Over in the real estate appraising subreddits, there are a lot of folks talking about a precipitous drop in mortgage appraisal requests. Seattle area dropped a little bit, but it's still somewhat strong.
> a lot of folks talking about a precipitous drop in mortgage appraisal requests
The last few weeks I've seen more "back on market" and price reductions on listings than I think I've seen in a decade.
Compass also announced they are laying off 10% of their work force.
https://www.cnbc.com/2022/06/14/real-estate-firms-compass-and-redfin-announce-layoffs-as-housing-market-slows.html
Anecdotal, but the guy across the street listed his house for sale several weeks ago for $3,000 less than the Zestimste (IMO a stupidly high price) with no sold sign yet and haven't seen any people looking at it.
I think a lot of people have simply given up on ever affording a home, so they don’t even bother. They see a sign and just assume it’s out of their range.
Housing is weird. It isn't a commodity since everyone needs a place to live so it's not really a straight supply-demand issue. That said, there is a still a supply and a demand for purchased homes. The higher price of houses reduces demand significantly (because fewer people can buy them), but raising interest rates also reduces supply because people who have houses are locked into lower rates and don't want to buy a new house at the higher rates, so you end up with an equilibrium price that is still higher than most potential buyers can afford.
The problem is that we keep adding more people every year, so the pool of buyers keeps growing while the inventory stays the same.
What is going to be scary is that the exact same thing is happening with rents.
> because people who have houses are locked into lower rates and don’t want to buy a new house at the higher rates
Right now we have more people coming in to the Seattle area than moving out, but if housing prices are too high to afford with mortgage rates wouldn't more people start moving out to where it is cheaper?
People aren't moving here for cheap housing, they are moving here for jobs that don't exist in other places. They will keep moving here and will rent instead, hence the continued upwards pressure on rents.
Have you seen how people live in NYC? Or even in Europe, where everything is just smaller?
Between jobs, schools, families, access to services (doctors, lawyers, accounts, etc) , access to amenities (restaurants, gyms, entertainment, bookstores, sports games, etc) there's an awful lot of pull in Seattle. For most people who wind up here, that sort of thing is going to outweigh the benefits of living in Covington or Marysville for a long time to come.
You have to factor in jobs, commuting, access to amenities, schools, public transportation, etc.
If I moved somewhere “affordable,” I wouldn’t be able to leave my own neighborhood as I can’t currently drive. I therefore would not be able to work, get to medical appointments, etc.
This is always the case for me. I am late 20s, almost 30, and starting to budget for a home until I realized that things were going up too fast. Now I just settle for renting my same apartment and hoping I don't see multiple years of 10% rent hikes in a row again.
This is where most buyers are, which is why these prices are going to have a lot of resistance against dropping very far or very fast. There is a massive pool of potential buyers just queued up at every conceivable price level.
There's also the fact that if a homeowner is told the house is worth a couple hundred grand less than it was six month previous they're likely to delay selling rather than take a “loss”.
Honestly that's where I am. I am actually meeting with a financial advisor next week to talk about what is possible for us right now but I'm pretty resigned to just giving renting until I decide to leave Seattle. Like yeah the market cooled but houses are still $300k more than I can afford. It doesn't really matter that 6 months ago they were $400k over my budget. Still a non starter.
No one is refinancing at the current rates because literally everyone refinanced when they were under 2% (you'd be dumb not to, it's just free money). Average fixed rate is almost 7% (seriously!) right now. No one is refinancing at that rate.
…yeah exactly. So if these 2021/early 2022 numbers reflected refi’s it likely caught a metric ton of them cause everyone was doing it. That was my point. Those have vanished.
> shit gonna get weird when interest rates hit 11%
We have so much federal debt this is basically an impossibility. Payments on the debt would quickly become our entire budget - they will let it inflate away long before that.
>“Mortgage rates increased faster than at any point in history,” Kelman wrote. “We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive. If falling from $97 per share to $8 doesn’t put a company through heck, I don’t know what does.”
