Federal Reserve: signs abound that housing market is entering bubble territory

[Anonymous]

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Everyone buying right now is overpaying. Some by a little, most by a lot. And some by a staggering amount. Case in point: https://www.washingtonian.com/2022/02/18/photos-this-dc-house-sold-for-800000-over-asking-price/

That buyer will probably never get their money back.

The asking price was very low given the unique property and large sq ft compared to comps. $800k over is misleading.

Depending on what happens, they might be screwed if they try to sell in the next few years but they will be fine. It’s a desirable area.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Everyone buying right now is overpaying. Some by a little, most by a lot. And some by a staggering amount. Case in point: https://www.washingtonian.com/2022/02/18/photos-this-dc-house-sold-for-800000-over-asking-price/

That buyer will probably never get their money back.

The asking price was very low given the unique property and large sq ft compared to comps. $800k over is misleading.

Depending on what happens, they might be screwed if they try to sell in the next few years but they will be fine. It’s a desirable area.

It was an old house with minimal cosmetic updates but no major systems updates. It needed a lot of work and some really significant remediation, as as discussed on this forum previously. This price reflects an emotion-driven feeding frenzy. Psychology, not fundamental value, set this price. And the location is not walkable. That far west of Wisconsin is not uber desirable. It’s fine, but not spectacular. This sale exemplifies every single current market failure (I’m assuming a cash offer because there’s no way this would appraise). This money is not coming back on resale, not in 10 years, probably not ever.

[Anonymous]

Anonymous wrote:Doesn't the fed have a steak in wanting to cool the market? Well a note like that will cool the market.

Yes they are trying to cool the market. They’ve been openly talking about slowing down the market since January. Now ask yourself why they would want to slow down the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Everyone buying right now is overpaying. Some by a little, most by a lot. And some by a staggering amount. Case in point: https://www.washingtonian.com/2022/02/18/photos-this-dc-house-sold-for-800000-over-asking-price/

That buyer will probably never get their money back.

The asking price was very low given the unique property and large sq ft compared to comps. $800k over is misleading.

Depending on what happens, they might be screwed if they try to sell in the next few years but they will be fine. It’s a desirable area.

It was an old house with minimal cosmetic updates but no major systems updates. It needed a lot of work and some really significant remediation, as as discussed on this forum previously. This price reflects an emotion-driven feeding frenzy. Psychology, not fundamental value, set this price. And the location is not walkable. That far west of Wisconsin is not uber desirable. It’s fine, but not spectacular. This sale exemplifies every single current market failure (I’m assuming a cash offer because there’s no way this would appraise). This money is not coming back on resale, not in 10 years, probably not ever.

"probably not ever"? LOL.

Yes, they probably spent too much. But it's "only" $2.6M which isn't that far off. And it has a pool - which is a hot commodity right now.

This house will be fine. A crazy overpriced house in BFE? Maybe not.

[Anonymous]

Anonymous wrote:From 2018: “ The housing market has generally recovered. Prices across the U.S., which fell 33 percent during the recession, have rebounded and are now up more than 50 percent since hitting the bottom, according to CoreLogic, a global property analytics site. Still, some markets in Arizona, Florida, Illinois and Nevada have yet to reach their pre-recession levels.” It depends on the local market and how overvalued the individual asset was at the peak. People who are paying 40% overvalue now could take more than a decade to recover, even without an overall housing crash.

https://www.washingtonpost.com/news/business/wp/2018/10/04/feature/10-years-later-how-the-housing-market-has-changed-since-the-crash/

"About one-third of all mortgages in 2006 were low or no-documentation loans or subprime loans, says Nothaft."

Wow - I didn't realize it was such a high %. No wonder we had issues.

