Housing crash deniers ???
Most Popular Reply
Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesThe market may correct, but I firmly believe there won't be a crash. The reason is simple, equity.
Before 2008 people with no income could get liars loans and buy much more real estate than they could afford. We heard stories of cleaning ladies buying multiple million dollar homes. When home prices starting falling, the whole thing collapses like a house of cards because nobody had any equity. They couldn't sell and get out. We had cascading foreclosures creating a downward spiral.
Recently, prices have been surging. Given the laws passed after the Great Recession, appraisals and lending is highly restricted. Appraisals have not been keeping up with prices and lenders won't lend above appraised value. We sold a house in 2021 and in one day had 20 offers. Several of them had acceleration clauses stating they would pay more than anyone else up to $X. Both of them waived any financing contingency because they KNEW the house wouldn't appraise for what they were offering. They had to make up the difference with cash. Those people have a ton of equity in their homes. If they had to sell, they might take a haircut, but they aren't going to get foreclosed.
There is no house of cards here to come tumbling down.
2904 Replies
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3y
Quote from @Carlos Ptriawan:
Quote from @Greg R.:
Quote from @James Hamling:
Quote from @John Carbone:
ginning of the year. Trust me, several months ago they would have gotten 50K over list at these prices.
I think those all FOMO overbid buyers are created by the hallucinations of the realtors ... LOL the irrational exuberance meets agent that keeps saying we have no more house to sellYeah, but there are 20 percent bag holders in dfw right now and I know there a lot in my market too already.
Also, need to stop seeing YOY numbers showing gains. Need to MOM and annualized based on that. First half of year was still low rates. You can’t say oh we are still up 7 percent yoy when you were on pace for 12-15 percent back in June. Come on, try selling that crap to someone else .
- Member since 2019 · 7k+ posts · 4k+ votes3y
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage. - 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOP
Quote from @Carlos Ptriawan:
Quote from @Greg R.:
Quote from @James Hamling:
Quote from @John Carbone:
ginning of the year. Trust me, several months ago they would have gotten 50K over list at these prices.
I think those all FOMO overbid buyers are created by the hallucinations of the realtors ... LOL the irrational exuberance meets agent that keeps saying we have no more house to sellYup. This doesn't apply to them all, but many realtors are the ones responsible for a lot of the reckless buying that caused the bubble. Most of them were advising their clients that if they wanted "a chance to buy" a house they needed to do this... 1) Go in 100k over list, 2) no inspection, 3) waive appraisal contingency 4) degrade yourself by begging the sellers to be so gracious to let you buy their house for 100k over value with a pathetic letter, 5) donate a vital organ to the sellers.
I'm told that there were a good portion of realtors that wouldn't work with buyers unless they agreed to conditions like this.
Had a majority of realtors told their buyers that the prices were a rip off and the conditions were atrocious, we likely wouldn't have seen the craziness that went on. I believe many of them did not uphold their fiduciary responsibility to their clients and guided them down the wrong path.
Many lenders are guilty as well, and led buyers to believe that just because they were getting a 3% rate that it was a good idea to pay 700k for a house that a year ago was worth 470k
Many of them got fat over the last couple years and profited greatly.
But those who live by the sword, die by the sword.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.
As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.
2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.
- Member since 2022 · 485 posts · 216 votes3y
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOPI don't know if we're going to see a drop in rents. However, I wouldn't be surprised if they did correct some. I don't have a ton of data to support this, just one personal example. My cousin moved out of CA recently and put his house on the market for $4,500 in early August. Definitely on the high side, but he should have been able to get 4k all day. However, he's now down to $3,550 and dying a slow death.
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.
As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.
2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.
This is a suburb of San Diego, not a lot of rental availability and rents are very high. I have rentals in the same city and every time I have a vacancy it's like a black Friday sale. Seemingly hoards people lined up around the block - a lot of them good A+ grade renters.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3y
Quote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
This isn’t news. I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oil
- Member since 2022 · 485 posts · 216 votes3y
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Carlos Ptriawan:
Quote from @James Hamling:
Quote from @Justin Fox:
I think the reasoning is because when you quash demand through rates, you signal to markets to retract supply while simultaneously making any potential production ramp-up cost prohibitive. The road to hell is paved with...
