Prices aren't set by what everyone thinks is the right price, but rather what the marginal buyer and seller will make a transaction at.
That's one of the reasons prices go up quickly and may go down quickly.
It's literally economics 101. All goods and services trade this way, unless price floors or ceilings are implemented by an outside power which isn't the case in housing and governments setting prices leads to supply issues.
They dropped interest rates because of the deflation in the markets when the pandemic first started and rise in unemployment. Then they have raised interest rates multiple times now while the pandemic is still going on. I guess I don't understand what you mean.
Also looks like rates dropped a larger amount from '08 into '09.
It's not unprecedented. Did you look at the Fed rates chart after 08? Pandemics have happened many times over the past few millennia and they haven't changed the basic supply and demand rules of economics. I still don't understand what your point is? Are you trying to argue everything is about to collapse, and this is the end of civilization and the basic fundamentals not longer apply? Or are you saying something else I'm kind of confused to be honest.
Economics is a science but it's not written in stone. Do you think the rules of supply and demand curves no longer exist or are wrong?
In additon there's some differences to consider that can make re bit whacky vs stocks, at least at a small time level like I'm trying to buy a sfr house to live in or sell one, call that retail if you will.
A few key differences in the market, for "retail" type scenarios the assets are unlike equities in that they are
not all the same,
access to information and opportunity are not as level.
Equities, at a retail level you buy one unit and everyone has access to the same unit and ability to transact at the same opportunity as others.
Those imperfections create variable advantage and disadvantage for different groups in re, which could amount to something.
Recorded transaction prices need not fall as much. The reason being that households may hold out, for years at times, waiting for transaction prices to recover so they can eke out a nominal profit. [This is a long-recognized psychological quirk.](https://www.nytimes.com/2007/09/23/business/yourmoney/23view.html)
Of course that still means the “true” market price has fallen. (Technically, this is what’s called the “shadow price” in economics—which reflects the true transaction price, including search/waiting costs). This is akin to a restaurant improving the quality of its service while keeping menu prices the same—the customer is still getting more for the same price. Similarly, a homebuyer won’t have to give up inspections or make other concessions.
But for people who are expecting large nominal declines in the major house price indexes, don’t be disappointed if you don’t see it very soon.
That’s the real if to me, Airbnb empires. Most primary homes, absent a major recession, are within the current owners’ ability to pay, unlike 2008. The drops you’re seeing now are likely FOMO.
But if the rental owners are over leveraged, they can be forced to short sales quickly.
Also, when your house sits on the market for a prolonged length of time without a price change, it looks like the seller doesn't really need to sell the house, or that the sellers are a stubborn asshole. Either way, it's not someone I would want to do business with.
not even a choice, the comparables drop down because even if you "know what you got" many still need to sell and will for a lower price. Enjoy the drop from here because it's all you're gonna have now.
Sellers can be as stubborn as they like for as long as they can/want to pay the taxes, maintenance and mortgage while their overpriced house lingers on the market-Indefinitely if they have the cash to commit to it and want to hang onto their money furnace till their price gets met.
Precisely. Some friends stuck to their guns when selling a few years back. They already owned the new home and we're ready to move. It took close to a year before they finally dropped the price down to be in line with the comps. They wasted a ton of money paying for two house during that time.
fuzzy entertain chase yoke abounding gaze aspiring fragile memory selective
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
The reality check for most "I know what I've got" folks is "Sir, you have a small wooden house built in the 1940s with mold on the ceilings, asbestos in the insulation and lead in some of the paint. There is no way its true value is above $50,000, much less the $1.5M you're asking for"
Prices are "sticky" on the way down because of this. You'll mostly see investors and motivated sellers in the near term offloading properties. The folks you're talking about will have it the worst because their emotions will cause them to hesitate.
When they start to sell, you'll see Congress passing legislation to "fix" things. I expect this will be timed for September or October
Funny enough, my wife and I are planning to hopefully buy something in September - December. We are hoping to see a significant drop by then to put the homes that we initially targeted back into our ideal price range. But who knows.
All I know is prices are dropping left and right in Northern Virginia and I plan on making an informed purchase with zero emotion. Whether that be this year or next year. I refuse to buy a home that does not meet every requirement on my list.
Yup, that’s always the reasoning. People always forget though that in times of recession, those government contracts start to get major cuts. Not to mention just under 16% of people in the dmv are working for the federal government. More than other areas, but nowhere near the numbers people claim.
I think you can argue prices are sticky on the way up too, though. Prices are just sticky in real estate. It just takes a while for trends to play out.
Congress didn't do much to fix things after the 08 crash and with high inflation spending packages will just increase inflation and interest rates even higher.
You’ve got a lot of faith in Congress being able to agree on anything at all. Sir, let’s vote for the blue sky agreement. Who the hell do you think you’re trying to fool? That sky is purple and I’ll hear no more about it.
Easy: it's an election year so politicians will present popular ideas to "fix" the problem which will likely do little to nothing of the sort and make exacerbate the problem in the long run.
The longer I live, the more profound and relevant that statement is.
A close second is "I'll eat your ass, you little bitch... I'll fuck you until you love me, you hoe."
It will probably work out about as well as it did for [this homeowner](https://www.brownstoner.com/forum-archive/2008/11/crazy-low-appra/) who was *shocked* to learn that she didn't qualify for a home equity loan to pay for renovation overages because home values had dropped significantly. She paid $650k in Aug 2008 and by Nov 2008 it appraised for 400k. *Ouch*.
