Real estate thread

Thomas More

Hummingbird
Hey guys,

I found some land for a decent price and in a conservative town about 40 min from where I work. I have never bought land before and I'm seriously inexperienced in the subject. Any advice for an up and coming landowner?
This is probably something to strongly pursue, with some warnings:

1. 40 minutes is a long commute, and I wouldn't be surprised if it is longer during morning and evening rush hours. I have had commutes like this a number of times, and it is a real drain on your life.
2. Building a house on new land is a big project, and cost overruns are common. Make sure you have a well thought out plan to get the house built, and account for all the costs involved, like permitting fees, well, sewer, driveway, landscaping, furnishing the house after it's built, etc. Start your planning with something cheaper than you think you can afford. Leave yourself some room to spare for cost overruns. Don't put yourself in the position of having your budget stretched to the max to afford your house. The stress of an out-of-control construction project is a killer. However, if things are setup so you can afford to do it right and have funds to cover everything, then it can go smoothly and quickly.

On the positive side, if you can get a home and land in a conservative town now, you will probably be way ahead in quality of life for years to come, and your home will probably appreciate a lot over time.
 

Cervantes

Woodpecker
Woman
10 Reasons Why Now is the Absolute Worst Time to Buy a House

1.
We are at the peak of a housing bubble, caused by panic-buying in a media-fueled mania. The prices have risen so quickly that long-time real estate cheerleaders are now reluctantly admitting that it looks like a bubble. If you buy now, the chances are very high that you are buying at the top of the market.
2. It's a seller's market. Multiple bids are commonplace, along with cash offers tens of thousands of dollars above asking price, and waived inspections. Competing under these conditions creates a false sense of desperation and FOMO, increasing the likelihood of an imprudent decision. There's a saying in real estate that the profit is made at purchase, not at selling time. In other words, if you don't get a great price on your home it's very unlikely you'll realize profit on it. Waiting for a buyer's market to return is the most wise thing you can do. And it WILL return.
3. Imagine that you already have a perfectly running car, let's say it's a Cadillac. Suddenly every magazine and newspaper says you should run out and buy a new Cadillac, and everyone is bidding for them sight unseen, hoping to get whatever Cadillac is available, even if they overpay by 50%. These same magazines and newspapers just happen to make a huge portion of their income from Cadillac advertisements. Would the prudent man join the stampede or sit back and wait until the mania died down? Housing is fungible - there is nothing rare or unique about it. It has undergone a temporary disruption to the supply chain creating an artificial shortage that will self-correct in time. Lumber is stacking up to the ceiling at mills and builders are anxious to get the ball rolling again. Construction costs WILL come down rapidly. Just like the toilet paper shortage was a temporary blip driven by herd mentality, so is the housing "shortage".
4. The argument that housing is a hedge for inflation is faulty. Stop for a minute and think about it logically. If inflation starts to spiral out of control, the interest rates rise to combat it. When that happens housing prices will immediately tumble. You can't have a situation where housing costs inflate so high that average earners can't afford them. The inventory simply wouldn't move. If inflation rises, wages and interest rates will be forced to rise in tandem until equilibrium is reached.
5. The argument that you should buy a depreciating asset based on the monthly payment rather than the total purchase price is faulty. Again, use the car analogy. What does a slick and sleazy car salesman try to do? He makes you focus on the low monthly payments rather than the total price, and that's how you get reamed. Every economist will tell you to ignore the monthly payment and instead negotiate a lower purchase price.
6. The argument that you should buy now to take advantage of low interest rates is faulty. First of all you aren't likely to stay in your home for the full term of the loan - you will stay for an average of 4 years or so before you sell. So you are not locking in low interest rates for the life of the loan. You are also likely to be making interest-only payments, along with PMI, for that first four years. So the low interest rates don't even help you chip away at the principle. The low interest rates simply make the overall purchase price much higher which works against you. Instead, it is wise to wait until interest rates rise and purchase a house for a much lower price, because you can always refinance later when interest rates go back down or your credit improves. This is especially true if you plan to stay in the home for 10 years or longer. You will also have lower property taxes and insurance when you buy a home with lower appraised value.
7. Real estate prices are cyclical and there is no doubt that we are due for another crash. It's as reliable as the sunrise. No, it's not "different this time". No, you won't be "priced out forever". In fact when you see all these armchair investors and amateur economists trying to generate FUD with their haughty, condescending remarks, you know that it's time to get OUT of the housing market because the crash is looming.
8. Now is the perfect time to keep your powder dry. Stay where you are, cut expenses, and save save save. If you're worried about inflation buy gold and silver bullion. You have time to save a substantial down payment so that when prices crash you will be in perfect position to buy during a time when few others can qualify for the stricter lending standards. This puts you in the Captain's Chair - - imagine how much better the deal would be if you're putting in an offer on a place that's been on the market for 3 months without a single serious buyer.
9. The stories about wild appreciation gains are fool's gold. People love to brag about how much their house has increased in "value" over the past six months while they sat back and did nothing. But how are they going to unlock that equity? If they sell now, they will have to roll all that equity and then some into their new home, unless they downgrade their living situation. If they wait until prices go down to sell then they will lose the equity. So they are trapped in their home with a lot of equity on paper that doesn't mean a thing in the real world. And again, think logically - did the house really gain any true value, or did it merely increase in price due to hype and speculation?
10. Renting has the key advantage of mobility. There are a lot of reasons why it's advantageous to stay mobile right now. The world is in a state of flux. The work from home situation might continue or it might go away later this year. The mass migrations out of democrat controlled states might continue or it might reverse. Everyone is moving around right now and a lot of people are putting their houses on the market. This means neighborhoods are rapidly changing. Do you want to be stuck next to a bad neighbor for the next 4 or 5 years? Do you want to be stranded away from employment when your boss announces it's time for everyone to come back to the office? Do you want to be stuck holding the bag when real estate prices suddenly start coming down and you have to find a greater fool to unload yours on? Buyer's remorse is at an all-time high according to polling on recent homebuyers. Imagine overbidding for an average suburban shack only to find that you hate it 6 months later. People slag renters but in a rapidly changing world the renter can go where the opportunity is, or go away from the undesirables. It's hard to put a price tag on that.

