Zelman on housing

[Gregmal]

Probably depends. A lot of the conventional wisdom ones have dumped big time because the perception is that they rely on volume even though prices haven’t come down much. If price comes down 15%, volume is gonna surge. Which for a builder or a brokerage per say, is something they’d take all day. 
 

Additionally, what if prices come down 15% because commodity based inputs have come down? Depending upon how much, most can probably keep similar margins or even improve them. NVR mentioned something like that recently. Costs come down so they can sort of pass that along to the buyer. Sort of lol.

[Gregmal]

Demand for housing hasn’t waned. Folks have just been pushed out. I spoke with a builder recently and then to their preferred mortgage lender. On “have rates effected building for you guys” the answer was interesting. The lady said yes and no. Yea obviously some people had to cancel, but for us not really because we tend to build for the more affluent customer. So again, pick your spots accordingly but the trends haven’t changed. There’s still builders increasing prices in many regions. But there’s also areas where they’re dropping contracts quite fast and lowering price. This is why by and large the national statistics are useless.

[FCharlie]

For what it's worth to the discussion, my dad just listed one of his rental properties for sale. Under contract in one day for just slightly ($500) over ask price. This is in North Carolina. 

[Gregmal]

Welcome to the clown show.

 

 

He's obviously feeling vindicated. LOL Call doom and gloom and you get a slowdown in volume, inventory pushing back to normalized levels, and pricing from a whole year ago....

 

GFC 2.0 bro. This is what the bears are all about. Not about making money. Not about anything actionable. Just about saying "I called it". Even when virtually nothing remarkable has happened. 

 

Edited August 24, 2022 by Gregmal

[Gregmal]

Another thing I found funny lately was how we have a literal recession occurring with the US economy and we are being told its not a recession....meanwhile home prices are a tick or two off all time highs and we're being screamed at about a housing recession....interesting clash of agenda driven narratives at play. 

[ERICOPOLY]

20 minutes ago, Gregmal said:

Welcome to the clown show.

 

 

He's obviously feeling vindicated. LOL Call doom and gloom and you get a slowdown in volume, inventory pushing back to normalized levels, and pricing from a whole year ago....

 

GFC 2.0 bro. This is what the bears are all about. Not about making money. Not about anything actionable. Just about saying "I called it". Even when virtually nothing remarkable has happened. 

 

 

I haven't heard of him, but I scrolled back on his Twitter feed and looked to see if this guy is an oracle or something:

 

 

[Gregmal]

Yea I’ve never heard of him. But this is the kind of head scratching victory lap taking you only see on Wall Street. He s been super bearish on housing and a volume slowdown is his vindication? If I’m bearish on Berkshire Hathaway I don’t think I’d have the nuts to call victory over the ADV declining as the stock trades around all time highs. To each their own. 

[ERICOPOLY]

Well, at least at the high end, the Sacramento area housing market is toast.  The buyers have simply vanished.

 

Our home is in great shape and we've had ONE agent request a showing and we've been listed for 13 days.

[ERICOPOLY]

It isn't just us, the other agents with listings are saying the same.  So we're cutting price because what else can we do with growing inventories and a dwindling pool of buyers?  You have to be the most attractively priced.

Edited August 24, 2022 by ERICOPOLY

[Gregmal]

26 minutes ago, ERICOPOLY said:

Well, at least at the high end, the Sacramento area housing market is toast.  The buyers have simply vanished.

 

Our home is in great shape and we've had ONE agent request a showing and we've been listed for 13 days.

I dont follow CA at all so I dont know that market. What Ive heard is San Diego is one of the few areas really doing well but SF/Bay Area is struggling. Everyone by you is moving to Texas and Colorado LOL. Jokes aside, the markets I do follow, the volume issue is easily solvable with some minor concessions but some are just being unreasonable and others by and large arent in a hurry to sell. This pause really just allows inventory to build back up and get things balanced again which IMO is when you wanna think about starting to get long the builders and brokerages. If prices come down it will be in exchange for volume. Moving off the ATH 10-15% is hardly a big deal even though the fear mongers are trying to present it as one. I personally found the housing market to be quite healthy and attractive back in 2019 and dont think getting back to those dynamics just with higher prices, is bad or bearish at all. 

