Real estate decline 2020

aynrus

Woodpecker
Market is insane almost everywhere right now.
I just spent several months traveling and looking at what's going on, across multiple states, in rural/remote areas.
Rural houses with land sell instantly, pretty much, unless they're major problem houses - but in the West even terrible fixers with meth tenants sell like that as soon as they got at least an acre.
In the West, even homes in remote small towns which go no land often sell withing the first hour.
Many sell in pre-market, others get offers the moment they go on MLS - from remote buyers from big cities who never seen them.
Locals snap them up a lot too, there're a lot of locals looking right now and a lot of buyers and their realtors checking for updates 3 times a way, these buyers had been waiting for months and offer full price cash and more... It's impossible to buy anything decent/ok.
This is peak market, I believe.
US has 18.5 year real estate cycles since 1790. Last bottom was in 2012 - right now is peak (+9).
Single family homes are up a lot this year, also, I've seen estimate 22% - about matches the dollar printing.
 
Last edited:
Market is insane almost everywhere right now.
I just spent several months traveling and looking at what's going on, across multiple states, in rural/remote areas.
Rural houses with land sell instantly, pretty much, unless they're major problem houses - but in the West even terrible fixers with meth tenants sell like that as soon as they got at least an acre.
In the West, even homes in remote small towns which go no land often sell withing the first hour.
Many sell in pre-market, others get offers the moment they go on MLS - from remote buyers from big cities who never seen them.
Locals snap them up a lot too, there're a lot of locals looking right now and a lot of buyers and their realtors checking for updates 3 times a way, these buyers had been waiting for months and offer full price cash and more... It's impossible to buy anything decent/ok.
This is peak market, I believe.
US has 18.5 year real estate cycles since 1790. Last bottom was in 2012 - right now is peak (+9).
Single family homes are up a lot this year, also, I've seen estimate 22% - about matches the dollar printing.

My wife and I are trying to buy a house right now and its a nightmare. Houses that were 200k 4 years ago are going for 300k+. Houses that were 240k in February are going for 275k. These low mortgage interest rates have done nothing but inflate the housing market. So buying a house means the same monthly payment just a bunch more debt. New builds that were going for 280k are now listed at 360-400k. My inlaws live in a small midwestern town and house prices there have gone from 100-200k to 250k MINIMUM.

We could have put 3% down and gotten PMI a couple of years ago but instead did the financially responsible thing and saved up a bigger down payment. That now seems like a mistake because we're priced out of putting 20% down again. Maybe the market cools off once foreclosures restart, usually it takes a few years for those to trickle through the system.
 

aynrus

Woodpecker
The market is just too heated in the DC exurbs. Houses are going very quickly. It's fascinating to watch overpriced junk I pass on become "Pending/Contingent" within a week. I sense people are using mostly emotion in these buying decisions to not miss out. It feels like the frenzy of 2008.

Thing is this may not be a "bubble". There is a structural shortage of single family homes. But if interest rates go back up and there are many foreclosures, which is inevitable at this point, we may see things cool down a bit, but I'm not hopeful prices will decline outside the urban areas.

Personally, I feel uncomfortable buying a home when things are in flux politically. I like being nimble in movement and with my cash. I'm not even sure if buying a home is right for me as a single man, as much as I would love to have some acreage. What am I going to do on a plot of land 90 minutes away from everyone I know?
It's RE peak now (I posted above about 18-year US real estate cycle, which correlates with current peak timing as well) - like they say, it's a bad idea to buy anything at its peak...
Prices might not come down, but there's constant and pretty rapid inflation now, so during the next downturn it'd likely be that the prices would be simply below inflation-adjusted prices after facing slow-down.
One thing that should improve much is availability and choice.
However, if sitting and waiting for the downturn one better have a cheap/free place to live, otherwise rental expenses will eat any benefit from buying a dip and better protect cash from inflation, as RE appreciates fast (for now). So if one is waiting for market to cool down, they better invest their cash in a way that it keeps up with RE value increases and their QE printing.
Replacement value has to get well above market values...
 
Last edited:

aynrus

Woodpecker
In the States, under Biden administration, there'll likely be foreclosure relief and deferring them forever, while printing money.
So I would not make financial bets on a big wave of foreclosures hitting soon.
 

