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(CNBC)   How to cause a housing price collapse. Step1) Have all homeowners put their houses on the market at the same time fearing they will miss out on record prices   (cnbc.com) divider line
    More: Amusing, Real estate, home sales, higher mortgage rates, supply of homes, sixth straight month of sales declines, home sellers, measure of signed contracts, Real estate brokerage Redfin  
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1317 clicks; posted to Business » on 26 May 2022 at 5:20 PM (4 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



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2022-05-26 5:01:29 PM  
You cannot afford an American dream.
 
2022-05-26 5:29:23 PM  
It's because of the rate hike, and the further rate hikes to come.  If you were waiting for a time to sell, best get after it, because borrowers won't have access to financing for much longer.  If you live in a city, don't worry - you can still name your price, because investment bankers want to buy your house and rent it out for massive damage.  Rents won't be dropping, because living space is already in a pinch and not getting any better.
 
2022-05-26 5:30:02 PM  

vudukungfu: You cannot afford an American dream.


Somebody is wishing they will be able to do so soon.

/they still won't
 
2022-05-26 5:31:18 PM  
Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.
 
2022-05-26 5:37:51 PM  
Definitely happened in my neighborhood. For over two years, there would be 4-5 houses on the market. Today there's 23 existing houses, plus another 13 under construction.

And some of them are dropping their asking price, which is probably 30-50% more than two years ago.
 
2022-05-26 5:42:06 PM  
LOL

Most finance news of this kind should just use the same headline:

Americans Prove How Stupid They Are About Money

Housing, NFTs, crypto, Nigerian scams, extended warranties, the "IRS" telling them to pay taxes using a gift card, multilevel marketing

Americans in general are just goddam dum-dums about money. They may be even more stupid about money than they are about politics.
 
2022-05-26 5:45:11 PM  

natazha: Definitely happened in my neighborhood. For over two years, there would be 4-5 houses on the market. Today there's 23 existing houses, plus another 13 under construction.

And some of them are dropping their asking price, which is probably 30-50% more than two years ago.


Not seeing it in mine.  Houses that were $1XX,000 in 2008-2009 (bottom of the market) are still $5XX,000 today.

/Riverside, CA
//we actually have people who work in LA/OC but now go into the office one or two days a week and who can't afford $1-2 mill for a house there paying $500k for one here and dealing with the commute part time
 
2022-05-26 5:46:18 PM  

ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.


A lot of people are always in the middle of big financial decisions and it's usually one thing that pushes them one way or the other.  So if you have been thinking about selling/moving/downsizing and there are signals that home prices in your area are about to go down, you may act now.
 
2022-05-26 5:57:12 PM  
Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?
 
2022-05-26 5:58:37 PM  

natazha: Definitely happened in my neighborhood. For over two years, there would be 4-5 houses on the market. Today there's 23 existing houses, plus another 13 under construction.

And some of them are dropping their asking price, which is probably 30-50% more than two years ago.


Yeah, I've noticed in the past week or two that prices have suddenly dropped from what they were asking.
 
2022-05-26 6:00:49 PM  
Some may sell but there is a lot of us on a 2 to 3 percent mortgage who are fine with a monthly payment cheaper than rent.
 
2022-05-26 6:02:06 PM  
I farking hope it crashes.
 
2022-05-26 6:03:34 PM  

DuneClimber: Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?


A very large percentage of new housing is always "luxury" and always has been.

"Normal" people buy used.
 
2022-05-26 6:04:07 PM  

My Second Fark Account: I farking hope it crashes.


Last time it did it took down the entire economy.
 
2022-05-26 6:07:26 PM  
Must be all those people with spare houses just sitting there.

I hate moving, wouldn't do it just for money.
 
2022-05-26 6:10:51 PM  

Kuroshin: borrowers won't have access to financing for much longer


Sure they will. Just like all the other times interest rates were more than 4% (which is most of the time over the last 40 year).

People are going to have to lower their expectations or sellers lower prices. But loans will be available, just not as large or cheap.
 
