Zelman on housing

[Ross812]

16 hours ago, Gregmal said:

https://www.zillow.com/homedetails/50-W-Sandlefoot-Ln-Inlet-Beach-FL-32461/251160975_zpid/

 

Another one, under contract inside a week after a super bearish price cut resulting in only a $100k profit from the price paid....a year ago. A nice, but totally unremarkable home as well. 

 

GFC 2.0. 

 

In this case, they immediately listed the house for rent for 67k per year. Taxes and a 5% note are 50k and insurance/HOA are going to be another 10k. Sounds a bit housing boom 2.0 to me.

 

On a side note, who are these buyers competing for condos and homes in Panama City Florida? I saw a house on the beach listed for 8M up from 1.5M in 2019. The job prospects in the city are nothing like a tier 1 or even tier 2 city. Is this all  Boomers competing against each other to move to the sunshine state? 

[sleepydragon]

2 minutes ago, Ross812 said:

 

In this case, they immediately listed the house for rent for 67k per year. Taxes and a 5% note are 50k and insurance/HOA are going to be another 10k. Sounds a bit housing boom 2.0 to me.

 

On a side note, who are these buyers competing for condos and homes in Panama City Florida? I saw a house on the beach listed for 8M up from 1.5M in 2019. The job prospects in the city are nothing like a tier 1 or even tier 2 city. Is this all  Boomers competing against each other to move to the sunshine state? 

Someone from citadel? Whole firm is moving there.

A friend told me someone from citadel bought a 12m on the beach in an island there . The house was sold for 500k in 1999.

[thepupil]

1 minute ago, sleepydragon said:

Someone from citadel? Whole firm is moving there.

A friend told me someone from citadel bought a 12m on the beach in an island there . The house was sold for 500k in 1999.

Citadel is moving to Miami, which is an 8.5 hour drive from Panama City Beach.

[Gregmal]

5 minutes ago, Ross812 said:

On a side note, who are these buyers competing for condos and homes in Panama City Florida? I saw a house on the beach listed for 8M up from 1.5M in 2019. The job prospects in the city are nothing like a tier 1 or even tier 2 city. Is this all  Boomers competing against each other to move to the sunshine state? 

Basically retirees and wealthy families fleeing the “other” areas. It’s why you see so many of the “NY rulez 4eva” folks always hating on JOE. There’s definitely some sort of complex there but when you really get into the weeds it’s pretty remarkably clear. The thing is it’s not even really just isolated to that, it’s relative to a lot of Florida as well. It’s a bubble in the literal sense that many of those communities are insulated. As a northern guy myself, I love the safety and schools where I live. Florida, despite it not really getting much attention, is up there in terms of crime/shitholeness with NYC in many areas. You can go a few miles outside of the wealthy areas of palm beach and be surrounded by criminals and gang bangers. Yuck.
 

Somewhere like Origins(where that home is) for instance, you have so much space that’s controlled and isolated from all that. Add in that if you want a home there you either pay up for existing or get in line and wait 24 months for one to be built. There’s no supply.
 

PCB is still quite rough, but it’s improving. West of that though….schools are good and getting better because of the wealth moving there, and crime is near nonexistent in some of these areas. Add in that climate and topography wise it’s not really Florida either, which is good. Florida is disgusting 60% of the year which sucks if you wanna live there for tax reasons. 80-90 and humid ain’t much better than 20 with snow. I’d personally prefer the later.

[Ross812]

23 minutes ago, Gregmal said:

Basically retirees and wealthy families fleeing the “other” areas. It’s why you see so many of the “NY rulez 4eva” folks always hating on JOE. There’s definitely some sort of complex there but when you really get into the weeds it’s pretty remarkably clear. The thing is it’s not even really just isolated to that, it’s relative to a lot of Florida as well. It’s a bubble in the literal sense that many of those communities are insulated. As a northern guy myself, I love the safety and schools where I live. Florida, despite it not really getting much attention, is up there in terms of crime/shitholeness with NYC in many areas. You can go a few miles outside of the wealthy areas of palm beach and be surrounded by criminals and gang bangers. Yuck.
 

Somewhere like Origins(where that home is) for instance, you have so much space that’s controlled and isolated from all that. Add in that if you want a home there you either pay up for existing or get in line and wait 24 months for one to be built. There’s no supply.
 

PCB is still quite rough, but it’s improving. West of that though….schools are good and getting better because of the wealth moving there, and crime is near nonexistent in some of these areas. Add in that climate and topography wise it’s not really Florida either, which is good. Florida is disgusting 60% of the year which sucks if you wanna live there for tax reasons. 80-90 and humid ain’t much better than 20 with snow. I’d personally prefer the later.