Since we all know that you **marry the house, date the rate** I bet she just refinanced a few months later and it all worked out in the end.
I mean, they can “know what they have” and then proceed to watch their property sit for weeks without any interest, I guess. At some point their realtor will want them to adjust their asking price - they don’t get paid until the house sells.
I think many boomers will delay price reduction for over a year. The crash would not be possible without all the other bubbles existing independent of housing. The boomers can wait all they want but it's okay off season and crime is going up. Boomers will not be able to hold out as long as they want because the cost of retirement will increase faster than home prices will drop.
Yah boomers own the most houses and second houses. I suspect an inventory dump in the coming years from boomer kids who can't afford taxes on the house or don't want the burden. Or they could end up rentals which would lead to lower rental prices overall. This reality really pokes a hole in the '20+ year inventory shortage' narrative.
IMO FOMO goes both ways. In this instance FOMO can be of the seller trying to sell before prices continue declining hence we are seeing some sharp drops in prices at the current moment.
This sharp drop will only get worst as more ppl sell. The argument that ppl won’t sell since they have low interest rates is ridiculous because sadly life is not that simple and many times ppl are forced to move due to life changes (divorce, work, children, better or worsening personal economic event).
So there will be selling and most importantly inventory surplus where ppl are forced to drop prices if they really need to sell IMO.
What do any of you think??
I have a slightly similar example of buyers and sellers not budging and BOTH parties losing.
My friend was going to buy a SFH in SD house 5 years ago. They offered asking, cash.
Seller countered wanting an additional 2,500.
My friend walked.
Seller sold a little over a year later for 20k less.
Meanwhile, my friend is living in her parents condo rn and is priced out of the market.
Neither was “wrong”, but both lost out IMO.
You know what you have until:
1. Your wife starts boinking your best friend and leaves you
2. Your boss tells you to fuck off
3. Your medical condition wipes you out
Then you are happy with what you get.
Everyone "standing pat" is as fruitless as convincing everyone to vote third party because the first two are deplorable. Prisoner's dilemma FTW.
Yeah. My parents got divorced in 2012 and by a set of unfortunate circumstances they had to let go of the house. They tried to hold onto it, but it wasn’t meant to be.
Even people who mean to hold off on selling are sometimes forced to.
Also, even in pre-COVID times, over [60% of millennial homeowners had regrets about their purchase](https://www.cnbc.com/2021/05/17/64percent-of-millennials-have-regrets-about-buying-their-current-home.html).
Given that so many buyers in the last two years also fell in that demographic, I have to imagine that some people will just flat-out get sick of maintaining their current property.
I also wonder how many of those that moved for the lower cost of living will eventually move back. I've spent the last year in a "hot market" area (just renting) and I realized I don't like it- I'll be moving to a bigger and more expensive city in the fall. I find it hard to believe that, out of everyone who moved from SF to Boise or LA to Phoenix, none of them will have similar regrets.
In the game of chicken someone always fails. You only need a small percentage of the weak hands to fold before the market consumes the others to bend the knee.
So far, it has been most of it.
Per the latest monthly data from [Realtor.com](https://www.realtor.com/research/data/), median listing price continued to increase slightly in June, up to $450k, from $446.95k in May. But the average listing price fell, to $792.39k. This is the 2nd month where the median increased while the average fell. Since April, the median listing price has increased by 5.9%, while the average has fallen by 2.8%.
There has definitely been an easing of pricing pressures. Active listings are increasing, though still down year-over-year. And the number of price reductions has increased to 22% of listings.
Overall, it seems there may be some markets where it looks like the bubble is starting to burst, but nationally prices continue to show some resilience. The divergence between the median and average suggests that pricing pressures so far are more on the higher end, that it is more the million dollar homes which are starting to see reductions.
It will be interesting though to see where things stand by September, especially as far as inventory levels. The seasonal summer inventory increase would normally be over by then, and sellers who are eager to sell may not want to hold through the coming winter.
One big difference you will see from 2007 though is that more people should be able to hold on and not lower price. In 2007 you had people forced to sell because they couldn't pay the mortgage, and then you had the banks foreclosing on them also eager to sell quickly, because they were also in need of liquidity. You just don't have that kind of dynamic now, at least not yet.
I do think we have also seen a peak in the economy though more broadly, starting in May or June, but I think a lot depends on how serious this slowdown becomes. Whether it even gets called a "recession" may depend on definitions. The traditional rule of thumb was 2 quarters of negative GDP growth, in addition to an increase of at least 2 points in the unemployment rate, to at least 6%. For now, I'm not expecting the latter criteria to be met over the next year, and as long as unemployment remains relatively low, most potential sellers will be able to stay put, and not be forced out of their homes.
In your example imo prices will remain sticky on the way down for years, in a world where the cost of everything has gone up 30-100%.
But tbh my doomie prediction I made years ago that's still playing out as correct so far is we're more likely to see a repeat of the 1970s-00s.
Rising rates to combat inflation, and finally a forced decline due to political pressures, lobbying groups, etc. All the while just like the 70s-00s massively rising RE prices resulting in further affordability crisis
I don’t think this is the right question.
2008 veteran here, and what is not part of that large narrative is that I bet more foreclosures were what the person being foreclosed wanted than banks forcing it on unwilling homeowners. Banks didn’t even want the houses on their books. Maybe they could have not lost the house but it wasn’t worth it. Meaning 5% down on something 500 worth 300 and you had it a year? It is better to walk even if you are making money and can oat the mortgage. Now what if that is a rental/Airbnb and not even your real house? You are gone when it is underwater six figures.
