Another Housing Crash

[Michigander]

So much of the trouble in my market has to do with the lack of inventory. The lack of inventory is really creating a lot of upward pressure on prices. I wrote an article that’s more specific to my market but I’m concerned that we’re going to miss the correction and a lot of appraisers are going to get caught with their pants down.

http://www.workingre.com/changing-markets/

Wrote this in the Hopes that people would just try and pay attention to different nuances of when the market does change, because markets always change. I don’t know if we’re going to have a crash like we did before but we certainly are going to need a correction because were having too many people buy properties that are outside Affordability for a large swath, And we are pushing high debt to income ratio’s and lower credit scores now. That’s not a recipe for good long-term Stability in my opinion at least

 

[Randolph Kinney]

So much of the trouble in my market has to do with the lack of inventory. The lack of inventory is really creating a lot of upward pressure on prices. I wrote an article that’s more specific to my market but I’m concerned that we’re going to miss the correction and a lot of appraisers are going to get caught with their pants down.

Yep, just look at the pole on this thread.

Markets (securities, real estate, etc.) became coupled in the 2008 crash. I expect the same for the next crash that I expect to occur during 4th quarter 2019. Could be sooner if geopolitical missteps occur.

 

[Meandering]

Good article.

I've been working on some of that in my market. Once I have all my graphs nailed down, I'll have a better idea of where the inventory suddenly went, but the prolonged winter did not help the current market.

.

 

[Randolph Kinney]

During the crash of 2008 and thereafter in California, many speculators entered into the market to fix up and flip, along with Wall Street buying up distressed sales and converting them into rentals, securitizing the rents into bonds.

When these speculators (especially rentals) exit the market, there will be a flood of inventory to absorb.

 

[Joe Flacco]

So much of the trouble in my market has to do with the lack of inventory. The lack of inventory is really creating a lot of upward pressure on prices. I wrote an article that’s more specific to my market but I’m concerned that we’re going to miss the correction and a lot of appraisers are going to get caught with their pants down.

http://www.workingre.com/changing-markets/

Wrote this in the Hopes that people would just try and pay attention to different nuances of when the market does change, because markets always change. I don’t know if we’re going to have a crash like we did before but we certainly are going to need a correction because were having too many people buy properties that are outside Affordability for a large swath, And we are pushing high debt to income ratio’s and lower credit scores now. That’s not a recipe for good long-term Stability in my opinion at least

I don't know why you describe increasing prices as "trouble". It is natural. It is what prices do when demand is greater than supply. What is going to bring more supply? Higher prices. Once prices get high enough then developers will create inventory because there is incentive to do so. There is a lack of inventory because prices are too low. It is not prices are too high because inventory is low.

 

[Terrel L. Shields]

There is a lack of inventory because prices are too low. It is not prices are too high because inventory is low.

Wishing that were so. The disconnect between prices in flyover America and the coasts is far more complex than that. The inventory issue is one where balance and velocity go hand in hand. Many people are stuck because they cannot find cheaper places than the place they own thus don't want to sell only to not be able to buy any cheaper. Builders who cannot build competitively because of red tape and high soft costs cannot meet new demand. Some builders in CA have tried to develop land and been held up by red tape. That rarely happens in Texas, Arkansas, or Missouri. So builders are building there.

With older folks trying to downsize, part of the problem is their McMansion isn't either popular nor affordable with millennials. They want to wait and get exactly what and where they want in housing.

 

[Joe Flacco]

Wishing that were so. The disconnect between prices in flyover America and the coasts is far more complex than that. The inventory issue is one where balance and velocity go hand in hand. Many people are stuck because they cannot find cheaper places than the place they own thus don't want to sell only to not be able to buy any cheaper. Builders who cannot build competitively because of red tape and high soft costs cannot meet new demand. Some builders in CA have tried to develop land and been held up by red tape. That rarely happens in Texas, Arkansas, or Missouri. So builders are building there.

With older folks trying to downsize, part of the problem is their McMansion isn't either popular nor affordable with millennials. They want to wait and get exactly what and where they want in housing.

It is so. How do you think supply and demand comes into balance then? You think lower prices will balance supply and demand?

It doesn't matter that people can't sell because they can't find cheaper. What matters is that they are not selling. Accounting for red tape and soft costs is just part of the incentive calculation.

 

[Meandering]

Joe,
I think your blinders are missing the impact of financing availability, financial risk, and manipulation. All what you are saying works if we're discussing number 2 pencils and people can decide to buy one, or buy a pen, and they could purchase with all cash.

The housing market is far more complicated.

.

 

[Joe Flacco]

Joe,
I think your blinders are missing the impact of financing availability, financial risk, and manipulation. All what you are saying works if we're discussing number 2 pencils and people can decide to buy one, or buy a pen, and they could purchase with all cash.

The housing market is far more complicated.

.

It really is not that complicated. Supply and demand is what matters. All factors that impact prices will be reflected in supply and demand. You guys are screaming crash is coming with supply at the lowest level since financial crisis. smh

 

[Randolph Kinney]

How do you think supply and demand comes into balance then?

Big investment firms have stopped gobbling up California homes

Astronomical prices are forcing a rising share of California families to postpone buying a house. As a result, the state’s record-low homeownership rate has been a boon to one growing segment of California’s housing market: single-family home rentals.

Between 2005 and 2015, the number of owner-occupied homes in California shrunk by nearly 64,000 units, according to the Public Policy Institute of California. Meanwhile the number of renter-occupied homes increased dramatically. California now has 450,000 more homes used as rentals than it did a decade ago. Compare that to the 1990s, when the number of rented homes grew by less than 120,000 while the state added 700,000 homes owned by the people who live in them.

The rising tide of single-family rentals has renewed attention on who actually receives the rent payments that nearly 2 million Californians make each month.

Lawmakers and first-time homeowner advocates have been scrutinizing a relatively new form of landlord: private investment firms that snapped up thousands of homes during the foreclosure crisis and now rent them out. With nearly one in four California homes now purchased in all-cash, these well-financed institutional investors have also been blamed as unfair competition against families bidding on starter homes.

California no longer has a glut of cheap houses that can be easily gobbled up in foreclosure auctions. A sustained economic recovery and a lack of construction of new housing has sent housing prices skyrocketing. It’s now too expensive for institutional investors to buy lots of California homes. Blackstone’s Invitation Homes bought only 82 California houses last year.

https://www.dailynews.com/2018/04/05/big-investment-firms-have-stopped-gobbling-up-california-homes/

Cheap inventory is gone. Rental yields make the HBU for SFR income producing. That trend is on the cusp of reversing. Supply will meet demand when rentals are liquidated.