Another article showing concern in the housing market- yet the author may have lacked critical thinking

GON

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This article from Fox Business dot com highlights REDFIN saying 60k real estate transactions have been called off in September 2022.

Headline was very eye catching but reading the article I couldn't help but come away that no significant housing decline will happen (unless the US dollar were to collapse).

What I came away with from the article:
- there is an overall housing shortage in the USA
- builders are fearful to build new homes- not that the new homes won't sell, but inflation and labor issues make the proposition to risky. A home a builder thinks will cost 500k to build, may end up at 650k. The market won't support the increase cost in labor and materials
- since builders aren't building new homes, the housing shortage will get worse
- majority of people in the USA have mortgages at 2%-3.5%. They are not selling unless they can get a dream deal- less inventory

End state- no housing price decline of any meaning in the USA IMHO. People may not buy new boats or new motor homes, but nobody is walking away from their house at 2.5% interest rate. I see fair value in single family homes at 2015 prices for 2022. The market just exploded. I will view a decline in housing if a single-family home declines lower than 2018 values. And I don't see any of the housing declines coming. People may want a new home, but they are not selling what they have because they have such a low interest rate.

Disclosure- I have cash ready and am ready to buy a home; I want a major correction in the market for personal reasons, but the information I read (past the headlines) shows no meaningful decline in single family home prices. There will need to be an oversupply in housing for prices to drop. No oversupply now or on the horizon.

 
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This article from Fox Business dot com highlights REDFIN saying 60k real estate transactions have been called off in September 2022.

Headline was very eye catching but reading the article I couldn't help but come away that no significant housing decline will happen (unless the US dollar were to collapse).

What I came away with from the article:
- there is an overall housing shortage in the USA
- builders are fearful to build new homes- not that the new homes won't sell, but inflation and labor issues make the proposition to risky. A home a builder thinks will cost 500k to build, may end up at 650k. The market won't support the increase cost in labor and materials
- since builders aren't building new homes, the housing shortage will get worse
- majority of people in the USA have mortgages at 2%-3.5%. They are not selling unless they can get a dream deal- less inventory

End state- no housing price decline of any meaning in the USA IMHO. People may not buy new boats or new motor homes, but nobody is walking away from their house at 2.5% interest rate. I see fair value in single family homes at 2015 prices for 2022. The market just exploded. I will view a decline in housing if a single-family home declines lower than 2018 values. And I don't see any of the housing declines coming. People may want a new home, but they are not selling what they have because they have such a low interest rate.

Disclosure- I have cash ready and am ready to buy a home; I want a major correction in the market for personal reasons, but the information I read (past the headlines) shows no meaningful decline in single family home prices. There will need to be an oversupply in housing for prices to drop. No oversupply now or on the horizon.

Very good points and I agree with you.
 
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Prices in my neighborhood are down 15-20%. It’s a neighborhood specific market. Homes are going up for sale at a perceived full price later to be reduced down. This is typical as sellers don’t believe housing is going down.

Houses around me are on the market longer as well.
 

GON

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Prices in my neighborhood are down 15-20%. It’s a neighborhood specific market. Homes are going up for sale at a perceived full price later to be reduced down. This is typical as sellers don’t believe housing is going down.

Houses around me are on the market longer as well.
PT,

Are any houses in your neighborhood selling for less than they would have sold for in January 2021?

My Wife's cousin came in from Phoenix AZ two weeks ago. Her husband said the same thing, his house went down in value over it's peak in the last three months. I asked him did it get down over January 2021, he said no, he is up six figures on a modest Chandler AZ single family home in a cookie cutter subdivision when compared to January 2021.
 
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Over the past year and a half, 3 houses on my block sold for substantially more than the asking price. I live next door to one of these properties. Last Summer, I received a Certified letter in the Mail from a Real Estate Agent who was showing one of these houses to a client. Seems that the client liked my houses so much, that he asked the Agent to propose an offer to purchase MY home. It was a nice offer, but I have no intentions of selling. Fast forward to today, my house has been valued at close to $100,000 more now than that initial offer over a year ago. (Zillow)
Long Island, NY Market.
 
