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It's one thing to assume the same level of housing price appreciation and high-velocity demand we've had for the last two years. I agree that such an assumption is highly risky right now.
It's another to imply that housing prices will fall substantially. It's very hard to see that happening. I can certainly see a pretty likely scenario where they quit going up, maybe soften slightly, as the overall economy stagnates or contracts a bit. But dropping a bunch, why? You do know that in Texas, which was doing very well economically going into the Great Recession, followed by substantial job losses during 2009-2010, still didn't see any real decrease in home prices during that period? The reason is that home prices here were not a "bubble" like they were in other markets driven by unjustifiably loose credit and rampant speculation. I'd say the situation is parallel now.
Quote:
Originally Posted by Mr. Clutch
I'd say that's not entirely true - Dallas and Austin definitely saw notable price decreases during those years and the rest of the state took a bit of a hit as well. The decreases weren't as bad as the coasts yes (and we recovered faster) but they did happen.
I do agree that as long as the upcoming recession isn't as bad as the Great Recession was, we shouldn't see crazy price crashes.
Dallas didn't see a big run up prior to 2008, and it didn't see a big crash after 2008. IMO, those two points are connected.
Dallas has seen quite a run up this go-round:
Maybe fundamentals have changed that much, maybe not. But I don't think the fact that Dallas didn't crash much in 2008 means it won't crash much if housing crashes this time (which I still think is unlikely).
As long as the principal job base supporting the folks who have been purchasing the homes (plus the renters who are occupying the homes the investors purchase) doesn't shrink greatly, the overall level of pricing is supportable. As I noted, price increases may end, which would be a good thing IMHO. Maybe some softening, or slight price decreases. But, this is NOT like the 2000s markets outside of Texas where the prices were literally not sustainable because sketchy mortgages were letting folks purchase beyond their means.
Yes the Fed held rates artificially low - and Congress pumped a lot of spending into folks' hands as well. But credit has not been "loose." You're speaking more to the overall economy than to home prices.
Not to mention there's been a significant share of all-cash home purchases by people relocating from high-cost states. As long as they haven't taken out home equity loans since then, they're not even that much impacted by an economic downturn in terms of home occupancy.
You are correct that we shouldn't be as concerned about existing homeowners and recent buyers as in 2008. I really doubt we see a big wave of foreclosures like last time. But there is significant downward pressure that can be put on prices from higher rates, economic contraction and inflation. Buyers have less to spend because of inflation, their available monthly housing payment buys less house due to higher rates and economic contraction makes fewer buyers available.
I don't expect 2008, but I think we came into 2022 with buyers stretched and every possible good fortune baked in. A lot of that is eroding, and I wouldn't be surprised to see prices come down. And I do think there is a real chance for a more serious economic downturn. We have no idea how high rates will have to go to get inflation under control. If we end up at a 3% terminal rate, fine. But we don't know that's the case right now.
So it’s interesting looking back that median prices fell by 3.0% from peak to bottom as the number of homes sold fell by 34%. If took 4 years for prices to gain that 3% loss back, but almost 10 years for the number of home sales to recover - while during the same years the population grew by about 1 million people. ** I know that median is just the median, home in very expensive neighborhoods like the Park Cities had steeper declines than 3%. There were some crazy bargains even in 2011 in HP.
I was in California in January 2010 and was absolutely astonished to see the local newspaper I picked up at breakfast one morning had something like 50 pages of foreclosure notices over 2 years into the Great Recession. It was NOTHING like that here.
Home prices began to rapidly increase in price in 2012/13, gaining 60% in value from 2011-2016. IIRC Toyota HQ moved in phases in 2016- 2017. Then 2016 to 2019 pre-Covid, another 16% increase and then another 25% increase in 2 years since the pandemic started.
Also of note, inventory has been a problem sitting at “historical lows” for 10 years now.
Thanks, I use the Real Estate Research Center at Texas A&M, so I could have gone back to their data (laziness on my part). Your retrieval shows that despite the severity of the economic contraction and the massive slowdown in home buying, prices dropped only slightly, which was my point. (Not saying you were disagreeing with me.)
Lending standards are ONLY onerous on people purchasing homes. Builders and investors have been buying very large portions of the limited Dallas inventory with free money. As I said elsewhere, no crystal ball on where we go. But the idea that lending standards are tight right now is laughable.
Consumer lending standards for mortgages remain way way more restrictive than in the 2000s. There is definitely a flood of Wall Street capital into the rental investment sector, but even those investors know there's limits on what they can pay for homes in order to get a satisfactory return. And if their business model goes out the window, does that necessarily mean a housing price crash, even if they decide to turn loose large numbers of properties to the market?
You are correct that we shouldn't be as concerned about existing homeowners and recent buyers as in 2008. I really doubt we see a big wave of foreclosures like last time. But there is significant downward pressure that can be put on prices from higher rates, economic contraction and inflation. Buyers have less to spend because of inflation, their available monthly housing payment buys less house due to higher rates and economic contraction makes fewer buyers available.
I don't expect 2008, but I think we came into 2022 with buyers stretched and every possible good fortune baked in. A lot of that is eroding, and I wouldn't be surprised to see prices come down. And I do think there is a real chance for a more serious economic downturn. We have no idea how high rates will have to go to get inflation under control. If we end up at a 3% terminal rate, fine. But we don't know that's the case right now.
