Is the realestate bubble bursting?

[copyright1997reloaded]

Restoration Hardware trims fiscal 2022 outlook

link: https://seekingalpha.com/pr/18850978-rh-updates-fiscal-2022-outlook?source=content_type%3Areact%7Csection%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews

Gary Friedman, Chairman and Chief Executive Officer, commented, “The deteriorating macro-economic environment has resulted in lower than expected demand since our prior forecast, and we are updating our outlook, particularly for the second half of the year.”

Note: RH just did earnings some twenty some days ago, and is now adjusting expectations further down three weeks later. Sounds like things have deteriorated quickly.

 

[copyright1997reloaded]

SW Florida recent analysis:

 

[MuirWannabe]

It’s happened to me. I bought high just 6 weeks ago. Paid cash and $50K above asking. I wasn’t the highest offer but they accepted since it was a cash offer. Closed mid June.

Obviously I knew it was a crazy market. But the thing is, if you’re buying in a crazy market, you get to sell in a crazy market. Right?

Wrong! I put my current house up for sale June 16th. Traffic has been slow although still a good number of buyers looking. But not buyers buying. We’ve gone from buyers buying in a day, multiple offers above asking, sight unseen, as is, writing appeal letters, etc, to a market where buyers suddenly find any reason to talk themselves out of buying.

I’m stuck for now. The classic buy high sell low situation. Guess I deserve it. Doesn’t feel good. I just didn’t know it could change this fast. It literally changed in a week. The week of June 12th. At least here in the Dallas area.

Now I own 2 homes. We were trying to downsize and be closer to the grandies on the other side of town. Not sure how I’ll proceed. But the bubble has definitely burst.

 

[harllee]

MuirWannabe, I had a similar experience in 2008, the real estate market changed in a matter of days and we got stuck with a house we no longer wanted. Took us 2 years to sell the house and we had to sell at a loss. The real estate market can change in a heart beat.

 

[Teacher Terry]

Had this happen in 2005. It took us 8 months to sell. It’s amazing how fast things can go wrong.

 

[VFK57]

Had this happen in 2005. It took us 8 months to sell. It’s amazing how fast things can go wrong.

It is all depend on a place you bought it at.

 

[harllee]

It is all depend on a place you bought it at.

True, the house I got stuck with in 2008 was in a resort area with mainly second homes. Those type places get hit first in a real estate drop.

 

[copyright1997reloaded]

It’s happened to me. I bought high just 6 weeks ago. Paid cash and $50K above asking. I wasn’t the highest offer but they accepted since it was a cash offer. Closed mid June.

Obviously I knew it was a crazy market. But the thing is, if you’re buying in a crazy market, you get to sell in a crazy market. Right?

Wrong! I put my current house up for sale June 16th. Traffic has been slow although still a good number of buyers looking. But not buyers buying. We’ve gone from buyers buying in a day, multiple offers above asking, sight unseen, as is, writing appeal letters, etc, to a market where buyers suddenly find any reason to talk themselves out of buying.

I’m stuck for now. The classic buy high sell low situation. Guess I deserve it. Doesn’t feel good. I just didn’t know it could change this fast. It literally changed in a week. The week of June 12th. At least here in the Dallas area.

Now I own 2 homes. We were trying to downsize and be closer to the grandies on the other side of town. Not sure how I’ll proceed. But the bubble has definitely burst.

Just like my recent purchases of certain equities', what is past is past. I can't change the decision - I can (and you can) only assess to the best of your knowledge what is to come.

Waiting is sometimes the best option.
Waiting is sometimes the worst option.

What is your assessment of what is to come next in terms of the house you wanted to sell? If you think things will get considerably worse, lower the ask enough to get it sold and move on, as if that is true (things will get worse) there are others out there also trying to figure out what to do.

 

[socca]

... We’ve gone from buyers buying in a day, multiple offers above asking, sight unseen, as is, writing appeal letters, etc, to a market where buyers suddenly find any reason to talk themselves out of buying. ...

