Worthless headline for almost everyone, home sales could plunge in 2023

[JHZR2]

I am rooting for San Jose to drop like a rock! I am looking for 2 places!

Same for beach houses in NJ!

 

[RhondaHonda]

RH,

Price reduction of 10-30% off of what? When some gives a percentage, and then never gives the off of what- what they are saying is not very credible.

If IBM stock sells for $100 a share in JAN 2021, $150 a share in JAN 2022, and sells for $200 a share from FEB2022-NOV2022, and then on 1 DEC 2022 a fake headline that Microsoft is buying IBM for $350 a share, and IBM goes to $300 for a single day- and then returns to $200 a share, did shareholders of IBM of record from JAN 2022 lose $100, or 33 percent on 2 DEC 2022?

I didn’t attend the talk this morning but a colleague did. I’m assuming he was referring to a discount to current pricing. As you know, stocks are much more liquid than single family homes. The fluctuations in the stock market may mirror home prices
over the long term, but the day to day can have tons more volatility, so not a great comparison to real estate. The projected 8-9% mortgage rates they talked about would definitely have a cooling effect on home prices. I’m curious where it all falls out and have cash to invest, hopefully at the right time.

 

[alarmguy]

This article's headline says home sales could plunge in 2023. This is only a meaningful headline for people that make money on real estate sales, like realtors, mortgage brokers, home inspectors, etc.

The article then lists the top ten areas predicted to have home sales declines in the USA. At the end of the article, the statistic that means the most to everyone. Home prices are projected to INCREASE 5.4 percent in 2023.

CBS News: Home sales could plunge in 2023. These cities could see the biggest dips..

Home sales could plunge in 2023. These cities could see the biggest dips.

Buyers are getting squeezed by higher real estate prices and soaring mortgage rates, which could force more out of the market.

www.cbsnews.com

I love the word “could” in todays media “stories” It’s not news it’s the writers speculation to create news that doesn’t exist yet because it didn’t happen.

Honestly did not read the story though cause I’m in bed and hopefully going to fall asleep 😴 again for a short while.

I guess if successful I “could” wake up with niot a care in the world or “could” wake up PERIOD!
🧐
Edit,
Ok so shoot me, I read the story and I honestly agree with a lot of it, 😃 yes the hot markets of past years will get hit and the more stable markets will stay relatively strong.
I realized this when we found it stupid easy to sell our house last month and at a price near, actually at the top ever in the community.

 

[dlundblad]

I guess you can say home sales have decreased here since there’s really nothing good for sale. The good ones are being sold by the dreamers.. one being a nice house with a garage and pole barn that was on 40 acres that was sold at auction. Whoever bought it is keeping the ~35 acres of woods and trying to sell the house for nearly what they paid for everything. It’s a free country. They can do what they want.. it just won’t sell without a major price adjustment.

I honestly can’t see housing prices drop.

I can see people hurting from borrowing outside of their means and/ or being spread too thin from rising costs of virtually everything.

 

[Dave Hess]

While interest rates could do that, who knows, it wont alleviate the fact there isn't enough houses to go around for everyone.

The new reality in many parts of the USA is that developers would rather build apartments and condos than houses.
Houses simply aren't being built like they use to to keep up with demand.

Builders don’t want to build basic 3 bedroom single story homes….. it’s either McMansions or apartments / townhouses / condos.

I did help my kids buy a house with down payment.

 

[RDY4WAR]

The interest rates have already had an effect. I am looking for an entery level condo, 2/1, 850 - 900 sq ft. I can get a McQuen in Blossom Valley area of San Jose for high 400's to low 500's. This is a 10% drop. This is the bang for your buck area of the Valley. If I see $400K I'm a buyer. My Schwab crew is alerted to be ready.
Blossom Valley Condo

This just blows my mind. A condo... Not a house, not yard, no garage, no privacy... a condo for $400k... and a steal at that price. I can't fathom it.

I bought a 2,200 sqft house on a full acre 2.5 years ago for $200k in South Carolina. That's the most I will likely ever spend on a house.

A friend moved to NC from CA, taking a big pay cut to do so, but his mortgage is almost half the percentage of his income compared to CA, (19% vs 37%) with all other COL cheaper, and has more disposable income. His quote... "NC has beaches with sand, saltwater, sunlight, and homeless people like CA."

The prices in CA still just blow my mind.


I wouldn't want to build anyway. Have you seen how junk the construction of some new homes are? It seems especially bad in sub-divisions with houses shooting up as fast as possible as cheap as possible. Houses just 2-3 years old that need whole walls replaced, roofs replaced, major plumbing and electrical work, etc... Usually found when they go to sell it and an outside inspectors raises a lot of red flags that HOA/sub-division management/lawyer sponsored inspector let slide.

