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For the Real Estate Drop in sales and price Naysayers HOLD ONTO YOUR HATS

pronstar

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FOR SURE, so many were able to buy that could not afford the monthly payments with the higher rates and were able to with the crazy low rates. Also, reports just came in that 33% of all homes bought this year were bought using cash. No one knows exactly what is going to happen only time will tell.

Yup, and these buyers further worsened the lack of supply for entry-level homes, driving prices upward.

I wonder how many “cash buyers” are using firms that front cash like this one?

…probably not a huge number, but certainly not zero, either.
 

Sportin' Wood

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Yup, and these buyers further worsened the lack of supply for entry-level homes, driving prices upward.

I wonder how many “cash buyers” are using firms that front cash like this one?

…probably not a huge number, but certainly not zero, either.
FWIW The "Cash" Buyer that bought our home 6/21 took a short-term loan to generate the cash and then did a ReFi to settle. I suspect it happens more than we think.
 

COCA COLA COWBOY

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I can provide a bit of real world middle of the road experience. I sold 3/2 1200SF average type home in central San Diego that went into escrow May 18th for $750,000 and closed in June. An extremely similar home is available in the same neighborhood for $680,000 and has not sold in the last 2 weeks of it being on the market.

I can't tell you how many sellers are still dreaming their homes are still worth April/May pricing.
 

pronstar

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I can provide a bit of real world middle of the road experience. I sold 3/2 1200SF average type home in central San Diego that went into escrow May 18th for $750,000 and closed in June. An extremely similar home is available in the same neighborhood for $680,000 and has not sold in the last 2 weeks of it being on the market.

I can't tell you how many sellers are still dreaming their homes are still worth April/May pricing.

Down the street from me is a flip that a neighbor bought 1.5 years ago off the MLS.

Tokk 1.5 years to rehab, its on the market now for a higher price per SF than any home in this neighborhood has ever sold for.

My house is nearly 2x the size on a larger lot, and she wants more than my house appraised for just 6 months ago.

Seen it happen all too often. They’re trying to recoup their investment, but it’s a pipe dream. You can’t buy at retail, rehab at retail, then expect to make a profit. Throw in a declining market and they’re fucked.
 

Havasu blue label

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Maybe they sold there Calif home they lived in for 20 years and took there equity if any left and bought in a lower cost of living state
 

NicPaus

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I can provide a bit of real world middle of the road experience. I sold 3/2 1200SF average type home in central San Diego that went into escrow May 18th for $750,000 and closed in June. An extremely similar home is available in the same neighborhood for $680,000 and has not sold in the last 2 weeks of it being on the market.

I can't tell you how many sellers are still dreaming their homes are still worth April/May pricing.


What were those houses going for in 2010?

See if we are at crash levels yet.
 

LargeOrangeFont

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Playing devils advocate for a moment… one could argue that ultra-low rates created a pool of buyers who were otherwise unable to afford homes in a “normal” market.

Continuing that advocacy.. we have been in an “abnormal” market for 20 years now.
 

LargeOrangeFont

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Yup, and these buyers further worsened the lack of supply for entry-level homes, driving prices upward.

I wonder how many “cash buyers” are using firms that front cash like this one?

…probably not a huge number, but certainly not zero, either.

Those outfits were advertised all over RE hotbeds until a few months ago
 

LargeOrangeFont

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FWIW The "Cash" Buyer that bought our home 6/21 took a short-term loan to generate the cash and then did a ReFi to settle. I suspect it happens more than we think.

It happens a ton. I talked to many of those outfits in Feb when assessing my options.
 

TCHB

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Living there full time I got to know quiet a few snowbirds that will be selling to take the cash and run. Not sure is the new snowbirds will step in to the higher prices. Let’s see how long single family homes on the market goes over 500. https://www.zillow.com/lake-havasu-city-az/houses/
 

Boatymcboatface

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Living there full time I got to know quiet a few snowbirds that will be selling to take the cash and run. Not sure is the new snowbirds will step in to the higher prices. Let’s see how long single family homes on the market goes over 500. https://www.zillow.com/lake-havasu-city-az/houses/



Almost all the houses I click on in your link are listed for double what they paid for it in 2020. The ones that aren’t are even higher than double if you can’t see there’s going to be a correction or a decent price reduction I can’t help you.

Is asking to go back to 20% above the price of 2020 purchase price rooting for people to fail? I think it’s just hoping some of these sellers put down the crack pipe!
 

Havasu blue label

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Majority of the havasu homes for sale in havasu are realtor owned ok let say 25 percent crazy loans
 

530RL

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681 PSF.

Havasu has become California.

