Interesting article from CNBC on residential home prices

GON

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One of the more interesting articles I have read recently on the housing market in the USA.

The article's title :

Confused about the housing market? Here’s what’s happening now – and what could happen next​


A few takeaways from the article:
- main driver of the slowdown is rising mortgage rates (not housing prices- but there must be a correlation)

- Prices are now 43% higher than they were at the start of the MAR 2020 virus

- supply of homes for sale is growing, up 27% at the start of September compared with the same time a year ago

- Active inventory is still 43% lower than it was in 2019 (this is what I see is the real factor in current and potential future housing prices, still only about half the homes on the market today then were for sale in 2019, and interest rates in 2019 were lower than rates today)

My .02, unless more new construction homes become available, it is not likely housing will fall hard, as people need a place to live. Heck, plane tickets are up over 40 percent from just a few months ago, yet nearly every seat on every flight has a body sitting in the seat. Tough times may very well be coming, but I am not seeing it at the current moment.

 
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Yeah but it’s unequal

Southern and western are having housing inventory level increases that are setting all time records

Midwestern and north eastern are still having falling inventory with minimal price movements

This is similar to 2008 when the crash didn’t really happen here until 2011
 

GON

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Yeah but it’s unequal

Southern and western are having housing inventory level increases that are setting all time records

Midwestern and north eastern are still having falling inventory with minimal price movements

This is similar to 2008 when the crash didn’t really happen here until 2011
"" Southern and western are having housing inventory level increases that are setting all time records""

I watched a video on youtube that stated the same thing your post stated. I later went and verified, validated, and accredited the numbers this popular youtube video displayed. What I found is that yes, housing inventories are up significantly in what were the super hot markets when compared to one year ago. BUT I COULD NOT FIND A "HOT MARKET" TREND WHERE CURRENT HOME INVENTORIES ARE HIGHER TODAY THAT THEY WERE AT ANY TIME FROM 2016-2019. The video blogger mentioned Boise at like 2016 levels, but Boise his added many thousands of new homes to its market since 2016- the blogger stats do not take that into account.

So, in BITOG language, a Ford dealer has six new super dutys on his lot today. The asking price today is 20k over retail sticker. Last year this same Ford dealer only had one Super Duty on his lot, and he was asking 3k over sticker. Yes, this Ford dealer's inventory of new Fords is up 600 percent over last year.

But in 2019, this Ford dealer had 30 new Super Dutys on the lot, and he would sell them for 8k under sticker.

Comparing to 2021, yes, the Ford dealer's new super duty inventory is up 600 percent. But using 2019 (pre virus) numbers, the Ford Dealer's 2022 inventory of Super Dutys is down 80 percent. And this does even account for the price swings.

I found this video blogger to be more of a carnival barker than impartial commentator. But he has 600k views, so he is making coin with his schtick.
 
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"" Southern and western are having housing inventory level increases that are setting all time records""

I watched a video on youtube that stated the same thing your post stated. I later went and verified, validated, and accredited the numbers this popular youtube video displayed. What I found is that yes, housing inventories are up significantly in what were the super hot markets when compared to one year ago. BUT I COULD NOT FIND A "HOT MARKET" TREND WHERE CURRENT HOME INVENTORIES ARE HIGHER TODAY THAT THEY WERE AT ANY TIME FROM 2016-2019. The video blogger mentioned Boise at like 2016 levels, but Boise his added many thousands of new homes to its market since 2016- the blogger stats do not take that into account.

So, in BITOG language, a Ford dealer has six new super dutys on his lot today. The asking price today is 20k over retail sticker. Last year this same Ford dealer only had one Super Duty on his lot, and he was asking 3k over sticker. Yes, this Ford dealer's inventory of new Fords is up 600 percent over last year.

But in 2019, this Ford dealer had 30 new Super Dutys on the lot, and he would sell them for 8k under sticker.

Comparing to 2021, yes, the Ford dealer's new super duty inventory is up 600 percent. But using 2019 (pre virus) numbers, the Ford Dealer's 2022 inventory of Super Dutys is down 80 percent. And this does even account for the price swings.

I found this video blogger to be more of a carnival barker than impartial commentator. But he has 600k views, so he is making coin with his schtick.

He is more dramatic for entertainment rather than useful advice.

As stated half the country is tightening more and not gaining inventory, though that is what happened here in 2009
 
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I admit I don’t follow the trend besides knowing that here in New England values seem to be up along with demand.

Sold my parents’ house last month. Very nice and well-kept house but on a small lot. Desirable if not very desirable neighborhood in central Massachusetts. Appraised value was around $340k, starting price (chosen by real estate agent) was $400k, we sold it in less than 72 hours for $440k. There were three interested parties “bidding” against each other. I was thinking the agent was correct and it would go for precisely $400k. I didn’t know the market was still so hot.
 
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As time goes on, I think more will default on their loans because of the inflated prices paid in the last 2-3 years, increasing the supply of existing homes. New construction doesn't seem like a good value right now. I don't see much activity in my area right now.
 
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People will read or watch what they want to be true. Right now, people desperately want home prices to fall sharply, so they will read or watch whatever channel is telling them this is what is going to happen.

The reality is that this is nothing like 2008. The mortgages that funded this massive surge in demand are, largely, solid loans. I'm not sure what is going to happen in 12-24 months, and I'm not sure that anyone is, because we've never seen anything like this. What I'll be interested in seeing is what happens in 2028. The average American moves every 8 years, and I'll be interested to see what the impacts are when people try to sell their home and relocate. For two years now, people have overpaid by large margins for their new home. If home prices do slump, how hard is it going to be for these people to move? What is the impact going to be if people can't get out of the mortgages they took on during this housing spike? I really don't know, but it will be interesting to watch.
 