 

[John105]

I am no economist either, but the old saying is that if you torture the numbers long enough they will tell you what you want to hear.

So what then?

The historic norm home price is 5X average household income. Average household income was 71K in 2021. Lets assume that has now gone up 5% so maybe around 75K, making 5X = $375K. Median sales price is $455K which would be about 6X, so maybe 18% higher than the historical average. For reference, 2016 peak was 7X median income, so were no where close to that number.

Another way to look is the historical average mortgage should cost around 28% of gross pay. So with todays 75K median income that would be about 21,000 per year or $1750 per month of mortgage, which with 7% on a 30 year fixed would get you $265,000 of mortgage. So clearly by that measure the $455K median home price is over valued. If interest rates go to 9% as some were predicting, then there even more over valued.

Of course, inflation is a factor. The last large inflation we had was in the 70's and housing prices tripled because people wanted fixed assets not dollars. So even if you factored 6% core inflation compounded for 3 years then your $455K median home price should be pretty darn close to 5X your Median income. So if inflation holds and housing goes sideways for 3 years, were back to the norm.

Then of course there is the fact that the last time the fed started raising rates they broke the banks and we ended up in a lost decade. Japan had their lost decade 4 decades ago and haven't recovered. The fed continues to raise rates.

Pick your narrative - I can probably find numbers to match it.

I used to tell my dad who was always to the point. Our household income is more than double the median income for our town. Yet, we have the smallest house, oldest cars, and no vacations. At the time, no kids. What gives?

He said it's math. Either the people you observe have help from parents, an inheritiance, or no savings.

28% of gross income? Wow, that would put my dream 3500 sq ft McMansion into reality. I honestly do not know how people maintain their lifestyles as they do, today. I do hear kids in the office throwing around the number $1,000, for a car payment. I couldn't afford that and my income has to be triple lol

I'll always remember the BMW marketing material about the year 2000, for the 3 series. The median buyer was 41 years of age, male, and had an income of $140,000. How much we wanna bet the median age is much younger, and the income much lower, in 2022?

 

[John105]

... but his mortgage is almost half the percentage of his income compared to CA, (19% vs 37%) with all other COL cheaper, and has more disposable income.

That blows my mind. Both 37, and 19. I feel there have to be a lot of lurkers who agree with me. Whatever the median income is in the USA, quadruple it, and it's not easy to make ends meet when chuck steak is $6/lb at Aldi. My mortgage is about to become 0% of my income, am I headed to easy street then? lol p.s. I have an 8 y.o. turning 9 as well

 

[GON]

Just had a validation that some of the house prices have lost value is complete fiction.

I sold a house in August 2022 for 450,000. The house reportedly went up to 455,000 in September, and then 457,000 for October, and 459,500 for November. On Dec 1, 2022, the house is now showing a value of 457,100. The site providng this number displays the home has lost $2,400 in value.

The house actually gained $7,100 in value since the house was sold in Aug 2022 according to this site, yet the show the home as have lost $2,400 in value as of DEC 1 2022.

 

[John105]

Just had a validation that some of the house prices have lost value is complete fiction.

I sold a house in August 2022 for 450,000. The house reportedly went up to 455,000 in September, and then 457,000 for October, and 459,500 for November. On Dec 1, 2022, the house is now showing a value of 457,100. The site providng this number displays the home has lost $2,400 in value.

The house actually gained $7,100 on value since the house was sold in Aug 2022 according to this site, yet the show the home as have lost $2,400 in value as of DEC 1 2022.

You did well. imho Jan 2022 was the last stop on the train for many things. Our friends rent (not a bad thing they were a family at $1200 for a townhouse)--landlords got smart, evicted them, and moved into it themselves. Sold their main home for $600k. This was in April as I remember driving to a Flyers game and the landlord called my buddy and they got into an argument. Over the blinds to the townhouse hahahahahahahaha

They were forced to move and now pay $3,000, which is a market rate. That's the downside of renting. But imagine how that landlord pretty much nailed it. Sold their home at about the right time, and had someone paying rent at an investment condo for 12 years by our friends.

Also, imagine they are so petty over blinds and a microwave. amazing. This may be offensive and I mean none, but I thought of a Seinfeld where Jerry says, "But you're a cashier." the landlord is something like that, yet look at the wealth she amassed. I told him to say that when they were arguing and he muted his phone.

