Why do expert say: Buckle in for a brutal free-fall in home prices - Housing Bubble

[Anonymous]

Anonymous wrote:Dropping in Arlington:

https://www.arlnow.com/2022/11/29/ask-eli-arlington-housing-market-performance-metrics-rea1/

1) are we trusting realtors now?
2) he doesn’t show any data that prices are “dropping”
3) he did show that some sellers originally priced too high

[Anonymous]

I have been looking at cottages on Maine for several years and after a sharp increase during the pandemic I can see the prices starting to soften. I’m hoping they will fall more so we can get a good deal!

[Anonymous]

Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

[Anonymous]

Anonymous wrote:Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

I get DCUM is full of the 1.7m starter home people, but this is still how it is for most people. Even back when rates were low. I owned a tiny 1 bedroom apartment I bought for 200k out of grad school, and when I got married we upgraded to a 2 bedroom condo in a slightly better neighborhoods neighborhood for 450k, using combo of sake proceeds and savings to make that an easy purchase. We are now looking to move to a SFH with good schools. Looking at fixer uppers around 600k so we can keep payments low. Most important thing is fantastic schools.

But the rate hike is hurting people like us, too. First off, we don’t know if we can sell our condo in this market. It’s not just a pricing issue. The rate hike has scared off a lot of people who normally buy condos (ft buyers, young people) and they aren’t moving fast at all. After watching units in our building sit in the market despite being priced very competitely, we’re taking 6 months to do some upgrades and get it looking extra nice to see if next summer is any better. And on the other side, prices really haven’t come down much at all on SFHs, even fixer uppers. At least not where we are looking. It’s not a huge deal because we’ve saved carefully and even if we sell our condo for what we paid we will get quite a bit of equity out of it (though not if we sell for less). But with the rate hike, every extra 10k in purchase price has a much bigger impact on monthly payments.

If either the market doesn’t warm up for condos, or prices come down by a lot on SFHs, or rates come back down at least a little, we may ultimately stay out and just figure it out with the schools. I think this rate hike is backfiring because new buyers are scared to lick in a rate so high, and sellers currently have such low rates locked in that they have much less incentive to sell, especially below what they think should be market price. I don’t think it’s having the intended effect, it’s just locking up the market and making everyone less mobile.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

I get DCUM is full of the 1.7m starter home people, but this is still how it is for most people. Even back when rates were low. I owned a tiny 1 bedroom apartment I bought for 200k out of grad school, and when I got married we upgraded to a 2 bedroom condo in a slightly better neighborhoods neighborhood for 450k, using combo of sake proceeds and savings to make that an easy purchase. We are now looking to move to a SFH with good schools. Looking at fixer uppers around 600k so we can keep payments low. Most important thing is fantastic schools.

But the rate hike is hurting people like us, too. First off, we don’t know if we can sell our condo in this market. It’s not just a pricing issue. The rate hike has scared off a lot of people who normally buy condos (ft buyers, young people) and they aren’t moving fast at all. After watching units in our building sit in the market despite being priced very competitely, we’re taking 6 months to do some upgrades and get it looking extra nice to see if next summer is any better. And on the other side, prices really haven’t come down much at all on SFHs, even fixer uppers. At least not where we are looking. It’s not a huge deal because we’ve saved carefully and even if we sell our condo for what we paid we will get quite a bit of equity out of it (though not if we sell for less). But with the rate hike, every extra 10k in purchase price has a much bigger impact on monthly payments.

If either the market doesn’t warm up for condos, or prices come down by a lot on SFHs, or rates come back down at least a little, we may ultimately stay out and just figure it out with the schools. I think this rate hike is backfiring because new buyers are scared to lick in a rate so high, and sellers currently have such low rates locked in that they have much less incentive to sell, especially below what they think should be market price. I don’t think it’s having the intended effect, it’s just locking up the market and making everyone less mobile.

A few things.

You mention that you don't want to have to sell your condo for less than you paid (which is understandable), but when did you buy it? I'm not a RE, but it seems implausible that a condo purchased before the pandemic would be at a lower value. You should talk to an RE to get an honest assessment of what you could get.

But it has also been a long time since you could find a SFH in an area with "fantastic schools" for less than 600K. Unless you mean something beyond what most people consider a fixer upper. You can get something perhaps with decent schools, and I think decent schools really are fine in this area.

But generally speaking when rates are low, prices go up. So you might get a better price for your condo, but you're still paying more. And vice versa went the rates go up. The problem here is that rates are up but prices aren't really down, and they seem to be holding steady.

[Anonymous]

Anonymous wrote:Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

What makes you think only “big trade up houses” have gone up? The problems is that ALL housing has gone way, way up. Your kids and grandkids won’t be able to afford what you did back in the day. Housing is now much, much more unaffordable relative to income at all price points.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

What makes you think only “big trade up houses” have gone up? The problems is that ALL housing has gone way, way up. Your kids and grandkids won’t be able to afford what you did back in the day. Housing is now much, much more unaffordable relative to income at all price points.

Because it's easier to pat yourself on the back and believe you deserve your inflated housing value than to consider whether you have benefited at the expense of younger generations and should perhaps support policy solutions that might lower your home values a little.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

What makes you think only “big trade up houses” have gone up? The problems is that ALL housing has gone way, way up. Your kids and grandkids won’t be able to afford what you did back in the day. Housing is now much, much more unaffordable relative to income at all price points.

completely agree. I'd like to know where the starter homes are for people like us - with a HHI near 100k.

