It’s a Great Time to Sell and a Bad Time to Buy, they think.
Americans have been gung-ho in recent years about the housing market, bidding up prices with gusto as they went. The election helped. By February, the Fannie Mae Home Purchase Sentiment Index (HPSI) had shot up to 88.3, up 5.6 points year-over-year, and the highest ever in the data series going back to 2011. But since then, some dark clouds have appeared, and other dark clouds have been out there for a while – by some measures the darkest in the data series.
The index itself still looks benign: In May, it fell 0.5 points to 86.2, down 2.1 points from its February peak, but still up 0.9 points year-over-year:
But here are the clouds, according to Doug Duncan, senior VP and chief economist at Fannie Mae:
“High home prices have led many consumers to give us the first clear indication we’ve seen in the National Housing Survey’s seven-year history that they think it’s now a seller’s market.”
It’s seller’s market, suddenly.
But these people have a problem if they try to sell, according to Duncan: “Many potential sellers are unwilling or unable to put their homes on the market, perhaps due in part to concerns over finding an affordable replacement home.”
So they’re stuck because home prices have soared, and if they would like to sell to profit from the high prices, they might not because they can’t afford the high price and the mortgage payment of the home they’d have to buy. Welcome to the pleasures of Housing Bubble 2.
So a Bad Time to buy.
Fannie Mae’s survey, “the most detailed consumer attitudinal survey of its kind,” as it says, threw some very untoward data points into the mix:
- Americans who say it is a bad time to buy surged 6 points from April to 33%, the highest ever in the data series.
- Americans who say it is a good time to buy fell 2 points from April to 60%, tying for the lowest level in the data series.
But it’s a Great Time to sell.
- Americans who say it is a good time to sell increased by 4 points to 61%, a new record in the survey high.
- Americans who say it is a bad time to sell dropped to 29%, another new survey low.
But Americans remain conflicted: Those who think home prices will rise over the next 12 months fell 5 points to 48%, with only 8% thinking they will fall. At the same time, 56% say that mortgage rates will rise, though rising mortgage rates will pressure home prices that have been re-inflated to, and in many cities far beyond the levels of the prior housing bubble peak.
The results show that Americans, aware of how far housing prices have surged, are losing their appetite for buying a home at these prices, and they’re building up an appetite for selling. This is not propitious for the market.
If they were investors in the housing market, rather than homeowners, they could sell easily enough. But since they’re homeowners who live in their homes, for them, selling their home means having to buy something else or renting, and suddenly they realize they’re stuck and they cannot sell, even it is a great time to sell, because they cannot afford to buy precisely because it’s a bad time to buy, unless they move to a much cheaper city, and that’s not always possible.
That’s the quandary homeowners are facing as homes have become a global asset class that the Big Money chases as if it were stocks or bonds. But the Big Money doesn’t have to live in those homes; people do.
Minneapolis Fed President Neel Kashkari was the latest Fed official to claim that “spotting bubbles is hard,” that the Fed cannot see them, and that if it could see them, it shouldn’t do anything to stop them. So here are some visual aids to help the Fed spot the housing bubble. Read… Dear Fed, It’s Not “Really Hard to Spot Bubbles”
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– I guess these americans have heard of the housing bubble in Canada.
– and got scared.
Most Americans exist in the Matrix. They’ve been swallowed whole by their televisions and know nothing about inflows of Chinese buyers or low interest rates inflating housing bubbles.
When I mention such topics to my neighobors they look at me with stunned expressions. To them, housing prices are a mystery and no one knows why these things happen, they just ‘happen’.
Homeowners still buy and sell homes based mostly on necessity, not market timing.
Although I see many for-sale signs in the north-east, the signs flip to ‘under-contract’ within about two months- except for the ‘for sale by owner’ ones, those signs seem to hang around forever.
Fact Check ; Its not just the Chinese so once again lets not look to the simplistic conspiracy theory explanation .
Here in Denver according to my FA CPA and personal banker the overwhelming amount of properties are being purchased by Private Equity firms and a few well heeled investors along with a phalanx of delusional investors using their home equity to purchase investment properties .. not the Chinese
TJ– Why do you accuse everyone who has a different opinion than you do of engaging a conspiracy theory? “Overwhelming numbers of PE firms” – hmm, sounds like you are the one indulging a “conspiracy theory.”
The legal definition of “conspiracy” is two or more people plotting or engaging in criminal activity. That’s it. Your constant and condescending use of CT as a catch-all ad hominem that circumvents actual discourse makes it look like circumvention of discource is your actual objective.
Not many foreigners want to shovel snow.
