All Forum Posts by: Michael Wooldridge
Michael Wooldridge has started 0 posts and replied 481 times.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
And look at that. 2022 was the second best year on record for job growth (only behind 2021) and boomers are retiring finally which is creating more pressure. Things are going to conitnue to be fun but the job market is going to continue to be strong.
Real nice article on this trend here: https://www.nytimes.com/2023/0...
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @David Oldenburg:
I think the real estate market gets worse later in 2023. This is due to consumers treading water financially and this has been going on for 2 years and they are out of money. I have a relative who works for a large car repo company and they have never been this busy in their history. There are now 15,000 repos per day in the US (you can use Google unless they have hidden this fact again). Layoffs have been increasing, especially in silicon valley and they are many many companies stating 2023 is going to be bad for them and they may have to reduce staff. It feels like 2007 when the real estate market was holding steady but the consumer was weakening behind the scenes. As the consumer got worse the market went down. Sorry but there are lots and lots of loans and homes upside down and these people will be gone when things get worse and they will drive the market down. In my area of Sacramento there are thousands of upside down FHA loans done over the last 18 months and they were all financed at near 100% with MIP and these are the lowest quality buyers... To say the market "can't" or won't" drop is just as ridiculous as the people who said it in 2007....and there were a lot of them... they were all wrong. I will mark this post and take a look at it in 12 months January 2024.
@David Oldenburg sorry but have to add one comment. Across the US mortgage to value ratios are the best they have been in decades if not ever. Underwriting since 08 has been very stringent and when rates went up it got more stringent.
Could FHA loans end upside down? Sure but those are only certain homes and much more limited. Hell in the Northeast FHA buyers have been forced out of the market the last 3 years.
Anyway we might crash but to say there are many homes upside down is just patently false.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @Carlos Ptriawan:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
I'm not going to search through 2,700 posts but several of the deniers have made the claim. Volume is down primarily because of rates and inflated costs. Many deniers said that rather than dropping the price, sellers would withdraw from the market, which would tank inventory levels. That clearly didn't happen. Inventory is rising and costs are coming down.
Of the markets I showed all are still increasing. The only one that's been flat is LA. They are not all going to increase rapidly, but the trend is up and that's very clear.
if you check redfin "new listing" in 2022 , you would find the chart that "aggregate supply" in 2022 is way lower than "aggregate supply" within 2019-2021 era, that's indication where "seller is delaying selling" and would like to keep their mortgage rate as long as possible.
this market is created primarily for owner occupant and no-longer investor friendly for now.
@Carlos Ptriawan exactly. This is the point. There is not a single person in this entire thread who said definitively 2021-2022 growth levels would sustain and inventory would stay that low. And yet @Greg R. is acting like it is.
Almost universally over summer/September people were saying inventory would remain “historically” tight. Especially because builders have cut back dramatically. Every aspect of that has happened.
Now there are a few macro level reason to believe more things could fall but generally speaking stagnation seems to be the key. Low inventory (not covid low) and low volumes = little volatility in price in “many but not all” markets.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @Greg R.:
Quote from @Greg R.:
Quote from @Greg R.:
Quote from @Greg R.:
Quote from @Greg R.:
Quote from @Greg R.:
Quote from @Carlos Ptriawan:
If you see the insight data, only the following city has triple digit active inventory YoY
Austin
Vegas
Nashville
Phoenix
Northwest
Jacksonville
Other city is pretty much regressed to 2020 inventory level.
DFW?
Albuquerque, NM?
Oklahoma City?
Nashville?
Boston, MA?
Bottom line, inventory is up almost across the board. Yes, some places more than others - of course. However, the deniers were saying that when rates rose and buyers became skeptical that sellers would simply pull out and inventory would tank. However, the opposite has happened - inventory has risen.
Who said inventory would tank (besides James and I don't believe he ever used those words)? I said inventory would remain tight. Historically it's still tight hence why all of the East Coast while volume is way down, inventory is up from COVID levels (we all knew it would go up so this tank is hilarious) yes but it's still historically low and at a healthy level.
Hence the stagnation on east coast. And if you go back to my predictions (where I said no crash outside of key markets like West, Austin etc..) that we would see lower sales volumes (100% seeing that everywhere), low inventory (it still is) and if you look at inventory after the initial increase from the April/May time frame. it's been flat inventory last few months in almost all markets you even showed.
