Housing Market about to Crash Again?

[Melensdad]

The lovely Mrs_Bob and I have been house flipping for years. I stopped during Covid/2019 because the prices were becoming crazy. I actually bid $10,000 over asking for a cheap house, the seller rejected the offer, pulled it off the market and re-listed for $12,000 over my offer. That was when I walked away from flipping. Figured it would get even more crazy. It has, over the past 24 months, gotten even crazier. And now it looks like the bubble is bursting in 2022. Serious recession seems to be on the horizon.

I'll be ready to buy when the market crashes again. But not at the overvalued prices of today.

Below is an article from ZeroHedge, but there are others, indicating similar news.

Zerohedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

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There Goes The Housing Market​

Since the Fed is rushing to hike the US into a deep recession just so inflation will (supposedly) slide ahead of the November midterms, in line with Biden's demands, the housing market is eager to comply with Powell's and Biden's handlers' wishes, and is leading the charge into the economic abyss, as we discussed most recently here, and as the latest nationwide survey of new home builders confirms.​

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Last week, Zillow's dismal outlook stoked fears that rising mortgage rates would result in the next downturn. On Monday night, Airbnb co-founder and CEO Brian Chesky warned: "this moment feels similar to late 2008 when we started" the online marketplace for lodging.​

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It should: the surge in mortgage rates means that housing affordability has crashed to the lowest on record.​

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And nos there's this: John Burns Real Estate Consulting provides a monthly snapshot of more than 300 builders across the nation. Here are a some comments from the builders, according to tweets from the firm's director of research:​

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1. Demand is slowing, namely entry-level due to payment shock.
2. Investors are pulling back.
3. Ripple effect of rising rates starting to hit move-up market. Market commentary to follow

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The regional breakdown is shockingly uniform in just how quickly it got ugly across the entire nation:​

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• Dallas builder: “Interest lists are shrinking or buyers are truly pausing.”
• Houston builder: “Many first-time buyers simply no longer qualify with the increase in interest rates, as their debt-to-income ratio gets out of whack.”
• San Antonio builder: “Traffic has been cut in half since the hike in rates.”
• Raleigh builder: “Investor activity has slowed dramatically.”
• Provo builder: “Investors are evaluating the investment more critically than in the past.”
• Washington DC builder: “Traffic half what it was in March. Worried about first time buyers. Many fewer REAL buyers than number of people collected on interest list last 6 months. Certainly more attempts [from buyers] to negotiate.”
• Seattle builder: “Pause by a large population of buyers. To achieve our desired [sales] pace, we had to make price adjustments. Rates starting to knock people out of qualification.”
• Riverside San Bernardino builder: “Cancellations are starting to creep up due to loan declines and job losses. Waiting lists are certainly smaller. Saw an immediate change in buyer behavior when rates climbed over 5%.”
• Los Angeles builder: “Buyers who are stretching to purchase have become more cautious.”
• San Diego builder: “Buyers are definitely a bit more edgy.”
• Denver builder: “Sales are slowing due to higher prices and rates. Backlog of buyers have remained but we are seeing new prospects priced out with interest rates and anticipated payments. Conforming loans quoting over 6%.”
• Boise builder: “Rising interest rates may have pulled some buyers forward, and we expect to see a slowing of sales in the coming months as a result.”
• Salt Lake City builder: “In our lower priced segments, buyers are compromising and reducing options.”
• Bend builder: “Our market has slowed and prices are starting to drop.”
• Atlanta builder: “Seen a decrease in the number of potential buyers who are participating in best and final offers on homes/homesites.”
• Knoxville builder: “Detached 2,000-3,000 square foot product still selling, just not with 3 buyers for every home like a few months ago.”
• Allentown builder: “Double hit of higher home prices and higher mortgage interest rates clearly has reduced the number of qualified buyers. Our waiting list is almost zero as of April 30th.”
• Philadelphia builder: “Between higher interest rates and higher sales prices, along with high gas prices and a volatile stock market, we’re seeing a pullback in our sales.”
• Tampa builder: “We’ve seen a significant shift in buyer behavior in the last 30 days. Florida was on fire and pricing has really come to a high point, and people are not willing to pay the prices anymore.”
• Indianapolis builder: “Traffic has significantly declined and people have paused on moving forward with purchases.”
• Kansas City builder: “Our lower end product has paused or slowed dramatically.”
• Columbus builder: “Higher rates are definitely tempering buyer enthusiasm and traffic.”
• Baltimore builder: “Buyers aren't putting in as many options as they did last year.”
• Reno builder: “Cancellation rate last month more than doubled from 6% to 16%. We attribute this to buyers that did not lock interest rates early in purchase process. Also seeing many buyers put buying decision on hold.”
• Fresno builder: “Finding an increase in cancellations due to the rate increase. The majority of cancellations are resulting from fear vs non-qualification.”
• Cleveland builder: “Once we reach home closings, about 5% of our current customers on the books will be forced to bust out as they originally qualified at a 3.25% rate and won't be able to stretch beyond this.”
• Sacramento builder: “Seeing trouble qualifying for entry-level buyers as they are priced out by rates.”
• San Jose builder: “Quality traffic has significantly decreased.”