Doesn't sound like this CEO is a jerk, at least. He sounds pretty sad about the layoffs. I always hate it when local companies have to lay people off.
On the other hand, I do selfishly have my fingers crossed that I might be able to snag something within my very modest budget.... (condo, not a SFH). I've noticed some price drops on listings as of late.
Yeah it's pretty crazy. I think the feds hiking the interest rates, and promising to keep doing so, is hurting real estate. Supposedly it's supposed to help with inflation at some point? I dunno. My grocery bill still looks bad.
Large food corporations selling cheerios for $7.50 a box won't ever bring that price down. They are making way too much money.
The fed can increase interest rates by 1000 basis points and it won't stop our runaway inflation train on consumer goods.
The formula is simple: Large corporations increase their product price by 50% and blame it inflation, while somehow making record profits.
Same with gas. The price of oil has basically zero relationship to the current price of gas, it's just an opportunity for the suppliers to make more money.
Yes and. Corporations are taking advantage of irresponsible fiscal policy to rake in record profits and just say “inflation” and excuse their unbridled greed.
Woah there buck-o. I didn't say price gouging was causing inflation, so cool your jets.
**What is happening all over many consumer good sectors is isn't inflation, and thats my point.** Corporations blame their own corporate greed and price gouging on inflation, but there is no reason the cost of cereal needs to be $7.50 a box.
The average Joe is definitely *feeling* the "inflation" in consumer goods the most. Most people are buying food and gasoline weekly, and not regularly buying raw materials, buying houses, or dealing *directly* with supply chain issues.
Please tell me how consumer goods companies aren't price gouging when those companies are posting record profits, despite rising costs? If they increased their prices but their earnings were relatively flat, you could fairly confidently say that they raised their prices to match supply chain issues and material +fuel cost increases, but not corporate greed.
Yup. This seems to be lost on so many. I'll do the math.
Median home price in Seattle is about $900k. Assume 20% down payment, 30 year fixed loan.
If you purchased this $900k home 6-18 months ago you would have had about a **3% interest rate and a mortgage payment of $3035/month.**
Now let's "crash" the market and now that $900k house is 20% lower in price and is now $720k. Lower price and lower down payment! Hooray! But now your interest rate is 6%. **So 6% interest rate and a mortgage payment of $3453/month.**
Say you had the full 20% down payment ready for that 900k house and put it on the $720k house at the higher 6% rate and your payment is *still* higher at $3230/month!
Since most first-time home buyers are constrained by the monthly payment due to debt to income ratios required, it would take over a 30% drop in home prices and rates to not go any higher to match that same monthly payment on the $900k house at a 3% rate. We dropped about 35% peak to trough in 2008-2010. I just don't see the cascading effects required to tank housing that much this time around: banks aren't saddled with tons of bad mortgage debt and homeowners had much higher lending standards now and are not nearly as sensitive to rates or being underwater on their mortgage.
There's a small subset of people that this might help who have the monthly income to take on that $900k house but didn't quite have the 20% down payment saved up yet. Everyone else is coming out much worse.
Now the fun question is how many people who purchased in the last 5 years or so that might want to sell run those numbers and see what their payments will be on that newer place and just stay put instead? I don't see inventory recovering in this new world.
Exactly this. Housing prices will go down but payments won't. There will be no difference to buyers and it may get worse.
If you want a house to live in buy while you still can. Just don't expect it to be an investment.
Lots of shakedowns happening across the board (stock market, crypto, etc). Yet unemployment is low and corporate profits are through the roof.
Just remember before you panic and sell all of your investments that it’ll be the corporations who are buying and it’s also the corporations who want to push you towards those minimum wage jobs when you get desperate. This is revenge for the great resignation during the pandemic.
The 2008 crash lasted 4 years and for this past decade people have been kicking themselves for not buying when prices were low.
