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Real estate market is in a full blown correction

37,723 Views | 169 Replies | Last: 2 yr ago by fig96
Red Pear Luke (BCS)
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In reply to rme • 11:11a, 6/19/22
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rme said:
Medaggie said:
The biggest mistake would be to sell and wait things out IMO esp if you are buying a similar priced home b/c of prop tax. I think I have about 20 yrs of homestead exemptions that would be gone if I traded into a similar home
Do you mean the "cap loss"? I'm guessing most homes have been under the 10% cap nearly every year except this year. Yes, moving to a similar priced home will increase your property taxes, but you might be significanty overestimating the impact…..unless these "crazy" valuations persist. Historically, I would have been more concerned about the hassle and transaction costs.


My favorite part is that we owe an absurd amount for property taxes and then another $2900 on top of that per year for PID. Still better than being in a MUD I guess.
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Diggity
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In reply to La Bamba • 12:10p, 6/19/22
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Supply issues are why I have maintained there won't be a crash. I do think we'll see a drop in prices because of interest rates and looming employment issues.

People will sell in slowing markets though.. they always do, and lower sales prices will have a cascading effect.

It seems to be herecy on this thread not to insist that prices can only continue to rise.

A year from now, we can all look back to see who was naive. I will admit I have been wrong on markets before so we'll see.
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Medaggie
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In reply to rme • 10:51p, 6/19/22
rme said:

Do you mean the "cap loss"? I'm guessing most homes have been under the 10% cap nearly every year except this year. Yes, moving to a similar priced home will increase your property taxes, but you might be significanty overestimating the impact…..unless these "crazy" valuations persist. Historically, I would have been more concerned about the hassle and transaction costs.

My example is an extreme but Austin and many Tx cities saw a huge jump in our Appraised Value which is diff from the taxable value when homestead is used.

My house appraisal went up by 1M this yr and I already have been capped the past 3 yrs from previous increases. With the Cap my appraisal is 1M more than my Taxable value.

If I moved and about a similar house, my appraised = taxable value and I would be paying around 20K more taxes.

Just as an aside, how can an appraisal district raise my home's improvement value by 700K when I have done exactly nothing to the house in the past year? I know the answer but still seems stupid.
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Red Pear Realty
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1:57p, 6/20/22
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HAR just released their first ever Rental Market Update on June 15th. Check this out:

Quote:
HOUSTON (June 15, 2022) With housing inventory still near the lowest levels in history and mortgage rates continuing to climb, more and more homebuyers are turning to Houston's rental market for relief.

....

"We are seeing a surge of activity in Houston's rental market as prices of homes for sale and interest rates move beyond the reach of some consumers," said HAR Chair Jennifer Wauhob with Better Homes and Gardens Real Estate Gary Greene. "For now, there appears to be an adequate supply of rental properties throughout the Houston market, but that could change if demand grows."

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swimmerbabe11
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11:18a, 6/22/22
My manager just sent our team this:
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Wehner High
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In reply to swimmerbabe11 • 12:50p, 6/22/22
AG
Maybe I'm missing something here from this video....but Ramsey also says that now is the best time to sell your home because the market is going to cool off in 6 months.

So now is actually not the best time to buy, 6 months is when the market cools off. You can't have both a buyer and sellers market
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double aught
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In reply to Wehner High • 12:54p, 6/22/22
AG
Just buy low, sell high. Duh!
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swimmerbabe11
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In reply to Wehner High • 12:55p, 6/22/22
yeah, I noticed that too, but I guess his point was that prices won't come down, houses will just sit on the market longer than they were.
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Wehner High
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In reply to swimmerbabe11 • 1:04p, 6/22/22
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List prices may not come down much, but final sale prices will come down because people will stop offering over 20%
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swimmerbabe11
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1:08p, 6/22/22
something something uncertainty I don't know. Sales managers gonna sales manage.
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Red Pear Realty
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In reply to Wehner High • 2:13p, 6/22/22
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Wehner High said:
Maybe I'm missing something here from this video....but Ramsey also says that now is the best time to sell your home because the market is going to cool off in 6 months.

So now is actually not the best time to buy, 6 months is when the market cools off. You can't have both a buyer and sellers market


Possible he thinks interest rates go up in the future, making housing even more unaffordable than it is now, even if prices drop? Most data I've seen suggests as much as 200 bps worth of increases over the coming year.

