McBride is now predicting a 10% nominal decline in home prices

[PDXTabs]

My realtor sent me this graph today. I sold my house and it closed in May, so I guess that I top ticked the Portland housing market.

Are you going to buy back in? If you are going to do so, please document the numbers going forward. 

Typically, if someone tries to time the market, they need a 10% gain to break even because there is typically around 10% in transactions costs when you buy and sell a house. The math is much easier if it's a cash transaction. When you factor in a mortgage, it gets more complicated. If the rate is higher, that needs to be factored in. When you go back to the beginning of a mortgage amortization schedule, that needs to be factored in as well.

Good luck. I hope it works out toward your goals.

I agree with basically everything you wrote. But I sold the house I was living in for personal reasons and now rent and live with roommates. If I buy another house it will be to live in for personal reasons and not to time the market.

[Abe]

We’re buying a vacation / part-time retirement condo for the parents and we got it for 80% of asking price. This is in Hawaii.

[clarkfan1979]

We’re buying a vacation / part-time retirement condo for the parents and we got it for 80% of asking price. This is in Hawaii.

Cool. What island? What is the zoning? Long-term or short-term?

[Shane]

I was scared off by sight-unseen all-cash no-inspection offers on every home I looked at earlier this year, and was stuck accepting a large rent increase. I would really like to own my first home soon and get out from under landlords, but my house hunting experience just left me feeling bitter and anxious. So I just feel excitement, relief, and maybe a little schadenfreude toward those 'investors' with all these new headlines about prices hopefully falling soon. The media has been a little too euphoric these last couple of years about the housing price squeeze.

That seems to be going away now - at least here in uber expensive coastal SoCal - where prices have dropped along with a lot of the competition to buy. I sold my house here awhile ago (housing top was not in but still high for crappy old place) and prices are dropping from even that high. I have been doing short term rentals/travel with no plans to buy yet and.just holding that money until I find the dream hovel somewhere cheaper then here - which is most places - or once the housing market tanks a bit. Might be a couple of years but I'm OK with that.  So waiting might be the best option for you compared to paying a high mortgage plus everything else right now.

Yeah unfortunately it's not over yet in my used-to-be LCOL city, and I have to negotiate around lease renewal timing again next year, but at least savings accounts are giving interest now. My down payment savings were worth less and less the longer I looked for a house, and I haven't been able to add much to them after the rent increase, but at least they are earning *something* for the first time since I started saving.

Are you sure? If the real rate of return on an investment is negative, are you really "earning *something*"?

Real Rate of Return Calculator

[clarkfan1979]

I was scared off by sight-unseen all-cash no-inspection offers on every home I looked at earlier this year, and was stuck accepting a large rent increase. I would really like to own my first home soon and get out from under landlords, but my house hunting experience just left me feeling bitter and anxious. So I just feel excitement, relief, and maybe a little schadenfreude toward those 'investors' with all these new headlines about prices hopefully falling soon. The media has been a little too euphoric these last couple of years about the housing price squeeze.

That seems to be going away now - at least here in uber expensive coastal SoCal - where prices have dropped along with a lot of the competition to buy. I sold my house here awhile ago (housing top was not in but still high for crappy old place) and prices are dropping from even that high. I have been doing short term rentals/travel with no plans to buy yet and.just holding that money until I find the dream hovel somewhere cheaper then here - which is most places - or once the housing market tanks a bit. Might be a couple of years but I'm OK with that.  So waiting might be the best option for you compared to paying a high mortgage plus everything else right now.

Yeah unfortunately it's not over yet in my used-to-be LCOL city, and I have to negotiate around lease renewal timing again next year, but at least savings accounts are giving interest now. My down payment savings were worth less and less the longer I looked for a house, and I haven't been able to add much to them after the rent increase, but at least they are earning *something* for the first time since I started saving.

Are you sure? If the real rate of return on an investment is negative, are you really "earning *something*"?

Real Rate of Return Calculator

In reference to the real rate of return, let's say a rental house appreciates at 5%, but inflation is 7.5%. If you are getting a small amount of cash flow, principle pay down and tax advantages, I'm thinking the total return is going to be above inflation. If you are leveraged 2 to 1 (50% equity), your return is higher than no leverage.

Isn't housing part of the metric to calculate inflation? What happens if a housing shortage drives up rent and then it impacts inflation numbers? If you own your primary residence and 3 rentals, I would consider rent increases that drives up inflation to be a positive return on your investments, not negative, even if the rentals falls a little short of inflation.   

[Shane]

I was scared off by sight-unseen all-cash no-inspection offers on every home I looked at earlier this year, and was stuck accepting a large rent increase. I would really like to own my first home soon and get out from under landlords, but my house hunting experience just left me feeling bitter and anxious. So I just feel excitement, relief, and maybe a little schadenfreude toward those 'investors' with all these new headlines about prices hopefully falling soon. The media has been a little too euphoric these last couple of years about the housing price squeeze.

That seems to be going away now - at least here in uber expensive coastal SoCal - where prices have dropped along with a lot of the competition to buy. I sold my house here awhile ago (housing top was not in but still high for crappy old place) and prices are dropping from even that high. I have been doing short term rentals/travel with no plans to buy yet and.just holding that money until I find the dream hovel somewhere cheaper then here - which is most places - or once the housing market tanks a bit. Might be a couple of years but I'm OK with that.  So waiting might be the best option for you compared to paying a high mortgage plus everything else right now.

Yeah unfortunately it's not over yet in my used-to-be LCOL city, and I have to negotiate around lease renewal timing again next year, but at least savings accounts are giving interest now. My down payment savings were worth less and less the longer I looked for a house, and I haven't been able to add much to them after the rent increase, but at least they are earning *something* for the first time since I started saving.

Are you sure? If the real rate of return on an investment is negative, are you really "earning *something*"?

Real Rate of Return Calculator

In reference to the real rate of return, let's say a rental house appreciates at 5%, but inflation is 7.5%. If you are getting a small amount of cash flow, principle pay down and tax advantages, I'm thinking the total return is going to be above inflation. If you are leveraged 2 to 1 (50% equity), your return is higher than no leverage.