Following up on your comments TJ…I live in Cheyenne, Wyoming and we are seeing one helluva residential building boom on the outskirts of Cheyenne proper. The funny thing…the vast majority of the new homes being built (3/4 bed-2/3 bath) are for RENT. Just a handful for sale. The oilfield workers here are staying in the motels so I don’t think the rental homes are for them. Just wondering…
What TJ said worries me. 2008 is the year that the houses changes from the weak hands (W2 buyers think they OWN the house without the income to afford) into the strong cash hands. Unfortunately, the strong hands are NOT stronger W2 hands, but a bunch of rent seeker riches. There are two kinds of rich. The first kind is the Bill Gates and Henry Ford, the 2nd kind is the rent seeking rich such as land lords, bankers and insurance. The first kind of rich creates jobs and bring prosperity. The 2nd rich are parasites. Elite rentier dynamics played in many society collapses. Their mode of operation is “positive forward carry”. Borrowing low rates and seek rent/interest at higher rates. The FED did everything under the name of encouraging the first kind of rich but in reality, it cultivated a bunch of the 2nd kinds since the artificially low rates is the fundamental cost of doing their wealth transfer rent seeking business.
Supply and demands on housing no longer matter folks. It is the W2 VS the rent seekers like all of those PE buyers TJ was referring to.
With the king of rent seeker as the president of this country, I do NOT see the W2 guys have any chance.
Expects your W2 turn into rents and fees those parasites, until the trend changes. The trend will change when the W2 earners are sucked dry and a regime change happens.
2008 is when housing change from weak hands to even weaker hands.
What is the definition of W2?
I’m assuming it is NOT reference to tax form, no?
Talk to multiple Realtors who have a better understanding of the market than your present advisors. I don’t see the Denver market the same as your post.
TJ is correct. Why would anyone talk to a realtor?
Ragnar, W2 buyers are buyers with income on their W2, which is working people who tries to buy shelter.
W2 means income source from labor, time.
Those PE or other entities, their funding source is NOT W2 income. Their funding source is borrowed money which is why artificially low interest rate give them more advantage against W2 buyers.
To even the playing field, it is simple. Let those rent seekers borrow money from W2 folks at market rate. But that’s NOT what we have. What we have is the funding rate is aritificially suppressed and those rent seekers can compete out W2 buyers since while you can artificially surpres funding rate, you can NOT artificially expand people’s labor time.
Most Americans (mejor dicho, USAers) couldn’t locate Canada on the map. Goes with being Truly Exceptional. On the other hand some places in Mexico like Puerto Vallarta seem to have as many Canadians living there as Mexicans. The Mexicans have all gone to the USA to work and send money back to their families in Mexico, and the Canadians all moved to Mexico to avoid terminal depression from lack of melatonin.
Strange world.
Excuse me, I find both, the corroborating data and the article quite lame.
Time willing tell
Chris So you own a lot of American real estate I take it and yes indeed Time will tell
Unimpressed by survey extremes? OK, methinks you’re talking your book
With housing, you have replacement cost vs market value.
Replacement cost depends on the cost of all inputs that make up the price of the home. Land in prime California locations costs more than land in south New Mexico. Materials depend on the type of structure. Labor is also variable depending on location.
Market cost takes all these things into consideration plus population density and the quality of competitive housing, all with respect to income levels.
Next comes … can people afford to live there?
While I think California real estate prices in some communities is crazy expensive, it can be explained and, therefore, is less of a bubble as some might think. It’s where you work, not where you retire.
Me, personally, I wouldn’t take it. But, you go where the jobs are and stay if you can afford to.
If the house isn’t being used as an ATM, and if the rising value isn’t creating a wealth effect / debt bubble, then is it really a bubble and not an expression of free market valuation? (Assuming away Chinese mandarins with cash to launder.)
It’s nothing more than a snapshot of the prevailing psychology of the current housing market which the data supports. The trends will undoubtedly change when the broader economy does. It’s only lame if you’re looking for an answer.
With foreign investors, house flippers, speculators and QE the housing market is completely distorted. “Normal” or “regular” economic rules, the ones that are being taught in schools, do not apply anymore. The bad side of capitalism is showing it’s ugly face.
Heinrich That is true however that said I believe all that does is distort the market and make the crash that much worse when it comes but I imagine most people here know that fact very well
The
badtruesideface of capitalism. FIFY.Read your Rand and Mises, two beers. You’ll find there is no room for fiat currency, too big too fail, managed exchange rates, the governmental determination of winners and losers, etal. in Capitalism.
All of the above are based on coercion, by definition, not capitalism.
“….selling their home means having to buy something else or renting, and suddenly they realize they’re stuck and they cannot sell, even it is a great time to sell, because they cannot afford to buy precisely because it’s a bad time to buy, unless they move to a much cheaper city, and that’s not always possible.”
Yeah, welcome to the club.
