Housing Market Response in this environment?

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TresBelle65
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Housing Market Response in this environment?

Post by TresBelle65 » Sun Mar 22, 2020 4:19 pm

During previous economic downturns, I was a homeowner and watched the market value of my home weave and bob before turning around.

I am currently staying with friends and will soon be looking for a rental for the next couple years before finally seeking to purchase again. (I am close to retirement, so job issues are not a factor)

How does the rental market usually respond to downturns? I am wondering whether I should reconsider my strategy about renting vs. buying.

Thank you

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WoodSpinner
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Re: Housing Market Response in this environment?

Post by WoodSpinner » Sun Mar 22, 2020 8:56 pm

OP,

Good question, I think it’s too early to tell what is going to happen. I suspect there may be some buying opportunities but who knows at this point. Best to be in a good position to take advantage of either direction.

That’s our plan ....

WoodSpinner

A-Commoner
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Re: Housing Market Response in this environment?

Post by A-Commoner » Sun Mar 22, 2020 9:01 pm

Don't know about the rental market but my house value here in Los Angeles has supposedly gained 10% since the stock market started diving. Probably due to falling interest rates. But this house valuation is according to Zillow, so who really knows...

simas
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Re: Housing Market Response in this environment?

Post by simas » Sun Mar 22, 2020 9:32 pm

TresBelle65 wrote:
Sun Mar 22, 2020 4:19 pm
During previous economic downturns, I was a homeowner and watched the market value of my home weave and bob before turning around.

I am currently staying with friends and will soon be looking for a rental for the next couple years before finally seeking to purchase again. (I am close to retirement, so job issues are not a factor)

How does the rental market usually respond to downturns? I am wondering whether I should reconsider my strategy about renting vs. buying.

Thank you
no one knows. just as well you could be playing with random number generator (in Excel or in any other programs). When you are ready to look => look and based on what you see then decide.

barberakb
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Re: Housing Market Response in this environment?

Post by barberakb » Mon Mar 23, 2020 1:00 am

No one knows but i have been renting out a house since 2005, and have never lowered the rent. Even during previous downturns.

It might be a great time to buy though. Low interest rates and unfortunately people will lose their jobs and need to sell.

DVMResident
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Re: Housing Market Response in this environment?

Post by DVMResident » Mon Mar 23, 2020 7:26 am

I don’t think it’s been priced in. I read and heard from real estate agent friends in LA and Boston that it’s really busy in that lots of people are looking (pre-approved, low interest rates, and tight inventories) but also nervous (not lots of offers being made and some showings cancelled with the stay-in-place orders).

We won’t have the first real measure on impact for another month or so.

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Sandtrap
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Re: Housing Market Response in this environment?

Post by Sandtrap » Mon Mar 23, 2020 8:37 am

TresBelle65 wrote:
Sun Mar 22, 2020 4:19 pm
During previous economic downturns, I was a homeowner and watched the market value of my home weave and bob before turning around.

I am currently staying with friends and will soon be looking for a rental for the next couple years before finally seeking to purchase again. (I am close to retirement, so job issues are not a factor)

How does the rental market usually respond to downturns? I am wondering whether I should reconsider my strategy about renting vs. buying.

Thank you
Random considerations:

The residential R/E income property is not directly correlated to market movement.

1. Rental markets from the renters Point of View in an economic downturn that has had a local effect.
a) increase supply as those that cannot afford to own first try renting their properties before selling out (hanging on)
b) increase demand as those that have lost income sell thier homes and need to rent
c) average monthly rents decline because tenants have less ability to pay, landlords seek stability, low vacancies
d) average monthly rents increase, because of the flood of quality tenants that can pay more, and reduced inventory.
e) nicer properties in the mid to upper rental niche might be going for less than what they used to rent for.

2. Rental markets from a landlord/property owner Point of View in an economic downturn that has had a local effect.
a) Because of #1 above, there is a glut of properties, thus driving prices down. There is an impetus to sell.
b) Those with "staying power" and "deep pockets" hang on and buy more properties (low hanging fruit).
c) Sometimes, rental lease agreements are adapted to changing conditions. IE: shorter leases, etc.
d) Screening of renters becomes more "flexible" to adapt to the changing customer market.
e) etc.