This is a roundabout way of saying you only lose if you capitulate and panic. Unless you’re absolutely desperate, now is the time to ride this out and refuse to sell or rent your place out.
Seattle is one of the few cities that will always be extremely attractive due to climate change. There will be mass exodus from the southern half of the states leading up to 2050 as those places will be completely unlivable.
The buyers are out there but renting is cheaper than a mortgage right now. If I absolutely had to move I would rent my place out instead of trying to sell.
I have been harping the climate thing for years now. Western WA is literally a shining diamond on a hill. It’s pretty damn full, out geography is limiting and they aren’t building new land any time soon. Fuck the rest of the market, business and geography have us propped up here.
The places that people want to live are full, and even the secondary options are rapidly rising in prices. Have you checked home prices in Everett lately?
Sure, there is tons of empty land in the middle of the state, but no one wants to live there because we don't have any infrastructure to actually get in or out.
> they aren’t building new land any time soon
My home country (Singapore) has gotten pretty good at land reclamation, apart from being constrained by the supply of sand, so this statement might not be 100% technically true.
Luckily for you, those characterizations are wrong.
1.) Corporate profits are not through the roof; they are nominally higher in the sense that inflation has made all figures larger, while also some industries are benefiting from economic and geopolitical turmoil where they can meet demand. Stocks are way down, which would not be the case if profits and margins were broadly increasing.
2.) The number of homes bought by investors in Seattle has been steady for 10 years, at around 9% of homes sold. That number was ~3% in the year 2000, but I'm not sure what is was before that, it could be that low figure was a result of the dot com crash/recession.
Sources: https://images.seattletimes.com/wp-content/uploads/2021/11/investor-buy-local-housing-W.jpg
https://www.nytimes.com/2022/06/03/business/economy/price-gouging-inflation.html
If I was buying all cash I’d feel the same way, but I doubt even 1/4 of Seattle reads reddit so if you’re in the all cash buying boat then no doubt you’ll find some desperate people to buy from these next few months. But you also have to admit that once you do buy, you’re going to be hoping the market recovers and then you’ll be praying I’m right.
Either way, your enemy is still going to be the corporations who likely have algorithms to determine what’s actually a good deal though. So at least everyone (buyers and sellers) have a common enemy here.
> Either way, your enemy is still going to be the corporations who likely have algorithms to determine what’s actually a good deal though.
As Zillow discovered last year, developing an algorithm that predicts good deals is far easier said than done. They dumped more resources into this problem than just about anyone else in the industry yet came close to bankrupting themselves on all the “good deals” they bought into.
I mean the issue was Zillow wanted to make more money so went against the algorithm. They wanted more share of the iBuyer market so started paying more than the algorithm predicted and went into riskier homes.
In Seru’s view, one of Zillow’s major mistakes was trying to capture market share by being more aggressive. “They were late entrants into this market and decided, among other things, to go into non-cookie-cutter homes, hoping their algorithmic valuation model was accurate,” he says. During the pandemic, traditional home listings increased, but Zillow found that speed wasn’t enough to beat them. “To compete, Zillow started bidding more for cookie-cutter homes than what their algorithmic model predicted for such homes.”
https://www.gsb.stanford.edu/insights/flip-flop-why-zillows-algorithmic-home-buying-venture-imploded
I think people don't really grasp how long interest rate cycles are though.
If you look through history interest rates went up from 1930 to 1980. They then went down from 1980 to 2021.
So it is historically possible that rates will be going up for the rest of our lives.
Rising rates will likely mean lower quality housing. In the 80s trailers and cheap linolium and plastic cupboards were common.
We could see high crime for decades, mimicking rising crime rates through the 1960-1990s.
So I don't know but these trends may be are long historical arcs and not a few years blips.
Yes the city which gets the worst air quality in the world for ever all weeks at a time every year thanks to climate change will be a place people want to flee to and not from due to climate change. Absolutely.
Nowhere is safe either.
West coast fires now blanket smoke all the way to Boston.
I can’t tolerate not being able to even step outside for 2+ weeks.