 

Real question, if you listed your house for a 10-20% premium to pre covid prices, does it sell? People saw cash registers ringing 6 months ago and it was nuts but going from 110 mph to 80 is still going pretty fast. Thats why the investment will continue to work. I wouldn't be fooled by people setting the bar at Q3 2021 levels and saying and sort of downward move on ANY metric at all, is GFC 2.0, which is whats going on right now. 

Edited August 24, 2022 by Gregmal

[Gregmal]

I bought a second primary home in NJ this time last year. NJ suburbs are still doing OK, but slowly bleeding out like many other blue states. I could easily sell the place for a 10-15% premium to what I paid 12 months ago. I dont have a good comp on the "highs" and I dont know if I'd have 15 all cash offers in the first week, but that doesnt exactly have to mean the world is ending or be a bad thing. I guess its just about defining what you consider healthy but I find it bizarre how people are acting like things getting back to a state of normalcy equates to GFC 2.0. 

Edited August 24, 2022 by Gregmal

[ERICOPOLY]

16 minutes ago, Gregmal said:

I dont follow CA at all so I dont know that market. What Ive heard is San Diego is one of the few areas really doing well but SF/Bay Area is struggling. Everyone by you is moving to Texas and Colorado LOL. Jokes aside, the markets I do follow, the volume issue is easily solvable with some minor concessions but some are just being unreasonable and others by and large arent in a hurry to sell. This pause really just allows inventory to build back up and get things balanced again which IMO is when you wanna think about starting to get long the builders and brokerages. If prices come down it will be in exchange for volume. Moving off the ATH 10-15% is hardly a big deal even though the fear mongers are trying to present it as one. I personally found the housing market to be quite healthy and attractive back in 2019 and dont think getting back to those dynamics just with higher prices, is bad or bearish at all. 

 

Real question, if you listed your house for a 10-20% premium to pre covid prices, does it sell? People saw cash registers ringing 6 months ago and it was nuts but going from 110 mph to 80 is still going pretty fast. Thats why the investment will continue to work. I wouldn't be fooled by people setting the bar at Q3 2021 levels and saying and sort of downward move on ANY metric at all, is GFC 2.0, which is whats going on right now. 

 

We are cutting price from $1.825m to $1.695m.  I can't say whether that will change a goddam thing though.  There are simply very few people shopping for homes like this one.  5 bedroom in a gated community of luxury homes.

 

Edited August 24, 2022 by ERICOPOLY

[Gregmal]

10 minutes ago, ERICOPOLY said:

 

We are cutting price from $1.825m to $1.695m.  I can't say whether that will change a goddam thing though.  There are simply very few people shopping for homes like this one.  5 bedroom in a gated community of luxury homes.

 

Yea at least by me, pre COVID price and volume levels for those type of homes was….not very good. Definitely a tough market especially with the SALT issue.
 

Across the lake there was a whole section of lakefront lots that were developed right after GFC. Maybe 12-15 of them. Maybe one or two would sell per year. Post COVID they all sold out and it was a never ending build bigger competition. Existing homes were turning over at solid prices too. I haven’t seen anything recently hit the market so it’s still wait and see, but the market dynamic before COVID was very much one where anything under $500-600k sold well. Over was tough. And over $1.5m was very tough. Palm Beach though? Totally different story LOL.

[LC]

Colorado is down too. Everything is dropping prices. Frankly, everyone who could afford to move or buy a first/second home already has. 

[ERICOPOLY]

26 minutes ago, Gregmal said:

Yea at least by me, pre COVID price and volume levels for those type of homes was….not very good. Definitely a tough market especially with the SALT issue.
 

