2023 Market activity = almost equal to 2022 market equity

James HamlingPremium

#3 Real Estate News & Current Events Contributor

Real Estate Broker
Twin Cities, MN

James HamlingPremium

#3 Real Estate News & Current Events Contributor

Real Estate Broker
Twin Cities, MN

Replied Jun 7 2023, 13:54

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @John Carbone:
I don’t believe todays prices reflect todays rates.

How can you think such? Todays prices absolutely reflect today's rates. How can they do anything but? Ones financing is with todays rate is it not? Approvals are on todays rates.
If inferring that investor purchases, are on future value play, ok, but be clear on that and let's detail that investor purchases denote "as much as" 7% of SFH transactions, at best. And one can't argue 100% of investor purchases are of the 1 mindset, so what "as much as" 50% are, so we are talking at best 3.5%?
That leaves 96.5% or more, of real estate transactions today, price reflecting todays rates.
Rates did not move from 4 last month, this has been a long road to where rates are today. We are many months into this, it is a fact that todays prices are based upon todays rates.
AND I will note, that 10% decline has not happened all places. Many markets have not had a 10% decline, some, many, have held flat OR even gone UP. Not to mention if your picking specific months to infer a drop, is it an actual drop or seasonal adjustment?
Below is a 12mnt data read and one showing the monthly that reflect seasonal variations. As one can see, seasonally adjusted clearly shows record highs, still, and continuing.
While I don't argue there is markets out there that have had a decline, some expectedly so, it's FAR from a truth of the market as a whole or everywhere. Seems that you've got tunnel vision due to your local market actions.
Inventory holding in historic lows/shortage
And even digging to find anything to argue a decline, going to price per sqft, even that holding at historic new highs.
This is direct data from the MLS itself, 0-filtering 0-manipulation. No 2nd/3-rd hand takes, direct from the source itself. And it CLEARLY shows no-decline of 10% your consistently referencing, in a major national market.
If I had the direct data feed from others I'd add those. Maybe other Brokers with similar access would like to jump in to help clarify the actual data from the opinions, feeling, thoughts.
I get it if you have a feeling of prices going down, the media has sure tried pumping that narrative. But reality on the ground simply isn't so.
And if you feel it is, ok then, it's just a statement that I have the #1 best market in the U.S. under my thumb and without doubt where all should be investing, right? because the data clearly shows, not only no 10% decline, but INCREASE in same timeframe, right.

Just because people are paying more for housing now doesn’t necessarily mean it reflect todays prices. It’s possible and probable people are overpaying now betting on the future that they will refinance to a lower rate later on. John Q and his wife need a home, they figure they will extend themselves a little by paying $600 more a month due to higher rates (maybe they keep their vehicle longer than expected), their new home builder gave them a rate buy down and they had their closing costs covered etc etc and the homebuyer feels good about their purchase. If rates do drop in the next 1-2 years then they will feel great about their decision. If their buydowns expires and rates aren’t down and their payment goes up another $500….and that old car they have been holding on to breaks down and they need a new car and now a new car payment is $700 because rates in autos are 6-7 percent…I mean Americans always used to live paycheck to paycheck there isn’t much slack for most to absorb.

this economy isn’t built on high rates for long durations. Looking at the auto industry now they are stockpiling inventory. The Covid stimulus is running thin right now. I think anyone who could afford a house at current rates already has one, some investors are still buying, but these institutions get insider deals and terms to make it worth their while to still be investing. Powell could surprise and keep rates high for all of this year and next year, if that happens it definitely will be trouble for housing market. Your reasoning for them cutting makes sense and that’s what the market is pricing in too (which is reflective in the housing values having a support floor). I never said twin cities prices are dropping in value, in many markets prices are down up to 10 percent though, your charts seem to show twin cities. Still though, even in twin cities housing didn’t beat inflation or 5 percent treasuries in terms of appreciation so the past 12 months there has been a risk free method to beat housing which is a first in many years.