Isn't housing part of the metric to calculate inflation? What happens if a housing shortage drives up rent and then it impacts inflation numbers? If you own your primary residence and 3 rentals, I would consider rent increases that drives up inflation to be a positive return on your investments, not negative, even if the rentals falls a little short of inflation.   

My question was in response to the bolded part above, which seems to be referring to *savings accounts*, not RE.

[halfling]

I was scared off by sight-unseen all-cash no-inspection offers on every home I looked at earlier this year, and was stuck accepting a large rent increase. I would really like to own my first home soon and get out from under landlords, but my house hunting experience just left me feeling bitter and anxious. So I just feel excitement, relief, and maybe a little schadenfreude toward those 'investors' with all these new headlines about prices hopefully falling soon. The media has been a little too euphoric these last couple of years about the housing price squeeze.

That seems to be going away now - at least here in uber expensive coastal SoCal - where prices have dropped along with a lot of the competition to buy. I sold my house here awhile ago (housing top was not in but still high for crappy old place) and prices are dropping from even that high. I have been doing short term rentals/travel with no plans to buy yet and.just holding that money until I find the dream hovel somewhere cheaper then here - which is most places - or once the housing market tanks a bit. Might be a couple of years but I'm OK with that.  So waiting might be the best option for you compared to paying a high mortgage plus everything else right now.

Yeah unfortunately it's not over yet in my used-to-be LCOL city, and I have to negotiate around lease renewal timing again next year, but at least savings accounts are giving interest now. My down payment savings were worth less and less the longer I looked for a house, and I haven't been able to add much to them after the rent increase, but at least they are earning *something* for the first time since I started saving.

Are you sure? If the real rate of return on an investment is negative, are you really "earning *something*"?

Real Rate of Return Calculator

3% is greater than the ~0.5% interest rates on savings accounts that I've had for the last decade, so yes I would say I am "really" "earning" "something." I'm not sure what you were trying to do with this comment, other than make me feel bad. Should I feel stupid for earning 3% on my down payment savings which would have been earning basically nothing before? I will take any hedge against inflation I can get, and the Treasury locked me out of being able to buy I bonds, so.

Thanks for the link to the real rate of return calculator. But I am familiar with the concept.

[Shane]

I was scared off by sight-unseen all-cash no-inspection offers on every home I looked at earlier this year, and was stuck accepting a large rent increase. I would really like to own my first home soon and get out from under landlords, but my house hunting experience just left me feeling bitter and anxious. So I just feel excitement, relief, and maybe a little schadenfreude toward those 'investors' with all these new headlines about prices hopefully falling soon. The media has been a little too euphoric these last couple of years about the housing price squeeze.

That seems to be going away now - at least here in uber expensive coastal SoCal - where prices have dropped along with a lot of the competition to buy. I sold my house here awhile ago (housing top was not in but still high for crappy old place) and prices are dropping from even that high. I have been doing short term rentals/travel with no plans to buy yet and.just holding that money until I find the dream hovel somewhere cheaper then here - which is most places - or once the housing market tanks a bit. Might be a couple of years but I'm OK with that.  So waiting might be the best option for you compared to paying a high mortgage plus everything else right now.

Yeah unfortunately it's not over yet in my used-to-be LCOL city, and I have to negotiate around lease renewal timing again next year, but at least savings accounts are giving interest now. My down payment savings were worth less and less the longer I looked for a house, and I haven't been able to add much to them after the rent increase, but at least they are earning *something* for the first time since I started saving.

Are you sure? If the real rate of return on an investment is negative, are you really "earning *something*"?

Real Rate of Return Calculator

3% is greater than the ~0.5% interest rates on savings accounts that I've had for the last decade, so yes I would say I am "really" "earning" "something." I'm not sure what you were trying to do with this comment, other than make me feel bad. Should I feel stupid for earning 3% on my down payment savings which would have been earning basically nothing before? I will take any hedge against inflation I can get, and the Treasury locked me out of being able to buy I bonds, so.

Thanks for the link to the real rate of return calculator. But I am familiar with the concept.

Not trying to make you feel bad, at all. Just trying to get you to think a little. Back when the inflation rate was 2% and you were getting .5% on your savings, you were only losing 1.5% of your savings' spending power each year. Now that US inflation is up closer to 9%, earning 3% interest gives you a -6% real rate of return, which is much worse than you were getting before. If 3% is the best you can do right now, given your plans to use the money in the relatively near future as a down payment, there's no need to feel "bad" about it, but you should be aware that your money is losing value at a pretty significant rate and make plans for your future accordingly. Good luck.

[Paper Chaser]

Latest Case Shiller data was released today (current through Oct 2022). The only times that C/S saw 2% drop in a 4 month period have now been 2007, 2008, 2009, and 2022

[Telecaster]

We’re buying a vacation / part-time retirement condo for the parents and we got it for 80% of asking price. This is in Hawaii.

I'd like to hear about this as well.  I have a STR condo in Hawaii and would mind another one, but have priced out lately. 

[Dicey]

... and the same model condo we paid $425k for in April, 2022, is now on the market for $385k. They have five more to sell. It's going to be interesting to see where they land.

...and the most recent one closed for $381.5k.

[ChpBstrd]

... and the same model condo we paid $425k for in April, 2022, is now on the market for $385k. They have five more to sell. It's going to be interesting to see where they land.

...and the most recent one closed for $381.5k.

The 10% decline is no longer predicted - it has arrived!

[Dicey]

... and the same model condo we paid $425k for in April, 2022, is now on the market for $385k. They have five more to sell. It's going to be interesting to see where they land.

...and the most recent one closed for $381.5k.

The 10% decline is no longer predicted - it has arrived!

When I was poking around at condo prices yesterday,  I noticed several places asking very little over what the owner had paid several years ago, which is ominous. Not for us, as we aren't selling anything, but for the market in general. If this keeps up, short sales might become a thing again.