 

Yeah, I don't have a high opinion of Florida in general. I completely understand living there in the winter, but the summers are awful. The state is essentially rural Alabama/Mississippi 5 miles inland and much of the costal area is no better than living anywhere in the Caribbean as far as shitty areas with swaths of resort type communities. I like the ex-pat lifestyle and people much better. The Florida coast seems full of retires who are either too sick or too small minded to be ex-pats.  

 

1.1M buys you a gorgeous lake front home anywhere in the south. For 8M, you could have a lakefront compound complete with your own security .   

[Spekulatius]

These prices are crazy. I bet I could buy a great chalet in France for $1M, like this on in the Normandy:

https://www.sothebysrealty-france.com/en/luxury-real-estate-france/ref-de2-401/sale-luxury-house-caen-12-rooms-4-bedrooms-14000/

 

 

You can find wonderful areas in the French countryside where you can buy a small Chalet for 600k Euro.

[Gregmal]

34 minutes ago, Spekulatius said:

These prices are crazy. I bet I could buy a great chalet in France for $1M, like this on in the Normandy:

https://www.sothebysrealty-france.com/en/luxury-real-estate-france/ref-de2-401/sale-luxury-house-caen-12-rooms-4-bedrooms-14000/

 

 

You can find wonderful areas in the French countryside where you can buy a small Chalet for 600k Euro.

Yea but your gas and electric is gonna be $80k a year by the time you close.

[ERICOPOLY]

You can just retire in Nicaragua on your SS income.

[Spekulatius]

47 minutes ago, Gregmal said:

Yea but your gas and electric is gonna be $80k a year by the time you close.

It's a summer house. It has oil heating and you just heat it with the bare minimum in winter to prevent damage. Relative to the US, there are incredible bargains to be had in Europe. I would pick France, Italy or perhaps Portugal.

 

[Spekulatius]

1 hour ago, ERICOPOLY said:

You can just retire in Nicaragua on your SS income.

 

https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/nicaragua-travel-advisory.html

[ERICOPOLY]

2 minutes ago, Spekulatius said:

 

https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/nicaragua-travel-advisory.html

Well you don't want to be old do you?

 

Okay, Portugal is doable on SS income.

[Gregmal]

On 8/19/2022 at 3:29 PM, 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. 

Sold for $19M. 

[UK]

https://www.bloomberg.com/news/articles/2022-11-28/us-housing-enters-deep-freeze-with-sellers-and-buyers-sidelined?srnd=premium-europe

 

 

[Gregmal]

Weird. People aint giving up their 3% mortgages? Guess the housing bears will say "next year they will!"...wait til next year, as always. Yawn. I still have my fat bag of cash waiting for them to be right so I can buy some more homes at pre covid prices. Its beginning to collect dust.

[Spooky]

6 hours ago, Gregmal said:

Weird. People aint giving up their 3% mortgages? Guess the housing bears will say "next year they will!"...wait til next year, as always. Yawn. I still have my fat bag of cash waiting for them to be right so I can buy some more homes at pre covid prices. Its beginning to collect dust.

 

Bit of a different story up here in Canada - home prices are down fairly significantly and some people are forecasting more pain to come since most people are on either 5 year fixed or variable rate mortgages. I was looking at a few listings around Toronto and the prices are notably better (and no bidding wars anymore). Problem is affordability has still taken a hit due to the increase in mortgage rates. If you aren't reliant on mortgage financing though...

 

[Gregmal]

Yea Canada is a way different story and honestly, they had their decades of fun. I’d totally be a buyer if the opportunity presented.
 

But US is a totally different story. All this pause is doing is conditioning people to pay even more. Couple contacts I spoke with already mentioned how 6% mortgages scared folks off. Then 7%. Now back at 6%? It’s like oh I’m getting a deal and some activity is picking up. There’s no shortage of demand for housing, it’s just some people have gotten priced out and a lot of others, even the ones who can easily afford it, hear all the commotion and get spooked. I guess that’s why the Wall Street scumbags with short positions go so heavy on the rhetoric. It does eventually influence behavior.
 

Eventually mortgage to treasury spreads collapse but folks will still be fine paying $5k a month but instead of getting a $500k home they’ll be able to buy a $650k home. And so on. So far it’s been the biggest nothing burger boy who cried wolf collapse I’ve ever seen. Miami and Tampa are still north of 25% year over year. In NJ nothings really gone down. It’s basically just tech heavy places and fringe work from home beneficiaries thatve pulled back to like early 2021 prices. It’s probably getting close to the point where buying LEAPs on homebuilders presents a nice trade opportunity. 

Edited November 29, 2022 by Gregmal

[Viking]

Here is the math in Canada (Vancouver/Toronto) for an investor. Lose money on the carry (your purchase will be cash flow negative). Make a killing on price appreciation. 
 

Where is the math? Well, the math is not important. Because real estate ONLY GOES UP. 

