Real Estate Crash thread

[Danno]

god our RE world has become so twisted that 30 days without being under contract is now a stale listing.

[dunfree]

https://billings.craigslist.org/reo/...758382997.html

would you like own some land that is there sometimes, and other times not so much. act fast. what an opportunity for someone w an extra arc sitting around.

wait, it’s the gravel island below the OHWM?

nice scam.


going on 2? years the shitdemic house flip hasn’t sold, but it’s a horrible design badly redone

[anotherVTskibum]

Commercial real estate loans not looking so great:
https://www.nytimes.com/2024/06/24/b...smid=url-share

[Bronco]

Commercial real estate loans not looking so great:
https://www.nytimes.com/2024/06/24/b...smid=url-share

I don't think the banks are in as much trouble as the individual investors who acquired commercial properties at 3% interest on a 5 year term in 2020. The banks use Debt Service Coverage Ratios nowadays to assess creditworthiness and most of these loans originated 3-4 years ago are not going to be financeable. Maybe some good opportunities for cash buyers, I guess we'll find out pretty quick.

[neufox47]

I have family that work for funds that invest in commercial loans. They are definitely of the opinion that the office market is in the shitter and it’s only going to get worse.


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[liv2ski]

I have family that work for funds that invest in commercial loans. They are definitely of the opinion that the office market is in the shitter and it’s only going to get worse.
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Going forward to say 2026, I wonder if adjusting rates on Commercial properties and sellers having to sell at greatly reduced prices due to cratering rents (if any) blows up the stock market and economy like 2007's implosion of residential properties did?

[Mazderati]

Also wonder if commercial office space getting worse means anything to anyone outside of office-heavy locales.

[Mustonen]

I don't think the banks are in as much trouble as the individual investors who acquired commercial properties at 3% interest on a 5 year term in 2020. The banks use Debt Service Coverage Ratios nowadays to assess creditworthiness and most of these loans originated 3-4 years ago are not going to be financeable. Maybe some good opportunities for cash buyers, I guess we'll find out pretty quick.

I dunno. Empty office buildings don’t cash flow very well. We’ll see some creative financing and a few hold your nose deals because if the property isn’t financeable and the balloon is due there’s not much option for the bank. They’re in it. Couple that with a liquidity pinch and appetite to take a big credit off of another bank’s hands is tepid at best.

[Vt-Freeheel]

vtdigger.org/stowe-property-values-double-after-reassessment/


Got $1.5 million? That is now officially the average appraised price of a home in Stowe, following a townwide property value reassessment that recently wrapped up after two years of work.

Stowe town appraiser Tim Morrissey said that, while it seems these new values — which will be released next week — might have appeared overnight, Stowe hasn’t done a townwide reappraisal since 2012 and a lot has happened since then to the real estate market.

“In 12 years, we’ve seen it more than double,” Morrissey said.

[alias_rice]

I dunno. Empty office buildings don’t cash flow very well. We’ll see some creative financing and a few hold your nose deals because if the property isn’t financeable and the balloon is due there’s not much option for the bank. They’re in it. Couple that with a liquidity pinch and appetite to take a big credit off of another bank’s hands is tepid at best.

How’s your commercial portfolio holding up? A year ago we were getting pretty nervous with our tight liquidity and the amount rate adjustments we had on the docket, but it ended up being much ado about nothing. It helps that we had very little office exposure, but other than a few never ending construction deals we haven’t seen an increase in delinquencies at all.

[365wp]

I'm starting to see more homes go on the market in our neighborhood, so far they've all sold in under a week. Curious to see if that continues. Also curious to see if these continue to move at this price point: https://www.redfin.com/VT/South-Burl...home/190970271. They're going to start building down the other side of the hill now, curious to see if they manage to pull it off before a downturn happens. Those lots have the best view of Mansfield though, smart to save them for last.

[Mustonen]

How’s your commercial portfolio holding up? A year ago we were getting pretty nervous with our tight liquidity and the amount rate adjustments we had on the docket, but it ended up being much ado about nothing. It helps that we had very little office exposure, but other than a few never ending construction deals we haven’t seen an increase in delinquencies at all.

Holding steady.

[Mazderati]

Palacios expects inventories to keep building and prices to remain under pressure until the mortgage rate falls. So does Nancy Vanden Houten of Oxford Economics:

I do think?.?.?.?we will start to see prices soften in the months ahead. With mortgage rates at current levels and prices where they are, homebuying has become unaffordable for most households?.?.?.?while supply may still be relatively tight, it has increased and if sellers want to sell their homes, they will, similar to 2022/early 2023 have to make some price concessions. One difference between now and then, however, is that in 2022 we were at the start of the Fed’s rate hiking cycle and now we’re close to the beginning of a rate cutting cycle. So while we may see some near-time declines in home prices?.?.?.?I don’t think we will see sharp declines in prices.

https://www.ft.com/content/81035b28-...e-2a8753b72238

[Whiteroom_Guardian]

That topic came up on Thursday while playing golf. I don't follow the RE market but one guy just sold a place in Bozeman and bought a place in Livingston. He and another guy both claimed, longer time on the market for many properties and some capitulation on prices, but prices here are still stupid high.

god our RE world has become so twisted that 30 days without being under contract is now a stale listing.