The next 12 months is going to be interesting.
It seems that many are making a MAJOR mistake of thinking the raise in rates ELIMINATES buyers completely. It does NOT, it reduces there purchase capacity. ALTHOUGH the raise in rates DOES eliminate potential sellers, completely, because they simply choose rates are too high to make a home move at the moment so they just don't sell to buy now.
So what you're saying is basically buyer is downgraded to a lower price tier structure.
Do you see lower priced home receiving more bids than higher priced homes in your specific market?
..
What I am saying is several keep talking about rate increase completely eliminating buyers, that since cost to buy is a bit more "poof" buyers just disappear, or they go "oh gosh darn it, well, back to the apartment forever because if we can't buy EXACTLY the home we wanted, nope, renting forever".
Think about how ridiculous that notion is.
Some buyers will choose to wait, the very few who barely JUST barely could have bout at 5% rates yes are pressed out, but that's a tiny fraction of any markets buying pool. The vast majority of buyers, will be pressed to adjust plans, adjust budgets. The utilitarian buyers will still buy. The couple with 2 kids and #3 on the way that NEED something more then the current 2br. The renters who have saved and built credit for years, they will still buy what they can BECAUSE it's a necessity item, a change of existence, the value exceeds the minor added cost. And yes, 7% vs 5% is a minor added cost for most transactions, especially the 1st time buyer class.
The transitional buyers, we see thing still active without skipping a beat. Why? Because they have ample financial means and again, it is the transition that matters most. There moving for better employment, for a better standard of living, or retirement. The value exceeds the price increase impact.
Go find that young couple with young kids or kids on the way and just try to talk them out of buying now, seriously, give it a whirl, they know it costs a bit more but it's more important then some money, it's more then a house to them, it's HOME, there home, a home that is there's. You can not discount the power of that, and many of you are.
Sellers, those who would potential sell with lower rates, they BIG TIME will hold off and wait, because the locus of control, there is no big pressing "why" for them to get a home, they have one. And by the #'s more then 50% of all homeowners today are sitting on super low fixed rate mortgages, and another 22% are in very decent ones.
All this doom and gloom is chasing charts and ignoring the human factor, that's why you all keep getting it wrong and will keep getting it wrong. Humans don't follow charts, they follow there motives, race towards pleasure, run from fear.
Unless your a jar-head, lol, then ya don't fear anything. Oorah!
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3y
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
I’m not going to rule out a Lehmans brother moment depending on the fed - not yet and not with Credit Suisse. But short of that I see no shot of hell of that happening in the Northeast. And nationally 20% unlikely. But guess we will see when time comes.
Also would lov ethe data that half of homes recently (what is that a last 6 months?) that shows 50% of homes by investors. That’s just beyond far fetched to me.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3y
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
I’m not going to rule out a Lehmans brother moment depending on the fed - not yet and not with Credit Suisse. But short of that I see no shot of hell of that happening in the Northeast. And nationally 20% unlikely. But guess we will see when time comes.
Also would lov ethe data that half of homes recently (what is that a last 6 months?) that shows 50% of homes by investors. That’s just beyond far fetched to me.
I never make stuff up.
https://www.google.com/amp/s/w...
- Member since 2022 · 485 posts · 216 votes3y
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
I’m not going to rule out a Lehmans brother moment depending on the fed - not yet and not with Credit Suisse. But short of that I see no shot of hell of that happening in the Northeast. And nationally 20% unlikely. But guess we will see when time comes.
Also would lov ethe data that half of homes recently (what is that a last 6 months?) that shows 50% of homes by investors. That’s just beyond far fetched to me.
I never make stuff up.
Link doesn’t work. And I mean more how they compiled the data not you.
- Member since 2022 · 49 posts · 46 votes3y
Fixed rate debt (like mortgages) also behave a little weirdly when inflation gets high. Remember, economic theory all hinges on "real" (inflation adjusted) dollars. In "normal" times of 2% inflation, this doesn't matter much. But in inflationary environments it does.
Also the "wealth effect" of people spending money because their assets have appreciated is also observed. Plenty of people will refinance their home, take cash out, keep their payment the same, and spend the money (cars, vacations, etc). Higher rates kill that option. That reduces consumer spending.
