Outstanding video on home values now and the future

[97prizm]

Long video (45 minutes) with Jason Hartman, a very savvy real estate statistician.

Video is long, but if you are looking at buying/ selling, etc...... this video might provide some insight on a six figure (or higher) transaction.

This video discusses where housing is now, and where he sees it going in the future. If you don't want to invest 45 minutes to watch the video, the bottom line is:

• housing is not coming down, as no inventory is going to hit the market as over 25% of all mortgages are under three percent interest- these homeowners simply are not going to sell (on a macro basis)
• 65% of all mortgages are under four percent interest- these homeowners simply are not going to sell (on a macro basis)
• Foreclosures are at historic record low- another sign that housing prices are not coming down
• For many years, the home was the asset, and the mortgage was the liability. Have a mortgage under four percent- the mortgage is actually an asset.
• Inventory is at 500k homes. 1.2million homes is normal. Inventory has to exceed 1.2 million homes to raise a flag that home values may reduce in price. Average days on the market, and home inventory are two key figures that provide critical signals in projecting where the housing market is heading.

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Does this include condos, or apartments? It seems like in Colorado apartments are like seeds, just add water.

 

[SC Maintenance]

Does this include condos, or apartments? It seems like in Colorado apartments are like seeds, just add water.

Here too. There was a big glut built based on extremely low finance rates. My guess is this will be a problem in the future when they need to refi. Of course if inflation persists it may not be a problem.

 

[JeffKeryk]

$3500 a month for a $720,000 place is right in range for a rental price.

Yeah, and this is for a 2/1 850 sq ft condo... And the prices go up from there. That's why buying starts to make sense, over renting.

 

[SC Maintenance]

Yeah, and this is for a 2/1 850 sq ft condo... And the prices go up from there. That's why buying starts to make sense, over renting.

Assuming you want to be a landlord.

I did it before. Not really by choice. I am neutral on the subject. It’s not for everyone though.

 

[JeffKeryk]

Assuming you want to be a landlord.

I did it before. Not really by choice. I am neutral on the subject. It’s not for everyone though.

I don't wanna be a landlord. This is to help my niece and her younger girls. A place for them to live. It's rough around here.
You might recall a giant eucalyptus tree totaled their condo; it could be a year, or more before they can move back in.

This just came up. The price is good.

 

[SC Maintenance]

I don't wanna be a landlord. This is to help my niece and her younger girls. A place for them to live. It's rough around here.
You might recall a giant eucalyptus tree totaled their condo; it could be a year, or more before they can move back in.

I am all for helping family. But what will you do with the place when there done?

 

[JeffKeryk]

I am all for helping family. But what will you do with the place when there done?

Use a rental service; I have great real estate resources. This place would rent in a heartbeat. In 5 years it will likely be a nice asset.
If I put $200K down, I am at about $3700 payments, plus tax and insurance. That's doable. After Wendy and the girls move home, it would rent for about the mortgage payment.

I wish I had a better option.

 

[GON]

Some graphics that may be helpful to some trying to understand the single family home markets:

 

[Owen Lucas]

I have been praying housing would come down---it hasn't happened and not a single indicator supports a fall in housing prices on a MACRO basis.

You might be better off building now, hopefully the cost of quality construction has gone down. Not sure how land is doing though.

 

[Hillbilly Deluxe]

FYI, I talked to a mortgage loan officer yesterday, he advised me that average interest rates on a 30 yr investment property (25% down min) are hollering at 9% right now. He sent me a sheet based on ~730 credit score, shows 8.8%.

He said that Fannie Mae raised rates on investment loans because they are trying to calm down investment buying.... Ok....

Let's look at it another way -

Let's get real. Someone buying a $130k home probably doesn't have 20% to put down. They're going to scrape up 5% if lucky. Their payment at 8% will be about $900. Throw in $250 for PMI, Taxes and Insurance and their payment is pushing $1300. That's most likely a struggle for them AND they have to (should) budget for some repairs/etc. That and increasing property taxes and insurance in the future.

The rent on that $130k home would be about $1200-1300 (there are tenants in place in my example at $1350 right now; I do NOT feel $1350 is sustainable for the two homes I was presented).

Bottom line, the home buyer that is the marketable buyer for this home probably can't make the payments or secure the loan due to low income, low credit score and most likely wouldn't be able to afford it down the line.

So why try to penalize the investor who will buy it and rent it for most likely a few dollars less that what the buyer would be strapped with?

 

[dubber09]

Imho, property taxes in general and especially based on property 'value' (non-negotiable to boot) is a robbery.
Your property -> then scoot off in the sunset....

 

[CKN]

Imho, property taxes in general and especially based on property 'value' (non-negotiable to boot) is a robbery.
Your property -> then scoot off in the sunset....

With the appreciation I have seen with the properties I own I will be happy to pay taxes. You have to pay (taxes) on other types of investments. So....

 

[dubber09]

With the appreciation I have seen with the properties I own I will be happy to pay taxes. You have to pay (taxes) on other types of investments. So....

Don't confuse property and investments, house is property, car is property, wrist watch is property unless you bought them with intent to make money then the tax should be capital gains tax and not a property tax.

