Funny Housing Purchase Experiences

[ASAP]

As everyone knows, we are kind of in a crazy housing market with interest rates and supply etc.

I recently looked at a few houses that i'd be purchasing... I don't need to move but I am in a comfortable enough situation to move. In any case, here is what I've seen... BTW I live in FL (which throughout the pandemic has had the highest pricing growth over the past 4 years and is now one of the most expensive places to live)... the things I've seen to say the least are strange.

First off, the housing market in my area is absolutely at a a dead halt... when during the pandemic, houses where getting multiple offers and sold within days, there is absolutely nothing going on right now... this is even backed up by my realtor who said there is 0 hurry to buy anything right now and there is little to no activity in my area... the 7.5% RATE is starting to do its things...

In any case -

House 1 - New construction, downtown... at a price of about 400K... there are about 8 empty houses by this builder next to each other... with a street on the other side with about 8 more. A few streets down, more expensive larger homes sitting empty. The builder doesn't seem to want to budge on price by more than 10-15k... again... they are sitting on miles of inventory in this area. There is also no special financing. These houses have now sat for 300+ days...

House 2- Nice neighborhood in the suburbs... about 4-5 years old... list price of about 360k... I offered based on similar comps from recent sales 310K. The sellers said this is outrageous... even tho I showed them this is based on comps... their realtor tells me, if they listed this house at 330k... it would have multiple offers... guess what, it's been 2 months and there are exactly 0 offers. They called me and said they can easily do 320k now... lol... i said i am not budging at all. Well this put the sellers in a quandry because unless they sell at that price, they can't even move (i.e) they don't even quality for a loan for their next home lol. Story continues later -

House 3- pops up in a neighborhood down the street from house 2... listed also at 360k but far larger than the one above... also much much nicer. I offer 330k... the sellers were "offended" by my offer... since that time... little to no movement on the house lol and the owners are somehow still convinced they can sell close to list price. In the meantime, house 2 owners reach out they will sell for 310k just to get the deal done lol.... however i am not even interested in house 2 based on seeing house 3 and what you get for just a little more.

I can conclude a few things-

1) There is a major tidal wave of recession upon us that will completely reset sellers expectations.

2) Most sellers are stuck in a sellers market from 2 years ago when rates were 2% not near 8% lol. Most people could not afford their own homes anymore at all with current rates.

3) We will return to a normal seller / buying market where houses sit for months and months.

I say this and understand that this is heavily influenced by the area you are in... but recall, I am in FL (aka what was the hottest market a few months ago). Not sure what everyone is seeing their markets... but the market will be in for a rude awakening very very soon.

[kscarrol]

Bubbles always burst….

Edit: seeing the same thing back in New Orleans where we sold our house in May of ‘21 for 120K over asking, seven offers all over asking on day one of listing. Now houses come to market, languish for months with multiple price drops and still not selling. Here in Greenville things are a bit better but mortgage rates are definitely biting. Days of cheap money are over and reality is setting in.

[Chick Webb]

Originally Posted by ASAP

I say this and understand that this is heavily influenced by the area you are in... but recall, I am in FL (aka what was the hottest market a few months ago). Not sure what everyone is seeing their markets... but the market will be in for a rude awakening very very soon.

Hard to argue with that. At this point even the middle-class consumer has been crushed, and (as I demonstrated in the stock mkt tips thread) they have now run out of their Covid cash. Auto loan and credit card delinquencies are rising rapidly. Rates are so high that the home builders can't eat enough of the costs to lower their prices further, so (as you observed) their homes sit empty.

The $4T that the Dems printed while they controlled both sides of congress will, to an extent, keep the economy from completely crashing. The unions will keep inflation higher than the Fed wants, though, so rates aren't going to come down any time soon. Once the layoffs start, and they will, home prices will drop as sellers who are forced to move face a lack of demand at 2021-2 prices.

If you don't believe me, it's even happening here in coastal CA. Two homes on the most desirable (read, stable) cliff in Capitola haven't sold, even though they've been on the market more than a minute. Of course, they're $10 and $15 million, but that shouldn't stop anybody.