[halfling]

Not trying to make you feel bad, at all. Just trying to get you to think a little. Back when the inflation rate was 2% and you were getting .5% on your savings, you were only losing 1.5% of your savings' spending power each year. Now that US inflation is up closer to 9%, earning 3% interest gives you a -6% real rate of return, which is much worse than you were getting before. If 3% is the best you can do right now, given your plans to use the money in the relatively near future as a down payment, there's no need to feel "bad" about it, but you should be aware that your money is losing value at a pretty significant rate and make plans for your future accordingly. Good luck.

I am aware. Don't need you to "get me to think a little" as there is not really an alternative at hand. You are just trying to get me to understand that inflation exists and I am fucked because I am not a property owner? I have thought about this (more than a little) and am looking for the silver lining like other first time home buyers. Thanks for the well wishes.

How about this: home listing prices are declining, while my DP savings is growing, and my rent already went up this year, so my COL can only get so much more inflated. Yay!

[Abe]

We’re buying a vacation / part-time retirement condo for the parents and we got it for 80% of asking price. This is in Hawaii.

I'd like to hear about this as well.  I have a STR condo in Hawaii and would mind another one, but have priced out lately.

Kind of lucked into it - the owner was moving back to CA and didn’t want to keep it on the market forever. Was already listed for about 3 months before we bought it. Don’t worry, he made a ton of return from when he bought it new in 2018. Interestingly a slightly larger (but same number of bedrooms, etc) condo in the development sold for $200k more than we paid. 

[clarkfan1979]

... and the same model condo we paid $425k for in April, 2022, is now on the market for $385k. They have five more to sell. It's going to be interesting to see where they land.

...and the most recent one closed for $381.5k.

The 10% decline is no longer predicted - it has arrived!

I think the small dip could be partially explained because it's a condo. Condos tend to decrease before single family homes when things slow down. When searching for housing data, some websites combine all sales (condos & single family homes) and others provide them separately.

The 10% decline hasn't quite arrived in my markets yet for single family homes. Below is data for November 2021 to November 2022 (single family homes) for my respective cities. Things could be different in the future.

Fort Collins, Co (+10.9%)
Fort Myers, FL (+30.19%)
*Koloa, HI (+67%)
Pueblo West, CO (+9.7%)

*This is based off of 4 home sales, which is a very small sample size.

[PDXTabs]

I noticed this condo today on Zillow: https://www.zillow.com/homedetails/1500-SW-Park-Ave-APT-418-Portland-OR-97201/67570958_zpid/

Sale history:

Date	Price
2005	304,000
2006	365,000
2014	364,987
2016	374,900

Currently listed at $360k.

Obviously all real estate is local and downtown Portland isn't doing great right now. I kind of want to buy it, but to live in. But not enough to actually pay for it.

[Mr. Green]

I noticed this condo today on Zillow: https://www.zillow.com/homedetails/1500-SW-Park-Ave-APT-418-Portland-OR-97201/67570958_zpid/

Sale history:

Date	Price
2005	304,000
2006	365,000
2014	364,987
2016	374,900

Currently listed at $360k.

Obviously all real estate is local and downtown Portland isn't doing great right now. I kind of want to buy it, but to live in. But not enough to actually pay for it.

It's hard for me to believe that's an accurate representation of the broader Portland market. Over 16 years of no appreciation. Ouch. Our house in a distant DC metro missed in large part the huge pandemic run up and we're still up 15-20% over the last three years.

[PMJL34]

Interesting condo case study. Ouch on the $500+ HOA.

I agree with Mr. Green and don't understand how this condo has lost value in the last 15 years in a city like Portland. There's gotta be something else going on??

EDIT: Also, SF Bay Area is #1 in the nation for decline in home prices and tech layoffs just started! Yikes.

[clarkfan1979]

Edit: Based on the article, median sales prices is listed as +7.7% in August 2022 (year over year). For those predicting a housing crash, it hasn't happened yet. Maybe it will happen later?

Year over year will flip in the next 3 or 4 months - think of it this way, prices were still going up in February/March. That, for most places, was probably the peak. Now they're declining, but (thus far) slowly enough that as of August, your house was still worth a bit more than it was last August (though it's probably flat in real terms). It's worth a lot less than it was 6 months ago, though, and if that trend continues, it'll be (strongly) negative YOY soon.

If there's limited forced selling (people do die/lose jobs/divorce all the time) then I could imagine a sort of slow grind down for many years. If there's a recession or some other event that causes more forced sales, I could imagine a faster (double digits annually) decline.

In real terms, of course, we're already probably negative YOY. I'm talking nominal here.

-W

It looks like Denver is holding on at +2% (Jan 2022 to Jan 2023). If mortgage rates end up in the upper 5's in the spring, I doubt we will end up seeing any YOY housing price declines.

   

[FIPurpose]

Edit: Based on the article, median sales prices is listed as +7.7% in August 2022 (year over year). For those predicting a housing crash, it hasn't happened yet. Maybe it will happen later?

Year over year will flip in the next 3 or 4 months - think of it this way, prices were still going up in February/March. That, for most places, was probably the peak. Now they're declining, but (thus far) slowly enough that as of August, your house was still worth a bit more than it was last August (though it's probably flat in real terms). It's worth a lot less than it was 6 months ago, though, and if that trend continues, it'll be (strongly) negative YOY soon.

If there's limited forced selling (people do die/lose jobs/divorce all the time) then I could imagine a sort of slow grind down for many years. If there's a recession or some other event that causes more forced sales, I could imagine a faster (double digits annually) decline.

In real terms, of course, we're already probably negative YOY. I'm talking nominal here.

-W

It looks like Denver is holding on at +2% (Jan 2022 to Jan 2023). If mortgage rates end up in the upper 5's in the spring, I doubt we will end up seeing any YOY housing price declines.

 

The Fed seems to be signaling that they will not be lowering rates that quickly. I doubt we'll be seeing mortgage rates go that low this year.

[waltworks]

It looks like Denver is holding on at +2% (Jan 2022 to Jan 2023). If mortgage rates end up in the upper 5's in the spring, I doubt we will end up seeing any YOY housing price declines.