Btw I didn't watch the video.
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insulator_king
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9:47p, 6/25/22
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Well, I'm going to list my house for sale in ABQ hopefully in a couple weeks.
It does have an assumable VA loan at 2.75% that I can wave to people.
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Sea Speed
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In reply to insulator_king • 10:54p, 6/25/22
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That is like handing someone well over 6 figures in interest savings. How does that work? Do they have to pay cash or a second mortgage on top of it? Thst seems like a massive selling point.
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TexasStone
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8:23a, 6/26/22
No showing requests first four or so days on the market for condo property in round rock

Three+ months ago completely different story in this community
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highpriorityag
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In reply to insulator_king • 8:42a, 6/26/22
insulator_king said:
Well, I'm going to list my house for sale in ABQ hopefully in a couple weeks.
It does have an assumable VA loan at 2.75% that I can wave to people.


I'd add atleast 15% to the selling price for that
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bkag9824
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In reply to insulator_king • 11:08p, 6/27/22
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insulator_king said:
Well, I'm going to list my house for sale in ABQ hopefully in a couple weeks.
It does have an assumable VA loan at 2.75% that I can wave to people.


Is it STR eligible?
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insulator_king
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In reply to bkag9824 • 5:54p, 6/28/22
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bkag9824 said:
insulator_king said:
Well, I'm going to list my house for sale in ABQ hopefully in a couple weeks.
It does have an assumable VA loan at 2.75% that I can wave to people.


Is it STR eligible?
Short Term Rental?

Probably, whatever the city of ABQ allows,
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dubberage
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10:05p, 6/28/22
i have insider information that one of, if not the largest homebuilders in the US will have a 50% drop in home starts for the month of June compared to their projection from a few months ago. This is nationwide and not specific to Texas but still a huge drop. I think we are just going over the cliff now. Yes your Highland Park areas or similar in Houston will be fine, but suburbs are about to dry up with new builds. But don't confuse all the SFFR (single family for rent) properties being built to absorb these folks who can't afford new homes but will rent a new home for same as a 3 bedroom apt going rate in most cities
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swimmerbabe11
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10:07p, 6/28/22
June was rough in houston.
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htxag09
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12:29p, 6/29/22
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I definitely don't know what the future holds. If I flipped a coin it's more likely to be right.

But I was in a wedding recently and three of the other guys in the wedding were in the home construction business. The topic of higher rates and lower mortgage applications came up and they blew it off. Saying new builds in Texas areas are insulated from this and it's of zero concern to them, not even on their radar. They anticipated their home builds increasing at the same rate this year as last, continuing into 2023, etc.

All of them said if anything does happen, they have like 100% margins right now so aren't worried if they have to lower their prices.

Not going to lie, their attitudes scared me more than anything.
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Chipotlemonger
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In reply to htxag09 • 12:48p, 6/29/22
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htxag09 said:
Not going to lie, their attitudes scared me more than anything.
Yep
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Sea Speed
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1:20p, 6/29/22
AG
That flippant attitude is just about a sure sign those guys are about to completely lose their asses
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swimmerbabe11
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1:29p, 6/29/22
The prevailing attitude is that this is a slow moment while people readjust their expectations to the new normal and things will settle back in shortly.
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NoahAg
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In reply to htxag09 • 2:15p, 6/29/22
htxag09 said:
I definitely don't know what the future holds. If I flipped a coin it's more likely to be right.

But I was in a wedding recently and three of the other guys in the wedding were in the home construction business. The topic of higher rates and lower mortgage applications came up and they blew it off. Saying new builds in Texas areas are insulated from this and it's of zero concern to them, not even on their radar. They anticipated their home builds increasing at the same rate this year as last, continuing into 2023, etc.

All of them said if anything does happen, they have like 100% margins right now so aren't worried if they have to lower their prices.

Not going to lie, their attitudes scared me more than anything.
Interesting. Not really what I'm hearing. What kind of builders are these? Small custom guys? Big production? Hopefully they know what they're doing and don't have their heads in the sand.
Let's go, Brandon!
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Red Pear Realty
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2:26p, 6/29/22
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The iBuyers are still gobbling up starter homes in Texas. I'm 2 for 2 in the last 10 days or so for homes in Houston listed under $400,000 going to iBuyers, all cash, full asking, and closing whenever we want. I have heard that they just (this week) stopped making purchases in some markets like Phoenix, South Florida, and Las Vegas (the markets that were overbuilt and were hit the worst in the Great Recession).