We’d like to sell based on price, but:
1. Where would we go? We like the little village area of our suburb and other places are not as nice. For example, the fruit trees in our yard are mature and producing.
2. What would we buy? Prices have soared across the city of Melbourne and even in the country towns. Downsize? Prices for townhouses are even more expensive than single family houses where I live!!
Why would I want to spend more on a place that is half or 1/3 smaller than I own now?
3. Costs. The costs of buying and selling real estate here are huge. The buying of a house entails forking out a whole bunch of money to the state government for ‘stamp duty’. On a A$750,000 place that would cost A$40,000. A million dollar place would be A$55,000.
Rent? That would run around A$30,000 or more a year for a similar place. Add in all the other fees and the cost of moving and you are looking at around A$100,000 to sell and rent for a year, and then buy…………..
No way.
Of course, we could leave the wonderful world of Oz and move overseas, but that would also involve a whole different set of tasks and costs…………
Although elevated rents here in the US are miniscule compared to the total cost of buying. Australia? Give time because housing is about to get a whole lot more affordable globally.
Sell ,rent for a short period of time Market corrects say 40 percent Buy back in Simple and it WILL correct I spent the day perusing the Zillow listings online and noticed that there are a lot of pending foreclosures as well as prices decreases by sellers and that’s from Maine to the Carolinas
Once a few flippers burn from their deals, other flippers stop buying. With no buyers, a few owner who have to sell for various reasons will offer their house at a lower price; that will lower the price, and many find themselves underwater. Given so many are borrowing on credit cards to pay for their mortgages, this will start a vicious cycle of selling. And whether you want to sell or not is immaterial. Because if you sell, then you have lost a lot of money; if you don’t sell, then your house will be more and more underwater. Basically, there is no way out without losing a lot of money. Welcome to the hell that banks and real estate industry created for the suckers.
We live just outside of Toronto 40 miles South near Niagara Falls.For sale signs in our area are sprouting like dandelions. 2 to 3 day sold have gone to 2 weeks and maybe more.
Buying and selling real estate is similar to buying gold after selling silver. If precious metals are “too high” you will get more for your silver, but be disappointed in how much the gold costs. The same is true by in large with real estate. If the market is up, the only way to lock in gains is to sell, then go to cash (rent), waiting for a downturn. Transaction costs, and the hassle of moving exacts a high cost for profiting off the “commodity” of real estate, but it can be done. To do it really well, you have to be right twice, calling a top, selling, then the bottom, and buying.
No offense, but I’ve often wondered why anybody would want to live in Vancouver or Toronto. Vancouver with its wet gloom eight months a year, and high real estate prices, high cost of living and high drugs use statistics, Toronto with icy cold winter and oppressive summers.
Same goes with Portland (where I live) and Seattle. Some of the gloomiest most depressing places in the U.S., yet some of the highest real estate and rental markets, esp Seattle. What an idiotic city Seattle is. They have City “safe spaces” for heroin addicts, they paint their sidewalks rainbow colors and now they want a city tax on soda drinks. Idiots.
Something doesn’t compute.
How about nut loose california 15 cents for a goddam plastic bag at stores, we help everything here save the rats the wales the insects you name it we save it.
Not using plastic bags works just fine. Bring your own reusable bags. Alternative: pay 10 cents (here, or may 15 cents somewhere else) for a classic paper bag or for a biodegradable plastic bag. No biggie.
Yeah and if you are lazy honestly for 15 cents you get a kick ass plastic bag that will never tear on you. Also they are reusable.
Actually I’m ALL for that as people waste so much and it all ends up in landfills or the sea If you don’t want to pay do what everyone does in Poland Bring your own carrying devices No big deal
I’m with you, tony. These people are missing the point. It’s not about the cost of the bag nor their perceived scope of your inconvenience.
What it’s about is one set of people forcing others to carry on with their life in a certain way through the force of the state, under the guise of the better good. That’s California. It’s getting worse, and that’s why the hell I’m moving out. The high cost of everything is the salt in the wound. The arrogant “no big deal, let me tell you how your priorities should be just like mine” mindset confirms I’m making the right choice.
I LOVE not seeing so many wasteful, ugly, take decades to decompose, shred easily, dumb-ass plastic bags littering the public spaces since that law went into effect. Love it. And, plastics messes with your hormones as they do slowly breakdown particles and get into your water supply. Who wants that? Really enjoy the added availability of paper bags too. It’s just smart.
At the end of the day that’s why we have states in the first place. If you find one oppressive you can move to another.
Also not saying that Cali doest make some stupid and excesive laws… but also I think it is very difficult and a matter of opinion to determine which state is the most off base and least desirable to live in. There isn’t a state in the Union in which I wouldn’t disagree with at least some of it laws. It’s a matter of degrees.
