Wall Street thinks US homes are overvalued by as much as 30+%
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
|
This is how they kill the middle class:
https://www.wsj.com/real-estate/wall-street-thinks-u-s-homes-are-overpriced-1fc1c18d They want to start the new story that real estate is overvalued by that much. Millions of middle class Americans will find themselves in upside down mortgages and be worth negative dollars of Wall Street gets their way. That will allow them to come in and take everything at a bargain discount once they wipe out the middle class from owning. |
Anonymous
|
You either didn't read or didn't understand the article.
It profiled two publicly traded companies that are in the business of buying homes from sellers, and then of course hoping to resell them at a profit (they usually do some cosmetic improvements and what not). In theory, sellers are happy to sell to these companies for slightly less than market to avoid R/E closing costs and the hassle of finding a buyer...it's usually like a 5% - 10% "discount". It said that the companies' stock prices are about 30% less than the value of the homes they own. In reality, that is more a reflection of how these companies are managed, where they own homes and how good of a job in the past they have done in placing their investments. There is also a time value issue for these companies. They use a ton of debt to acquire homes, so if the plan was they flip them in 60 days and now it takes 120 days, well that is additional interest payments and other costs to that company. I get that Headlines get clicks...but the article is kind of plain vanilla. |
Anonymous
|
From the article:
The stock market is pricing portfolios of American homes at a hefty discount to what houses are changing hands for in the open market. Shares of single-family landlords Invitation Homes INVH 0.55%increase; green up pointing triangle and American Homes 4 Rent AMH 1.33%increase; green up pointing triangle are trading at 35% and 20% discounts to their net asset values, respectively, according to real-estate analytics firm Green Street. Invitation Homes’ stock has traded at a particularly large discount to NAV since interest rates began to rise in early 2022, but the gap has widened by 10 percentage points in the past year. |
Anonymous
|
But it’s true! A crash is inevitable because the next generation just can’t afford houses.
There’s no way my house is worth a million dollars. I behave accordingly. |
Anonymous
| It is true that homes are grossly overvalued in much of the US and Canada. Income doesn't support these prices, particularly with higher interest rates. Average income and average home prices are completely out of whack by historical standards. But how it unravels is anyone's guess. Home prices continued to go ever up in 2007, and then collapsed in 2008. The difference this time is that the banks are in good shape. So I'm not sure how we get to a more balanced real estate market this time. But invariably, home prices and income will revert to an equilibrium. But how and when is unclear. |
Anonymous
| See, there is no housing crisis. PE companies and ultra-wealthy people are just using this PR spin to advocate for upzoning policies that destroy the middle class while boosting their wealth. |
Anonymous
What's funny about this is that the companies that invest in single family homes actually say very clearly in their filings that the regulatory limits on new supply is a key reason that they see value in their holdings. The companies which are buying single family homes love supply limits because it means the things they buy go up in value and they throw off more rental income. |
Anonymous
| No sh!t. |
Anonymous
Agree with all of this. I currently see no economic forces in play that will bring prices down - but never say never! |
Anonymous
I think it depends on what you mean by balanced. Gradual slowing of price increases and some decreases seems very probable. A crash does not. SFHs in desirable areas aren't going to lose much value. One reason is that we haven't built enough homes to keep up with demand since the crash. And now that we have higher interest rates the building that has been happening will start to slow. |
Anonymous
Simple. Time. House prices have been stagnant recently and will continue to be so for many years to come. |
Anonymous
Until rates go down again. |
Anonymous
|
People need to stop thinking of their houses like their personal piggy banks. My house was purchased for 700k in 2015 and now is 1.1m. I don’t think it’s worth that much even though I know it would sell for more than that (we did nicer renovations than they realize).
Home ownership should be prized for stability for kids and being cheaper than renting. |
Anonymous
|
In my mental net worth calculations I never include our house at the current value estimate. After living through the post 2008 drop in values, I know how quickly and how far they can drop.
|
Anonymous
You have a very poor grasp of what “worth” means. An asset is worth the price the market will bear. |