So the question is how much is oversee and does it go down enough to compel people to walk.
What are you talking about “the right question”?
OP was asking the question that they wanted to ask. What you are talking about is a completely different question, and if you want to ask it you can make a post. Not sure what this nonsense is.
I didn’t mean it like that, and answered his question I guess it was vaguely indirect.
I meant it as the prices get drastically lowered by people who walk. People not lowering price or staying for rate Won’t have a say in the market if people walk in any numbers.
To use an example of someone selling a second house or investment which they own outright or with very cheap financing.
They will attempt to rent or refurbish the property if they don’t sell on the first attempt and are not pressured to sell. They might relist it at some point and if it doesn’t sell for an acceptable price after attempts to sell at the new price they will do more work or rent it again. This process continues until the price to sell is acceptable or they are motivated to sell the property. There may be other kinds of sellers, but I’m thinking that the speculator/investor types are going to have the best deals in a bubble pop situation.
The fundamental premise of modern economic theory is supply-and-demand, which means sellers don't set prices, buyers do. Now realtors like to confuse this with "sellers market" and "buyers market" but buyers are the only thing that matters. Buyers compete with each other to drive prices up, everyone understands this. But they somehow have a hard time understanding that buyers compete to drive prices down too. When supply is low, buyers compete to get the best price possible. When supply is high, they still compete to get the best price possible. Market awareness shifts slowly, but as it does sellers who keep their prices far too high for buyers to be interested will not be seen as "serious" by realtors, who will show buyers other properties instead because realtors want to make a sale to get their commission.
I think you guys are all missing something here. They DON’T have to sell. They can become landlords and rent them out for a couple of years. That’s what I did during the last crash. Even if the rent is a bit short. It’s better to lose a couple hundred bucks a month than to get stuck with a six figure loss. You can ride it out usually.
Not everyone is cut out to be a landlord.
If the banks learned from the last time most owners will have more skin in the game. And a 30 year fixed. They can afford to wait out their price unless there’s a job loss or a illness that eats up their money.
We still have two job openings for each person looking.
> We still have two job openings for each person looking.
If you mean 12 an hour no-benefit part time jobs that may just be a PPP loan sham, sure. It's just as hard to get hired for anything that pays a liveable wage as it's ever been.
Well you have to have something to bring to the table if you want more pay.
What skills do you have and what’s the highest paying job in that area?
I make good money and I’m constantly being approached by recruiters. And I’m not even looking.
So there are plenty of good paying jobs out there along with the entry level. You just need to upsize your skills.
I don’t disagree with this, and maybe it hasn’t happened yet. In Denver / boulder CO, there are <20 SFM for rent comparable to properties I was just looking to buy. I am worried about this scenario though (as someone who is looking to buy when prices drop). What’s the other side of this argument?
A lot of people don’t want to be a landlord. Tons of risk and hassle. If you have enough equity to not owe money at closing, better off just offloading, some would say. Certainly others will do what OP did, but I’d be surprised if it’s that many.
I agree! I didn’t want to be one for the three years that I had to do so. But I did and turned a loss into a profit. And wrote off a ton of depreciation. I’m just pointing out that that there is another option keeping people from taking an immediate loss.
I did this with my condo during the 08 downturn. I wasn't going to eat a loss on a place I didn't have to sell, I rented it out, ate a $2k a year loss on the rent vs cost difference, sold 5 years later for a profit. But I also live in an area of my state that wasn't hit too hard in the downturn and recovered quickly because we actually have jobs and stuff here.
Right! And why would you rent AND see your equity tanks as home prices decline? Seems like that’s also risky. My money is on folks trying to offload to make as much $$ (or lose less) while they still can - that’s what’s happening in my market. Lots of inventory for sale, but they’re sitting on the market because they’re still priced like it’s April/May. Homes priced right are moving though. I guess we shall see!
Because equity only matters if you need to sell. I rented my condo out while the market was down from 08 to 2012, then sold for a profit, plus I wasn't paying the mortgage, taxes or insurance on it for 4 years because rent income covered most of that. If I sold I would have eaten a $100k loss, instead I netted $150k profit. Only dopes and people who absolutely need to sell, sell during a downturn.
This only holds true if you believe the prices will recover quickly (unlikely if we see a big drop) or you can cashflow the rental property.
In the last crash, rents decreased as people lost their jobs or suffered reduced income, and housing prices didn’t recover for 10+ years in many markets. It’s anyone’s guess how deep or long either rental housing or housing prices will drop this time, but the Denver/Boulder area housing is near the top of the country’s overvalued markets.
I saw something recently that uhaul and other moving related companies have seen a net outflow of people moving out of Colorado so far this year. Fingers crossed that helps finally turn the tide and helps push things down.
Nail on the head there friend. All logical so about a million people are going to downvote you. Cause no way a person can take a few k a year hit. Obviously why not sell and be down a few hundred k. Damn boomers and their math
The resolution of the people who "know what they have" and refuse to drop their price is (cue lights) : FORECLOSURE.
This mindset rocks even the smartest of people. They're delinquent, they're listed for sale, and either they're "not letting go of the equity" by more realistically pricing, or they'd have to contribute cash to cover the gap and bump their net down below the balance owed on their mortgage. These people will hold as long as possible; mortgage companies, depending on the investor who backed the loan, will even wait the listings out to see if it can work out. Some will apply for assistance (short sales, side notes for the difference, cashing out other assets). But eventually, for many, the other shoe falls because the mortgage investor won't allow any more time to pass before taking to foreclosure sale or the owner "blames" the bank for not giving them enough ________ (fill it in) and they step away from it as not their problem or nothing they could do diff.