Across the lake there was a whole section of lakefront lots that were developed right after GFC. Maybe 12-15 of them. Maybe one or two would sell per year. Post COVID they all sold out and it was a never ending build bigger competition. Existing homes were turning over at solid prices too. I haven’t seen anything recently hit the market so it’s still wait and see, but the market dynamic before COVID was very much one where anything under $500-600k sold well. Over was tough. And over $1.5m was very tough. Palm Beach though? Totally different story LOL.

 

We bought it 3.5 years ago for $1.18m.  I could see the market not wanting to pay more than $1.4m.  I'll find out one of these days. 

[Gregmal]

I think you mentioned somewhere else you have to sell so if that’s the case the you just do what you gotta but I would hate losing the 30 year fixed on that. I remember you being pissed they limited your LTV since you are retired…what’s the rate, 2.5%? 

13 minutes ago, ERICOPOLY said:

 

We bought it 3.5 years ago for $1.18m.  I could see the market not wanting to pay more than $1.4m.  I'll find out one of these days. 

 

[ERICOPOLY]

4 minutes ago, Gregmal said:

I think you mentioned somewhere else you have to sell so if that’s the case the you just do what you gotta but I would hate losing the 30 year fixed on that. I remember you being pissed they limited your LTV since you are retired…what’s the rate, 2.5%? 

 

The rate is 2.8%.  It was a cash-out refi loan for $880,000.  The cash-out penalized the rate, as did the loan size.

 

[Dinar]

I hope that Shepherdson is correct, however in the markets that I track, suburbs of NY (Westchester, Manhasset, Darien, Bergen County, Millburn, Chatham), suburbs of Phily (Radnor Township School District, Tredy- school district, Newton Bucks County, Richboro), Boca Pointe (in Boca Raton, FL) and Maui, there is essentially no inventory and from my recollection it is less than half of what it was three years ago.   Prices however in Boca & Maui are probably up 50-100% since 2019.  In Manhattan, there is NO inventory either 3+ bedroom apartments.   So if the market cracks, great, but I have not seen it in the markets I track.  I am in the market for: 1) three/four bedroom in Manhattan; 2) house on Maui; 3) house in Boca Pointe; 4) house in the suburbs of NYC.  I am flexible if I get number one, I do not need number four.  If I get number two I do not need number three.  

[Gregmal]

49 minutes ago, LC said:

Colorado is down too. Everything is dropping prices. Frankly, everyone who could afford to move or buy a first/second home already has. 

Yea Denver I follow somewhat cuz of Pure Cycle. And it’s a great example of what I’m talking about. In 2019 you had the entry level homes to those MPCs somewhere in the low $300s. The numbers from $10-11 per share worked at those prices. They peaked probably a little over $500-550k. They’ve come in a bit, but you still have a ton of room where it’s pure profit to the lot owner and then obviously depending upon inputs even to the builders. A 20% decline from the peak is still putting significantly more money in the bank than what one had hoped for a few years ago. Meanwhile the share price is the same and/or lower than when $350k was the ASP.

 

The volume and pricing thing is an interesting dynamic but if managed well, another one of the unique features that makes housing different. But once a home is sold, it’s only the homeowners problem, no one else’s. You could say the banks but lending standards are tight and honestly, people forget how friggin hard it was to get through underwriting during COVID. I did a bunch of refis and bc of all the eviction moratoriums the loan process was like 2012 tight. 
 

There’s a lot of homes off the market that are never coming back and now we are already hearing about builders slowing pace of building when building at 1.6m a year was the only way out of the shortage. I can’t imagine what it would take to see 30-40% declines and foreclosures. Even if rates go to 10% it’s really just the new build that’s caught in the cross hairs because everyone else is staying put with their 3% 30 years, equity accrued from purchase, and rent optionality. 
 

