Real estate thread

[Hypno]

TM, I disagree with you on the facts.

In the 2006-2010, you had hedge funds buying up single family houses. But they were buying them low.

This time its mostly pent up demand by people who intend to occupy them.

Also, because of inflation (which includes higher nominal wages) and lower interest rates, homes are more affordable now despite higher nominal prices than they were then. That is what that chart is showing. You can't just look at prices in a vacuum, you have to compare it to the affordability, and higher wages and lower interest rates make houses, even at recently increased prices, still very affordable relative to prior periods.

 

[DanielH]

TM, I disagree with you on the facts.

In the 2006-2010, you had hedge funds buying up single family houses. But they were buying them low.

This time its mostly pent up demand by people who intend to occupy them.

Also, because of inflation (which includes higher nominal wages) and lower interest rates, homes are more affordable now despite higher nominal prices than they were then. That is what that chart is showing. You can't just look at prices in a vacuum, you have to compare it to the affordability, and higher wages and lower interest rates make houses, even at recently increased prices, still very affordable relative to prior periods.

I'm skeptical of any graph that relies on an accurate historical measure of inflation when we can see the lie that official inflation numbers are now. Your graph still has housing less affordable than at any time in the last 11 years. Relative to inflation, wages are going down, they do not adjust 1:1. Maybe they do in the food service industry where fry cooks now make 20/hr, but that's not enough for a home in most suburban areas. From the nurses and engineers I know - some very middle class professions, wages are not increasing with recent inflation. My only expenses are food, gas, car payment, car insurance, and I live with my mother in law, while only extremely rarely eating out, but I'm moving out soon. Despite this, I was not able to save faster in the past year with a good salary than the rate that housing increased.

In fact, I'm about to purchase a home in a rural area for 23% more than it was sold for in 2014. No maintenance of any sort was done on the house in those 7 years. It needs a new roof, chimney flue, carpeting, all the walls need to be repainted and wallpaper removed, basement walls need new mortar, probably a sump hole and pump put in, and half the appliances don't work.

And soon we'll either have a) another stimulus check b) reparations for blacks, or c) universal basic income. Pretty much none of which will actually help anyone productive but drive inflation through the roof.

I guess the one thing I can't complain about is interest rates which does make the house worth it as an investment.

 

[EndlessGravity]

This time its mostly pent up demand by people who intend to occupy them.

I haven't seen any direct evidence of hedge funds buying homes but since the pandemic numerous properties were purchased around me in cash and a year later...no one has moved into any of them. They're just sitting. Often the story is a parent from up north bought it for their little girl or something similar. Inventory is decimated but something else is going on, imho.

 

[The Beast1]

There's a growing "anti-landlord" movement in LA county. The percentage of owners to renters is approaching 50%. All it takes is one commie to start attacking the landlords to make real estate in SoCal a bad investment.

I bought my condo in the middle of the pandemic. That was the dip. Glad I did because all of my friends had their rents jacked up.

 

[Slim Whitman]

TM, I disagree with you on the facts.

In the 2006-2010, you had hedge funds buying up single family houses. But they were buying them low.

This time its mostly pent up demand by people who intend to occupy them.

Also, because of inflation (which includes higher nominal wages) and lower interest rates, homes are more affordable now despite higher nominal prices than they were then. That is what that chart is showing. You can't just look at prices in a vacuum, you have to compare it to the affordability, and higher wages and lower interest rates make houses, even at recently increased prices, still very affordable relative to prior periods.

You sound like you have a vested interest in prices continuing to rise indefinitely, and will come up with any data that seems to support what you hope will happen. Many such cases. Citing affordability is not an argument we usually hear these days. Traditional affordability metrics dictate that you should pay no more than 2-3 times annual income for your home. If you are really stretching it you can go 4x. This is according to standard mortgage lending practice that was in place for decades before the market became so artificially warped in the 2000s. The prices rose so quickly that banks started abandoning their long-proven formulas of sound lending, and we saw the result.

