulus while getting inflation under control.

You seem to think this is not going to greatly affect the ability of your buyers to buy their dream home at the beach.

(Of course there's #3 too - the Fed engineers a "soft landing" - after being wrong about EVERYTHING major in the economy over the past two years.)

 

[sdsrfr]

personally, I think #1 will happen fast or we’ll go for #2 around 2024 election cycle (someone else here said it first!)

that said - I just dont believe supply is going to suddenly increase. boomers with homes expected to sell aren’t bc they have new found appreciation for their empty nests post covid. new construction is well behind. even with dropping demand we are losing supply as millennials age into needing homes.

im no boomer but they seem to have ended up in two distinct directions - really well off or incredibly broke, still working and in mediocre health.

i think the same will be true with millennials and it sure feels like the reckoning is happening as we speak.

 

[Sharkbiscuit]

@casa_mugrienta when you say bloodbath, what would you characterize the 2008 snafu as?

 

[casa_mugrienta]

@casa_mugrienta when you say bloodbath, what would you characterize the 2008 snafu as?

A friction burn on your pepis (man or woman parts) from a bad handy.

 

[Sharkbiscuit]

A friction burn on your pepis (man or woman parts) from a bad handy.

Wew lad.

 

[PRCD]

Redirect Notice

www.google.com

Strong arguments in here.

The "fundamentals" changed non-linearly seemingly overnight in 2020. It can't have anything to do with the central bank. Merely demand side (owner/occupiers):


Seems like I was reading articles like this in 2008. Also, no data was presented other than quotes from various expert-Americans the reporter somehow had in her Rolodex.

 

[PRCD]

Agreed.

I've made my points multiple times but most people in this thread somehow believe that demand will remain with high interest rates and a recession. How is that possible?

It's possible if the Fed keeps pumping money to Black Rock and other REITs and they keep using it to buy houses. IOW, a total take-over of American housing stock by Fed-backed banks.

https://twitter.com/i/web/status/1402434266970140676

 

[grapedrink]

The mental gymnastics here is amazing. You wouldn't be able to afford it but somehow the prices stay high?

Places where the median sale price is $1.5M for the simple fact that money was cheap. It wouldn't be $1.5M if the rates were higher.

7% mortgage pmt for a 1.2M mortgage is ~$8K per month.
2.5% mortgage pmt for a 1.2M mortgage is ~4.75K.

That's a $3.25K difference for the same house and mortgage.

Now the current argument in this thread is this delta between payments won't be enough to push prices back down because there is enough people who will still pay the difference even when the economy is in a recession.

Again, nobody is saying there won’t be some kind of contraction. Especially at the high end, that always contracts the most in whole dollar terms during a recession. Less competition will lead to less bidding wars and homes will sell at a lower price. Great.

What you are still ignoring is the supply side. We had steady building from WW2 up until 08, and have not built nearly as much since. Also, nice places tend to have physical limitations on supply, because pretty things like oceans and mountains can’t be built on (at least not economically). Think about how many people want to live near the beach in Hawaii or California and how many homes there actually are. Pending some disaster that makes those towns unlivable, there will always be excessive demand relative to supply.

And IMO, even with a recession and dip in prices for the next few years, in desirable markets those homes will still be worth more 10 years from now.

 

[keenfish]

Glad I bought my little shitbox when I did.

 

[mundus]

Glad I bought my little shitbox when I did.

#metoo

 

[bluemarlin04]

Think about how many people want to live near the beach in Hawaii or California and how many homes there actually are. Pending some disaster that makes those towns unlivable, there will always be excessive demand relative to supply.

And IMO, even with a recession and dip in prices for the next few years, in desirable markets those homes will still be worth more 10 years from now.

I don't understand why people cannot see this.

No one is saying there will be no contraction or economic turn and everyone in this thread keeps repeating that as if we have not heard it enough.

You are spot on.

Its just that demand is so high on a literal 3-5 square mile piece of real estate that the available homes for sale IN THOSE SPECIFIC AREAS will not be affected.

People are not magically going to stop buying homes. They need a place to live. They will find a way to make the payments on a place to live in an area they want.

Serious question for @Muscles and everyone else in this thread on the recesssion.

Would you purchase a house at 10 percent interest in an area you know you want to live and will be in for the next 10-12 years?

Most people would buy and pay what it costs cause the alternative is renting and making someone else wealthy.

 

[keenfish]

The bottom line is it doesn't matter what the interest rates are when you buy your home as long as you can afford it.

Just because rates may go North that doesn't change anything unless you can't afford the payment but that would be due to other circumstances unless you bought your home with an adjustable loan which I would never recommend.

Even if the home isn't worth what you paid for it no worries unless you have to sell it. Don't sell it until things correct.

You don't lose unless you sell so stay in it for the long haul and things will correct eventually.

Don't buy a loan that is adjustable and all should be fine in the long run.

 

[sdsrfr]

buy in an indisputably desirable location and all shall be fine in the long run.

 

[bluemarlin04]

The bottom line is it doesn't matter what the interest rates are when you buy your home as long as you can afford it.

Just because rates may go North that doesn't change anything unless you can't afford the payment but that would be due to other circumstances unless you bought your home with an adjustable loan which I would never recommend.

Even if the home isn't worth what you paid for it no worries unless you have to sell it. Don't sell it until things correct.

You don't lose unless you sell so stay in it for the long haul and things will correct eventually.

Don't buy a loan that is adjustable and all should be fine in the long run.

Thats what I am saying.

If you own coastal property- you would be insane to sell it unless you absolutely have too or want to cash out (even then better off just renting it out).

Because of this- it keeps supply low.

So unless some magical force comes along forcing people to all of a sudden sell. Prices are going to stay high. This is nothing like 2008 because a huge majority of the sales and foreclosures were tied to ARMs.