Zelman on housing

[Gregmal]

Saw a property come on market in an area I know very well at what I considered a fair price. Listed a couple days ago. Figured hmmm, this great housing crash everyone is predicting might finally be occurring. Didn’t really want the property per say, but with rents still solid figured I’d see if I could get it a small discount to asking price and then would make it work. Reached out to my realtor, and…already under contract over ask. GFC 2.0 is here!

[cubsfan]

^^ So much for the housing crash...

[Gregmal]

First thing you need to see is that if someone is applying stock market characteristics to the housing market theyre an idiot and you can write off anything they have to say.
 

Someone I hadn’t spoke to in a while emailed me the other week asking if I was concerned that some people might already be down 10-20% from prices a few months ago on their recent home purchases. I was going to respond and eventually didn’t cuz I didn’t want to be too condescending but if that’s how you think of the housing market you shouldnt be anywhere near it. There’s no day trading of houses, there’s very rarely forced liquidation and those take months or years. Anything that sold today and previously is gone. 95% 30 year fixed and vetted rates they know they can afford as demonstrated by lending standards. So the only area you may see true declines in in new supply but even there the builders will take volume over pricing all day. Investors generally underwrite their purchases to rental income. And everyone else buying just wants a home. So to answer his question about the mark to imaginary market on a home purchase from say April? Unless you’re a degenerate gambler…how are you feelin? Great that you’re finally in a home. 
 

Second thing is that not all pricing is equal and simply following headlines is misleading. Great example was a home in Florida I was looking at. Sold in 2016 for $700k. 2020 for $1.7m. $2021 for $2.4. Listed in April for $5.5m and was reduced twice down to $4.4 before selling at $4.2m. To the dumb housing bear this is bearish because of all the “price cuts”. I don’t even need to explain how it’s actually the opposite. 

Edited August 7, 2022 by Gregmal

[Dinar]

12 hours ago, Gregmal said:

First thing you need to see is that if someone is applying stock market characteristics to the housing market theyre an idiot and you can write off anything they have to say.
 

Someone I hadn’t spoke to in a while emailed me the other week asking if I was concerned that some people might already be down 10-20% from prices a few months ago on their recent home purchases. I was going to respond and eventually didn’t cuz I didn’t want to be too condescending but if that’s how you think of the housing market you shouldnt be anywhere near it. There’s no day trading of houses, there’s very rarely forced liquidation and those take months or years. Anything that sold today and previously is gone. 95% 30 year fixed and vetted rates they know they can afford as demonstrated by lending standards. So the only area you may see true declines in in new supply but even there the builders will take volume over pricing all day. Investors generally underwrite their purchases to rental income. And everyone else buying just wants a home. So to answer his question about the mark to imaginary market on a home purchase from say April? Unless you’re a degenerate gambler…how are you feelin? Great that you’re finally in a home. 
 

Second thing is that not all pricing is equal and simply following headlines is misleading. Great example was a home in Florida I was looking at. Sold in 2016 for $700k. 2020 for $1.7m. $2021 for $2.4. Listed in April for $5.5m and was reduced twice down to $4.4 before selling at $4.2m. To the dumb housing bear this is bearish because of all the “price cuts”. I don’t even need to explain how it’s actually the opposite. 

Greg, this may be the wrong forum, but would you consider a house with a drain easement?  I am looking at a house in Woodcliff Lake and it has a drain easement, and I am trying to understand the potential implications of the drainage easement.  (I googled the stuff on the web, so I have an "academic" understanding, but practical knowledge is lacking.)  Thank you.

[Gregmal]

5 hours ago, Dinar said:

Greg, this may be the wrong forum, but would you consider a house with a drain easement?  I am looking at a house in Woodcliff Lake and it has a drain easement, and I am trying to understand the potential implications of the drainage easement.  (I googled the stuff on the web, so I have an "academic" understanding, but practical knowledge is lacking.)  Thank you.

I don’t know anything useful about the subject. 

[Parsad]

https://finance.yahoo.com/news/us-mortgage-lenders-starting-broke-110002052.html

 

Cheers!

