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

[hallett21]

Housing bubble is trending towards the bubble busting. Some huge housing and mortgage experts say it has already started, housing sales down, mortgage rates up highest they have been in decades, prices still adjusting, within the next 18 months we will see a very clear picture especially with the next 2 rate increases and how bad it is going to get. 2023 is going to be key year to watch.

Honest question.

During 2008 pretty much every expert was saying “everything’s fine”. I’m not in disagreement that high interest rates mixed with inflation will bring prices down.

But why do you think the experts are “right” this time? What will be the event that causes the pop? A bubble popping to me is 20%+ reduction in prices.

 

[Bpracing1127]

Honest question.

During 2008 pretty much every expert was saying “everything’s fine”. I’m not in disagreement that high interest rates mixed with inflation will bring prices down.

But why do you think the experts are “right” this time? What will be the event that causes the pop? A bubble popping to me is 20%+ reduction in prices.

We’re on our way to that but it doesn’t happen over night. Took about 4 years to hit bottom in 2008.

 

[PaPaG]

Honest question.

During 2008 pretty much every expert was saying “everything’s fine”. I’m not in disagreement that high interest rates mixed with inflation will bring prices down.

But why do you think the experts are “right” this time? What will be the event that causes the pop? A bubble popping to me is 20%+ reduction in prices.

Because I see the numbers reported daily. I agree the 20% rule, I believe that the pop has started and by the time the market catches up with the fed rates we will be at such a sales slowdown the prices will have to come down to the 20%+ numbers. From what I had researched the housing drop would be 18-24 months after the start of this post but that can vary to a shorter or longer time frame. I'm no expert who really knows where it is going to go.

 

[COCA COLA COWBOY]

Honest question.

During 2008 pretty much every expert was saying “everything’s fine”. I’m not in disagreement that high interest rates mixed with inflation will bring prices down.

But why do you think the experts are “right” this time? What will be the event that causes the pop? A bubble popping to me is 20%+ reduction in prices.

We have already seen 11.9% reduction in San Diego.

Powell is more than likely increasing the fed rate .75 today.

Inflation has had little change from the rate hikes.

The experts I talk to are saying 9% lender rates by the end of year and maybe 10% next year.

I'd say 20% is going to happen. Personally, I think we will go back to the values of 2020.

 

[hallett21]

It’s pretty bad right now. I’m pulling out of my search till January as interest rates are up there limiting my burying power. Homes are dropping fast in st George right now. About a 10% fall since peak in March or so and picking up steam.

Do you think something will be happening by January or is that just a personal stop/start time?

Real estate market is currently in denial. Mortgage rates at or over 7%. And a lot of people expect it to hit 10%.

Prices aren’t dropping fast, but homes are sitting on the market. It’ll take some time. Real estate isn’t gonna move as fast as people have come to expect it, prices will continue to drop.

I feel like the last 5-6 years have been an anomaly and everyone has expected it to be the norm.

Homes historically took 60-90 days to sell and they usually went under asking.

IMO the over asking model was a marketing tool the RE industry came up with.

 

[hallett21]

We’re on our way to that but it doesn’t happen over night. Took about 4 years to hit bottom in 2008.

But the needle that popped the bubble was sub prime loans kicking into extremely high interest rates that people could not afford nor refinance out of.

So what’s gonna pop this “bubble”?

 

[attitude]

Housing would need to drop about 35% to keep payments the same when jumping from 2% to 7% interest rates.

At least that’s what my simple math shows.

 

[Bpracing1127]

Because I see the numbers reported daily. I agree the 20% rule, I believe that the pop has started and by the time the market catches up with the fed rates we will be at such a sales slowdown the prices will have to come down to the 20%+ numbers. From what I had researched the housing drop would be 18-24 months after the start of this post but that can vary to a shorter or longer time frame. I'm no expert who really knows where it is going to go.

Yep agreed.

This is what I am seeing as an active home buyer right now.

Rates are over 7%

My buying power is way down because of rates. For me to get the same house today as I was looking at in July the houses today need to drop 100k to keep the same payment. They havnt dropped that much yet, about half of that. With interest rates climbing faster than houses are dropping we will still see a free for all.