John.... I feel like I'm talking to a brick wall here.
Your ignoring half of what I am saying, most of the data I share, and all of the points.
Your every argument John is assumptions, wrapped in a a box of assumption, with a bow of "I think".... Do you not see how your stretching to try to make your assumed premise true?
You say "oh, but but but, uhmmm, those buyers are, uhm-aaah, there only buying now with plans to refi, yeah, that's it, there ONLY doing it to refi" LMAO, really..... come-on-man. Ok, so a few hundred of thousand transactions a day, there all just doing it ignoring today, planning on a rapid refi....... Holly stretch-man.
TODAYS PRICES REFLECT TODAYS RATES, period-full-stop-end-of-story. I get how that 1 fact blows your entire assumptions out of the water. Now IF you were an investor, you'd stop there and go "Huh, wow James, I never thought of it like that. yeah, I see that, and the data, it really proves that. Huh, ok, so yeah, when rates shift, I get it, I GET IT NOW, yeah, prices will jump up".
But no, you dig deep, and throw out the most ridiculous stretch "Uhmmmm, there all only buying now to refi tomorrow" lol.......
Weren't you flipping out on me John last fall saying how certain you were real estate was going to collapse this past winter? Yes you did. You spammed and trolled my posts than, in a total tirade on how you were so correct, I was such an idiot in my THOUROUGH forecast for a volume collapse, with prices holding in many markets, market specific deviations, and a move UP in prices Q2. Well here we are, what happened?
Come on John, I am calling you out: who was right? What did I forecast? What happened? What did you say would happen? If there were an award for market forecasts I'd be with the Oscar in hand now. It's fleshed out EXACTLY as I forecasted, and that's because I follow the data NOT emotions.
You went bananas for page after page on it, it's archived here on BP for all to find and review. It's how you earned your first block from me, remember that?
But here you are again, so dang focused on being "right" vs accurate.
When I forecast half of the crazy things I have, and nailed them I have said I hope I am wrong, and my economic forecast, yeah, I hope I am wrong, I do, because it's a sucky outlook, but I follow the math wherever it leads me. I am not the one making forecasts, the math is, I am just it's voice, a translator let's say. yeah, that feels most accurate, a data-translator.
So get as pissy as you want with me, it matter not, the data and math says what it says regardless of your freak-out's on me, I'm just the dang translator.
Now, today is a TIME TO BUY, because the unleashing of the buyers is just a few steps down the road. Exact day, I don't know, math/data isn't telling me that, but it's saying it's within next 16-18 months. It could be as soon as 14.
Check bond and CD charts, the data/math is singing away there, just listen.

Rate buy downs James. Last year you were talking them up as a way to get lower mortgage payments. You definitely nailed this and this has happened. When you buy a home with a rate buy down what does it do? It artificially lowers the payment for the homebuyer so that they can afford a higher purchase price. It's very similar to the teaser rates in early 2000s, but not nearly as bad this time around. So what happens james is, by default, with SFH purchased by rate buy down homeowners they have a year or two until higher payments kick in. Developer or realtor doesn't care though once the closing happens. Everyone is predicting rates will drop in a year or two, possibly will happen, but since everyone believes it real estate values haven't dropped as much because the feel like they have the FED floor beneath them. So yes, the prices people are paying now are real (they are still down double digits in many markets). But it is reflective in what is priced into the markets (ie, lower rates in a year) which is also why equities are doing so well. The fed is a genius pulling this off. They raise rates and the market doesn't believe them, so they get to slow down inflation without a crash because people like you James and everyone else believes it's temporary. Powell really is a genius.

I never said real estate was going to crash. I said a 20-30 percent drawdown by end of 2023 on the median sales price. I think it’s still trending towards that if fed doesn’t cut rates which has always been my position.

lastly, my main point last year was that it was wise to take off a year or two from real estate and invest in other risk free alternatives. I don’t know ANYBODY without a bias or agenda who has said “John…I wish I had bought Q3/Q4 2022 I missed the boat”… Why won’t you admit that real estate is down the last 12 months adjusted for inflation and investing in 5 percent treasuries is a better position. This is the first time in over a decade where this has been the case.

18 months from now we will agree on everything.

