All Encompassing Mortgage and Real Estate Thread

[Wulaw Horn 19074]

4 minutes ago, bluto said:

What’s going rate for appraisal cost these days? Standard single fam home in neighborhood, 1.25m value roughly. 

Depending on timeline and where it’s at?  $700-2000…

[Neonmoon 38129]

Tell me how a home with 25 offers over ask by 50K+ only appraises for list? 

[Gil Bang 25961]

Yeah, the appraisal is supposed to determine "most probable sales price".   The last listing I had went over by quite a bit.  It was a condo, so it was pretty easy to comp, and the comps were about 20% below contract price.   I met the appraiser, and had the offers in a binder, and showed them to him. 

[UTPhil2006 3807]

35 minutes ago, Neonmoon said:

Tell me how a home with 25 offers over ask by 50K+ only appraises for list? 

Appraisers and logic don’t go hand in hand 

[Neonmoon 38129]

47 minutes ago, Gil Bang said:

Yeah, the appraisal is supposed to determine "most probable sales price".   The last listing I had went over by quite a bit.  It was a condo, so it was pretty easy to comp, and the comps were about 20% below contract price.   I met the appraiser, and had the offers in a binder, and showed them to him. 

They don’t give a shit. The challenges never work. The system is flawed 
 

[LCHorn 2620]

Obviously experiences vary, but I think a lot of appraisers live in fear of their state board.  I’ve certainly had a handful threaten to report me to mine, like the TDSML is going to enforce anything other than license violations.  

[Gil Bang 25961]

It's USPAP than can use some frequent updating when the market is crazy.  Back when we were in the toilet and started working our way out, USPAP said that pending comps could be used, as they were more reflective of the market at the time. 

[UTPhil2006 3807]

Gotta love we've gotten to the point in the market where when you open it (down barely a point) and are like "well at least it isn't going up so far"

[Hmbre97 6308]

So what is everyone's thoughts on where rates are headed from here? I've already gotten fucked once last year trying to build a home when the builder went to a bidding system right before my spot in line came up. Now I found another builder that has shit I can afford but only if rates don't go crazy. My broker and I sat down in December running the numbers and said I should be go as long as we don't go much north of 4% and his opinion (along with every other article I read) was it might creep up to 4% by EOY 22 which is around when I'd be looking at closing. Now that we're above that in fucking February, can someone give me an idea if I am going to get fucked with no lube again? 

[Wulaw Horn 19074]

14 minutes ago, Hmbre97 said:

So what is everyone's thoughts on where rates are headed from here? I've already gotten fucked once last year trying to build a home when the builder went to a bidding system right before my spot in line came up. Now I found another builder that has shit I can afford but only if rates don't go crazy. My broker and I sat down in December running the numbers and said I should be go as long as we don't go much north of 4% and his opinion (along with every other article I read) was it might creep up to 4% by EOY 22 which is around when I'd be looking at closing. Now that we're above that in fucking February, can someone give me an idea if I am going to get fucked with no lube again? 

No lube at all!  
ehst kind of mortgage balance are you looking at carrying?  I ask bc that gives a sense of affordability at a movement in rates. Feel free to answer through PM if that’s more your speed. 
 

They are going to war over inflation. The numbers (YOY) should start to look a little better once we are comparing them to inflationary times from 12 months prior. That happens in March for the April report (in other words we should climb again in the report next month but then start to decline (so hopefully no numbers in the 7’s anymore). 
recession looks really likely. 2 year and 10 year yield are converging and then when they cross it’s almost always a recession. Fed raising interest rates is typically good for bond market which is typically good for your interest rate on your house. Everything should set up for us to say rates have peaked and will be stabilizing and maybe headed down. But, and this is a major but, the fed is talking about selling (perhaps very aggressively) their holdings in the MBS market.  That’s been the biggest driver of this in my opinion. Depending upon the pace that goes down is going to depend on if my optimistic scenario is correct. 
@Scipio says the beatings will continue until morale improves. I think @LCHornwould probably say I’m being overly optimistic here. Nobody knows obviously. I laid out the case for why it won’t be that bad for you. 
I’m not saying I’m right or have this nailed. This is a thing I think that I think. 

[Hmbre97 6308]

34 minutes ago, Wulaw Horn said:

No lube at all!  
ehst kind of mortgage balance are you looking at carrying?  I ask bc that gives a sense of affordability at a movement in rates. Feel free to answer through PM if that’s more your speed. 
 