Today, average household income in the U.S. stands at about $80k. Median home prices are around $300k for used and $400k for new. So already we are at around 3.5 to 5x median income. But of course the reality on the ground is good luck finding anything that you would consider mid-grade for less than $400k, due to bidding wars and inflated asking prices.

It's well known that industrial buyers like hedge funds and REITs are buying up properties in hopes of creating a permanent serf class of renters. It's also well known that Chinese and other foreign buyers are responsible for a huge amount of these absurd sale prices.

We could talk all day about the various factors that contribute to this housing bubble but the bottom line is that when prices become this far decoupled from average income, a crash is sure to follow. You simply can't keep selling houses to people who don't make enough money to qualify for them - regardless of how low the interest rates are. As soon as inflation starts becoming a real problem, interest rates will rise and "poof" there goes the housing hype.

We've also seen a lot of constraint on new construction due to artificial covid lockdowns and artificially high lumber prices. Those factors will self-correct rapidly in the coming year. Builders have to make a living and they don't do that by sitting around on their thumbs.

The argument that you should buy now on a 30 year fixed in order to lock in low interest rates is very flawed, as it assumes you will stay in that property for the full term of the loan. The reality is that people sell after an average of 3-4 years. You'll just be making interest-only payments that whole time and as usual Mr. Bankster is the only one who wins.

Your "pent up demand" is totally artificial - nothing more then lemming FOMO generated by hysterical media articles manipulating everyone to believe the old myth that "if you don't buy now, you'll be priced out forever". Same exact scenario we saw play out in 2006-2008. The thing about herd stampedes is they can quickly turn in the other direction when they get spooked.

Anyone sitting on the sidelines would do well to wait. It's all but guaranteed that within 18 months you will see a severe cratering in prices, maybe not everywhere but in a vast number of U.S. locations.

 

[Slim Whitman]

Another thing I'd add to the housing debate, though it's more anecdotal, is that we are not even close to running out of land, as the real estate hype men would have you believe. As someone who has driven all the way across the country recently I can attest that the overwhelming majority of it is just vast emptiness. The premium that is put on land and dwellings is purely artificial just like everything else in this clownworld, driven by media liars who stand to profit from your fear and desperation. As soon as you get outside of the major cities you see that there is empty land as far as the eye can see. Don't ever believe that you have to hurry up and pull the trigger on the biggest financial decision of your life. Take it slow and easy, and remember that prices crash roughly every decade like clockwork. This map shows a dot for each building in the U.S. so you can see for yourself that if you just get away from leftist hellholes and coastal enclaves, there is plenty of American soil to go around.

 

[Pointy Elbows]

Another thing I'd add to the housing debate, though it's more anecdotal, is that we are not even close to running out of land, as the real estate hype men would have you believe. As someone who has driven all the way across the country recently I can attest that the overwhelming majority of it is just vast emptiness. The premium that is put on land and dwellings is purely artificial just like everything else in this clownworld, driven by media liars who stand to profit from your fear and desperation. As soon as you get outside of the major cities you see that there is empty land as far as the eye can see. Don't ever believe that you have to hurry up and pull the trigger on the biggest financial decision of your life. Take it slow and easy, and remember that prices crash roughly every decade like clockwork. This map shows a dot for each building in the U.S. so you can see for yourself that if you just get away from leftist hellholes and coastal enclaves, there is plenty of American soil to go around.

Slim, I agree there is still a lot of developable land in the US, but that grey shaded edge running up from Texas, Oklahoma, and Kansas is there for a reason. This is close to the the "Marfa Front" - a dry line. Lands east of this line receive enough rainfall to sustain reliable agriculture. West of the line, grasslands become deserts. I've travelled and lived in much of this region, from southern border to the northern Rockies. Rainfall increases along mountain ranges and there are some aquifer supplies like the famous Ogallala Aquifer (it still sustains much agriculture, but it is showing weakness on the edges now).