I am now in the mindset that this is not a correction anymore and the bubble has poppped. What caused it to pop? Inflation if they cannot stop inflation this is only going to get way worse.

 

[Gonefishin5555]

Honest question.

During 2008 pretty much every expert was saying “everything’s fine”. I’m not in disagreement that high interest rates mixed with inflation will bring prices down.

But why do you think the experts are “right” this time? What will be the event that causes the pop? A bubble popping to me is 20%+ reduction in prices.

Loss of jobs and Airbnb investors dumping their properties. Everyone else will sit tight with their 3% mortgage. For river property I’d say 10-15% drop remaining which will bottom out prices at about the time the rate increases stop

 

[Bpracing1127]

Housing would need to drop about 35% to keep payments the same when jumping from 2% to 7% interest rates.

At least that’s what my simple math shows.

Yep and only 10% roughly so far (market driven) it not a good time to buy or sell

 

[JLG614]

I agree, Seems like everything is lowering ( I wouldn't say dropping yet because it seems to be smaller reductions) but if it is not priced aggressively its sitting. I've been looking at 2020 and newer GMC 2500 Denali's and the prices they have been asking for used trucks is insane. I check weekly and everything is finally being reduced. I'm waiting for them to drop into the 60k range and then I will pull the trigger on one. But I see things sitting across the board, houses, cars and trucks, offroad toys. I don't think anyone is panicked yet and doing fire sales but maybe it will start next year if work and the economy slows more. After mid terms who knows what the government and 2023 will look like. Thank god my wife and I have a good nest egg sitting. We will either get by and ride it out or if work stays good and everything drops maybe we can pick up our first rental property on the cheaper side

 

[Havoc Powesports]

Seeing a fair drop in prices and long listings now. Watching a neighborhood and have seen a couple of homes drop 100k in price since June. Have a house in our area that should have sold in a day or two at the list price, but now 38 days and 30k off so far. Have a family member with a house in Paoli OK, listed at 450, now down to 389, and nothing on it, listed since the end of July.

 

[c_land]

Remember when this got laughed at in a thread earlier this year.... Pepperidge Farm remembers

Rates jumping to 8% would be a wet blanket on the economy. Houses selling for 800k at 3% wont be selling for 800k at 8%.

 

[hallett21]

Remember when this got laughed at in a thread earlier this year.... Pepperidge Farm remembers

In So Cal they absolutely are selling at 7% and over 800k

 

[hallett21]

These all sold in the last week. 800k-2 million

 

[HotRod82]

IMO the lynch pin on this whole thing is the job market. Job market holds then we will have a simple correction, if we start shedding millions of jobs it's going to be a bloodbath.

 

[shintoooo]

This guy is going to lose money on this flip

7000 Vicky Ave, West Hills, CA 91307 | Zillow

7000 Vicky Ave, West Hills CA, is a Single Family home that contains 1396 sq ft and was built in 1958.It contains 3 bedrooms and 2 bathrooms.This home last sold for $970,000 in December 2022. The Zestimate for this Single Family is $1,024,700, which has increased by $11,252 in the last 30...

www.zillow.com

 

[Havasu blue label]

It’s California they will slow down but there selling

 

[NicPaus]

In So Cal they absolutely are selling at 7% and over 800k

It's slowed down a little. But check the listings in Torrance. 1.2. Is average and low inventory.



When it drops 20% below 2020 prices then the crash has officially started.

 

[Gonefishin5555]

Two houses in my tract of homes small one for 1.279 and big one 1.479. No real slow down yet except they have been listed for two weeks if they are still listed in 2 months with price drops then we have a slow down though any price over 1.2 and 1.4 would be acceptable to me

 

[c_land]

These all sold in the last week. 800k-2 million

Dang, that's a lot of bag-holders

https://twitter.com/i/web/status/1587184981360754692

https://twitter.com/i/web/status/1584893042707742722

 

[COCA COLA COWBOY]

IMO the lynch pin on this whole thing is the job market. Job market holds then we will have a simple correction, if we start shedding millions of jobs it's going to be a bloodbath.

Agreed, but that's going to come after the mid term elections. I really think the next year.

Check out this indicator....It's called SPY and is a commonly used stock market indicator. The signal line is the market in 2008...the other line is current 2022. It's amazing how it's almost mirroring 2008.

