Author Topic: U.S. housing market about to get SLAMMED  (Read 13392 times)

Jurgis

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Re: U.S. housing market about to get SLAMMED
« Reply #80 on: July 31, 2020, 08:22:03 AM »
What I see in my area is that housing prices are increasing and properties are going under contract the day they go on the market.  I think people are fleeing the cities and looking for suburban houses.  I think the cities are in trouble.

But are city demand and prices actually dropping?
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BG2008

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Re: U.S. housing market about to get SLAMMED
« Reply #81 on: July 31, 2020, 08:38:17 AM »
More generally, I think it is a mistake(mentally) how everyone always assumes, everything needs to "plummet", "get slammed", "crash", etc. There are so many of variable outcomes in between the goal posts of the situations entirety, thats ridding yourself of that knee jerk panic reaction is usually helpful.

What Ive seen in the markets I follow(blue, high tax, NJ/NY) is the same as has been occurring for awhile. Insatiable demand for sub $500k SF, above that price point it gets a little trickier, although there has been a bit of uptick in demand there as well.

Yeah, every time we have a crisis, everyone says  "plummet" "spirals out of control" "slammed".  In the Queens residential rental market.  We got down to about 50% rent collection in April from the chatters that I had with people.  Many of the tenants are restaurant employees.  But by July, they are getting close to 80-100% rent collection.  Obviously, smaller # of units equals big fluctuations.  But if you talk to enough people, the overall numbers tend to be meaningful.  The things that worries me is the crime.  Simply put, if a cute 22 year college grad is afraid to move to NYC because she feels (doesn't matter if it's true or not) unsafe, then we have a problem.  The key is the perception not the actual stats.  If that cute 22 year old don't want to move to NYC, then the companies have no reason to set up shop there.  That's a real spiral.  This is why I worry about DeBlasio.

The only time that I have really seen the US Housing Market get SLAMMED was during 08/09.  It really got slammed.  Simply put, people could not afford the mortgage.  It was ludicrous.  If you have 20-30% equity in your RE and you can service the debt, you will do everything you can to hold onto it and keep chugging on.  In RE, the transactions happen because either you can no longer pay your mortgage or your bank force you to sell.  No one sells RE in the private market by saying "hmm, this looks a little rich, let me sell and re-deploy into some other liquid asset class.  I don't mind paying cap gains and depreciation recapture as well."  Depreciation Recapture is a bitch.   

As I have gotten older, I have come to appreciate how much inertia there is once you have kids and wife.  Man, I don't make the most rational decision anymore on a purely financial basis.  Rule number one, keep the Mrs happy.  Rule number two, listen to the Mrs.  Rule number three, pay attention to the future needs of your kids.   Rule number four, don't forget these 3 rules and verbally communicate to the Mrs. that those are your top priorities.  Rule number five, now you can think about what you want. 

Gregmal

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Re: U.S. housing market about to get SLAMMED
« Reply #82 on: July 31, 2020, 08:56:40 AM »
More generally, I think it is a mistake(mentally) how everyone always assumes, everything needs to "plummet", "get slammed", "crash", etc. There are so many of variable outcomes in between the goal posts of the situations entirety, thats ridding yourself of that knee jerk panic reaction is usually helpful.

What Ive seen in the markets I follow(blue, high tax, NJ/NY) is the same as has been occurring for awhile. Insatiable demand for sub $500k SF, above that price point it gets a little trickier, although there has been a bit of uptick in demand there as well.

Yeah, every time we have a crisis, everyone says  "plummet" "spirals out of control" "slammed".  In the Queens residential rental market.  We got down to about 50% rent collection in April from the chatters that I had with people.  Many of the tenants are restaurant employees.  But by July, they are getting close to 80-100% rent collection.  Obviously, smaller # of units equals big fluctuations.  But if you talk to enough people, the overall numbers tend to be meaningful.  The things that worries me is the crime.  Simply put, if a cute 22 year college grad is afraid to move to NYC because she feels (doesn't matter if it's true or not) unsafe, then we have a problem.  The key is the perception not the actual stats.  If that cute 22 year old don't want to move to NYC, then the companies have no reason to set up shop there.  That's a real spiral.  This is why I worry about DeBlasio.

The only time that I have really seen the US Housing Market get SLAMMED was during 08/09.  It really got slammed.  Simply put, people could not afford the mortgage.  It was ludicrous.  If you have 20-30% equity in your RE and you can service the debt, you will do everything you can to hold onto it and keep chugging on.  In RE, the transactions happen because either you can no longer pay your mortgage or your bank force you to sell.  No one sells RE in the private market by saying "hmm, this looks a little rich, let me sell and re-deploy into some other liquid asset class.  I don't mind paying cap gains and depreciation recapture as well."  Depreciation Recapture is a bitch.   

As I have gotten older, I have come to appreciate how much inertia there is once you have kids and wife.  Man, I don't make the most rational decision anymore on a purely financial basis.  Rule number one, keep the Mrs happy.  Rule number two, listen to the Mrs.  Rule number three, pay attention to the future needs of your kids.   Rule number four, don't forget these 3 rules and verbally communicate to the Mrs. that those are your top priorities.  Rule number five, now you can think about what you want.

Branching off your point about crime, I have a life long friend who was always a bit of a suburb/country guy. Carpenter by trade. Vowed his ambition was to buy a decent plot with a small house and a huge garage with a loft in a rural part of NJ/PA. Then he met his wife, who was a typical suburb girl. Needed to go get the "live in NYC/Hoboken" right of passage out of her system, and he got dragged along. Both worked in NYC so at least it was convenient. They have a 1 year old as well. Turns out that the BBQ shooting that killed the infant in Brooklyn was on their street. They went to their landlord the following week, negotiated a breaking of their lease, and are moving back to the burbs. I share your concerns about the effect of crime, although I have for awhile, well before this outbreak.

On the leasing/collections side, at least in terms of CRE, I've gotten significantly more comfortable lately as the results have rolled in and figures solidified a bit. The doomsday situation IMO was current leases being broken and huge numbers of insolvencies or properties flooding the market. This is clearly not happening. As long as we continue to see CRE tenants paying their rent, the best players, with strong balance sheets and good properties, will be quite OK.