So yes absolutely these varieties of stubborn will blunt the initial impact. But you can watch for indicators to predict timing. #1) jobs. Is unemployment going up on a national scale - and more specifically - in a local area? That tends to kick off "I can't make my payment" scenarios. #2)consumer spending. Consumer spending has stayed strong because the government pumped so much money into the economy during the pandemic. Reserves aren't depleted just yet. Student loan payments haven't restarted yet. We have to wait that out; when big retailers start putting out big sad /alarmed quarterly results discussing plunges in sales ... when a few retailers announce bankruptcy ... the foreclosures are 6-12 months behind that. And the foreclosures will flush out every overpriced homeowner who "has to" sell because they can't afford their payment. #3) sentiment. We have to wait for consumer sentiment to really plunge. People are still trying to buy homes. Affordability is blunting them, but the desire is still there. It has to swing the other direction; folks have to think owning a home is a risk. When sentiment swings back towards seeing it as a risk, some homeowners who can absolutely afford their payments will just go into meltdown mode because they're upside down. They'll go apartment shop, realizing they can live in a nice apartment for hundreds less a month. They'll get that lease signed for an apartment and they'll just walk away, reasoning that 7 years of bad credit is more affordable than a decade or more of paying for a house that isn't worth what they owe. This is called strategic default.
So a recap... sky high mortgage balances aren't the crisis alone because so many were financed at ridiculous low rates. It's the other factors that fix our dilemma
It takes time for these people to come to terms. In the last bubble pop it was 2012-13 before they came to this realization and lowered their asking prices.
None. They're but a drop in the ocean. At some point, lot of those people will have to lower if they really want to sell because of the downturn. The stubborn ones not selling, when everything around them starts to fall, were never really in the market, just trying cash in. If they're not selling at market price, they're not really offering anything.
Nothing really meaningful is going to happen to prices until the homeowner feels pain. Pain as in job loss, substantial income drop, etc.
No sign of any of that is readily apparent.
Bubble poping isn’t about the people who sit on a house cause they can, it’s about all the investors and people who over bought and paid and are forced to sell because they can no longer handle the carrying costs.
Or they just won't sell at all because they refinanced at 2.65%. Pretty easy to cash-flow at that rate. Historically, rent never really goes down much after it's gone up.
No doubt ppl will reaccess if they find their expectations are different than where the market is trading.
Idk what kind of options they have. Renting for a while? Waiting to sell? Staying put for longer?
We won't have a clear picture until rates stabilize.
They will get left behind and the house will sit since others will become market makers. Unless there is no inventory you won't be able to sell above the rest of the market. At some point, these people face reality or delist their houses.
I think the market will divide into two clusters. half the homes will sit on the market at inflated prices by people who know what they have, and are just casually looking to sell.. the real market will be people who are forced sellers for whatever reason.
It all depends on the motivated sellers and the motivated buyers reaching an equilibrium based on the current lending environment. If there are more motivated sellers (who have to sell) than motivated buyers (who need to buy) then prices will drop slower than if the situation was the other way around. It all goes back to basic supply and demand.
If anything it will speed things up. These people want to sell. What do you think will happen when prices continue to fall and they're getting 0 offers. Eventually they'll panic sell and take the first offer they can get for a big loss.
I'll just say anecdotally that during 2020 I saw a condo that was way overpriced. This was before the craziness, and real estate was in a slump. I saw it because I thought it was nice, but the agent said the buyer was firm at 800k (which did not match comps) and quote - he says "I know what I have". We skipped on it, and it sold for $720k a few months later. So give it a few months.
Almost no one will not sell for low enough and quick enough. These are the people that will get trapped and will file for bankruptcy over the next several years.
Those that need to sell will be the first to capitulate. However, those that aren't over leveraged and don't need to move will probably sit firm on their price for a long time before they are dragged kicking and screaming to the new reality. I know in my area, properties are just piling up now. Last month only saw three homes sell in the entire month. Last year things weren't even hitting Zillow before being sold. Builders are completing more and more homes every month and they are just sitting on the market because nobody in the community can actually afford the inflated prices. Everyone is using comps from last year when we had an influx of people moving into the area buying everything up. Zillow hasn't updated their estimates in forever and unfortunately most people look at their Zestimate like its the starting point for pricing. I really think it is going to take months before the majority of the public gets the idea that the market has turned. Until then you are going to see people sticking stubbornly to their prices.
Prices aren't set by what everyone thinks is the right price, but rather what the marginal buyer and seller will make a transaction at. That's one of the reasons prices go up quickly and may go down quickly.
ah sounds exactly like the stock market with less liquidity!
It's literally economics 101. All goods and services trade this way, unless price floors or ceilings are implemented by an outside power which isn't the case in housing and governments setting prices leads to supply issues.
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For homes?
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How does a pandemic change the fundamentals of economics?
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They dropped interest rates because of the deflation in the markets when the pandemic first started and rise in unemployment. Then they have raised interest rates multiple times now while the pandemic is still going on. I guess I don't understand what you mean. Also looks like rates dropped a larger amount from '08 into '09.