As soon as word reaches the masses that we're near the top of the market, everyone will stampede to put their homes up for sale, which will cause prices to come down dramatically. The "pent up demand" is going to be on the seller side, not the buyer's. Sellers are going to be desperate to move once the covid restrictions die down because they have been waiting for over a year now. We haven't even touched on demographic issues like the boomers' downsizing, or the continued birth rate collapse. We haven't touched on the coming end of the eviction and foreclosure moratoriums. We haven't touched on Wall Street roaring back to life post-pandemic, creating movement from housing investment into the equity market.

When something seems out of balance, just ask yourself "is this sustainable"? With current housing trends the obvious answer is NO.

So take a deep breath, relax, stop listening to real estate cheerleaders in the media, and rest easy knowing that if you follow the wise and prudent path you will get the home you want. You just have to wait a little longer for it. Don't believe the hype! Hype is always trying to manipulate you into a trap. Sheep get sheared, the wolf gets dinner.

Full Disclosure: I am divested from real estate and am a housing bear who believes prices will come down over the next 18 months. I'm saving to buy when that happens and renting a nice home for about the same price as the mortgage. This is not financial advice, it's informed opinion.

This is bad advice.

Interest rates are probably not going to rise:

Our economy is not functioning normally. The fed is printing money without any controls at all. The entire oligarchy that controls the fed is floated on massive leverage, they cannot afford interest rate increases. Even as inflation grows the Fed is only lowering rates. In many places in Europe *consumer* mortgage rates are actually negative. I'm expecting inflation plus low rates. There are no brakes on this train.


If they did rise real estate would gain value faster:

But suppose this *was* normal times and rates did increase, does your prediction bear out? No. Housing prices grew fastest during times of high interest rates and high inflation in the 70's and 80s.