So frankly seems like none of those predictions are really far off. Unless it goes up again by that amount in summer. Also I don't believe what you are using is seasonly adjusted. Is it? If not then that's something else to consider considering time of year.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @Carlos Ptriawan:
Quote from @Chris John:
Ok, so you're saying that it's a good time to buy, but that you don't expect prices to get back to where they were a few months ago until late '25/early '26. A couple of questions:
1. Wouldn't I make easier money buying mutual funds/stocks?
2. Or do you feel like real estate would be a better investment for you since you appear to be in the Bay Area and that market seems to have dropped more than others. So, obviously with real estate being regional, are there specific markets that you're focusing on?
In the end, putting 20% down on a 350k property, plus fees, plus light renovation that always seems necessary (around 80-90k total) in the central valley and waiting for it get me 40k in equity a few years (that would be EXTREMELY difficult and expensive to access assuming it did happen) sounds pretty risky to me as I'd probably be cashflow negative that entire time.
Sorry, I just feel like I'm having a little trouble following your logic and timeline on still wanting to purchase over just putting money into the market since it seems like it's already dropped so much...
Thanks!
To understand my logic is easy, buy low sell high LOL. Now is "low" moment LOL.
First of all, not all bay area city experience the same price movement. SJC has rebounded, much better than SF. Typical very rich neighborhoods in East bay also do not see price drops that much, but there're cities like Tracy or Livermore that do not receive that much of a bid.
1. easier would be just to buy a stock index, in one year we would reach S&P previous high anyway.
2. So the opportunity is this, there are these bottom 10% of houses that experiences 20-30% discount from "assumed June high". For example, in SJC we see house that could be sold for $1.6-1.7mil. ; it is finally sold for "only" $1.05mil. I checked the owner of the house has to leave in hurry. So if one wants to flip and do BRRR or live in this house and then sell in the 2026-2027 timeframe, this is easiest timeframe to make money at least 300-400k in few years.
However, for good / showroom condition houses, they're still being sold sometimes above listing price. In Maui it's even worse, it's like there's no recession there, there's nothing to sell even for a lousy 1 BR condo it's still $1600/sqft lol lol
In Livermore, an 1950's neighborhood is sold for 650k recently. It's a pretty hefty discount.
When purchasing, try to buy the property use cash as much as possible, and live in the flip.
Btw your rehab cost is too high for me, I can do rehab way way way lower than your number. Maybe because I've bribed the contractors w/ something else :)
Rent and write offs need to be factored in also to add to what Carlos said. And the rehab cost sounds crazy at $90k. I just did 2 bedrooms 2 full bath and ripped out everything from floor to light fixtures to bathrooms to kitchen + new appliances and an hvac. Did it for under $40k. A 3rd bedroom isn’t going to add that much more (just flooring costs.
Oh also had to do whole new closet and door setup.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Nicholas L.:
just as a reminder, here's what you said in your 5th post to this thread:
"I would say take the 10 years prior to the bubble and get the average rate of appreciation. Use the same rate of appreciation for 2021 & 2022, once you get to where values are at that point, that's the market correction. Crash is beyond that."
i haven't done the math to see what that would be. and i think you'd agree that it's not the case that every single market corrects to that... right?
Without the bubble these properties still would have appreciated +/- 4%, so one would need to calculate that out to see that amount compared to the current amount. I don't think it will necessarily be exact, but it should be somewhat close IMO.
Except you forgot calculate inflation.
And there are still booms on housing. one of the big ones for your period, which is why TX, FL have seen such big booms.Is work from home becoming more standard. That cause a lot of the boom in many places even if they weren't moving long distance people relocated for backyards, pools etc.. How much is that impact though?
Which is why generally thinking I think we will fall some where in the middle.
And I agree re: remote work. However, a lot of that is starting to become frown upon. Many companies are wanting a return to the office because of decreased productivity and an unsavory work environment due to everyone working from home.
