As a curiosity, how many people in this thread are home buyers that sat on the sidelines over the past year or two and are now waiting for prices to drop?
I’m in that camp and I’m starting to suspect there are enough people in that camp that any noticeable drop in prices will be immediately met by strong demand, even at current rates.
Since you cannot predict the future I recommend not waiting “for prices to drop”.
Instead, buy a house when you find one you love and that you can afford. Houses are not widgets- each have pluses and minuses and optimizing for price won’t make you happy.
The problem for us is the inventory has completely dried up. Our market has a lot of second homes. People who wanted to cash out already have. The people who weren't ready to sell, seem to be willing to "wait it out".
In the long run, it doesn't _really_ matter. We're well within our budget and plan to be in this home for a very, very long time.
> any noticeable drop in prices will be immediately met by strong demand, even at current rates
As long as people are okay with buying insanely overpriced homes they will not fall.
But careful, you might be fired too. Or lending may be even higher later (forcing lower prices). Or rates will be high be many years. Or you'll go underwater and not be able to refinance. Or your taxes will also go up. Or maybe you need to move/divorce. Or maybe you die and your next-of-kin can't pay the house and be foreclosured. Or maybe you can dump the cash in bonds/stocks and make more money. You may have more kids and need to move to a bigger house and be forced to sell at a loss.
As a curiosity, how many people in this thread are home buyers that sat on the sidelines over the past year or two and are now waiting for prices to drop?
Waiting for a price drop doesn't really work.
Firstly, when prices start to drop people stop selling. You might want a cheaper house but the supply will be severely limited so you probably won't get what you really want.
Secondly, when prices drop it usually comes with other changes in the market. Mortgage lenders are weirdly skittish at the moment, and they stop lending the instant anything looks bad. If you need a high loan-to-value mortgage (eg 90% of the purchase price) you probably won't get it in a downturn.
I bought a place about 18 months ago and got a 5 year fixed interest mortgage because I figured we're going into a period of inflation and maybe recession so interest rates will probably go up. My timing was off a bit but it's going to save me a fortune over the next few years (and then I get a huge shock when the fix rate ends... yay!)
It won’t. Real estate is on track for at least 20% crash from here. People with 3% rates don’t want to sell and move to 7%. So, they are renting out at loss and therefore renting is becoming amazingly cheaper compared to buying. This further reduces demand and increases supply and it’s a classic recursive cycle that will only accelerate as rates will go up even more for next 6 months. My advice would be to rent house of your dream for next year while housing crashes. The best time for buying would be when interest rate hits below 4%.
I am in that camp as well. But... my rent is less than half the cost of a mortgage (including taxes and insurance) for a similar place. And this doesn't even account for maintenance costs. My landlord prefers long term tenants, so has shown no interest in raising our rent, and even if they did we are under rent control which will limit the damage. And while we are definitely paying under market rent, it is not by that much. So I feel fairly confident we can find something similar on short notice, and with more time could probably find a really good deal.
So after years of holding our down payment money in low interest savings accounts, I am now moving it into CDs and bonds that have nice returns which will result in a nice chunk of change. And if prices don't come down anytime soon, I am more than happy to keep renting. I think prices would need to drop by almost 40% before I would really consider buying at this point.
For context, I am in the Bay Area so it might be a somewhat unique situation to our market. But in the four years that I have been renting at this particular location, rents have not really moved much while house prices are up 50%.
Turns out “cash on the sidelines” disappears quite fast when assets broadly devalue.
Housing is correcting faster than GFC, though it remains to be seen if it ends up deeper. But when it falls at this pace, people start to get cold feet
But the mortgage payment is in the process of skyrocketing. Even if home values drop, the majority of people are going to have less ability to buy a house as more of that money will go to the bank.
>I’m in that camp and I’m starting to suspect there are enough people in that camp that any noticeable drop in prices will be immediately met by strong demand, even at current rates.
Same. I dropped out of the market last year after refusing to take part in the insanity. No, I am not going to waive all contingencies, give you 5% earnest, and bid over appraisal, for the hope of having my offer selected. Hopefully this will change with the corporate money drying up.
We bought at pretty much the rock bottom of 2020/2021 interest rates (nothing like wiring away your hard earned money on the very same day when the US capitol was being overrun and the government seemed just about to topple…)
We had to work hard to avoid areas in SF that had been overbid. We didn’t find a bargain but we found a good deal, something that the prior owners needed to let go off but which wasn’t in a super popular area. This was in a hot market. So I think in the coming market you will find good opportunities.
So, as I obsess over listings today pondering if there might be an opportunity… I think that there will be good deals to be had, but not necessarily steals. In the Bay Area, people trip over themselves to live in a few neighborhoods so I think prices in those highly sought after areas won’t reach absolute bargain levels.