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This housing cycle isn't the first one . Housing affordability is all about the monthly payment, not so much the cost of the house. The interest rate is important, but then I remember when the interest rate was over 11% in I think the 1980's. Some people have lots of income others do not.
 
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GON

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This video blogger talks without a lot of emotion and uses more quantitative analysis.

At about 7 minutes into his video, he suggests no national macro housing decline nationwide. He sees the now cooling super-hot real estate markets offering some short-term price declines and more selection than a year ago, but nothing catastrophic.

 
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I am seeing price drops everywhere. One house has been on the market for just over 90 days and is now pending contingency. Another one has been up for 42 days. Both had price drops. Houses used to sell within 2 to 5 days.
 

GON

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I am seeing price drops everywhere. One house has been on the market for just over 90 days and is now pending contingency. Another one has been up for 42 days. Both had price drops. Houses used to sell within 2 to 5 days.
PT,

Are any of these houses you are seeing being reduced below their 2019 likely appraised price? Or is this the case of the Ford dealer charging 20k over sticker for a new pickup two months ago, and now reduced the price of the truck to 18.5k over sticker.....
 
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Some things to think about.
The leading edge of baby boomers are reaching 80 and surveys show they intend to age in place.
Millennials are a couple of years away from peak home buying.
Actual builder inventory is still low although they own a lot of empty lots which are included in the inventory figure.
Credit quality is exponentially better than 2008.
 

GON

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Some things to think about.
The leading edge of baby boomers are reaching 80 and surveys show they intend to age in place.
Millennials are a couple of years away from peak home buying.
Actual builder inventory is still low although they own a lot of empty lots which are included in the inventory figure.
Credit quality is exponentially better than 2008.
BMWTD,

A few years ago, I read an article predicting collapsing housing prices in some places in Florida and Arizona that had an extremely high percentage of baby boomers. The theory of the article was there not enough "younger" baby boomers to replace the dying baby boomers.

The theory appears to be wrong. Communities like Green Valley, AZ (south of Tucson), full of retired baby boomers- had somewhat stagnate home prices from 2000-2017. Green Valley AZ prices have sharply risen over the past few years, even with less MACRO population of living baby boomers. I don't know why that is- maybe younger families are moving into baby boomer communities.
 

JHZR2

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They keep going up here, and there are few decent homes available.

I want a beach house, not another primary, so I need the frivolities to start getting sold off.

I don’t know a lot about southern or western inventories, but many places are not all that comfortable to live in due to heat or water issues. I would think that would weigh in on some decisions.
 
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PT,

Are any of these houses you are seeing being reduced below their 2019 likely appraised price? Or is this the case of the Ford dealer charging 20k over sticker for a new pickup two months ago, and now reduced the price of the truck to 18.5k over sticker.....


I don’t think the prices cuts are going that far.

We were in that euphoria range for a while. The reality has returned.
 
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People will read or watch what they want to be true. Right now, people desperately want home prices to fall sharply, so they will read or watch whatever channel is telling them this is what is going to happen.

The reality is that this is nothing like 2008. The mortgages that funded this massive surge in demand are, largely, solid loans. I'm not sure what is going to happen in 12-24 months, and I'm not sure that anyone is, because we've never seen anything like this.

“Solid loans” that were primarily given to investment houses and transient / multiple residence owners in the upper 15% of workers aren’t solid.

The trend in so called hot areas is a double whammy of investors wanting to pull out instantly and remote / former city dwellers wanting or being forced to move back.

These were 90% of the last 3 years sales, the typical single family owner with roots was rare and if they bought are going underwater as we speak.

Even though WI is mostly immune we are already seeing migration out of state increase and may have population reductions in specific cities, layoffs in the upper 15% of the workforce being an absolute nearly nationwide will cement an eventual crash as the rich newcomers leave and have to get their homes filled by someone earning less than 1/4 the income.

This is why only selling homes to a very small subset of the population is risky because if something changes to someone without roots to the area they instantly leave consequences be ****ed.

I’ve seen this personally in the past as my particular area is a boom bust region where everyone is there for work only, causes real estate to follow a rictor scale of overpriced to valueless in a small timeframe.

I can’t say how long this will take to play out but I’m guessing we will have a strange environment where the overpriced end of the market deflates rapidly as none of the locals can afford the newly built and vacated properties but traditionally cheaper properties will remain rare and fought over.

I foresee half the country crashing and half having a minor correction primarily in the high end since those folks will be loosing employment first.
Crashes normally take years, this one is odd due to the odd striated nature of who participated, perhaps 2 years outwe start seeing changes, but there are already 30% price drops in overpriced areas.
see how accurate that I am.
 
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The median home price in California is now $883,000. Unless you have a HUGE down payment from selling another house that had increased in value substantially, with the increase in mortgage interest rates most home buyers aren't going to be able to make the payments, And that $883k is the median. After living in a condo for 20 years I never want to do that again. And the houses in the neighborhoods that I like are more like $1.25 - $1.5 million.

I guess I'll be staying where I am in a home that I paid cash for in 2019.
 
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The median home price in California is now $883,000.

I guess I'll be staying where I am in a home that I paid cash for in 2019.

You and most of the population are waiting this out in place.

I myself am dealing with what I would have considered in the past an intolerable landlord because all the rentals are from the same 4 entities.

A lot of renters both home and car are on the edge of eviction.

Not sure when things will unfreeze but an entire country can’t depend on a small percentage of the population being the sole participants.
 
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