Why? For two reasons: First, when inflation is high people are under more pressure to buy something that holds value. Second, when interest rates are high - since the carrying cost of investing in property is higher - then also rents rise. Just as people calculate what they can afford to pay for a house based on monthly mortgage payment, they consider the cost of rent compared to what it would cost to buy. As rents go up, it becomes more attractive for cash investors to buy.


Real Estate is not a depreciating asset:

While it is true that as an accounting trick you are allowed to depreciate the value of a building (to create paper losses to offset income - but a bad idea for almost everyone). In reality the value of real estate is mostly land, which does not depreciate even technically, and the structures when maintained do not depreciate in real terms.

Real estate is also relatively easy to make it more valuable: you can improve the quality of the house you live in. Over time add things that you will enjoy and will have value when you sell. The easiest way is to buy a house from an older person who is downsizing. Those houses have dated decor and old paint that can be improved easily. Or you can simply put an addition onto a house and it will gain substantially in value.


Money paid later is worth less than money now:

It is dumb to focus on the total cost of something financed over a very long term. A dollar that I have to pay in 30 years has way less value than a dollar I have to pay now - even without inflation. When you count the actual inflation then the value of a dollar in 30 years approaches zero.


How do people get rich?

People become rich in only a few ways. One is via starting some kind of business, or if you have capital via investment. Another is via crime and corruption. The last is via having some extremely marketable skill: like being a pro athlete or an actor.

But if you are a wage cuck there is only one way: real estate. The only way wagies ever accumulate capital is via real estate. Nobody, and I mean absolutely nobody, gets rich by saving money. Wagies that rent are always, always, always poor.
 

