How many of these loans are using the forbearance just to extract concessions from their mortgage company?
Trend of single family home prices dropping hard in "non-hot markets"
- Thread starter GON
- Start date
Glad I sold when I did.. made $130k was in the house 4 yrs.
We are an attorney state so the attorneys handle the purchase and sale agreements. I've had several cases where the attorneys go back and forth with the language in the contract and get into some deep fights. Then it closes and it turns out it didn't matter at all in the end but each one was doing their best to protect the interests of their clients and some of it was pretty minor. I think the potential for being sued is always there, whether they'll win is another story.
The problem with this argument is the sharp increase in house prices has created a wealth effect where people can pay cash when they move to cheaper markets.
That is what's driving prices around here. Along with more organic growth, large tech companies are putting huge amounts of employees here because for many, Austin is the preferred destination in Texas. Many come from the Bay Area in CA and they can make cash offers for homes.
Indeed, I could move somewhere cheaper like the aforementioned Raymondville, MO and pay cash for a house based on the house appreciation in my current MSA, were I to sell my current house.
What's stopping that from happening currently is that my job and child's school is here. But when those conditions no longer exist, who knows. I would definitely like to go somewhere that's not quite so hot in the summertime, but without significant winter snowfall. Maybe something along the Mason-Dixon line is in my future.
Oh yeah I sold a few houses of people who moved out of my state to Texas or Florida or some other southern state where it's much cheaper. Usually it's a condo that's 500k+ and they end up buying a house that's about double the square footage or more for 400k+. A couple of them were working remotely so it didn't matter where they lived.
And the people who purchased homes in good areas within the last 50 years.
I drove used Hondas and strippie Toyota Pickups instead of fancy new rides. Put money into investments. Real estate proved to be a good one.
What about the current owners and sellers?
I'm sitting on some property that has probably doubled in value or more since I bought it. I think I'll hold on for a few more years, I think with the minimum wage going up in this state, people will have more money and can afford to pay more in rent and the trend the last few years is that rents have been going up. Sale prices are also somewhat based on rents so the more you get in rent, the higher the sales price.
Real estate is a reflection of inflation. A nation print money or reduce tax or lower interest rate, economy gets stimulated immediately, some people make money, some people can afford to buy a home eventually (along with all the other stuff), and some borrow a lot because they think borrowing money against inflation is safer than letting their saving gets inflated away. Eventually the immediate stimulation is finished, and then the government has to either do it again to kick the payment down the hall, or has to increase tax and or interest rate to pay off the debt. Many would rather keep doing it to inflate away the debt instead of paying it back.
The winners were the people / businesses / governments who benefit from the QE / tax cut / interest rate drop from back in the days. Sometimes nobody wins because it all went into wars. This is how a lot of empires in the past collapsed right after a war. This is also how a lot of nations collapse despite winning a war, yet in the long run the losing side ended up winning because they signed a relatively cheap treaty instead of trying to win at all cost.
While true, and it clearly is in many hot markets, I wonder what overall % of buyers are paying cash to move into crowded urban or suburban environments? Sure, folks are selling $3 million shoeboxes in San Fran and moving to Phoenix or Dallas areas and paying $1 million for larger homes. A hugely incentivized move. But what % of buyers are doing this? And it assumes there's people actually buying those $3 million shoeboxes in San Fran. Are they paying cash? Migratory moves, for sure. But I would venture that's less than 20% of movers, maybe only 5%.
It doesn't have to be all cash buyer. They could be going from a mortgage with 800k balance to one with 300k, or they could go from 7k a month to 3k a month and still outbid the locals who can afford only 2k.
Let's also remember, many jobs even after adjusting for cost of living to becomes remote (say a typical 20% to 30% reduction of a Bay Area job that pays 180k) is still going to be way higher than the local income of the place they move to (say Bozeman Montana). This is the main reason they decided to move. It may not be like this long into the future, but we all know people make decision usually 5 years into the future instead of 30 years.
Just curious where your finding 40 and 50 year mortgage options? They are not on any of the wholesale rate sheets i follow. They are not currently offered by the govt backed agencies that make our mortgages dirt cheap. The last time i saw a 40 year product it was a credit union and the rate was higher than the 30 year to the point that the payment was equal or greater than a 30 year. There is talk of FHA/VA modification to 40 year if you are in forbearance but its months away.
Also the banks (buyers of Morgage Backed Securities really) could be on the losing end bigly if the market dives down. Short sales and foreclosures would devastate MBS returns.
Interest rates have been below 5% for quite a while now. People can afford significantly more house with the interest rate this low.
When I bought my first house in 1995, I had 8% interest on my mortgage, and that was considered good at the time. Paid $99K for the house and it was the model home in the neighborhood, most houses went in the 70s and 80s. Payment was a little over $800 a month PITI.
Times have changed...
I wondered about this too. Forty-year mortgages have been around since the 1970s, but have been extremely rare. The longer the term, the greater the risk to the lender, so the higher the interest rate. As you noted, at some point you don't get any lower monthly payment with a longer term because of that higher interest.
And let's face it: 30 years, let alone 40 or 50, is already a long time to be committed to paying for anything. Before WWII, mortgages were normally for a maximum of 5 years. But people bought houses then for a place to live, not as a get-rich scheme.
The overheated housing markets we see now are the result of widespread speculation. Speculation means bubbles. We know what happens to bubbles... And that might explain what's happening in the non-hot markets.
Speculation is always around. Everything from aluminum and oil to orange juice and coffee are speculations.