OP: renting gives you more options going forward. Buying locks you in to uncertain times and conditions.

j :D
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MedSaver
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Re: Housing Market Response in this environment?

Post by MedSaver » Mon Mar 23, 2020 12:39 pm

Starting to see some downward pressure on high end housing here in NorCal around 5% so far. Not much movement yet in mid/lower tiers.

seychellois_lib
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Re: Housing Market Response in this environment?

Post by seychellois_lib » Mon Mar 23, 2020 1:40 pm

I sold a home two years ago. Coincidentally it was a primary residence I purchased in 2008 and got stuck with as a result of you know what. I rented it and finally sold at more or less break even in 2018. What a relief!

I just received a note from my RE agent in that transaction. She requested an updated performance review and stated that the market was beginning to slow down in her area which is about 50 miles East of SF Bay Area. This is, of course, entirely anecdotal.

psteinx
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Re: Housing Market Response in this environment?

Post by psteinx » Mon Mar 23, 2020 1:49 pm

Moderately interested in this topic, for general interest, and because my parents plan/hope to put their home on the market in the 2nd half of this year.

I think that the housing market (purchases, not rentals) will crater. More specifically, new transactions will approach 0. Some existing transactions will go through (close), some will not. Folks will make do in the meantime by staying in their current accomodations (i.e. lower household formation), and/or simply not making the moves they might otherwise have done.

Trailing, price based indexes won't show this for a while. They'll show transaction volume falling, but not a marked drop in price, short term. Prices will be sticky - would-be sellers won't mark down their prices that aggressively, and so the houses will either sit on the market, or folks will pull their houses from the market. (Who really wants strangers walking through their house if there's little chance it'll sell?)

How long will it last? Not easily predictable at present - depends on how this thing (the pandemic, the social/economic disruption, etc.) plays out, over how long.

vtjon02
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Re: Housing Market Response in this environment?

Post by vtjon02 » Mon Mar 23, 2020 1:50 pm

Just a tangential thought, I've never been happier to be a homeowner than right now. I can stay inside my comfortable house, not think about rent increasing, landlord entering, moving etc. I can stockpile goods and install extra locks.

I have a friend whose lease is up and she has told me that it is a nightmare trying to look for rentals, view them, coordinating moving. Then getting in cleaning and sterilizing.

btenny
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Re: Housing Market Response in this environment?

Post by btenny » Mon Mar 23, 2020 1:58 pm

I think it is too early to tell. I think for the short term property prices and new rentals will stay pretty close to past numbers. BUT if things stay bad and seem to be getting worse by May lookout below. Then RE will crash as all kinds of people stop buying and prices drop fast.

So TBD. Good Luck.

Picksburgh
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Re: Housing Market Response in this environment?

Post by Picksburgh » Mon Mar 23, 2020 2:13 pm

Totally anecdotal but we put our house up two weeks ago and had an offer over asking the same day. Our agent was telling us to expect it because rates are so low. She said lenders were giving shorter windows on rates because of how fast the market was changing. They wanted a 30 close but we agreed on 45.

Now we’re just worried a lock down could stop the deal.

CommitmentDevice
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Re: Housing Market Response in this environment?

Post by CommitmentDevice » Mon Mar 23, 2020 2:17 pm

My prediction is that housing prices are going to drop 25%-35% in the next 12mo.
A big chunk of the economy is or soon will be on ice due to Covid-19. That means a big uptick in unemployment, which will result in:
  • More inventory due to foreclosures
  • Lower demand due to fewer people having a paycheck
Demand will be further lowered due to fear-induced risk-aversion.

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Go Blue 99
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Re: Housing Market Response in this environment?

Post by Go Blue 99 » Mon Mar 23, 2020 2:21 pm

vtjon02 wrote:
Mon Mar 23, 2020 1:50 pm
Just a tangential thought, I've never been happier to be a homeowner than right now. I can stay inside my comfortable house, not think about rent increasing, landlord entering, moving etc. I can stockpile goods and install extra locks.

I have a friend whose lease is up and she has told me that it is a nightmare trying to look for rentals, view them, coordinating moving. Then getting in cleaning and sterilizing.
We're facing this issue right now. Our current house is set to close at the end of next month. We haven't found a new house we like so we'll be doing an apartment, but we aren't even able to tour places. Apt communities here are pushing on-line leasing, but we don't want to sign without seeing something in person.

ballons
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Re: Housing Market Response in this environment?

