House prices falling like woah

[Parliament 14234]

This topic was broached in another thread and God help me I can't find it.  Seems like a big thing, and I think it deserves its own thread.

Mortgage rates are going bonkers and it WILL drive home prices down.  And it might start with new home prices.  When you sign your contract to build a house, you can't lock in your mortgage rate; can't do that until the house is done.  When interest rates go up, your mortgage payment goes up, and you may not be approved for the mortgage on your brand new house.  I spoke with my mom (no pics), a retired banker.  She comfirmed the above and we did some math:

Mortgage amount: $350k

30 year mortgage rate 15 months ago: $2.95%

30 year morgate rate now (mid-October actually, the most recent I can find): 6.85%

When you were planning your house, your payment woulda been $1466/month.  Now as your house is almost done, and it's time to get a mortgage, you gotta pay 6.85%; $2293/month; $10k/yr more than you planned.  Can you afford that?  Will you be approved?  Will you/your bank hafta sell a brand new house, and at a much lower price thant $350k?

If so, that buyer is gonna need a bargain.  To get the original $1466 mortgage, at today's interest rate, they need to get you down to $221k, a drop of $129k.  (I'm not using the down-payment in the example. Makes the math easier, but doesn't change the reality.)

Please check my math and conclusions.  That all seems kinda bad.

 

[Firemans4Horn 18034]

[Hefeweizen 5310]

Hmm big thing missing is that we’re still short houses.  So if buyers can’t qualify, maybe someone else is buying them and leasing (rent) to the non qualifying buyers?

 

I don’t see pressure down on land prices, or construction, yet.  Without those the house prices aren’t coming down.

[bluto 4912]

I don’t think Texas metros will see a fall in prices, but am seeing a plateau/stall lately. Still pretty high on prices. 

[WBT 20561]

Higher interest rates have to drive down prices eventually.

[Patron 230]

That's the point, the Fed needs to make payments less affordable in order to stop people from continuing this orgy of FOMO. Then prices will fall until such a point at which the Fed either starts cutting rates or prices crash enough to make payments affordable despite high rates.

[jimmyjazz 45880]

A huge factor in price stability is the fact that most homeowners aren't willing to get out of a historically low interest rate and take on a rate that could be 2X that amount.  Some people have to move, sure, but a lot of people who MIGHT otherwise move are instead putting money into renovations, etc.  This continues to suppress supply, roughly offsetting reduced demand.

Rates bottomed out almost two years ago, and began a slow climb that really started to take off early this year.  Home prices (S&P/Case-Shiller Index) didn't peak until June and they're currently less than 3% off that peak.  I'm skeptical that prices will plummet from here, given the downward trend in rates combined with what is typically a spring pricing bump.  We'll see.  In cities like Austin, there is a significant short supply that doesn't appear to be close to resolving itself, so that comes into play, too, depending on where one lives.

[NotActuallyALonghorn 4974]

1 hour ago, bluto said:

I don’t think Texas metros will see a fall in prices, but am seeing a plateau/stall lately. Still pretty high on prices. 

I think a lot of the big metro areas are still growing enough to support these prices for now, but small town Texas has seen the same crazy price increases despite there being no underlying reason for them other than prices have increased in the city. It wasn't sustainable before inflation really took off, and it isn't sustainable now. Lower end wages in these areas have increased, but not the wages of most of the folks who would be buying these homes. As factors like in the OP set in, and as people who stretched their budget before inflation to buy a house in these areas that was 40% than the previous year start to feel the pain, I expect there will be a reckoning. Will it work it's way into the cities that are growing? I dunno. But for small town Texas there really isn't a good way out of this.

[Patron 230]

Yeah, I was shocked when I saw the increase in home prices in Amarillo a year or so ago. We had numerous properties in the area and just decided to sell them off. I don't know whats going to happen up there.

Edited December 5, 2022 by Patron

[Rimbo 25910]

The issue is that homes aren't being bought by people; companies are buying them up and renting them out. These companies can then charge more for rent than they have to pay for a mortgage, even with the increased interest rates. So the banks make more money and the companies make more money... and get tax breaks intended for families, while regular people get fucked.

