All Forum Posts by: John Carbone

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. 

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. 

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. 

Rates will, at some time, have to come down, it's a mathematical fact UNLESS the powers that be change the fundaments of the math (example, 40/50yr debt terms). 

Here is what those who preach to sit sidelines and wait for lower rates keep missing. Todays PRICES, reflect todays RATES.     Again; TODAYS PRICES, REFLECT TODAYS RATES. 

When pricing is consolidated at a rate level, as it is today, when you change the rates, the price will change in relation and amplitude of the rate change. Again, changing the rates WILL change the prices when in an environment as most are in today. 

Why are so many institutional buyers going gung-ho at what many novices are saying is "dumb prices" today? Do you really think those commanding hundreds of millions in capital are "dumb"? They "get-it", they know what's to come next and they are buying on FUTURE VALUE.    They know this rate environment is unsustainable in any enduring stance. And they know the math CLEARLY says as rates cut, activity will increase, and that means more people bidding for the finite inventory, with more purchasing power via rate cuts, making for HIGHER prices. 

It is coming, with absolute certainty. The only question is when, and in what amplitude. What do you think would happen if rates went to 4% tomorrow? It would be headlines of properties going into multiples in minutes of listing, yet again.     Because this phase we are in right now today, this very minute, is building pent-up-demand. 

Ask any PM how many times a day they hear from applicants "we were going to buy, but....". That is pent-up-demand creation. 

How many on BP here are saying WHEN ____ there going to be back in it? Again, pent-up-demand. 

As one loads tension on a rubber band, the more load goes into it the stronger the force against that loading force. The more pent-up-demand is created the sooner and sooner it comes to time that force factor will start pressing out like steam building in a kettle. At some point that force will start moving free to an extent "the lid blows" and FOMO comes into play. THATS where bubbles get made, in that rush. 

It's coming, and smart $ knows this that this, today, is THE time to buy. BUT..... but, but, but, strategically. No, one should NOT just buy something to buy something, that's a setup for failure. 

Is it a more complex market, 1,000%. Strategy and insight matters leagues beyond what it has the last 10 years. But make no mistake, fortunes are being "bought" today, in preparation for the reaping to come. 

In markets that have found and proven bottom from this recent consolidation, it's GO-time. Some markets are still in consolidation, some are in uptick, market specific variations matter and exist.     But make no doubt, we are in pressure building for pent-up-demand and all they have to do is open spigot of financing through any number of actions, and the moves normalizing 40yr mortgage shows the direction of things to come. 

Those awaiting a big recession will be sorely regretful. Name a time that in election cycles for POTUS the administration has allowed a recession to begin? You won't find even 1, not in a re-election bid. 

It's ok to sit the sidelines and watch but don't fool yourself, when the lid blows, your complaint will move from rates too one of prices soaring, yet again, and your $ buying less. 

Again-again; Todays prices reflect TODAYS rates.    Slash those rates down, price WILL move up AND the amplitude of that pent-up-demand entering market will super-charge the price increase disproportionately to the rate decrease. 

Save this post, come back to it in 18 months, test me. I called it in Q3 '22', I called it Q1 '22', I called it "21", "20".... As luck has it, betting against my forecasts doesn't fare too well. I am fallible, I am just a human, but man-alive I seem to have a knack for seeing what the math is saying. 

 The people still buying now are either getting a mediocre deal on the market with the hopes of refi-ing whenever the rates drop or they have a decent off-market deal that makes sense now

OR

They need to buy real estate to offset their taxes. I have a client now that is building a new primary residence there because the amount he will be saving by not having to pay state income tax by moving there, will more than pay for anything he buys. You can do the math on that lol. He is not afraid to buy anything right now but he pays more in taxes than most people make in a year so take it how you will.

I have this long-time investor friend, and in '09' as I was cranking away at flips he came to me sweating bullets asking advice as to what I am forecasting and his situation of what he should do. 

This friend had the joy and pleasure of closing on a duplex 1 week before the bottom fell-out. With all the fear in the media, he was falling to the media fear-mongering. 

He had a tenant, was clearing little, maybe $50 net monthly during occupancy. But freaking out because on paper, if he was to sell, he would loose $100k. He asked, what should he do, he's "lost" $100k, and fears it getting worse, that he keeps "loosing" more and more week by week. 

I laughed, seriously. 

I told him he needed to take a TV vacation. Turn it off, just turn it off for a month, see how much it improves his life. The answer is simple, selling looses $ so, DON'T sell, because he hasn't lost anything, he ONLY looses if he sells for a lose. So, DON'T sell. 

We spoke a few more time son it and he chilled, and after a tv vacation he realized that yeah, why would he, he's got tenants, and there is only more and more tenants, rental rates going up due to increase in demand so yeah, why be dumb. 

Last summer I sold that property for him. We had a great laugh about it all recounting how freaked out he once was. Because end of day, he accrued many many thousands in equity from tenant paydown, had pocketed many more thousands in net from rents over the years, and cleared a 6 figure profit on the sale. 

All he did was not sell when selling was dumb. That's it, simple. Rents went up considerably, and that property bought at the very peak, was a cash-cow in rather short order. 

Those seeking confirmation-bias of there fear-porn dooms-day scenarios will always grab to "well, well, what if you buy at this exact time, and sell at this exact time" lol, well DUH! If i go buy a car for $10k and sell it a day later at $5k I'd loose $ to, but it's obviously DUMB. Do we really need to point out the blatantly obvious "Don't Do's"? Ok, don't bludgeon yourself in the head with a hammer, use it to hit nails. Don't drink bleach. Don't use 60-grit sandpaper for underwear. Any other obvious don'ts we need to cover? 

I can buy any property at any "high" price and make profits, with 1 magic ingredient; TIME. 

Arguing bought in May '22', why would you be selling 1yr later? Duh, one SHOULD loose $, unless it's a flip, and flips DONT make $ on market movement, a flip is BUILDING equity, you CREATE the equity via taking the ugliest home and making it a gem. I know, I have done a great-many. 

@John Carbone

I think you're right that some people that started investing at, and bought at, and only bought at, the absolute peak might be stuck, and might have been better not buying and doing something else with their cash.  But isn't that a small fraction of investors?  

And, if you listen to the latest BP podcast, David Greene really hammers on how it is really, really tough to replace W2 income with rental cash flow.  And I would agree that that advice is probably about 2 years late... BP seems to be pivoting now after it's already happened.

BUT, a lot the folks in this thread weren't saying "invest your life savings in real estate in May 2022," they were just saying "keep buying, and make sure you're buying good deals."

...right?