Author Topic: Will we get a RE crash?  (Read 9979 times)

the_fixer

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Will we get a RE crash?
« Reply #50 on: March 28, 2020, 10:30:49 PM »
Couple of thoughts.

We are coming up on the busy time for RE listing here in the next couple of months in my area and I expect that we will see the amount of active listings go up, multiple price cuts and DOM grow significantly.

Hard to buy a house when you are laid off, spent your down payment try to get by for a while. Even people with jobs are likely to hold off till the price implores them to buy since they may feel prices are potentially going to drop.

I am also thinking that we will see short term rentals (VRBO style) take a hit many people leveraged heavy and count on the rentals and peak seasons to make their nut. Look at ski resorts here in Colorado they are closed during the busy time of the year, coming into mid season where no one rents, the summer is uncertain so I expect booking will be down and that has to hurt.


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« Last Edit: March 29, 2020, 07:37:36 AM by the_fixer »

marble_faun

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Re: Will we get a RE crash?
« Reply #51 on: March 29, 2020, 01:05:51 AM »
COVID has created difficulties with basically every logistical aspect of buying a house and moving. 

Lots of people are sheltering in place, whether voluntarily or by government suggestion, which means no visiting properties.  Under these conditions inspectors can't operate as normal.  Town clerks and notaries aren't always manning their posts.  There could be issues with hiring movers. Etc.

My husband and I REALLY wanted to buy a house this spring or summer.  There are properties we are interested in, but the whole process is stymied.  We need to let our landlord know if we will be renewing our lease, and we just don't know.

former player

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Re: Will we get a RE crash?
« Reply #52 on: March 29, 2020, 02:18:38 AM »
In the UK all new transactions have stopped, and only existing contracts for vacant buildings are continuing.  No change before June at the earliest.  My neighbour has needed to sell for a long while, has been let down twice and is now completely stuck with an expensive empty house she can't even visit.

spartana

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Re: Will we get a RE crash?
« Reply #53 on: March 29, 2020, 08:49:26 AM »
I started a thread about a year ago saying a couple of former neighbors in my old hood wanted to sell their places because a two story big ass house (BAH) plus 2 story ADU was being built 5 feet from their small homes. Most here said they should wait until construction was finished before selling. Guess what? Construction is done and landscaping is going in now but I doubt they will be able to sell their places anytime soon. Of course the BAH investors can't sell either and if it was planned as foreign student housing that's off the table too. My neighbors will wait until June and try to sell then but being in literal lockdown in SoCal right now is going to make it nearly impossible to sell or buy a place now. And of course prices may fall fairly drasticly.

https://forum.mrmoneymustache.com/ask-a-mustachian/house-next-door-razed-giant-mcmansion-to-be-built-sell-now-or-wait/msg2359000/#msg2359000

Laserjet3051

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Re: Will we get a RE crash?
« Reply #54 on: March 29, 2020, 09:22:26 AM »
I started a thread about a year ago saying a couple of former neighbors in my old hood wanted to sell their places because a two story big ass house (BAH) plus 2 story ADU was being built 5 feet from their small homes. Most here said they should wait until construction was finished before selling. Guess what? Construction is done and landscaping is going in now but I doubt they will be able to sell their places anytime soon. Of course the BAH investors can't sell either and if it was planned as foreign student housing that's off the table too. My neighbors will wait until June and try to sell then but being in literal lockdown in SoCal right now is going to make it nearly impossible to sell or buy a place now. And of course prices may fall fairly drasticly.

https://forum.mrmoneymustache.com/ask-a-mustachian/house-next-door-razed-giant-mcmansion-to-be-built-sell-now-or-wait/msg2359000/#msg2359000

True, there are many roadblocks to buying/selling in socal now. But that doesnt mean its impossible. My wife is still conducting home closings in Orange County as recently as today and has more lined up for next week.

Mustache ride

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Re: Will we get a RE crash?
« Reply #55 on: May 16, 2020, 11:14:15 AM »
How's everyone feeling now that we're a couple months in? I was planning on purchasing a primary residence this spring, but am now waiting for a crash. I'm not sure how bad it's really going to be though now that the government seems to be providing a lot of protection towards homeowners. I live in a highly educated HCOL area that usually doesn't get hit as bad as other parts in the US. Right now, houses that are clean and well priced in the $400K-500K range sell for over asking within a few days. I've noticed the nicer houses listed for over $600K seem to be impacted and are staying on the market longer even with price decreases. I'm struggling with the risk/reward factor of taking advantage of the drop, not knowing how much further the drop can go. Does anyone have a crystal ball I can borrow?

betsbillabong

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Re: Will we get a RE crash?
« Reply #56 on: May 16, 2020, 11:23:32 AM »
I'm in the same position (in Boulder County, CO -- how about you?)

I need to move by 8/31 and am trying to decide whether I should just purchase a home I plan to live in for the next ten years, or rent for a year and see what happens. They both seem like imperfect plans.

I'm thinking I will keep an eye out for something perfect, but not make any compromises.

maizefolk

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Re: Will we get a RE crash?
« Reply #57 on: May 16, 2020, 11:27:48 AM »
At this point I don't think we will see a residential real estate collapse like 2008.