Post by ballons » Mon Mar 23, 2020 2:29 pm

Before:
Millions of boomers retiring each year
SALT changes
Case-Shiller index hitting all time highs

Adding on:
Virus could hit elderly very hard - more sales and/or reduced pool of stable renters.
Home builders are going to drop prices to move homes as their credit freezes and/or their debt deteriorates to junk status.
Recession could cause panic selling to cash out at high prices.

Home prices and rent should go down. How much? Stocks rolled back to late 2016 levels, so don't be surprised if housing follows.

jcoll1
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Re: Housing Market Response in this environment?

Post by jcoll1 » Mon Mar 23, 2020 2:33 pm

DVMResident wrote:
Mon Mar 23, 2020 7:26 am
I don’t think it’s been priced in. I read and heard from real estate agent friends in LA and Boston that it’s really busy in that lots of people are looking (pre-approved, low interest rates, and tight inventories) but also nervous (not lots of offers being made and some showings cancelled with the stay-in-place orders).

We won’t have the first real measure on impact for another month or so.
I agree we'll need a little time to see the effects on real estate. We just signed an agreement of sale on our primary residence a few weeks ago and currently are working out an issue before settlement. The buyers are still very positive about the process. Our agent is very positive about the market currently and in the foreseeable future. She has lots of interest in her listings and our area is still very active.

Prices do seem to be leveling off. Time on the market is still relatively low due to supply being low. However it does seem reasonable to consider waiting a bit and watch housing prices in the area you want to live. I can see where some areas will have some real bargains if this market doesn't turn around and jobs are lost permanently as a result.
jcoll1

Xrayman69
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Re: Housing Market Response in this environment?

Post by Xrayman69 » Mon Mar 23, 2020 8:18 pm

DVMResident wrote:
Mon Mar 23, 2020 7:26 am
I don’t think it’s been priced in. I read and heard from real estate agent friends in LA and Boston that it’s really busy in that lots of people are looking (pre-approved, low interest rates, and tight inventories) but also nervous (not lots of offers being made and some showings cancelled with the stay-in-place orders).

We won’t have the first real measure on impact for another month or so.
Shocking that a real estate agent would say things are great.

I suspect with unemployment expecting to rise and those that keep their jobs in an economy in/heading towards a recession all will Be a bit more conservative and cautious. From my experience real estate pricing has tended to lag behind by 1/2 - 1 year from a recovery standpoint. Housing prices in my neck of the woods in the PNW bottomed around late 2009 or early 2010. The price decreases did not catch up to the recession. Until late 2008.

People selling houses tend to over estimate what the house is worth in a slowing economy and thus more hesitant to sell at prices lower than the neighbors house that sold 1 year prior. As result they may remove the listing.

Regardless of how low the interest rates go currently if the economy is slowing or in a recession unknown duration, the banks get tighter in lending to less than stellar credit individuals.

In my opinion, i suspect the average prices of sold properties will be lower in 6-9 months than they are today. Not necessarily the prices of homes for sale until later in the year or early next year. But perhaps the Economy with all the proposed stimulus 2-4 trillion dollars will avert a drawn out recession.

DVMResident
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Re: Housing Market Response in this environment?

Post by DVMResident » Mon Mar 23, 2020 8:41 pm

Xrayman69 wrote:
Mon Mar 23, 2020 8:18 pm
DVMResident wrote:
Mon Mar 23, 2020 7:26 am
I don’t think it’s been priced in. I read and heard from real estate agent friends in LA and Boston that it’s really busy in that lots of people are looking (pre-approved, low interest rates, and tight inventories) but also nervous (not lots of offers being made and some showings cancelled with the stay-in-place orders).

We won’t have the first real measure on impact for another month or so.
Shocking that a real estate agent would say things are great.
They said "busy" (not "great") meaning they are working a lot of hours.

CoastalWinds
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Re: Housing Market Response in this environment?