2022-05-26 6:11:52 PM  
You'd think it's a mistake, but around here houses are snapped up the day they're listed for over the asking price.  Like, by the time you see the ad and put in an inquiry, stuff is already signed.  The owner is some useless, faceless, out-of-state monied interest who can afford instant investments.  There is just no competing with that.
 
2022-05-26 6:30:51 PM  

gadian: You'd think it's a mistake, but around here houses are snapped up the day they're listed for over the asking price.  Like, by the time you see the ad and put in an inquiry, stuff is already signed.  The owner is some useless, faceless, out-of-state monied interest who can afford instant investments.  There is just no competing with that.


What happens as soon as these people start seeing the price of the investment dropping significantly? I'm thinking we'll see a lot of investors who have been buying up these properties dump them as soon as the prices start dropping significantly, so price drops could snowball fast.
 
2022-05-26 6:34:05 PM  
As someone who wants a house and can't afford one with the prices the way they've been lately, I support or endorse this behavior.

A 1950's house, not redone at all (wood paneling, etc), a mile and a half from me, 4 bedrooms, 1.3 acres of land, with assessed values (for tax purposes) generally in the $200-300K range:

Listed at $320K in October 2011.  Price cut to $270K, then $250K in 2012, listing removed, relisted at $250K, cut to $210K, sat on the market for almost a year and a half before selling for $150K in 2013.

Listed for rent at $2K/month briefly in 2014, but then they apparently decided to just live in it for a few years.  In 2017 they tried listing it for rent a bunch of times but kept having to cut the price if it was more than $2200/month and may have just decided to live in it some more.

This March, though?  People overpaying for housing?  Here's our chance!  Listed at $599K.  Got a bunch of views but no sale.  Cut to $550K in April.  Realistically, probably a $350-$450K house in this market, since anyone who doesn't want to live in the 1950s is going to need to renovate.
 
2022-05-26 6:34:24 PM  

DuneClimber: Where the fark are the developers building, you know, normal housing for normal people?


I don't think they do very much of that these days.
 
2022-05-26 6:37:37 PM  
Eh, I was talking to the person building a new house across the street from me in Atlanta. He says that the demand is still there. His new homes are receiving offers when they still have one to two months for work left. The only reason he and other builders aren't building more at the moment is because supply chain issues are delaying how long it takes to get appliances -- he has a bunch of property that he's just going to wait until 2023 to start building on.
 
2022-05-26 6:40:57 PM  

ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.


It is also driven by life. I bought at the top of the market in 2007.  All my roommates were going their separate ways. I had a dog. I had a soon to be fiancee.

I was able to buy the smallest, shiatiest house in the rich school school district and the house has always gone up in value. After 3 refinances, I was able to halve my interest rate and expand some. If I had waited, I probably would have saved some money but I needed a place and renting was not an appealing option.
 
2022-05-26 6:42:31 PM  

Kuroshin: It's because of the rate hike, and the further rate hikes to come.  If you were waiting for a time to sell, best get after it, because borrowers won't have access to financing for much longer.  If you live in a city, don't worry - you can still name your price, because investment bankers want to buy your house and rent it out for massive damage.  Rents won't be dropping, because living space is already in a pinch and not getting any better.


I'm a mile from the beach in a rapidly "gentrifying" neighborhood. I'm hoping that will cushion the hit somewhat.
 
2022-05-26 6:47:10 PM  

ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.


I'm going to sell my house now at the top of the market and then get back in when the market crashes.  I'm basically a financial genius.
 
2022-05-26 6:51:46 PM  

DuneClimber: Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?


No. Thats the only type of development that makes financial sense. You can thank rent control and prop 13 for that.
 
2022-05-26 6:54:36 PM  
Also,

Interest rates go up, bond prices go down.
Interest rates go down, bond prices go up.

Low interest rates & QE for ~12 years fueled the "everything" bubble.

Higher interest rates now will deflate the ~12 year free moneyesque coke bender. 

The amount of people who were caught off guard by this blows my mind. It's gravity.
 
2022-05-26 6:56:42 PM  

ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.