"Why won’t you admit that real estate is down the last 12 months" - Because it's not.... I literally posted charts clearly showing it is NOT, look up, it's right there. Why would I call up as down? Sorry, the #'s show UP. I can't support your feeling things are down double digit's, because there not. Pull up the market MLS data-feed for what market your saying is down double digit's and post it. Because as i said before, if your saying "everywhere" well, nope, LOOK UP, Twin Cities is UP.

I don't have every direct data-feed so I can't post them. Maybe others will help out and post there's. Than we will see what the #'s say.

I don't know what your talking about with rate buy-downs, certainly nothin I ever said or presented. Rate buy-downs are a marketing tool, a band-aid to drive sales in the moment, and that's what I was advising finance brokers when they were asking me about doing such last year. I told them play with it but don't go to deep, it's a marketing ploy that's it.

I don't know where your pulling this false-narrative that I believe what-ever is "temporary". I have been really clear, detailed and uniform in stating the "NEW NORM" and not of anything in a transient nature. We are in a major market shift, and re-pricing, in a sense some things are short-term because we are in the flow of this change, but the change is not temporary, i have been clear on this.

Now the rate levels, they are NOT sustainable in any enduring manner. Big difference between that and "temporary". They may seem the same, they are not.

Rates, mathematically, can not hold at this level for much longer because of all the things that will implode from it. First one, everything commercially financed. There is a ticking time-clock, and it's already started hitting expiration on the first ones. Every Q that goes by it get's bigger and bigger, creeping closer and closer to a MOUNTAIN of commercial finance that is un-serviceable at current rate environment. These rates are driving at a brick wall. It would be suicide to keep going, everyone knows this in banking, and that's why everyone in banking knows the dates the rates WILL drop by, because they literally have to. Tinfoil hat club can argue the gov. could smash headlong into it, yeah, in theory they could, at cost of their political lives, it's suicide.

FYI, my wife is CFO of a private finance institute, I am "in the room".

You havn't read enough BP posts if you don't know of any lamenting they didn't buy in '22' vs now. I have these conversations weekly, if not daily. Persons who bought into the hype of an eminent "crash" which of course never happened.

Look, your statement that your NOT forecasting a "crash" just a 30% drop in median home value, is the definition of oxymoron. A 30% drop in median home value IS a "crash". So your saying your not predicting a crash, your just predicting a crash....

When bonds are high that's the time to buy. Because when bonds drop, where is that $ going to go? Your missing the point, coming back in to buy R.E. when everyone else is buying R.E. is foolish, your only assuring less purchasing power. Buy low, sell high, it's a simple universal paradigm.

A step beyond all this, I see NOTHING being resolved in next 12-24 months. No, this is a looooong roller coaster ride and things are going to be a mess for a very long time.
WHEN, when NOT if, rates come down to avoid the "everything implosion" which is really a commercial finance implosion, residential real estate will take off like a rocket. And with that, HOT inflation will yet again rage.

Now how much of that will phase over into general economy, anyone's guess but historically residential real estate is a MAJOR driver to the economy in whole, so it's very plausible and conservative to expect economic wide HOT inflation from such.
So, depending on how they band-aid commercial finance, will probably launch into another phase of extreme tightening.
And than something else will strain and start to break. So, back on the gas.

Picture this, it's like were in a car that if let of the gas, the motor will stall, so gotta keep peddle to the floor. BUT were on a winding road up a mountain of switch-backs, so we run full out and off-a-cliff we go. So, were in an alternating patter of slamming on the brake, slamming on the gas, break, gas, break, gas.......
And all this with notion that at some point we will get somewhere of level ground to just, coast.... maybe....

I don't see a way out, and the chatter is ever increasing of the same. I hear more and more coming not only to acceptance but encouragement of a dollar default and currency swap as the solution. Only way to "clean house" and get a reset.

Not to mention biggest holder of U.S. debt is China so.... yeah.... could be a ultimate F-U card to play, would cost lopping off a limb for U.S. to do it but could decapitate China so, worth it, maybe?

Regardless, the life-boats are tangible assets of utilitarian value, which real estate is king.