The people getting hit hardest in the lockdown are those with lower wage jobs that have to be done in person. Those folks are much more likely to rent than to own.

The forbearance language in the Cares Act means that even people how both own their home with a mortgage and who do lose their jobs are unlikely to be forced to sell (180 days forbearance with an extension to 360 days).

Sales may slow down a lot, but without big batch of forced distressed sellers (either selling because they cannot make the payments or foreclosed homes being sold by the banks) I don't think prices for single family homes will drop all that much.

With less government relief for renters plus the calls for a "rent strike", I do wonder if we'll see a more noticeable decline in the sale prices of dedicated rental units (du- tri- quad- plexes, small apartment buildings, and such).

Papa bear

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Re: Will we get a RE crash?
« Reply #58 on: May 16, 2020, 11:27:49 AM »
Itís still HOT in central Ohio, even among what is typically higher cost homes (500k+). It hasnít really slowed down at all


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iris lily

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Re: Will we get a RE crash?
« Reply #59 on: May 18, 2020, 07:41:34 AM »
In my immediate neighborhood in the city of St. Louis, houses seem to be selling like crazy. A whole bunch of housing stock went on the market in the past two weeks and my casual observation is that wow things are moving!

I donít  understand it but it looks like a good thing.

waltworks

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Re: Will we get a RE crash?
« Reply #60 on: May 18, 2020, 07:43:41 AM »
Around here there wasn't really a spring selling season but it certainly doesn't seem like we'll have a housing crash, at least yet.

-W

spartana

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Re: Will we get a RE crash?
« Reply #61 on: May 18, 2020, 09:16:44 AM »
Around here there wasn't really a spring selling season but it certainly doesn't seem like we'll have a housing crash, at least yet.

-W
Same here but it seems all selling/buying is pretty much frozen now so it will be interesting to see where prices go once things are back to normal. The LA Times yesterday said there has been a huge drop in the volume of houses sold but nothing changed price-wise...yet. Our markets are pretty much foreign investor driven )generally from China) and word has it they are very hesitant to invest right now. I'm wanting to rent my place out now but am waiting to see how things go.

betsbillabong

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Re: Will we get a RE crash?
« Reply #62 on: May 18, 2020, 09:50:04 AM »
I am following closely because I was planning on buying a home this spring. I have to be out of my university housing (I'm faculty) by 8/31. Really don't want to pay for movers twice (I have a six year old and a very heavy piano), and really don't want to move at all during COVID (I'm high risk), but I also don't want to buy just before a crash. So hard to know what to do. Hopefully my extension for another year here will pan out.

Edited to add: in normal times, my job should be incredibly stable (I should be under contract for the next five years). However, higher ed budgets are way up in the air right now. Also, I would be borrowing a big chunk of the down payment from the university. Sigh.
« Last Edit: May 18, 2020, 11:03:22 AM by betsbillabong »

Paper Chaser

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Re: Will we get a RE crash?
« Reply #63 on: May 19, 2020, 05:51:03 AM »
I'm a resident of a smallish, rural town in the Midwest. 12 months ago a Zillow search for my town would've shown 60-80 homes for sale. Now, it's 27. I'm not including raw land or pre-foreclosures/auctions in either example.
Of those 27 homes currently shown:
9 have recent price drops in the 2-3% range and another had a 25% drop (it was way overpriced)
8 have been on zillow for 60 days or more and a 9th (the most expensive home shown) was just relisted after being removed late last year
8 are priced at or below the median price for the zip code
7 are priced more than double the median home price

So anecdotally, I'd say volume is down 60% or greater. Homes that are priced competitively still seem to be selling in reasonably short times. Price adjustments have been minimal thus far, but some people that were holding out for high prices may be getting a little uncomfortable. The low end of the market seems to have more activity than the high end, but that may not be different than normal.

Dicey

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Re: Will we get a RE crash?
« Reply #64 on: May 19, 2020, 06:43:09 AM »
In the community where we own our rentals, where we're always on the lookout for our next BRRR, there are more listings than we've seen in five years, but prices haven't softened. It remains to be seen if this mini- glut will lead to significantly lower prices. We hope so, but we're not overly optimistic.

waltworks

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Re: Will we get a RE crash?
« Reply #65 on: May 19, 2020, 06:45:39 AM »
Remember, everyone, that we're VERY early in this. RE might well not be affected for a couple of years (if it is at all).

I'm half hoping for a crash here, because it would mostly affect the massive glut of nightly rentals and second homes (I think) and hopefully provide more normal-income housing stock as the AirBnB folks bail.

