Anonymous wrote:I’ve read a lot of people claiming to have made less than 20% down payments on these boards. I would think give this area’s affluence, it would be less of practice here than in many areas. If prices slide, will those who are under water walk and what will that do to the market?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Investment Banker here. (I'll keep saying that, just to piss off some of you )

Character assassination happens, when you run out of arguments. If you can't talk to the topic, shut up.

Former investment banker here, left for PE like a normal person. The fact that you use “investment banker” shows how much of a tool you are. You literally make pitch decks for a living and get paid a lot for having been willing to work abusively long hours and be the last man standing when all of the folks from your analyst / associate class left for actually fulfilling careers where they aren’t making useless PowerPoints and “turning comments” for a living.

IB here (Acronym is easier to type... , and yeah, I'm an early riser)

Well, hello PE guy/gal. More character assassination? Jealousy? Regret about moving to PE? Not getting paid enough there? And yes, I do get paid a lot for whatever it is that I do.

Me and my profession aside, I'm seeing radio silence on any of the arguments I've made since yesterday. No one has provided ANY concrete arguments that favors the RE market continuing to rise or even stay flat. None. That's telling.

In my profession, I get paid to analyze macro behavior, including human psychology, because guess what? We're dealing with humans for the most part (leaving aside the algo side of things). And I can promise you, everybody here who bought int he last 2 years is getting palpitations, whether they want to or not. Why?

The biggest misguided notion in the last two years was that the pandemic will last for years and years. This was exacerbated in no small part by the current resident(s) of the White House, media, health agencies (CDC, NIH and the likes) and vested interests (more on that later). They created a "panic" and people bought into that. All this for a virus, whose fatality rate is no worse than many other things that we've lived with for decades, if not longer. Well, guess what? Two years in, and life is back to normal. Yes, there's still lingering effects of the pandemic, but it's become as easy to handle as annual flu shots.

Panic's over. Now comes the hangover.

The people who bought houses in the last 2 years were banking/betting on a long lasting pandemic that will fray dense urban cores, which in turn will drive RE demand across the periphery to a much higher level. It DID happen during the pandemic, but we're on the falling side of the bell curve now. Barring another global disaster, that bell curve will hold true in the near future. THAT is what the bond traders are reading, and you're seeing the results of that in rising interest rates.

As we speak, any potential home buyers should be looking at the RE market, with this expression (pardon my jest):



Not this:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

. Uh, skyrocketing interest rates? It’s gonna be ugly. And everyone here who says otherwise is going through denial after their silly purchase in the last 2 years.

Slowdown <> collapse

It’s like you’ve never seen fluctuations in interest rates before.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

. Uh, skyrocketing interest rates? It’s gonna be ugly. And everyone here who says otherwise is going through denial after their silly purchase in the last 2 years.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Nobody talks about the effect a stock market crash will have as well. Stocks have doubled or more in the past 5 years. The Nasdaq almost quadrupled. How many people used brokerage money or retirement money or even got lucky with some play money to leverage themselves into a house they couldn't otherwise afford? Once that sort of money vaporizes, less people will be entering as buyers->housing crash.

I think very very few. The only way most normal people can use stocks to get into a bigger house is by selling them and using them for a downpayment. The vast, vast, vast majority of Americans are not getting asset-backed mortgages, and most of those that did are still going to be just fine. It's not like the average joe or jane has made enough in the market the last 5 years that dividend income was a substantial part of their monthly payment.

To add the point which is implied here but may not be obvious--credit underwriting is still worlds different than it was pre-2008. Just because you have a big downpayment doesn't meant you're going to get the loan unless you have the W2 income to show that you can afford the monthly payment. If there truly is a massive crash such that a ton of people lose their jobs, then sure, at least some people will get foreclosed on. Although the big equity cushion will help and maybe they'll just sell before that.

Anonymous wrote:

Anonymous wrote:Nobody talks about the effect a stock market crash will have as well. Stocks have doubled or more in the past 5 years. The Nasdaq almost quadrupled. How many people used brokerage money or retirement money or even got lucky with some play money to leverage themselves into a house they couldn't otherwise afford? Once that sort of money vaporizes, less people will be entering as buyers->housing crash.

I think very very few. The only way most normal people can use stocks to get into a bigger house is by selling them and using them for a downpayment. The vast, vast, vast majority of Americans are not getting asset-backed mortgages, and most of those that did are still going to be just fine. It's not like the average joe or jane has made enough in the market the last 5 years that dividend income was a substantial part of their monthly payment.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:More data points - This was two days ago.