I think you are misunderstanding how YOY numbers work. Even if prices stay steady from here out, YOY numbers will be strongly negative soon, as the market was still rising (though about May/June) in 2022.

Month over month declines have been happening for 3 or 4 months now (data lagged a bit, so really 6-7 months but we don't have the numbers yet).

https://www.calculatedriskblog.com/2023/01/comments-on-november-case-shiller-and.html


-W

[clarkfan1979]

It looks like Denver is holding on at +2% (Jan 2022 to Jan 2023). If mortgage rates end up in the upper 5's in the spring, I doubt we will end up seeing any YOY housing price declines.

I think you are misunderstanding how YOY numbers work. Even if prices stay steady from here out, YOY numbers will be strongly negative soon, as the market was still rising (though about May/June) in 2022.

Month over month declines have been happening for 3 or 4 months now (data lagged a bit, so really 6-7 months but we don't have the numbers yet).

https://www.calculatedriskblog.com/2023/01/comments-on-november-case-shiller-and.html


-W

You said the exact same thing 4 months ago and it didn't happen. Go back and look at the discussion thread. In my opinion, it was a reasonable prediction. However, reasonable predictions don't always come true. 

I think your second prediction is also reasonable. However, we now have to wait another 4 months. However, just because it's reasonable doesn't mean it's going to happen. We have to wait and see. You act like it already happened and it didn't.

Back in October 2022, I was talking about YOY data for August (August 2021 to August 2022). I was reporting +7.7% for Denver. You corrected me and said in 3-4 months YOY is going to flip, meaning go negative (For Denver). We now have January data, which is 5 months later and we are still at+2% for YOY (January 2022 to January 2023). 

Mortgage rates are not solely controlled by the FED interest rate. Mortgage rates were over 7% in late October/early November 2022. Mortgage rates are now 6.2%. During this time the FED did not lower rates, but yet mortgage rates declined by almost 1%. It's very possible that mortgage interest rates could be in the 5's in the spring.   

[waltworks]

The CalculatedRisk/Case Schiller numbers are for November. Long lag (and those numbers are for contracts signed 30-60 days earlier, obviously). MOM has been down for a while, so yes, you'll see YOY down.

-W

[waltworks]

https://www.denverpost.com/2023/02/04/colorado-home-price-gains-sales-mortgage-rates/ (paywall- TL;DR - Denver is down about 1% from December 2021 to December 2022). That's nominal. In real terms it's probably down close to double digits.

This is not a repeat sales index (which have a ton of lag), so it's not nearly as accurate, but in a big metro like Denver it's probably not bad.

Case Schiller numbers in a few months will give us better data.

-W

[SilentC]

It looks like Denver is holding on at +2% (Jan 2022 to Jan 2023). If mortgage rates end up in the upper 5's in the spring, I doubt we will end up seeing any YOY housing price declines.

I think you are misunderstanding how YOY numbers work. Even if prices stay steady from here out, YOY numbers will be strongly negative soon, as the market was still rising (though about May/June) in 2022.

Month over month declines have been happening for 3 or 4 months now (data lagged a bit, so really 6-7 months but we don't have the numbers yet).

https://www.calculatedriskblog.com/2023/01/comments-on-november-case-shiller-and.html


-W

You said the exact same thing 4 months ago and it didn't happen. Go back and look at the discussion thread. In my opinion, it was a reasonable prediction. However, reasonable predictions don't always come true. 

I think your second prediction is also reasonable. However, we now have to wait another 4 months. However, just because it's reasonable doesn't mean it's going to happen. We have to wait and see. You act like it already happened and it didn't.

Back in October 2022, I was talking about YOY data for August (August 2021 to August 2022). I was reporting +7.7% for Denver. You corrected me and said in 3-4 months YOY is going to flip, meaning go negative (For Denver). We now have January data, which is 5 months later and we are still at+2% for YOY (January 2022 to January 2023). 

Mortgage rates are not solely controlled by the FED interest rate. Mortgage rates were over 7% in late October/early November 2022. Mortgage rates are now 6.2%. During this time the FED did not lower rates, but yet mortgage rates declined by almost 1%. It's very possible that mortgage interest rates could be in the 5's in the spring.   

I agree on mortgages getting into the 5%s but I don’t think it is going to matter that much because the FOMO has totally evaporated and a payment in the mid-5% is still about 30% higher than a payment in the low 3%s (in low property tax low insurance state at least).  Obviously there will be some incremental benefit but still an incredible drop in affordability.  From a cash buyer perspective there should also be relief as deliveries from the home builders slow which puts downward pressure on labor costs and lumber, shipping prices from China etc are already falling so that will help prices glide lower.  Pulte had something like a net 40% decline in orders and KBH around 80% (net being new orders minus cancellations) so the backlog of homes to be built is shrinking. 

[Finances_With_Purpose]

This is where I see things going as well, @waltworks .  Prices are also down here YOY. 

Rates will remain high and/or not drop rapidly that soon, which will continue pushing housing down.  (And I wish that weren't the case, but that's a best guess.) 

People can't buy new or keep contracts with the mortgage-rate risk/pressure, in addition to the payment size becoming impossible for larger and larger slices of the market. 

We're paying a lot of attention to this since I enjoy real estate and we have finally outgrown our place.  We'd like to move, but why give up a 2.5% rate and take on a larger place unless there's a huge price drop?  I'd hate to buy just before, say, a 20% negative swing--and high rates push prices down.  I would also hate to be wrong about the bottom, since mortgage rates at 6-7%/year will eat up the benefit of any price difference you get very rapidly. 

I am finding that it is financially very, very hard to justify giving up a sub-3% rate.  Especially when we can stuff spare cash into i-bonds that pay us almost 3x our mortgage rate (until, of course, rates go back down). 

Meanwhile, I'm watching supply stack up, especially with new builds, which keep aggressively dropping prices and still struggle to find buyers at prices that would have been snapped up before they hit the market--before June. 