-W

LaineyAZ

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Re: Will we get a RE crash?
« Reply #66 on: May 19, 2020, 08:38:59 AM »
Agree that prices may not be affected right away.  After the 2008 crash, the real estate market here in Phoenix didn't bottom out until 2011.

fixie

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Re: Will we get a RE crash?
« Reply #67 on: May 20, 2020, 01:23:35 PM »
Yes.  I'm not a math surgeon or Nostradamus but asymptomatic spread, MAGA hat wearing science-deniers, the fact that there has never been a coronavirus vaccine, unwillingness to do the obvious and wear a mask, lack of effective treatment for the ~10-15% hospitalized patients, virtually guarantee a repetitive, prolonged sinusoidal curve in the number of active cases spanning years, potentially.  The balance of keeping hospitals functioning, keeping the economy going, and keeping the death rate down calls for leaders, not managers, and we don't have the former.
Skipping vital steps in the vaccine development and approval process may also cause problems for those crazy enough to become guinea pigs for big pharma.  This is already happening.
I'm trying to find my forever property right now and don't see a lot of action in my area.  Prices seem to be inflated beyond reason.
-fixie

martyconlonontherun

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Re: Will we get a RE crash?
« Reply #68 on: May 20, 2020, 01:57:13 PM »
IMHO, I think a lot will have to do with if there is another relief bill and what unemployment looks like in 4 months. If people are still unemployed and not getting the extra $600, I could see a lot of people falling behind/limiting new buyers.

But I think big corps have learned to scoop up cheap homes so maybe that will inflate home prices.

Kroaler

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Re: Will we get a RE crash?
« Reply #69 on: May 21, 2020, 04:59:49 AM »
I've been waiting for a R/E crash for years. Just keeps climbing.

Additionally I know some others with similar logic. So even if there is price adjustment I don't think it will be major cause so many people have been on the sidelines. 10% will look amazing and get scooped up.

With spring here, I don't think we will see a true slow down till fall / winter.  But who knows, my crystal ball is fuzzy.

I've actually got my eye on a house and may pull the trigger. A friend tipped me off so I contacted the owner before they even listed.   

Right now for my local market inventory is low and demand seems high, people still moving I guess. . .   However there's alot of construction that mid way to complete. All that hitting the market at once could change the landscape.

LWYRUP

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Re: Will we get a RE crash?
« Reply #70 on: May 21, 2020, 07:26:23 AM »
I'm in CRE though a different part of the market.  From the grapevine, single family home sales are strong and expected to remain so (people leaving apartments, echo boom bulge, construction starts lower than normal in last decade). 

I expect this will come at the expense of multifamily rents (esp. for large buildings in dense areas).

It's hard to tell now exactly how long this crisis will last or how it will all shake out but I don't expect a huge drop in single family home market except perhaps in places with a lot of economic damage (Las Vegas comes to mind).

I expect prices in suburban DC / NY / SF / Boston / Seattle to hold up as younger buyers sick of quarantine with remote jobs decide it's time to get more space.  Esp. if they expect they will be able to work from home a few days a week semi-permanently.

Possibly will be distress in the investor community if tenants do not pay rent for extended periods.  So next year may be a good time to pick up an investment property.


waltworks

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Re: Will we get a RE crash?
« Reply #71 on: May 21, 2020, 09:37:58 AM »
I have heard (purely anecdotally) about multifamily struggles (ie, many tenants combining households/breaking leases/not paying rent). Single family in my general area seems unaffected thus far.

I think the big questions are:

-Will low end/service industry jobs return to a meaningful extent in the next, say, 6 months? If not, big trouble for multi/commercial.

-How tight are the margins on multifamily and commercial RE and how much rainy day money do landlords have? Obviously this will vary a ton from case to case. If not bailed out and jobs don't return, this will mean significant foreclosures/fire sales toward the end of the year, I'd guess.

-How many people will move to the burbs from the city now that they can telecommute? We could see a surge in prices for SFH in desirable school districts, and a corresponding crash in high end apartments/condos in the city.

-Will AirBnB/house shares be seen as a *preferable*/safer alternative to hotels? Or the opposite? I can see arguments for either side of that. In tourism dependent areas, both will take a hit, but there will be a much smaller pool of tourists to capture, so the loser will lose badly. I can imagine scenarios where Las Vegas dries up and blows away and looks like the abandoned parts of Detroit. I can imagine scenarios where it thrives with tech workers moving from CA even as tourism and gambling crash.

That's just the stuff that's obvious to me (though I don't claim to have any answers) - and there are probably secondary/tertiary effects of this that I'm not smart enough to think of.

-W
« Last Edit: May 21, 2020, 09:47:30 AM by waltworks »

FatFI2025

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Re: Will we get a RE crash?
« Reply #72 on: May 21, 2020, 12:01:51 PM »
-How tight are the margins on multifamily and commercial RE and how much rainy day money do landlords have? Obviously this will vary a ton from case to case. If not bailed out and jobs don't return, this will mean significant foreclosures/fire sales toward the end of the year, I'd guess.

Interesting to think about. Let's say you have $500K equity in a $2M building and 50% of tenants aren't paying. Do you start flowing money into that business to keep it alive or just stop payments to the lender? One could argue that with the same cap rate, the building value is really $1M so the owner is underwater $500K. I think in that situation I'd stop paying the note and force the lender into a mod knowing that they don't want to foreclose on a property that would be impossible to sell.

If that scenario plays out then we wouldn't see as many fire sales.

waltworks

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Re: Will we get a RE crash?
« Reply #73 on: May 21, 2020, 12:35:49 PM »
-How tight are the margins on multifamily and commercial RE and how much rainy day money do landlords have? Obviously this will vary a ton from case to case. If not bailed out and jobs don't return, this will mean significant foreclosures/fire sales toward the end of the year, I'd guess.