Here's one 4410 Opal Cliff Dr, Santa Cruz, CA.

[M-technik-3]

The Fed said they expect a recession by them trying to get inflation back down to 2%. The need unemplyment numbers to go up as well. This will cool the market but we will be back in a 4 year recovery mode.

Builder does not want to budge because the are priced at low end as we know how much materials cost these days. Can't believe the country is still moving as well as it is but a major reset is coming. I feel it will be worse than the 07 crash.

[ASAP]

Originally Posted by Chick Webb

Hard to argue with that. At this point even the middle-class consumer has been crushed, and (as I demonstrated in the stock mkt tips thread) they have now run out of their Covid cash. Auto loan and credit card delinquencies are rising rapidly. Rates are so high that the home builders can't eat enough of the costs to lower their prices further, so (as you observed) their homes sit empty.

The $4T that the Dems printed while they controlled both sides of congress will, to an extent, keep the economy from completely crashing. The unions will keep inflation higher than the Fed wants, though, so rates aren't going to come down any time soon. Once the layoffs start, and they will, home prices will drop as sellers who are forced to move face a lack of demand at 2021-2 prices.

If you don't believe me, it's even happening here in coastal CA. Two homes on the most desirable (read, stable) cliff in Capitola haven't sold, even though they've been on the market more than a minute. Of course, they're $10 and $15 million, but that shouldn't stop anybody.

Here's one 4410 Opal Cliff Dr, Santa Cruz, CA.

Do you think they would take 400K for that home? I am a buyer then

Originally Posted by M-technik-3

The Fed said they expect a recession by them trying to get inflation back down to 2%. The need unemplyment numbers to go up as well. This will cool the market but we will be back in a 4 year recovery mode.

Builder does not want to budge because the are priced at low end as we know how much materials cost these days. Can't believe the country is still moving as well as it is but a major reset is coming. I feel it will be worse than the 07 crash.

In those new construction 400k homes, they "claim" they only have 15k to give... not sure what 15k to give means... i guess that means they need that to 15k make 50%+ margin... because absolutely no one is building those houses with land for over 250k... so I think the greedy expectation will need a wild reset or we will be stuck w a dead market for years. No transactions = everyone fails including realtors, builderes, buyer, sellers etc...

[dreamingat30fps]

I have noticed a LOT of houses going on the market around Port St Lucie and prices are definitely going down. Just a year ago I don't think you could find anything half decent for less than like high $600k+

Now I'm seeing a lot of decent houses for $500-$600k and slightly more basic houses in the $400s and some crappier ones in the $300s. Still I will often see one and I just "know" that one will sell quick and they typically do. Further south though I think the market is holding. Nothing worthwhile for less than $700k and just not much inventory at all below that price.

At some point reality has to set in... but then I've been saying that for 3 years so...

[skyline408]

Im not seeing that here in northern CA. We just bought a house a few months ago and our old house sold before we even went to market. My next door neighbors house sold for almost 250k over asking and in 1 weekend.

[ASAP]

Originally Posted by dreamingat30fps

I have noticed a LOT of houses going on the market around Port St Lucie and prices are definitely going down. Just a year ago I don't think you could find anything half decent for less than like high $600k+

Now I'm seeing a lot of decent houses for $500-$600k and slightly more basic houses in the $400s and some crappier ones in the $300s. Still I will often see one and I just "know" that one will sell quick and they typically do. Further south though I think the market is holding. Nothing worthwhile for less than $700k and just not much inventory at all below that price.

At some point reality has to set in... but then I've been saying that for 3 years so...

Originally Posted by skyline408

Im not seeing that here in northern CA. We just bought a house a few months ago and our old house sold before we even went to market. My next door neighbors house sold for almost 250k over asking and in 1 weekend.