kel

Ostrich
10 Reasons Why Now is the Absolute Worst Time to Buy a House

1.
We are at the peak of a housing bubble, caused by panic-buying in a media-fueled mania. The prices have risen so quickly that long-time real estate cheerleaders are now reluctantly admitting that it looks like a bubble. If you buy now, the chances are very high that you are buying at the top of the market.
2. It's a seller's market. Multiple bids are commonplace, along with cash offers tens of thousands of dollars above asking price, and waived inspections. Competing under these conditions creates a false sense of desperation and FOMO, increasing the likelihood of an imprudent decision. There's a saying in real estate that the profit is made at purchase, not at selling time. In other words, if you don't get a great price on your home it's very unlikely you'll realize profit on it. Waiting for a buyer's market to return is the most wise thing you can do. And it WILL return.
3. Imagine that you already have a perfectly running car, let's say it's a Cadillac. Suddenly every magazine and newspaper says you should run out and buy a new Cadillac, and everyone is bidding for them sight unseen, hoping to get whatever Cadillac is available, even if they overpay by 50%. These same magazines and newspapers just happen to make a huge portion of their income from Cadillac advertisements. Would the prudent man join the stampede or sit back and wait until the mania died down? Housing is fungible - there is nothing rare or unique about it. It has undergone a temporary disruption to the supply chain creating an artificial shortage that will self-correct in time. Lumber is stacking up to the ceiling at mills and builders are anxious to get the ball rolling again. Construction costs WILL come down rapidly. Just like the toilet paper shortage was a temporary blip driven by herd mentality, so is the housing "shortage".
4. The argument that housing is a hedge for inflation is faulty. Stop for a minute and think about it logically. If inflation starts to spiral out of control, the interest rates rise to combat it. When that happens housing prices will immediately tumble. You can't have a situation where housing costs inflate so high that average earners can't afford them. The inventory simply wouldn't move. If inflation rises, wages and interest rates will be forced to rise in tandem until equilibrium is reached.
5. The argument that you should buy a depreciating asset based on the monthly payment rather than the total purchase price is faulty. Again, use the car analogy. What does a slick and sleazy car salesman try to do? He makes you focus on the low monthly payments rather than the total price, and that's how you get reamed. Every economist will tell you to ignore the monthly payment and instead negotiate a lower purchase price.
6. The argument that you should buy now to take advantage of low interest rates is faulty. First of all you aren't likely to stay in your home for the full term of the loan - you will stay for an average of 4 years or so before you sell. So you are not locking in low interest rates for the life of the loan. You are also likely to be making interest-only payments, along with PMI, for that first four years. So the low interest rates don't even help you chip away at the principle. The low interest rates simply make the overall purchase price much higher which works against you. Instead, it is wise to wait until interest rates rise and purchase a house for a much lower price, because you can always refinance later when interest rates go back down or your credit improves. This is especially true if you plan to stay in the home for 10 years or longer. You will also have lower property taxes and insurance when you buy a home with lower appraised value.
7. Real estate prices are cyclical and there is no doubt that we are due for another crash. It's as reliable as the sunrise. No, it's not "different this time". No, you won't be "priced out forever". In fact when you see all these armchair investors and amateur economists trying to generate FUD with their haughty, condescending remarks, you know that it's time to get OUT of the housing market because the crash is looming.
8. Now is the perfect time to keep your powder dry. Stay where you are, cut expenses, and save save save. If you're worried about inflation buy gold and silver bullion. You have time to save a substantial down payment so that when prices crash you will be in perfect position to buy during a time when few others can qualify for the stricter lending standards. This puts you in the Captain's Chair - - imagine how much better the deal would be if you're putting in an offer on a place that's been on the market for 3 months without a single serious buyer.
9. The stories about wild appreciation gains are fool's gold. People love to brag about how much their house has increased in "value" over the past six months while they sat back and did nothing. But how are they going to unlock that equity? If they sell now, they will have to roll all that equity and then some into their new home, unless they downgrade their living situation. If they wait until prices go down to sell then they will lose the equity. So they are trapped in their home with a lot of equity on paper that doesn't mean a thing in the real world. And again, think logically - did the house really gain any true value, or did it merely increase in price due to hype and speculation?
10. Renting has the key advantage of mobility. There are a lot of reasons why it's advantageous to stay mobile right now. The world is in a state of flux. The work from home situation might continue or it might go away later this year. The mass migrations out of democrat controlled states might continue or it might reverse. Everyone is moving around right now and a lot of people are putting their houses on the market. This means neighborhoods are rapidly changing. Do you want to be stuck next to a bad neighbor for the next 4 or 5 years? Do you want to be stranded away from employment when your boss announces it's time for everyone to come back to the office? Do you want to be stuck holding the bag when real estate prices suddenly start coming down and you have to find a greater fool to unload yours on? Buyer's remorse is at an all-time high according to polling on recent homebuyers. Imagine overbidding for an average suburban shack only to find that you hate it 6 months later. People slag renters but in a rapidly changing world the renter can go where the opportunity is, or go away from the undesirables. It's hard to put a price tag on that.

As soon as word reaches the masses that we're near the top of the market, everyone will stampede to put their homes up for sale, which will cause prices to come down dramatically. The "pent up demand" is going to be on the seller side, not the buyer's. Sellers are going to be desperate to move once the covid restrictions die down because they have been waiting for over a year now. We haven't even touched on demographic issues like the boomers' downsizing, or the continued birth rate collapse. We haven't touched on the coming end of the eviction and foreclosure moratoriums. We haven't touched on Wall Street roaring back to life post-pandemic, creating movement from housing investment into the equity market.

When something seems out of balance, just ask yourself "is this sustainable"? With current housing trends the obvious answer is NO.

So take a deep breath, relax, stop listening to real estate cheerleaders in the media, and rest easy knowing that if you follow the wise and prudent path you will get the home you want. You just have to wait a little longer for it. Don't believe the hype! Hype is always trying to manipulate you into a trap. Sheep get sheared, the wolf gets dinner.

Full Disclosure: I am divested from real estate and am a housing bear who believes prices will come down over the next 18 months. I'm saving to buy when that happens and renting a nice home for about the same price as the mortgage. This is not financial advice, it's informed opinion.

Do you have a timeframe estimate when you personally think the pullback will be and supply will outstrip demand?
 

kel

Ostrich
Hey guys,

I found some land for a decent price and in a conservative town about 40 min from where I work. I have never bought land before and I'm seriously inexperienced in the subject. Any advice for an up and coming landowner?
Please keep the board updated on how your purchase (or not) goes. I, and others here no doubt, are kinda in your shoes and would appreciate learning from your experience.
 

