Bacon's Rebellion

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What Housing Slowdown?

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by

Dick Hall-Sizemore
in ,

by Dick Hall-Sizemore

I keep reading and hearing that the housing market has cooled. Well, the folks in my neighborhood have not gotten the message.

About three weeks ago, a house a block and a half from me went on the market. It quickly went under contract. Then, a couple of weeks ago, a “For Sale” sign went up in front of a house near mine. Within two or three days, the owner had five offers, at least two of which were for more than the listing price and one of those was a cash offer. The offer that was ultimately accepted was significantly above the listing price; the buyer was pre-qualified; the offer included no contingencies, not even a home inspection; and, in case the appraisal was less than the amount being offered, the buyer stipulated that he/she would cover a significant amount of any difference.

This house is in good condition, but the final sale price was about the same as that for a larger house also in fine condition down the street that sold last summer when interest rates were about half what they are today.

On my morning walk today, I saw a house on another street with a realtor’s sign denoting it was “Sold”.

My reassessment and tax bill for next year just went up.

Oh, to be a Realtor these days!

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Comments

22 responses to “What Housing Slowdown?”

  1. walter smith Avatar
    walter smith

    Sounds like all the signs of the Tulip Craze and a market about to crash to me…
    There will be people who expect the craze to continue, and their net worth will be wiped out. If you pay cash, you can wait it out…maybe. If you are leveraged…well…

    1. Nancy Naive Avatar
      Nancy Naive

      You can’t live in a tulip.

  2. Lefty665 Avatar
    Lefty665

    Be patient Grasshopper. Interest rates making mortgages more expensive and quantitative tightening sucking cash out of circulation will do their work. In the meantime isolated areas of activity can persist.

    Nationally construction and mortgages are down and headed down more rapidly. By the first of the year housing sales will be in the deep freeze. So will the rest of us if diesel/heating oil/kerosene shortages cascade and nat gas prices spike as supplies are diverted to freezing Europe.

    Don’t ever underestimate American politicians ability to f things up.

    1. Eric the half a troll Avatar
      Eric the half a troll

      I hope real estate does crash and I hope the speculators who drove the bubble lose their shirts.

      1. Lefty665 Avatar
        Lefty665

        There’s certainly been a lot of corporate money buying residential housing. I wouldn’t shed a tear if they lost their shirts.

        1. Nancy Naive Avatar
          Nancy Naive

          Redfin, Zillow, etc.

      2. Keydet Avatar
        Keydet

        It’s likely to crash whether you wish it or not, but shirt losing won’t be limited to the speculators. As to driving the bubble, I think you need to look a little higher up the foot chain than speculators. They didn’t set the interest rates or shovel trillions of new spending into the economy.

        1. LarrytheG Avatar
          LarrytheG

          well , to be clear as to what the rates were and when:

          https://uploads.disquscdn.com/images/6a851895ead807529395d2430efdfdf1ca19af2e523243168be73520d6ca0340.jpg

          1. Keydet Avatar
            Keydet

            I’m in the industry and I know the history of the rates.

          2. LarrytheG Avatar
            LarrytheG

            so the rates started down in the 1990’s and continued due to the same reasons?

        2. Eric the half a troll Avatar
          Eric the half a troll

          https://www.cnbc.com/2020/01/28/trump-says-the-fed-should-cut-rates-so-the-us-could-then-focus-on-paying-off-refinancing-debt.html

    2. Eric the half a troll Avatar
      Eric the half a troll

      I hope real estate does crash and I hope the speculators who drove the bubble lose their shirts.

  3. LarrytheG Avatar
    LarrytheG

    I’m seeing stuff on TV about the effect higher interest rates have on monthly payments and in-turn first-time buyers and those who want to move up from their first house. No joy there. I think there still is a market for older folks who have mostly paid off their houses and have money put aside but those high interest rates are going to do the damage sooner or later.