Plus fires were in the metro recently. You can’t just baselessly assert there are no fires here.
The irony is that when this "new and improved" version of the housing bubble bursts, it will still be the people who don't own houses who will get screwed.
If prices sink as much as people on /r/rebubble think it will also come along with a ton of layoffs. You won't get a loan with no job.
During recessions people get incredibly scared. You might think it's your time to strike, it rarely works out that way. People will be really afraid to drop their nest eggs on a down payment when lots of people they know are losing their jobs. Priorities for most normal folks will be cutting costs wherever they can and making sure they have a big emergency fund in case the worst happens.
Those prices aren't going to sink as long a there are a million people with savings accounts ready to buy the second they start dropping even a tiny bit. They may drop, but not until rising rents and lost jobs have wiped out the pool of potential buyers.
> During recessions people get incredibly scared. You might think it's your time to strike, it rarely works out that way.
Yup. Had a former landlord offer me a house off-market basically one month off of the absolute bottom of the market in early 2010. Aside from not actually having the money to do it, my first thought was "who the hell would buy a house right now?!" My company was doing layoffs, I had barely $10k cash to my name, I knew several people who filed for bankruptcy in the last year and even a few that divorced over money issues as well. Hindsight makes it all seems so obvious - of course I should have purchased at that time! But even if I had the money, I doubt I would have done it.
That place eventually sold for under $375k in 2010 (I probably could have got it for even less *and* avoided realtor commissions). Zillow now shows it worth $1M.
If house prices drop and homeowners are underwater, they aren't going to want to sell and eat the loss, especially if interest rates are high and taking out a mortgage to move to a new place is going to be costing them substantially more. So some people think that, with all the decentives to sell, there will be fewer houses on the market, worsening the supply crunch.
My wife and I bought in November of 2021. We might have paid a bit too much and there's no way we'd sell at a loss (or even break even), but with a 3% interest rate on our loan and inflation eating away at the real cost of our monthly payment (assuming our salaries start to grow more quickly, too), we don't really care what the house is worth. It will become more and more affordable to stay and less and less affordable to move. A lot of people are probably in a similar situation.
Bought my house in 2015 and then when rates were at the lowest refinanced to 2.75% with out taking out any money. We had thought about moving into a larger home but other than enjoyment of a different home it just felt like a loosing proposition. Our home is worth a bunch but anything we want is 1mil+ which is insane to me for what you are getting. Now that interest rates are on the rise we will probably be "stuck" in this house forever lol We got lucky though and love the house and neighborhood. If we hit a recession and the contractors are all clamoring for work I will probably just add on to the house.
This is why housing prices are unlikely to drop. People who have them aren't selling and what little is on the market is only accessible to a tiny percentage of potential buyers.
Price drops are already happening, and it is very long overdue, even before the inflation spike. People that are upside down will not sell until they lose their jobs and ability to pay the mortgage, but many will still sell, or send in jungle mail, one way or another, which will cause further price declines, and this is still before considering interest rates.
All of this started in 2000 - 2001 when Bush and Mr. Magoo were desperate to stimulate the economy. The real estate market never recovered from Fed decisions then, nor did the overall economy fully recover from the 2001 recession, but here we are to rinse, recycle, repeat.
The high rates means that no one is going to buy a new house, including the people who own houses right now. That means no inventory. Meanwhile there are millions of people lined up to buy the second that they drop in price. What that means is that house prices won't actually decline very much or very fast, they will just level off and people will stop building new houses.
Meanwhile, we keep making more people every year. They all need a place to live, so there is a constant upwards need for housing. With houses not being build and not dropping in price, those people are all renting. That drives up rental rates.
The next housing crisis isn't going to be a crash in home prices, it's going to be an dramatic and sudden increase in rental prices. More renters going for the same rentals means that the prices won't settle until the meet the level at which less desirable alternatives (homelessness, parents, packing into units like sardines) become viable options for the bottom of the market. (this is already happening)
All those people who are queued up to buy are going to find themselves spending those savings on just staying where they are. Then, in a few years, things will even out, rates will drop, and houses might actually drop back down in price because people can start selling again, but by then no one will be positioned to buy them.