 

[JeffKeryk]

This just blows my mind. A condo... Not a house, not yard, no garage, no privacy... a condo for $400k... and a steal at that price. I can't fathom it.

The problem is, the price today is closer to $550K today in many cases. Too much.
I sold my folk's home in Sunnyvale in Aug 2019 for $1.9M, it is half a mil more now. They paid $27K in Dec 1969, which was big bucks then.
That's what the Apple Spaceship will do. My smaller, older house was always worth more, but not now.

 

[John105]

The problem is, the price today is closer to $550K today in many cases.
I sold my folk's home in Sunnyvale in Aug 2019 for $1.9M, it is half a mil more now. They paid $27K in Dec 1969, which was big bucks then.
That's what the Apple Spaceship will do. My smaller, older house was always worth more, but not now.

It's a condo, but they call it a carriage home, 1.3 mil where I live. I can't for the life of me understand how a person could have a shared wall, with someone else, in metro Phila. (this is not Boston, this is not DC, and it's certainly not CA), and the market price is 1.3 mil. Who can get into another person's mind to find out why they behave the way they do. Also, at what multiple is there a "revolution" where the peasants bust down the gates?

Imagine 2-4 bedrooms, most are 3. I'd want 5 bed 6.5 bath at that price. (again metro Phila. not Boston)

 

[Dave Hess]

The problem is, the price today is closer to $550K today in many cases. Too much.
I sold my folk's home in Sunnyvale in Aug 2019 for $1.9M, it is half a mil more now. They paid $27K in Dec 1969, which was big bucks then.
That's what the Apple Spaceship will do. My smaller, older house was always worth more, but not now.

A house is worth what a buyer(s) are willing to pay.

I know a woman that inherited her parents home in Miami Beach and was lucky to sell near the top.
Wealthy person won the bidding war, paid big $$$ only to tear it down a month later to build a bigger more modern house.

Location, Location, Location….

 

[JeffKeryk]

A house is worth what a buyer(s) are willing to pay.

I know a woman that inherited her parents home in Miami Beach and was lucky to sell near the top.
Wealthy person won the bidding war, paid big $$$ only to tear it down a month later to build a bigger more modern house.

Location, Location, Location….

Yup. My house is small and cheaply made; we have had to do a lot to it. When I kick the next owner will start with a dozer. The house was built in '62 so the lot is bigger than most and LG is a nice place to live.

 

[Hillbilly Deluxe]

Is any economist expecting the price of anything to ever return to 2019 levels?

I don't know about that, but I'm pretty sure every person under 50 today has been hoodwinked by the media (imagine that) that once inflation "is under control" (and is gone?), that prices are magically going to do down to some utopian level.

I really wonder WTH people are learning under these college educations....

 

[CKN]

Bought my home in the SouthWest part of the Salt Lake Valley 10 years ago. It was in foreclosure. It's now worth 2-1/2 times what I paid for it. I think very few of us bought solely for investment-but just a place to live. But it's nice to have the nest egg-either to borrow against should the need arise-or leave it to the kids-assuming they deserve it.

 

[JeffKeryk]

Bought my home in the SouthWest part of the Salt Lake Valley 10 years ago. It was in foreclosure. It's now worth 2-1/2 times what I paid for it. I think very few of us bought solely for investment-but just a place to live. But it's nice to have the nest egg-either to borrow against should the need arise-or leave it to the kids-assuming they deserve it.

Well done. Buying a house was the impossible dream for me. Owning your home free and clear is living the dream, at least to me.

 

[RDY4WAR]

I bought my house in early 2020 right before the lockdowns happened. It was appraised at $203k then. It's now worth $284k, a 40% increase.

 

[SC Maintenance]

This just blows my mind. A condo... Not a house, not yard, no garage, no privacy... a condo for $400k... and a steal at that price. I can't fathom it.

My nephew was recruited to Silicon Valley out of college - $175K a year - masters in engineering and top of his class so I assume everyone doesn't make that, but him paying $400K would be the same as the average South Carolina Engineering grad making $70K and paying say around $160K for their first shack. You would think nothing of it.

 

[PandaBear]

My nephew was recruited to Silicon Valley out of college - $175K a year - masters in engineering and top of his class so I assume everyone doesn't make that, but him paying $400K would be the same as the average South Carolina Engineering grad making $70K and paying say around $160K for their first shack. You would think nothing of it.

You would be lucky to find a nice one at 400K. The good school district one I bought back in 15 was like 970k and the typical ones back then was 700k. Between the 2 I'd say the 70K grad buying 160K home is the luckier one, but eventually, one day when he wants to make more he may want to get a 300K job and buy a 2M house here.