The mountain west and plains on either side do have lots of undeveloped land. That isn't for lack of entrepreneurial interest. Water rights (usually in narrow bands along scrawny rivers) are hard assets. People and municipalities buy "acre-feet" from faraway places and pump water through pipelines, drilled through mountains sometimes.

Basically, the inter-mountain west is an archipelago of habitable islands in a sea of dirt. These islands are scattered along "riverbeds" that would be called creeks in the east of mid-west. The Rio Grande "ain't so grand," as my grandmother would say.

 

[Hypno]

Slim

Yes, I am hedged for inflation so I benefit if real estate continues to rise.

Are you unhedged - so you lose if it rises? Does that disqualify your perspective?

"Citing affordability is not an argument we usually hear these days." This is something the Fed and others track. Sorry if you are ignorant.

Affordabilty is not the average home price divided by median income. Its the monthly home cost divided by monthly income of home owners. Lower interest rates and rising incomes have been favorable to affordability. Home prices have risen and affordability is starting to decline, but from the perspective of a home buyer they want bigger, newer, better located homes, and they can afford to pay more, so its likely home prices will continue to increase. During the 70s, home prices increased due to inflation without regard to affordability - prices can go a lot higher than you think.

As for running out of land, perhaps not everywhere, but we are running out of land in NYC, South Florida, San Fran, L.A., DC., anywhere that real estate is expensive. Some people can work remote, and those folks are picking up and moving to less expensive areas. I just did that myself.

The real constraint is not land. Its homes. There is a relatively fixed supply of homes. The cost to build has averaged around $150 per square foot, depending on finish level, but if you have read the news then you know supply chains are all screwed up. A sheet of 4 by 8 OSB used to cost less than $10 bucks is now $60 if you can get. Builders can't finish, let alone starte new jobs, because they are short on materials. They are also short on workers. Hopefully this is temporary but minimum wage jobs around me for teenagers with no experience have zoomed from $8-9 hour last summer to $12-15. Imagine what it costs to get a guy to show up to frame your house if you can even get enough lumber delivered?

There are also precious few homes located close to jobs and other amenities.

Maybe someday everyone will move off grid, get starlink internet, solar energy and collect rainwater. A few pioneers are doing this now. But most people are not. Most people want to live close to jobs, stores, cell coverage, electricity, water and sewer systems. Buying land without access to a sewer system and trying to get a permit for a septic tank is literally a crap shoot. That is why the middle of the country is mostly empty - lack of access to those things.

Lets have a little intellectual bet. I'll bet you that nominal home prices are higher in 1 year, 3 years, 5 years, and 10 years from now. I'm not infalliable, but I think those things are very likely if only for the fact of the spending coming out of Washington DC these days.

 

[Hypno]

Same exact scenario we saw play out in 2006-2008.

Affordability was at the tope of the chart during 2006-2008, this is not the same.

Also, back then, you have banks and regulators relax requirements to buy houses with the results that people were buying houses for investment and speculation. That is not happening this time (yet).

 

[EndlessGravity]

Lets have a little intellectual bet. I'll bet you that nominal home prices are higher in 1 year, 3 years, 5 years, and 10 years from now. I'm not infalliable, but I think those things are very likely if only for the fact of the spending coming out of Washington DC these days.

What's the price of you losing within the year?

 

[ball dont lie]

Another thing I'd add to the housing debate, though it's more anecdotal, is that we are not even close to running out of land, as the real estate hype men would have you believe. As someone who has driven all the way across the country recently I can attest that the overwhelming majority of it is just vast emptiness. The premium that is put on land and dwellings is purely artificial just like everything else in this clownworld, driven by media liars who stand to profit from your fear and desperation. As soon as you get outside of the major cities you see that there is empty land as far as the eye can see. Don't ever believe that you have to hurry up and pull the trigger on the biggest financial decision of your life. Take it slow and easy, and remember that prices crash roughly every decade like clockwork. This map shows a dot for each building in the U.S. so you can see for yourself that if you just get away from leftist hellholes and coastal enclaves, there is plenty of American soil to go around.