I sold a house in the Midwest a couple of months ago. I rushed to get the place on the market because I was afraid that the seller's market would quickly disappear. I'm not a big believer in market timing but perhaps I was right this time around.

I received 4 offers for the house. Throw away the typical all-cash low-ball offer from a flipper, and the other three offers were surprisingly uniform. All were substantially over list price, all were from young married couples around 30 years old who wanted to move from downtown to the suburbs and (presumably) start reproducing, and all involved substantial mortgages. One offer was kind of cute: the would-be buyer (proudly) provided proof of modest cash available to cover a small appraisal gap. This took me back to when I was just starting out and (basically) had no money. The offer that won out had an escalation clause and offered to cover ANY appraisal gap (maybe the Bank of Mom and Dad was involved?) I hope the young dreamers are happy in their new suburban paradise.

Considering what's happened to mortgage rates since I sold, I doubt that these youngsters would be able make the offers they did if I were putting the house on the market today.

 

[RetiredHappy]

We are hoping to move from Texas to Las Vegas. One of our criteria for moving was looking at taxes. Of course, Texas doesn't have state income taxes but property taxes are high. Texas does provide a freeze for some taxes if you are over 65. Our school taxes are frozen so we pay a lot less than we would pay if we didn't have that exemption. However, if you move to Nevada our taxes well be far lower even though they won't have that cap.

Our home property tax in Las Vegas metro, i.e. Henderson, is about 0.36% of the value of the property, with a primary residence cap on increase of 3% per year.

We moved here from Northern California and property tax plus Melo Roos (applicable to newly developed areas) was almost 2% of the purchase price. Paying property tax was a pretty painful event each year.

We are very happy that we made the move.

 

[ElizabethT]

We are in S. Orange County in California, two miles from the ocean, and we have been waiting for the market to soften, as it then becomes a good time to move up, which we are once again considering. (We moved ‘up’ to our current home five years ago) Whatever softening occurs on our current home’s selling price, will be larger in terms of real dollars on whatever more expensive, even closer to the ocean home we might find.

We had our realtor over in May, and she said the crazy Dec ‘21-Feb ‘22 offers of upwards of $300,000 over asking on our home’s then-$2M price point were no longer occurring. We could also see online that small price reductions were beginning to occur, which are increasing in size with each passing week.

Our area is interesting in that it is too expensive for young families, most who tend to buy a little further inland. Our area is made up of a lot of well-heeled professionals and retirees, plus a lot of long time residents who were either raised here, or moved here when it was cheap and considered to be in the boonies of OC. I don’t hear talk of anyone looking to move as we all feel like we live in paradise already. However, we didn’t live in this part of OC during the 2010 recession, so it will be interesting to observe what may be to come if housing prices continue to shift downward.

 

[skyking1]

I'm certainly watching property prices with interest. The development costs are not going down for the short plat, but the profit sure seems to be.

 

[Aerides]

I spoke to a realtor I know today. At least around here, it's happening. Three showings in the past week. Nobody came to one of them. Just a few to the other two. No offers. Virtually nobody is buying. Houses are staying on the market longer and longer. Inventories are up.

I'm sure it's different in various locations.

S.Fla - my (not awesome, 1800 sf avg 40 year old homes, 2 miles in from beach, good schools) neighborhood is still hot. A couple more listings than lately but nowhere near normal, and they are all at the current highs or over (900+ is pushing it for an area that was $400 pre-2020).

A house listed a week ago, had cars around the block for an open house at $799. Went to Pending Offer in 3 days. Today it increased to $899. nuts!

 

[pjigar]

I was on the fence to put one of my rental SFH on sale this month. Lease was expiring today. Between increased mortgage rate, reduced buyer pool and future inflation expectations, I decided to renew the lease again for a year. We will reassess next year.