 

c_land

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Living there full time I got to know quiet a few snowbirds that will be selling to take the cash and run. Not sure is the new snowbirds will step in to the higher prices. Let’s see how long single family homes on the market goes over 500. https://www.zillow.com/lake-havasu-city-az/houses/
This site is really good for gauging stats of any particular market:

Altos Research - Get Real-Time Market Insights with Altos Reports

483 on the market in Havasu, List price down about 12% since June $652k - $579k, may be seasonal if you look at the long term chart

1663432456785.png
 

COCA COLA COWBOY

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Down the street from me is a flip that a neighbor bought 1.5 years ago off the MLS.

Tokk 1.5 years to rehab, its on the market now for a higher price per SF than any home in this neighborhood has ever sold for.

My house is nearly 2x the size on a larger lot, and she wants more than my house appraised for just 6 months ago.

Seen it happen all too often. They’re trying to recoup their investment, but it’s a pipe dream. You can’t buy at retail, rehab at retail, then expect to make a profit. Throw in a declining market and they’re fucked.

You just can't go by active listings...especially right now. We have a lot of hungry realtors that will list anything at any price. That doesn't mean they will sell. I can publish hundreds of overpriced listings right now that will not sell. Hence, the huge amount of price reductions. A lender just posted that in SD 18% of listings had price reductions.
 

COCA COLA COWBOY

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Just a heads up....during the 80's people did not buy homes, they bought assumable loans. If rates get too high you will see values decline so much that the good deals will be forced sales. However, some of the better properties will be sold where the loans are assumable at those 2.5-3% rates. The sellers will walk away from their previous equity and use their low interest rate loan as marketing to dump their home.

It's pretty strange....the news wasn't talking about real estate tanking until this week. Now, it seems like every financial station was discussing this topic. It could get quite interesting. I'm even seeing rents decline in some areas. Rents usually don't decline in recessions, but we just entered recessionary numbers and already seeing this.
 

hallett21

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Just a heads up....during the 80's people did not buy homes, they bought assumable loans. If rates get too high you will see values decline so much that the good deals will be forced sales. However, some of the better properties will be sold where the loans are assumable at those 2.5-3% rates. The sellers will walk away from their previous equity and use their low interest rate loan as marketing to dump their home.

It's pretty strange....the news wasn't talking about real estate tanking until this week. Now, it seems like every financial station was discussing this topic. It could get quite interesting. I'm even seeing rents decline in some areas. Rents usually don't decline in recessions, but we just entered recessionary numbers and already seeing this.
Can any loan be assumed? I always thought that had to be laid out ahead of time.
 

LargeOrangeFont

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Can any loan be assumed? I always thought that had to be laid out ahead of time.

I’m suspecting this will be the new gimmick to boost home sales and prices as we move ahead.

What do you do if your loan is assumed though? Assume someone else’s loan?
 

pronstar

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For loans that aren’t assumable, many banks simply don’t care who makes the payments as long as they are being made on time.
 

530RL

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Just a heads up....during the 80's people did not buy homes, they bought assumable loans. If rates get too high you will see values decline so much that the good deals will be forced sales. However, some of the better properties will be sold where the loans are assumable at those 2.5-3% rates. The sellers will walk away from their previous equity and use their low interest rate loan as marketing to dump their home.

It's pretty strange....the news wasn't talking about real estate tanking until this week. Now, it seems like every financial station was discussing this topic. It could get quite interesting. I'm even seeing rents decline in some areas. Rents usually don't decline in recessions, but we just entered recessionary numbers and already seeing this.
Assumable loans were a contributing factor to the S&L crisis in the 80’s as these institutions held long term assets at low rates (mortgages) and funded them with short term deposits at higher market rates resulting in negative interest rate spread, monthly losses and a failure of the institution.

As a result conventional mortgages now primarily have a “due on sale” clause. To the extent someone sells their house and doesn’t pay off the loan they are still on the hook for it. Further, if we had a protracted period of high rates, loan servicers would have a fiduciary duty to enforce the due on sale clause in order to exit that below market mortgage security and return the capital to the investor to re-invest at higher rates of return.

As Pron points out very few servicers care when rates were going down and collateral values were going up as not enforcing the due on sale clause is a better economic decision consistent with a loan servicers obligations. We will see if they continue to take such a position when the owner of the loan’s financial interests would then demand enforcement of the due on sale clause?
 

530RL

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VA is assumable and some other products.
Some VA loans are assumable but the new borrower must still qualify and pay a .5% transfer fee.

The original borrower is not released from liability unless they specifically request it and are granted it.

The original borrowers VA entitlement is no longer available unless the person assuming the loan has VA entitlement and the original borrowers entitlement is specifically released once the new borrowers own entitlement is substituted. More simply without the release of the original borrowers entitlement they are not eligible for a new VA loan until that other loan is paid in full.
 