They are going to war over inflation. The numbers (YOY) should start to look a little better once we are comparing them to inflationary times from 12 months prior. That happens in March for the April report (in other words we should climb again in the report next month but then start to decline (so hopefully no numbers in the 7’s anymore). 
recession looks really likely. 2 year and 10 year yield are converging and then when they cross it’s almost always a recession. Fed raising interest rates is typically good for bond market which is typically good for your interest rate on your house. Everything should set up for us to say rates have peaked and will be stabilizing and maybe headed down. But, and this is a major but, the fed is talking about selling (perhaps very aggressively) their holdings in the MBS market.  That’s been the biggest driver of this in my opinion. Depending upon the pace that goes down is going to depend on if my optimistic scenario is correct. 
@Scipio says the beatings will continue until morale improves. I think @LCHornwould probably say I’m being overly optimistic here. Nobody knows obviously. I laid out the case for why it won’t be that bad for you. 
I’m not saying I’m right or have this nailed. This is a thing I think that I think. 

Thanks for the reply and thorough explanation. My main concern is rates creeping up to 5%. I'm going new construction and am not under contract yet so this is TBD but looking at $375k purchase with 20% down so prob a loan of around $300k. My issue is I'm probably one of the lowest paid network engineers in the Austin metro so assuming I am still in the same spot come later this year/early next year when it comes time to close, my DTI is on a razor's edge for qualifiying conventional. I have some wiggle room for rates to creep a little but if they get up around 5%, then things get tricky.

[Wulaw Horn 19074]

16 minutes ago, Hmbre97 said:

Thanks for the reply and thorough explanation. My main concern is rates creeping up to 5%. I'm going new construction and am not under contract yet so this is TBD but looking at $375k purchase with 20% down so prob a loan of around $300k. My issue is I'm probably one of the lowest paid network engineers in the Austin metro so assuming I am still in the same spot come later this year/early next year when it comes time to close, my DTI is on a razor's edge for qualifiying conventional. I have some wiggle room for rates to creep a little but if they get up around 5%, then things get tricky.

Gotcha. 
can you move the needle on any of your debts?  
refinance cars, pay off credit cards, stuff like that?  
Every 1/8 of a point at that rate is going to be something like 20-25 right?  1 point is 160-200. Most people can get that taken care of on the debt side if they are not totally clean.  

[Muny_Tex 293]

Thanks for the reply and thorough explanation. My main concern is rates creeping up to 5%. I'm going new construction and am not under contract yet so this is TBD but looking at $375k purchase with 20% down so prob a loan of around $300k. My issue is I'm probably one of the lowest paid network engineers in the Austin metro so assuming I am still in the same spot come later this year/early next year when it comes time to close, my DTI is on a razor's edge for qualifiying conventional. I have some wiggle room for rates to creep a little but if they get up around 5%, then things get tricky.

I know this is a very difficult projection, but are we sure the market will sustain those same prices/demand for “entry level” homes in the presence of 5% rates?

I think there’s a certain segment of the Austin area market that is “rate-proof” due to investors/out-of-state cash buyers (e.g. Central/West); but if you’re looking at new construction under $400k I would guess you’re in a non-premium area like Manor or somewhere way South/East.

As such, I highly doubt you’re gonna be the only cat with DTI concerns in the ~5% rate scenario, especially if accompanied by a recession that is creating job disruption for mid-tier earners (which I think is unavoidable if Fed is serious about taking inflation); therefore complicating their loan approvals/underwriting requirements.

Also, if the recession and tight lending scenario holds true, are there really that many people at your price point that will be able to swing a no-shit 20% down payment?

In other words, I’m not sure you’re worse off taking a ~1-1.5% rate hike if it is paired with $40-$50k in purchase price reduction and/or softer competition for other properties…espec if an ace like Wulaw can get you refi’d down in a couple years once the smoke clears.

I am more bearish than the average bear, but I also know first-hand how broke 95% of “real world” American consumers are once you remove their ability to borrow without limitation.

I know the hard data supports a severe shortage of housing supply, and demographic inflow into CenTex is not stopping anytime soon….but if people simply can’t afford it anymore I don’t see how this level of appreciation is going to continue.


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[Muny_Tex 293]

Also, unsolicited advice: Don’t top out your DTI regardless of where you think the market is heading.