Prices are down about 5% (nominal dollars) from peak, that's about 13% (real dollars) because 8% inflation, that's a correction.
Higher rates contribute to higher "cost of housing" because prices are downward sticky. People resist selling at a loss. Inflation is a way to combat that. Landlords stop "raising rents" for a year or two (fear of vacancies) and inflation brings things down a bit.
My main point is with inflation running at 8%, things can stay nominally flat instead of nominally declining. In 2009 we had -0.39 inflation (deflation), so nominal prices came down. With inflation, nominal rates don't have to come down to bring down real rates.
If you sit in I-bonds and real estate prices drop, you are better off buying in 2023 than now.
If you sit in I-bonds and real estate prices increase slightly, and inflation comes under control, you're worse off.
This housing run-up was by actual demand, people buying. That was juiced by rebate checks. The pre-crash bubble was funded by a lot of straw buyers. Plenty of people we saw used Liar Loans to buy property from family members at inflated prices. It was fine until the music stopped. In 2007 a nationwide housing crash was unprecedented. We've had one. The suggestion that we are due for one 14 years later seems unreasonable.
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOP
Quote from @James Hamling:
Quote from @Carlos Ptriawan:
Quote from @James Hamling:
Quote from @Justin Fox:
I think the reasoning is because when you quash demand through rates, you signal to markets to retract supply while simultaneously making any potential production ramp-up cost prohibitive. The road to hell is paved with...
The next 12 months is going to be interesting.
It seems that many are making a MAJOR mistake of thinking the raise in rates ELIMINATES buyers completely. It does NOT, it reduces there purchase capacity. ALTHOUGH the raise in rates DOES eliminate potential sellers, completely, because they simply choose rates are too high to make a home move at the moment so they just don't sell to buy now.
So what you're saying is basically buyer is downgraded to a lower price tier structure.
Do you see lower priced home receiving more bids than higher priced homes in your specific market?
..
What I am saying is several keep talking about rate increase completely eliminating buyers, that since cost to buy is a bit more "poof" buyers just disappear, or they go "oh gosh darn it, well, back to the apartment forever because if we can't buy EXACTLY the home we wanted, nope, renting forever".
Think about how ridiculous that notion is.
Some buyers will choose to wait, the very few who barely JUST barely could have bout at 5% rates yes are pressed out, but that's a tiny fraction of any markets buying pool. The vast majority of buyers, will be pressed to adjust plans, adjust budgets. The utilitarian buyers will still buy. The couple with 2 kids and #3 on the way that NEED something more then the current 2br. The renters who have saved and built credit for years, they will still buy what they can BECAUSE it's a necessity item, a change of existence, the value exceeds the minor added cost. And yes, 7% vs 5% is a minor added cost for most transactions, especially the 1st time buyer class.
The transitional buyers, we see thing still active without skipping a beat. Why? Because they have ample financial means and again, it is the transition that matters most. There moving for better employment, for a better standard of living, or retirement. The value exceeds the price increase impact.
Go find that young couple with young kids or kids on the way and just try to talk them out of buying now, seriously, give it a whirl, they know it costs a bit more but it's more important then some money, it's more then a house to them, it's HOME, there home, a home that is there's. You can not discount the power of that, and many of you are.
Sellers, those who would potential sell with lower rates, they BIG TIME will hold off and wait, because the locus of control, there is no big pressing "why" for them to get a home, they have one. And by the #'s more then 50% of all homeowners today are sitting on super low fixed rate mortgages, and another 22% are in very decent ones.
All this doom and gloom is chasing charts and ignoring the human factor, that's why you all keep getting it wrong and will keep getting it wrong. Humans don't follow charts, they follow there motives, race towards pleasure, run from fear.
Unless your a jar-head, lol, then ya don't fear anything. Oorah!
I don't think anyone is saying that the rates will completely shut down all financed home sales. But the rates are already, and will continue to have a significant impact on prices. Look at the impact rates are having on affordability - big difference in payments when comparing a 3% to a 7% rate.
Sentiment has already shifted amongst the public and a majority of people believe that housing is way over priced and is destined for a fall. Not to mention lending is tightening, and people who were barely qualifying for a loan 6-months ago are probably SOL right now.