Totally depends on where you're moving to.  Example, buy a house in California in 2010 for $600k, sell it today for $2.2mil.  Pay your capital gains and bail out to almost anywhere else and buy a crazy house for $500k.

Tada!
 
2022-05-26 7:18:55 PM  

Geotpf: DuneClimber: Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?

A very large percentage of new housing is always "luxury" and always has been.

"Normal" people buy used.


This.

You just want new units being built in your area.  Did they rip out 50 units and replace with 40 "luxury" unit?  No, then good.  Pretty much more total house units = will make housing overall go down in price.  Where it gets bad is when a 20 story, 80 unit building is converted to 10 "luxury" apartments.  Because after the "development" is done there is less housing overall on the market.

Now, total mix is still farked, but it at least adds total residences.

Now what we really need is more 'starter' houses that can then stay in place.  I've noticed a distinct lack of 3 bedroom houses in my area.  Effectively that starter home that gets you from 25 and first kid on the way to 35 with a second kid just about to enter pre-school.  What you can afford at 25 vs. what you can afford at 35 is worlds apart in most cases.

/Yes, yes, there's those that haven't seen a raise ever and are still earning minimum at 35... your basement dwelling ass doesn't count.
 
2022-05-26 7:27:58 PM  

D135: ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.

I'm going to sell my house now at the top of the market and then get back in when the market crashes.  I'm basically a financial genius.


I sold and found a relatively inexpensive rental nearby with a better layout and kitchen frankly. Pretty sure I just lucked out.
 
2022-05-26 7:32:57 PM  

Red Shirt Blues: Some may sell but there is a lot of us on a 2 to 3 percent mortgage who are fine with a monthly payment cheaper than rent.


Yeah same boat (and also really like my house, and improving it). Let the bubble burst. Lower property taxes and prices might come down enough that I buy a 2nd house
 
2022-05-26 7:44:12 PM  

My Second Fark Account: I farking hope it crashes.


So you hope the economy tanks because you're upset about housing prices?  That's not childish at all.
 
2022-05-26 7:48:05 PM  

Geotpf: My Second Fark Account: I farking hope it crashes.

Last time it did it took down the entire economy.


So?
 
2022-05-26 8:05:59 PM  

MadHatter500: Now what we really need is more 'starter' houses that can then stay in place.  I've noticed a distinct lack of 3 bedroom houses in my area.  Effectively that starter home that gets you from 25 and first kid on the way to 35 with a second kid just about to enter pre-school.  What you can afford at 25 vs. what you can afford at 35 is worlds apart in most cases.


Plenty of 3-bedroom houses around me, and more being built -- but they're all $700K+ McMansions.  The 'starter' homes -- also 3-bedroom, but more modest in scale and built 50 years ago -- are more like $300-$400K but are almost all occupied, by a mix of old folks who've lived in them for 50 years, and folks who got in about 20 years ago.  (Those folks don't find the town unaffordable; those of us who moved here in the last 10 years disagree.)

I want lots of rooms, but I don't need more than 100 square feet to sleep in, and I don't need any 200-square-foot rooms.  Nor does any of my kids.  My wife might need 100 square feet of "dressing room" and 100 square feet of walk-in closet, but the rest of us don't feel the need to look like we're going for dinner at the White House before we set foot out the door. ;)
 
2022-05-26 8:06:52 PM  
There's nowhere to move to, unless you're ready to end up in WV or an apartment for the next 5 years.

You sell your house and some equity firm will buy it up, that price on SFH isn't going anywhere.
 
2022-05-26 8:13:46 PM  

DuneClimber: Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?


No money in it.  Same reason econobox cars aren't pushed in the US.  More profit in a bloated SUV or bro-dozer.
 
2022-05-26 8:16:02 PM  

ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.


Theoretically, if you want to bet prices go down drastically, it may make sense to sell at the top of the market, rent for months/year, rebuy into market after prices drop.

/sell high, buy low. you can't explain that.
//housing bubbles...how do they work?
 
2022-05-26 8:20:09 PM  

emonk: Must be all those people with spare houses just sitting there.

you mean, people or corporations with investment property? I doubt they exist.