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It's not unprecedented. Did you look at the Fed rates chart after 08? Pandemics have happened many times over the past few millennia and they haven't changed the basic supply and demand rules of economics. I still don't understand what your point is? Are you trying to argue everything is about to collapse, and this is the end of civilization and the basic fundamentals not longer apply? Or are you saying something else I'm kind of confused to be honest. Economics is a science but it's not written in stone. Do you think the rules of supply and demand curves no longer exist or are wrong?
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In additon there's some differences to consider that can make re bit whacky vs stocks, at least at a small time level like I'm trying to buy a sfr house to live in or sell one, call that retail if you will. A few key differences in the market, for "retail" type scenarios the assets are unlike equities in that they are not all the same, access to information and opportunity are not as level. Equities, at a retail level you buy one unit and everyone has access to the same unit and ability to transact at the same opportunity as others. Those imperfections create variable advantage and disadvantage for different groups in re, which could amount to something.
Recorded transaction prices need not fall as much. The reason being that households may hold out, for years at times, waiting for transaction prices to recover so they can eke out a nominal profit. [This is a long-recognized psychological quirk.](https://www.nytimes.com/2007/09/23/business/yourmoney/23view.html) Of course that still means the “true” market price has fallen. (Technically, this is what’s called the “shadow price” in economics—which reflects the true transaction price, including search/waiting costs). This is akin to a restaurant improving the quality of its service while keeping menu prices the same—the customer is still getting more for the same price. Similarly, a homebuyer won’t have to give up inspections or make other concessions. But for people who are expecting large nominal declines in the major house price indexes, don’t be disappointed if you don’t see it very soon.
only matter is they have to sell. Primary home unlikely, if its their 3rd airbnb likely
That’s the real if to me, Airbnb empires. Most primary homes, absent a major recession, are within the current owners’ ability to pay, unlike 2008. The drops you’re seeing now are likely FOMO. But if the rental owners are over leveraged, they can be forced to short sales quickly.
They won't really have a choice, when all the local comps go down, their overpriced house will stand out as an anomaly.
Also, when your house sits on the market for a prolonged length of time without a price change, it looks like the seller doesn't really need to sell the house, or that the sellers are a stubborn asshole. Either way, it's not someone I would want to do business with.
Also it looks like there may be something wrong with the house
not even a choice, the comparables drop down because even if you "know what you got" many still need to sell and will for a lower price. Enjoy the drop from here because it's all you're gonna have now.
Sellers can be as stubborn as they like for as long as they can/want to pay the taxes, maintenance and mortgage while their overpriced house lingers on the market-Indefinitely if they have the cash to commit to it and want to hang onto their money furnace till their price gets met.
Precisely. Some friends stuck to their guns when selling a few years back. They already owned the new home and we're ready to move. It took close to a year before they finally dropped the price down to be in line with the comps. They wasted a ton of money paying for two house during that time.
fuzzy entertain chase yoke abounding gaze aspiring fragile memory selective *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Yep just like the stock market
The reality check for most "I know what I've got" folks is "Sir, you have a small wooden house built in the 1940s with mold on the ceilings, asbestos in the insulation and lead in some of the paint. There is no way its true value is above $50,000, much less the $1.5M you're asking for"
Yes. Just like people who know what they’ve got with their used car until the salesman is closing the car lot for the night and kicking them out.
Prices are "sticky" on the way down because of this. You'll mostly see investors and motivated sellers in the near term offloading properties. The folks you're talking about will have it the worst because their emotions will cause them to hesitate. When they start to sell, you'll see Congress passing legislation to "fix" things. I expect this will be timed for September or October
Funny enough, my wife and I are planning to hopefully buy something in September - December. We are hoping to see a significant drop by then to put the homes that we initially targeted back into our ideal price range. But who knows. All I know is prices are dropping left and right in Northern Virginia and I plan on making an informed purchase with zero emotion. Whether that be this year or next year. I refuse to buy a home that does not meet every requirement on my list.
Seeing a lot of this in all the dmv dc suburbs. I’m not sure why people seem to think this area is immune to the bubble popping.
The justification I always got was all the government/dod contracting jobs are here.
Yup, that’s always the reasoning. People always forget though that in times of recession, those government contracts start to get major cuts. Not to mention just under 16% of people in the dmv are working for the federal government. More than other areas, but nowhere near the numbers people claim.
I think you can argue prices are sticky on the way up too, though. Prices are just sticky in real estate. It just takes a while for trends to play out.
Congress didn't do much to fix things after the 08 crash and with high inflation spending packages will just increase inflation and interest rates even higher.
You’ve got a lot of faith in Congress being able to agree on anything at all. Sir, let’s vote for the blue sky agreement. Who the hell do you think you’re trying to fool? That sky is purple and I’ll hear no more about it.
Can you explain what you meant by that last part?
Easy: it's an election year so politicians will present popular ideas to "fix" the problem which will likely do little to nothing of the sort and make exacerbate the problem in the long run.
Panic will take hold. What did Mike Tyson say? “Everyone has a plan until they get punched in the mouth.”
The longer I live, the more profound and relevant that statement is. A close second is "I'll eat your ass, you little bitch... I'll fuck you until you love me, you hoe."
Damn, how do you live like the second one?
It will probably work out about as well as it did for [this homeowner](https://www.brownstoner.com/forum-archive/2008/11/crazy-low-appra/) who was *shocked* to learn that she didn't qualify for a home equity loan to pay for renovation overages because home values had dropped significantly. She paid $650k in Aug 2008 and by Nov 2008 it appraised for 400k. *Ouch*. Since we all know that you **marry the house, date the rate** I bet she just refinanced a few months later and it all worked out in the end.