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Houses in our neighborhood have been dropping the price by over 10% and are still on the market... 6 months ago houses moved within 2 or 3 days at those prices...

Still to early to say that higher interest rates aren't having an affect. But the basic point is (for this market), there is a pretty low number of homes up for sale (relative to a normal market), and asking prices are declining, particularly in the last month. Prices are still up from Jan of 2021, but only by 5%...
 

GON

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Prices are still up from Jan of 2021, but only by 5%...
According to ycharts dot com, the aveeage 30 year mortgage rate in JAN 2021 was 2.67 percent. The average rate today is according to ycharts is 6.97 percent.

So according to ycharts, single family home 30n years rates are up 230 percent over JAN 2021. And your home is still up 5 percent from JAN 2021.

Seems to me your example shows a strong housing market right now. Rates up 230 percent, and yet your home value is up 5percent.

Add to the fact you are in Minnesota- not a state currently known for large migrations of populations to relocate to. I was asked to apply for a job at the MN/ Candian boarder a few weeks ago. I checked out housing prices- blew me away how expensive the homes were in far Northern Minnesota. Some of the homes for sale were on the market for some time, but the Sellers were not reducing the listing price. If we were to move to far North MN and were to buy a home, the market is dictating we would be paying top shelf prices, for a area that may not be top shelf in housing momentums.
 
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Are any houses in your neighborhood selling for less than they would have sold for in January 2021?


It would be close. I don’t have that information.

Last week a house that was one the market for about four weeks had a sold sign on it and the occupant had moved. This eeek it’s back put for sale. Not sure what happened.
 
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Using your data, how much are interest rates up in the last month? 3 months? And what have sale prices done in that timeframe? Picking Jan of 2021 is an interesting data point - as the economy emerged from a pandemic and flush with extra cash...

I live a community that is building over 800 new housing units every year - for years on end... And builders in the last month are lowering prices. They've consistently been going up for years. What kind of signal is that?

The signs are there in the short term - last month in particular.
 
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In regards to the home prices in northern Minnesota, tell me you aren't from here without telling me... Market drivers there are significantly different than you may expect - particularly depending on where in Northern MN you looked. A state unemployment rate at under 2% will do that....
 
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Your points about the supply side of the market are valid. However if the demand side collapses because a major recession causes massive unemployment and a drastic downturn in small business profits, all bets are off. Tight supply won't matter if potential buyers don't have sufficient income to buy a house.
 
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The Denver metro market has over 24000 houses available, where there were 5000 6 months ago. Prices are all over the board, the lower priced houses seem to be the best value and fairly priced and there are plenty of people pricing as if the market was still on fire especially on the high end. Plenty of big price drops on most of them the longer they sit.

My realtor told me one of the drivers is employers requiring their employees to be back in the office. It may not be a big part but the Boise market is seeing it too.
 

GON

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Using your data, how much are interest rates up in the last month? 3 months? And what have sale prices done in that timeframe? Picking Jan of 2021 is an interesting data point - as the economy emerged from a pandemic and flush with extra cash...

I live a community that is building over 800 new housing units every year - for years on end... And builders in the last month are lowering prices. They've consistently been going up for years. What kind of signal is that?

The signs are there in the short term - last month in particular.
MNG,

We can pick JAN 2020 instead of JAN 2021. I was trying to demonstrate this big housing fall in prices have not really occurred- even though the headlines in the media say they have.

Are the builders in your community lowering prices to under JAN 2020 levels? I speculate the builder very well may have locked in the land cost years ago. I guess it is if a Ford Dealer was selling a new 2022 F350 for 25k over sticker in May 2022, and is now selling that same F350 for ONLY 18k over sticker- the price on the F350 has lowered. But compared to a 2020 F350 sold in JAN 2020, the F350 is selling for 18k over sticker today. And likely in JAN 2020 the buyer of the F350 paid under sticker, maybe a lot under.