But If you are prepared and ready to step in you can already find properties that I think are marked down.
I’ve been watching closely dreaming of a place for our parents, or maybe more space for us, or maybe a rental…
Almost bought a second home a year ago to get out of (and sell) our starter home. Was looking at houses with a realtor, a few new constructions, etc. Both glad and not glad we didn't buy at the time.
Glad because everything is likely to crash at this point and we would certainly have an underwater mortgage, but not glad because with the more than doubled mortgage rate since we were looking, it'd be stupid to sell our current home and upgrade now (especially with prices still high), so now we feel stuck (granted, stuck in a home with a fairly cheap mortgage payment, so it could be worse, but stuck nonethless).
We also held off on refinancing during the super low mortgage rates, because we were pretty sure we were going to buy a new house so it would have just been wasted money, but now it's obvious it would have saved us some money. I had a feeling that would be the case, but my wife seemed adamant we were going to move last year (until we both got too busy with work), so I held off on pursuing it.
I'm in that camp, kinda. We're looking for a small "vacation place". The area we wanted to buy in saw ~40% increase in the first half of this year. We hope it goes back down the same amount (but have no idea!)
In my case, I think it is increased AirBnB demand. Don't know if that will start to ebb.
> I’m in that camp and I’m starting to suspect there are enough people in that camp that any noticeable drop in prices will be immediately met by strong demand, even at current rates.
What you're missing is that when the bottom is in nobody will want to buy a house. They'll be way too terrified or plain incapable of acting. Afraid of losing their job. Of further declines. Of the bottom falling out of the economy. Of homelessness invading their area. Of they job they lost.
Depends on the location but I would say that there are going to be a lot of people who bought homes on expected gains in equity / salary that haven't priced in inflation. Ive been watching homes in a couple markets and the prices have come off and things aren't moving quickly.
If you want to see significant drops in pricing thats going to depend how the winter macro economic environment hits everyone. Next summer is when you will see movement is my suspicion.
Well, the problem with this strategy is it assumes you're employed and still in a financial position to buy a house once prices drop. Housing price drops are rarely disconnected from wider economic issues. If you're unlucky enough to be in the 13% at Facebook then you're likely going to be unable to take advantage of lower house prices when they finally drop.
It's an interesting question, but you might also want to ask which markets people are based in. While the overall economy, interest rates and other factors do correlate to some extent, of course, some other important fundamentals (and price movements) can vary significantly even within the same country.
Prices aren't going to drop significantly in major markets because political forces won't allow it--there are simply too many retiring people with the bulk of their assets tied up in their house. Probably prices will get eroded by higher-than-usual inflation until they come down to somewhat sensible numbers in real dollars, which is somehow more politically palatable, but that's a much more gradual process, so there won't ever be a "great time to buy" in that scenario.
We were thinking about buying for ourselves but opted not to.
However we did hedge that decision by buying my mother in law an apartment and essentially becoming her landlords. We timed it as well as we possibly could have and locked in 2.5% on a 30 year in December of 2020.
We have waited the last couple years, so it's no sweat to wait another year or two for the prices to correct and interest rates to come back down to Earth.
boomers are going to start downsizing or moving to retirement communities eventually. I'm holding back part because of what you said, and part because I can't really make up my mind about where I want to live long term. Happy to rent and collect index funds in the mean time.
Most of these layoffs are mimetic: Meta is insanely profitable and does not need to lay anyone off, this is just an excuse to get rid of some people. So they try to copy everyone else in most of the details.
Redfin's decision is not similar to the others. They are in real estate business and try to take over the market like zillow. Real estate game is more difficult than social media.
On timing the market: you cannot time the market. However, you can have a sense of what the historical rates for mortgages are and will probably return to.
Back when they were at ridiculously low levels, I would tell people "Get a 15-year loan now! You'll be paying off principal as well as interest, real soon."
They'd object, reasonably, "Oh, I can't afford those payments!" So now with higher rates, what will they pay for that 30-year?
You can also object that nothing stops you from making extra principal payments, on top of your regular monthly payment. That's true. But will you?
Is all that incorrect? You can do this analysis in Excel or Google Sheets.
This entire comment lacks evidence or data to support it but I used to work in SFR and still keep tabs with several companies on a personal basis.
Redfin and Zillow are not the problems in the SFR industry. These are tech companies that were trying to capitalize on the PE flowing into SFR. Their lack of success is not an indicator for the industry as a whole.
Make no mistake about it: SFR is alive and well and increased rates will not hurt them. Most have paused acquisitions but their cash flow is still fantastic. The outcomes over the next 24 months will play in their favor and those companies will grow as the economy pulls back.
I had no idea Redfin had the home flipping unit too.
The real estate prices and estimates clearly are on a downward trajectory. Previously redfin struggled to keep up with growing value in their estimates and so always came in lower to the asking price. Now they constantly come in higher.