And you have this backwards. If anyone is in a position to hold and wait it's the buyers. Sellers are the ones (through life circumstances), that are forced to sell their homes. Almost no buyers are in a position where they are forced to buy a home - doesn't work that way. - 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOPNot sure I understand the significance of minimum wage... I don't think a majority of income from renters is from minimum wage jobs. Those jobs are mostly kids in high school, college kids, and people who don't rely on it as a "living wage" - for the most part.
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
But even if it did raise, did it really double? Can you cite a source on that? - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3yI get where your coming from, viewing rents not in whole $ but instead in relation to wage, I like it. Only problem with that is it varies across asset class, and so does that % relation, and the movement of it.
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.
In my utilitarian SFR's I would argue the rent's are actually lagging and have much more growth potential, in the mid-class it's spot on, rather stagnant. But in my luxury rentals, it's a whole different universe. I get $3+ per sqft. And even then it's a nothing impact in relation to there income. I had one this summer who leased a luxury townhome at near $6k mnth, paid the full year in cash up-front, and it wasn't even denting his income for that month.
So that % relationship, there is a lot of variables there. - Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3yBefore Covid most places paid around $10 outside of major cities for non skilled work. Now, those people are making a minimum of $15 and most are close to $20. These people generally are renters since they can’t own anything or qualify. Houses went from 100K range to 200K and these prices are likely to hold unless the low end wages drop.
Quote from @Greg R.:
Not sure I understand the significance of minimum wage... I don't think a majority of income from renters is from minimum wage jobs. Those jobs are mostly kids in high school, college kids, and people who don't rely on it as a "living wage" - for the most part.Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
But even if it did raise, did it really double? Can you cite a source on that? - Member since 2022 · 485 posts · 216 votes3y
Quote from @Greg R.:
Not sure I understand the significance of minimum wage... I don't think a majority of income from renters is from minimum wage jobs. Those jobs are mostly kids in high school, college kids, and people who don't rely on it as a "living wage" - for the most part.Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Yes, I posted a few days ago a dealer trying to unload brand new trucks for 20 percent off summer higher prices. Everything is going to take a 20 percent haircut at a minimum, except food and oilQuote from @Michael Wooldridge:
Well more evidence of the shift and things that should help with inflation.
https://www.coxautoinc.com/mar...
New and used prices are declining. Inventory for new and used is up. Full size domestic brand pickup truck inventory is back to pre-pandemic levels.
Considering how much this has also been a contributor to inflation, it’s a positive.
Everything eh? Rents declining 20% too?
I won’t go that far to say nationally rents, but in a lot of markets yes. Min wage doubled so unless depression I doubt rents drop 20 percent. But Greg just posted an example of what seems to be one in the making. I read a stat dfw has like 50 percent of all homes recently purchased by investors….yeah 20 percent rent drop there is likely. In Lincoln Nebraska, probably not. Housing prices though yes for sure.
But even if it did raise, did it really double? Can you cite a source on that?It’s not so much minimum wage doubled as jobs like Taco Bell, Starbucks etc.. In many part of the country are 17-18 bucks an hour due to labor shortage. PLenty of articles out there on it.
Glassdoor has a posting for Starbucks barista right now in Philadelphia $16-20 an hour. A few days ago I read an interesting article on the CEO of Starbucks that is worth a google that speak to some of it.
There has been massive shifts on the low end of the income spectrum to @John Carbone’s point. It’s one of the reasons inflation is happening actually.
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOP
I get the points on wage increase. I'm just saying that I don't think the main driver of increased rents is people working minimum wage jobs.
My experience with people with these jobs are one of a few scenarios. It's their primary income, but they also drive for uber, lyft, or have some other "side hustle". They live at home with mom & dad or with a family member. They don't rent by themselves, they are married or live with their partner and have two incomes. They rent out a single room (many room rentals on Craigslist, etc.) Also can't rule out the fact that some of these folks might be on section 8 or get some other kinds of government assistance.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @Greg R.:
I get the points on wage increase. I'm just saying that I don't think the main driver of increased rents is people working minimum wage jobs.