Guess we will have to agree to disagree. A single-family home is not a gallon of gas. I think single family home prices are a capital expense, not a expense like milk or fuel. I think one needs to look over a minimum of a year to see where prices are going. If the house next door to you was worth 500k, but sold today for 800k, and you have the same house, did you make 300k overnight?
 

GON

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Using your data, how much are interest rates up in the last month? 3 months? And what have sale prices done in that timeframe? Picking Jan of 2021 is an interesting data point - as the economy emerged from a pandemic and flush with extra cash...

I live a community that is building over 800 new housing units every year - for years on end... And builders in the last month are lowering prices. They've consistently been going up for years. What kind of signal is that?

The signs are there in the short term - last month in particular.
MNG,

I stand corrected- Minnesota has had a healthy/ steady population growth over the past ten years.
2011 5.278 Million MN residents
2020 5.6 Million MN residents
 

GON

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In regards to the home prices in northern Minnesota, tell me you aren't from here without telling me... Market drivers there are significantly different than you may expect - particularly depending on where in Northern MN you looked. A state unemployment rate at under 2% will do that....
MNG,

I was asked to apply for a position in Baudette, MN. Only one house on the market that my Wife would consider even touring if I took the job (I did apply for the job but put ZERO effort into the application- not even a cover letter or updated resume),

This was the home- it is well above what we would like to spend, and my Wife did not love some parts of the home. She (and our adult Daughter) have something against arched windows and entryways- beats me, I was blown away when they both told me arched windows and entryways are not desirable.
 
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The average 30 year fixed rate since 1971 is 7.71% and we are below that currently. But we had super low rates for so many years that people are just use to low rates. A lot of people aren't going to sell their current house with a 2% or 3% mortgage to move to bigger house if their new mortgage will be 5% or 6%.

Obviously there are some overheated housing markets that are now in correction mode.

But in most of the country there is probably a housing shortage and owners of existing homes are staying put. Builders are building but not at the pace they once did.

One thing that isn't happening is building starter homes.

In DE they are building $400K to $600K houses on 1/2 acre lots that 6 months before use to be a cornfield.
 
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These "60k" are buyers who backed out, which was 17% of the contracts that one company had (meaning that even in this supposed panic, more than 4 out of 5 deals did close).

* A house was available for sale.
* A buyer appeared and the price was agreed on.
* The buyer changed their mind.

Two big reasons for buyers backing out would be that on further consideration they think they're about to pay too much-- as they expect prices to drop. Or they don't like the APR / can't get approved for a mortgage.
 
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I just saw this on ShadowStats:


The continuing year-to-year decline in September 2022 Existing Home Sales deepened to 23.8% (-23.8%) [October 20th, National Association of Realtors®]. Third-Quarter 2022 Housing Starts and Building Permits showed respective, deepening, consecutive quarter-to-quarter contractions of 38.2% (-38.2%) and 28.7% (-28.7%) [October 19th, Census Bureau].
 

GON

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These "60k" are buyers who backed out, which was 17% of the contracts that one company had (meaning that even in this supposed panic, more than 4 out of 5 deals did close).

* A house was available for sale.
* A buyer appeared and the price was agreed on.
* The buyer changed their mind.

Two big reasons for buyers backing out would be that on further consideration they think they're about to pay too much-- as they expect prices to drop. Or they don't like the APR / can't get approved for a mortgage.
MK,

Good input- and to supplement your input, some of the Buyers may have backed out because of a contingency that they sell their house, etc. Also, a Seller may have had a later offer without a contingency that cancelled the contract with the Buyer with the contingency.

My home sale in JUL 2022 was backed out because of deadlock on the home inspection results, Buyer wanted me to fix the items, I offered cash at closing to the Buyer for the items- I was not willing to fix the items. Another Buyer contracted the home and the sale closed. In my case, it would show 50 percent of the Buyers on my house backed out of the deal.
 
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