A couple of years ago I tried to rent from one of these companies but things didn't work out. I did double take and was thankful because I don't want to support and encourage this kind of business model .
Corpo home pillagers deserve everything bad they're getting. Young families need homes. I wish the government would step in and protect something so necessary for it's citizens.
> I wish the government would step in and protect something so necessary for it's citizens.
You mean like the mortgage interest deduction, 30-year fixed (subsidized) rate, SALT, Prop 13, etc - that actually make the problem worse for new buyers?
[+] [-] imnotreallynew|3 years ago|reply
I’m in that camp and I’m starting to suspect there are enough people in that camp that any noticeable drop in prices will be immediately met by strong demand, even at current rates.
[+] [-] andsoitis|3 years ago|reply
Since you cannot predict the future I recommend not waiting “for prices to drop”.
Instead, buy a house when you find one you love and that you can afford. Houses are not widgets- each have pluses and minuses and optimizing for price won’t make you happy.
[+] [-] SkyPuncher|3 years ago|reply
The problem for us is the inventory has completely dried up. Our market has a lot of second homes. People who wanted to cash out already have. The people who weren't ready to sell, seem to be willing to "wait it out".
In the long run, it doesn't _really_ matter. We're well within our budget and plan to be in this home for a very, very long time.
[+] [-] ddorian43|3 years ago|reply
As long as people are okay with buying insanely overpriced homes they will not fall.
But careful, you might be fired too. Or lending may be even higher later (forcing lower prices). Or rates will be high be many years. Or you'll go underwater and not be able to refinance. Or your taxes will also go up. Or maybe you need to move/divorce. Or maybe you die and your next-of-kin can't pay the house and be foreclosured. Or maybe you can dump the cash in bonds/stocks and make more money. You may have more kids and need to move to a bigger house and be forced to sell at a loss.
For that and more, /r/REBubble/
[+] [-] onion2k|3 years ago|reply
Waiting for a price drop doesn't really work.
Firstly, when prices start to drop people stop selling. You might want a cheaper house but the supply will be severely limited so you probably won't get what you really want.
Secondly, when prices drop it usually comes with other changes in the market. Mortgage lenders are weirdly skittish at the moment, and they stop lending the instant anything looks bad. If you need a high loan-to-value mortgage (eg 90% of the purchase price) you probably won't get it in a downturn.
I bought a place about 18 months ago and got a 5 year fixed interest mortgage because I figured we're going into a period of inflation and maybe recession so interest rates will probably go up. My timing was off a bit but it's going to save me a fortune over the next few years (and then I get a huge shock when the fix rate ends... yay!)
[+] [-] sytelus|3 years ago|reply
[+] [-] qqqwerty|3 years ago|reply
So after years of holding our down payment money in low interest savings accounts, I am now moving it into CDs and bonds that have nice returns which will result in a nice chunk of change. And if prices don't come down anytime soon, I am more than happy to keep renting. I think prices would need to drop by almost 40% before I would really consider buying at this point.
For context, I am in the Bay Area so it might be a somewhat unique situation to our market. But in the four years that I have been renting at this particular location, rents have not really moved much while house prices are up 50%.
[+] [-] adam_arthur|3 years ago|reply
Turns out “cash on the sidelines” disappears quite fast when assets broadly devalue.
Housing is correcting faster than GFC, though it remains to be seen if it ends up deeper. But when it falls at this pace, people start to get cold feet
[+] [-] dougmwne|3 years ago|reply
[+] [-] ramesh31|3 years ago|reply
Same. I dropped out of the market last year after refusing to take part in the insanity. No, I am not going to waive all contingencies, give you 5% earnest, and bid over appraisal, for the hope of having my offer selected. Hopefully this will change with the corporate money drying up.
[+] [-] d136o|3 years ago|reply
We had to work hard to avoid areas in SF that had been overbid. We didn’t find a bargain but we found a good deal, something that the prior owners needed to let go off but which wasn’t in a super popular area. This was in a hot market. So I think in the coming market you will find good opportunities.
So, as I obsess over listings today pondering if there might be an opportunity… I think that there will be good deals to be had, but not necessarily steals. In the Bay Area, people trip over themselves to live in a few neighborhoods so I think prices in those highly sought after areas won’t reach absolute bargain levels.
But If you are prepared and ready to step in you can already find properties that I think are marked down.
I’ve been watching closely dreaming of a place for our parents, or maybe more space for us, or maybe a rental…
Great SNL skit: https://youtu.be/yEfsaXDX0UQ
[+] [-] cableshaft|3 years ago|reply
Glad because everything is likely to crash at this point and we would certainly have an underwater mortgage, but not glad because with the more than doubled mortgage rate since we were looking, it'd be stupid to sell our current home and upgrade now (especially with prices still high), so now we feel stuck (granted, stuck in a home with a fairly cheap mortgage payment, so it could be worse, but stuck nonethless).