Post by CoastalWinds » Mon Mar 23, 2020 10:22 pm

DVMResident wrote:
Mon Mar 23, 2020 8:41 pm
Xrayman69 wrote:
Mon Mar 23, 2020 8:18 pm
DVMResident wrote:
Mon Mar 23, 2020 7:26 am
I don’t think it’s been priced in. I read and heard from real estate agent friends in LA and Boston that it’s really busy in that lots of people are looking (pre-approved, low interest rates, and tight inventories) but also nervous (not lots of offers being made and some showings cancelled with the stay-in-place orders).

We won’t have the first real measure on impact for another month or so.
Shocking that a real estate agent would say things are great.
They said "busy" (not "great") meaning they are working a lot of hours.
Exactly.

Plus, would you really expect a salesperson agent whose livelihood depends on a positive forecast for their industry to give you a negative outlook?

While different locales will be hit differently, on the aggregate, real estate will not be spared from carnage.

flaccidsteele
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Re: Housing Market Response in this environment?

Post by flaccidsteele » Tue Mar 24, 2020 7:27 am

CommitmentDevice wrote:
Mon Mar 23, 2020 2:17 pm
My prediction is that housing prices are going to drop 25%-35% in the next 12mo.
A big chunk of the economy is or soon will be on ice due to Covid-19. That means a big uptick in unemployment, which will result in:
  • More inventory due to foreclosures
  • Lower demand due to fewer people having a paycheck
Demand will be further lowered due to fear-induced risk-aversion.
+1 I hope so!

I started buying rentals during the credit crisis and haven’t bought one in years because prices got away from me

Looking forward to adding to the collection
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

bugleheadd
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Re: Housing Market Response in this environment?

Post by bugleheadd » Tue Mar 24, 2020 8:05 am

with many jobs at risk, people who wanted to buy a home will probably sit tight this year

livesoft
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Re: Housing Market Response in this environment?

Post by livesoft » Tue Mar 24, 2020 8:11 am

I think there will be a paradigm shift over the long term. Folks will want to have a place outside of crowded cities and perhaps outside of suburbs. They may still rent in the cities, but rural places near big metropolitan areas will start to become a thing. Of course, there is already some pushback from the folks who live permanently in those areas: "Don't come to our island. Stay away", but I think it is now inevitable.

Just like I read that folks built bomb shelters after / during the Cuban missile crisis, folks will try to have compounds where their families can shelter away from others during times of plague. The preppers are going to be so disappointed that everybody becomes like them.
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snowman
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Re: Housing Market Response in this environment?

Post by snowman » Tue Mar 24, 2020 8:26 am

I honestly don't know. Yes, common expectation says when economy slows down, people lose jobs, and since many/most don't have savings, foreclosures rise and put downward pressure on RE prices. It may or may not happen this time.

One scenario I see is that many potential sellers and buyers will just stay put. Assuming their numbers are roughly equal, prices won't move much. Another scenario is a shift towards smaller metro areas and more rural areas, including moving to foreign countries. Another is that people will want to own vs rent. And on and on... Nobody knows.

Have been around a long time to know that more often than not unexpected things happen. I don't even try to predict anything anymore.

mnsportsgeek
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Re: Housing Market Response in this environment?

Post by mnsportsgeek » Tue Mar 24, 2020 9:48 am

As a renter looking to buy in the next year, I wouldn't mind saving 50 grand.

CommitmentDevice
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Re: Housing Market Response in this environment?

Post by CommitmentDevice » Wed Mar 25, 2020 12:47 pm

Very relevant literature review from Zillow on the impact of past pandemics on the housing market.
Information From Past Pandemics, And What We Can Learn: A Literature Review
https://www.zillow.com/research/pandemi ... iew-26643/

Jags4186
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Re: Housing Market Response in this environment?

Post by Jags4186 » Wed Mar 25, 2020 12:50 pm

snowman wrote:
Tue Mar 24, 2020 8:26 am
I honestly don't know. Yes, common expectation says when economy slows down, people lose jobs, and since many/most don't have savings, foreclosures rise and put downward pressure on RE prices. It may or may not happen this time.

One scenario I see is that many potential sellers and buyers will just stay put. Assuming their numbers are roughly equal, prices won't move much. Another scenario is a shift towards smaller metro areas and more rural areas, including moving to foreign countries. Another is that people will want to own vs rent. And on and on... Nobody knows.