This means that still buoyant homebuilder confidence is about to catch down to abysmal homebuyer sentiment...​

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... which will immediately mutate into a recession, at which point the Fed will slam the breaks on the hiking cycle and quickly go into reverse. The only question is how long before the market grasps what is now patently obvious.​

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[mla2ofus]

2- Investors are pulling back.
Because as I understand it they're the ones that drove prices up.

 

[Melensdad]

2- Investors are pulling back.
Because as I understand it they're the ones that drove prices up.

I disagree.

Low interest rates, combined with people moving out of inner cities, helped to created a housing boom in suburban and near rural areas.

We now have a somewhat weaker jobs market, high inflation making it harder to pay for daily essentials, 2/3rds of Americans are living paycheck-to-paycheck and interest rates have climbed from the LOW 2's to an average of over 5%. Wait until it hit's 7% and the real COLLAPSE will begin. And that will be the entire economy.

 

[XeVfTEUtaAqJHTqq]

When people can no longer rely on re-financing their homes to pay for their over-extended lifestyles then we will see lots of foreclosures and good buying opportunities. Shouldn't be too much longer at the current rate of decline of our economy.

 

[XeVfTEUtaAqJHTqq]

I'm most curious as to whether or not companies like Blackrock are going to continue their purchasing or if the higher interest rates will slow that down.

 

[m1west]

I'm most curious as to whether or not companies like Blackrock are going to continue their purchasing or if the higher interest rates will slow that down.

Thats exactly whats going to happen, interest rates don't effect cash purchases. I don't expect prices to fall, quite the opposite, building materials costs and home shortages are going to keep the prices up. The inventory of homes for sale is actually quite low. Real property and metals are becoming the only semi safe place to put your money other than the mattress. It will make home ownership for some impossible. Blackrock and other investment groups are going to buy up everything they can. Just remember, you will own nothing and be happy.

 

[XeVfTEUtaAqJHTqq]

Thats exactly whats going to happen, interest rates don't effect cash purchases. I don't expect prices to fall, quite the opposite, building materials costs and home shortages are going to keep the prices up. The inventory of homes for sale is actually quite low. Real property and metals are becoming the only semi safe place to put your money other than the mattress. It will make home ownership for some impossible. Blackrock and other investment groups are going to buy up everything they can. Just remember, you will own nothing and be happy.

That's pretty much what I fear. Maybe something will change this but the future doesn't look good for private home ownership anywhere in the world.

 

[mla2ofus]

2- Investors are pulling back.
Because as I understand it they're the ones that drove prices up.

Thats exactly whats going to happen, interest rates don't effect cash purchases. I don't expect prices to fall, quite the opposite, building materials costs and home shortages are going to keep the prices up. The inventory of homes for sale is actually quite low. Real property and metals are becoming the only semi safe place to put your money other than the mattress. It will make home ownership for some impossible. Blackrock and other investment groups are going to buy up everything they can. Just remember, you will own nothing and be happy.

That's what I was tryng to say I guess, but I'm not a finance wizard!!

 

[Aircal]

Dear , I'm not a finance wizard either!

 

[FrancSevin]

I have stayed out of this thread because of my one word answer.

Housing market crashes, Big speculative investors lose.

GOOD!

It will take some time, but eventually young people will go back to working for a living and be able to buy a house.

 

[m1west]

Im not seeing a housing market crash, real property is about the only place to put your money. In Ca. where I live there is a housing shortage. Home sales only slows because of low inventory. What I am seeing is the average person is being priced out, especially first time buyers that have no equity in and existing home to build on. Another thing getting ready to happen is millions of folks in the south west dependent on the Colorado river, lake Powell and lake Meade are going to be looking for a place to move to soon.