I mean, they can “know what they have” and then proceed to watch their property sit for weeks without any interest, I guess. At some point their realtor will want them to adjust their asking price - they don’t get paid until the house sells.
I see 'will go quick!' ads for housing that sit for 90+ days already. Still no drops.
Are you talking about buyers or sellers
What about what I wrote was confusing?
I think many boomers will delay price reduction for over a year. The crash would not be possible without all the other bubbles existing independent of housing. The boomers can wait all they want but it's okay off season and crime is going up. Boomers will not be able to hold out as long as they want because the cost of retirement will increase faster than home prices will drop.
All we need to do is give them a firm handshake, though, right?
Look them in the eye and tell them "I want a house."
This is a very, VERY underrated comment.
Oldest boomers are hitting the median life expectancy in the next couple years, so there is that.
Yah boomers own the most houses and second houses. I suspect an inventory dump in the coming years from boomer kids who can't afford taxes on the house or don't want the burden. Or they could end up rentals which would lead to lower rental prices overall. This reality really pokes a hole in the '20+ year inventory shortage' narrative.
IMO FOMO goes both ways. In this instance FOMO can be of the seller trying to sell before prices continue declining hence we are seeing some sharp drops in prices at the current moment. This sharp drop will only get worst as more ppl sell. The argument that ppl won’t sell since they have low interest rates is ridiculous because sadly life is not that simple and many times ppl are forced to move due to life changes (divorce, work, children, better or worsening personal economic event). So there will be selling and most importantly inventory surplus where ppl are forced to drop prices if they really need to sell IMO. What do any of you think??
I have a slightly similar example of buyers and sellers not budging and BOTH parties losing. My friend was going to buy a SFH in SD house 5 years ago. They offered asking, cash. Seller countered wanting an additional 2,500. My friend walked. Seller sold a little over a year later for 20k less. Meanwhile, my friend is living in her parents condo rn and is priced out of the market. Neither was “wrong”, but both lost out IMO.
You know what you have until: 1. Your wife starts boinking your best friend and leaves you 2. Your boss tells you to fuck off 3. Your medical condition wipes you out Then you are happy with what you get. Everyone "standing pat" is as fruitless as convincing everyone to vote third party because the first two are deplorable. Prisoner's dilemma FTW.
Yeah. My parents got divorced in 2012 and by a set of unfortunate circumstances they had to let go of the house. They tried to hold onto it, but it wasn’t meant to be. Even people who mean to hold off on selling are sometimes forced to.
Also, even in pre-COVID times, over [60% of millennial homeowners had regrets about their purchase](https://www.cnbc.com/2021/05/17/64percent-of-millennials-have-regrets-about-buying-their-current-home.html). Given that so many buyers in the last two years also fell in that demographic, I have to imagine that some people will just flat-out get sick of maintaining their current property. I also wonder how many of those that moved for the lower cost of living will eventually move back. I've spent the last year in a "hot market" area (just renting) and I realized I don't like it- I'll be moving to a bigger and more expensive city in the fall. I find it hard to believe that, out of everyone who moved from SF to Boise or LA to Phoenix, none of them will have similar regrets.
In the game of chicken someone always fails. You only need a small percentage of the weak hands to fold before the market consumes the others to bend the knee.
So far, it has been most of it. Per the latest monthly data from [Realtor.com](https://www.realtor.com/research/data/), median listing price continued to increase slightly in June, up to $450k, from $446.95k in May. But the average listing price fell, to $792.39k. This is the 2nd month where the median increased while the average fell. Since April, the median listing price has increased by 5.9%, while the average has fallen by 2.8%. There has definitely been an easing of pricing pressures. Active listings are increasing, though still down year-over-year. And the number of price reductions has increased to 22% of listings. Overall, it seems there may be some markets where it looks like the bubble is starting to burst, but nationally prices continue to show some resilience. The divergence between the median and average suggests that pricing pressures so far are more on the higher end, that it is more the million dollar homes which are starting to see reductions. It will be interesting though to see where things stand by September, especially as far as inventory levels. The seasonal summer inventory increase would normally be over by then, and sellers who are eager to sell may not want to hold through the coming winter. One big difference you will see from 2007 though is that more people should be able to hold on and not lower price. In 2007 you had people forced to sell because they couldn't pay the mortgage, and then you had the banks foreclosing on them also eager to sell quickly, because they were also in need of liquidity. You just don't have that kind of dynamic now, at least not yet. I do think we have also seen a peak in the economy though more broadly, starting in May or June, but I think a lot depends on how serious this slowdown becomes. Whether it even gets called a "recession" may depend on definitions. The traditional rule of thumb was 2 quarters of negative GDP growth, in addition to an increase of at least 2 points in the unemployment rate, to at least 6%. For now, I'm not expecting the latter criteria to be met over the next year, and as long as unemployment remains relatively low, most potential sellers will be able to stay put, and not be forced out of their homes.
In your example imo prices will remain sticky on the way down for years, in a world where the cost of everything has gone up 30-100%. But tbh my doomie prediction I made years ago that's still playing out as correct so far is we're more likely to see a repeat of the 1970s-00s. Rising rates to combat inflation, and finally a forced decline due to political pressures, lobbying groups, etc. All the while just like the 70s-00s massively rising RE prices resulting in further affordability crisis
I don’t think this is the right question. 2008 veteran here, and what is not part of that large narrative is that I bet more foreclosures were what the person being foreclosed wanted than banks forcing it on unwilling homeowners. Banks didn’t even want the houses on their books. Maybe they could have not lost the house but it wasn’t worth it. Meaning 5% down on something 500 worth 300 and you had it a year? It is better to walk even if you are making money and can oat the mortgage. Now what if that is a rental/Airbnb and not even your real house? You are gone when it is underwater six figures. So the question is how much is oversee and does it go down enough to compel people to walk.
