Million Dollar Question - Buy or Wait? 2022 Edition (Dallas, Frisco: pricing, groceries)

[ThomasCrown]

Anecdotal of course, and not directly comparable to SFH sales, but last week, we decided to put one of our properties up for sale, some acreage in Grayson county. We got an offer within 2 days for $100k over asking price. The buyer is a land developer with about 15 different properties owned right now, 5 of which they closed on this year.



So, if the housing market seems to be slowing for individuals/SFH right now, that may not be the case for investors and development groups. They're probably welcoming the rise in interest rates to limit their competition.

[SyZ]

Originally Posted by ColeH111

27% of Texas new construction buyers cancelled their contract in June. We are double the national average. So, something is happening.

Source?

[Wittgenstein's Ghost]

Originally Posted by ColeH111

Someone had posted the above in the Texas forum. Looks like Texas is nearly double the national average. Yes, we're the hottest market but why do we have the most cancellations if that's the case?

In 2008, the areas with the biggest runups mostly saw the sharpest declines. I'm not saying I think we're going to have a 2008-level correction, but I do think the hottest areas of late are more susceptible to declines.

But Texas cities weren't the truly top of the hot market. Places like Boise and Tampa were even crazier, and I'd be completely shocked if they don't see significant corrections. My parents live in the Tampa area, and a neighbor a few doors down bought a new house in mid-2020 for $680k and sold it nine months later for $1.05MM. It was brand new, so they didn't do any renovations or anything. Absolutely nuts.

[Xalistiq]

June CPI numbers:

The all items index increased 9.1 percent for the 12 months ending June, the largest 12-month increase since the period ending November 1981: https://www.bls.gov/news.release/cpi.nr0.htm

We can now officially kiss the Fed’s 2% target inflation target goodbye. It’s gone for the foreseeable future.

After three successive months of 8% and 9% inflation, these disastrous numbers permanently nullify the ridiculous “inflation is transitory/temporary/not as bad as it seems“ conjecture.

Even hoping for a sub-6% CPI report the rest of this year is forlorn.

This shocking CPI report also dismantles the flawed notion that the Fed will be forced to “pivot” and abandon quantitative tightening and rate hike measures anytime soon, as has been propounded by several financial “experts” and publications.

In order for inflation to fall to 2%, “a major economic downturn is needed...”, according to Bank of America:

https://www.foxbusiness.com/economy/...alysts-say.amp

At this point, a rate hike-induced recession is the only tool the appallingly inept Fed has left to reign in what is now alarmingly high, dire, and “sticky“ inflation.

If the Fed does its job and agrees to more consecutive, “aggressive” rate hikes than what’s currently expected in July and September (as it must), expect job losses and layoffs to accelerate throughout the remainder of this year and into next year.

In other news, consumer sentiment has dropped to depths rarely seen since the Great Financial Crisis.

As of May 2022, consumer sentiment comes in at 58.4, as compared against 56.4, 61.2, and 57.3 in June 2008, January 2009, and March 2009, respectively:

https://fred.stlouisfed.org/series/UMCSENT

May’s depressed consumer sentiment index is supported by a recent MagnifyMoney survey, which found that 70% of Americans expect an impending recession:

https://www.cnbc.com/amp/2022/07/12/...o-prepare.html

June was an interesting month because the data resolutely portends the beginnings of a major nationwide housing correction, as far as I’m concerned.

According to Realtor.com, in June 2022, active listings surged +18.7% year-over-year, the fastest yearly pace it’s ever recorded:

https://getfea.com/end-use/active-li...r-year-in-june

June also saw the highest number of cancelled home sale agreements since the start of the pandemic, according to Redfin:

https://www.cnbc.com/amp/2022/07/11/...-of-covid.html

Rising inventory: check.
Falling demand: check.
Extremely low consumer confidence: check.
Job insecurity: check.
Persistent inflation: check.
Surging interest rates: check.

With the abovementioned economic pressures unlikely to recede — and an escalating probability that they worsen — I anticipate housing inventory nationwide will increase substantially throughout the remainder of 2022 and into 2023.

This inundation of inventory will come both from existing/used homes as well as new home construction. Data I’ve shared previously has adduced that homebuilders have been in overdrive since 2020 with an avalanche of nationwide housing starts in the last 30 months (1.8MM+), many of which are already coming to market.

Meanwhile, home builder sentiment in July has turned negative, according to MarketWatch:

“A quarter of home builders are reducing their prices, according to the John Burns Real Estate Consulting survey...”

And

“Sales of new homes fell 31% this June as compared to last year”.

And

“Sales have fallen off a cliff,” an Austin, Texas builder said. “We’re selling 1/3 of what we sold in March and April.”