For me I love San Diego enough to where the only likely force that could one day drive me out is housing costs.
Ahem ..as a Yank who’s spent some time living there if I may … mountains on one side … the sea on the other .. in reality spectacle weather [ Vancouver is NOT Seattle ] incredible restaurants culture and art scene etc
Fact is the only downside is the price . And truth be known if it weren’t for that I’d be an ex-pat in a heartbeat living under Trudeau the Younger’s reign . Fact is … Vancouver along with NYC and Montreal are my four favorite North American cities … by a long shot
Lived in Vancouver for 7 years. You are right, Vancouver is not Seattle, the only job you can do there is to work in construction and real estate related business or server in a restaurant . It has very little industry and wages are very low compared to Seattle that is a giant of industry with some of the biggest companies located there.
Vancouver is beautiful on a sunny day.
But it is a gloomy place to be for 8 to 9 months a year with non stop rain just like Seattle if not worse. It can rain in Vancouver for weeks without seeing the sun. The worst I experienced was in November when it rained for close to 23 days non stop day and night, it alternates from light to heavy rain without end in sight. Even the summer can get wet some years that it really rains all year around.
Mountains are beautiful, and Whistler has great skiing infrastructure.
But to enjoy it you shouldn’t be working as you never know when it’s going to be sunny, and if sunshine happens on a weekend , the place gets so crowded, not worth the money.
Vancouver is a great con city for foreigners to buy RE as it has stunning panoramas on a sunny day that make alluring marketing brochures, but once you live there, rain, fog, huge traffic jams , overpriced crap everywhere and low wages together with little opportunity awaits you.
Philadelphia imposed a soda tax and it has been a disaster for revenue collection. Everybody shops out of the city for their groceries now and the poor get stuck with the consequences.
I call this classic leftist hypocrisy… To wit–our Democrat governor shuttered half of the unemployment offices in Pa. before Christmas 2016, over budget differences with Republicans…causing a wait time of months to process a claim and receive benefits. As you accurately commented–the poor get stuck with the consequences…
I agree. We moved to Portland 21 years ago from California for a more affordable and better quality of life. We got tired of the gloom but felt it was an acceptable trade off for what we gained. Now, I don’t see an upside here at all. Huge housing costs, lower per capita income than other states, horrible traffic, and a magnet for low income people from all over the country looking for the generous handouts of all kinds Oregon offers thanks to the far left leaning progressive government. Not to mention the protesters and anarchists that take over downtown. Sadly, we are done with this once livable state and are looking to leave. There are probably others like us which is a shame as we are the ones the state should be trying to keep. The future of this state appears bleak.
I left the Portland area 2 years ago and don’t miss it a bit.
What area did you live… smelLA? It still blows my mind anyone wants to live there. San Diego is great. Been here all my life, never seen a protest. I am sure they hapoen but no looting and they are small/peacful. A few too many homeless downtown, but the nice coastal and inland areas are pristine, safe and happy. Don’t know where you would find a poor person leeching here. Small 2 bedrooms start at $2k a month, the only none workers are living off their parents money. Like the OC…
Tell me about it. Portland has become one of the most depressing places in the US. I have to leave here every four months just to tolerate the in-between time. I’ve been stuck here since January and it’s starting to wear on me.
Rents are exploding; what you get for $1400/month is a sh** hole unless you push out further and further into the outer suburbs (Sherwood, McMinnville, Newberg).
And the beach cities (Seaside, Lincoln City, Newport, Florence) are populated by drug addicts, ex-cons and homeless. How’d that happen?
The traffic is awful because the city planners refuse(d) to do their job, and PLAN. Thus I-5/I-405 (nobody drives on 405) are mostly two lane and sometimes three lane and so the traffic is terrible.
You folks make the PNW sound so enticing, lol! Where do I sign up?
True story – most of the people I know who moved there are fringey, loser types with not a lot going for them. Its seems its a magnet for those who cant make it in coastal socal or other places where you have to hustle quite a bit to keep your head above water.
Probably doesn’t apply to Seattle since its a tech/engineering Hub. Lots of high paying jobs to bump up prices to San Diego levels.
I hear the weather sucks but the city is beautiful in the summer when its hot and sunny.
Decades ago before the Chinese invaded Vancouver it was a nice place to live because of the short winters, lack of air and water pollution and pure water than ran/runs out of the water taps. Toronto was always a hellhole of a city with bad air pollution, noise pollution and water pollution. The cost of living has always been and still is sky high compared to wages. Jobs at one time a long time ago were plentiful in Toronto but not anymore. Why anyone would want to live in Toronto is beyond me.