[Gregmal]

Yea mortgage brokers and real estate agents are having a really tough time. Agents especially for about the past 18 month and mortgage folks been about 12 months now. Contrary to popular wisdom, even throughout a good portion of last year, they weren't really making money because there wasn't volume. However one shouldn't feel bad for them, especially the mortgage brokers....they made absolutely obscene money from June 2020 through fall 2021 on the combination of sales and refis. Have friends who made more money in a few weeks than they had in entire years previously. 

 

Anyway, easier to just own the thing everyone wants....the property itself. 

[Guest]

On 8/7/2022 at 2:10 PM, Gregmal said:

 

 

Second thing is that not all pricing is equal and simply following headlines is misleading. Great example was a home in Florida I was looking at. Sold in 2016 for $700k. 2020 for $1.7m. $2021 for $2.4. Listed in April for $5.5m and was reduced twice down to $4.4 before selling at $4.2m. To the dumb housing bear this is bearish because of all the “price cuts”. I don’t even need to explain how it’s actually the opposite. 

 

Did they do any improvements or anything?

Edited August 19, 2022 by stahleyp

[Gregmal]

2 minutes ago, stahleyp said:

 

Did they do any improvements or anything?

Nothing material. Its a newer home. Less than 10 years old. 

[thepupil]

On 8/7/2022 at 2:10 PM, Gregmal said:

 

Second thing is that not all pricing is equal and simply following headlines is misleading. Great example was a home in Florida I was looking at. Sold in 2016 for $700k. 2020 for $1.7m. $2021 for $2.4. Listed in April for $5.5m and was reduced twice down to $4.4 before selling at $4.2m. To the dumb housing bear this is bearish because of all the “price cuts”. I don’t even need to explain how it’s actually the opposite. 

 

you gotta post the link. I don't find this sequence believable. home prices are up, but they haven't 6x'd in 6 years. 

[sleepydragon]

1 minute ago, thepupil said:

 

you gotta post the link. I don't find this sequence believable. home prices are up, but they haven't 6x'd in 6 years. 

Happening  Greenwich CT too. a house that was bought by a someone working at citadel two years ago for 4m ish. Now citadel is moving to Florida, I think it just sold for 6m ish.

 

 

[changegonnacome]

Interestingly some NYC metro folks I know........who have been simultaneously been renting/maintaining apartments in New York and Florida etc etc for the last couple of years as a result of COVID are seriously considering giving up one or the other and committing to one location.....wonder how many people out there right now are one bird occupying two nests and are exasperating/contributing to the rental shortage in New York/Sun Belt etc.

 

Tightening financial conditions & negative wealth effects are working here.......I know one couple, heavily invested in a particular 'hot' stock and once we had the bear a couple of months ago very quickly jettisoned their NYC residence in response as they felt less wealthy cause their Shwaeb account balance went down.

 

Its almost a perfect case study in tightening financial conditions, leading to negative wealth effects which results in a reduction in aggregate demand (in this case an empty NYC apartment was released)

[thepupil]

i'm from south florida and have had many friend/family in market (albeit more in the $1-$2mm range than $4mm range) and south florida resi real estate is the largest holding of the (extended) Pupil family. i feel like i have a decent but not super close pulse on the market.

 

it's the $700K in 2016 that doesn't make sense to me. a house that's worth $4mm today was worth $1.8-$2.2mm in 2016, not $700K. 

[Gregmal]

6 minutes ago, thepupil said:

 

you gotta post the link. I don't find this sequence believable. home prices are up, but they haven't 6x'd in 6 years. 

 

Will try to. Was in one of the million Zillow emails I get daily a few weeks ago. Didnt strike me as that odd. Higher end within a block or two from beach in Walton has definitely gotten bumps like that. 

[thepupil]

1 minute ago, Gregmal said:

 

Will try to. Was in one of the million Zillow emails I get daily a few weeks ago. Didnt strike me as that odd. Higher end within a block or two from beach in Walton has definitely gotten bumps like that. 

 

that's more believable to me. thought you were talking about South Florida. 