 

[Instigator]

Agreed, but that's going to come after the mid term elections. I really think the next year.

Check out this indicator....It's called SPY and is a commonly used stock market indicator. The signal line is the market in 2008...the other line is current 2022. It's amazing how it's almost mirroring 2008. View attachment 1168769

Yikes.

 

[Singleton]

IMO the lynch pin on this whole thing is the job market. Job market holds then we will have a simple correction, if we start shedding millions of jobs it's going to be a bloodbath.

That is starting. I know multiple tech companies (I work for one) that has had a RIF in the last three weeks. Since June we have had 2. Was told, we could have more if our margins continue to be compressed. It’s a margin based decision. Expenses are running higher then budget and forecast and to maintain margins you have to cut staffing.

 

[WhatExit?]

Steve Forbes on the Fed, interest rates and the dollar (and energy)

 

[Orange Juice]

IMO the lynch pin on this whole thing is the job market. Job market holds then we will have a simple correction, if we start shedding millions of jobs it's going to be a bloodbath.

.75% increase, and the S&P 500 jumps 1%

 

[EmpirE231]

Do you think something will be happening by January or is that just a personal stop/start time?


I feel like the last 5-6 years have been an anomaly and everyone has expected it to be the norm.

Homes historically took 60-90 days to sell and they usually went under asking.

IMO the over asking model was a marketing tool the RE industry came up with.

The last 2 years specifically have been an anomaly, and a lot of people have bought and sold in the those last 2 years. Some areas rose as much as 50-60% in those 2 years. So even if we just adjust back to "pre-covid" pricing.... that is a lot of people under water.

but if people can hold on... maybe they will...

I do know that the real estate and mortgage business is way down.... historically it takes 6-8 months or so after that for construction to really feel it.

I'm in the insurance business, and on the carrier side we are starting to see a lot of lay-offs. Agency side people are getting squeezed, and you will see a lot of small offices going out of business. Consumer side is gonna get hit with massive rate increases next year (more inflation)

etc etc... it all takes time, but it definitely looks like a perfect storm for things to crash.

 

[westair]

The last 2 years specifically have been an anomaly, and a lot of people have bought and sold in the those last 2 years. Some areas rose as much as 50-60% in those 2 years. So even if we just adjust back to "pre-covid" pricing.... that is a lot of people under water.

but if people can hold on... maybe they will...

I do know that the real estate and mortgage business is way down.... historically it takes 6-8 months or so after that for construction to really feel it.

I'm in the insurance business, and on the carrier side we are starting to see a lot of lay-offs. Agency side people are getting squeezed, and you will see a lot of small offices going out of business. Consumer side is gonna get hit with massive rate increases next year (more inflation)

etc etc... it all takes time, but it definitely looks like a perfect storm for things to crash.

They should be able to hold on having the 3% loans .... where would they go!

 

[traquer]

This guy is going to lose money on this flip

7000 Vicky Ave, West Hills, CA 91307 | Zillow

7000 Vicky Ave, West Hills CA, is a Single Family home that contains 1396 sq ft and was built in 1958.It contains 3 bedrooms and 2 bathrooms.This home last sold for $970,000 in December 2022. The Zestimate for this Single Family is $1,024,700, which has increased by $11,252 in the last 30...

www.zillow.com

These flip houses all look the same lol. Nice master shower though

 

[NicPaus]

They should be able to hold on having the 3% loans .... where would they go!

Move to a apartment that overlooks a gas station and a oil tank farm.

 

[hallett21]

The last 2 years specifically have been an anomaly, and a lot of people have bought and sold in the those last 2 years. Some areas rose as much as 50-60% in those 2 years. So even if we just adjust back to "pre-covid" pricing.... that is a lot of people under water.

but if people can hold on... maybe they will...

I do know that the real estate and mortgage business is way down.... historically it takes 6-8 months or so after that for construction to really feel it.

I'm in the insurance business, and on the carrier side we are starting to see a lot of lay-offs. Agency side people are getting squeezed, and you will see a lot of small offices going out of business. Consumer side is gonna get hit with massive rate increases next year (more inflation)

etc etc... it all takes time, but it definitely looks like a perfect storm for things to crash.

