Interesting article from CNBC on residential home prices

[JustN89]

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

Yes, they are. Solid in the sense that they're financially in a good place, which is the opposite of 2008. In fact, many of the companies that were buying up homes in my area were doing so in cash, no loan required.

The middle/lower middle classes and first time home buyers have been slaughtered in this market, but they didn't secure adjustable rate loans with little to no income/employment verification. The loans were well vetted and prospective homeowners were in a good enough place to secure their mortgage. Where these new homeowners are going to get bitten isn't with adjustable rates, but rather the surprises that will pop up because they waived their right to inspections.

What's missing in your premise is the fact that these corporations that bought up homes with the intent to rent them out don't have to sell if the market's not there to offset their costs. Yes, there's likely some companies that are looking to liquidate especially as the markets are rocky, but with rent costs at all-time highs, assuming that there's no bankruptcy then these companies are in no rush to move off their recently acquired properties.

There's also no evidence that I can find of these "upper 15% of workers" being forced to move back to the cities they moved out of originally. Sure, there's beginning to be a return to office, but that doesn't necessarily equate to selling your new home and moving back to the city. It means that they'll likely either find a new job closer to their home or commute.

 

[Rmay635703]

I guess we face the laws of unexpected consequences.

Solid loans to Recent homebuyers are also most likely to be facing unemployment as there was an unprecedented number of tech folks spreading their wings now getting recalled to base or fired.

Many recent buyer have their homes for sale for less than they paid.

I foresee high end foreclosures as vacancies increase in the hot markets

 

[Wolf359]

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.

A couple of things go in lock step like the rising rent prices and low unemployment. Also lenders have to vet their borrowers these days. Most of the sales I've been doing lately have been to people that can easily afford it, there's not too much 3.5% down payments around here, usually at least 20% or more. Some of those are from stock market gains and others just from savings or people with good jobs just waiting for the right property.

I guess we face the laws of unexpected consequences.

Solid loans to Recent homebuyers are also most likely to be facing unemployment as there was an unprecedented number of tech folks spreading their wings now getting recalled to base or fired.

Many recent buyer have their homes for sale for less than they paid.

I foresee high end foreclosures as vacancies increase in the hot markets

While there was a huge demand for labor, with recent layoffs, the demand for tech talent will cool off a little but they won't be in the unemployment lines for long. Unemployment is still pretty low which will continue to fuel inflation. While the market is down this year, it didn't erase all the gains from the previous years. 2019/2020/2021 were very good years, the 10 year return on 10k invested in the S&P 500 is still over 34k. Inflation will put a bottom on how much housings prices can go down. The competition is new construction and there's not much of that and the costs for that keeps going up in terms of materials and labor.

 

[Rmay635703]

A couple of things go in lock step like the rising rent prices and low unemployment. Also lenders have to vet their borrowers these days. Most of the sales I've been doing lately have been to people that can easily afford it, there's not too much 3.5% down payments around here, usually at least 20% or more. Some of those are from stock market gains and others just from savings or people with good jobs just waiting for the right property.


While there was a huge demand for labor, with recent layoffs, the demand for tech talent will cool off a little but they won't be in the unemployment lines for long. Unemployment is still pretty low which will continue to fuel inflation. While the market is down this year, it didn't erase all the gains from the previous years. 2019/2020/2021 were very good years, the 10 year return on 10k invested in the S&P 500 is still over 34k. Inflation will put a bottom on how much housings prices can go down. The competition is new construction and there's not much of that and the costs for that keeps going up in terms of materials and labor.

The pay and demand may cool a little but that isn’t the problem

Literally EVERY remote worker is one by one being recalled home, it is estimated 75% will either return to office or get fired and people from tech areas are as far away as Appleton WI which had active efforts importing them and the increase of migration from this area indicates tides are changing and the immigration numbers out show it.
Further if they stay there are ZERO jobs in their pay grade within a 100 miles, best case get half in a different industry.

The job work location is again mattering as the companies mostly didn’t move the brick and mortar.

There is also talk from companies like Ascenture that desire to outsource the entirety of the domestic remote workforce overseas.

I think many underestimate the effects of reversing 2.5 years of population migration and the desire to outsource remote work now that the ice is broken on what can be done remotely

Half of remote workers live over 100 miles away from their job and will have problems unloading their house into an area that can’t absorb it.

 

[PimTac]

The pay and demand may cool a little but that isn’t the problem

Literally EVERY remote worker is one by one being recalled home, it is estimated 75% will either return to office or get fired and people from tech areas are as far away as Appleton WI which had active efforts importing them and the increase of migration from this area indicates tides are changing and the immigration numbers out show it.
Further if they stay there are ZERO jobs in their pay grade within a 100 miles, best case get half in a different industry.

The job work location is again mattering as the companies mostly didn’t move the brick and mortar.

There is also talk from companies like Ascenture that desire to outsource the entirety of the domestic remote workforce overseas.

I think many underestimate the effects of reversing 2.5 years of population migration and the desire to outsource remote work now that the ice is broken on what can be done remotely

Half of remote workers live over 100 miles away from their job and will have problems unloading their house into an area that can’t absorb it.

Amazon is bucking the trend. A lot of workers will not be forced to return to the office. In Seattle a big part of that decision is employee safety as Amazon is located downtown. The article I linked doesn’t mention that. I got that from Amazon workers I know.

Amazon CEO Andy Jassy says he has no plan to force workers to return to the office

Last year, Amazon said it would leave it up to individual managers to decide how often employees would be required to work at physical offices.

www.cnbc.com

 

[alarmguy]

Bottom line = as interest rates climb we are getting to a historical normal market.