I think this is 100% market dependent like I mentioned... the "hot" areas like South FL and Northern CA that are completely overcroweded will hold... these are however not typical US markets. Once you starting looking at more medium cost of living cities i.e. atlanta, charlotte, orlando, dallas, the story quickly changes. I feel most of the boom in these southern cities was from people moving down... most of that seems like it's already done.

[Mach550]

This all sucks for me right now. I could have listed my 5/3 house late last year but stupidly didn't. I priced it competitive to comps in my area but its been sitting for the past 2'ish months with minimal interest.

[50shadesofhockenheim]

Yeah and no one is selling because they don't want to purchase their new home at 7.5% when they're locked in currently at 3% or under.

[ASAP]

Originally Posted by Mach550

This all sucks for me right now. I could have listed my 5/3 house late last year but stupidly didn't. I priced it competitive to comps in my area but its been sitting for the past 2'ish months with minimal interest.

I think people need to entirely reset their expectations at this point... meaning downward pricing pressure... we won't see what we saw the last 4 years again... at least not for a long time. I don't see int rates going even 5% within years at this point unless a major recession happens... and if that does happen, I am not sure anyone will be purchasing a home.

[dreamingat30fps]

Originally Posted by Mach550

This all sucks for me right now. I could have listed my 5/3 house late last year but stupidly didn't. I priced it competitive to comps in my area but its been sitting for the past 2'ish months with minimal interest.

In my case it doesn't seem to matter one way or the other. We have been wanting to move from our FL house to one in a quieter area. However when prices go up we get more for our house but "new" house is also more, when prices go down our house is worth less but new house is also less.

At least around here houses are selling fast, but only when it's perceived as a deal. Like I said before I'm always browsing and every so often I will come across a house that seems like a great deal (given the current market) and it will usually be gone within a week or less. Everything else that's meh and priced like everything else seems to sit a lot longer. I think it's just because there are now soooo many meh houses for sale that the competition is high.

[RickFLM4]

Originally Posted by ASAP

I think people need to entirely reset their expectations at this point... meaning downward pricing pressure... we won't see what we saw the last 4 years again... at least not for a long time. I don't see int rates going even 5% within years at this point unless a major recession happens... and if that does happen, I am not sure anyone will be purchasing a home.

I think downward vs. the rapid pace of escalations is correct. Some are still over-pricing and need to adjust, but will still be well above 2 years ago. This will bring stability vs. where we were a year to 18 mos. ago. People around me who price as though prices have now leveled off are still selling (and doing quite well vs. realistic expectations), while those asking absurd prices as if the runup further ratcheted up are either decreasing prices, renting or just sitting on the market.

However, interest rates are only part of the equation and I also think the fundamental issue of lack of inventory is still going to put a floor under prices. People will just stay put and not sell their houses and home builders will slow new construction. While demand will fall, unless there are massive job losses in another Great Recession that force people to sell, supply will remain limited to reach an equilibrium of sorts through reduced demand. Hard to imagine significant price drops in the absence of a flood of inventory and that is not the case right now or in the foreseeable future. There are some home builders and flippers caught with their pants down right now, but it is nothing like 2008 right now.

[ASAP]

Originally Posted by RickFLM4

I think downward vs. the rapid pace of escalations is correct. Some are still over-pricing and need to adjust, but will still be well above 2 years ago. This will bring stability vs. where we were a year to 18 mos. ago. People around me who price as though prices have now leveled off are still selling (and doing quite well vs. realistic expectations), while those asking absurd prices as if the runup further ratcheted up are either decreasing prices, renting or just sitting on the market.

However, interest rates are only part of the equation and I also think the fundamental issue of lack of inventory is still going to put a floor under prices. People will just stay put and not sell their houses and home builders will slow new construction. While demand will fall, unless there are massive job losses in another Great Recession that force people to sell, supply will remain limited to reach an equilibrium of sorts through reduced demand. Hard to imagine significant price drops in the absence of a flood of inventory and that is not the case right now or in the foreseeable future. There are some home builders and flippers caught with their pants down right now, but it is nothing like 2008 right now.