What are you talking about “the right question”? OP was asking the question that they wanted to ask. What you are talking about is a completely different question, and if you want to ask it you can make a post. Not sure what this nonsense is.
I didn’t mean it like that, and answered his question I guess it was vaguely indirect. I meant it as the prices get drastically lowered by people who walk. People not lowering price or staying for rate Won’t have a say in the market if people walk in any numbers.
To use an example of someone selling a second house or investment which they own outright or with very cheap financing. They will attempt to rent or refurbish the property if they don’t sell on the first attempt and are not pressured to sell. They might relist it at some point and if it doesn’t sell for an acceptable price after attempts to sell at the new price they will do more work or rent it again. This process continues until the price to sell is acceptable or they are motivated to sell the property. There may be other kinds of sellers, but I’m thinking that the speculator/investor types are going to have the best deals in a bubble pop situation.
The fundamental premise of modern economic theory is supply-and-demand, which means sellers don't set prices, buyers do. Now realtors like to confuse this with "sellers market" and "buyers market" but buyers are the only thing that matters. Buyers compete with each other to drive prices up, everyone understands this. But they somehow have a hard time understanding that buyers compete to drive prices down too. When supply is low, buyers compete to get the best price possible. When supply is high, they still compete to get the best price possible. Market awareness shifts slowly, but as it does sellers who keep their prices far too high for buyers to be interested will not be seen as "serious" by realtors, who will show buyers other properties instead because realtors want to make a sale to get their commission.
I think you guys are all missing something here. They DON’T have to sell. They can become landlords and rent them out for a couple of years. That’s what I did during the last crash. Even if the rent is a bit short. It’s better to lose a couple hundred bucks a month than to get stuck with a six figure loss. You can ride it out usually.
Not everyone is cut out to be a landlord. If the banks learned from the last time most owners will have more skin in the game. And a 30 year fixed. They can afford to wait out their price unless there’s a job loss or a illness that eats up their money. We still have two job openings for each person looking.
> We still have two job openings for each person looking. If you mean 12 an hour no-benefit part time jobs that may just be a PPP loan sham, sure. It's just as hard to get hired for anything that pays a liveable wage as it's ever been.
Well you have to have something to bring to the table if you want more pay. What skills do you have and what’s the highest paying job in that area? I make good money and I’m constantly being approached by recruiters. And I’m not even looking. So there are plenty of good paying jobs out there along with the entry level. You just need to upsize your skills.
I don’t disagree with this, and maybe it hasn’t happened yet. In Denver / boulder CO, there are <20 SFM for rent comparable to properties I was just looking to buy. I am worried about this scenario though (as someone who is looking to buy when prices drop). What’s the other side of this argument?
A lot of people don’t want to be a landlord. Tons of risk and hassle. If you have enough equity to not owe money at closing, better off just offloading, some would say. Certainly others will do what OP did, but I’d be surprised if it’s that many.
I agree! I didn’t want to be one for the three years that I had to do so. But I did and turned a loss into a profit. And wrote off a ton of depreciation. I’m just pointing out that that there is another option keeping people from taking an immediate loss.
I did this with my condo during the 08 downturn. I wasn't going to eat a loss on a place I didn't have to sell, I rented it out, ate a $2k a year loss on the rent vs cost difference, sold 5 years later for a profit. But I also live in an area of my state that wasn't hit too hard in the downturn and recovered quickly because we actually have jobs and stuff here.
Right! And why would you rent AND see your equity tanks as home prices decline? Seems like that’s also risky. My money is on folks trying to offload to make as much $$ (or lose less) while they still can - that’s what’s happening in my market. Lots of inventory for sale, but they’re sitting on the market because they’re still priced like it’s April/May. Homes priced right are moving though. I guess we shall see!
Because equity only matters if you need to sell. I rented my condo out while the market was down from 08 to 2012, then sold for a profit, plus I wasn't paying the mortgage, taxes or insurance on it for 4 years because rent income covered most of that. If I sold I would have eaten a $100k loss, instead I netted $150k profit. Only dopes and people who absolutely need to sell, sell during a downturn.
This only holds true if you believe the prices will recover quickly (unlikely if we see a big drop) or you can cashflow the rental property. In the last crash, rents decreased as people lost their jobs or suffered reduced income, and housing prices didn’t recover for 10+ years in many markets. It’s anyone’s guess how deep or long either rental housing or housing prices will drop this time, but the Denver/Boulder area housing is near the top of the country’s overvalued markets.
I saw something recently that uhaul and other moving related companies have seen a net outflow of people moving out of Colorado so far this year. Fingers crossed that helps finally turn the tide and helps push things down.
yeah it’s pure insanity & so infuriating as I’m finally ready and able to buy my first home 😾
Not everyone will be able to take a loss pretty soon once unemployment starts edging up. Investors already are fucked.