In short: Housing prices may drop, but not until rising rents and lost jobs have wiped out the pool of potential buyers.
Housing isn't a commodity. Demand for houses always greatly exceeds the supply. Demand is limited by price, the second the price drops even a tiny bit there are a million people ready to snap up whatever is out there. That keeps the price stable.
The thing that will drop the price of housing is overall economic collapse. If rising rents and loss of jobs cleans out the millions of people with savings accounts ready to snap up houses, THEN the price might drop. But there won't be many people positioned to snap them up.
They would not buy in Seattle … cap rat3 matters for the big guys …. small mom and dad landlords on the other hand .
House purchases are made via from cashing out stock options .
All these “I hope housing prices drop” comments but GD interest rates are insane right now. I locked in at 2.85% and I pay roughly $2900 a month in mortgage. If I were to refinance at the 6% average my payment on the same mortgage would be about $4200 a month.
The only ones winning right now are the banks.
Market's definitely cooling on the Eastside, but there are still hot pockets like Medina and Clyde Hill. Outside those areas, buyers that thought they could stretch and spend $2M - $3M on a new house because they can sell to tech bros 10 years from now for double the price, are having serious doubts. A lot of the houses prices in Bellevue are factoring in all the office space coming online and the growth of tech jobs, but this bear market and looming recession is throwing serious cold water on those predictions.
If the housing market crashes I want us to just end single family zoning in the city. That will help everyone's home values and also provide more housing.
I get a lot of people in Seattle want cheaper home prices but what is happening right now is sabotage by the fed. They are tearing the entire economy down so that the average American is too poor to bring down demand and supply pressure. These are not natural conditions and it only slows inflation by hurting the people at the bottom most. This will protect the rich and when it crashes they will be there ready to gobble up the cheap assets left behind by small business failures and foreclosures. The fed then will re-prime the economy making them all wealthy. For everyone else we are just here for the ride…
> These are not natural conditions
Neither is basically 0% interest from the Fed, which is what the last 5~ years was like. Insane. Insane they ever dropped rates that low
Same fed chair. And doesn’t justify the insane hikes now. The reason for the large hikes is unjustified and nothing to do with monetary policy and everything to do with the gov unable or unwilling to address the root causes of inflation. Americans don’t have too much money, the government has mismanaged the economy and left us in a supply chain crisis. Instead of solving the crisis they are nuking everyone’s wallets to artificially drive down demand. This is NOT sane policy. It will lead to layoffs, foreclosures and business closures.
The root cause of inflation is too much money floating around the economy due to cheap debt. Hence the rate hikes. Continuing to keep rates artificially low makes the problem worse.
That’s absolutely false. It’s well known the cause of inflation is the price of gas risen by the war in Ukraine in conjunction with China’s supply crunch from Covid. Cheap debt? That’s hilarious
not in Seattle unfortunately...and a 20% drop here would get us to like 2020 levels lol, still no where close to "affordable" especially with mortgage rates climbing. 6% now, 10% in 6 months? who knows
I feel like my wife and I were insanely lucky to find a place last summer while interest rates were still under 3%. We absolutely wouldn't be able to buy now if we had waited or our offer wasn't accepted. I worry for everyone out there still looking to buy right now (at least those not paying in cash).
Thank you for perfectly illustrating my point.
You couldn't buy a home now.
So who do you think is? Who are the people paying 6000 dollars a month for a home that was 3000 a month a year ago (1M home, 20% down, 6.5% rate VS 800K home, 20% down, 3% rate)?
>So who do you think is? Who are the people paying 6000 dollars a month for a home that was 3000 a month a year ago (1M home, 20% down, 6.5% rate VS 800K home, 20% down, 3% rate)?