[Guest]

My middle of the road 3/2 '80s build here in Austin hit a peak of $700K. It's dropped in price (I check the average of RedFin/Zillow once a month and find them in line with what I see things sell for) to around 550K. That's a 20%+ drop in less than a year.

The drop seemed to have slowed a couple of months ago and now resumed again.

[Guest]

The notion of higher interest rates driving down prices makes me laugh, not because it isn't sound in theory; but rather it assumes buyers will miraculously, suddenly discipline themselves to stay within a budget.

That isn't how this shit works.  Not by a long shot.

[Parliament 14234]

9 hours ago, bluto said:

I don’t think Texas metros will see a fall in prices, but am seeing a plateau/stall lately. Still pretty high on prices. 

Median home prices are down $152,000 in Frisco, $115,000 in Plano, and $110,000 in Irving from their springtime highs, according to a city-by-city analysis.

Median prices for single-family houses are down $90,000 in McKinney, $72,000 in Dallas, $67,500 in Richardson, $40,000 in Fort Worth, $37,000 in Denton, and $26,000 in Arlington from their peaks earlier this year, according to AgentStory, a tech company that pulled home price data in select North Texas cities at the request of the Dallas Business Journal.

The data shows sharp variations in how much median home prices have dropped from their peaks in the spring in cities across North Texas.

In Frisco, the median home price stood at $598,000 in October, down from a peak of $750,000 in March.

Plano’s median home price plunged to $450,000 last month from a high of $565,000 in April.

In Irving, where prices have bounced up and down more than most cities, the median price was $374,700 in October. That’s down from a peak median home price of $485,000 in May, but up from $340,000 in September.

The Texas housing market has cooled quickly not only in terms of pricing, but sales volume, said Jon Cardella, co-founder and CEO of AgentStory.

https://www.wfaa.com/article/money/business/home-prices-have-plunged-in-dallas-fort-worth-metroplex/287-e7f3697d-df01-4298-b653-d49dec603cea

37 minutes ago, slorch said:

The notion of higher interest rates driving down prices makes me laugh, not because it isn't sound in theory; but rather it assumes buyers will miraculously, suddenly discipline themselves to stay within a budget.

 

What about people who were at the max a year ago?  Seems today they wouldn't qualify for a loan.

[Guest]

2 minutes ago, Parliament said:

Median home prices are down $152,000 in Frisco, $115,000 in Plano, and $110,000 in Irving from their springtime highs, according to a city-by-city analysis.

Median prices for single-family houses are down $90,000 in McKinney, $72,000 in Dallas, $67,500 in Richardson, $40,000 in Fort Worth, $37,000 in Denton, and $26,000 in Arlington from their peaks earlier this year, according to AgentStory, a tech company that pulled home price data in select North Texas cities at the request of the Dallas Business Journal.

The data shows sharp variations in how much median home prices have dropped from their peaks in the spring in cities across North Texas.

In Frisco, the median home price stood at $598,000 in October, down from a peak of $750,000 in March.

Plano’s median home price plunged to $450,000 last month from a high of $565,000 in April.

In Irving, where prices have bounced up and down more than most cities, the median price was $374,700 in October. That’s down from a peak median home price of $485,000 in May, but up from $340,000 in September.

The Texas housing market has cooled quickly not only in terms of pricing, but sales volume, said Jon Cardella, co-founder and CEO of AgentStory.

https://www.wfaa.com/article/money/business/home-prices-have-plunged-in-dallas-fort-worth-metroplex/287-e7f3697d-df01-4298-b653-d49dec603cea

What about people who were at the max a year ago?  Seems today they wouldn't qualify for a loan.

Buy a smaller house?

 

Weird, I know...

[Incredulity 11649]

3 hours ago, Rimbo said:

and get tax breaks intended for families

Are you claiming that corporations can take the home mortgage interest deduction?

[txduck87 985]

Buy a smaller house?
 
Weird, I know...

Fucking crazy talk man. This is America. Leverage up baby and keep up with those Jones’s.

[Captainant 27625]

29 minutes ago, Incredulity said:

Are you claiming that corporations can take the home mortgage interest deduction?