Slim Whitman

Sparrow
Do you have a timeframe estimate when you personally think the pullback will be and supply will outstrip demand?
Very hard to time this market precisely because nothing about it is organic, it's all determined by artificial inputs and vested interests keep goosing the market with phony stimulus. That said I am predicting that by the end of this summer we will have an observable high water mark in real estate prices, and they will start leveling off and coming down gradually for the rest of the year. This trend will gain steam and by this time next year, prices will be 10 - 20% lower than they are today, and continuing to fall from there. Just my best guess. As usual, real estate is highly local and price corrections will play out differently depending on the region.
 

Roosh

Cardinal
Orthodox
Mortgage forbearance is slated to end on June 31, with no indication that it will be extended. If it does end on that date, when would we expect to notice an increase in housing supply (if at all)? My guess is by October.
 
You have the pride of showing me up.

I didn't offer it as a real bet. I try not to gamble. Someone once told me that gambling is a prideful attempt to circumvent Gods plan. Genesis 3:19. I'm not too dogmatic, so I don't know about the theology, I just try to avoid gambling because its a shortcut to things that are not good - pride, sloth, etc.

But intellectual bets can be a useful intellectual tool. Ask yourself where you would place the probabilities at a given endpoint. Sounds like you have already done that and you like the 1 year but but not the 5 and 10. Me, I'm up 100% on my cash invested in 6 months so I'm good. And a neighbor with an inferior house just listed theirs for another 10% more - they might reset the market.

I don't think it's a good bet the US will be around in 5 or 10 years, so those interest me less. 1 year, I have real bets in the market already.

Mortgage forbearance is slated to end on June 31, with no indication that it will be extended. If it does end on that date, when would we expect to notice an increase in housing supply (if at all)? My guess is by October.

Months of inventory is a good predictor and we felt a shift in April which is being confirmed in the data, as you posted. Personally, my powder would be ready over the summer but this will be impossible to fully time without watching your metro daily and weekly. Don't put it past the govt to extend past June 31st though or the banks to deny your loan, although we're seeing loan requirements loosen again. I haven't checked the survey of lenders to see where that currently stands. Might be worth a look or getting approved a couple months before you're certain you're going to buy.

Edit: I mention summer but don't expect a crash. If you're selling, that may be your peak. If you're buying, as summer ends might be the better time to plan for, as existing sellers start to get more desperate. I am seeing some of the craziest situations where people are starting to be forced to sell because they bought rural properties they couldn't afford.
 
It's definitely coming. Ignore the sunny parts of this article which are pure BS and read the comments. The housing market is seizing as I've said before.

After a brief pause, mortgage applications tumbled again last week (-4.0% WoW after falling 4.2% WoW the prior week), to their lowest level since February 2020.

 

Pointy Elbows

Woodpecker
Orthodox
Any thoughts on commercial real estate? I have a business move to consider, and I do think the general/residential RE market is over-rated. Commercial RE in my target area is up also (not as crazy as residential RE), with limited availability for the type of property (industrial zoning, facility size, utility infrastructure, etc.).

I expect a residential pull-back in the next year, but less confident about timing into a commercial RE pullback. Any thoughts are welcome.
 

Slim Whitman

Sparrow
When articles like this start appearing in major publications, it's a harbinger of doom for the housing market. The good news for people who already own their homes is they can just stay in them, and enjoy the low interest rates they crowed about so much. If the monthly payment is all that matters then cratering values shouldn't effect them. For those who don't have a home, the good news is that they can keep saving a down payment and improving their credit, and they'll be in position to enter a buyer's market when the time comes.


Jeremy Grantham said on Wednesday that real-estate bubbles were popping up in almost every market around the world and that eventually there'd be a "day of reckoning."

"This time you look around and you find the real estate is suddenly pretty bubbly in almost every interesting market in the world," he said.

"You can't keep an asset class like housing, where the house doesn't change, and you're just marking it up in real terms year after year," Grantham said. "Eventually there'll be a day of reckoning."
 