There’s a big difference between what you can borrow vs. what you can meaningfully afford...don’t sell your soul for the sake of this endeavor.

A lot will depend on your personality (along with your significant other if you have one), but being house poor can be a special type of miserable…espec if you end up buying at the “top” and don’t see any material appreciation for several years therefore keeping you “stuck” there indefinitely.

Home should be a sanctuary, not a prison…don’t take the bait and bust outside of your means.

The fact that you’ve accumulated 20% down despite moderate salary means you’re a hard worker and responsible human…keep that train rolling and find something (even if it’s a condo/townhouse) that will allow you to maintain peace of mind going forward.


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[Wulaw Horn 19074]

1 hour ago, Muny_Tex said:

Also, unsolicited advice: Don’t top out your DTI regardless of where you think the market is heading.

There’s a big difference between what you can borrow vs. what you can meaningfully afford...don’t sell your soul for the sake of this endeavor.

A lot will depend on your personality (along with your significant other if you have one), but being house poor can be a special type of miserable…espec if you end up buying at the “top” and don’t see any material appreciation for several years therefore keeping you “stuck” there indefinitely.

Home should be a sanctuary, not a prison…don’t take the bait and bust outside of your means.

The fact that you’ve accumulated 20% down despite moderate salary means you’re a hard worker and responsible human…keep that train rolling and find something (even if it’s a condo/townhouse) that will allow you to maintain peace of mind going forward.


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There is a TON to like in this post and it’s a conversation I have with all my younger and high DTI people. A few things to go in a bit of a different direction with the understanding that is great advice:

1) what are your long term job prospects? . I often tell people that they will likely never be more poor than they are today. What are your prospects to earn better etc?

2) don’t be in love with 20% down if you can use some of that money to clean up other stuff in your life. I’d rather you be completely debt free and owe 90% on your house, in most situations, than carry shitty consumer debt and only owe 80%. Pmi is irritating but it’s a tool and not the end of the world. Don’t let pmi avoidance cause a bad financial decision  

Edited February 17, 2022 by Wulaw Horn

[KYHorn 17076]

14 hours ago, Wulaw Horn said:

No lube at all!  
ehst kind of mortgage balance are you looking at carrying?  I ask bc that gives a sense of affordability at a movement in rates. Feel free to answer through PM if that’s more your speed. 
 

They are going to war over inflation. The numbers (YOY) should start to look a little better once we are comparing them to inflationary times from 12 months prior. That happens in March for the April report (in other words we should climb again in the report next month but then start to decline (so hopefully no numbers in the 7’s anymore). 
recession looks really likely. 2 year and 10 year yield are converging and then when they cross it’s almost always a recession. Fed raising interest rates is typically good for bond market which is typically good for your interest rate on your house. Everything should set up for us to say rates have peaked and will be stabilizing and maybe headed down. But, and this is a major but, the fed is talking about selling (perhaps very aggressively) their holdings in the MBS market.  That’s been the biggest driver of this in my opinion. Depending upon the pace that goes down is going to depend on if my optimistic scenario is correct. 
@Scipio says the beatings will continue until morale improves. I think @LCHornwould probably say I’m being overly optimistic here. Nobody knows obviously. I laid out the case for why it won’t be that bad for you. 
I’m not saying I’m right or have this nailed. This is a thing I think that I think. 

One would think the fed would see the skyrocketing rates and think "maybe we shouldn't drive those even higher by selling MBS"... right?

Assuming you're correct, when do you see the peak of the rates occurring?

[Wulaw Horn 19074]

1 hour ago, KYHorn said:

One would think the fed would see the skyrocketing rates and think "maybe we shouldn't drive those even higher by selling MBS"... right?

Assuming you're correct, when do you see the peak of the rates occurring?

Hopefully last Friday.  I think there’s a possible argument for that. Fed minutes were not as terrifying as many had feared- I think inflation peaks next month (the YOY number) and starts to decline, and fed raising interest rate should help interest rates on mortgage side. If not last Friday then maybe in the next month or so. I think I might be the Lone Ranger on this though. I recommend that everyone working with a broker take a lock now in case I’m wrong and monitor the market during the process for another jumping off point. 
Also- If I’m right then the strategy should be take an even higher interest rate than the market is offering right now with all your closing costs paid for by your lender (if you have a bigger loan and can do this for 1/4 of a point) because you will have an opportunity to redo the deal a couple years (or months) down the line so the rate is less important than what you paid for it, and what you will have wanted to pay for it is zero if you are out of the deal in 6 months or a year. If I’m wrong, well, you didn’t pay for closing costs. Invest that in an index fund and come out ahead even if you are paying $60 or $80 a month more. 