[Gregmal]

2 minutes ago, Gregmal said:

 

Will try to. Was in one of the million Zillow emails I get daily a few weeks ago. Didnt strike me as that odd. Higher end within a block or two from beach in Walton has definitely gotten bumps like that. 

Actually pretty sure it was Coral Gables. Not Walton. 

[Gregmal]

1 minute ago, thepupil said:

 

that's more believable to me. thought you were talking about South Florida. 

LOL yea I'll try to find it. 

[Gregmal]

https://www.zillow.com/homedetails/10-Scout-Ln-Inlet-Beach-FL-32461/108591651_zpid/

 

Here's one but I dont think thats the one I saw. Sold below ask! 

[Gregmal]

I'm looking to move and also generally just check stuff out cuz it interests me and South Florida, at least the good areas inventory is still stupid tight. Prices arent off much, if at all. North by St Johns I like too and thats given in very modestly, but still hardly anything that screams DEAL. And in the JOE areas you still need to pay through the nose or put down a deposit with a builder and wait 18-24 months. I probably want the housing market to come down more than anyone. Haven't seen it, at least where I wanna live. Where I do live in NJ....more supply has come to market, inventory still probably 25% below pre covid but up about 40% from the lows. Prices are probably off peak by 5% but still way up compared to a few years ago. 

Edited August 19, 2022 by Gregmal

[Gregmal]

https://www.zillow.com/homedetails/145-Paradise-By-The-Sea-Blvd-Inlet-Beach-FL-32461/121166810_zpid/

 

This gem too. Will be interesting to see what it sells at but will be another example of price cut = bearish...back to huge premium to..a year or two ago. 

 

Its hard to find anything in that area that isnt at least 3-4x pre covid. Southern Florida is for the most part maybe double. Although a few areas have really picked up. Wellington I was looking at but its gotten pretty obnoxious. 

[ERICOPOLY]

1 hour ago, Gregmal said:

https://www.zillow.com/homedetails/145-Paradise-By-The-Sea-Blvd-Inlet-Beach-FL-32461/121166810_zpid/

 

This gem too. Will be interesting to see what it sells at but will be another example of price cut = bearish...back to huge premium to..a year or two ago. 

 

Its hard to find anything in that area that isnt at least 3-4x pre covid. Southern Florida is for the most part maybe double. Although a few areas have really picked up. Wellington I was looking at but its gotten pretty obnoxious. 

 

Well, the whole notion of "bearish" is predicated only on a pullback from peak prices.  Like, if the S&P500 trades at PE of 50x and pulls back 20% in price to trade for a PE of 40x that is regarded as "entering a bear market".  But that's still people agreeing to pay 40x earnings, which in itself isn't all that bearish.

[Gregmal]

10 minutes ago, ERICOPOLY said:

 

Well, the whole notion of "bearish" is predicated only on a pullback from peak prices.  Like, if the S&P500 trades at PE of 50x and pulls back 20% in price to trade for a PE of 40x that is regarded as "entering a bear market".  But that's still people agreeing to pay 40x earnings, which in itself isn't all that bearish.

Yea I try not to ever get too dismissive but it doesnt take more than like 3 seconds to write off housing bears as either having some sort of bullshit agenda for personal reasons, or simply not understanding the market when they make these claims. GFC was largely caused by 3-4 things. Fraud. Variable rate loans. And people not being able to afford the houses they were buying. Maybe add in overbuilding but really that was a product of the first 3 things. Today? No fraud. 95% fixed rate loans most with tons of equity. Oh and add in that rates were also HIGHER back during the GFC....so yea. I think you're already starting to see the narratives change. Now the "plummet" is 10-15% and it "could happen" if things materially get worse LOL. Thats hardly anything but a hiccup. 

[crs223]

How can housing drop when mortgage rates are below CPI?

[ERICOPOLY]

The per capita income is $270 in Burundi.  What constitutes an overpriced housing market in Burundi?

 

People have this notion that housing follows inflation but it follows income.

[ERICOPOLY]

1 hour ago, crs223 said:

How can housing drop when mortgage rates are below CPI?

 

It's a good point that it encourages leverage.