My point is the 10% correction I’m calling won’t hit the full 20-25% because we are also seeing 10% inflation top of it. I’m saying when you start factoring in inflation + remote work + a 5-10% correction - it’s actually a larger “correction because of inflation. I’m saying housing prices won’t drop as much because dollar values has changed. I.e. real impact of inflation everything gets more expensive.
As to remote work you have to be in the room with the c-suite and policy. yes some companies are forcing back. I know of health sciences companies (Fortune 500) who ar telling people to return to work 2 days a week. And yet in leadership meetings it’s ok if you turn a blind eye as long as they come in once a week.
I also know of other companies saying return to work but meanwhile they are closing leases everywhere they can. Remote work is here to stay and will only accelerate as companies can end leases and close properties to realize cost savings.
Middle management would like to get back to office because it helps with their jobs but the reality is middle management is getting axed more than anybody
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @John Carbone:
Quote from @Nicholas L.:
just as a reminder, here's what you said in your 5th post to this thread:
"I would say take the 10 years prior to the bubble and get the average rate of appreciation. Use the same rate of appreciation for 2021 & 2022, once you get to where values are at that point, that's the market correction. Crash is beyond that."
i haven't done the math to see what that would be. and i think you'd agree that it's not the case that every single market corrects to that... right?
Housing historically has always just been an inflation hedge. Your home price should go up with the rate of inflation. Houses are a deteriorating asset that require maintenance and upkeep. This last 10 year boom in housing will not last.
I’m not 100 percent convinced it will “crash” but we could have a lost decade in housing where prices are stagnant and inflation just eats away at the “hedge” so 10 years from now wages will be higher and home prices in a flattish range over this time.
I definitely see a long slow on the housing but decade? That seems far too long when economy moves faster not slower the last 20 years. Also rents will still increase (people have to live somewhere and we've seen that with gas/food) so it's hard to really thinking what a slow decade looks like when housing ownership for younger generations has been declining. That means they are renting which will keep some movement in housing (likely a lot more MF).
Rent still went up in the 70's and housing was one of the things that generally did ok through the period in the long run. So historically it might not be that flat growth - hence that inflation hedge you mention.
Anyway this thread just shows how many "different and big" factors there are at play here. It's a very mixed bag.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @Greg R.:
Quote from @Nicholas L.:
just as a reminder, here's what you said in your 5th post to this thread:
"I would say take the 10 years prior to the bubble and get the average rate of appreciation. Use the same rate of appreciation for 2021 & 2022, once you get to where values are at that point, that's the market correction. Crash is beyond that."
i haven't done the math to see what that would be. and i think you'd agree that it's not the case that every single market corrects to that... right?
Without the bubble these properties still would have appreciated +/- 4%, so one would need to calculate that out to see that amount compared to the current amount. I don't think it will necessarily be exact, but it should be somewhat close IMO.
Except you forgot calculate inflation.
And there are still booms on housing. one of the big ones for your period, which is why TX, FL have seen such big booms.Is work from home becoming more standard. That cause a lot of the boom in many places even if they weren't moving long distance people relocated for backyards, pools etc.. How much is that impact though?
Which is why generally thinking I think we will fall some where in the middle.
Post: Housing crash deniers ???
- Posts 485
- Votes 217
@Greg R. 6 months ago puts us in the heart of this conversation when I and many were saying flat to small corrections maybe 5-10% which is what I've been saying personally - especially when inflation is factored in. TX had some markets hit harder than a lot of areas but for the most part the East Coast has been flat
Volume down? Absolutely but most of us said that - we said people would sit tight on their rates.
Now to me the real question is where are inflation stats come Aprilish. That is when housing had hit it's a peak and hosuing has been driving 40% of inflation. I expect numbers to trend better but mostly we will inflate are way out of some of the drop.
Which goes for the same thing on food. Thats been trending better overall not worse meats in particular have been better for me locally - steak etc.. IT's still high for average person though.
On the flip side still more jobs out there than people looking. Boomer retirement accelerating over next few years. Things aren't good but they aren't bad either. We are in this weird stagnation and pause phase. Even corporate profits have been ok. A lot of the pain corporations are experiencing is the rate reset on their loans. That's been very expensive for everybody. So the fed could have some real pain down the road. I also have major concerns about china supply chain right now that could have a big impact. On the flip side demand is down on the consumer aspect side (think tvs, playsation etc...). Some things demand remains consistent like food, housing, gas, medicine (thats a huge pain point right now).