I guess my point is that we’re in downward trend vs a bubble. A bubble indicates an event happening that brings the whole market down. Right now we have people saying havasu will lose 50% while also saying SoCal may not be effected.

I do agree with costs of

Insurance is up
Cars are up
Groceries are up
Fuel is up
Materials are up
Etc etc

Home loans are fixed for the majority. If we pull back to 2020 that doesn’t sound drastic to me. Rent is through the roof in SoCal. I can rent our 18x18 garage out for $2500, that’s insane to me.

I can see the STR market taking a hit, I can see toys going on sale but I can’t see primary homes losing 50%.

When we bought our house in 2018 everyone was already offering over asking. So I think we’ve been in an anomaly for longer than just crazy Covid pricing. By the time we got to Covid we had people offering 10%+ over appraised value.

Yes those buyers will be underwater, but that’s also like you selling me a $100 bill for $110. Doesn’t take a genius to see that won’t work out well lol.

 

[EmpirE231]

They should be able to hold on having the 3% loans .... where would they go!

Hopefully so......... but if people lose their jobs or source of income... can they hold on? I guess it depends on how conservative they were financially.

 

[PaPaG]

Powell just said in Fed Speak that they will continue to increase rates going forward at levels needed to get us down to 2% inflation. Definition: I am guessing another rate increase of .75 in December and another possible .75 at the following meeting if things do not slow down. I was hoping for .75 this round, .50 next two or three and then .25 for the next few.. I doubt that is going to happen.

 

[EmpirE231]

I guess my point is that we’re in downward trend vs a bubble. A bubble indicates an event happening that brings the whole market down. Right now we have people saying havasu will lose 50% while also saying SoCal may not be effected.

I do agree with costs of

Insurance is up
Cars are up
Groceries are up
Fuel is up
Materials are up
Etc etc

Home loans are fixed for the majority. If we pull back to 2020 that doesn’t sound drastic to me. Rent is through the roof in SoCal. I can rent our 18x18 garage out for $2500, that’s insane to me.

I can see the STR market taking a hit, I can see toys going on sale but I can’t see primary homes losing 50%.

When we bought our house in 2018 everyone was already offering over asking. So I think we’ve been in an anomaly for longer than just crazy Covid pricing. By the time we got to Covid we had people offering 10%+ over appraised value.

Yes those buyers will be underwater, but that’s also like you selling me a $100 bill for $110. Doesn’t take a genius to see that won’t work out well lol.

yes funny money type stuff has been happening for the last 4-5 years or so, but it really "artificially" spiked in the last 2 years.

I don't know of too many peoples incomes that have kept up with recent real rate of inflation.

Just inflation alone could be that trigger for the bubble to burst.... but really would be when lots of people start losing their jobs. we've been bits and pieces of the job losses, but I fear it's gonna get worse pretty fast. Most big companies make all decisions on a quarterly basis... so we'll see how things look soon.

 

[hallett21]

yes funny money type stuff has been happening for the last 4-5 years or so, but it really "artificially" spiked in the last 2 years.

I don't know of too many peoples incomes that have kept up with recent real rate of inflation.

Just inflation alone could be that trigger for the bubble to burst.... but really would be when lots of people start losing their jobs. we've been bits and pieces of the job losses, but I fear it's gonna get worse pretty fast. Most big companies make all decisions on a quarterly basis... so we'll see how things look soon.

But then we’re talking about people living on the streets. If they can’t afford the mortgage how can they afford the rent?

The mortgage is fixed this time and not doubling the price of rent like 2008.

 

[Havasu blue label]

It’s sucks for people that pulled money out of there home

 

[hallett21]

It’s sucks for people that pulled money out of there home

Now if you did that and bought the boat and toy hauler “cash” at MSRP…… that’s gonna sting.

I can see insurance fraud on the rise before home sales.

 

[EmpirE231]

But then we’re talking about people living on the streets. If they can’t afford the mortgage how can they afford the rent?

The mortgage is fixed this time and not doubling the price of rent like 2008.

I agree with that... that is the saving grace, IF people can continue to make those payments.

rents will go down, when people can no longer pay their rents. So you might see people walk away and rent in a less desirable area or city.... or move out of state.