TCHB

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A friend just called me about putting their house up for sale. They spend about 4-5 months in town and less every year with family commitment. He figures if he sells now the extra money will pay a lot of part time rent and free them up to go other places in the winter. They have been in Havasu 8 years.
 

hallett21

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According to google rates have broken 7%.

So unless you’re moving for work, getting divorced or need money why would you give up your low interest rate?

I think we’re headed towards an inventory shortage.
 

Englewood

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According to google rates have broken 7%.

So unless you’re moving for work, getting divorced or need money why would you give up your low interest rate?

I think we’re headed towards an inventory shortage.
That is the wildcard...If people can weather the storm and not be forced to sell, I think we'll be ok.

I would be in the market but I am not going from 3% to 6%+.
 

Done-it-again

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According to google rates have broken 7%.

So unless you’re moving for work, getting divorced or need money why would you give up your low interest rate?

I think we’re headed towards an inventory shortage.
haven't seen those rates yet.....

 

hallett21

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haven't seen those rates yet.....

I figured they weren’t that bad. But if you google mortgage rates and look at what they populate it shows this

8594D72B-F5DF-4E2C-9D46-6EB720144621.png
 

RiverDave

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A friend just called me about putting their house up for sale. They spend about 4-5 months in town and less every year with family commitment. He figures if he sells now the extra money will pay a lot of part time rent and free them up to go other places in the winter. They have been in Havasu 8 years.

Let me know if we can help..
 

OldSchoolBoats

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I figured they weren’t that bad. But if you google mortgage rates and look at what they populate it shows this

View attachment 1156296

$600K PP
20% Down
$480K LA
740 FICO

I could offer 6.5% on that scenario today with no points and no lender fees.

Problem with the Google rates is that they are surveying a lot of retail lenders with 300-400bps of margin baked into their sheets on conventional. There are definitely some companies local to me who are at 7% or close to it, today. Wholesale brokers are easily .375 - .5 better in RATE compared to retail right now. Too much middle management in that space. Everyone wants their piece and the consumer is the one who ends up paying for it.
 

TCHB

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I think there are tens of millions of people feeling the same way.
I bought my first house with a 12% loan. I tell people the most important thing is that you buy in a neighborhood you like for you and family. The vacation home is a different story because of the high turn over for a lot of reasons.
 
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LargeOrangeFont

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I bought my first house with a 12% loan. I tell people the most important thing is that you guy in a neighborhood you like for you and family. The vacation home is a different story because of the high turn over for a lot of reasons.

Agreed. And if interest was 24% several years later, you’d stay put for sure.
 

hallett21

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COCA COLA COWBOY

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We may see 9% rates before years end. If Biden keeps spending money, we may have to see 10% or 7% by the fed to combat his induced inflation. I am going to live like a pauper until this is over. Going big and buying everything in sight when I feel the grunt of the drop is over. We could see a real estate crash of some sort. Won't happen until after the mid-terms, but I'm starting to think it could happen.
 

LargeOrangeFont

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We may see 9% rates before years end. If Biden keeps spending money, we may have to see 10% or 7% by the fed to combat his induced inflation. I am going to live like a pauper until this is over. Going big and buying everything in sight when I feel the grunt of the drop is over. We could see a real estate crash of some sort. Won't happen until after the mid-terms, but I'm starting to think it could happen.

My good friend in the industry thinks we will see 10% before it turns.

A return to normalcy isn’t a crash.

The question is still the same. If there is a crash where do those displaced people go? With those kind of rates people will do anything they can to stay in their house with a low rate.
 

EmpirE231

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anyone with common sense will hold on, until they can't no mo.

One thing about everyone having some equity, is it provides a cushion... and people can reduce the price, and still walk away with something.

This is one of the houses I was eye balling in the last few months (the other fell out of escrow after 45 days and is back on the market)... anywho listed at 1.4M. price dropped to 1.325M a week later, then dropped again a week later... finally closed @ 1.25... took over 40 days to close. The bad sign I see, is these homes were close to 1M new in 2015 on a bare dirt lot. Small sample size, I know... but I'm always trying to read between the lines

 

LargeOrangeFont

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anyone with common sense will hold on, until they can't no mo.

One thing about everyone having some equity, is it provides a cushion... and people can reduce the price, and still walk away with something.

This is one of the houses I was eye balling in the last few months (the other fell out of escrow after 45 days and is back on the market)... anywho listed at 1.4M. price dropped to 1.325M a week later, then dropped again a week later... finally closed @ 1.25... took over 40 days to close. The bad sign I see, is these homes were close to 1M new in 2015 on a bare dirt lot. Small sample size, I know... but I'm always trying to read between the lines


You pretty much defined a normal home sale there. The house was priced for March 2022, and the owner had to lower the price.

$250k upside for a $1M house in Riverside in 7 years as we enter a housing downtown isn’t bad. Seems about normal.
 
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