Dr Mantis Toboggan

Kingfisher
Gold Member
In the States, under Biden administration, there'll likely be foreclosure relief and deferring them forever, while printing money.
So I would not make financial bets on a big wave of foreclosures hitting soon.

More likely they keep moratoriums on evicting renters but not on foreclosures, thus letting their bank buddies repossess rental properties from individual investors. They'll find some roundabout way of doing or explaining it so it isn't that blatant of a grab, but that will be the end result.
 

aynrus

Woodpecker
My wife and I are trying to buy a house right now and its a nightmare. Houses that were 200k 4 years ago are going for 300k+. Houses that were 240k in February are going for 275k. These low mortgage interest rates have done nothing but inflate the housing market. So buying a house means the same monthly payment just a bunch more debt. New builds that were going for 280k are now listed at 360-400k. My inlaws live in a small midwestern town and house prices there have gone from 100-200k to 250k MINIMUM.

We could have put 3% down and gotten PMI a couple of years ago but instead did the financially responsible thing and saved up a bigger down payment. That now seems like a mistake because we're priced out of putting 20% down again. Maybe the market cools off once foreclosures restart, usually it takes a few years for those to trickle through the system.
Yes, the punishment for the prudent/savers, it's all over the place. I tried to offer cash for a moderately priced, remote small town in the West (2-hours drive to real services) small old house, small lot...Called them one hour after viewing it. They said they dk to take my offer as they got other cash buyers lined up already and accepted one.
In another state (Eastern) I saw a rural house out-of-town and realtor said that in 2019 they could count on only a half of what they're going to be selling it for right now.
Seeing crapshack cabins on land selling with 30% premium after being bought end of 2019 and no work done of them. Selling instantly with multiple offers.
There was a rural place coming up in remote Northern CA on several acres....bad methhead tenants, not paying and not-evictable, house in terrible shape/a fixer....sold before it hit the market.
This game isn't worth playing right now if one has alternatives.
 

aynrus

Woodpecker
More likely they keep moratoriums on evicting renters but not on foreclosures, thus letting their bank buddies repossess rental properties from individual investors. They'll find some roundabout way of doing or explaining it so it isn't that blatant of a grab, but that will be the end result.
End result but I believe they'll drag it for a while this time, with foreclosures. They need to win the Senate... with all the printing they resigned to they can afford to do things.
 

Roosh

Cardinal
The contrary move for those of us who aren't married may be to stay in the cities/suburbs. Live cheap with a couple patriot roommates to allow for a 24 hour watch during violent episodes. Life wouldn't be boring, for sure.

For money that would have gone into house, invest in asset classes that the elites won't let collapse (stocks).
 

aynrus

Woodpecker
Or move to a country with cheap cost of living/cheap houses (where one can also have some land or public pasture for some livestock) as an alternative to US living (well, for us middle-aged folks and farmers-at-heart, especially), while speculating and investing in assets that are going to stay propped up by their "Powell put/Bernanke put".

I'd say I'm not entirely sure about them propping up these assets enough to outperform inflation forever - 2 years ago I run some numbers on long-term S&P/Dow index investing versus real inflation (versus fake official published inflation data) and my calculations showed that index investing did not outperform inflation, despite what many expect - because real inflation had been higher than published (one can use Shadow Stats site to see their real inflation estimates and my own estimates done independently came close to Shadow Stats info). Plus, they need periodic crashes of stock market to buy things up, etc, which makes some people exit. So I'd heavily diversify and be ready to do swing trading versus long-term investing through thick and thin. I guess I just don't have this level of trust in the system - any system - after seeing total collapse of my home country long time ago and 1929 stock collapse also required decades to recover to even nominal (pre-inflation) level of stock prices. Dot com crash also put many out of their savings/not all stocks recovered.
 

nathan

Robin
I just went through this same process (albeit in Texas). I saw corona arrive and figured that a bunch of deals would be hitting the market soon. I waited out the summer and checked out a few spots with a lot of land. But when it hit me that our government would not be letting anything crash and would instead print as much money as needed, I just scooped up a house in an area I like to be done with it.