Y'all are misinterpreting what I'm saying. I fully recognize that mortgage rate increases, plus just reaching affordability limits in a given housing market, may certainly end rapid price appreciation and even cause a little softening. So would a recession, if a lot of people lose jobs. I actually WANT price increases to end - it's bad for Texas.
What I'm saying is that I'm not seeing how current price levels (as opposed to current appreciation levels) are "unsustainable". Pricing is only unsustainable if it's built on out-of-whack fundamentals like in the 2000s (outside TX). Homes are being sold to buyers who can actually afford them. Investors are actually getting the rents they need to make their numbers work. That's not out of whack. Now, to the extent investors are banking on continued rapid asset and rent appreciation, they may be in for an unfortunate result, but I don't see that as causing a crash.
If the economy does crash and massive numbers of folks with good-paying jobs lose them, then yes, we could see substantial price decreases, but that wouldn't be the worst of the country's economic worries in such a scenario. And as I pointed out (and TC80 helpfully showed with the data), even in the Great Recession with all its job loss (based in large part on a housing finance crisis no less), DFW prices dropped only slightly.
Consumer lending standards for mortgages remain way way more restrictive than in the 2000s. There is definitely a flood of Wall Street capital into the rental investment sector, but even those investors know there's limits on what they can pay for homes in order to get a satisfactory return. And if their business model goes out the window, does that necessarily mean a housing price crash, even if they decide to turn loose large numbers of properties to the market?
There is a flood of money beyond single family rentals (SFR). There is the free money allowing developers to finance their purchases of land/homes to renovate/build and sell. There is a flood of capital to the robo-buyers who use algorithms to bid on houses they think are marginally underpriced and "flip" them very quickly for very thin margins. Institutional investors are not as disciplined as you would want to believe and they piled into SFR and other real estate at absurd cap rates/yield for the risk. But it is other people's money and as long as safe investments had effectively no yield, investors put up with taking lots of risk for little return.
Asset prices of homes COULD continue to run, or flatten. They don't have to fall. I'm just saying I think some of you are not super informed about the way the free money works its way through our financial system in ways you can't see.
Last edited by numbersguy100; 05-20-2022 at 10:35 AM..
There is a flood of money beyond single family rentals (SFR). There is the free money allowing developers to finance their purchases of land/homes to renovate/build and sell. There is a flood of capital to the robo-buyers who use algorithms to bid on houses they think are marginally underpriced and "flip" them very quickly for very thin margins. Institutional investors are not as disciplined as you would want to believe and they piled into SFR and other real estate at absurd cap rates/yield for the risk. But it is other people's money and as long as safe investments had effectively no yield, investors put up with taking lots of risk for little return.
Asset prices of homes COULD continue to run, or flatten. They don't have to fall. I'm just saying I think some of you are not super informed about the way the free money works its way through our financial system in ways you can't see.
I don't disagree that "free money" has had an effect on the entire economy way way way beyond housing. And it may not have been good policy in some respects (Wall Street of course loved loved loved it for the most part). And, it's ending, at least to the extent to which everyone had gotten used to it over the last few years. But why are you and others acting like it's so apocalyptic? I guess if you're expecting a Volcker-level rate adjustment, then maybe? To me, the Fed is acting as it should, this shouldn't be some shock, and it won't make the housing market turn to ashes if they continue to be responsible.
As I said, some investors will take a bath if they made bad assumptions. Too bad for them.
Something has changed. I'm suddenly seeing tons of inventory for sale in my neighborhood priced well below market value, and none of it is selling. I don't know about others' neighborhoods, but there is definitely no shortage where I live.
Something has changed. I'm suddenly seeing tons of inventory for sale in my neighborhood priced well below market value, and none of it is selling. I don't know about others' neighborhoods, but there is definitely no shortage where I live.
You finally made it. Now stop spewing non-sense and read the below facts about your neighborhood from someone who recently listed their property and are set to close on the transaction.
I seriously hope no one has put you in charge of reporting on financial conditions or manage their finances.
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Quote:
Originally Posted by stephwin
I have an anecdotal story to share. A relative passed away last year and my mom has been getting the home ready to sell (cleaning out, but not updating). It is located in Stonebridge Ranch in McKinney and was listed on a Thursday. By Sunday morning, she had an offer 17% over asking, close in 3 weeks, 25% down, appraisal waived, and the seller was going to pay for the survey and title fees. There are definitely people out there that are still desperate to buy despite the rising interest rates.
You finally made it. Now stop spewing non-sense and read the below facts about your neighborhood from someone who recently listed their property and are set to close on the transaction.
I seriously hope no one has put you in charge of reporting on financial conditions or manage their finances.
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I know what I am seeing right now, just the past couple weeks, based on the listings on Zillow and discussions with the local agents. Some subdivisions within Stonebridge are likely doing better than others. Mine is doing poorly relative to virtually everywhere around me, and it's been doing poorly since June of last year. I see the data and numbers and I have seen the reports from my agent on my subdivision. Some get less. Some sit on the market over a month. The houses getting over list were listed at ridiculously low prices. No one "hands things to me regularly." I know real life very well, and it's not a pretty picture.
Last edited by Acntx; 05-21-2022 at 08:18 PM..
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