The only reason the market has been what it was is because of artificial low interest rates do to government intervention on multiple fronts for the last 10+ years.

Let not forget the world health event that affected all industries.

Mortgage Rates Chart | Historical and Current Rate Trends

Current and historical mortgage rate charts showing average 30-year mortgage rates over time. See today's rates in context.

themortgagereports.com

 

[Wolf359]

The pay and demand may cool a little but that isn’t the problem

Literally EVERY remote worker is one by one being recalled home, it is estimated 75% will either return to office or get fired and people from tech areas are as far away as Appleton WI which had active efforts importing them and the increase of migration from this area indicates tides are changing and the immigration numbers out show it.
Further if they stay there are ZERO jobs in their pay grade within a 100 miles, best case get half in a different industry.

The job work location is again mattering as the companies mostly didn’t move the brick and mortar.

There is also talk from companies like Ascenture that desire to outsource the entirety of the domestic remote workforce overseas.

I think many underestimate the effects of reversing 2.5 years of population migration and the desire to outsource remote work now that the ice is broken on what can be done remotely

Half of remote workers live over 100 miles away from their job and will have problems unloading their house into an area that can’t absorb it.

This is basically the difference between macro and micro. Sure you might see this on the local level or individual stories but if you look at the national numbers, the default rate on loans hasn't increased and the unemployment numbers are still low. So what you're probably seeing is things just at the local level and housing prices are just declining due to higher interest rates but there's no impending collapse. Higher rents also drive people into buying houses instead of continuing to rent.

 

[zzyzzx]

 

[Lubener]

Maybe the "home affordability act" is in the works. Down payment assistance to go along with a chicken in every pot.

 

[alarmguy]

View attachment 116484

I'll add this to the script "...but the payment will be the same"

 

[brianl703]

Some things to think about.
The leading edge of baby boomers are reaching 80 and surveys show they intend to age in place.

That's what they intend. What actually happens when they find out that going up and down stairs as they get older is harder if not impossible and they live in a house where all the bedrooms and the bath/shower is on the upper floor?

Or they have to use a walker and the walker doesn't fit through the bathroom door, or other problems like that?

Aging in place is nice, but the reality is that a LOT of houses were NOT designed with that in mind.

 

[joekingcorvette]

With the rising interest rates home prices will fall. The feds are raising the interest rates another .75 soon the way it sounds. People will hold on to their homes unless they lose their jobs as in 2007. Lots of people are living paycheck to paycheck in these expensive times and it keeps getting worse every month. Lots of people bought homes and cars at high prices and they don't all have emergency funds. In time a large car repair and maybe a new furnace and air conditioner or a roof and the house of cards begins to fall. A layoff, car accident with $500 deductable new tires and things like that begin to happen and the prices keep escalating. Maybe people are using extra money to pay off their houses instead of investing in the market? I remember paying 12 percent interest on a home. People think a 6% APR is high priced but I think it's a bargain. I guess time will tell regarding home prices.

 

[BMWTurboDzl]

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

That's what they intend. What actually happens when they find out that going up and down stairs as they get older is harder if not impossible and they live in a house where all the bedrooms and the bath/shower is on the upper floor?

Or they have to use a walker and the walker doesn't fit through the bathroom door, or other problems like that?

Aging in place is nice, but the reality is that a LOT of houses were NOT designed with that in mind.

I'd opine that Mlmany of them are already in homes with master on mains.

 

[brianl703]

I'd opine that Mlmany of them are already in homes with master on mains.

Probably not the case in an area where ranch style homes are not common or popular.

And it is possible to get a multi-story home with a master on the main level, but many builders didn't even offer that as an option until within the last, say, 20 years.

That leaves a HUGE population of multi-story homes built in the 90s and prior which you can be sure don't have a master on the main level.

 

[billt460]

You can modify an existing 2 story home with a stair lift, and walk in showers and tubs, a lot easier and cheaper than selling and moving.

Which is going to cost you 6+ percent just in commission alone. It's not cheap to sell and move. And the older you get, the tougher it becomes.

 

[brianl703]

You can modify an existing 2 story home with a stair lift, and walk in showers and tubs, a lot easier and cheaper than selling and moving.

Which is going to cost you 6+ percent just in commission alone. It's not cheap to sell and move. And the older you get, the tougher it becomes.

Or you can sell that house, move somewhere cheaper, while you're still able to do so easily, and buy something more suited for aging in place when you do. It's what I wish my dad would have done. Much easier to do this stuff at 65 than at 81.

 

[billt460]

I can see it if there is an advantage in climate, or less property taxes. But not just to avoid a few steps. As I said, moving is very expensive when all things are considered.

And most people aren't willing to pay it. Or else simply can't afford to.

 

[zzyzzx]

Probably not the case in an area where ranch style homes are not common or popular.

And it is possible to get a multi-story home with a master on the main level, but many builders didn't even offer that as an option until within the last, say, 20 years.

That leaves a HUGE population of multi-story homes built in the 90s and prior which you can be sure don't have a master on the main level.

Which is why residential elevators are becoming more common now.

 

[brianl703]

Which is why residential elevators are becoming more common now.

Not sure where you'd put one on many of these 2-story homes. Seems like something that really needs to be designed in, not added later.

 

[zzyzzx]

Not sure where you'd put one on many of these 2-story homes. Seems like something that really needs to be designed in, not added later.

Ideally true. But you could say that about a lot of things. I think that's why the stair climber options are as popular as they are.
According to construction estimators it's still cheaper to build up with an elevator and stairs than it is to build on one story.