Current prices made sense when rates were low, but rates rose rapidly, and it's taking a while for that to play out: e.g., a buyer might have a contract on a new build but not yet be forced to realize that the mortgage is now impossible, so now those houses are slamming onto the market.  I am seeing more and more of them.  Current prices make less sense in this rate environment, even if the seller offers a buy-down of some sort.  So they should keep dropping for a while until things balance out. 

I've considered throwing out a lowball or two, especially on a new build, to tempt a builder who's sitting on a fattening pile of inventory but needs cash in order to build more homes.  But I haven't done it yet...though I would be curious as to your thoughts. 

We've kept our powder dry for now and are waiting for a better deal.  My sense is that the better deals are yet to come. 

[FIPurpose]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

[Paper Chaser]

I'm reading more and more about builders offering rate buy downs (often temporary or short term) rather than dropping prices very much.
The idea is that they're willing to put some money toward reducing the monthly payments for buyers (at least temporarily) without lowering the actual list price very much. Prices are kind of sticky, and they don't particularly want to go that direction. Plus, they'd have a host of recent buyers upset and asking for money back if they started significant price drops on identical new builds (a la Tesla in recent weeks after their price drops).

I suppose that measures like that might make housing more affordable without showing up in pricing data such as Case/Shiller?

[SilentC]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

[FIPurpose]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

The fed claims to have a target of around 2% inflation. My guess is that at some point in the next year inflation will level out close to 0% or even saw back into a deflationary environment, and they'll start lowering the interest rate to try and get it back up again. I could be wrong. But if the economy whipsaws on inflation, you'd see the fed start dropping interest rates very quickly.

[ChpBstrd]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

The fed claims to have a target of around 2% inflation. My guess is that at some point in the next year inflation will level out close to 0% or even saw back into a deflationary environment, and they'll start lowering the interest rate to try and get it back up again. I could be wrong. But if the economy whipsaws on inflation, you'd see the fed start dropping interest rates very quickly.

Thousands of bond traders agree with you:
https://fred.stlouisfed.org/series/T5YIE/

[SilentC]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

The fed claims to have a target of around 2% inflation. My guess is that at some point in the next year inflation will level out close to 0% or even saw back into a deflationary environment, and they'll start lowering the interest rate to try and get it back up again. I could be wrong. But if the economy whipsaws on inflation, you'd see the fed start dropping interest rates very quickly.

If we get to 0% inflation/deflationary environment that is very possibly bearish for housing (maybe initially bullish) because it is likely accompanied by weaker job market conditions/recession. Powell pretty much said softening job market is required to lower inflation.  Of course it could be total Goldilocks somehow too.  He also said there needs to be a ‘reset’ in home prices, I don’t think down mid single digit counts.  But they are mere mortals, rates are kind of a fool’s errand to try to predict in my view unless they are at extremes. 

[ChpBstrd]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

The fed claims to have a target of around 2% inflation. My guess is that at some point in the next year inflation will level out close to 0% or even saw back into a deflationary environment, and they'll start lowering the interest rate to try and get it back up again. I could be wrong. But if the economy whipsaws on inflation, you'd see the fed start dropping interest rates very quickly.

If we get to 0% inflation/deflationary environment that is very possibly bearish for housing (maybe initially bullish) because it is likely accompanied by weaker job market conditions/recession. Powell pretty much said softening job market is required to lower inflation.  Of course it could be total Goldilocks somehow too.  He also said there needs to be a ‘reset’ in home prices, I don’t think down mid single digit counts.  But they are mere mortals, rates are kind of a fool’s errand to try to predict in my view unless they are at extremes.

In theory, existing houses represent a sunk investment in materials and labor. By owning a house, one is made immune from future increases in the costs of building a house. I.e. the person who buys today removes from their future the potential liability of having to pay higher costs. The person who rents for one more year before buying or building accrues the liability of next year's inflation as it relates to the costs of materials, labor, or the amount of materials and labor sunk into new houses.

So maybe if inflation expectations collapse (as they already have in the bond markets) so will people's urgency to buy a house now to avoid increases in the cost of construction. Of course, this applies mainly to LCOL areas where the cost of construction is a much larger component of property value than the cost of the land.

[Villanelle]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

The fed claims to have a target of around 2% inflation. My guess is that at some point in the next year inflation will level out close to 0% or even saw back into a deflationary environment, and they'll start lowering the interest rate to try and get it back up again. I could be wrong. But if the economy whipsaws on inflation, you'd see the fed start dropping interest rates very quickly.

If we get to 0% inflation/deflationary environment that is very possibly bearish for housing (maybe initially bullish) because it is likely accompanied by weaker job market conditions/recession. Powell pretty much said softening job market is required to lower inflation.  Of course it could be total Goldilocks somehow too.  He also said there needs to be a ‘reset’ in home prices, I don’t think down mid single digit counts.  But they are mere mortals, rates are kind of a fool’s errand to try to predict in my view unless they are at extremes.

In theory, existing houses represent a sunk investment in materials and labor. By owning a house, one is made immune from future increases in the costs of building a house. I.e. the person who buys today removes from their future the potential liability of having to pay higher costs. The person who rents for one more year before buying or building accrues the liability of next year's inflation as it relates to the costs of materials, labor, or the amount of materials and labor sunk into new houses.

So maybe if inflation expectations collapse (as they already have in the bond markets) so will people's urgency to buy a house now to avoid increases in the cost of construction. Of course, this applies mainly to LCOL areas where the cost of construction is a much larger component of property value than the cost of the land.

Interesting take, which I hadn't considered.  Thanks.