I thought that if I was wrong and I put it into stocks and they crashed, I would have nothing, but if I put it into property and that did end up crashing, I would at least have a house and some land. Plus I needed to just make a decision, so it made sense for me.

If you want to wait I would maybe wait a few months to see if they extend the rental payment moratorium deadline, which I believe ends in January, and also see if any additional stimulus packages are announced. If neither of those things happen, then a real estate crash actually does seem more likely, but if they just extend the rent deadline again and print a bunch of money, I would want to just go ahead and buy because I wouldn't see any crashes as being likely.

Your situation is likely to be different from mine though. I was financially blessed this year and had little worry of going underwater on any new mortgages, and I also was not looking for something long term. I found a spot in an area I love where property values have gone up about 40% in the past 2 years and is also close to a university, so I jumped on it.

Another outside of the box option that I considered was building a steel (https://www.budgethomekits.com/about-us) or prefab, or even building it myself (not actually doing the hammering but managing all of the contractors), on some land because you can get a lot more sqft for your money by doing that. However, I have multiple good friends who are builders so that option may be a little easier for me than it would be for the average person. I went down the road of looking for agricultural grants but I did not get far. But if you are looking at 10 acres or more then that could be an option (there are surely people on this forum much more qualified than I am on this subject though).

Ultimately I did not go that route because I figured it would take 6 months or more, so I ended up just buying the quick option with the intent to rent it out in the future. But I learned a lot about what my options will be if I go that route in the next 5-10 years.
 

aynrus

Woodpecker
I just went through the idea of building steel/pre-fab home and explored some options.
The good part is that these can be insured by standard home insurance policies...the bad part is that it's near impossible to get a mortgage on those (at least in most parts of the US) - which will affect a pool of future buyers.
May be, with luck, a local bank would mortgage it (this mortgage can not be sold/can't be Fannie-backed - appraisers are not writing them up) it but it would be higher interest rate and downpayment. I learned that these appraise as manufactured homes, basically, so depreciation is possible.
With insane construction prices in the States it doesn't make sense to invest in construction of potentially non-appraising/non-mortgageable asset as the main house.
Anyway, builders around many places, especially good/honest ones worth dealing with, are booked solid many months out due to construction boom. Steel and wood prices are up a lot, also. Every step in lot development faces big delays right now, seems like.
Land prices are also up. Seen hardly usable lot (because of terrain and just logged) listed for 40K which they bought for 8K just last year.
 

nathan

Robin
My builder friends swear that anyone who is moderately intelligent can just manage their own build, although I am doubtful of that because it seems like a lot. They told me that the main first thing is just to get a good blueprint, which supposedly has everything, and I am sure they would have walked me through any issues I had. I know if you build, there are special FHA loans you can get, so I looked into that a little but ultimately decided against it. Of all of the alternative methods, I was probably closest to getting a mortgage on a chunk of land (and applying for grants) and then buying a steel house or barndominium with cash to put on the land.

Running power to raw land was a lot more expensive than I knew, though. I figured it was going to be a cost, but I did not realize how expensive it is to run the wires.
 

aynrus

Woodpecker
I don't believe FHA would agree to finance a steel, especially steel-sided home. At least all people who tried had failed to secure them, seems like. My understanding is that even conventional loan is a problem. It might be different in the area which has a bunch of recent residential steel home sales, as comparables, but this would be extremely rare location.

Power companies provide free footage, 1000 ft in some places, but if they think you're building a seasonal dwelling they might deny it and charge full price. I think one can usually count on at least 200-300 ft free. This means the pole has to be at the lot boundary if you want any privacy and not pay for install.
 
Last edited:

nathan

Robin
I don't know if they would finance a steel home. My plan if I purchased a steel home was to use cash for the dwelling, but otherwise finance a normal style home with an FHA loan. But the other thing with FHA loans is that I know some of them require an established builder, which if I was going to manage my own build would not be the case.

After researching power costs I ended up just refining my search to only include land that already had electric or at least had electric at the road. Some of the stuff I had been looking at was pretty rural.
 

aynrus

Woodpecker
One trick to get around financing problem for resale is to put vinyl siding on it before putting in on the market (and keep the mouth shut about frame being steel and steel siding underneath)...this worked for some.