    It’s funny talking about the “economy” when the unemployment rate is what , 3%? and employers are crying
    for help?

    Something doesn’t seem to add up… but since everyone is getting told the economy is “bad”, they’re believing it!

    1. Stephen Haner Avatar
      Stephen Haner

      Inflation is real. The gap between price increases and wage increases is real. Plenty of income sources are fixed and not indexed, so inflation is a big tax on those. The market is still down. Probably the best prop for our economy is that the U.S. remains a haven for capital from elsewhere, but voters have reasons to be unhappy with what is going on, even if causes are complicated. Housing is seen as a haven, as well, keeping that market growing (and rents skyrocketing.)

      Still not at the double digit rate we paid on our first house in 1978.

      1. LarrytheG Avatar
        LarrytheG

        Speaking of rents. The situation in Fredericksburg is dire these days for folks who “need” affordable apartments.

        I’m not sure it’s entirely about inflation – the demand for apartments is STRONG and people want MORE than a basic apartment and that is what is being primarily built.

        Pretty bad when you have a full-time job and you cannot even afford an apartment.

      2. Lefty665 Avatar
        Lefty665

        Nationally housing is trending down, and new starts in particular. Anecdotally a local realtor reports that while homes are still moving there are no longer bidding wars above asking prices, they are starting to see asking price cuts and time on market has stretched.

        It will be interesting to see how the capital haven and strong dollar sort out. Folks in England and the EU can’t be happy with exchange rates.

        We were luckier than you, a 4.25% fixed rate in 1976 was gold several years later. We came out of that inflation with a mortgage that was only about twice the electric bill.

  4. James C. Sherlock Avatar
    James C. Sherlock

    Mortgage rates rule. Demand and prices will always respond inversely.

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      I talked to the woman recently who just purchased one of the houses I mentioned. She is giving up a mortgage rate of below 3 percent and getting a 7 percent mortgage on the house she is purchasing. She admitted that she was shocked at the increase in her mortgage payment that would entail. Notice that it did not deter her. She is assuming (betting?) that rates will decline in a couple of years and she can refinance. I have my doubts that the Fed will return anytime soon to near 0 percent rates, resulting in mortgage rates in the 2-3 percent range.

      1. Lefty665 Avatar
        Lefty665

        Well there goes the neighborhood.

        Rates are going to have to stop going up before they start going down. The Fed has made it clear that it will keep ratcheting rates up until inflation comes way down, which it shows few signs of doing. Then it will take awhile for rates to wind back down. The good news for her is that next year her 7% mortgage will look like a bargain as long as she has enough cash to make the monthly payment.

        I sure would not take on debt today with the expectation that rates will quickly subside.

        Maybe you and I can get together and sell her a bridge. She seems like an easy mark.

      2. James C. Sherlock Avatar
        James C. Sherlock

        Our daughter and her husband are planning to move soon. They are in the same squeeze with the same long term plan.

  5. Nancy Naive Avatar
    Nancy Naive

    Well, I’m happy to report that houses in the Venice to Naples area are going for pennies on the dollar. It’s a nice time to consider the snowbird lifestyle.

    We just did our annual vacation to Manasota Key. They were lucky. They were only ripped a new one instead of being given two new ones. All but one restaurant on the key is back up and running.

    Still hundreds and hundreds of debris piles on the island. Internet restored to all but a few houses, although the street where we stayed went vigilante on Comcast and rewired our own connections. We used indoor connectors and splicing, and Comcast will have to replace it all, but everyone was up and running after 6 weeks.

    Easily 80% of the houses suffered lost shingles, siding, or had severe water intrusion, including ours. But the beach is still sand.

  6. VaPragamtist Avatar
    VaPragamtist

    Its erroneous to say the housing market has cooled.

    The housing market is softening, especially for low to low-mid income buyers–those for whom rising interest rates will most greatly impact buying behavior.

    But demand is still high because housing stock is still very limited.

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