[UTPhil2006 3807]

2 hours ago, KYHorn said:

One would think the fed would see the skyrocketing rates and think "maybe we shouldn't drive those even higher by selling MBS"... right?

Assuming you're correct, when do you see the peak of the rates occurring?

Short answer no one knows.  If we did, we'd be a lot richer.  Gun to my head prediction? 4.5.  That being said, thank the unemployed, huge dump on the 10 year based on jobless claims, and the Fed Minutes had already been priced in so we already survived that as well.  

[jimmyjazz 45963]

Let me chime in from the cheap seats, as per usual:  4.5% is a great rate, historically speaking:

[Wulaw Horn 19074]

11 minutes ago, jimmyjazz said:

Let me chime in from the cheap seats, as per usual:  4.5% is a great rate, historically speaking:

Historically that’s absolutely correct. It’s pretty high for the last decade. You can see there’s only one little spot there (2018) where we were cruising along above that this past decade. 
I expect that for lots of reasons most of my career (I’ve got 20 or so years left) will see rates trade between 3 and 5. 

Edited February 17, 2022 by Wulaw Horn

[jimmyjazz 45963]

12 minutes ago, Wulaw Horn said:

Historically that’s absolutely correct. It’s pretty high for the last decade. You can see there’s only one little spot there (2018) where we were cruising along above that this past decade. 
I expect that for lots of reasons most of my career (I’ve got 20 or so years left) will see rates trade between 3 and 5. 

Without getting political, let's emphasize that point:  rates were higher for part of 2018.  I imagine the average American has no idea this is the case.

[Wulaw Horn 19074]

6 minutes ago, jimmyjazz said:

Without getting political, let's emphasize that point:  rates were higher for part of 2018.  I imagine the average American has no idea this is the case.

So, typically, higher interest rates aren’t a bad thing in that they are usually a sign of a robust economy. You can see the flip side of that very clearly with rates dropping during all the recessions after the 1972 recession. You can also see it when every time a bad jobs report comes out, if international strife, or any other negative event the interest rate market gets better. The converse is true- good and expansionary economic times with good employment and growth leads, typically, to higher rates. 
Being in the real estate market for the last 20 years has made me feel ba son the sense of bad things happening (9/11, Great Recession and Covid) have led to good times for me. 
Basically, my bet is that with the shrinking of the world, more economies continuing to open up, outsourcing and a whole host of other things that will keep inflation and wages and thus interest rates low. 
the current inflation is obviously a very unique confluence of events and I think we will see this as a historical abnormality when looking at that chart extended 25 years into the future. 

[jimmyjazz 45963]

To piggyback on my last point, I downloaded the weekly 30-year rates from the St. Louis FED, averaged them (3.78%), and charted them, and it shows just how nominal things are AT THE MOMENT.  Beyond that, over the decade, there have been 250 weeks BELOW average and 272 weeks ABOVE average.  So, it's not uncommon.

[Wulaw Horn 19074]

17 minutes ago, jimmyjazz said:

To piggyback on my last point, I downloaded the weekly 30-year rates from the St. Louis FED, averaged them (3.78%), and charted them, and it shows just how nominal things are AT THE MOMENT.  Beyond that, over the decade, there have been 250 weeks BELOW average and 272 weeks ABOVE average.  So, it's not uncommon.

Yep. I was talking about Phil’s guess at 4.5 to end the year, obviously if you move the target there almost the entire decade would be below that figure. 
Also, it’s not the number it’s how steep the slope is. Mike straight home. You only see that one other time around 8/13 or so. So- to move this far this fast is pretty dang unusual. 
thanks for the charts. Great stuff! 

[Johnny Chimpo 478]

Looks like the opposite of stock price movements, go figure. Instead of an escalator up and an elevator down, it’s the opposite. 

[Mother mopar 3319]

Lot of good info/takes today. My uneducated thoughts are folks got used to low rates and suckling on that teat and now that that monetary fed milk bag isn't producing as much people are going to be upset as it "dries" up. Reminds me of weaning calves off their mommas.