The supply issue is no more... I read a metric on that. The supply issue was 100% true when demand was soaring... but high interest rates destroyed demand and there is 0 issue with supply any longer... homes are sitting and available left and right... maybe not what you want but they are there.

[RickFLM4]

Originally Posted by ASAP

The supply issue is no more... I read a metric on that. The supply issue was 100% true when demand was soaring... but high interest rates destroyed demand and there is 0 issue with supply any longer... homes are sitting and available left and right... maybe not what you want but they are there.

Well, demand is lower but there is not a rapid increase in supply relative to housing needed for the population. So the imbalance is closing but it’s not because the there is an abundant supply. For prices to drop significantly, demand needs to further decline or at least not increase, while supply significantly increases due to crisis. So while I agree there may not be a rush to buy right now, waiting for and expecting a 30% (or whatever %) drop in prices also isn’t logical unless you expect a huge downturn in the economy in the near term.

[ASAP]

Originally Posted by RickFLM4

Well, demand is lower but there is not a rapid increase in supply relative to housing needed for the population. So the imbalance is closing but it’s not because the there is an abundant supply. For prices to drop significantly, demand needs to further decline or at least not increase, while supply significantly increases due to crisis. So while I agree there may not be a rush to buy right now, waiting for and expecting a 30% (or whatever %) drop in prices also isn’t logical unless you expect a huge downturn in the economy in the near term.

i agree with you... i dont see a 30% drop... not in FL at least... maybe another 10% but again this is pending 2 things-

1) we never know what dumb move the govt will do next.... decrease rates too fast? flood the market w money again?

2) recession... i would say right now with all that is going on... its going to be near impossible to have this soft landing, people are no longer making ends meet and corp earnings are getting hit finally

i don't think anyone can predict anything right now because we've never been in a scenario like this... the one thing i can predict, is people better get used to homes sitting for months again and offers well below asking

[TboneS54]

I'm trying to buy in Socal. It's definitely slowed down, with some mild price drops, but lack of inventory tells me it won't drop a whole lot more until there's a true recession (even then, who knows). We sold our primary home 6 months ago and did very well. We definitly did it before things started to cool. It feels, out here, like there are still enough people with all cash for prices to not fall too far. Luckily we can wait indefinitly, but I am jonesing for a 3 car garage. I'd hate to over pay and prices come down significantly in 2024. I'm all cash basically, so I don't care too much about rates. I'm making good return on my cash right now, so I'm just happy to wait till the right house/deal comes along I guess.

[ASAP]

Originally Posted by TboneS54

I'm trying to buy in Socal. It's definitely slowed down, with some mild price drops, but lack of inventory tells me it won't drop a whole lot more until there's a true recession (even then, who knows). We sold our primary home 6 months ago and did very well. We definitly did it before things started to cool. It feels, out here, like there are still enough people with all cash for prices to not fall too far. Luckily we can wait indefinitly, but I am jonesing for a 3 car garage. I'd hate to over pay and prices come down significantly in 2024. I'm all cash basically, so I don't care too much about rates. I'm making good return on my cash right now, so I'm just happy to wait till the right house/deal comes along I guess.

Like I said above... if you are talking about over crowded areas where more and more people are just packing, I agree, don't see major price adjustments... however this just isn't true for a vast majority of the country.

Pockets of CA, South FL, NY / NJ metro will always be crowded... and maybe some of these nonsense areas like Denver / Austin that grow for no reason and there is tons of space to build so everyone is just getting artificially squeezed but those are already seeing major corrections... everywhere else however, it's almost impossible to go anywhere but down at this point.

[ASAP]

Just wanted to follow up on this because it just continues to get funnier and funnier... again, I think sellers are still completely disconnected from reality and living on hopes and dreams from 2022.

House 2 finally sold for 315k lol... or 45k off the originally ridiculous listed price.

House 3, I made a 2nd offer of 340k on...the sellers countered at 350k lol... so 5-10k off original list... mind you since they listed over a month ago, there have been 0 other offers and almost no interest. My realtor is telling me that they are now considering renting the home before they move. In other words, they are screwed but are unwilling to accept an offer on the table that is close to asking.

