Friday Update July 8, 2022
1415 is the number this week. That's roughly 110 single family homes on the martket more than last week and roughly 350% more than 3 months ago. Nice houses still selling relatively quickly but at noticably less crazy prices than a couple months ago.
428 price decreases in last 7 days keeping with roughly the same level as the last 2 weeks.
This is kind of small sample size early into July but we've had 246 units close out with a median price of $479,000. I don't want to look to deeply into this until the month ends but will update it weekly just to see if we can spot a trend.
Median sold to list price ratio is now 100%. Again the list price is not the original list price but the one the house went under contract at. So what this tells me is that bidding wars are not common anymore. Meaning appraisal gaps aren't either. Fuck appraisal gaps. Good riddance.
Interest rates are not 18%, they're not even 10%, but they're absolutely digging into people's buying power and it shows. We had a nice little drop recently in the 10 year notes to as low as 2.8% but are finishing this week around 3.1%. Mortgage rates don't tie to this directly but correlate pretty closely. VA rates at or slightly over 5% with conventional rates pushing 6% have been the thing for the last few weeks.
The 10 year and 2 year yields inverted again for the second time since April. Right now the difference between the two is negative .03 but any inversion is a signal from the bond market of short term uncertainty. I'm sure if you guys own a television or have internet you've heard a lot about recession, recession, recession. When will it get here? Will it even happen? It's here guys just embrace it and move on with your lives.
And chances are things are gonna get a bit worse before they get better. The reason is because we're going to have to work off quite a bit of bad debt that accumulated over the last 2 years. Like we should have been dealing with a recession towards Q4 of 2019 or Q1 of 2020 but then the thing happened with the China and the masks. And we kicked the shit out of the can all the way down the road to now.
But at some point there has to be a deleveraging. It's a normal part of the business cycle and is the economic equivalent of pulling weeds out of your garden to allow your crops to prosper.
Think about it in terms of people not being able to afford or get a house because some asshole has been living there for years without paying their mortgage. Eviction moratoriums and foreclosure moratoriums have finally come to an end last week and the system can start to purge. Say what you will about people's misfortune but there are plenty of scumbags out there working the system that are about to have a day of reckoning, and them getting booted out will make room for normal people needing a place to live.
Honestly in retrospect the Covid policies as they applied to housing created more homelessness and affordability issues than the makret could have ever done on its own. The government created a bottle neck that would not allow for shit debt and shit tenants to blow off. This artificially drove up sales and rent prices and created what now to me seems like an artificial inventory shortage.
And of course the ridiculously low interest rates of 2020 and 2021 created a demand for housing at price points that are not sustainable when the rate doubles.
So in the short term one of three things can happen.
1. Rates drop to sustain affordability and the Fed comes clean about the fact that inflation is just going to be a fact of life. I think in the long haul this will happen but in the short term they must maintain the facade.
2. Prices will come down significantly to accomodate affordability at the higher interest rates. In my opinion this is already happening and happening fast.
3. People will learn to physically shit money and everything will be amazing. Let me know if you figure out how that works and I'll pay you for training.
Thinking about selling a house just for fun? Maybe wait it out.
Need to sell a house to move elsewhere? Realize that any haircut you're taking is being felt across the board and any losses you feel you might be taking you should recoup on your puchase.
Thinking about buying a house? If you intend to stay here for years or are ok with being a landlord I don't think its a bad idea. I think there are deals to be had and if you find something that makes sense to you with a long enough time frame it will be fine.
But are you thinking about buying something and will need to sell it next year, or in 3 years, or even in 5? Just rent. Please just rent and don't let some thirsty Realtor convince you that we have found the bottom, or that next year is gonna be amazing, or that real estate is a good short term invenstment.
Real estate is a great investment. However in any normal market its not a super liquid investment. It's something you buy with the long haul in mind.
I'm happy to help you through this crazy time as I myself make sense of it in real time.
Post a Comment