 
2022-05-26 8:31:36 PM  

ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.


I suspect a good bit of the sellers are owners of rental properties (including AirBnb); the houses aren't in great shape and they rightfully believe they can unload the houses now without having to spend a dime on repairs, new appliances, etc.

When I was looking at homes this winter, I saw a bunch that were rentals which fit this bill (one still had the wifi password posted) - and people paid cash for them despite the homes easily needing $150k of work.
 
2022-05-26 8:53:21 PM  

logieal: natazha: Definitely happened in my neighborhood. For over two years, there would be 4-5 houses on the market. Today there's 23 existing houses, plus another 13 under construction.

And some of them are dropping their asking price, which is probably 30-50% more than two years ago.

Yeah, I've noticed in the past week or two that prices have suddenly dropped from what they were asking.


Doubling mortgage rates in the span of a few months will do that.
 
2022-05-26 8:53:55 PM  
We are at the climax stage. A bunch of people are rushing to get in right at the top just as a bunch of people are rushing to get out because they know it is the top. Which group is guessing correctly now? Which will be correct in a month or two?

Clearly the answer is to get in, flip to a bigger fool and get out.

The suspense is killing me.
 
2022-05-26 8:57:32 PM  
We really need a Housing Hording Tax.  Every additional house you own past a second house the tax on that house increases exponentially.
 
2022-05-26 9:09:45 PM  

thornhill: ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.

I suspect a good bit of the sellers are owners of rental properties (including AirBnb); the houses aren't in great shape and they rightfully believe they can unload the houses now without having to spend a dime on repairs, new appliances, etc.

When I was looking at homes this winter, I saw a bunch that were rentals which fit this bill (one still had the wifi password posted) - and people paid cash for them despite the homes easily needing $150k of work.


People will do all kinds of math gymnastics. If they are anticipating inflation getting out of control, they don't care about the loan payments and costs to get it marketable. Those are FUTURE dollars, not today dollars. All they know is that they want to get rid of today dollars as fast as they can because they are worth 10% more than 2023 dollars.

I knew a guy who borrowed against his home and his business to build homes based on high inflation reducing the value of his loans, producing profit for a marginal business. He eventually lost his home, his family, his business, his reputation. He was my stepfather.

You can also figure that anyone cashing out of the stockmarket or bitcoin or whatever has to put their money somewhere. Cars? Airplanes? Boats? People expecting inflation just want something tangible.
 
2022-05-26 9:12:37 PM  

wildsnowllama: We really need a Housing Hording Tax.  Every additional house you own past a second house the tax on that house increases exponentially.


The UK has a bedroom tax. I have few details, but from what I understand, every extra bedroom you have makes you liable for some tax in addition to your property tax.

So if you want to have an extra house in the country, and do not have a tenant, then you get smacked for the property tax and however many bedrooms it has. I guess?
 
2022-05-26 9:18:59 PM  

mononymous: ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.

Theoretically, if you want to bet prices go down drastically, it may make sense to sell at the top of the market, rent for months/year, rebuy into market after prices drop.

/sell high, buy low. you can't explain that.
//housing bubbles...how do they work?


This creates a really odd phenomenon with price bubbles. People get in, make a lot of money, get out, watch the bubble get bigger, and then figure they were wrong, and jump back in at higher prices, thereby losing more than they would have, and missing the gain.

This is why price dips perpetuate bubbles. They create pools of cash that people eventually use to buy in at higher prices.

The smart money gets out and stays out until there is "blood in the streets." Actual huge losses and financial pain signal that the bubble is over. Until you see articles about angry mobs and suicide, you are not looking at a bottom.

Ahem. So they say. That is pretty well the size of it, though.
 
2022-05-26 9:46:44 PM  

sleze: ANDizzleWI: Why do people do this?

Unless you plan to downsize or renting makes more financial sense, selling your home now to take advantage of the seller's market won't benefit you as you'll have to turn around and be a buyer on the same seller's market you just took advantage of.

It is also driven by life. I bought at the top of the market in 2007.  All my roommates were going their separate ways. I had a dog. I had a soon to be fiancee.