[KYHorn 17076]

8 minutes ago, Mother mopar said:

Lot of good info/takes today. My uneducated thoughts are folks got used to low rates and suckling on that teat and now that that monetary fed milk bag isn't producing as much people are going to be upset as it "dries" up. Reminds me of weaning calves off their cows.

Right, but as Wulaw has said, it's the speed with which the change has happened that most (at least I- as someone actively looking) take issue with. Not to mention, sudden changes are rarely a positive thing in the economy. So, weaning would be fine. This... not so much.

[Gil Bang 25961]

Help...I'm having brain freeze.  

Assume Alpha and Gamma are adjacent lots.  Gamma  has an easement to drive over Alpha to get to the road. Alpha has no rights to Gamma. 

  Alpha is the "burdened" property, but what is Gamma?   I want to say "beneficiary property" but that doesn't seem right and I know there's a more appropriate term. 

[Wulaw Horn 19074]

12 minutes ago, Gil Bang said:

Help...I'm having brain freeze.  

Assume Alpha and Gamma are adjacent lots.  Gamma  has an easement to drive over Alpha to get to the road. Alpha has no rights to Gamma. 

  Alpha is the "burdened" property, but what is Gamma?   I want to say "beneficiary property" but that doesn't seem right and I know there's a more appropriate term. 

Master   That’s probably no longer politically correct but I want to say that’s how I learned it in property law school class almost 22 years ago. Maybe dominant?  

[gmr548 16580]

1 hour ago, Gil Bang said:

Help...I'm having brain freeze.  

Assume Alpha and Gamma are adjacent lots.  Gamma  has an easement to drive over Alpha to get to the road. Alpha has no rights to Gamma. 

  Alpha is the "burdened" property, but what is Gamma?   I want to say "beneficiary property" but that doesn't seem right and I know there's a more appropriate term. 

Gamma is the alpha, Alpha is the beta.

 

$9.95 plz

[Gil Bang 25961]

Looks like "dominant" or "benefited" is the current verbage. 

[UTPhil2006 3807]

Solid last 2 days to end the week after last weeks beating.

[Guest]

So I'm a bit confused (as I'm sure everyone is) about not just soaring housing prices but also rents. Seeing headlines about rents rising 20%, and not just in high demand places like Austin. What the heck is behind that?

There isn't some huge wave of household formation. I know millennials are moving into the "buying a house" phase, but rents rising on a regular old apartment?

[Wulaw Horn 19074]

52 minutes ago, FirstTimeCaller said:

So I'm a bit confused (as I'm sure everyone is) about not just soaring housing prices but also rents. Seeing headlines about rents rising 20%, and not just in high demand places like Austin. What the heck is behind that?

There isn't some huge wave of household formation. I know millennials are moving into the "buying a house" phase, but rents rising on a regular old apartment?

Valuations going up mean bigger tax bills mean more carrying costs mean inflationary pressures on rents. 
Also, we talked about 3 or 4 pages up thread the slow down in additional supply from the Great Recession and not building enough housing over the past decade. 
population growth triggered with supply not expanding enough triggered with greater ownership carrying costs mean higher rents. 

[Guest]

6 minutes ago, Wulaw Horn said:

Valuations going up mean bigger tax bills mean more carrying costs mean inflationary pressures on rents. 
Also, we talked about 3 or 4 pages up thread the slow down in additional supply from the Great Recession and not building enough housing over the past decade. 
population growth triggered with supply not expanding enough triggered with greater ownership carrying costs mean higher rents. 

I can see the first part.

The second part I don't buy. Population growth was nil last year. Housing shortage growing over the last decade? Absolutely, and we had seen that in the steady increase in prices. But it's not like there was all the sudden some population boom that set off this price explosion in rents.

[Wulaw Horn 19074]

3 minutes ago, FirstTimeCaller said:

I can see the first part.

The second part I don't buy. Population growth was nil last year. Housing shortage growing over the last decade? Absolutely, and we had seen that in the steady increase in prices. But it's not like there was all the sudden some population boom that set off this price explosion in rents.

It’s cumulative pressure in an upward direction though. And vivid shut down pretty much all. Holding while also driving up demand to “have your own space”. It’s not any one thing it’s lots of things. 

[Muny_Tex 293]

With regard to rent prices, is there some sort of red flag indicator that states “market is at risk of bubble when equivalent mortgage cost is X% or $XXX higher per month than market rent price?”