Have been around a long time to know that more often than not unexpected things happen. I don't even try to predict anything anymore.
I hate to say it, but this time is different. If this were a regular secular downturn, I'd say yes, we'll see a downturn in the RE market. What is happening this time is mortgage payments are being put on delay, evictions and foreclosures are being delayed, money is being sent to people. If things are bad a year from now then I definitely foresee some buying opportunities.

stocknoob4111
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Re: Housing Market Response in this environment?

Post by stocknoob4111 » Wed Mar 25, 2020 1:30 pm

A-Commoner wrote:
Sun Mar 22, 2020 9:01 pm
Don't know about the rental market but my house value here in Los Angeles has supposedly gained 10% since the stock market started diving. Probably due to falling interest rates. But this house valuation is according to Zillow, so who really knows...
house prices move very slowly so I doubt that they are immediately responding to anything that is current. Just to close on a house and that price reported as a comp takes 30+ days or perhaps even longer.

A friend of mine was planning to buy a condo, she rescinded her offer due to the current conditions and she told me that they place had 3 other offers and all of them have rescinded as well. If anecdotal evidence is taken this is looking very ugly for the housing market. But that will take time to show up in the results.

If the housing market cracks it will add more woes to the economy in general and deepen the recession. That is my expectation at this point.

dardeninvestor
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Re: Housing Market Response in this environment?

Post by dardeninvestor » Wed Mar 25, 2020 6:03 pm

We were looking at a house 4 weeks ago. Seller was asking 15% over what they paid in 2017 with minimal improvements so we passed without offering.

As in above story, buyers rescinded the offer based on corona. Over the past 4 weeks Dow crashed and businesses aren't yet reopen.

Curious to see what happens or if worth us making a low ball offer.

Xrayman69
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Re: Housing Market Response in this environment?

Post by Xrayman69 » Wed Mar 25, 2020 6:22 pm

dardeninvestor wrote:
Wed Mar 25, 2020 6:03 pm
We were looking at a house 4 weeks ago. Seller was asking 15% over what they paid in 2017 with minimal improvements so we passed without offering.

As in above story, buyers rescinded the offer based on corona. Over the past 4 weeks Dow crashed and businesses aren't yet reopen.

Curious to see what happens or if worth us making a low ball offer.
You can make a low ball offer and the current owners have 3 choices, decline, accept our counter. That being said, homeowners psychology frequently leads them to overestimate the “value of their home” particularly early during changes in the economy thus leading to lagging descent of housing prices compared to the state of the economy.

But just my conjecture.

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ElJay
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Re: Housing Market Response in this environment?

Post by ElJay » Wed Mar 25, 2020 6:56 pm

My wife and I have been shopping for a larger house. We're on pause for a bit now until we know that a closing can happen as expected and we are OK with hiring movers to visit and touch all of our stuff. I can't stomach converting a lot of cash into a house and increasing our expenses right now.

60B4E24B
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Re: Housing Market Response in this environment?

Post by 60B4E24B » Wed Mar 25, 2020 6:58 pm

A-Commoner wrote:
Sun Mar 22, 2020 9:01 pm
Don't know about the rental market but my house value here in Los Angeles has supposedly gained 10% since the stock market started diving. Probably due to falling interest rates. But this house valuation is according to Zillow, so who really knows...
It also probably takes recent closings into account, but those were from deals made months ago...

brianH
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Re: Housing Market Response in this environment?

Post by brianH » Wed Mar 25, 2020 8:05 pm

livesoft wrote:
Tue Mar 24, 2020 8:11 am
I think there will be a paradigm shift over the long term. Folks will want to have a place outside of crowded cities and perhaps outside of suburbs. They may still rent in the cities, but rural places near big metropolitan areas will start to become a thing.
An interesting take, and one I've been thinking a lot about myself, recently. Dense, metropolitan cities are amazing for many reasons, but they're pretty much the last place you want to be when the thin veneer of orderly society has a hiccup.

For those with the means, there doesn't seem to be much of a downside to splitting time between the city and a exurban/rural area a few dozen miles away (assuming the Internet connection is decent.)

dardeninvestor
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Re: Housing Market Response in this environment?