[Anonymous]

Anonymous wrote:

Anonymous wrote:From 2018: “ The housing market has generally recovered. Prices across the U.S., which fell 33 percent during the recession, have rebounded and are now up more than 50 percent since hitting the bottom, according to CoreLogic, a global property analytics site. Still, some markets in Arizona, Florida, Illinois and Nevada have yet to reach their pre-recession levels.” It depends on the local market and how overvalued the individual asset was at the peak. People who are paying 40% overvalue now could take more than a decade to recover, even without an overall housing crash.

https://www.washingtonpost.com/news/business/wp/2018/10/04/feature/10-years-later-how-the-housing-market-has-changed-since-the-crash/

"About one-third of all mortgages in 2006 were low or no-documentation loans or subprime loans, says Nothaft."

Wow - I didn't realize it was such a high %. No wonder we had issues.

"“The share of mortgage applicants with FICO scores below 640 used to be around 25 percent and now it’s just three or four percent,” says Khater."

[Anonymous]

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Got it don't buy the top. Such an easy strategy!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Everyone buying right now is overpaying. Some by a little, most by a lot. And some by a staggering amount. Case in point: https://www.washingtonian.com/2022/02/18/photos-this-dc-house-sold-for-800000-over-asking-price/

That buyer will probably never get their money back.

The asking price was very low given the unique property and large sq ft compared to comps. $800k over is misleading.

Depending on what happens, they might be screwed if they try to sell in the next few years but they will be fine. It’s a desirable area.

They have 4500sf and a pool in a great location. I doubt they're trying to turn it over for a profit in the next 5 years

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

No, people were for closing because they were in precarious financial situations and they could not sell their house for what they bought it for.

Do you really think everyone who bought at the top of their DTI last year is in a great financial spot? Do you not see how inflation is affecting everyday Americans? What about the impending recession?

They were trying to sell because they couldn’t pay the mortgage.

Gas & food increases aren’t comparable to huge jumps in mortgages. People can adjust their driving and eating habits. They can’t adjust their mortgage payment.

Sure you can. You can get roommates. You can rent out your place and move somewhere cheaper.

If you can't sell your property for what you paid, why in the world would a renter pay enough to cover your mortgage? Rents would also be done in that scenario. It will be a renter's market (and a buyer's market). Why would a renter move in with you to help you pay your mortgage when there are a lot of other options? Also, what family with kids wants to take a stranger into their home just to pay the mortgage in an underwater house? Most people would vastly prefer bankruptcy to taking in a boarder just to hang onto an overpriced and underwater asset.

*Prices would also be down in that scenario. Rents and purchase prices track together. As housing prices decrease, rents will also decrease as more owners try to rent out what they can't sell (without taking a loss).

Who said the renter would cover the full mortgage? Rent it for as much as you can, pay the bank the difference out of your own pocket, move in with mom/friends.

Who said only families with kids live in houses? Lots and lots of single people own houses, especially in other parts of the country.

And yes, many people would prefer bankruptcy/foreclosure, which is exactly why they decided to walk away when housing prices began to tumble before and during the last crash.

Why would anyone do that? Why would you continue to pay on an underwater mortgage under these circumstances?

They wouldn’t! They would walk away. That was the whole point.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:From 2018: “ The housing market has generally recovered. Prices across the U.S., which fell 33 percent during the recession, have rebounded and are now up more than 50 percent since hitting the bottom, according to CoreLogic, a global property analytics site. Still, some markets in Arizona, Florida, Illinois and Nevada have yet to reach their pre-recession levels.” It depends on the local market and how overvalued the individual asset was at the peak. People who are paying 40% overvalue now could take more than a decade to recover, even without an overall housing crash.

https://www.washingtonpost.com/news/business/wp/2018/10/04/feature/10-years-later-how-the-housing-market-has-changed-since-the-crash/

"About one-third of all mortgages in 2006 were low or no-documentation loans or subprime loans, says Nothaft."

Wow - I didn't realize it was such a high %. No wonder we had issues.

"“The share of mortgage applicants with FICO scores below 640 used to be around 25 percent and now it’s just three or four percent,” says Khater."