Their ownership of that property prevents a family from otherwise claiming that credit, increasing the tax burden on individuals relative to corporations. Even more so, of course. 

[Guest]

1 hour ago, slorch said:

The notion of higher interest rates driving down prices makes me laugh, not because it isn't sound in theory; but rather it assumes buyers will miraculously, suddenly discipline themselves to stay within a budget.

That isn't how this shit works.  Not by a long shot.

Except the data doesn't show that at all. The monthly carrying cost has shot up and sales have plummeted. 

[Viking 301]

New home prices for starter homes are still crazy high to me. 3/2 2100 sqft in Mansfield going for just under 500k like this https://www.realtor.com/realestateandhomes-detail/Foundry_South-Pointe-Cottage-Series_1700-Burney-Street_Mansfield_TX_76063_P417000615818

Fucking Mansfield. Not Plano or Southlake or some rich suburb that is built out.

I can afford these prices but I worry about my kids. They'll need to get married and both make 6 figures to afford a home.

[Hmbre97 6305]

Prices have most certainly fallen here in the Greater Austin area. I've had a standing MLS search for anything in Williamson county <$350k for a year+ now. Up until spring of this year, I would see the occasional teardown pop up but I'd go weeks between anything popping up. Fast forward to now and my inbox is flooded with listings, many taking price drops after sitting on the market.  

[hornbri 1394]

30 minutes ago, FirstTimeCaller said:

Except the data doesn't show that at all. The monthly carrying cost has shot up and sales have plummeted. 

Exactly - this is working exactly as the FED is intending it to (in this area at least)

[Incredulity 11649]

33 minutes ago, Captainant said:

Their ownership of that property prevents a family from otherwise claiming that credit, increasing the tax burden on individuals relative to corporations. Even more so, of course. 

 

He said plainly corporations, “get tax breaks intended for families”.  That is incorrect. 
 

Isn’t individual property ownership anathema to your beliefs?

[YGIFS 19449]

I follow the macro trends nationwide, but didn’t know what to make of Austin.  Our HOA has had three sales since the beginning of the school year/market dip.  It’s only a little over 100 homes.  One was a demo/grounDup spec, one was mostly overhauled, and one was just as is.  Different sizes and lots and finish outs, I get it.  But the spread is literally $400/foot difference between the 3.  Bottom, $200/foot more, and then another $200/foot more.  It’s anecdotal but that’s an insane fucking spread for this sub market.  The appraisals I got for our HELOC literally by 25%.  How the fuck is thst possible?  Ain’t all waiting on the Fed. 

[Neonmoon 38129]

The Fed lowered rates during pandemic to bolster demand and save economy. It created too much demand after pandemic which resulted in higher inflation. The Fed increased interest rates to lessen demand. House prices lowering due to less demand is one of the signs it’s working. 

[Guest]

1 hour ago, FirstTimeCaller said:

Except the data doesn't show that at all. The monthly carrying cost has shot up and sales have plummeted. 

Didn't we run out of homes though too?

There are more factors than just the interest rate, but I must agree it contributes.

[Guest]

1 hour ago, Viking said:

New home prices for starter homes are still crazy high to me. 3/2 2100 sqft in Mansfield going for just under 500k like this https://www.realtor.com/realestateandhomes-detail/Foundry_South-Pointe-Cottage-Series_1700-Burney-Street_Mansfield_TX_76063_P417000615818

Fucking Mansfield. Not Plano or Southlake or some rich suburb that is built out.

I can afford these prices but I worry about my kids. They'll need to get married and both make 6 figures to afford a home.

Now do it in New Jersey... Slorch Jr is living that shit, but I reminded him recently-  you didn't move there for financial reasons.  Closing on their first home in next 10 days or so. I could add my last 2 houses together and not equal the price of their (older) new home.

Edited December 5, 2022 by slorch

[52-80 19145]

You sure?

 

[Captainant 27625]

1 hour ago, Incredulity said:

He said plainly corporations, “get tax breaks intended for families”.  That is incorrect. 