 

[CKN]

Don't confuse property and investments, house is property, car is property, wrist watch is property unless you bought them with intent to make money then the tax should be capital gains tax and not a property tax.

I have purchased Real Estate as investments-not to live in. I have been in Canada-more than once. What you guys pay for stuff is quite high. But to not break the rules on this forum-you have things down here we don't. However they are not "free" (or nearly such) - as they are often refereed to-you pay for them-one way or the other.

 

[SC Maintenance]

FYI, I talked to a mortgage loan officer yesterday, he advised me that average interest rates on a 30 yr investment property (25% down min) are hollering at 9% right now. He sent me a sheet based on ~730 credit score, shows 8.8%.

He said that Fannie Mae raised rates on investment loans because they are trying to calm down investment buying.... Ok....

Let's look at it another way -

Let's get real. Someone buying a $130k home probably doesn't have 20% to put down. They're going to scrape up 5% if lucky. Their payment at 8% will be about $900. Throw in $250 for PMI, Taxes and Insurance and their payment is pushing $1300. That's most likely a struggle for them AND they have to (should) budget for some repairs/etc. That and increasing property taxes and insurance in the future.

The rent on that $130k home would be about $1200-1300 (there are tenants in place in my example at $1350 right now; I do NOT feel $1350 is sustainable for the two homes I was presented).

Bottom line, the home buyer that is the marketable buyer for this home probably can't make the payments or secure the loan due to low income, low credit score and most likely wouldn't be able to afford it down the line.

So why try to penalize the investor who will buy it and rent it for most likely a few dollars less that what the buyer would be strapped with?

I take a very different opinion. Why should the US taxpayer underwrite a investor? That is what commercial banks and the bond markets are for.

You can make a reasonable argument underwriting resedential mortgages makes sense to incentivize family formation. I don't see how you make a similar argument for rentals.

If we weren't subsidizing investors to become landlords possibly the price would fall so families could afford these again?

 

[Hillbilly Deluxe]

I take a very different opinion. Why should the US taxpayer underwrite a investor? That is what commercial banks and the bond markets are for.

You can make a reasonable argument underwriting resedential mortgages makes sense to incentivize family formation. I don't see how you make a similar argument for rentals.

If we weren't subsidizing investors to become landlords possibly the price would fall so families could afford these again?

I'm not asking the taxpayers to underwrite investment loans. I fully admit I don't know exactly how the mortgage interest rates are set, but it appears to me that Fannie Mae/The Fed seem to play a big part in free market interest rates. I doubt my investment mortgages would be "Fannie Mae" loans, but I'll admit that I don't know what all Fannie Mae does other than probably not much of nothing worthwhile...

I'm pretty sure my home mortgage I have is underwritten by a mortgage backed security like many out there. Most likely a lot of investment mortgages are also.

 

[SC Maintenance]

I'm not asking the taxpayers to underwrite investment loans. I fully admit I don't know exactly how the mortgage interest rates are set, but it appears to me that Fannie Mae/The Fed seem to play a big part in free market interest rates. I doubt my investment mortgages would be "Fannie Mae" loans, but I'll admit that I don't know what all Fannie Mae does other than probably not much of nothing worthwhile...

I'm pretty sure my home mortgage I have is underwritten by a mortgage backed security like many out there. Most likely a lot of investment mortgages are also.

Fannie and Freddie are Government sponsored enterprises - GSE. They purchase mortgages after they originate - so you may go to a bank and they give you a mortgage. After it closes they most likely sell it to one of these. Fannie may hold it, or more likely bundle it up into a bond and sell that bond to investors as a mortgage backed security - MBS. The MBS is guaranteed by Fannie or Freddie which are guaranteed by the government, much like a government bond, so the investor in the actual bond is taking no risk.. So if the person that took the loan defaults were all on the hook. ie the taxpayer underwrote that loan - ie took all the risk.

If they didn't do this the interest rate on your loan investment loan would be much, much higher.

One more way the market is distorted.

Don't feel bad. I would take the same loan and the same lesser rate. Don't hate the players, hate the game.

 

[Number_35]

I have purchased Real Estate as investments-not to live in. I have been in Canada-more than once. What you guys pay for stuff is quite high. But to not break the rules on this forum-you have things down here we don't. However they are not "free" (or nearly such) - as they are often refereed to-you pay for them-one way or the other.

American political columnist George F. Will wrote, some years ago, possibly when the ACA was in the works, "If you think health care is expensive now, wait until it's free!"

Funny, and yet there was a bit of an informal survey here a few years ago. An American BITOGer asked if we Canadians would be willing to give up our public health care in exchange for lower taxes. The great majority of us answered "no".

 

[GON]

Observations on the real estate market from Chuck Cowan, who according to LINKIN is a mortgage coach:

When you look at where housing demand is growing in 2024. Geographically, purchase demand growth is spread throughout the country.
But the most considerable growth is coming out of midwestern and southern states such as South Dakota, Mississippi, Arkansas, and Oklahoma.
However, some markets that led demand in previous years (e.g. Florida and Arizona) appear to be moderating, implying that the rate lock-in effect and high home prices are starting to take their toll on these hot markets.

 

[GON]