Don't forget before Vietnam War USD was pegged to gold. Nixon shock changed that and leads to sky high inflation (to fund the war). The low interest rate since 2001 to now, despite the perpetual boom and bust, are really needed to fund our 20 year war. Maybe with the withdraw we will finally be able to increase the interest rate (after the pandemic is over) and slow down the inflation, so we will have a quite early 90s soft landing again.
Every empire collapse came from overspending of war to currency and debt collapse, Persian, Roman, French, China, Russian, etc.
The world is now addicted to below zero and near zero debt yields. USA is just the least sick person in the financial hospital where everyone is terminally ill. There are no 100% safe returns anywhere unless you consider 1% good. Even Dillards, a B rated "high yield" is getting debt sold at a 1.338% yield today. Dillards! Some tax advantaged munis under half a percent. Apple, who has hundreds of billions of dollars, sells even more bonds just because they are so dirt cheap.
People can't safely store value anymore. You have to gamble or lose money slowly.
I think it’s topped out in my area.
My house has always been the median price house in my area.
Suddenly, and I mean suddenly, the median price has doubled. No way on earth could I sell my house for anything like that even in this market.
Credit standards are good, so those sales represent people with inherited wealth or people moving from California. The employment scene around here doesn’t allow the prices. The working guy with a mortgage market has completely dried up.
My house has always been the median price house in my area.
Suddenly, and I mean suddenly, the median price has doubled. No way on earth could I sell my house for anything like that even in this market.
Credit standards are good, so those sales represent people with inherited wealth or people moving from California. The employment scene around here doesn’t allow the prices. The working guy with a mortgage market has completely dried up.
I thought housing prices were stabilizing here; I was wrong. Single-family home prices reached all-time highs...
Local analysts wonder where all this buying power came from in the last few months.
They decided the money was always there, but but people were simply not spending it.
YOY, single-family home prices increased considerably, up 22% in San Mateo, 19% in Santa Clara, and 33% in Santa Cruz.
The median prices jumped, of course this perhaps implies that the mix included more higher priced area sales along with price increase.
Average days on the market shrunk to 18 days. In my neighborhood I see, "Coming soon" and then "Sale Pending".
Local analysts wonder where all this buying power came from in the last few months.
They decided the money was always there, but but people were simply not spending it.
YOY, single-family home prices increased considerably, up 22% in San Mateo, 19% in Santa Clara, and 33% in Santa Cruz.
The median prices jumped, of course this perhaps implies that the mix included more higher priced area sales along with price increase.
Average days on the market shrunk to 18 days. In my neighborhood I see, "Coming soon" and then "Sale Pending".
GON
$100 Site Donor 2024
Still seeing price drops daily in non-hot markets, often by 10-49k.
I have not seen many price drops in Arizona, and this is a unique/ hard to sell property I suspect. It dropped $250k from $1,250,000 to $999,000. Its price was reduced yesterday.
www.zillow.com
I have not seen many price drops in Arizona, and this is a unique/ hard to sell property I suspect. It dropped $250k from $1,250,000 to $999,000. Its price was reduced yesterday.
3791 W Highway 80, Bisbee, AZ 85603 | MLS #22020833 | Zillow
This 2523 square feet Single Family home has 4 bedrooms and 2 bathrooms. It is located at 3791 W Highway 80, Bisbee, AZ.
www.zillow.com
No disrespect but you are not seeing home prices drop.Still seeing price drops daily in non-hot markets, often by 10-49k.
I have not seen many price drops in Arizona, and this is a unique/ hard to sell property I suspect. It dropped $250k from $1,250,000 to $999,000. Its price was reduced yesterday.
3791 W Highway 80, Bisbee, AZ 85603 | MLS #22020833 | Zillow
This 2523 square feet Single Family home has 4 bedrooms and 2 bathrooms. It is located at 3791 W Highway 80, Bisbee, AZ.
You are seeing some property owners who incorrectly overpriced their homes reduce their prices.
You are looking at the wrong numbers to know what the real estate market is doing. You need to look at "sold" price. Not the asking price of a property owner, it means nothing.
The sale price is what the public is willing and able to spend and the only way to measure trends. Sale price is the only measurement banks use to calculate what a property is worth, not what people are asking.
With all the above said, its only a matter of time before prices level out. Covid has killed the market, people stopped moving and hunkered down. That is all changing and will continue to change in the coming 2 years. Interest rates should at some point bump up, I say should, impossible to know taking into account the extent of government interference in the markets. But if they are allowed to go up homes prices will fall further after an initial panic rush by the public to buy for fear of rising interest rates.
The bottom line is homes are priced for what the public can afford, right now with little on the market only the "top tier" buyer can buy in a given area. Supply and demand, sooner or later supply ALWAYS catches up and the pendulum swings the other way.
Last edited:
GON
$100 Site Donor 2024
You are 100 percent correct in studying listing price to sold price.
That would require a lot more time on my part to do, and access to some databases like the MLSs which are not all public (Zillow does not capture every listing). I would then look at additional variables like time on the market, time listed, contracted, then closed. Private sales. What contingencies on the contract, etc.
This was a easy trend to track- price reductions in a dozen counties across the USA, that were listed on Zillow. It was never meant to be holistic understanding of what is going on across the USA with single family home prices. I typically read three to five published articles daily on what is going on with home prices, and every expert opinion is different, some very different.
Center of gravity of this thread was simply showing price cuts, some by double digit percentages, happening in the last 30 days in non hot markets. The six months prior, almost no price cuts, even in non-hot markets. What does this mean....... anybody's guess.
Similar threads