Well you may have me there on the barest technicality, but they still do receive a significant tax benefit. The 2017 TCAJ act allows a landlord to deduct 20% of their net rental income and specifically made it more advantageous for corporate landlords - while removing the SALT deductions for mere plebes like you and me. Unless you're a renter, and then RIP lol

[Guest]

6 minutes ago, Captainant said:

Well you may have me there on the barest technicality, but they still do receive a significant tax benefit. The 2017 TCAJ act allows a landlord to deduct 20% of their net rental income and specifically made it more advantageous for corporate landlords - while removing the SALT deductions for mere plebes like you and me. Unless you're a renter, and then RIP lol

Why would this impact a renter?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( i know the answer.)

[drewlaws 126]

Based on the publicly available MLS, it seems like prices in my Austin neighborhood are down ~20% off their frothy spring peak. Most homes listed are sitting for months. Several flip houses bought between Q4 2021 through Q2 2022 have come to market recently and all are sitting, even after price cuts. I wonder how long the late train investors can hold on or if demand will come back before they break.

[52-80 19145]

6 hours ago, Rimbo said:

The issue is that homes aren't being bought by people; companies are buying them up and renting them out. These companies can then charge more for rent than they have to pay for a mortgage, even with the increased interest rates. So the banks make more money and the companies make more money... and get tax breaks intended for families, while regular people get fucked.

Comrade, we must seize the means of habitation

[52-80 19145]

1 hour ago, Incredulity said:

Isn’t individual property ownership anathema to your beliefs?

Ownership of anything is a dirty latestagecapitalist construct. We can all live cooperative within the bosom of mother gaia

[Rimbo 25910]

3 hours ago, Incredulity said:

Are you claiming that corporations can take the home mortgage interest deduction?

No, but you'd be absolutely astonished how taxes are rigged in favor of landlords.

[jimmyjazz 45880]

Spring 2022 in Austin was nuts, no doubt.  Most metrics show us ~ 14% off that peak, but still up year-over-year.  

The thing is, pricing almost always drops going into the fall.  This drop is by observation more substantial, but hardly shocking.  October prices were actually above September prices.  We'll see what happened in November in about a week.

[Wally Fairway 5539]

3 hours ago, 52-80 said:

You sure?

 

NIce place 
Come and listen to a story about a man named Jed
Poor mountaineer, barely kept his family fed
Then one day he when sold the family shed
Moved out of Californy,  put a roof above their head

 

A poor mountaineer, barely kept his family fed,

[hornmpa96 2618]

6 hours ago, Incredulity said:

Are you claiming that corporations can take the home mortgage interest deduction?

They are taking an unlimited business interest expense deduction available to real estate rental businesses. Additionally they are entitled to tax depreciation on the rental property.

[Guest]

5 hours ago, Wally Fairway said:

NIce place 
Come and listen to a story about a man named Jed
Poor mountaineer, barely kept his family fed
Then one day he when sold the family shed
Moved out of Californy,  put a roof above their head

 

A poor mountaineer, barely kept his family fed,

I looked it up and this spot is 27 minutes from Apple's campus, located in a forest. The house is a dump, but the location seems awesome.

[jimmyjazz 45880]

7 minutes ago, FirstTimeCaller said:

I looked it up and this spot is 27 minutes from Apple's campus, located in a forest. The house is a dump, but the location seems awesome.

I don't know why people get all "ermehgad" about a dumpy structure seemingly commanding a high price per square foot.  It's the land.  It would probably be worth a bit more if the "building" weren't there, just because of demolition costs.  Put a Barbie house on a vacant lot and it doesn't mean local real estate is going for $420,000 per square foot.

[Dbeasy 15040]

Jimmy jazz is correct. Prices are off, but have still been up year over year, which is the better metric. Prices are finally starting to decline year over year. It does take a long time for real estate issues to flush through the system, probably 24 months. Prices will likely drop a bit, but won’t collapse like 2008. 

[jimmyjazz 45880]

40 minutes ago, Dbeasy said:

Jimmy jazz is correct. Prices are off, but have still been up year over year, which is the better metric. Prices are finally starting to decline year over year. It does take a long time for real estate issues to flush through the system, probably 24 months. Prices will likely drop a bit, but won’t collapse like 2008. 