We also held off on refinancing during the super low mortgage rates, because we were pretty sure we were going to buy a new house so it would have just been wasted money, but now it's obvious it would have saved us some money. I had a feeling that would be the case, but my wife seemed adamant we were going to move last year (until we both got too busy with work), so I held off on pursuing it.
[+] [-] timmg|3 years ago|reply
In my case, I think it is increased AirBnB demand. Don't know if that will start to ebb.
[+] [-] SevenNation|3 years ago|reply
What you're missing is that when the bottom is in nobody will want to buy a house. They'll be way too terrified or plain incapable of acting. Afraid of losing their job. Of further declines. Of the bottom falling out of the economy. Of homelessness invading their area. Of they job they lost.
[+] [-] boringg|3 years ago|reply
If you want to see significant drops in pricing thats going to depend how the winter macro economic environment hits everyone. Next summer is when you will see movement is my suspicion.
[+] [-] importantbrian|3 years ago|reply
[+] [-] tristanb|3 years ago|reply
[+] [-] c7b|3 years ago|reply
[+] [-] colinmhayes|3 years ago|reply
[+] [-] stephencanon|3 years ago|reply
[+] [-] wefarrell|3 years ago|reply
However we did hedge that decision by buying my mother in law an apartment and essentially becoming her landlords. We timed it as well as we possibly could have and locked in 2.5% on a 30 year in December of 2020.
[+] [-] FollowingTheDao|3 years ago|reply
And what part of economic collapse do you all not get yet?
[+] [-] thenoblesquid|3 years ago|reply
[+] [-] TSiege|3 years ago|reply
[+] [-] 2fast4you|3 years ago|reply
[+] [-] wollsmoth|3 years ago|reply
[+] [-] nayuki|3 years ago|reply
https://techcrunch.com/2022/11/03/stripe-cuts-14-of-its-work... , https://www.cnbc.com/2022/11/09/meta-to-lay-off-more-than-11...
[+] [-] dboreham|3 years ago|reply
No. It's similar to how IPO commission is always 7%. It's a number between "so small it's not enough" and "so large the org can't function".
[+] [-] squokko|3 years ago|reply
[+] [-] system2|3 years ago|reply
[+] [-] peder|3 years ago|reply
[+] [-] type-r|3 years ago|reply
[+] [-] option|3 years ago|reply
[+] [-] boringg|3 years ago|reply
[+] [-] AlbertCory|3 years ago|reply
Back when they were at ridiculously low levels, I would tell people "Get a 15-year loan now! You'll be paying off principal as well as interest, real soon."
They'd object, reasonably, "Oh, I can't afford those payments!" So now with higher rates, what will they pay for that 30-year?
You can also object that nothing stops you from making extra principal payments, on top of your regular monthly payment. That's true. But will you?
Is all that incorrect? You can do this analysis in Excel or Google Sheets.
[+] [-] iknowSFR|3 years ago|reply
Redfin and Zillow are not the problems in the SFR industry. These are tech companies that were trying to capitalize on the PE flowing into SFR. Their lack of success is not an indicator for the industry as a whole.
Make no mistake about it: SFR is alive and well and increased rates will not hurt them. Most have paused acquisitions but their cash flow is still fantastic. The outcomes over the next 24 months will play in their favor and those companies will grow as the economy pulls back.
[+] [-] jedberg|3 years ago|reply
[+] [-] xfour|3 years ago|reply
[+] [-] rybosworld|3 years ago|reply
[+] [-] uoaei|3 years ago|reply
[+] [-] ThisIsTheWay|3 years ago|reply
[+] [-] yalogin|3 years ago|reply
The real estate prices and estimates clearly are on a downward trajectory. Previously redfin struggled to keep up with growing value in their estimates and so always came in lower to the asking price. Now they constantly come in higher.
[+] [-] cpursley|3 years ago|reply
This is what happens when you throw cheap money at smooth-talking tech-bros living in the coastal bubbles.
[+] [-] andrew_|3 years ago|reply
[+] [-] nonethewiser|3 years ago|reply
It's a feature of the 7.7% average mortgage rate, which is not great for buyers. Nothing stopping it from coming back when rates go down.
[+] [-] Bilal_io|3 years ago|reply
[+] [-] maram|3 years ago|reply
Did the story mention why?
[+] [-] sergiotapia|3 years ago|reply
[+] [-] onlyrealcuzzo|3 years ago|reply
You mean like the mortgage interest deduction, 30-year fixed (subsidized) rate, SALT, Prop 13, etc - that actually make the problem worse for new buyers?
[+] [-] magwa101|3 years ago|reply
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