Right the mortgages we have now are less like to default due to better lending practices. We also don’t have a Wild West market in secondary derivatives the way we did in 2002-2007. INSTEAD, we have a Fed supported market and the Fed is about to divest. It’s not the same problem, but it’s still a serious problem. Why do people seem to think there only one way to create a housing market crisis? Issuing bad loans is ONE way to create an unstable market, but exuberant overextended buying spurred on by artificially low interest rates while the Fed buys up all the risk is another way to create a housing crisis. The Fed has been absorbing the risk of default, but now it’s going to start selling that risk back to lenders. That may go fine, or it may create an asset crisis. It wouldn’t be a crisis caused by subprime lending, but it could still be a crisis.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:1) “panic selling: the worry that conditions are going to get worse.”

It wouldn’t be anywhere close to the scale of panic buying. People will ride out to avoid losses. Just like they did in 2008.

2) “wait 10-15 (20?) years to recover”

Values won’t drop that much - if at all. And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Many 2007 era losses have only just been recovered in this year’s price surge. That’s 15 years.

Please show examples of this, or better, data or analysis. Because it sounds like urban legend.

It's very true for certain places that were hit especially hard. It's completely untrue for our area.

I have family in an area that was massively hit by it, and it is completely untrue there. Those losses came back in a few years. So I will need to see data or i do not believe the claim.

Tons of examples where I live in Fairfield county CT (wealthy NYC suburb). This one is under contract and was asking the exact same amount it sold for in 2005. So seller will break even on sales price (maybe get a bit more) but is down $20k per year in property taxes, maintenance, and they did a very substantial renovation after purchasing in 2005 to boot.

https://www.redfin.com/CT/Westport/4-Crawford-Rd-06880/home/107259177

[Anonymous]

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Got it don't buy the top. Such an easy strategy!

It’s not rocket science.

Hint: don’t buy in Florida right now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:1) “panic selling: the worry that conditions are going to get worse.”

It wouldn’t be anywhere close to the scale of panic buying. People will ride out to avoid losses. Just like they did in 2008.

2) “wait 10-15 (20?) years to recover”

Values won’t drop that much - if at all. And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Many 2007 era losses have only just been recovered in this year’s price surge. That’s 15 years.

Please show examples of this, or better, data or analysis. Because it sounds like urban legend.

It's very true for certain places that were hit especially hard. It's completely untrue for our area.

I have family in an area that was massively hit by it, and it is completely untrue there. Those losses came back in a few years. So I will need to see data or i do not believe the claim.

Tons of examples where I live in Fairfield county CT (wealthy NYC suburb). This one is under contract and was asking the exact same amount it sold for in 2005. So seller will break even on sales price (maybe get a bit more) but is down $20k per year in property taxes, maintenance, and they did a very substantial renovation after purchasing in 2005 to boot.

https://www.redfin.com/CT/Westport/4-Crawford-Rd-06880/home/107259177

If it’s the same price then they didn’t even nearly break even because you have to account for inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Got it don't buy the top. Such an easy strategy!

It’s not rocket science.

Hint: don’t buy in Florida right now.

Hint: don’t buy anywhere right now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: And unless you overbought in a weak market, it won’t take 10-20 years to regain loss.

Yes, there are pockets of real estate that suck. Don’t ever buy there. Or at least don’t buy at peak there.

Undesirable areas/properties are always the first to fall and the last to recover. And they aren’t representative of the overall market.

Everyone buying right now is overpaying. Some by a little, most by a lot. And some by a staggering amount. Case in point: https://www.washingtonian.com/2022/02/18/photos-this-dc-house-sold-for-800000-over-asking-price/

That buyer will probably never get their money back.

The asking price was very low given the unique property and large sq ft compared to comps. $800k over is misleading.

Depending on what happens, they might be screwed if they try to sell in the next few years but they will be fine. It’s a desirable area.

They have 4500sf and a pool in a great location. I doubt they're trying to turn it over for a profit in the next 5 years

They have about 3000 square feet, which translates into a relator’s 4500.