Yes, I expect to see YoY prices here in Austin start to go negative here in the next few months.  Appreciation was out of control in early 2022.  We're about to see the relative price go negative, which will probably surprise people, even though it's entirely predictable.

[fattyflattie 4639]

I only watch 2 small areas west of Houston, but these particular two have fallen back to the prices from roughly 18 months ago.  There is also ALOT less on the market, at least in these two hoods, for several reasons I suppose.  But everything that was ~725, that went up to 950-1.1 last year, is back down to 775-825-ish.  Have noticed the lots are higher than they previously were, but like 100%.  Will continue to keep an eye, as usual.  I know several people that moved out there during the boom, oof.  

[bluto 4912]

8 minutes ago, fattyflattie said:

I only watch 2 small areas west of Houston, but these particular two have fallen back to the prices from roughly 18 months ago.  There is also ALOT less on the market, at least in these two hoods, for several reasons I suppose.  But everything that was ~725, that went up to 950-1.1 last year, is back down to 775-825-ish.  Have noticed the lots are higher than they previously were, but like 100%.  Will continue to keep an eye, as usual.  I know several people that moved out there during the boom, oof.  

“Oof”… fuck that noise, they almost certainly locked in a sub 3.5 mortgage, no oof about that. 

[fattyflattie 4639]

17 minutes ago, bluto said:

“Oof”… fuck that noise, they almost certainly locked in a sub 3.5 mortgage, no oof about that. 

True.  Except for the ~30% equity that disappeared overnight.  So yeah, cheap money on your 950k house that’s now not selling for 750…   Maybe by the time they’re ready to leave it will have appreciated back to when they bought, who knows.   

[52-80 19145]

13 hours ago, jimmyjazz said:

Spring 2022 in Austin was nuts, no doubt.  Most metrics show us ~ 14% off that peak, but still up year-over-year.  

The thing is, pricing almost always drops going into the fall.  This drop is by observation more substantial, but hardly shocking.  October prices were actually above September prices.  We'll see what happened in November in about a week.

All of redfins metrics show Austin was more overheated during covid, and has started a sharper correction, than the rest of the country. 

#days on market. Closing to listing price ratio. %over asking, etc. Even with seasonal effect accounted for  

this is relative to houston, denver, seattle, etc. gotta imagine its in part due to the WFH tech migration. 

[jimmyjazz 45880]

6 hours ago, 52-80 said:

All of redfins metrics show Austin was more overheated during covid, and has started a sharper correction, than the rest of the country. 

#days on market. Closing to listing price ratio. %over asking, etc. Even with seasonal effect accounted for  

this is relative to houston, denver, seattle, etc. gotta imagine its in part due to the WFH tech migration. 

I was quoting Austin Board of Realtors data, so there could be some mismatch.

[52-80 19145]

3 minutes ago, jimmyjazz said:

I was quoting Austin Board of Realtors data, so there could be some mismatch.

They claim its from MLS and/or other public record. Sample for Austin is ~1000 transacted properties per month

[Loop 1604 227]

Record low inventory means home prices aren’t going anywhere anytime soon. This is the new normal despite mortgage rates.

[Catpfish 618]

This is not even close to record low inventory.  Using the Pflugerville MLS area as an example there are over 100 new homes listed by builders alone.  At the lowest inventory levels during COVID, there were less than 15 homes total.  The inventory is only about 10-15% less than "normal" times with the mix being slightly skewed toward new homes right now.  Pflugerville is running about 4-4.5 months inventory and the pending sales are beginning to slow down while the listings have stayed relatively stable.

Anecdotal?  Sure, but the same can be said about most of the MLS areas in the Austin area (maybe not the mix of new homes vs resales).

 

Edited December 6, 2022 by Catpfish

[YGIFS 19449]

Also, got my property tax bill.  Where's all this relief/surplus refund I was promised?  I can wrap my head around the interest rate hike on my debt, but where't the tax help?  

[closetohumping 17433]

I was looking at buying a place in Vegas a few months ago.  Passed.  Now, the builder sends me an email with up to 100k markdowns on a 650k home.  Drops in most markets, even in Texas I think.