 

[300 H and H]

Lake Mead Marina Update.. Hoover Dam Closed​

 

[m1west]

Yep, they are losing more than 8" a day with no plan from the gubment. My sifering says they got less than a year without some real draconian water cuts that are on the table. The power goes out before the water. The LA times finally ran a story on it. My sister lives in SoCal her and everyone else down there had no clue how bad it is. The cat is out of the bag now. Look for lots of for sale signs and a mass exodus from the southwest.

 

[m1west]

 

[m1west]

Zillow says my home price increased $9,813.00 in 30 days.

 

[chowderman]

Zillow and many other similar sites use algorithms that use the the % of the last documented sale to predict the sale price of some random property in the same zip code.

it's totally bogus.

 

[bczoom]

Zillow and many other similar sites use algorithms that use the the % of the last documented sale to predict the sale price of some random property in the same zip code.

it's totally bogus.

Agreed. My house is seriously undervalued on that site. I took out a HELOC a few years ago and my listed value is based on the HELOC which is nowhere near to its appraised value.
I have 2 other properties. Zillow's value on one is low, the other is high.

 

[m1west]

Point is property values are not dropping around where I live, sales only slow when inventory is low.

 

[Melensdad]

Point is property values are not dropping around where I live, sales only slow when inventory is low.

That is not the normal situation for much of the United States. Obviously there are pockets where prices hold. But what you personally see is not the same as what is happening across much of the US.

And the news for many is getting worse. 15% of houses "sold" ended up with cancelled sales, which is a near record number of cancellations.

FULL STORY at Just The News: https://justthenews.com/nation/economy/buyers-cancelling-home-sales-highest-rate-beginning-pandemic

Buyers cancelling home sales at highest rate since beginning of pandemic​

A skyrocketing number of home sales are faltering throughout the U.S. housing economy, with experts pointing to slower housing markets and higher mortgage rates as the main drivers of the turnaround. ​

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Nationwide, "roughly 60,000 home-purchase agreements fell through in June, equal to 14.9% of homes that went under contract that month," real estate company Redfin said in a home sale analysis this week.​

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Redfin said that that number represents "highest percentage on record with the exception of March and April 2020, when the housing market all but ground to a halt due to the onset of the coronavirus pandemic." . . .​

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"Buyers are increasingly keeping rather than waiving inspection and appraisal contingencies. That gives them the flexibility to call the deal off if issues arise during the homebuying process," she said. ​

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She added that "rising mortgage rates are also forcing some buyers to cancel home purchases. If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home . . .​

 

[m1west]

That is not the normal situation for much of the United States. Obviously there are pockets where prices hold. But what you personally see is not the same as what is happening across much of the US.

And the news for many is getting worse. 15% of houses "sold" ended up with cancelled sales, which is a near record number of cancellations.

FULL STORY at Just The News: https://justthenews.com/nation/economy/buyers-cancelling-home-sales-highest-rate-beginning-pandemic

Buyers cancelling home sales at highest rate since beginning of pandemic​

A skyrocketing number of home sales are faltering throughout the U.S. housing economy, with experts pointing to slower housing markets and higher mortgage rates as the main drivers of the turnaround. ​

​

Nationwide, "roughly 60,000 home-purchase agreements fell through in June, equal to 14.9% of homes that went under contract that month," real estate company Redfin said in a home sale analysis this week.​

​

Redfin said that that number represents "highest percentage on record with the exception of March and April 2020, when the housing market all but ground to a halt due to the onset of the coronavirus pandemic." . . .​

​

"Buyers are increasingly keeping rather than waiving inspection and appraisal contingencies. That gives them the flexibility to call the deal off if issues arise during the homebuying process," she said. ​

​

She added that "rising mortgage rates are also forcing some buyers to cancel home purchases. If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home . . .​

I just checked, gained $2500.00 in the last 30 days. Like you said it can be regional. The interest rates are rising and effecting things.

 

[echo]

People are scared of the dollar, gold is already high enough. Buy a house will do the same thing that inflation is doing to the dollar.
You can buy paper but watch it. No bonds as they are someones else's debt. Good Luck amerika. I'm just sitting and watching the dollar shrink. I think I lost five grand this month. My wife lost twenty five grand. The only gain is coal/lp operated power plants.

 

[tommu56]

one of the youtubers i follow

 

[tommu56]

and this one

 

[UberBastid]

I am a California Real Estate Broker (retired). My wife is an agent.
She worked under my license.