[Anonymous]

Anonymous wrote:Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods

We can end the thread on this note.

[Anonymous]

I get DCUM is full of the 1.7m starter home people, but this is still how it is for most people. Even back when rates were low. I owned a tiny 1 bedroom apartment I bought for 200k out of grad school, and when I got married we upgraded to a 2 bedroom condo in a slightly better neighborhoods neighborhood for 450k, using combo of sake proceeds and savings to make that an easy purchase. We are now looking to move to a SFH with good schools. Looking at fixer uppers around 600k so we can keep payments low. Most important thing is fantastic schools.


Please define 'fixer upper'.

[Anonymous]

Anonymous wrote:

I get DCUM is full of the 1.7m starter home people, but this is still how it is for most people. Even back when rates were low. I owned a tiny 1 bedroom apartment I bought for 200k out of grad school, and when I got married we upgraded to a 2 bedroom condo in a slightly better neighborhoods neighborhood for 450k, using combo of sake proceeds and savings to make that an easy purchase. We are now looking to move to a SFH with good schools. Looking at fixer uppers around 600k so we can keep payments low. Most important thing is fantastic schools.

Please define 'fixer upper'.


Yes, how do you define 'fixer upper'?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

I get DCUM is full of the 1.7m starter home people, but this is still how it is for most people. Even back when rates were low. I owned a tiny 1 bedroom apartment I bought for 200k out of grad school, and when I got married we upgraded to a 2 bedroom condo in a slightly better neighborhoods neighborhood for 450k, using combo of sake proceeds and savings to make that an easy purchase. We are now looking to move to a SFH with good schools. Looking at fixer uppers around 600k so we can keep payments low. Most important thing is fantastic schools.

Please define 'fixer upper'.

Yes, how do you define 'fixer upper'?

I am the PP who wrote this. I define fixer upper as a house with outdated kitchens and baths, likely a few glaring aesthetic issues (wood paneling, flooring that needs replacing, maybe a crumbling porch that needs new steps), as well as one or two major issues (in need of new windows, requiring an HVAC overhaul, potentially even something structural depending on what it was). I also assume the exterior is going to need work, both on the house itself and things like landscaping and hardscaping.

But importantly, a fixer-upper has to be something you can live in while you fix it. So nothing unsafe or unlivable. We've looked at homes that don't have kitchens. That's an investment property that you might consider living in once you've fixed it, but it's not a "fixer-upper."

As for pricing, we have seen houses in our price range in this condition or better. Some have school issues (we've seen a bunch we like in PG county but are not ready to pull the trigger on private schools and just don't like what we hear about the schools there). I think our best bet is Wheaton/Forrest Glen/Kensington area. There are some lovely schools there and older housing stock that still includes quite a few un-upgraded homes. We're also looking at a few places further out -- Annandale in VA (on the fence about schools) or Laurel/Columbia in MD (great schools and housing is pretty affordable from what we've seen), but if we can find something closer in and reasonably metro or bus accessible, that would be preferable.

The real issue is selling our condo. We just watched a lot of condos in our neighborhood sit on the market all summer. In some cases the issue is price, but in others it really seems like there just is not a a good market for condos at the moment -- we saw some of what we thought were well priced condos sit and sit and eventually turn rental and it scared us off listing. Our place is in good but not perfect condition, and I think the key with condo sales at the moment is that people want perfect, because there are also a lot of brand new condos on the market. If we can do some targeted upgrades to make our place look more like the brand new ones, but list lower since we bought in 2015 and have more wiggle room there, I think we'll be okay. But this summer/fall have been pretty brutal for condo sales, at least in our corner of the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Nope. No inventory.

Really? I am seeing lots of inventory in the inside-the-beltway surburbs in Moco, Arlington, and Fairfax. It's just that sellers still are pricing like it's the spring.

Barely anything in the neighborhoods I’m looking at in close-in Silver Spring. And in my first choice neighborhood not a single house for sale right now at any price or size. Prices elsewhere seem to holding firm. Yes, taking longer to sell, but sellers getting what they’re asking for.

What are you basing this on? Not in the DMV but I am seeing some houses that take multiple discounts over time and some houses sit with the same initial asking price, sell and then I wonder what the closed sales price actually is. No, I don't think list and actual price are the same.

[Anonymous]

Anonymous wrote:I have been looking at cottages on Maine for several years and after a sharp increase during the pandemic I can see the prices starting to soften. I’m hoping they will fall more so we can get a good deal!

Maine was a steal several years ago, but no longer. However if there is a recession second homes will be the first thing to go so you might pick up something then.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I have been looking at cottages on Maine for several years and after a sharp increase during the pandemic I can see the prices starting to soften. I’m hoping they will fall more so we can get a good deal!

Maine was a steal several years ago, but no longer. However if there is a recession second homes will be the first thing to go so you might pick up something then.

Second home markets are already starting to soften. The short term rental market is flooded and people are having to discount off the prices they were getting during the pandemic. People who bought at the peak during the pandemic aren’t going to be able to easily cover their mortgages anymore. If we enter a real recession, it will be a good time to buy a second home.