—————

I am looking to buy where i live in Vancouver: 2 bedroom condo (800 sq feet)

- purchase price: C$800,000

- down payment = $240,000

- mortgage = $560,000

 

Revenue

- rent: $3,500/month = $42,000/year

- importantly, rent increases are controlled by prov gov’t. 2021 = 0%. 2022 = 1.5%. 2023 = 2% = 3.5% total increase last 3 years.

 

Expenses

- interest = $30,000 (5.5% interest rate)

- property taxes ==$2,500

- condo fee = $400/month = $5,000

- reno/misc costs = $2,500/year

Total expenses = $40,000/year

 

Opportunity cost of $240,000 down payment @8% (low) = $20,000/year

 

Revenue - Expenses (incl opp cost) = lose $20,000 per year

 

Conclusion: i can buy a condo and lose $20,000/year (including opportunity cost). And hope that future price appreciation will cover my loss and provide an acceptable return. 
—————

Alternative?

 

Invest my $240,000 and earn 8% = $20,000 per year. Hassle free. 

- if i can earn more than 8% this option gets much better. (My long term average is a little over 15% = $36,000.)
—————

So when i look at buying a condo where i live in Vancouver (through an investors eyes) it makes absolutely no sense for me.

————-

Other considerations:

- real estate offers diversification (from holding financial assets only)

- the rental market in Vancouver is nuts (hard to find and expensive)… my 3 kids will need to live somewhere after they graduate from university…

Edited November 29, 2022 by Viking

[Spooky]

Glad to see you included the opportunity cost of capital, most people I've talked to ignore it when looking at housing. Your conclusion is where I've ended up as well - I'm just renting so my rent increases are capped below inflation and my landlord has the tail risk of interest rates rising sharply. Worst case scenario if things go to hell I just give back the keys. I'm also putting the savings differential vs a mortgage into the stock market and have been swinging decently hard on that front given that sentiment has been extremely pessimistic and prices have dropped.  Where things go from here who knows but I'm glad I didn't end up buying a house in the last year or two.

[Sweet]

Canadian housing market is nuts. I know a couple that dropped over a million on a house.  I was gobsmacked.  If it corrects a lot of people are going to be a lot poorer.

[Gregmal]

I recall even like 10-15 years ago watching those flip or flop, love it or list it type shows on TV.. they were always based in Canada...and just being like WTF? How does anyone afford a house there. Ive always admired from afar but never understood it. Especially now that I'm older and being amazed they did what they did without 30 year fixed rate mortgages. God bless em. 

[Spooky]

43 minutes ago, Sweet said:

Canadian housing market is nuts. I know a couple that dropped over a million on a house.  I was gobsmacked.  If it corrects a lot of people are going to be a lot poorer.

 

Average price for a detached home in the Greater Toronto Area is $1,372,438 now after an 11% decrease!

[Ulti]

https://www.drorpoleg.com/airbnbs-double-disruption/

 

Might be a bit of an off topic but I found it interesting that they want to get into the MF\housing area

[UK]

https://www.wsj.com/articles/why-this-housing-downturn-isnt-like-the-last-one-11671273004?mod=hp_lead_pos1

 

 

 

[UK]

https://www.bloomberg.com/news/articles/2022-12-19/san-francisco-s-feeling-the-pain-of-big-tech-s-troubles-remote-work?srnd=premium-europe

 

Covid changed all that, as many of the young workers who fueled the city's surging wealth decamped to cheaper places such as Lake Tahoe or Austin, Texas, during lockdowns. From July 2020 to July 2021, San Francisco lost the most residents by share among major US cities. And even as vaccines brought some return to normalcy, tech companies, competing for in-demand workers, had little inclination to force reluctant employees back to offices. Earlier this year, when Karen Chapple led a group of researchers examining major economic hubs, she was surprised to see that San Francisco was seemingly “frozen in time.” Its downtown activity had recovered the least of 31 large US and Canadian cities. “San Francisco really suffered from kind of doubling down on commercial office towers,” said Chapple, a regional planning academic at UC Berkeley and the University of Toronto. “They made a big bet and it failed.”

 

“As people leave, as firms leave, that’ll ease up some of these price pressures and that will in turn check some of this out-migration that we’ve been seeing,” Ratz said, noting that the latest figures showed inflation less heated in San Francisco than elsewhere. But a new paradigm for San Francisco will take years to take effect, if it does at all. And as time goes by, the problem may less be people moving out, but fewer moving in. Liz Giorgi thought she had to move to San Francisco to launch Soona, a virtual photoshoot platform for brands. But she was able to raise about $51 million while in Colorado, and it struck her: Nobody was telling her she needed to relocate. In fact, she said, investors begged her to organize board meetings in Vail, the Rocky Mountain resort town. San Francisco “didn’t seem as powerful or as attractive to me,” Giorgi said.

 

Edited December 19, 2022 by UK

[UK]

https://www.redfin.com/news/the-housing-market-has-started-to-recover/