Interesting to think about. Let's say you have $500K equity in a $2M building and 50% of tenants aren't paying. Do you start flowing money into that business to keep it alive or just stop payments to the lender? One could argue that with the same cap rate, the building value is really $1M so the owner is underwater $500K. I think in that situation I'd stop paying the note and force the lender into a mod knowing that they don't want to foreclose on a property that would be impossible to sell.

If that scenario plays out then we wouldn't see as many fire sales.

Yeah, I'm not sure how that would work either. You could also argue that the lender *would* foreclose and just take over the building/manage it themselves rather than sell it. It would depend on who the actual holder of the note is, of course. I think a lot of those big loans are held in the lender's own portfolio and not sold on, but I'm not a multifamily RE person so I could be wrong.

In a lot of cases with SFH the legal costs and time would make a foreclosure not worthwhile/too difficult (we saw that in the 2007-2012 crash) - but for a multimillion dollar apartment complex? That's probably worth the cost of the foreclosure if you'll get something out of it, and if the courts aren't clogged with SFH foreclosures, the timeframe would be reasonably quick. I don't think multifamily qualifies for some of the legal foreclosure protections that exist for SFH in various places either.

If I held the note I'd probably foreclose, cut rents, and own the place myself, depending on the numbers.

But again I'm not that familiar with big multifamily stuff.

-W

Pennycounter

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Re: Will we get a RE crash?
« Reply #74 on: May 21, 2020, 04:52:21 PM »
You guys are forgetting that anyone can request forbearance on their mortgage right now related to the pandemic. So you can simply call up your lender and ask to not pay your mortgage, and poof you don't have to. There are a few different scenarios for payback or just extension of your mortgage duration. I expect that most legitimate investors we'll take this action instead of paying the mortgage out-of-pocket. There are repercussions on your credit report though, so it really depends on your long-term and short-term goals.

I agree that we're early days in seeing the full impact but this is not a real estate event like it was in 2009. My crystal ball, which is also frequently incorrect, sees that we will see fewer deals because people aren't selling and moving unless they absolutely have to but I don't think prices will move much. Real estate is hyperlocal, so some areas that have permanent impacts to their economy based on the pandemic are going to behave differently.

Wrenchturner

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Re: Will we get a RE crash?
« Reply #75 on: May 21, 2020, 05:11:47 PM »
You guys are forgetting that anyone can request forbearance on their mortgage right now related to the pandemic. So you can simply call up your lender and ask to not pay your mortgage, and poof you don't have to. There are a few different scenarios for payback or just extension of your mortgage duration. I expect that most legitimate investors we'll take this action instead of paying the mortgage out-of-pocket. There are repercussions on your credit report though, so it really depends on your long-term and short-term goals.

I agree that we're early days in seeing the full impact but this is not a real estate event like it was in 2009. My crystal ball, which is also frequently incorrect, sees that we will see fewer deals because people aren't selling and moving unless they absolutely have to but I don't think prices will move much. Real estate is hyperlocal, so some areas that have permanent impacts to their economy based on the pandemic are going to behave differently.

Are investors able to defer their non-primary mortgages?  Obviously regional but I believe in Canada it's not readily available.  Even if mortgages get deferred, will there be downward pressure on rents going forward that put more financial pressure on landlords?  Downward pressure on rent would come from AirBnBs turning into long term rentals, job losses from tenants, reduction of immigration(due to typical cyclical downtrends in immigration during a recession, not from policy changes).

LWYRUP

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Re: Will we get a RE crash?
« Reply #76 on: May 21, 2020, 06:34:39 PM »
-How tight are the margins on multifamily and commercial RE and how much rainy day money do landlords have? Obviously this will vary a ton from case to case. If not bailed out and jobs don't return, this will mean significant foreclosures/fire sales toward the end of the year, I'd guess.

Interesting to think about. Let's say you have $500K equity in a $2M building and 50% of tenants aren't paying. Do you start flowing money into that business to keep it alive or just stop payments to the lender? One could argue that with the same cap rate, the building value is really $1M so the owner is underwater $500K. I think in that situation I'd stop paying the note and force the lender into a mod knowing that they don't want to foreclose on a property that would be impossible to sell.

If that scenario plays out then we wouldn't see as many fire sales.

Yeah, I'm not sure how that would work either. You could also argue that the lender *would* foreclose and just take over the building/manage it themselves rather than sell it. It would depend on who the actual holder of the note is, of course. I think a lot of those big loans are held in the lender's own portfolio and not sold on, but I'm not a multifamily RE person so I could be wrong.

In a lot of cases with SFH the legal costs and time would make a foreclosure not worthwhile/too difficult (we saw that in the 2007-2012 crash) - but for a multimillion dollar apartment complex? That's probably worth the cost of the foreclosure if you'll get something out of it, and if the courts aren't clogged with SFH foreclosures, the timeframe would be reasonably quick. I don't think multifamily qualifies for some of the legal foreclosure protections that exist for SFH in various places either.

If I held the note I'd probably foreclose, cut rents, and own the place myself, depending on the numbers.

But again I'm not that familiar with big multifamily stuff.