Awesome. You should leave and free up one more place to live. I moved to Portland primarily because I like the weather and nature here. Try living in the Midwest with humid summers and real winters.
To me buying a box (house) position or a precious metal position on margin (mortgage) is the exact same.
The time frame is what makes them MUCH different.
The beauty of not owning is I can choose my environment from waterside to meadow, city to urban. This has been rental season. I sense the home owner anxiety around me and it’s only just begun.
The first few sentences of this article use the term “housing”. After that, the term “home” is used, as though it’s synonymous with “house”. It’s not, IMO.
Some of us have developed “homesteads” (old-fashioned, isn’t it?) for ourselves. We have built a house on the homestead, alright, but the house is not the entirety of our home.
“Home” encompasses the land, the woods, the fields, the friends and neighbors as they are born, live, grow old and die.
This PLACE is my home and I will soon die here, as have all but a few of my contemporary friends and neighbors, over the last forty years.
However one ‘feels’ about their home time keeps ticking and with America growing older that cohort known as the ‘homeowner’ maybe ageing most of all. As the baby boomer generation drifts off into eternity this is going to put a vast number of houses on the market. Many will be in markets where there is little demand. Others will be unaffordable to the heirs even if they wish to keep them. The house mom and dad bought in the Bay Area for $200,000 in 1985 may have a $2 million or more price tag today and as title to it passes, property taxes to match!
Actually, I believe that someone inheriting a house gets to keep the low property tax value. It’s if they have to buy it from the estate (to cash out the other heirs) that they take the property tax hit.
Even then, it’s cheaper than renting in the SF Bay Area.
On the other hand, people may be coming around to a more realistic way of thinking about buying houses. If you’re purchasing a home to live in, it’s more like a negative annuity: just as an annuity generates a fixed income, folks purchasing something to live in are buying something that will result in a fixed housing cost (plus maintenance, etc., of course.) This has value in a market where rents can be raised to the market whenever the landlord chooses, or one can be evicted for “building upgrades”, etc.
What’s really going on is a classic supply/demand curve, where demand is driven by speculators and folks seeking a place to live (home purchasers and renters – “Consumers”, and new supply takes a long time to generate. Long-term demand is driven by the Consumers. Short-term demand is driven by speculators seeking profits through purchasing properties and reselling them to Consumers.
What’s happening is that the speculators have bid the prices above what the average Consumer can afford. It’s not a market distortion, it’s just it takes a long time to bring new housing on line.
Turning homes into speculative commodities is founded in Central Banking. Big, often dirty, foreign money sloshing around all over the world, trying to find a place to hide.
As in all things economic, price is set at the margins. The entire stock of homes in a city aren’t bought/sold annually. But governments sure put their greedy snouts into the trough for property taxes. No wonder they are so silent about foreign dirty money.
Sorry ole bean but the OED MW etc et al all disagree with your personal definition of the word …. ‘ Home ‘ negating your ‘opinion ‘ entirely … reminding you of that age ole axiom when it comes to .. opinions …. as in ; ” ………………. everybody’s got one “
It’s been a very bad time to buy housing for many years now. At least 15 years.
Not if you bought the dip in 2008 it wasn’t In certain areas of the US anyway Anyone who buys housing or stocks now deserves what they get
Prices in 2008-2012 were still multiples above reproduction cost. One only thinks they didn’t get burned.
Totally agree …
I guess it depends on when and where you buy. Here in Melbourne:
“The median house price in the 3142 postcode has soared to $4,325,000, rising 33 per cent in the last year and more than doubling in price in the past five years.
The auction market is also performing strongly; the median price for a house sold under the hammer was $5.5 million in the May quarter.
Toorak outperformed rival prestige suburbs including Kew, Brighton, Middle Park, Canterbury and Malvern, which all recorded median auction sales above $2 million during the same period.
“Other top performing suburbs listed in PRD Nationwide’s latest Property Hotspots report include East Melbourne, where the median house price has risen by 71 per cent to just over $3.5 million.
In the east, Hawthorn’s median house price is sitting just shy of the $2 million mark at $1.943 million, jumping more than 10 per cent in the past year.”
SEE:
https://www.domain.com.au/news/toorak-still-melbournes-most-prestigious–and-expensive–suburb-after-string-of-strong-sales-20170612-gwp7o9/
In Florida, we have the “Save Our Homes” amendment to the state constitution. It requires that property valuation for tax purposes can not increase faster than inflation or 3%, whichever is higher.
I purchased my existing house n 2001 for $139,000. In 2005, a real estate lady showed up at my front door saying she could sell my house to a couple who had been looking at it for $300,000. While tempting, I realized that all I could do was buy a new house for $300k, it wouldn’t be any better than my existing one, and my taxes would go through the roof. It made no sense.