Yes zoning laws and other issues warp housing to levels that are hard to understand.

In my small town there is a huge need for more housing, but inside the city limits it is nearly impossible to build anything because of the 150 pages of zoning laws. Somehow every house on all the streets around here are too small, are too close to the property lines, etc. It is illegal to build anything in the city that actually looks like the rest of the city, where all these people grew up and where their children grew up. Now everything has to be at least 2500+ sq ft, but away from the property line, etc.

This is racket.

If people could build 1300 sq ft housing, small 2-3 bed, 1.5 bath, onto the smaller lots left that look like all the other houses in the city, the problem of housing would be over in a year and the city would be improved.



This guy below, Granola Shotgun writes all about urbanism and problems with zoning, the govt, etc. He is an odd duck. A prepper, but a lefty in other ways. He's about the best writing I have found talking about the epic collapse coming when the cities can no longer pay for all the roads, utilities, etc, that is coming to almost all major US cities because they are effectively bankrupt.

GS

www.granolashotgun.com

 

[Slim Whitman]

Slim, I agree there is still a lot of developable land in the US, but that grey shaded edge running up from Texas, Oklahoma, and Kansas is there for a reason. This is close to the the "Marfa Front" - a dry line. Lands east of this line receive enough rainfall to sustain reliable agriculture. West of the line, grasslands become deserts. I've travelled and lived in much of this region, from southern border to the northern Rockies. Rainfall increases along mountain ranges and there are some aquifer supplies like the famous Ogallala Aquifer (it still sustains much agriculture, but it is showing weakness on the edges now).

The mountain west and plains on either side do have lots of undeveloped land. That isn't for lack of entrepreneurial interest. Water rights (usually in narrow bands along scrawny rivers) are hard assets. People and municipalities buy "acre-feet" from faraway places and pump water through pipelines, drilled through mountains sometimes.

Basically, the inter-mountain west is an archipelago of habitable islands in a sea of dirt. These islands are scattered along "riverbeds" that would be called creeks in the east of mid-west. The Rio Grande "ain't so grand," as my grandmother would say.

Agreed, and good point. Much of the Western US is also in a 'super drought' which doesn't help matters. I moved out East to be where there is plenty of rain and water, following the intuition that 'water is life' and in a SHTF scenario you want to be close to plenty of fresh water sources. Hopefully we'll break out of the drought before much longer but it's looking doubtful.

 

[C-Note]

ADUs are a step towards urbanizing a community and everything that comes with it. To me the Boomers are selfish but justified for wanting to preserve the neighborhood. Although I do appreciate the theoretical advantages of town/city life, ADUs seem like a backdoor to urbanization without proper planning and design for denser living (infrastructure, traffic, noise, schools, etc). As much as I'd like to stick it to the boomers I think they have a good point on this one.

Los Angeles appears to allow ADUs. During the two years I lived there I noticed that it was common for housing lots to contain two or more houses. The additional houses were located behind the original house and frequently were converted garages. Often, it appeared that a second story had been built on the garage and both converted into separate rentals.

That may be one of the reasons for the white flight in LA. The ADUs facilitated the growth of the Spanish immigrant community into the inner neighborhoods of LA (like East LA, Southgate, Gardena, Pico Rivera, Downey, Norwalk, Huntington Park, Bell Gardens, etc) and made those neighborhoods much more densely populated. The quality of life in many of those suburbs did decline after white flight. Traffic and crime increased and the schools had worse ratings. However, I'm not sure if it had a direct impact on property values, because of the locations closer to the industrial and commercial areas.

Personally, I don't really care either way on the argument for or against ADUs. I live in a townhouse community, so it wouldn't effect me too much if the movement took hold here.

 

[Slim Whitman]

Los Angeles appears to allow ADUs. During the two years I lived there I noticed that it was common for housing lots to contain two or more houses. The additional houses were located behind the original house and frequently were converted garages. Often, it appeared that a second story had been built on the garage and both converted into separate rentals.