The only market I’ve seen that’s borderline sketchy is Arizona. Everything else is just kind of ebbing and flowing as markets do.

Edited August 24, 2022 by Gregmal

[KJP]

33 minutes ago, Dinar said:

suburbs of Phily (Radnor Township School District, Tredy- school district, Newton Bucks County, Richboro),

The folks in Lower Merion SD are aghast they didn't make the list.

Edited August 25, 2022 by KJP

[thepupil]

1 hour ago, Dinar said:

I hope that Shepherdson is correct, however in the markets that I track, suburbs of NY (Westchester, Manhasset, Darien, Bergen County, Millburn, Chatham), suburbs of Phily (Radnor Township School District, Tredy- school district, Newton Bucks County, Richboro), Boca Pointe (in Boca Raton, FL) and Maui, there is essentially no inventory and from my recollection it is less than half of what it was three years ago.   Prices however in Boca & Maui are probably up 50-100% since 2019.  In Manhattan, there is NO inventory either 3+ bedroom apartments.   So if the market cracks, great, but I have not seen it in the markets I track.  I am in the market for: 1) three/four bedroom in Manhattan; 2) house on Maui; 3) house in Boca Pointe; 4) house in the suburbs of NYC.  I am flexible if I get number one, I do not need number four.  If I get number two I do not need number three.  

I am impressed with your problems. Well done!

[Gregmal]

1 hour ago, Dinar said:

I hope that Shepherdson is correct, however in the markets that I track, suburbs of NY (Westchester, Manhasset, Darien, Bergen County, Millburn, Chatham), suburbs of Phily (Radnor Township School District, Tredy- school district, Newton Bucks County, Richboro), Boca Pointe (in Boca Raton, FL) and Maui, there is essentially no inventory and from my recollection it is less than half of what it was three years ago.   Prices however in Boca & Maui are probably up 50-100% since 2019.  In Manhattan, there is NO inventory either 3+ bedroom apartments.   So if the market cracks, great, but I have not seen it in the markets I track.  I am in the market for: 1) three/four bedroom in Manhattan; 2) house on Maui; 3) house in Boca Pointe; 4) house in the suburbs of NYC.  I am flexible if I get number one, I do not need number four.  If I get number two I do not need number three.  

Some of these areas are straight bulletproof. There’s nowhere left to build. Glen Rock/Ridgewood in Bergen County particularly. The only opportunities that occasionally come up are due to age and maintenance needed since many are 1920-1940s homes.

[Dinar]

2 hours ago, KJP said:

The folks in Lower Merion SD are aghast they didn't make the list.

I probably should add it to the list, but could it be too high end?  Gladwyne seems to be a bit snobby.

[Dinar]

2 hours ago, thepupil said:

I am impressed with your problems. Well done!

Thank you, but the marathon is not over.  I need to be able to raise three kids as productive, hard working, honest citizens with grit, also kind and well rounded.   That is a very hard part, and motivating them is a bit of a problem...   I also was very lucky in that I have wise parents who guided me well, and I got lucky with my choice of a career - thanks to parental advice.

Edited August 25, 2022 by Dinar

[Dinar]

1 hour ago, Gregmal said:

Some of these areas are straight bulletproof. There’s nowhere left to build. Glen Rock/Ridgewood in Bergen County particularly. The only opportunities that occasionally come up are due to age and maintenance needed since many are 1920-1940s homes.

Agreed, I ideally would buy in Oradell since it is a bit less snobbish than Ridgewood, but there is nothing for sale.   I mean Oradell, Woodcliff Lake, Haworth, Glen Rock, Ridgewood, Upper Saddle and Franklin lakes all work, but my preference is for Oradell/Glen Rock/Haworth due to much lower snobbism.  I came to this country with nothing, and I do not want to raise greenhouse kids.  I would walk two miles carrying 40 pounds of stuff in college to save a dollar on a bus fare, I would at least like my kids to not expect a BMW for sixteenth birthday.