-W

I wouldn't consider a loan big unless it was over $50 million.  But I am talking about my work, personally I own zilch other than an old split level.

Most loans of every size are sold on.  Smaller loans packaged for securitization.  Larger loans different banks "participate" behind the scenes.

kenmoremmm

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Re: Will we get a RE crash?
« Reply #77 on: May 22, 2020, 01:01:44 AM »
You guys are forgetting that anyone can request forbearance on their mortgage right now related to the pandemic. So you can simply call up your lender and ask to not pay your mortgage, and poof you don't have to. There are a few different scenarios for payback or just extension of your mortgage duration. I expect that most legitimate investors we'll take this action instead of paying the mortgage out-of-pocket. There are repercussions on your credit report though, so it really depends on your long-term and short-term goals.

I agree that we're early days in seeing the full impact but this is not a real estate event like it was in 2009. My crystal ball, which is also frequently incorrect, sees that we will see fewer deals because people aren't selling and moving unless they absolutely have to but I don't think prices will move much. Real estate is hyperlocal, so some areas that have permanent impacts to their economy based on the pandemic are going to behave differently.

isn't the standard forbearance plan offered by most US banks something along the lines of: don't pay for 3-4 months, but at the end of those 3-4 months, you owe everything that would've normally been paid in that time period? doesn't seem like much relief to me unless there's magically a V-shape recovery (ain't happening)

Ottoford

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Re: Will we get a RE crash?
« Reply #78 on: May 22, 2020, 03:29:58 AM »
As someone said RE is hyper local. We are two hours north of NYC and expecting a little boom. We were not getting feasible applicants for one of rentals so we listed it for sale.  Once lockdown started our realtor advised that we should move it back to rental market.  We immediately received a great set of applicants for a one year lease.  We unlocked the house, they looked at while on the phone with realtor. They are normally NYC residents but can work from home. They agreed to full asking for rent. In hindsight the realtor believes we could have gotten more, but I believe what we are receiving is fair.

If the work from home trend is sustained I see more people moving up to our rural area that is still just a two hour train ride to NYC. 

I was speaking to our local oil/propane company and he said the RE market here was strong after 9/11.  No one wants to capitalize on tragedy, but i found it an interesting fact.

My husband and I have been WFH since 2015 which is why we moved here. Lower real estate costs.  We were able to buy four houses for what we sold our NYC metro area house for.  NYC is still very accessible.  One main hurdle was good internet, but the NYS broadband for all initiative has finally made its way through our area. 

As tenants leave we will be assessing whether to sell or continue to rent. Luckily weíve had no issues with receiving rent payments so far.

betsbillabong

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Re: Will we get a RE crash?
« Reply #79 on: May 22, 2020, 06:09:37 AM »
That's really interesting about hyperlocal trends. I can well imagine Hudson Valley will do well -- I know lots of folks who have moved there and to the Catskills, both before COVID and to wait it out.

I wonder if that means that Boulder, where I live, could do well. Big tech scene, but relatively protected compared to NYC/Chicago/LA/SF.

waltworks

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Re: Will we get a RE crash?
« Reply #80 on: May 22, 2020, 07:02:48 AM »
isn't the standard forbearance plan offered by most US banks something along the lines of: don't pay for 3-4 months, but at the end of those 3-4 months, you owe everything that would've normally been paid in that time period? doesn't seem like much relief to me unless there's magically a V-shape recovery (ain't happening)

No. The typical scenario is that the missing payments/interest are added to the back end of the loan (due in many years). It will depend on the policy of the mortgage servicer and the specific situation, obviously. In general I would expect the "you got a job again? pay the whole amount now!" option to be pretty rare.

-W
« Last Edit: May 22, 2020, 07:56:59 AM by waltworks »

KateFIRE

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Re: Will we get a RE crash?
« Reply #81 on: May 22, 2020, 09:16:11 AM »
We are waiting for prices to drop too. In Houston, home prices are at all time highs. I noticed that less homes are listed, but if there are layoffs in oil and gas I think people will be forced to list. I strongly believe that we will see home prices drop in Houston. So many are unemployed. It just doesnít make sense. Also property taxes are 2-3% a year here. Even if homeowners get forbearance on the mortgage, they canít avoid the property taxes.

2 things that will lower home prices:
Unemployment in high property tax areas - Current problem
Ending of mortgage forbearance - Summer 2021


matchewed

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Re: Will we get a RE crash?
« Reply #82 on: May 22, 2020, 12:01:59 PM »
Keeping an eye on things in my particular market. Ideally some bad landlord owning one of our city's many triplexes mismanages their way into needing to sell on the cheap. More commonly they foreclose, the bank then has to wait out the tenants who stay, then the bank sits on the property for a few years and sells it for 50% off. If the pipes haven't been stolen and the winterizing hasn't fucked up the pipes, and the catch-up maintenance is within reason then you can snap up a decent property.

I think it may take some time for the affects of this to be felt. There doesn't seem to be too much of an immediate affect for our rents. I've heard similarly from the neighbors who are also landlords. Everything still seems to be on pause and the true impact won't be felt until the pause button is lifted and we see who is able to get back to work and when.