With $50,000 worth of exemptions on the house’s valuation and extremely low reported inflation over the last few years, my entire property taxes were $1090 last year. I’d be crazy to ever sell.
pretty sure that tax savings is portable to your new house now. i found this article about it: https://propertytaxinflorida.com/2010/02/07/homestead-portability-transferring-your-homestead-cap-to-your-new-home/
It is to a degree. But not back in 2005. It is portable a a percentage. But a higher priced house is still going to cost you more, just not as much as it would have.
The politicians had to make it portable because of people like me who would never sell and “trade up” without that portability.
in any event , property tax exemptions keep a lot of
real estate ;”off the market”. people don’t want to loose their subsidy when they sell and relocate.
Here on my TV there is a fellow touting his this weekend’s ‘free seminar’ on Flipping Houses !!! (for the last 2 weeks !!) I’ve noticed when the RE market starts to sag, or foreclosures are dogging the market, they trot out the ‘make a million in RE’ seminar folks. Carlton Sheets and several others not rememberable et al. Some of it is good basic information, but the current fellow is touting using your IRA money.
Being formerly in the ‘house fixing’ business myself, I enjoy watching ‘Ask This Old House’ and other shows like that. It’s amazing how much I can accomplish in just a half hour !!! LOL On most of the episodes I learn something, notice something they are doing not fully rightly or that they didn’t show a problem and they edited it out, but overall they all do a great job of fixing up an old house, just like i used to do.
Kent’s comment above is great !!! Yes, the longer I own property the lower the taxes are comparatively to a newly sold property, unless I buy a foreclosure that is !!! Which I did shortly ago and am enjoying fixing it up without the time pressure to get it done fast.
In FL radio has been flooded with ”be a bajillionaire in real estate by flipping houses” ads as well. Complete with ”nothing down, use other people’s money to get rich!”.
Same thing happened 10 years ago.
It’s coming again like a freight train Things feel eerily like 2006 to me
it is already bad. the creeps just have continuous bail-outs for the bankers and as the last vestiges of capitalism is being completely wiped clean. meat grinder market – get a loan you can never pay off go into bankruptcy and the next idiot will take over the payments until they can’t pay. at this rate it there will only be renters left and ownership is a thing of the past. Thomas Jefferson was right about the banks. what is even worse = you don’t only have to compete with wall street sleaze but now foreign ownership keeps pushing everything up.
Reminds me that the “financial gurus” who want to sell futures contracts, gold, silver, oil, whatever, get on the phones for their “churning” exercises just before the markets tank. Seems to happen way too often.
Can’t wait to here about the high school kid that has been flipping houses in his spare time between squeezing pimples and spanking the monkey.
Fed is still committed to their screwball 2% inflation goal (for expenses they consider pertinent) and the easy money always inflates assets first. We might be at a tipping point although it might also simply be that time of the season. I am seeing very few price drops thus far.
If you’re looking to downsize or move from an expensive area to a less expensive area, it’s a great time to sell. Otherwise, it’s probably a lateral move and not worth it.
5 years ago the prevailing prediction was that boomers would be selling their homes in droves as they retired. But, I saw an interview with FNMA’s Duncan a couple of years ago and he said that the surveys they ran on boomers showed that those who could afford to stay in their homes were not looking to sell and were planning on staying for their duration.
In Cali our laws leave disincentive to trade down for an older couple who slayed a 30 year mortgage….
My parents have a 3 bedroom that would now fetch around $800k. But even downsizing to a nice 2 wold cost more to carry because of a massive tax increases…
75 million boomers already heading for the grave leaves a whole lot of empty houses with very stagnant demand.
Don’t worry, wall street will just IPO some more institutional companies to buy those vacant homes and hold onto the inventory as it rots. they don’t care if they don’t make a profit. they do it on purpose for their disdain to the general public that they hate so much- think i am kidding. these people hate everyone including themselves. half of those evil pricks are bald ugly trolls who buy prostitutes and need pills to get through their miserable lives each day. – hell amazon ran 18 of 20 years unprofitable and has a PE of 300-500 – they pumped that thing to $1000 and are still going. because capitalism does not exist any longer. the world is run by crooks and ugly troll looking bastards who absolutely hate everyone including themselves.
Boomers may want to stay in their houses for as long as they can, but they’ll be up for grabs eventually as they die off. I expect the’ll be an avalanche of estate sales starting in 5-10 years. The next few decades in real estate won’t be as bubbly based on demographics.
I managed to do this selling in SF and moving to an LA suburb.
As expensive as south county is I feel like I won the lottery.
New purchase is twice as nice and 30% cheaper.
I expect my new house will either drop in price or stay relatively flat for a decade.
Of course I could be wrong and prices go up for a while, but regardless I now have a ton of cash on top of savings by selling my SF home and buying south.