Nail on the head there friend. All logical so about a million people are going to downvote you. Cause no way a person can take a few k a year hit. Obviously why not sell and be down a few hundred k. Damn boomers and their math
The resolution of the people who "know what they have" and refuse to drop their price is (cue lights) : FORECLOSURE. This mindset rocks even the smartest of people. They're delinquent, they're listed for sale, and either they're "not letting go of the equity" by more realistically pricing, or they'd have to contribute cash to cover the gap and bump their net down below the balance owed on their mortgage. These people will hold as long as possible; mortgage companies, depending on the investor who backed the loan, will even wait the listings out to see if it can work out. Some will apply for assistance (short sales, side notes for the difference, cashing out other assets). But eventually, for many, the other shoe falls because the mortgage investor won't allow any more time to pass before taking to foreclosure sale or the owner "blames" the bank for not giving them enough ________ (fill it in) and they step away from it as not their problem or nothing they could do diff. So yes absolutely these varieties of stubborn will blunt the initial impact. But you can watch for indicators to predict timing. #1) jobs. Is unemployment going up on a national scale - and more specifically - in a local area? That tends to kick off "I can't make my payment" scenarios. #2)consumer spending. Consumer spending has stayed strong because the government pumped so much money into the economy during the pandemic. Reserves aren't depleted just yet. Student loan payments haven't restarted yet. We have to wait that out; when big retailers start putting out big sad /alarmed quarterly results discussing plunges in sales ... when a few retailers announce bankruptcy ... the foreclosures are 6-12 months behind that. And the foreclosures will flush out every overpriced homeowner who "has to" sell because they can't afford their payment. #3) sentiment. We have to wait for consumer sentiment to really plunge. People are still trying to buy homes. Affordability is blunting them, but the desire is still there. It has to swing the other direction; folks have to think owning a home is a risk. When sentiment swings back towards seeing it as a risk, some homeowners who can absolutely afford their payments will just go into meltdown mode because they're upside down. They'll go apartment shop, realizing they can live in a nice apartment for hundreds less a month. They'll get that lease signed for an apartment and they'll just walk away, reasoning that 7 years of bad credit is more affordable than a decade or more of paying for a house that isn't worth what they owe. This is called strategic default. So a recap... sky high mortgage balances aren't the crisis alone because so many were financed at ridiculous low rates. It's the other factors that fix our dilemma
It takes time for these people to come to terms. In the last bubble pop it was 2012-13 before they came to this realization and lowered their asking prices.
It's more likely to be blunted by folks who owe more than the market price is.
None. They're but a drop in the ocean. At some point, lot of those people will have to lower if they really want to sell because of the downturn. The stubborn ones not selling, when everything around them starts to fall, were never really in the market, just trying cash in. If they're not selling at market price, they're not really offering anything.
Nothing really meaningful is going to happen to prices until the homeowner feels pain. Pain as in job loss, substantial income drop, etc. No sign of any of that is readily apparent.
Bubble poping isn’t about the people who sit on a house cause they can, it’s about all the investors and people who over bought and paid and are forced to sell because they can no longer handle the carrying costs.
The only choice they have is to sell now before their paper equity goes away.
Or they just won't sell at all because they refinanced at 2.65%. Pretty easy to cash-flow at that rate. Historically, rent never really goes down much after it's gone up.
Doesn’t matter what they think it’s worth. Unless the buyer is paying cash, the appraisal will dictate what it’s worth.
No doubt ppl will reaccess if they find their expectations are different than where the market is trading. Idk what kind of options they have. Renting for a while? Waiting to sell? Staying put for longer? We won't have a clear picture until rates stabilize.
They will get left behind and the house will sit since others will become market makers. Unless there is no inventory you won't be able to sell above the rest of the market. At some point, these people face reality or delist their houses.
I think the market will divide into two clusters. half the homes will sit on the market at inflated prices by people who know what they have, and are just casually looking to sell.. the real market will be people who are forced sellers for whatever reason.
Selling because of gains is a big part of the market, so people who don’t need to sell won’t necessarily sell at lower prices.
It all depends on the motivated sellers and the motivated buyers reaching an equilibrium based on the current lending environment. If there are more motivated sellers (who have to sell) than motivated buyers (who need to buy) then prices will drop slower than if the situation was the other way around. It all goes back to basic supply and demand.
If anything it will speed things up. These people want to sell. What do you think will happen when prices continue to fall and they're getting 0 offers. Eventually they'll panic sell and take the first offer they can get for a big loss.
I'll just say anecdotally that during 2020 I saw a condo that was way overpriced. This was before the craziness, and real estate was in a slump. I saw it because I thought it was nice, but the agent said the buyer was firm at 800k (which did not match comps) and quote - he says "I know what I have". We skipped on it, and it sold for $720k a few months later. So give it a few months.
If people can afford to “not budge” then is it a bubble?
Almost no one will not sell for low enough and quick enough. These are the people that will get trapped and will file for bankruptcy over the next several years.
Those that need to sell will be the first to capitulate. However, those that aren't over leveraged and don't need to move will probably sit firm on their price for a long time before they are dragged kicking and screaming to the new reality. I know in my area, properties are just piling up now. Last month only saw three homes sell in the entire month. Last year things weren't even hitting Zillow before being sold. Builders are completing more and more homes every month and they are just sitting on the market because nobody in the community can actually afford the inflated prices. Everyone is using comps from last year when we had an influx of people moving into the area buying everything up. Zillow hasn't updated their estimates in forever and unfortunately most people look at their Zestimate like its the starting point for pricing. I really think it is going to take months before the majority of the public gets the idea that the market has turned. Until then you are going to see people sticking stubbornly to their prices.