My particular city is rather blue collar, not many fancy places for high income rentals. But if you screen your tenants appropriately it seems you can get good tenants.

FINate

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Re: Will we get a RE crash?
« Reply #83 on: May 22, 2020, 01:09:59 PM »
IMO the housing market and economy of the greater SF Bay Area is going to, as they say, be disrupted. Nationally housing will look stable, maybe even increasing, but the average will mask regional differences.

Within the Bay Area I don't expect a full-on crash, but rather an acceleration of long simmering trends. Most software jobs can be done from anywhere with good internet connectivity, and folks in the Bay Area were already increasingly disillusioned before the virus hit. My guess is that the pandemic and SIP has people earnestly evaluating life in an expensive, dirty, and dense city with a terrible commute and zero backyard vs. somewhere with a lower cost of living and better quality of life. BigTech is already talking about sustained long-term telecommuting as they learn how to make it work and discover it's not the hit to productivity many expected.

So I think prices in the SF Bay Area will stagnate or decline slightly, whereas mid-sized secondary markets will see sustained increase in demand. There are many great places across the US and people will spread out, so I don't think it will be a huge spike in prices. But over a long period of time my guess is that there will be a releveling of prices, with major job centers such as the Bay Area slowly falling behind and desirable mid-sized cities gradually outpacing. As part of this I think we will see a proliferation of satellite micro-offices outside the traditional tech centers -- small simple offices with ~20-50 employees.

The decade of the 2010s was known for people returning to the urban core of major cities. We may look back on the 2020s as the decade of workers spreading out, not to suburbs this time, but instead to small- to mid-sized livable cities.

If this happens it may disproportionately affect investment properties in the Bay Area since these currently assume a certain amount of long-term capital appreciation.

LWYRUP

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Re: Will we get a RE crash?
« Reply #84 on: May 22, 2020, 01:24:22 PM »
@FINate, I agree with you, but might put it in a less pessimistic manner.  The Bay area is obviously a desirable area to live, which is why prices are so high.  However, the amount by which it is perceived to be more desirable than competitor cities (such as Seattle, Denver, Austin, etc.) has been declining in recent years and likely will continue to decline.  That doesn't mean prices will collapse or everyone will leave, just that we might see the gap between SF and other major cities close.  That could be as modest as Bay Area prices rising by 1% a year while Seattle prices rise by 3%.  Eventually that compounds.

SF and NY are probably the two major cities most impacted (NY just because of pure density).  I don't think we'll see that same effect in places a little less dense and a little less expensive like Boston, DC, Seattle, Denver, etc. 

Roughest spots will be places dependent on tourism and mass gatherings like Las Vegas and Miami.  Houston could also struggle due to oil as noted above.

I don't see some sort of mass price declines in, say, the single family home market in suburban Minneapolis.  Lots of knowledge workers, not that dense, not to bubbly previously.  There I think things just keep on steady without missing a beat. 

betsbillabong

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Re: Will we get a RE crash?
« Reply #85 on: May 22, 2020, 01:27:46 PM »
@FINateSF and NY are probably the two major cities most impacted (NY just because of pure density).  I don't think we'll see that same effect in places a little less dense and a little less expensive like Boston, DC, Seattle, Denver, etc. 

Roughest spots will be places dependent on tourism and mass gatherings like Las Vegas and Miami.  Houston could also struggle due to oil as noted above.

I don't see some sort of mass price declines in, say, the single family home market in suburban Minneapolis.  Lots of knowledge workers, not that dense, not to bubbly previously.  There I think things just keep on steady without missing a beat.

I agree with this. I'm currently in the market for a home, and though I would love to wait a year so that I could get a better sense of where things were going, I think it's very possible that knowledge workers might flee TO Boulder from some of these other spots. It's not dense here, there's a big tech scene, and you can always go outdoors. It's expensive, but not if you're selling your home in NYC or the Bay Area.

FINate

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Re: Will we get a RE crash?
« Reply #86 on: May 22, 2020, 01:53:58 PM »
@FINate, I agree with you, but might put it in a less pessimistic manner.  The Bay area is obviously a desirable area to live, which is why prices are so high.  However, the amount by which it is perceived to be more desirable than competitor cities (such as Seattle, Denver, Austin, etc.) has been declining in recent years and likely will continue to decline.  That doesn't mean prices will collapse or everyone will leave, just that we might see the gap between SF and other major cities close.  That could be as modest as Bay Area prices rising by 1% a year while Seattle prices rise by 3%.  Eventually that compounds.

SF and NY are probably the two major cities most impacted (NY just because of pure density).  I don't think we'll see that same effect in places a little less dense and a little less expensive like Boston, DC, Seattle, Denver, etc. 

Roughest spots will be places dependent on tourism and mass gatherings like Las Vegas and Miami.  Houston could also struggle due to oil as noted above.

I don't see some sort of mass price declines in, say, the single family home market in suburban Minneapolis.  Lots of knowledge workers, not that dense, not to bubbly previously.  There I think things just keep on steady without missing a beat.

I confess that I may be too pessimistic. We are in the process of relocating for a reason, so take my POV with a big grain of salt :) And to be clear, the Bay Area has a ton to offer and can be a great place to live. I just think there's a limit the the "sunshine tax" people are willing to pay, and that we crossed that threshold several years ago.