My experience with people with these jobs are one of a few scenarios. It's their primary income, but they also drive for uber, lyft, or have some other "side hustle". They live at home with mom & dad or with a family member. They don't rent by themselves, they are married or live with their partner and have two incomes. They rent out a single room (many room rentals on Craigslist, etc.) Also can't rule out the fact that some of these folks might be on section 8 or get some other kinds of government assistance.
Here’s the thing nothing is independent. Low wage workers suddenly have extra spending cash. We are a consumer economy and they spend more suddenly (one of reasons why food stamps will never go away btw) and this pushes up jobs related to that field and so on and so on.
The tight labor market isn’t just on the low end but hit trades big time (I’m sure your aware of that) it also hit tech drastically. Hell it even hit sales. last two years unasked for I’ve seen 11% and 8% increases to my annual OTE. Basically it sets off a chain reaction.
All sorts of sources but you can just look at the w-2 information used for SS. 2022 isn’t in but last year alone wages are up almost 9%….
https://www.ssa.gov/oact/cola/... - 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Greg R.:
I don't know if we're going to see a drop in rents. However, I wouldn't be surprised if they did correct some. I don't have a ton of data to support this, just one personal example. My cousin moved out of CA recently and put his house on the market for $4,500 in early August. Definitely on the high side, but he should have been able to get 4k all day. However, he's now down to $3,550 and dying a slow death.Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.
As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.
2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.
This is a suburb of San Diego, not a lot of rental availability and rents are very high. I have rentals in the same city and every time I have a vacancy it's like a black Friday sale. Seemingly hoards people lined up around the block - a lot of them good A+ grade renters.Rents San Diego county wide have continued going up even as RE prices have fallen. YOY in my market the rent appreciation has averaged over 10%. $4k was always high rent for that unit. Rentometer lists the average as $3450 based on six 4 BR comps. It also shows that the highest rent ever for that unit is the current rent.
- 3yHarvey LevinPro MemberProperty Manager · Indianapolis, IN · Member since 2012 · 205 posts · 157 votes
I believe this will be much more localized than in other downturns due to a lack of supply. I feel that those who refinanced into historically low rates will not want to sell and buy and hold without refinancing to pull equity will be a more prevalent method. The CRASH of 2008 will not be repeated as the events are completely different. I see a stabilization of values for most markets and possibly a small decrease in value short term.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Greg R.:
I get the points on wage increase. I'm just saying that I don't think the main driver of increased rents is people working minimum wage jobs.
My experience with people with these jobs are one of a few scenarios. It's their primary income, but they also drive for uber, lyft, or have some other "side hustle". They live at home with mom & dad or with a family member. They don't rent by themselves, they are married or live with their partner and have two incomes. They rent out a single room (many room rentals on Craigslist, etc.) Also can't rule out the fact that some of these folks might be on section 8 or get some other kinds of government assistance.
Nice ! I am about to say that.
Michael what makes the different of consumer behavior is ; for minimum wage worker/service industry worker:
- they live in multi generational family or living with room-mates, I never see a single McD or construction guy living alone, almost never
- they have multiple jobs
- they are usually immigrants so they have to send money back to their country,this is their biggest reason why they always saving
- their consumer behavior is extreme saving for everything
- even in the highest place in CA, their shelter cost per person sometimes is only $300-$700 max.
- they hate to live alone
- there's always the cheapest rent available, I will show it to you where in Bay Area you could get 1 BR for only $650 :) LOLTHat's the reason why the shelter increase might not have direct consequences to service industry worker.
Now you said they have more disposable income, but you remember we're in inflation you know, so if your salary increased to $1 but your taco increased by $2 it's all gone you know, they will even save more now.
One thing that James and Michael are right is that ...... the rent growth is more affecting to professional class in the middle class and higher-medium class. - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @James Hamling:
In my utilitarian SFR's I would argue the rent's are actually lagging and have much more growth potential, in the mid-class it's spot on, rather stagnant. But in my luxury rentals, it's a whole different universe. I get $3+ per sqft. And even then it's a nothing impact in relation to there income. I had one this summer who leased a luxury townhome at near $6k mnth, paid the full year in cash up-front, and it wasn't even denting his income for that month.Quote from @Carlos Ptriawan:
This is very accurate, for Class A+ MF the rents never go down from 2010 because their rent=PSF and then translated as yield investment return to the LP.