I wonder if this partly depends on the % of homes in an area that are new construction. For areas with lots of new housing, it seems like this cost of materials and labor element would have a larger effect on housing prices, and on the overall local housing market, than areas where there is little new construction.

~~~

What I'm seeing around me seems to be people who weren't really aware that interest prices could rise so much, or of the actual effect that would have on monthly costs, are suddenly quite eager to buy as soon as rates drop.  Two people, in separate conversations, have said to me that as soon as they see a "5" at the beginning of the available interest rates, they plan to jump into the market.  I think they feel burned by the recent increases that delayed them moving into ownership (or moving to a more expensive place), and plan to jump as soon as they see what they consider a reasonable number (and '5.X' seems to be that line) so that they aren't caught flat-footed again.

It's not entirely reasonable to me, but it doesn't seem like a rare viewpoint, unless 2 people saying that to me is just a large coincidence. 

[chasingsnow]

I almost think the inverse will be true. That being interest rates have risen so quickly there is pent-up demand to buy houses and many folks who would have previously bought are sitting on the sidelines continuing to rent. I think that if inflation decreases and interest rates fall as a result that we will see a (possibly temporary) growth in housing occur.

[Paper Chaser]

Perhaps not officially into negative price territory yet, but some data is showing that we could be there in 3-4 months if current rate of slowdown/decline continues:

[clarkfan1979]

My current thinking is that prices will not stay low very long. The pressure of everyone knowing that interest rates are artificially high, means that no one believes 6% rates are going to stick around very long.

The second is that higher interest rates are putting pressure to stop building new housing today.

I think this short-term thinking that the Fed is currently doing is going to hurt affordability in the next cycle.

Are you sure mortgage rates weren’t artificially low and now they are going to a normalized level?  It’s not normal for the Fed to be buying ~25-30% of mortgages and they stopped.  The margin over treasuries can shrink some but maybe 0.5-0.7% so you are still left with a mid to high 5s rate if you think low 3%s 10-year treasury is reasonable.  A 4% 10 year rate could also be reasonable though.

The fed claims to have a target of around 2% inflation. My guess is that at some point in the next year inflation will level out close to 0% or even saw back into a deflationary environment, and they'll start lowering the interest rate to try and get it back up again. I could be wrong. But if the economy whipsaws on inflation, you'd see the fed start dropping interest rates very quickly.

If we get to 0% inflation/deflationary environment that is very possibly bearish for housing (maybe initially bullish) because it is likely accompanied by weaker job market conditions/recession. Powell pretty much said softening job market is required to lower inflation.  Of course it could be total Goldilocks somehow too.  He also said there needs to be a ‘reset’ in home prices, I don’t think down mid single digit counts.  But they are mere mortals, rates are kind of a fool’s errand to try to predict in my view unless they are at extremes.

In theory, existing houses represent a sunk investment in materials and labor. By owning a house, one is made immune from future increases in the costs of building a house. I.e. the person who buys today removes from their future the potential liability of having to pay higher costs. The person who rents for one more year before buying or building accrues the liability of next year's inflation as it relates to the costs of materials, labor, or the amount of materials and labor sunk into new houses.

So maybe if inflation expectations collapse (as they already have in the bond markets) so will people's urgency to buy a house now to avoid increases in the cost of construction. Of course, this applies mainly to LCOL areas where the cost of construction is a much larger component of property value than the cost of the land.

Interesting take, which I hadn't considered.  Thanks.

I wonder if this partly depends on the % of homes in an area that are new construction. For areas with lots of new housing, it seems like this cost of materials and labor element would have a larger effect on housing prices, and on the overall local housing market, than areas where there is little new construction.

~~~

What I'm seeing around me seems to be people who weren't really aware that interest prices could rise so much, or of the actual effect that would have on monthly costs, are suddenly quite eager to buy as soon as rates drop.  Two people, in separate conversations, have said to me that as soon as they see a "5" at the beginning of the available interest rates, they plan to jump into the market.  I think they feel burned by the recent increases that delayed them moving into ownership (or moving to a more expensive place), and plan to jump as soon as they see what they consider a reasonable number (and '5.X' seems to be that line) so that they aren't caught flat-footed again.

It's not entirely reasonable to me, but it doesn't seem like a rare viewpoint, unless 2 people saying that to me is just a large coincidence.

Yes, I think it's a good point to separate out new construction vs. existing homes. For new constructions, builders are offering deals because their houses are sitting empty. For someone selling their personal home, if they don't get their number, they simply don't sell. If they are super motivated to move, they will rent their house instead of selling because they don't want to lose their 3% mortgage.

Yes, it's true that higher mortgage interest rates are making mortgage payments less affordable in 2023 than 2022. Things are slowing down for sure, but in areas of the country with very low inventory, it doesn't mean that prices have to go negative (YOY).

What I am seeing in my areas with low housing inventory is that the higher interest rates scared people away from buying and it flooded the renter pool. Now people are deciding if they want to continue to pay really high rent or buy. I think many are willing to pull the trigger with a mortgage rate in the 5's with the optimism that they will eventually refinance with a rate in the 4's. 

If a family is paying $2300/month in rent, a $2500/month mortgage payment (320K loan at 6.25% + taxes & insurance) for a similar house is a trade-off that many families would make. Yes, it sucks that you could have bought that same house last year with a $1875/month mortgage payment (3% rate), but that is in the past and not relevant today because it's not currently a viable option. Unless you have a time machine.     

[Paper Chaser]

Yes, I think it's a good point to separate out new construction vs. existing homes. For new constructions, builders are offering deals because their houses are sitting empty. For someone selling their personal home, if they don't get their number, they simply don't sell. If they are super motivated to move, they will rent their house instead of selling because they don't want to lose their 3% mortgage.

That was supposedly somewhat common in the 2008-2012 time frame, but mortgage rates were trending down over that time rather than up as they are now.
I realize that the 3% mortgage might make cap rates better for the rental in the bolded scenario, but not selling and taking the equity and cap gains exclusion means that our hypothetical motivated mover would just end up financing more of the new place at 6% so they could hold onto a 3% note for the rental. I haven't done the math, but I'm not sure that's a great trade off unless the new place is less expensive. Am I missing something?

[clarkfan1979]

Yes, I think it's a good point to separate out new construction vs. existing homes. For new constructions, builders are offering deals because their houses are sitting empty. For someone selling their personal home, if they don't get their number, they simply don't sell. If they are super motivated to move, they will rent their house instead of selling because they don't want to lose their 3% mortgage.