Post by dardeninvestor » Wed Mar 25, 2020 8:20 pm

Xrayman69 wrote:
Wed Mar 25, 2020 6:22 pm
dardeninvestor wrote:
Wed Mar 25, 2020 6:03 pm
We were looking at a house 4 weeks ago. Seller was asking 15% over what they paid in 2017 with minimal improvements so we passed without offering.

As in above story, buyers rescinded the offer based on corona. Over the past 4 weeks Dow crashed and businesses aren't yet reopen.

Curious to see what happens or if worth us making a low ball offer.
You can make a low ball offer and the current owners have 3 choices, decline, accept our counter. That being said, homeowners psychology frequently leads them to overestimate the “value of their home” particularly early during changes in the economy thus leading to lagging descent of housing prices compared to the state of the economy.

But just my conjecture.
That’s my concern as well. I guess the good news about making a lower offer when you’re not desperate to move, is low ball won’t get what you don’t ask for.

JGoneRiding
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Re: Housing Market Response in this environment?

Post by JGoneRiding » Wed Mar 25, 2020 8:38 pm

barberakb wrote:
Mon Mar 23, 2020 1:00 am
No one knows but i have been renting out a house since 2005, and have never lowered the rent. Even during previous downturns.

It might be a great time to buy though. Low interest rates and unfortunately people will lose their jobs and need to sell.
I am worried this time might be different. At least in my area one of the driving forces of a very high rental market is college students. All of which are going to online for all of next quarter. Generally speaking though rents dont drop because there ends up being more people needing to rent and LESS housing stock because builders arent building and foreclosures tend to just sit there.

Xrayman69
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Re: Housing Market Response in this environment?

Post by Xrayman69 » Sun Mar 29, 2020 11:38 am

No showings in my neck of the woods this weekend. Redfin agent offering virtual tour. We are starting our research for opportunities that may be available over the next 12-18 months. I’m trying to learn about current state of remodeling.

rgs92
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Re: Housing Market Response in this environment?

Post by rgs92 » Sun Mar 29, 2020 12:05 pm

Is the reported stoppage of jumbo mortgages affecting things?

I see that the jumbo level is $510K in MCOL areas like most of the south, and $710K or $765K in the high-cost areas like the northeast and west coast markets.

(By the way, any idea what is causing the stop on jumbo mortgages? Thank you.)

ribeyesteaks
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Re: Housing Market Response in this environment?

Post by ribeyesteaks » Sun Mar 29, 2020 12:15 pm

[OT comment removed by admin LadyGeek] Go visit a real estate forum instead of asking personal finance junkies about this kind of stuff. Mortgage brokers know price declines are coming, and it's due to a massive liquidity shortage coming in the mortgage financing markets. There are going to be new and HEAVY restrictions on real estate loans coming. It's already here, but it will be widespread in a month. Jumbo loans from warehouse banks are going to be toast, so that whole market will tank. You will need 6 months of reserves before buying a house with gift funds. You cannot use retirement funds for this purpose either. From what I'm hearing from mortgage brokers, it's going to be more restrictive than post 2008. DTI will be 50% for higher FICO scores. Expect 45% and lower for lower FICO scores.

It literally does NOT matter if inventories are tight when there are no potential buyers. These restrictions are going to price out the middle class, especially the lower class. The past several years, we basically saw a reprint of [(removed) --admin LadyGeek] money chasing housing prices higher. People with 40k incomes and multiple car leases outbidding others by 20% or more. Median home prices now are at LEAST 20% over valued if not closer to 30%.

The reckoning is coming again, and it was long over due.

rgs92
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Re: Housing Market Response in this environment?

Post by rgs92 » Sun Mar 29, 2020 12:32 pm

Ribeye-- Thanks for the honest assessment, but you mentioned a forecast of necessary DTI = 45 to 50%. I thought DTI was often 28 to 36% now, maybe 40% max. Shouldn't required DTI go down, not up as things get tighter? Thank you.

Just one other question. Is it really true that you will not be able to count retirement funds like an IRA in your reserves, even if accounting for taxes? That seems pretty draconian, since it's still your money and for many people, most of their funds could be stored in these tax-sheltered accounts, and they may even be in cash-equivalent investments in these accounts.

Thanks again.

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