And

“Texas saw the highest rate of cancelations...”

https://www.marketwatch.com/story/sc...ws-11657567086

Even if inventory remains “historically low” relative to 2018 and 2019, it won’t matter. Demand for homes will be suppressed the remainder of this year, and demand may be altogether destroyed if a major recession ensues next year, as I’ve made a case for since February (and most major financial institutions are now in agreement).

Current home prices, outrageously inflated beyond fundamentals, have nowhere to go but down — way down — in this challenging economic environment.

The premise that this recession will be “shallow” or “quick” is preposterous to me, because unlike during the Great Financial Crisis and the pandemic, the Fed cannot print more money, reduce interest rates, or engage in other reckless stimulative fiscal policy that the economy has relied on for the past 15 years.

The data is ominous and to me suggests we’re already in a recession, one that will only get substantively worse.

I extend genuine sympathies to those who FOMO’d into an overpriced house in 2021 and early 2022, and doubly so to those who won bidding wars or waived inspections.

This housing train wreck is playing out much how I envisioned it would, albeit at a much faster pace.

[Kenro911]

The issue is that employment data is so far very healthy. Yes inflation is causing everyone to worry but actually right now - the fear is over-bought for what actually is happening in the economy.

You also have to realize ever since 2020 Covid hit, the real inflation is about 30% total till now. That money will unlikely ever come back, inflation will slow but chances of deflation are extremely low given historical data.

[Xalistiq]

Employment data is not healthy.

According to Goldman Sachs: “Recent gains in US payrolls, including a stronger-than-expected June advance, probably exaggerate current employment growth”.

“US payrolls climbed 372,000 last month, the Labor Department’s establishment survey showed Friday, and averaged 375,000 from April through June.” — Forbes

”However, the department’s separate survey of households showed a 315,000 drop in June employment. And that source of data showed employment has fallen by about 116,000 on average over the past three months.” — Forbes

“This suggests that the still-robust nonfarm payroll prints of recent months probably overstate true job growth,” — Jan Hatzius, Goldman Sachs Chief Economist

https://www.bloomberg.com/news/artic...-hatzius-warns

[hereticiam]

Folks who sold their homes did capture in gains on their current homes. So even if they purchased homes in the past couple of years and overpaid they will be fine as long as they plan to live in their homes for 10 plus years.

My family wanted to move to Texas this year. However I had a lot of trouble paying these prices. Folks asking 100% more for a home they purchased 2-3 years ago was unacceptable to me. So we ended up delaying our move until next year.
It would have been prudent for us to sell our current home and rent but it is not convenient so decided to spend another year in midwest.

People who have existing homes may not put them in the market for sale but new home builders will see challenging times.
Last time we bought a home it was October 2006 and it took a long time for the home price to recover. Hoping to avoid this mistake.

[RedRefugee]

Just a thought, but if home prices start to come way down, while rents are simultaneously going through the roof, could we not expect that potential sellers will try to rent out their current homes so as not to lock in their (perceived or actual) losses? Of course if they still need a place to live, they have to run the rental gauntlet as well, but that's usually easier than the buying gauntlet, and one can put up with many things in a rental that one wouldn't be willing to own.

[Kenro911]

Originally Posted by hereticiam

Folks who sold their homes did capture in gains on their current homes. So even if they purchased homes in the past couple of years and overpaid they will be fine as long as they plan to live in their homes for 10 plus years.

My family wanted to move to Texas this year. However I had a lot of trouble paying these prices. Folks asking 100% more for a home they purchased 2-3 years ago was unacceptable to me. So we ended up delaying our move until next year.
It would have been prudent for us to sell our current home and rent but it is not convenient so decided to spend another year in midwest.

People who have existing homes may not put them in the market for sale but new home builders will see challenging times.
Last time we bought a home it was October 2006 and it took a long time for the home price to recover. Hoping to avoid this mistake.

True for that. However, the first time millennial buyers which apparently steam rolled the market - will be once again screwed.

I think if you paid more than 30% extra than 2020 pre covid prices - you are going to be under for quite a while. I feel for people who FOMO'd into paying double especially in north suburbs.

Would be extremely interesting if prices crash all the way to pre covid levels across the country. Although if that happens, I think it would make 1929 look like peanuts.

[Wittgenstein's Ghost]

Originally Posted by RedRefugee

Just a thought, but if home prices start to come way down, while rents are simultaneously going through the roof, could we not expect that potential sellers will try to rent out their current homes so as not to lock in their (perceived or actual) losses? Of course if they still need a place to live, they have to run the rental gauntlet as well, but that's usually easier than the buying gauntlet, and one can put up with many things in a rental that one wouldn't be willing to own.

Why wouldn't they just stay in the house they own?