These both predate the pandemic, they highlight the trends I mentioned up thread:
https://www.mercurynews.com/2019/08/30/bay-area-exodus-thousands-more-fleeing-region-than-arriving/
https://www.mercurynews.com/2020/02/23/bay-area-dissatisfaction-rich-poor-young-and-old-unhappy-here/

Additionally, when we were first contemplating a move out of the area I did my own scenario planning exercise for the Bay Area. After doing this I understood that I didn't like any of the likely future scenarios, which is when we got more serious about the move. Several months later SPUR published their scenario planning exercise, which is eerily similar to my own, with outcomes plotted along social inclusion and economic prosperity axes. These aren't predictions of the future, but rather a way to highlight the issues the region faces as a result of poor urban planning. (And yes, fully accept that most cities have these issues to some degree.)

Are we following the force of our convictions and voting with our feet, or are we guilty of confirmation bias? Probably a little of both :)
« Last Edit: May 22, 2020, 02:03:38 PM by FINate »

LWYRUP

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Re: Will we get a RE crash?
« Reply #87 on: May 22, 2020, 02:50:47 PM »
The Bay Area strikes me as NIMBY to an almost absurd degree.  We can be tough in the DC area too but I see big towers going up across the whole metro area so developers do persist eventually.  I know there is not a lot of space on the literal SF Penninsula, but there is PLENTY of space in the rest of the region so the issue is just political will to allow density.

I think the Bay Area can only fall so much.  If a ton of people leave, real estate prices will abate, which will lessen the burden on those who stay and make it a more enjoyable area to live.  Then people will want to come back.  I would pay more to live in the Bay Area than Austin, for example.  But I would not spend $2 million and need to work around the clock vs $400k and a happy life.  But if Bay Area prices go down to $1.5 million and Austin prices go up to $1 million, you'll then find plenty of people who will pay the premium.  So there's a very generous floor on how "bad" things will even really get there.

Same for DC area where I live, but not necessarily due to consumer preference.  So far the federal government has expressed a clear preference for having a lot of its workforce and private contractors close by.  As long as that remains the case, prices will remain high because the job market compels it.  (If some president decided to scatter the various agencies across the country, then I suppose all bets would be off but that strikes me as unlikely.) 

SndcxxJ

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Re: Will we get a RE crash?
« Reply #88 on: May 22, 2020, 10:54:53 PM »
@FINate
Yikes!  I agree with you on the underlying trends in the Bay Area pre-covid19, and I agree that real estate investments have priced in equity growth for a number of years, but I might disagree with the notion that there will be a mass exodus.  The Bay Area has a wide variety of areas that are appealing for a work from home situation, much of both the east Bay and West Bay are suburban areas with only a little multifamily sprinkled around.  I think the value of a house with a backyard, space from noisy neighbors, and extra square footage is suddenly worth much more than the crappy apartment.  I wouldn't be surprised if we see a stagnation of rents and values for lower end property and a slight increase in rents and values in mid-end property.  There will be an increased level of work from home going forward, but it might be a slow process, for example Facebook wanting to go 50% wfh in 10 years. 
Ultimately, if I had to predict real estate in the near term, my money isn't on a crash but rather a slight increase in values over the next year.

FINate

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Re: Will we get a RE crash?
« Reply #89 on: May 23, 2020, 12:14:12 AM »
Oh, I'm not expecting a "mass exodus" anytime soon, nor do I expect a RE crash. Though I suppose it depends how one defines such things.

Again, I think it's a long drawn out trend. This is actually more dangerous than an abrupt change. It's easy to ignore or explain away slow changes year after year, whereas an acute crisis has a way of shocking people into necessary action.

The rather large and growing percentage of people dissatisfied with the direction of the Bay Area is concerning, though talk is cheap and many will endure for the lucrative jobs. However, the fact that ~10% of Bay Area residents have concrete plans to move out of the area in the near future is alarming, as is the overall trend of more people moving out than moving in.

So great jobs and a comfortable climate, yet worsening quality of life. It seems like that these will essentially balance each other out as the region muddles along for a long period of time.

And therein lies the danger: If the region doesn't build a TON of housing and mass transit and infrastructure, and soon, then jobs will continue to slowly migrate elsewhere. Once other places become established tech hubs the Bay Area looses much of its distinctiveness. Pockets will continue on for a long time as centers for VC, such as Palo Alto and Menlo Park, and the universities will remain desirable.

Yet I don't think it's a given that the Bay Area retains its status as the center of all things tech. That this is taken for granted is one of the more concerning things.

clarkfan1979

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Re: Will we get a RE crash?
« Reply #90 on: June 02, 2020, 08:58:29 AM »
My crystal ball says there will be a correction in the vacation rental market. Maybe 10% over the next 12 months and then another 15% during the following 12 months and then start to recover again.

I will be in the market for a mountain retreat in about 2 years. I'm currently looking at Breckenridge, Monarch, Wolf Creek and Cuchara.