Jay Powell, keep those rates high as we move into the dark holiday selling season so that this absurdness finally flushes out.

[Watching The World Burn]

Story 1:

A few years ago a house on a street near ours sold but the seller effectively financed it through a VTB note, but got a reasonable downpayment - I can't remember what it was, but lets say it was minimum 20%. Within a year (maybe two, but I don't think it was that long) the buyers couldn't make the payments anymore so the seller took back the house.

And sold it again. For more money than before. But this time, no VTB! But he definitely made a killing, because he kept the downpayment, was only out of the house for a year or two, and then sold it for more. I think he was overall fairly happy.


Story 2:

A house on our street (but on the waterfront) sold for $2.65M to the best of my knowledge and the buyer's objective was simply to level the house and build a new, larger house with a two+ car garage attached to the house plus a separate detached garage to hold 4-6 cars (two tandem bays and two single bays as I recall from the plans I saw).

The build is going to cost easily another $1.5-2M I figure because I've seen the plans and admittedly, it looks like the house should be quite nice.

However, despite all his money and connections, absolutely nothing has happened on his property for two years now (nor has he torn down the old house yet) because he has severely underestimated the obstinance of the local lake conservation authority which appears to be blocking him at every turn in his quest to build.

I mean, its sort of funny, but I can only imagine he is grinding his teeth on a daily basis just cursing those guys as his property sits empty longer and longer, and some of his money is just tied up in this property that is not going anywhere at the moment. He doesn't even live there, he's living somewhere else at the moment because his plan was always to tear the house down.

As much as I'd like to live on the water, I don't think I ever would - dealing with the conservation authorities is just too much of a headache.

[M5Rick]

Originally Posted by 50shadesofhockenheim

Yeah and no one is selling because they don't want to purchase their new home at 7.5% when they're locked in currently at 3% or under.

Unless you have full cash then you beat everyone for a quick sale, the only worry then is if the sellers may back out at the 11th hour..

[Watching The World Burn]

I forgot - Story 3

This is somewhat unfortunate, because I think the buyers did the right thing, so not really funny, but relates to house purchasing.

Another home on our street just sold a few months ago...well, perhaps as long as a year ago. It too was on the water.

It was purchased by a younger couple (I say this because they are around my age, and the older I get, the more willing I am to consider early 40's to be young...and that goalpost will change further the older I get - just full disclosure there).

Anyways, they did their due diligence as far as I can tell, this was to be their cottage so they aren't going to live here year round, but the home inspection revealed that there was a small crack in the retaining wall that was between the pool and the boathouse.

So, they got an engineering firm in to look at it and they estimated it would cost about $50,000 to fix. The buyers then went to the sellers and as part of the sale price, negotiated a further $50,000 off to remediate the problem which the sellers were fine with and so everyone signed the purchase agreement and the home gets sold.

No more than a year later, the sellers are firmly out of the picture and the crack has widened a bit and so the young couple gets the engineering firm out to do the fix. No surprises here I'm sure, but of course the engineering firm goes "Oh no, this is much worse than before, it will cost a lot more to fix this properly".

So the firm comes back and says they have two options - they can either pour another wall by the existing one, but they can't guarantee that it will hold or that it will last for any length of time - be a bandaid fix at best and will likely cost $100K ish. But basically, no guarantees and might have to excavate the old and new wall if it doesn't work.

To do it properly though, they would redo the retaining wall (which apparently means they would have to tear down the boathouse and rebuild it because that is in the way of the retaining wall) the cost was going to be $1,000,000!

We heard the story from them and were just shocked - I mean, going from $50K to $1M in a year is kind of absurd, especially since they did most things right. Though I think fixing that crack as soon as they took the keys would have been my number one priority in hindsight...I can see why they didn't, because $50K probably didn't make it seem like any major issue.

Anyways, I don't know what they are going to do, be interesting to see. Wouldn't be surprised if they move, but at the same time I think they like it on the street so they might pay to stay.