You can rent new construction in Manor (Shadow Glen) for $2,150/mo, but neighborhood sale comps are now $375K…

You can rent a 1980-era 1/1 in North Burnet for $1200/mo, but recent sales in same complex are now starting at $240k (+$200/mo HOA)…

Back of the envelope on both purchases (10% down @ 4.0 rate for 30-yrs), say it costs you about $500 more per month to “own” either property than it does to rent them.

Does that align with historical norms for Austin?

Isn’t that kind of a lousy deal when you are already having to make a sizable upfront cash commitment for that privilege?

I guess if you’re 100% committed to occupying for 10+ years you’re ultimately better off…but seems like it used to be much more of a slam-dunk decision to buy?


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[Wulaw Horn 19074]

4 minutes ago, Muny_Tex said:

With regard to rent prices, is there some sort of red flag indicator that states “market is at risk of bubble when equivalent mortgage cost is X% or $XXX higher per month than market rent price?”

You can rent new construction in Manor (Shadow Glen) for $2,150/mo, but neighborhood sale comps are now $375K…

You can rent a 1980-era 1/1 in North Burnet for $1200/mo, but recent sales in same complex are now starting at $240k (+$200/mo HOA)…

Back of the envelope on both purchases (10% down @ 4.0 rate for 30-yrs), say it costs you about $500 more per month to “own” either property than it does to rent them.

Does that align with historical norms for Austin?

Isn’t that kind of a lousy deal when you are already having to make a sizable upfront cash commitment for that privilege?

I guess if you’re 100% committed to occupying for 10+ years you’re ultimately better off…but seems like it used to be much more of a slam-dunk decision to buy?


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Only real benefit to ownership is, you know, actually owning that appreciating asset and the reduction that comes from mortgage of renter paying your mortgage. Being in the ownership class is obviously key to growing wealthy, and if someone else can pay the monthly hassle of that it’s great. 
but taking out anything other than what is a short term benefit to how I can live cheapest/best?  Rent away. 

[jimmyjazz 45963]

I have a couple of close friends who are slowly building rental empires.  They are extremely picky when it comes to pulling the trigger on a new property.  I don't know the exact ratios, but simply being cash flow positive is nowhere near good enough for them.  So, given that, I assume that the flip side is a negative for the renter.  Does it just come down to renters not being able to qualify for a loan, or do they not try, or is it mostly a matter of the buyer striking the right deal at the right time?

[Dbeasy 15052]

Having been around Texas real estate for over thirty years and being in it as an investor and real estate agent, there is something not quite adding up in regards to the rapid increase in home prices and now rents. 
 
As explained earlier, Austin should be seeing significant pressure because of the rapid increase in people migrating to the area combined with a lack of available home inventory.

However, almost every major metro area is seeing similar strong upward pressures. The inflation concerns have definitely caused investors to go pay much more for hard assets, but at the end of the day, occupancy rates in apartment and home rental properties are what ultimately drives the price up or down, and here is where something doesn’t smell right. 

Many metro areas don’t have the population pressure Austin and Dallas have and yet rents are moving up rapidly there too. Yes there has been some supply constraints in new builds, but the sudden rapid upward price movements is unusual for what is a chronic problem.

My Multifamily real estate partner believes that all of the government actions of the last two years that have prohibited apartment owners from evicting tenants has created an artificial supply scarcity. They can’t get people out who aren’t paying. That is slowly coming to an end and evictions will be now happening with regularity soon.  Once that supply is available, it will be interesting to see what happens to rent prices. Similarly, I saw house price pressure drop precipitously for a few months before resuming again this last few months  

I believe we may see extremely volatile prices in the next 12-24 months  

 

[Wulaw Horn 19074]

1 hour ago, Dbeasy said:

Having been around Texas real estate for over thirty years and being in it as an investor and real estate agent, there is something not quite adding up in regards to the rapid increase in home prices and now rents. 
 
As explained earlier, Austin should be seeing significant pressure because of the rapid increase in people migrating to the area combined with a lack of available home inventory.

However, almost every major metro area is seeing similar strong upward pressures. The inflation concerns have definitely caused investors to go pay much more for hard assets, but at the end of the day, occupancy rates in apartment and home rental properties are what ultimately drives the price up or down, and here is where something doesn’t smell right. 

Many metro areas don’t have the population pressure Austin and Dallas have and yet rents are moving up rapidly there too. Yes there has been some supply constraints in new builds, but the sudden rapid upward price movements is unusual for what is a chronic problem.