I own single family homes near the median in Fort Collins, CO, Fort Myers, FL, Koloa, HI and Pueblo West, CO. I have not seen any sort of correction thus far.

waltworks

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Re: Will we get a RE crash?
« Reply #91 on: June 02, 2020, 09:18:26 AM »
If we see a decline in SFH prices, it won't be for a couple of years, just due to inertia. Las Vegas could be an exception.

I think there are too many balls in the air to predict anything much. We could have AirBnBs become a preferred alternative to hotels and a huge surge in nightly property prices. We could have a long-term decline in travel/tourism and a major crash in those same properties (if that happens, I'd predict more like a 50-75% haircut). We could have an effective vaccine in December. We could never have one. And there's the political/government angle - who might get bailed out? Will the Fed overreach and cause inflation?

I could go on and on. A place down the road from us just went under contract for 20% more than it would have last year. I was pretty surprised by that. At this point it will be fascinating to watch, but I'd hesitate to make any kind of prediction.

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spartana

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Re: Will we get a RE crash?
« Reply #92 on: June 02, 2020, 09:41:19 AM »
I mentioned this elsewhere but I'm now starting to see houses for sale in my SoCal area reducing prices by $10k or more (the million dollar plus homes are reducing prices by a couple hundred thousand) and sit on the market much longer. Same with rental prices. AirBNBs are still low - about 50% in some areas - but I'm seeing lots of reservations and people at the local ones (I'm in a tourist area). That may just be because of the reduced prices and could change if prices increase to pre-covid levels.

Example: A new house build has been on the market since Feb asking $1.5 million. It recently sold for $1.2 million. Pre-covid that would have been swooped up in a day at above asking price.
« Last Edit: June 02, 2020, 09:44:45 AM by spartana »

marble_faun

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Re: Will we get a RE crash?
« Reply #93 on: June 03, 2020, 06:55:28 AM »
I think each market will be different.

Right now there are masses of people living in city apartments who (a) have been feeling trapped inside for months; and (b) suddenly have the ability to work remotely. 

Layer the current phenomenon of looting on top of that, and I think we will see a demand for suburban and even rural homes among people who hitherto were happy to be urbanites.

I am a city apartment-dweller who had started to plan to move to a rural area since just before covid hit.  At first the rural market was really quiet.  Then, as the virus situation dragged on, houses started to come on the market and go within a day or two.  Our theory is that there is now a mass exodus of city-dwellers like ourselves. We are now part of a whole demographic movement.

spartana

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Re: Will we get a RE crash?
« Reply #94 on: June 03, 2020, 08:13:56 AM »
I think each market will be different.

Right now there are masses of people living in city apartments who (a) have been feeling trapped inside for months; and (b) suddenly have the ability to work remotely. 

Layer the current phenomenon of looting on top of that, and I think we will see a demand for suburban and even rural homes among people who hitherto were happy to be urbanites.

I am a city apartment-dweller who had started to plan to move to a rural area since just before covid hit.  At first the rural market was really quiet.  Then, as the virus situation dragged on, houses started to come on the market and go within a day or two.  Our theory is that there is now a mass exodus of city-dwellers like ourselves. We are now part of a whole demographic movement.
That's a good point. I hadn't thought about city dwellers wanting to escape to the 'burbs because of covid confinement/crowding, WFH, protests/looting, etc, along with the more normal reasons such as noise, traffic, pollution, higher costs for smaller places, crime. All that may mean another mass exodus out of many cities into the burbs causing a housing boom instead of a decline. Unfortunately that will probably be a "wealthy flight" situation leaving lower income jobless people stuck in decaying cities. 

As a suburban homeowner in the process of moving in with BF and deciding what to do with my place (nothing at the moment) I can see cities being less attractive post-covid and more remote areas being more attractive. Maybe the next boom is rural country areas. Or better...a great ski town in the mountains!
« Last Edit: June 03, 2020, 08:22:17 AM by spartana »

waltworks

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Re: Will we get a RE crash?
« Reply #95 on: June 03, 2020, 08:25:49 AM »
Just don't come to my ski town, damnit... trails are crowded enough already!

-W

spartana

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Re: Will we get a RE crash?
« Reply #96 on: June 03, 2020, 08:34:57 AM »
Just don't come to my ski town, damnit... trails are crowded enough already!

-W
Well you know I'm still looking. Park City was very high on my list. Maybe I will bring all the disgruntled Californians with me ;-).

kenmoremmm

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Re: Will we get a RE crash?
« Reply #97 on: June 04, 2020, 11:31:45 PM »
hard to argue with most of this
https://www.youtube.com/watch?v=oLDm6x-_txc

waltworks

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Re: Will we get a RE crash?
« Reply #98 on: June 05, 2020, 08:18:19 AM »
We're posting some dude in his living room videos now?

I resorted to skimming as he repeated what basically everyone already knows for 17 minutes, did he ever answer his "when will the RE market crash" question?

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marble_faun

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Re: Will we get a RE crash?
« Reply #99 on: June 05, 2020, 09:57:41 AM »
We're posting some dude in his living room videos now?

I resorted to skimming as he repeated what basically everyone already knows for 17 minutes, did he ever answer his "when will the RE market crash" question?

-W

Yeah, I closed out of that tab when I saw the goofy title image and the length.