The economy is very much a mixed bag - sort of like the housing market nationally. Some weakness, some things doing fine, and jobs still strong.
Anyway I think if you go back 6 months most people were saying flat to -10%
Post: Housing crash deniers ???
- Posts 485
- Votes 217
Quote from @James Hamling:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Carlos Ptriawan:
so update from me, there's this desktop automation software.
So here's what this software telling me.
Peak is at June 2022
Market is reaching -3% from Dec 2022 to Dec 2023
Bottom is Q4 2023, and the price going to reach the range of June 2022 somewhere around 2026.
This is for our local market though, meaning in 2023 is a quite good time to buy at the bottom before we sell it in 2026/2027.
@Carlos Ptriawan what you are seeing is mostly what I’m seeing. The deals are slight adjustments but for the most part prices are flat or a few % points down locally for me (nationally is closer to 8% or so). Volume is way down as expected but inventory is flat.
@John Carbone it's funny but my STR are doing very well even brand new ones in FL. I would have been happy with less than what I'm achieving (expected a downturn) but just not seeing it yet. Which is a pleasant surprise. That said I wouldn't call it a blue chips market but more like upper middle class markets. Which has been fairly stable and still a lot of cash on hand.
That said the next 6 months will be telling. So many variables with Covid in china (ukraine/russia is silent in news these days funny enough) and other global levers that could hurt us. I’m expecting inflation to slow about March/April as housing will be at their peaks. I’m curious what happens when the markets see that in the inflation numbers.
I’m personally not seeing it yet either, but I’m seeing it in the competition by looking at calendars.
real competition though? Or people who "heard" you could jump in and make easy money on STR? It's amazing how many times people cut corners like not having beach chairs when near a beach, not having a high chair / pack in-play for family oriented homes or even just adding snacks. Not saying it's as simple as that but to your point around you managing ahead of time, strategy does matter.
Yeah, the listings with no bookings are not operated or set up properly. However, last year at this time those places were renting out at a good clip going into 2022. So there is clearly a strong shift in demand going into 2023 relative to 2022. This could be a short blip though, and I hope it is as I don’t have bookings beyond Memorial Day.
That makes sense to me. Markets ar definitely slower just not a lot out there so prices are not holding strong but not dropping much so to speak. Generally obviously a few big markets got hit nationally.
On the rental side - people seem more cautious - so those not setup right I’m not surprised are hurting. On the flip side on a brand new property, I’m still seeing last minute rentals and long ones - and as reviews have been coming in bookings are jumping quick. So I feel like the market is there just selective.
Will it hold? Right now my concern there is china/fed. CHina Covid impact no supply chain has not been felt yet. Will be interesting.
I see very good things coming in manner of supply chain via a pivot to S. America.
The whole run to China was an abortion of an idea in the first place, the outcome was inevitable. But S. America, it's multiple solutions in 1.
A N/S American trade pact is simply liquid gold. We have proven out the path on how to develop such via what was done in China, now it's just a pivot to apply all lessons learned in S. America. The geo-political risks of enriching S. American nations is next to nil. It's just a no-brainer.
So I say go riddance China, thanks' for the Beta run on it all, now it's time for Alpha in S. America.
Anyone have any idea how far $1m USD will go in Guatemala? Far, very very far. Want farmers to stop growing coca in Columbia, hello chip-plant. Economic stability in Nicaragua, "Yo quiero Apple manufacturing".
South America is the future of manufacturing. Mexico become "the" logistical hub of the American continent. All win.... except China, they lose, big time. Good luck funding that military expansion when western commerce has gone to S. America.
@James Hamling I agree with a lot of this over the long term. It’s going to be quite beneficial on so many fronts and that said though I think we will diversify across several countries and leave stuff in China. Simply because they saw what happened with only one place to build. It’s sort of a macro version of what’s going on in the chip manufacturing.
That said the pivot over next 18-36 months should be fun. One as the supply chain won’t move immediately and two towards the end of it China will probably play games. If China continues to be overwhelmed by covid for some time it’s going to be a fun short term with more pressure on inflation.
Long term should be good though. The quesiton is how quickly.