My Multifamily real estate partner believes that all of the government actions of the last two years that have prohibited apartment owners from evicting tenants has created an artificial supply scarcity. They can’t get people out who aren’t paying. That is slowly coming to an end and evictions will be now happening with regularity soon.  Once that supply is available, it will be interesting to see what happens to rent prices. Similarly, I saw house price pressure drop precipitously for a few months before resuming again this last few months  

I believe we may see extremely volatile prices in the next 12-24 months  

 

That’s a really interesting point and I think you might be on to something rent wise. 
 

you in houston? Like South, Brazoria and Fort Bend county?

 

as a north side of houston guy I know the rent all up and down the 45 corridor from the woodlands to Huntsville, and now NE in kingwood/humble out is having a population surge. Housing is tight here and I don’t necessarily see anything nefarious going on. 
 

our church in Kingwood did a big expansion 3 or 4 years ago. Basically they said everyone they were talking to said the area was going to add a ton of population and they needed to expand capacity if they were going to keep serving the same amount of area. It’s certainly seen population grow as they expected it to. They aren’t advertising on TV or doing major pushes to go bring in other people. I get the sense it’s organic and just more people in the area so more people show up. 
 

[Neonmoon 38129]

The eviction moratorium ended in August 2021. Loan forbearance ended July 2021. Are landlords still waiting to evict people for some reason? That doesn’t make sense to me, but maybe it takes a while for it to happen? I know lenders will try to a workout agreement or modification remedies first before foreclosure proceedings. Is there some pending foreclosure wave still? 

I still see this as a supply issue. Not enough houses. Too many buyers. The question is why? We’ve already discussed the dearth of home building since the Great Recession and the population continued to grow over the last decade. Many argue government handouts increased homebuyers but I’ve yet to meet a borrower that could afford a house all of the sudden because of stimulus money. I’m sure it helped someone though. 

I think a subtle variable of the pandemic was the amount of movement. People talk about the Great Resignation, and it’s impacts on employers, but one impact is people moved to different cities. Yes, people have always moved, but not to this extent. The pandemic caused people to rethink their lives and make bold moves. This increased the amount of buyers. Not all these movers owned a home when they made this big life change. So it wasn’t a 1 for 1 exchange. 

 

 

 

[LCHorn 2620]

3 hours ago, Muny_Tex said:

With regard to rent prices, is there some sort of red flag indicator that states “market is at risk of bubble when equivalent mortgage cost is X% or $XXX higher per month than market rent price?”

You can rent new construction in Manor (Shadow Glen) for $2,150/mo, but neighborhood sale comps are now $375K…

You can rent a 1980-era 1/1 in North Burnet for $1200/mo, but recent sales in same complex are now starting at $240k (+$200/mo HOA)…

Back of the envelope on both purchases (10% down @ 4.0 rate for 30-yrs), say it costs you about $500 more per month to “own” either property than it does to rent them.

Does that align with historical norms for Austin?

Isn’t that kind of a lousy deal when you are already having to make a sizable upfront cash commitment for that privilege?

I guess if you’re 100% committed to occupying for 10+ years you’re ultimately better off…but seems like it used to be much more of a slam-dunk decision to buy?


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In my experience you typically need to be at 30%-40% equity for a SFR to cash-flow in Austin and it was worse prior to 2021 (rents seemed to catch up a bit last year).  Austin has always been an appreciation play.  
 

Multifamily was better and that’s why it’s never for sale unless it’s just about to fall down or someone got murdered in one of the units.  That and you can’t build it (I used to blame the City of Austin until I looked around at the suburbs and none of them wanted multifamily development there, either).  

[LCHorn 2620]

9 minutes ago, Neonmoon said:

The eviction moratorium ended in August 2021. Loan forbearance ended July 2021. Are landlords still waiting to evict people for some reason? That doesn’t make sense to me, but maybe it takes a while for it to happen? I know lenders will try to a workout agreement or modification remedies first before foreclosure proceedings. Is there some pending foreclosure wave still? 

I still see this as a supply issue. Not enough houses. Too many buyers. The question is why? We’ve already discussed the dearth of home building since the Great Recession and the population continued to grow over the last decade. Many argue government handouts increased homebuyers but I’ve yet to meet a borrower that could afford a house all of the sudden because of stimulus money. I’m sure it helped someone though. 