That was supposedly somewhat common in the 2008-2012 time frame, but mortgage rates were trending down over that time rather than up as they are now.
I realize that the 3% mortgage might make cap rates better for the rental in the bolded scenario, but not selling and taking the equity and cap gains exclusion means that our hypothetical motivated mover would just end up financing more of the new place at 6% so they could hold onto a 3% note for the rental. I haven't done the math, but I'm not sure that's a great trade off unless the new place is less expensive. Am I missing something?

I think a large piece of the puzzle is who owns the current real estate. In my opinion, the average home owner has more capital and a better credit score in 2023 than the ERA of 2008-2012. The sellers in my markets are not desperate. If they don't get their number, they take the house off the market, or they rent it out. I'm still seeing less than 2 months of inventory in my markets.

Taking on a larger mortgage at 6% is not a big deal for many people who are higher income, which consists of many of the homeowners today. You can cover the cost of the higher mortgage by the spread on your rental. You then wait another 2-3 years to get 10% more for your house. You still get the capital gains exclusion if you sell within 3 years.

My parents did the above strategy in 2014 to 2016 with their primary home in Florida. My parents are not skilled at this. I think they had help from my step-sister who is a local real estate agent. My parents wanted 400K in 2014 for their house and couldn't get it, so they rented it instead for 1.5 years. In 2016, they sold it for 430K. Because they rented it for 1.5 years, they pocketed an extra 40K because they got an extra 30K for sales and another 10K in principle pay down. 

For the new home, the new mortgage was around 4.25% + PMI because they only put 10% down. The mortgage rate on the other home was around 3.625%. The purchase price on the newer home was lower, but with a higher mortgage rate, PMI and flood insurance the overall mortgage payment was about the same. I think they had a $500/month spread on the mortgage vs. rent. The only repair that they had to do over 1.5 years was a new water heater, which my dad did himself, so it cost $600.

Once they sold the house in 2016, they took some of the proceeds to pay down the loan on the new house to get rid of the PMI, which lowered their payment. Then in 2020, they refinanced again from 4.25% to 3.625%, which lowered their payment even more.

It doesn't always work out this way, but if people don't get their number, this is what they are going to try to do, in my opinion. 



 

[SilentC]

Clarkfan that makes a lot of sense.  I couldn’t figure out why so many people are bent out of shape not being able to sell at the tippy top/seeing listings convert to rentals when they don’t get comps of three months ago but I can see people with above average loss aversion or a bullish LT outlook doing exactly this.

[clifp]

What I'm seeing around me seems to be people who weren't really aware that interest prices could rise so much, or of the actual effect that would have on monthly costs, are suddenly quite eager to buy as soon as rates drop.  Two people, in separate conversations, have said to me that as soon as they see a "5" at the beginning of the available interest rates, they plan to jump into the market.  I think they feel burned by the recent increases that delayed them moving into ownership (or moving to a more expensive place), and plan to jump as soon as they see what they consider a reasonable number (and '5.X' seems to be that line) so that they aren't caught flat-footed again.

It's not entirely reasonable to me, but it doesn't seem like a rare viewpoint, unless 2 people saying that to me is just a large coincidence.

I do think that 5.xx% mortgage will bring buyers back.  Folks who are looking for 3% mortgages are going to be waiting a long time.  I  think I'll be dead before we see that again.
Honestly, as I was getting my 1.875-3.75% loans over the last 1/2 dozen years,  I was constantly wondering who in hell is crazy enough to loan me money 15 or especially 30 years at that rate?  It seemed like a monumentally stupid investment, loaning me money at 5.x% merely seems dumb.

[Villanelle]

What I'm seeing around me seems to be people who weren't really aware that interest prices could rise so much, or of the actual effect that would have on monthly costs, are suddenly quite eager to buy as soon as rates drop.  Two people, in separate conversations, have said to me that as soon as they see a "5" at the beginning of the available interest rates, they plan to jump into the market.  I think they feel burned by the recent increases that delayed them moving into ownership (or moving to a more expensive place), and plan to jump as soon as they see what they consider a reasonable number (and '5.X' seems to be that line) so that they aren't caught flat-footed again.

It's not entirely reasonable to me, but it doesn't seem like a rare viewpoint, unless 2 people saying that to me is just a large coincidence.

I do think that 5.xx% mortgage will bring buyers back.  Folks who are looking for 3% mortgages are going to be waiting a long time.  I  think I'll be dead before we see that again.
Honestly, as I was getting my 1.875-3.75% loans over the last 1/2 dozen years,  I was constantly wondering who in hell is crazy enough to loan me money 15 or especially 30 years at that rate?  It seemed like a monumentally stupid investment, loaning me money at 5.x% merely seems dumb.

It seems like younger (maybe > ~30ish?) buyers and potential buyers were surprised at the increase, even after people had been talking about it theoretically for a while.  So it feels like the are now a bit spooked (or perhaps realistic) and will take a drop as a sign to act, before they are priced/interest-rate-ed out again.  Older people who've seen higher rates remembered all along that it was a possibility.

I also think that people might be over-reacting just a smidge to the higher rates.  It isn't as though they are permanent.  Cheaper houses with higher interest rates might cost the same or more *right now*, but that can be refinanced.  So they could come out ahead, thanks to those lower prices.

I guess time will tell.  As someone likely to be in the market to buy in a couple years, I'm interested to see where things end up, but also fortunate to be in a position where it probably doesn't matter, short of financial catastrophe. 

[SilentC]

Yeah time will tell.  High rates are probably not permanent though there have been 30+ year spans of mortgages staying above 6% so it’s also possible you never get to refinance a 6% 30 year mortgage.

Edit, I do think that even if rates stay in the 6%s people will get used to this concept and take the plunge.  We can already see it in some forward looking data.  So the question after that is does the Fed need to take rates even higher?  Your guess is as good as mine but the market is clearly getting concerned about it as the jobs number was on fire and some goods like autos are showing a bit of a resurgence. 