Definitely seeing quite a few new listings. I held an open house in a very desirable neighborhood on Sunday. A few visitors, but nothing to write home about. This is a primo primo house in one the the most sought after locations but priced a bit higher than comps from only a few months ago.

We can only get a real picture of what's happening once we get stats from July/August when anything under contract now actually closes. Many sellers are overpricing to start and that's only adding to the "high" DOM. As danno pointed out people/consumers who only started paying attention during covid (which I feel is a HUGE percentage of population......thanks to media/social media increased focus on RE) have no idea that 30 days is not a long time at all. Sold price to list price ratio may be widening, but that might not really mean things are going backwards if the sold prices still trend upwards. Many perceive this as a crash when something at 1.35 closes for 1.2 when in reality that same house would have closed for 1.1 or 1.15 last summer. Consumers are looking at the gap between list and close price and thinking that means it's a backwards slide. Really it was just overpriced. Meanwhile listings that are actually priced right are still getting multiples and going under contract quickly.

Many many buyers just sitting on their hands waiting for rates to come down and when they come down 0.5 - 1 % this same overall low inventory will have many buyers coming out of the woodwork. It's understandable because yes a financed buyer's monthly payment will be less, but that's assuming they can actually get under contract especially if they are competing against cash offers. I've personally seen cash offers with quick close beat financed offers even if $10k or more lower than that financed offers. Even well qualified ones with big earnest money etc etc. Same goes for home sale contingent offers. Lots and lots of those now. Obviously when rates were 2.5% and many were cash rich as well they could buy a replacement first and then sell their current home.

It's certainly a weird market and from a buyers side it's actually a good time to slow down, find a property you want, actually get inspection etc etc despite the "high" rates. There is definitely some, "OMG it's been on the market for 25 days?!? What's wrong with it??" from some buyers who's only frame of reference is what the media pushed in 2021 when every single property was under contract in 1-3 days.

[Foggy_Goggles]

I love ya Phish, but that's some Realtor Buzzword Bingo. Its a one buyer one seller non commodity product. It closes at the clearing price. Nothing more nothing less.

Every industry wants to justify their relevance for the purposes of self preservation, myself included.

Any monkey with an internet connection can get a pretty good idea on "comps" and "the market". Offer what is worth to you. Buy it or don't.

[singlesline]

I'm under contract for a house in whitefish with a $/sqft that's a lot lower than any of the other things we've made offers on in the last few years. Still trying to figure out if there's something wrong with it but inspection came out with nothing too bad.

It might not be everything we wanted, but the price is workable for us and it will be nice to have space for upcoming baby + inlaws + a pretty nice garage.

A few other houses in this neighborhood are for sale at much higher $/sqft and have been sitting on the market and taking price cuts...so I think the seller just wanted to price it to sell fast (they are moving into a house they just finished building). They are nice houses but it it is a less desirable neighborhood and my best guess at what is happening is that they are too big and expensive for ordinary folk...and the people with lots of money are willing to pay more (or give up some sqft) and/or do renovations to be in a more prime location.

[rideit]

In Teton Valley, ID, I think we are beginning to see STR owners trying to rent long term, which *might* be an indicator that the STR gold rush is subsiding.
Anyone else have insights on this?

[Whiteroom_Guardian]

I love ya Phish, but that's some Realtor Buzzword Bingo. Its a one buyer one seller non commodity product. It closes at the clearing price. Nothing more nothing less.

Every industry wants to justify their relevance for the purposes of self preservation, myself included.

Any monkey with an internet connection can get a pretty good idea on "comps" and "the market". Offer what is worth to you. Buy it or don't.

Shit yeah many/most listings are overpriced. At least around here a huge % of the property owners don't really NEED to sell. So they will just take their listings off the market and wait instead of sell at a low price. Thus tying up even more inventory. Anyone who bought anything around here prior to 2022 can rent it out and profit right away.

I think we would all like to see prices go backwards, but I just can't wrap my head around it happening unless mortgage rates just keep climbing.

I would be busier if home prices went down and so would every agent I know. We all have 10+ buyers looking at the listings we send them and waiting. All our listings would sell quicker. I don't have any skin in the game hoping home prices keep climbing.

And yes, STR numbers are down in Bozeman and Big Sky. Big part of that is many remote option workers were called back in for mandatory hybrid (3 days in the office, 2 days at home) etc and can't go spend a month in the mountains working half the day and then going skiing/riding bikes/fishing.

[singlesline]

I really don't think prices will go backwards, at least not significantly. Lot of evidence for prices being sticky when it comes to residential real estate.

Prices don't fall, supply just contracts which keeps prices in the same place. People don't sell because they don't think they'll get a good price, people don't upsize/downsize because they can't make the numbers work. Listings get thin which props up the market as there are always a few people who either need to buy into the market NOW (e.g. job moved, house burned down, whatever) or who have the cash to just buy what they want.