I was able to buy the smallest, shiatiest house in the rich school school district and the house has always gone up in value. After 3 refinances, I was able to halve my interest rate and expand some. If I had waited, I probably would have saved some money but I needed a place and renting was not an appealing option.


I did the same in 2010... moved out of a 2-bedroom rental townhouse and bought a small 3-bedroom in a neighborhood with good schools. It made sense at the time and I don't regret the decision. But we have definitely outgrown this house as our kids have gotten older and I've started a business at home.

But for now we're going to wait a year or two until prices drop (or at least level out) where we want to move (from the Des Moines suburbs to the Twin Cities). We could sell this house for a LOT more now, but for us it makes more sense to sacrifice a bit of profit on this house and wait to spend a bit less on a house in Minneapolis.
 
2022-05-26 10:48:52 PM  
A housing correction needs to happen.  Prices need to average out to 2 to 3 times the local area median income.

Yes that means a lot of people are going to own houses that they paid a lot more for than they could have if they bought after the correction.

I have little sympathy for these people.  If they bought a house to live in, they still have a house to live in.  They could afford the price they bought it for when they bought it and they can afford it still.

If they bought a house as an "investment", they're no different than a ticket scalper, a natural disaster bottled water price gouger, or a stock market manipulator.  Even crypto bros are more ethical as they're not creating a scarcity of a commodity essential to life and profiting off said scarcity.

Now when housing prices drop, what's to discourage investors from gobbling up the supply and renting them out?  Hold on to your butts, it's revolutionary.

Rent control thru supply and demand.  A certain level of vacancy across the city/county/whathaveyou must be maintained for properties in the "basic" tier.  Use that number to decide how many "basic" apartments must be built along with the "luxury" ones.  If these companies flat out refuse to build any housing, force them to convert units down to bring the vacancy rate down to a "non-emergency" level.  This is required for the next step.

Ban the division of single family homes into multiple units unless they're over 4 bedrooms.

Require all single family homes rented be available for sale to the tenant at a value set by the landlord.  This value will be used as the tax assessment.
 
2022-05-26 11:12:31 PM  

DuneClimber: Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?


Are those apartments going empty?  If they're attracting tenants, that's relieving pressure on other properties.

Same thing with houses - even if it's just "McMansions" being built, maybe a family moved there who would have bought the 3000 sq ft house from 2005, and that one is bought by the person who would have bought the 2500 so fr house from the 90's, which is bought by someone who would have bought the 2000 sq fr house from the 70's, and suddenly the 1200 sq ft ranch from the 50's is available as a starter home.
 
2022-05-26 11:53:48 PM  

Izunbacol: DuneClimber: Every time there's news about any residential development in my area, especially apartments, it's "luxury" housing. Apartments that start at $2,000, which around here is a lot. All they care about is developing high end housing.

Where the fark are the developers building, you know, normal housing for normal people?

Are those apartments going empty?  If they're attracting tenants, that's relieving pressure on other properties.

Same thing with houses - even if it's just "McMansions" being built, maybe a family moved there who would have bought the 3000 sq ft house from 2005, and that one is bought by the person who would have bought the 2500 so fr house from the 90's, which is bought by someone who would have bought the 2000 sq fr house from the 70's, and suddenly the 1200 sq ft ranch from the 50's is available as a starter home.


As more wealthy people move into a neighborhood, it becomes more desirable.  All values go up.  Existing landlords price legacy tenants out, paint everything gray, throw down some lumber liquidators flooring, and now that $600/mo apartment rents for $1800 a month.

The old tenants move into the new occupant's old 4 bedroom 20 miles out of the city that's been converted into two one-bedroom apts and an efficiency.  That pays the rent on the new place and the tax on the old place.
 
2022-05-27 12:40:07 AM  
This won't cause a crisis lapse because unless these people are selling second houses, they will most all be buying another home.
 
2022-05-27 1:32:05 AM  
All part if the plan.  Blackrock will buy.  If they dont have enough money the fed will print some and make a zero interest loan.

Problem solved.
 
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