[des999]

I am in North Florida, and in a large planned community.  They are still in the process of building 2 new phases.  It will be interesting to see how much they sell for.  As of now, the prices haven't really come down much from the 'peak'.  And, I just heard the other day they are already at half sold (which is a lot considering it's mostly lots at this point).

We have seen some folks back out of contracts, due to interest rates increasing their overall monthly price.  But, it has been much lower than any of us anticipated.  Outside of my planned community there are lots of other communities in the area.  I don't see how they all can survive.  We shall see.

[FINate]

Yes, I think it's a good point to separate out new construction vs. existing homes. For new constructions, builders are offering deals because their houses are sitting empty. For someone selling their personal home, if they don't get their number, they simply don't sell. If they are super motivated to move, they will rent their house instead of selling because they don't want to lose their 3% mortgage.

That was supposedly somewhat common in the 2008-2012 time frame, but mortgage rates were trending down over that time rather than up as they are now.
I realize that the 3% mortgage might make cap rates better for the rental in the bolded scenario, but not selling and taking the equity and cap gains exclusion means that our hypothetical motivated mover would just end up financing more of the new place at 6% so they could hold onto a 3% note for the rental. I haven't done the math, but I'm not sure that's a great trade off unless the new place is less expensive. Am I missing something?

I think a large piece of the puzzle is who owns the current real estate. In my opinion, the average home owner has more capital and a better credit score in 2023 than the ERA of 2008-2012. The sellers in my markets are not desperate. If they don't get their number, they take the house off the market, or they rent it out. I'm still seeing less than 2 months of inventory in my markets.

Taking on a larger mortgage at 6% is not a big deal for many people who are higher income, which consists of many of the homeowners today. You can cover the cost of the higher mortgage by the spread on your rental. You then wait another 2-3 years to get 10% more for your house. You still get the capital gains exclusion if you sell within 3 years.

My parents did the above strategy in 2014 to 2016 with their primary home in Florida. My parents are not skilled at this. I think they had help from my step-sister who is a local real estate agent. My parents wanted 400K in 2014 for their house and couldn't get it, so they rented it instead for 1.5 years. In 2016, they sold it for 430K. Because they rented it for 1.5 years, they pocketed an extra 40K because they got an extra 30K for sales and another 10K in principle pay down. 

For the new home, the new mortgage was around 4.25% + PMI because they only put 10% down. The mortgage rate on the other home was around 3.625%. The purchase price on the newer home was lower, but with a higher mortgage rate, PMI and flood insurance the overall mortgage payment was about the same. I think they had a $500/month spread on the mortgage vs. rent. The only repair that they had to do over 1.5 years was a new water heater, which my dad did himself, so it cost $600.

Once they sold the house in 2016, they took some of the proceeds to pay down the loan on the new house to get rid of the PMI, which lowered their payment. Then in 2020, they refinanced again from 4.25% to 3.625%, which lowered their payment even more.

It doesn't always work out this way, but if people don't get their number, this is what they are going to try to do, in my opinion.

This is more or less what we're seeing here in Boise. Very few motivated sellers, with a willingness to be patient and wait for the right offer or pull the listing and convert to a rental. We're still experiencing a housing shortage, so even with interest rates putting downward pressure on prices, rents remain quite robust. Homeowners have a lot of equity after 5-ish years of all cash offers, increasing prices, and locking in 3% for 30 years.

Inventory spiked mid '22 then quickly dropped. We're heading into the spring selling season with inventory at around the same level as this time of year 2019. With a little over 1 month of inventory, it's a strong seller's market.

Boise proper has relatively little new SFH construction, with most new developments in west Meridian, Kuna, and outside city limits. Builders pulled back aggressively in 2022, but continued with projects that were already underway, so new inventory is also on a downward trend as this backlog works itself out.

I don't pretend to know where prices are headed, but with such low inventory and somewhat easing of mortgage rates my guess is we'll see some modest price increases this year, especially in Boise proper and desirable inner ring neighborhoods.

In all, median prices are down 3% YoY, down about 10% from the peak. And homes are taking longer to sell. All good things for buyers, though not the "crash" some were hoping for.

[SilentC]

“Nothing goes to hell in a straight line.”  But yeah I’m seeing a lot of houses go under market first weekend again albeit off peak prices by at least 5%.  Maybe there is some re-acceleration for some time.

[Dicey]

Got this in my feed today and I was glad I wasn't drinking hot coffee.

"Price Improvement" - OMG ROFLMAO!

https://www.redfin.com/CA/Palm-Desert/78217-Willowrich-Dr-92211/home/5815022

Truth is, it's a very unpopular floor plan, so the price is going to have to "improve" some more.

[FIPurpose]

Got this in my feed today and I was glad I wasn't drinking hot coffee.

"Price Improvement" - OMG ROFLMAO!

https://www.redfin.com/CA/Palm-Desert/78217-Willowrich-Dr-92211/home/5815022

Truth is, it's a very unpopular floor plan, so the price is going to have to "improve" some more.

Well there's also the 4k annual HOA fee. That right there is going to drive the home price down 50-100k more than it would normally go for.

[Dicey]

Got this in my feed today and I was glad I wasn't drinking hot coffee.

"Price Improvement" - OMG ROFLMAO!

https://www.redfin.com/CA/Palm-Desert/78217-Willowrich-Dr-92211/home/5815022

Truth is, it's a very unpopular floor plan, so the price is going to have to "improve" some more.

Well there's also the 4k annual HOA fee. That right there is going to drive the home price down 50-100k more than it would normally go for.

Not really. The HOA fee is a constant, and has always been baked into the price. It includes premium cable, internet, and landline, plus world class amenities. Compared to other communities in the region, the dues are a bargain, especially for what you get. Utility rates are extremely low. The region has two providers. One is very high :-(, the other is almost stealing ;-).

Buyers in this Senior Community are typically cashing out their family homes. Many of them come from LA/Orange County, where the selling price can easily exceed $1k/sf. This is like Monopoly Money to them. What's creating a drag on prices is their existing homes are not selling as quickly, with dozens of all-cash* offers over asking. Those buyers are the ones being effected by rising interest rates and inflation.