Sellers who stay on the sidelines still have a loss, but it is in terms of time-value-of-money and reduced appreciation which is harder for people to wrap their heads around. They believe their house is worth $1m (because that's what their neighbor sold for in January 2022) and wont sell it today for $900k, but they'll hold it for 5 years to sell it for $1.05m and think they got a deal...even though that's like a $100k loss in NPV terms at 5%

[Kevo]

In Teton Valley, ID, I think we are beginning to see STR owners trying to rent long term, which *might* be an indicator that the STR gold rush is subsiding.
Anyone else have insights on this?

There is a prolific STR on my street that just went up for sale. It had been booked out quite often as best I could tell.

It was bought new and immediately turned into an STR in 2022.

Currently for sale for ~$1.2mm, which is likely within 10% of what they paid for it in

[goldenboy]

I think we would all like to see prices go backwards, but I just can't wrap my head around it happening unless mortgage rates just keep climbing.

As usual, I agree with most of what you're saying, except maybe this part. I know there is historically a correlation between increasing interest rates and lower home prices, but I don't think we'll see a decrease in prices unless we see a change on the supply side. Higher rates might take a few more buyers out of it, but I think there would still be more buyers than homes for sale. If anything, inventory would go down even more due to an increased lock in effect of even higher mortgage rates. It's been hard enough for sellers to stomach going from 3% to 7.x%, I really think they'll stay where they are if at all possible if it becomes 3% to 10% (not that I think that is likely)

Austin TX has seen an 11% drop in prices since the peak, the most of any metro area. Why? Because they built a metric shit ton of homes and apartments there, in a way that meaningfully increased the supply. Unless a bunch of people lose their jobs in a bad economy and are forced to sell, or a ton of homes are built in a given area, it's hard for me to see a scenario where prices don't remain pretty sticky.

Just my 2 cents

[yeahman]

Yeah, higher interest rates seem to have had the opposite effect from what they hoped. Increasing supply is the only way out of this mess. That and regulating institutional investors out of the market somehow.

[Whiteroom_Guardian]

As usual, I agree with most of what you're saying, except maybe this part. I know there is historically a correlation between increasing interest rates and lower home prices, but I don't think we'll see a decrease in prices unless we see a change on the supply side. Higher rates might take a few more buyers out of it, but I think there would still be more buyers than homes for sale. If anything, inventory would go down even more due to an increased lock in effect of even higher mortgage rates. It's been hard enough for sellers to stomach going from 3% to 7.x%, I really think they'll stay where they are if at all possible if it becomes 3% to 10% (not that I think that is likely)

Austin TX has seen an 11% drop in prices since the peak, the most of any metro area. Why? Because they built a metric shit ton of homes and apartments there, in a way that meaningfully increased the supply. Unless a bunch of people lose their jobs in a bad economy and are forced to sell, or a ton of homes are built in a given area, it's hard for me to see a scenario where prices don't remain pretty sticky.

Just my 2 cents

Yeah I think you are right. It would have to be a crazy scenario of rates in the double digits AND people NEEDING to sell because they lost their job and somehow can't get another one (most everyone I know in the corporate world right now can just switch to another company and get a higher salary for doing the exact same job).

In Austin not only did they oversupply like you said, a shitload of people moved there from locales to the north (CA was obviously the big one) and then they realized that it's literally 110-115* all summer long.

Yeah we get cold snaps here and people snicker, "Hope this sends em back to CA" but it's like 3-5 days. If we had 30+ days in a row of -40* temps I think it would have many people re-consider living here.

[Dantheman]

Yeah, higher interest rates seem to have had the opposite effect from what they hoped.

The goal of higher rates was to slow the rate of appreciation and cool the overall economy, not reduce home prices, and for that it did work.

[schuss]

As usual, I agree with most of what you're saying, except maybe this part. I know there is historically a correlation between increasing interest rates and lower home prices, but I don't think we'll see a decrease in prices unless we see a change on the supply side. Higher rates might take a few more buyers out of it, but I think there would still be more buyers than homes for sale. If anything, inventory would go down even more due to an increased lock in effect of even higher mortgage rates. It's been hard enough for sellers to stomach going from 3% to 7.x%, I really think they'll stay where they are if at all possible if it becomes 3% to 10% (not that I think that is likely)

Austin TX has seen an 11% drop in prices since the peak, the most of any metro area. Why? Because they built a metric shit ton of homes and apartments there, in a way that meaningfully increased the supply. Unless a bunch of people lose their jobs in a bad economy and are forced to sell, or a ton of homes are built in a given area, it's hard for me to see a scenario where prices don't remain pretty sticky.

Just my 2 cents

STR's are currently sucking up a ton of supply, so additional action there to reduce it or the bubble bursting will also put a ton on the market. For example, in Maine coastal regions, they're currently eating up 2-3% of total housing stock - https://www.mainehousing.org/docs/de...sn=b10a8015_13 (page 32) - that's after excluding non-viable long term rentals like seasonal properties.