Nobody is talking about all the retirees that are cashing out and renting overseas. I’ve seen more articles and more tv house show coverage of this lately. You can cash out and tour some cheaper countries for a few years and wait out the American housing market.
I even read a story in the NY paper about a younger couple living on a cruise ship. It’s cheaper than renting in NYC.
All of these behaviors tell you that the real estate markets are over priced and everybody knows it.
Nobody talks about it because its a phony narrative. Boomers are so loaded up on mortgage debt they can’t afford to pay attention.
Boomers are retiring in droves with much lower incomes than they anticipated. They can’t afford the house or the debts anymore.
BTW, medicare will take their paid off house if they get really sick. It just doesn’t pay to own above a certain age in the US.
Petunia – Like all generations there are those that only live for today and there are those who plan for tomorrow. Many, but not all, baby boomers have lower incomes than anticipated but the low interest rate scam punishes those that did plan for tomorrow.
Also, it is Medicaid that takes your assets not Medicare. But Medicaid only looks back 3-5 years so one plan is to transfer those assets to beneficiaries prior to needing Medicaid.
You land up on medicaid after you exhaust your liquid assets, then they take the rest, what’s the difference?
Unless you are rich, if you get very sick, you will die broke. If you can’t save enough to retire wealthy, you might as well spend it all.
In NY State and others, a trust can be set up that allows you to keep your home and other assets, and pass them on to your children, while qualifying for Medicaid.
The problem is that people didn’t know how to profit from the rising real estate market. Now that we are at the end of the cycle everyone is attempting to get in on the game but stuck in limbo because of all the negative consequences of moving.
Here is what they should have done and what I did in the Suburban DC market. I had a paid off home so I went and did a home equity loan at 2.75% and borrowed enough for the down payment on two homes. I put down enough so the rent would cover the PITI on the rental homes. My out of pocket expense was the interest on the 2.75% loan on my principal residence. That expense was mitigated by a tax savings of 40% (Fed & State combined). Net I was paying 1.65%
The real estate market in DC lasts about six years from bottom to top and I got the bottom which was 2009. I sold too early in the summer of 2015 but was satisfied. I made 36% on one house and 38% on the other and gave the government 25% of profit. 15% Fed, 5.75% VA and 3.8% Medicare tax.
That is how you play the game. You might want to remember that as we approach the coming crash.
Great way to go. The mistake most made was buying the lie that high appriciation would greatly benifit you on your primary home.
The flaw in this logic is obvious. The best time to sell is the worst time to buy… so you will be forced to make comprimses.
Yeah like me only I’m working with an Architect now on designing our new home My rent for this almost new one bedroom 20 min walk to the Med is 175 usd a month which includes cable TV internet and propane for cooking The hot water is free for nine months as it’s solar I sold my 1500 sf cottage in Sag Harbor NY in 2015 for close to a million and my SS just came into effect so we’re OK I also have an apt in Warsaw that I rent for around 1200 usd a month
I bought a modern condo for cash equal to less than one year’s salary. I now rent out that condo. I now pull in rental profit higher than what the gov’t promises me for a Social Security payment when I retire. The math astounds me. Now I am sickened to think of the much larger amount I have stuck in a non-productive 401K getting milked for fees by Wall Street.
Everything gets milked with fees. The improtant thing is minimizing the fees and diversifying.
I did the same but added stocks as well…
As I don’t have time and energy to maintain rentals…
Americans are just sour. Not just on real estate. And not suddenly, either.
“Americans who say it is a bad time to buy surged 6 points from April to 33%, the highest ever in the data series. Americans who say it is a good time to buy fell 2 points from April to 60%, tying for the lowest level in the data series.”
I am not sure how this data point can be submitted as an evidence to the hypothesis that Americans have suddenly soured. For one, the majority still believe it is a good time to buy.
By the same token, the following seller data point seems to indicate that nothing much has changed.
“Americans who say it is a good time to sell increased by 4 points to 61%, a new record in the survey high. Americans who say it is a bad time to sell dropped to 29%, another new survey low.”
In fact, I see from the buyer graph that the smallest jump is about 1 point and the usual movement seems to be about 3 to 5 points. The seller graph has a smallest change (that I could glean) of about 4 points. If these observations are right, this could reverse in the next time period.
So could these changes just be with in the noise level?
The clearest chart is the “Time to Sell” chart. It’s far beyond just noise.
Is there a vibrant market demonstrating organic demand or has the last ten years been funds, banks and speculators trading houses back and forth while sales have been massaged using a flawed methodology?
Dont look now because mortgage applications clearly show the latter.
What is the useful function of something called the Home Purchase Sentiment Index? Do opinion surveys like this, (you could not call it research) underwrite federal housing policy?