"Redfin Reports The Share of Sellers Dropping Their Asking Price Is Climbing Past Last Year’s Rate"

https://www.businesswire.com/news/home/20220407005936/en/Redfin-Reports-Share-Sellers-Dropping-Price-Climbing

Yeah that share went up by 3-4 percentage points. If price growth is slowing which you'd expect given interest rates, that makes sense. People list too high all the time, it's just a slightly larger share now. Doesn't mean much else.

Lots more data from Redfin pointing toward a slowdown (this was from more than a week ago, and we are in the height of the spring market). https://www.redfin.com/news/housing-market-update-early-signs-of-a-slowdown/

Even Redfin, which has a vested interest in seeing housing prices go up due to its struggling iBuying business, can’t ignore the stats. https://www.marketwatch.com/amp/story/redfin-stock-tanks-after-forecast-shows-losses-expanding-as-ibuying-business-grows-11645134655

Sure, but there's a *long* way between what many of these places were predicting for 2022 even a few weeks ago (10-15% appreciation in most cases) and the catastrophic outcomes that people are predicting on this thread. Double-digit prices increased are obviously not sustainable forever, and interest rates have risen more quickly than most expected because the path of anticipated Fed rate hikes and bond sales has gotten more aggressive than expected. The fact that we're seeing a modest but immediate response is frankly good news, and it cuts against the argument that consumers have entered into some sort of irrational bubble mentality. There's nothing to suggest that any response to increased interest rates is anything more than modest right now.

Inflation is problematic for lots of reasons, as are traditional recessions, but the real danger is always from financial crises that cause systemic issues. In that sense, high inflation actually buys the Fed quite a bit of flexibility. They can hit the brakes pretty hard, and inflation-adjusted prices can drop significantly, but as long as nominal prices remain stable, widespread disruption to financial markets remains unlikely. For example, inflation-adjusted home prices could go down in 2022 even if nominal prices go up by 5%! That's a big part of why a large or protracted decline in nominal home prices is unlikely.

I didn’t see any catastrophic predictions in this thread. The popping of a bubble is normal and expected (just as recessions are a part of a healthy cycle of economic activity), and it doesn’t have to result in the systemic issues that took down the economy after 2008. But remember, the last housing bubble burst in 2006, two years before the true crisis began. Prices can and will decline regardless of broader systemic issues like risky credit default swaps etc. In 2006, prices declined because the “lack of supply” narrative turned out not to be true, and demand decreased. That was the popping of the bubble. THEN, if prices hadn’t gone down, all those subprime borrowers who couldn’t make their payments could have sold their houses for a profit. Instead, they were underwater. That’s when the foreclosures started, and the rest is history. [Note - I think there are a multitude of ways we could be facing a systemic crisis in the economy soon, but that is another thread entirely.]

And not tracking your first paragraph. Of course the reaction is “modest” right now, it’s only been a few weeks since rates shot up. And there are still buyers who are bidding homes up because they want to lock in low rates. The irrational bubble mentality has changed - the party is over, and the media narrative has shifted from “buy now or be priced out forever” to “sell your house while you can!”

Inflation is a huge problem for the housing market. In an inflationary environment, people face increased costs from all directions and have trouble making ends meet, which can very well lead to people needing to sell or foreclosing. Raising interest rates is a big problem too, because it is likely to lead to recession and job loss, which again leads to selling and/or foreclosing. There really is no good way out and most analysts are not optimistic that the Fed will achieve a “soft landing.”

If inflation is so bad for existing homeowners, why was there no foreclosure crisis when interest rates spiked in the early Volcker years? The answer is obvious: in an inflationary environment, homeowners quickly gain positive equity (in nominal dollars), and so they have a strong incentive to sell rather than default. Even though existing home sales dropped precipitously in 1981 and 1982, homeowners were generally able to wait out the interest rate crunch, and so nominal home prices never fell despite massive interest rates and a severe recession.

Why should we not expect the same outcome, or a weaker version of the same outcome? Like the late 1970s, our high inflation is in large part the result of supply side shocks. Unlike in 2008, homeowners are currently already equity rich, and most of their debt is financed at extremely cheap fixed interest rates. Also unlike in 2008, the Fed has a much expanded toolkit that includes simply committing to buy up assets to keep their prices stable. In order for there to be a financial crisis (the only circumstance in which national nominal home prices have ever declined significantly), you need a good explanation for why the Fed would prefer to let one happen than to simply buy its way out. Much moreso than interest rate hikes, asset purchases can have immediate impacts because they involve buying long term debt directly rather than merely pricing market substitutes to long term debt.

I have always found investment bankers to be pretty mediocre when it comes to actually understanding the markets they participate in. Hype beasts and money chasers, not deep thinkers. You appear to be no exception.