Slim Whitman

Sparrow
Any thoughts on commercial real estate? I have a business move to consider, and I do think the general/residential RE market is over-rated. Commercial RE in my target area is up also (not as crazy as residential RE), with limited availability for the type of property (industrial zoning, facility size, utility infrastructure, etc.).

I expect a residential pull-back in the next year, but less confident about timing into a commercial RE pullback. Any thoughts are welcome.
Commercial RE is a bit trickier but it seems that office space has already undergone a bloodbath from what I've read and new tenants are in high demand, making it a good time to negotiate lower prices/rents with the owner. Obviously due to the new remote work paradigm. With industrial, manufacturing space I'd be worried it will start going back up pretty soon as the pandemic fades away and industry starts roaring back to life. I'd expect prices to be flat or to rise over the next year, due to pent up demand. If I were in your shoes I certainly wouldn't put my plans on hold waiting for better prices to come because it's a 50/50 gamble.
 

NoMoreTO

Ostrich
In Ontario the sheriffs are just beginning to perform evictions again after a 1 year moratorium. Rental houses are backed up with delinquent tenants milking the system. People with druggy losers have no means to get them out of their units (not me, but I know someone).

The backlog is large, and the sheriffs as I understand it will be resuming their normal operational schedule for evictions. So truly the backlog will continue to exist based on how people are in line. The Sheriffs should be at least doubling their efforts, since they have had time to handle other items in the past year. Doing some arithmetic, it could take a full 18 months to work through the current backlog, but that is assuming that additional shutdowns and pauses on evictions don't happen, which I would bet they will.

The degenerate tenants know this and will wait for the sheriff, even though they have been ordered to vacate long ago by the courts system. In their defense, there aren't many places for them to go. Rents in my rural area have more than doubled in the last 5 years. The table seems set for UBI and some sort of communist housing solution.

Landlords have seen a big jump in home values, but are locked in at the rental rate, with 0% allowed on rental increases despite the fact that costs, taxes, energy are all up. Small landlords in Ontario have received next to no support from the government while larger entities qualify for funding. Rent controls and low profitability are a feature of an inflationary cycle as governments move into keep the people housed.

I have a rental in Ontario and am riding it as I've been in long enough to weather the storm and why would I sell to pay a taxable capital gain on non principal residence. While I would recommend moving in on a personal residence if you are comfortable with the payment and are looking for a place to call your own, I would hesitate on buying rental units. There will be more 'losers' in the new economy and unless you are in with a quality respectable tenant, it can easily turn it's head on you. For those of us in the game for a while now, we can finance our mortgage payments and costs which are pegged to the old price, but buying a rental at these inflated prices is in the ways listed above, could be a risky investment and a headache, even at lower prices.
 

ItalianStallion9

Woodpecker
Now a good time to get a single family home? Not sure if it's better to wait for a crash, or buy now and avoid any risk of large inflation.
 
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Maddox

Woodpecker
I'm not an investor, but I'd like to start. It occurred to me that the terrible situation that is forcing people to take this vaxx could kill millions of people in the coming year or two. If millions of people do die from this vaxx, wouldn't that crater the housing market and leave a bunch of empty homes with not nearly enough buyers to purchase them?

Seems like a bad time to buy real estate when prices could soon crash.
 

Roosh

Cardinal
Orthodox
Lumber Prices Are Falling Fast, Turning Hoarders Into Sellers
Lumber prices are falling back to earth.
Futures for July delivery ended Monday at $996.20 per thousand board feet, down 42% from the record of $1,711.20 reached in early May. Futures have declined 14 of the past 15 trading days, the last two by the most allowed by exchange rules.
Cash lumber prices are also crashing. Pricing service Random Lengths said Friday that its framing composite index, which tracks on-the-spot sales, dropped $122 to $1,324, its biggest ever weekly decline. The pullback came just six weeks after the index rose $124 during the first week of May, its most on record. Random Lengths described a chaotic rout in which sawmill managers struggled to provide customers with price quotes.
 
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