Electric at the lot boundary (for larger lots)....and got to have water too. Which can be a bet in some places in TX, my understanding.
And a pump for those deep wells and electricicty for it will cost a bunch.
In places with woods and/or mountains, with much clearing and grading, long driveway can cost a fortune too.
 

nathan

Robin
One trick to get around financing problem for resale is to put vinyl siding on it before putting in on the market (and keep the mouth shut about frame being steel and steel siding underneath)...this worked for some.

Electric at the lot boundary (for larger lots)....and got to have water too. Which can be a bet in some places in TX, my understanding.
And a pump for those deep wells and electricicty for it will cost a bunch.
In places with woods and/or mountains, with much clearing and grading, long driveway can cost a fortune too.
People did that? That sounds like something that could get them into trouble. Some of those real estate disclosure laws would frown upon that I assume.

And yeah, electric/water on rural land seems like a pretty big pain, but at least with water it sort of depends on the water table wherever the lot is located. One of the lots I looked at had water at a pretty shallow depth under the surface, so that is something desirable as well.
 

aynrus

Woodpecker
People did that? That sounds like something that could get them into trouble. Some of those real estate disclosure laws would frown upon that I assume.

And yeah, electric/water on rural land seems like a pretty big pain, but at least with water it sort of depends on the water table wherever the lot is located. One of the lots I looked at had water at a pretty shallow depth under the surface, so that is something desirable as well.
Is there a question about framing materials or what's underneath the siding on RE disclosure form?
I had seen multiple states' disclosures and no question like that.
One does not have to disclose this unless asked.
There're homes built of all kinds of materials out there, added on and remodeled over the long years, with a couple of layers of siding being pretty typical and mystery insulation and wall sheething materials. No one will disclose anything about this ever. You can have terrible tarpaper shingles under the siding, this will not surface and the seller will never respond. They only have to disclose if the frame is from official HUD manufactured home, not from modular/kit, etc, these are site-built.
Usually, a buyer will figure out by poking under the top layer of siding, and they're supposed to hire home inspector and do due diligence anyway (any home inspector worth their money will find out once they see roof framing)...appraisers won't bother, the key is appraisal.
It's the external appearance of steel homes what appraisers don't like, as these don't compare to standard homes. Steel home might be more durable, if built right, it's just steel siding makes them look like outbuildings. So it helps to have higher pitch roof, also, and not use barn shell design.
 
Last edited:

nathan

Robin
Is there a question about framing materials or what's underneath the siding on RE disclosure form?
I had seen multiple states' disclosures and no question like that.
One does not have to disclose this unless asked.
There're homes built of all kinds of materials out there, added on and remodeled over the long years, with a couple of layers of siding being pretty typical and mystery insulation and wall sheething materials. No one will disclose anything about this ever. You can have terrible tarpaper shingles under the siding, this will not surface and the seller will never respond. They only have to disclose if the frame is from official HUD manufactured home, not from modular/kit, etc, these are site-built.
Usually, a buyer will figure out by poking under the top layer of siding, and they're supposed to hire home inspector and do due diligence anyway (any home inspector worth their money will find out once they see roof framing)...appraisers won't bother, the key is appraisal.
It's the external appearance of steel homes what appraisers don't like, as these don't compare to standard homes. Steel home might be more durable, if built right, it's just steel siding makes them look like outbuildings. So it helps to have higher pitch roof, also.
I don't know. You could be right, but I would just advise anyone who reads this to check first to be sure. It's just one of those things that seems like it could be frowned upon.
 

aynrus

Woodpecker
I don't know. You could be right, but I would just advise anyone who reads this to check first to be sure. It's just one of those things that seems like it could be frowned upon.
So how would you disclose it? In the description in the listing? I think this wouldn't create a problem for banks. You can put "vinyl" in the siding field, and state "steel construction" in the description.

Banks need appraisal to issue mortgage.
Appraiser needs comparable sales and they care about overall appearance - they're not evaluating structural properties of steel building or was it built properly (and they never do it with any building, you can have 2x4 studs in 2x6 zone this will never surface...as in ever), but metal siding creates non-standard outbuilding-like appearance in most cases. You can research appraisers forums, there're discussions on this topic.
 
Top