I think a subtle variable of the pandemic was the amount of movement. People talk about the Great Resignation, and it’s impacts on employers, but one impact is people moved to different cities. Yes, people have always moved, but not to this extent. The pandemic caused people to rethink their lives and make bold moves. This increased the amount of buyers. Not all these movers owned a home when they made this big life change. So it wasn’t a 1 for 1 exchange. 

 

 

 

I share @Wulaw Horn’s point that it’s multiple reasons, but your point about migration isn’t just limited to domestic migration (in terms of capital).  This is anecdotal but I think the movement of people from the classic urban metropolises to the sunbelt or elsewhere is underestimating the number of departures, in part because foreign investors are buying a significant amount of the sold housing.  

[Wulaw Horn 19074]

4 minutes ago, LCHorn said:

I share @Wulaw Horn’s point that it’s multiple reasons, but your point about migration isn’t just limited to domestic migration (in terms of capital).  This is anecdotal but I think the movement of people from the classic urban metropolises to the sunbelt or elsewhere is underestimating the number of departures, in part because foreign investors are buying a significant amount of the sold housing.  

This is absolutely also true. 

[Dbeasy 15052]

19 minutes ago, Neonmoon said:

The eviction moratorium ended in August 2021. Loan forbearance ended July 2021. Are landlords still waiting to evict people for some reason? That doesn’t make sense to me, but maybe it takes a while for it to happen? I know lenders will try to a workout agreement or modification remedies first before foreclosure proceedings. Is there some pending foreclosure wave still? 

I still see this as a supply issue. Not enough houses. Too many buyers. The question is why? We’ve already discussed the dearth of home building since the Great Recession and the population continued to grow over the last decade. Many argue government handouts increased homebuyers but I’ve yet to meet a borrower that could afford a house all of the sudden because of stimulus money. I’m sure it helped someone though. 

I think a subtle variable of the pandemic was the amount of movement. People talk about the Great Resignation, and it’s impacts on employers, but one impact is people moved to different cities. Yes, people have always moved, but not to this extent. The pandemic caused people to rethink their lives and make bold moves. This increased the amount of buyers. Not all these movers owned a home when they made this big life change. So it wasn’t a 1 for 1 exchange. 

 

 

 

That’s what I thought but apparently there are local and state actions that have extended protections even longer, such as below

 

https://amp.statesman.com/amp/9038890002

[Neonmoon 38129]

29 minutes ago, Dbeasy said:

That’s what I thought but apparently there are local and state actions that have extended protections even longer, such as below

 

https://amp.statesman.com/amp/9038890002

That’s true, but it’s not universal. Some are, some not. 

https://www.cnbc.com/2021/11/12/these-are-the-states-and-cities-where-evictions-are-still-banned-.html

 

[gmr548 16580]

So I'm a bit confused (as I'm sure everyone is) about not just soaring housing prices but also rents. Seeing headlines about rents rising 20%, and not just in high demand places like Austin. What the heck is behind that?
There isn't some huge wave of household formation. I know millennials are moving into the "buying a house" phase, but rents rising on a regular old apartment?

Supply and demand. Not enough homes for buyers keeps more households renting for longer. Corresponding rental supply not added = price spikes.

[gmr548 16580]

Valuations going up mean bigger tax bills mean more carrying costs mean inflationary pressures on rents. 
Also, we talked about 3 or 4 pages up thread the slow down in additional supply from the Great Recession and not building enough housing over the past decade. 
population growth triggered with supply not expanding enough triggered with greater ownership carrying costs mean higher rents. 

Property taxes are not a driving force on rising apartment rents. On a large multifamily building they’re often not even the largest opex line item. Rents are going up because the demand for housing is such that people will pay it.

Smaller landlords that have a single rental house or a couple units or something, sure, bigger part of the equation. Though demand for rental SFH is also through the roof. Large apartment buildings? Not even close to enough to drive the kind of increases we’ve seen.

[Guest]

7 minutes ago, gmr548 said:

Supply and demand. Not enough homes for buyers keeps more households renting for longer. Corresponding rental supply not added = price spikes.

Again though, why so much more demand now versus 2019? Population growth has been historically low during COVID. Are there that many more households being formed?

I get it in a place like Austin that's seeing a huge influx of people. But seems like rents are rising everywhere from small towns to highly desirable cities.

Edited February 21, 2022 by FirstTimeCaller