Anonymous wrote:Nobody talks about the effect a stock market crash will have as well. Stocks have doubled or more in the past 5 years. The Nasdaq almost quadrupled. How many people used brokerage money or retirement money or even got lucky with some play money to leverage themselves into a house they couldn't otherwise afford? Once that sort of money vaporizes, less people will be entering as buyers->housing crash.

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

Anonymous wrote:

Anonymous wrote:Lots of workplaces that discouraged telework before COVID are now letting their employees work from home 3, 4, or even 5 days a week when they return. Houses in the burbs will probably continue to be desirable for a while.

Also, some of you don’t get the distinction between “slowdown,” which means rising but at a slower rate (declining marginal increases) vs. actual price declines.

So...you're saying RE will continue to RISE even if the rate of that rise is slower than the past two years? Let's be clear on what you're saying.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:More data points - This was two days ago.

"Redfin Reports The Share of Sellers Dropping Their Asking Price Is Climbing Past Last Year’s Rate"

https://www.businesswire.com/news/home/20220407005936/en/Redfin-Reports-Share-Sellers-Dropping-Price-Climbing

Yeah that share went up by 3-4 percentage points. If price growth is slowing which you'd expect given interest rates, that makes sense. People list too high all the time, it's just a slightly larger share now. Doesn't mean much else.

Lots more data from Redfin pointing toward a slowdown (this was from more than a week ago, and we are in the height of the spring market). https://www.redfin.com/news/housing-market-update-early-signs-of-a-slowdown/

Even Redfin, which has a vested interest in seeing housing prices go up due to its struggling iBuying business, can’t ignore the stats. https://www.marketwatch.com/amp/story/redfin-stock-tanks-after-forecast-shows-losses-expanding-as-ibuying-business-grows-11645134655

Sure, but there's a *long* way between what many of these places were predicting for 2022 even a few weeks ago (10-15% appreciation in most cases) and the catastrophic outcomes that people are predicting on this thread. Double-digit prices increased are obviously not sustainable forever, and interest rates have risen more quickly than most expected because the path of anticipated Fed rate hikes and bond sales has gotten more aggressive than expected. The fact that we're seeing a modest but immediate response is frankly good news, and it cuts against the argument that consumers have entered into some sort of irrational bubble mentality. There's nothing to suggest that any response to increased interest rates is anything more than modest right now.

Inflation is problematic for lots of reasons, as are traditional recessions, but the real danger is always from financial crises that cause systemic issues. In that sense, high inflation actually buys the Fed quite a bit of flexibility. They can hit the brakes pretty hard, and inflation-adjusted prices can drop significantly, but as long as nominal prices remain stable, widespread disruption to financial markets remains unlikely. For example, inflation-adjusted home prices could go down in 2022 even if nominal prices go up by 5%! That's a big part of why a large or protracted decline in nominal home prices is unlikely.

I didn’t see any catastrophic predictions in this thread. The popping of a bubble is normal and expected (just as recessions are a part of a healthy cycle of economic activity), and it doesn’t have to result in the systemic issues that took down the economy after 2008. But remember, the last housing bubble burst in 2006, two years before the true crisis began. Prices can and will decline regardless of broader systemic issues like risky credit default swaps etc. In 2006, prices declined because the “lack of supply” narrative turned out not to be true, and demand decreased. That was the popping of the bubble. THEN, if prices hadn’t gone down, all those subprime borrowers who couldn’t make their payments could have sold their houses for a profit. Instead, they were underwater. That’s when the foreclosures started, and the rest is history. [Note - I think there are a multitude of ways we could be facing a systemic crisis in the economy soon, but that is another thread entirely.]

And not tracking your first paragraph. Of course the reaction is “modest” right now, it’s only been a few weeks since rates shot up. And there are still buyers who are bidding homes up because they want to lock in low rates. The irrational bubble mentality has changed - the party is over, and the media narrative has shifted from “buy now or be priced out forever” to “sell your house while you can!”

Inflation is a huge problem for the housing market. In an inflationary environment, people face increased costs from all directions and have trouble making ends meet, which can very well lead to people needing to sell or foreclosing. Raising interest rates is a big problem too, because it is likely to lead to recession and job loss, which again leads to selling and/or foreclosing. There really is no good way out and most analysts are not optimistic that the Fed will achieve a “soft landing.”

Anonymous wrote:Lots of workplaces that discouraged telework before COVID are now letting their employees work from home 3, 4, or even 5 days a week when they return. Houses in the burbs will probably continue to be desirable for a while.

Also, some of you don’t get the distinction between “slowdown,” which means rising but at a slower rate (declining marginal increases) vs. actual price declines.