We contracted with three major banks with significant loan portfolios in N. California (Shasta and Tehama Counties). We processed their foreclosed properties (REO) in those two counties from 2004 to 2010. At the peak we closed three to five properties a week.
Take possession.
Rehab.
Market
Escrow manage
Close.

I see a lot of similarities now to what was happening JUST before the big crash. There are a lot of differences ... but, lots of similarities.

What I wanted to tell you all is that about two months ago I got an email from a major bank, who's name you'd recognize inviting me and wifey to a three day, all expense paid seminar in San Francisco to 'introduce you to our new platform for processing REO properties'.
They want me to 'be prepared for a significant uptick in REO work.'

The banks know what's coming.

And, no, I declined their offer. I felt like I sold a little tiny piece of my soul with each closing. It's the hardest, most heartbreaking job I ever did - and I won't do it any more.
I don't have that much soul left.

But, the banks know what's coming.

Stagflation is cruel.

 

[mla2ofus]

Apparently some folks didn't read their recent history so they'll repeat it!!

 

[UberBastid]

People are scared of the dollar, gold is already high enough. Buy a house will do the same thing that inflation is doing to the dollar.
You can buy paper but watch it. No bonds as they are someones else's debt. Good Luck amerika. I'm just sitting and watching the dollar shrink. I think I lost five grand this month. My wife lost twenty five grand. The only gain is coal/lp operated power plants.

Ya know what I don't understand ... maybe somebody can explain it to me.
One of my undergrad degrees is in Economics, and it was drilled into us from Econ 101 forward that buying metals (gold, silver) is NOT an investment. It is an inflation hedge.
So ... why is it that silver hasn't moved AT ALL in the last few months? We are having almost 10% inflation ... why, if I sell my silver, I will get paid in the same amount of inflated dollars as the number of uninflated dollars I bought it with?

Why isn't inflation causing an uptick in the 'value' of metals?

.

 

[Melensdad]

Ya know what I don't understand ... maybe somebody can explain it to me.
One of my undergrad degrees is in Economics, and it was drilled into us from Econ 101 forward that buying metals (gold, silver) is NOT an investment. It is an inflation hedge.
So ... why is it that silver hasn't moved AT ALL in the last few months? We are having almost 10% inflation ... why, if I sell my silver, I will get paid in the same amount of inflated dollars as the number of uninflated dollars I bought it with?

Why isn't inflation causing an uptick in the 'value' of metals?

.

Silver is both an industrial metal and a precious medal.

But FWIW, I think the play today is commodities.

 

[UberBastid]

I think the play today is commodities.

I agree with that.
Tangible and useful and desirable physical assets.

But, my metals holding is not intended as an investment.
When the SHTF one little Mercury silver dime will buy a loaf of bread and feed me and wifey for a day.
And I got sacks, and sacks, and sacks of them.

They not for selling.
Not an investment.

.

 

[echo]

Ya know what I don't understand ... maybe somebody can explain it to me.
One of my undergrad degrees is in Economics, and it was drilled into us from Econ 101 forward that buying metals (gold, silver) is NOT an investment. It is an inflation hedge.
So ... why is it that silver hasn't moved AT ALL in the last few months? We are having almost 10% inflation ... why, if I sell my silver, I will get paid in the same amount of inflated dollars as the number of uninflated dollars I bought it with?

Why isn't inflation causing an uptick in the 'value' of metals?

.

Silver is at it's inflated value and so is gold.
I told my family years ago to buy real copper pennies as they will be worth a dollar someday. They laughed at me like my Swissies.
I also did real good when a quarter could be bought for fifteen cents. Yea I'm Milton Friedman trained.

 

[chowderman]

the 'Obama housing crash' was caused by the admin demanding banks write mortgages to anyone who could sign their name.
those buyers could not afford the houses the bought, they defaulted, houses went into foreclosure, got sold off dirt cheap because the banks wanted them off their books.

the couple across the street, for example. he was a not high level state employee, she did not work/earn. they sold their high $$ house in MD, bought here. he did _three_ re-fi's using the cashed out 'equity' to pay the first and second and third mortgages . . . until the money ran out. the house foreclosed, the bank(s) sold it off some $150k under value, just to get rid of it.

not sure we currently have a 'crash' - it more like prices are inflating, interest rates are going up, people can't afford the payments and banks are no longer writing mortgages to people who have no means to pay it back.