Next, see chart/link below. From 2010 to 2020, we built significantly less housing than we were building in the 1960s, 1970s, 1980s, and 1990s (we overbuilt in the 2000s). And the story of the last two years is that the iBuyers have been buying up all the homes they can get their hands on. As of the latest data from across Texas, all major markets are still under call it 1.6 months of inventory, with 6.0 months being equilibrium. And the builders can brag all they want about not slowing down, but the data says Housing starts are down ~15% nationwide MoM, and new starts haven't fallen in this much in May (during the summer busy season) since 2010.

So we don't have enough housing, we aren't building enough new housing, and the housing we do have is getting bought up by iBuyers. Good times.

https://fred.stlouisfed.org/series/HOUST

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Furlock Bones
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In reply to htxag09 • 2:34p, 6/29/22
AG
100% margins. wait what.
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htxag09
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In reply to NoahAg • 2:42p, 6/29/22
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NoahAg said:
htxag09 said:
I definitely don't know what the future holds. If I flipped a coin it's more likely to be right.

But I was in a wedding recently and three of the other guys in the wedding were in the home construction business. The topic of higher rates and lower mortgage applications came up and they blew it off. Saying new builds in Texas areas are insulated from this and it's of zero concern to them, not even on their radar. They anticipated their home builds increasing at the same rate this year as last, continuing into 2023, etc.

All of them said if anything does happen, they have like 100% margins right now so aren't worried if they have to lower their prices.

Not going to lie, their attitudes scared me more than anything.
Interesting. Not really what I'm hearing. What kind of builders are these? Small custom guys? Big production? Hopefully they know what they're doing and don't have their heads in the sand.
Both. One is a small custom guy, other two were with larger companies (one of largest in Houston and with branches across Texas, he works in the hill country).
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jja79
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3:05p, 6/29/22
AG
The segment I've not seen any drop in is the high dollar custom construction. $1MM and over is still ginning.
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htxag09
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In reply to Furlock Bones • 3:06p, 6/29/22
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Furlock Bones said:
100% margins. wait what.
50%, been a busy day of multitasking......They said a house they are building for ~$500K is selling for around $950K.
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Rustys-Beef-o-Reeno
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In reply to htxag09 • 3:40p, 6/29/22
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Well in my mind if you are selling for double your cost then that's 100% return
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Bob_Ag
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5:07p, 6/29/22
AG
Builder profit margins are no where near that. Historically, realistic margins were ~10% leading up to 2020. They've changed some for sure, but builders aren't profiting 50% on a new residential build.

The actual cost to build the home is just one item on the cost list. There's retail lot costs, impact fees, overhead, payroll, liabilities, etc. Lot costs alone are astronomically high.
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Red Pear Luke (BCS)
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In reply to jja79 • 10:13p, 6/29/22
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jja79 said:
The segment I've not seen any drop in is the high dollar custom construction. $1MM and over is still ginning.
The favorite thing about the $1MM homes being built on the ritzy side of our new build subdivision up here is the had to get their exterior rewrapped before bricking because the insulated foam board sheets spent too much time exposed to the wind and elements and were effectively trashed cause of it.

That of course didn't stop them from drywalling the inside and texturing/painting and building out the inside with effectively no shell on the property.

So the builders just found some cheap Tyvek wrapping to wrap around it to "fix" the issue. Just doesn't seem like the right steps to be taking IMO for a house worth over a million. Especially if the Tyvek is still gonna be exposed to the same elements for longer than a month or two....

The best part is - they literally have 6 houses waiting to be bricked and have been that way for months....

I'd be pissed if it was me forking out a mil on a house like that...
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jja79
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In reply to Red Pear Luke (BCS) • 9:44a, 6/30/22
AG
Doesn't sound like custom builds. If that happened with a custom the builder wouldn't get paid his draw.

Inadvertent, random emoji there. Sitting in a title company lobby and didn't notice until it posted.
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Whoop Delecto
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3:35p, 6/30/22
AG
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Diggity
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In reply to Whoop Delecto • 3:43p, 6/30/22
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Quote:
Rent levels within the Park West submarket remain far below underwritten levels. For Park West to break even, revenue from student leases would need to grow by over 40%, based on 2021 operations.
I get that Covid was disruptive for a period, but how is it possible that the ****ed the proforma up this badly?
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