Like many said, I don't think housing market will crash due to the supply side problems AND overall inflation going up. At worst, house prices will stay stagnant but my expectation is that the RE prices will keep up with the inflation and hence our decision to hold off on the sale. Unless we can build the new houses cheaper, house prices simply cannot go down. RE transactions may go down but not the prices. I expect everything to normalize after the next recession. Until then, flip a coin!

 

[eytonxav]

We are hoping to move from Texas to Las Vegas. One of our criteria for moving was looking at taxes. Of course, Texas doesn't have state income taxes but property taxes are high. Texas does provide a freeze for some taxes if you are over 65. Our school taxes are frozen so we pay a lot less than we would pay if we didn't have that exemption. However, if you move to Nevada our taxes well be far lower even though they won't have that cap.

How are home prices in Vegas, comparable to DFW?

 

[Magus]

Mortgage applications have fallen drastically and companies like JP Morgan are laying off the mortgage staff. I will be no surprise to find house prices coming down just like everything else.

I am selling some rental property at what could be peak prices

The majority of the drop in mortgage applications are for refinances (which isn't surprising).

Housing price growth is slowing but not dropping. Don't confuse price cuts with median housing decline. Give you a good example. The guy down the road from me listed his home for $1.175m two weeks ago. Two months ago he would have listed it for probably $950k and got $975-1m. It won't sell for $1.175 now and it wouldn't two months ago but he thought he'd try. He hasn't cut yet but its coming, but still above where it would have been a short while ago and a lot higher than 6 months ago. The very high end and second home areas are most likely to see a drop.

That said, i think there is a pretty good chance mortgage rates continue to drop. Historically they are 150-225 basis points over the 10 year treasury. Right now they are 300 bps+. 150 bps would put the 30 year at 4.4% right now with 5 & 7 year arms around 3.25-3.75%.

 

[MarieIG]

Seems to be cooling a tad, not yet bursting.

The extent of "cooling" will probably be location dependant, as well as being influenced by interest rates, and the extent/ depth of any recession.

Rising interest rates will knock out (not eliminate) some potential buyers and shrinking portfolios may cause some potential buyers to put buying on hold.

 

[luckydude]

Last year we subdivided a farm an hour north of a really big metro in the South and listed individual residential lots for sale. The first six lots (5 acres each) sold out like hot cakes late last year; each time a lot sold, we would raise the asking price just a bit for the remaining lots. Eventually only one was left, and it lingered on the market for 8 months before finally selling last month at slightly below asking.

All buyers were city slickers looking for elbow room in a more rural setting, and all but one lot are now being graded and readied for new home construction by the buyers.

The market is definitely slowing but there's still activity as long as sellers are willing to adjust their expectations to "meet the market".

 

[meleana]

Houses here are still getting multiple offers above asking prices, which are already crazy high, and selling within a two hour open house. Inventory is still a bit low.

 

[F.I.R.E User]

Will rents go down?

 

[pjigar]

Will rents go down?

I would like to know as well! We are not adding a lot of new houses nor new homeowners so rent and mortgage payment should move in lock step.

 

[marko]

SIL is a realtor in the Cambridge/Boston area where "average" homes go for $1MM, are on the market for a few days and sell $100k over asking. She's noticed a slowdown in the sense that the 2MM buyers are looking at $1.5MM places and the $1MM buyers are down to $850k. Many still pay cash though which is a bit amazing.

 

[VFK57]

Will rents go down?

When recession is going to set up, it will, depend on neighborhood.

 

[plex]

From what I remember from 2002 and 2010, rental prices did go down about 5-10% for one or two years, then they went back to the normal upward trend, they didn't semi-crash at any point like house prices did.

 

[Scuba]

Last week there was an article in the WSJ about rents going up. Apparently in some major markets, people are bidding above the asked rent to get the place. As more people with money hold off on buying, they’re renting and willing to pay for a nice place to wait it out.

During the 2008-9 crash, rental demand went up. Some walked away from homes that were severely underwater and rented instead.