I think banks will be quicker to foreclose this time around as well, on someone with a 2.75% rate... who is a few payments behind... in order to get someone else in @ a 7% + rate. They'll take a hit on the value, but make it up on the interest side. we'll see... things can get interesting very fast. Things have already drastically changed in the last 6 months alone.

I've been keeping an eye on used ford raptors, and they are dropping pretty quick now, or sitting for sale. Car lots starting to fill up with inventory. The offroad toy market is pretty stagnant, barber shop next door... parking lot was empty last Thursday and Friday. ... people are starting to spend a lot less money, whether they are forced to... or just voluntarily being cautious. who knows?? but when that happens, businesses start to feel it.

 

[hallett21]

I agree with that... that is the saving grace, IF people can continue to make those payments.

rents will go down, when people can no longer pay their rents. So you might see people walk away and rent in a less desirable area or city.... or move out of state.

I think banks will be quicker to foreclose this time around as well, on someone with a 2.75% rate... who is a few payments behind... in order to get someone else in @ a 7% + rate. They'll take a hit on the value, but make it up on the interest side. we'll see... things can get interesting very fast. Things have already drastically changed in the last 6 months alone.

I've been keeping an eye on used ford raptors, and they are dropping pretty quick now, or sitting for sale. Car lots starting to fill up with inventory. The offroad toy market is pretty stagnant, barber shop next door... parking lot was empty last Thursday and Friday. ... people are starting to spend a lot less money, whether they are forced to... or just voluntarily being cautious. who knows?? but when that happens, businesses start to feel it.

Can you find me a king ranch 3500??

F me they’re all 90k. Except one I found in Texas lol.

 

[EmpirE231]

Can you find me a king ranch 3500??

F me they’re all 90k. Except one I found in Texas lol.

Is that MSRP? New 1/2 ton GMC AT4 I ordered is 70k MSRP... but we'll see how things look when it shows up in December.

 

[hallett21]

Is that MSRP? New 1/2 ton GMC AT4 I ordered is 70k MSRP... but we'll see how things look when it shows up in December.

Used or MSRP

 

[TCHB]

No more free money. https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical
Just look at Glamis last weekend. Full of new toys bought right off the showroom!

 

[HTMike]

In So Cal they absolutely are selling at 7% and over 800k

Obviously not every single market is going to get hurt. Everywhere in the midwest is getting hurt bad right now.

 

[Englewood]

SoCal has so little inventory it’s a very strange time. 7% rates will bring the market to a crawl. I think 4-5% is the sweet spot.

 

[Done-it-again]

No more free money. https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical
Just look at Glamis last weekend. Full of new toys bought right off the showroom!

Look how fast the slips sold out at the Riviera.... Ain't no body hurting...

 

[TCHB]

Look how fast the slips sold out at the Riviera.... Ain't no body hurting...

The guys with money no big deal. The people Making $150k with everything tapped out it will hurt. Interest rates way too low for a long time. The RZR dealer in Havasu telling me $2500 down and free interest. Had a hard time getting a price out the door.

 

[RiverDave]

So if rates are currently at 6-7% and they are expected to go upwards of 10%.. What would be the benefit of not purchasing now?

Or are we all thinking they are going to drop down into the free money ranges again? If so how long does that cycle take? 10 years? 5 years?

RD

 

[EmpirE231]

No more free money. https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical
Just look at Glamis last weekend. Full of new toys bought right off the showroom!

off the showroom floor last year...
dealers actually have inventory sitting around this season, and starting to offer incentives again.

 

[TCHB]

So if rates are currently at 6-7% and they are expected to go upwards of 10%.. What would be the benefit of not purchasing now?

Or are we all thinking they are going to drop down into the free money ranges again? If so how long does that cycle take? 10 years? 5 years?

RD

I am hoping it stays around 7.7% just like the average since 1971. Old guys like fixed interest returns And low risk.

 

[Cdog]

So if rates are currently at 6-7% and they are expected to go upwards of 10%.. What would be the benefit of not purchasing now?

Or are we all thinking they are going to drop down into the free money ranges again? If so how long does that cycle take? 10 years? 5 years?

RD

3-5 quarters out from the next presidential election we will see 4% rates again. There’s my prediction.