Your post seems to make the point that its conclusions are embarrassingly obvious, and I’d certainly agree.
If helps no on but few people to keep their jobs on tax payers expense:-)
“Sentiment” (of homeowners, consumers, business executives, etc.) is an important factor when trying to understand the economy. It’s not necessarily a reliable predictor of what will happen next month because there are so many other variables at play. But there are no reliable other predictors either, which is why it’s so hard to predict with certainty what will happen next. And this is why it’s so important to look at a lot of different things.
Wolf,
Wouldn’t you expect the sentiment index to be the opposite in a true bubble?
Everyone should think it’s a great time to buy in a true bubble, correct?
Here’s some real estate sentiment that must mean something:
https://www.thenation.com/article/trump-friend-thomas-barrack-cashes-out-of-colony-starwood-homes/
Looks like prices and rents have topped out.
Thanks for the article!
Apparently, the builders have not gotten this memo, as they continue to go gangbusters in Southern CA and northwest WA. New tracts in SolCal are selling before ground is broken. Inventory is still in short supply in both these jurisdictions and buyers still outnumber sellers. We’ll see how it shakes out soon, it appears.
Gamblers buying up and holding onto empty houses isn’t exactly what I call buyers outnumbering sellers. It’s not going to end well here in SoCal.
the largest homebuilders are owned by wall street conglomerates. this means when the shit hitz the fan, they get bailed out too. probably will just buy the inventory sell it to Fed mbs special (just like housing bust 1.0) and sit on empty buildings for a dozen years until the market turns around. these dirtbags undercut all the real contractors out there who use to build homes for profit 20 years ago. now the these same contractors make a living by either flipping homes or subcontrcting to the multi-billion dollar wall street conglomerates. great game when you are spending other people’s money (via print press scheme and inflation) and diving profits among yourselves when you win. if you lose, give it to the bank. bastards did the same thing few hundred years ago. only difference is andrew jackson had the balls to break them up.
1. An interesting theory you have but it didn’t prevent housing prices from falling 38% here in the Bay area and falling nationally.
2. Wall Street homebuilders are minority players in terms of supplying the market.
3. All builders undercut previous buyers putting them underwater immediately. And this is happening right now too.
Sit back and grab your favorite popcorn because the show is just getting started.
Big developers, like the Related Group down in FL, did get a free pass during the crash. Their loans were restructured so they didn’t have to go bankrupt. They were even allowed to keep building when there were no buyers.
– Or perhaps US citizens are becoming aware that the Trump administration wants to reduce/abolish the tax deductabiltiy of interest payments on mortgages. It will put downward pressure on home prices.
– Talking of deductability of interest payments: In the UK there was the socalled “buy-to-let” investment scheme. It allowed people to borrow money (mortgage), buy a house and then rent it out. Then the interest paid on that mortgage is tax deductable. But in the next 3 years those tax deductions will be phased out.
— http://www.telegraph.co.uk/investing/buy-to-let/new-buy-to-let-tax-works-andhow-beat/
Here in the Seattle area, the boom is still going strong. Cranes everywhere in the city building 40 story apartment buildings, with only a few condo buildings which get snapped up before they even start construction. Any decent house get’s bid up with multiple offers, waved inspections & contigencies. I’m starting to see the signs of more cookie cutter homes & townhomes in the outskirts, where you can be 5 feet away from your neighbor, staring into their window. The only thing bringing this one down is a slowdown in the tech companies, or oversupply which I do not see yet. The plus side is the job market, clean air/water, wages. Bad side: housing costs & traffic…
Yeah, I think it’ll take a tech collapse, although cranes everywhere may not necessarily be a positive indicator. I remember living in Hollywood in 2007, and there were cranes everywhere then, too. A year later, there were huge, half-built condos and apartments everywhere that took years to finally get fully built.
– People are still “chasing yield”. In the region I live I recently saw 3 advertisements for real estate projects. And all cited “guaranteed” yields of 6.5% up to 10%. And each of these 3 projects were sold out within about 4 months. It reminds me of what happened in the housing boom years.
How on earth can one “guarantee” yields of 6.5% or more ?
May I ask, in which country were those projects?
In Seattle as well. It’s crazy what people are paying for dumpy old houses, but it’s also crazy what people are paying for the stock of the companies here. There’s no question that one feeds the other.
I was at one of the San Juan islands over the weekend. Stopped in at one of the cute restaurants catering to local tourists. On their drink menu they had specialty drinks for $12-$18 apiece. People pay it here no problem.
Just because some people are nuts doesn’t give me any more confidence It WILL all end very badly It always does
Private equity firms and their shell companies buying and selling houses to each other doesn’t sound promising.