That may be one of the reasons for the white flight in LA. The ADUs facilitated the growth of the Spanish immigrant community into the inner neighborhoods of LA (like East LA, Southgate, Gardena, Pico Rivera, Downey, Norwalk, Huntington Park, Bell Gardens, etc) and made those neighborhoods much more densely populated. The quality of life in many of those suburbs did decline after white flight. Traffic and crime increased and the schools had worse ratings. However, I'm not sure if it had a direct impact on property values, because of the locations closer to the industrial and commercial areas.

Personally, I don't really care either way on the argument for or against ADUs. I live in a townhouse community, so it wouldn't effect me too much if the movement took hold here.

Yes, take it from someone who knows, the advent of ADUs, colloquially known as "in-laws" will absolutely destroy the fabric of a neighborhood and make everything worse, just so greedy landlords can squeeze that extra drop of blood from their parcels. You already cited most of the reasons - increased traffic, influx of low-class tenants into formerly safe neighborhoods, dramatically reduced street parking, and an overall feeling of crowded, noisy, chaos. It's a tragedy to destroy single-family neighborhoods with this garbage. Almost as bad as the scourge of "affordable housing" or the Air BnB debacle.

In my old neighborhoods the common thing was old stately beautiful victorian single family homes that had been subdivided into 8 or 10 apartment units. A constant reminder of how our quality of life has been reduced to accomodate the endless flow of third world economic migrants. A constant reminder of the putrid greed so common in those who choose to make their living in real estate - sacrificing one nice neighborhood after another on the altar of base materialism. Disgusting!

 

[Roosh]

I've come to the conclusion that it's impossible to time the market and when it will "crash", but while I wait to buy, housing prices are going up faster than the asset classes I have holdings in, so whether I buy at the "top" today or wait 5 years to buy at what surely will be a higher price than today, at least in real dollar terms, I won't escape the downside of this rigged game. What is pushing me to buy is that the elites are buying, and they will do all they can to keep this asset class propped up. Nonetheless, there will be a correction and those who say "told you so" will have a victory dance, but the crooked game and money printer will keep the correction small and short and so we will continue for many years, maybe decades, until the entire system seizes, which I suspect will feel like end times, but at least at that point you have a place to live.

 

[DanielH]

Looks like I might not be able to buy the home I was hoping to. Since we are financing and I disclosed that the roof leaks, no company will give us homeowner's insurance, which is required for the mortgage. The house is being sold as-is so nothing I can do. I think the realtor assumed I would lie about the state of the roof to our potential insurer.

I prayed that God would put up obstacles for us if it isn't His will for us to move. I'll take this as an answer unless a simple solution comes up.

Now I'm not sure if I should continue saving or looking for a home. I really wanted a home for safety (as we live in a diverse area in a major metropolitan area) and as a hedge against inflation.

 

[EndlessGravity]

I've come to the conclusion that it's impossible to time the market and when it will "crash", but while I wait to buy, housing prices are going up faster than the asset classes I have holdings in, so whether I buy at the "top" today or wait 5 years to buy at what surely will be a higher price than today, at least in real dollar terms, I won't escape the downside of this rigged game. What is pushing me to buy is that the elites are buying, and they will do all they can to keep this asset class propped up. Nonetheless, there will be a correction and those who say "told you so" will have a victory dance, but the crooked game and money printer will keep the correction small and short and so we will continue for many years, maybe decades, until the entire system seizes, which I suspect will feel like end times, but at least at that point you have a place to live.

I hope this helps you, Roosh, or someone here in some way.

This is why I tell young men not to "time" the market: it's a rigged game with changing rules. There are constants but they take decades to understand and learn...and you still might be right but a minute too late. Instead you should make the best decision for YOUR situation and take what everyone else tells you, including official numbers, with a grain of salt. It's not unlike seeing through the fake news to decide what you want to do with life. Hopefully if you're inclined away from crowd mentality and have good values, you'll often end up ahead either way.

On the part about good values: forget timing or what realtors say...avoid overextending yourself, especially at the bequest of immoral people. It eventually leads to you being controlled by the world too.

I hope some of this made sense.

 

[wayfaringstranger]

As for running out of land,

Crazy globalists want the population here to be at least half a billion, and <sarcasm> "hispanics" </sarcasm> like Matt Yggeliss push for a billion people. They tell us to be green and eat bugs - but in turn say we need population growth to keep the economy going. That means every year there is less and less open land.

Long Island and New Jersey were once literally farming communities - New Jersey was the 'vegetable basket' of the east... now?

James Kunslter's book the Geography of Nowhere goes into this - suburbanization of American forest and farmland has replaced industrial might. Look up some of the origins of giant real estate firms- very much tied into the wall street east coast industrial complex.

The real constraint is not land. Its homes.

The real problem is Wall Street -like just about everything else wrong with our economy. A lot of people are hearing they were outbid by 'someone paying cash' for a home -a good chance that's a hedge fund - on top of that cheap money has inflated the price of homes. A saver has to compete with some clown who will get a 30 year mortgage with little money down - the clown doesn't' realize he's paying rent to the bank for the rest of his adult life, but saver still has to compete for this inflated price.


left and right - at least non neocon right agree:

When Wall Street Is Your Landlord

With help from the federal government, institutional investors became major players in the rental market. They promised to return profits to their investors and convenience to their tenants. Investors are happy. Tenants are not.

www.theatlantic.com

Big Money Gobbles Single-Family Homes While Biden Plans to Build More

President Joe Biden has revealed a $2.25 trillion dollar infrastructure proposal to build 2 million homes and apartments.

www.breitbart.com

How Wall Street has turned housing into a dangerous get-rich-quick scheme—again

Hedge funds and private equity firms have quietly bought 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.

www.motherjones.com

 

[Hypno]

I've come to the conclusion that it's impossible to time the market and when it will "crash", but while I wait to buy, housing prices are going up faster than the asset classes I have holdings in, so whether I buy at the "top" today or wait 5 years to buy at what surely will be a higher price than today, at least in real dollar terms, I won't escape the downside of this rigged game.

Roosh - you make two good points - 1. you need a place to live, and 2. by not owning a home you are at risk for higher prices.

Looking at things like the growth in the Fed's balance sheet (inflation) and home affordability over time tells me its relatively safe to buy now - probably safer than not buying.

But I own 1 house, the house I live in. I don't own 10. Maybe I should buy 10. I have other investments so for now 1 house is fine.

If you can stayin in a house for 4-5 years, and we continue to have price appreciation (whether from increased demand or from inflation) its going to pay off.

By the way, if you don't have FOMO, let me tell you a story. The house I bought in November I put 10% cash down. Its already increased in value 10%. So my gain is 100%.

As for the elites and Wall Street crowd, I don't think that has anything to do with it. Covid created pent up demand and reduced supply. Generationally low interest rates mean homes are more affordable than ever before. Riots and the ability to remote work have people questioning why they live where they live, with most people leaving the expensive cities on the West Coast and NE and moving elsewhere. This is a grassroots shift, not some sort of Wall Street or elite phenomenon. Quite the opposite, Wall Street has kept rates low so that the average guy can afford a bigger home. The first home I bought in 1997 was financed at 7.75%. My most recent was at 2.75%. By the way, I was outbid or lost out to someone quicker 5 times trying to buy this house, and in none of those cases was it to a hedge fund or wall streeter, just someone else with the same taste as me that was willing to act quicker or pay full price. In fact some of those houses had been on the market 3, 6, 9 months and were snatched out from under me. The house I did buy was on the market a year, price was reduced $25k, and then I got it.

Stop looking for the boogeyman under every rock and around every corner. Stop making excuses. Educate yourself and act.

 

[Kona]

Can you 1031 into REIT?

Aloha!