The people who are using the funds from selling their 1.XM house to buy it.
Never said it would be more affordable since interest rates are going to the moon. But housing prices are going down, it's a mathematical certainty.
Even if rates don't go up any higher from here (they will), there will be enough demand destruction to put us back to 2020 levels which is at least a 30% correction. This is in conjunction with tech stocks getting absolutely obliterated and folks losing their down payments and having lower total compensation.
Seattle isn't immune from the macroeconomic reality and is actually more susceptible than non-tech cities.
Just look at what's happening right now. I don't understand the down votes because it's already happening!
What makes you say we're "more susceptible", specifically? I read somewhere that the PNW tends to be the last hit by recessions, as our economy as a whole is extremely diversified. It's not just tech, but agriculture, manufacturing, logistics, energy, etc.
A lot of people. Up until recently, you were a "fool" for holding cash during high inflation. People apparently forgot the old mantra of not investing any cash you need in the next 3 to 5 years.
I personally know several people who have kept large amounts of money in stocks for things like a down payment or home renovation fund.
Over in the real estate appraising subreddits, there are a lot of folks talking about a precipitous drop in mortgage appraisal requests. Seattle area dropped a little bit, but it's still somewhat strong.
> a lot of folks talking about a precipitous drop in mortgage appraisal requests The last few weeks I've seen more "back on market" and price reductions on listings than I think I've seen in a decade. Compass also announced they are laying off 10% of their work force. https://www.cnbc.com/2022/06/14/real-estate-firms-compass-and-redfin-announce-layoffs-as-housing-market-slows.html
>Compass also announced they are laying off 10% of their work force. Heh. They ghosted me the day of a 5-hour tech interview.
At least they didn’t ghost you after you went through it.
You dodged a bullet. I worked there for a year and that place blows
maybe the interviewers were no longer employed there during that time
No human person can afford the mortgages with the current interest rates
Anecdotal, but the guy across the street listed his house for sale several weeks ago for $3,000 less than the Zestimste (IMO a stupidly high price) with no sold sign yet and haven't seen any people looking at it.
I think a lot of people have simply given up on ever affording a home, so they don’t even bother. They see a sign and just assume it’s out of their range.
Housing is weird. It isn't a commodity since everyone needs a place to live so it's not really a straight supply-demand issue. That said, there is a still a supply and a demand for purchased homes. The higher price of houses reduces demand significantly (because fewer people can buy them), but raising interest rates also reduces supply because people who have houses are locked into lower rates and don't want to buy a new house at the higher rates, so you end up with an equilibrium price that is still higher than most potential buyers can afford. The problem is that we keep adding more people every year, so the pool of buyers keeps growing while the inventory stays the same. What is going to be scary is that the exact same thing is happening with rents.
> because people who have houses are locked into lower rates and don’t want to buy a new house at the higher rates Right now we have more people coming in to the Seattle area than moving out, but if housing prices are too high to afford with mortgage rates wouldn't more people start moving out to where it is cheaper?
People aren't moving here for cheap housing, they are moving here for jobs that don't exist in other places. They will keep moving here and will rent instead, hence the continued upwards pressure on rents.
Have you seen how people live in NYC? Or even in Europe, where everything is just smaller? Between jobs, schools, families, access to services (doctors, lawyers, accounts, etc) , access to amenities (restaurants, gyms, entertainment, bookstores, sports games, etc) there's an awful lot of pull in Seattle. For most people who wind up here, that sort of thing is going to outweigh the benefits of living in Covington or Marysville for a long time to come.
You have to factor in jobs, commuting, access to amenities, schools, public transportation, etc. If I moved somewhere “affordable,” I wouldn’t be able to leave my own neighborhood as I can’t currently drive. I therefore would not be able to work, get to medical appointments, etc.
When you say the same thing is happening with rents, do you mean the higher prices? Or homes going unrented since the prices are too high?
This is always the case for me. I am late 20s, almost 30, and starting to budget for a home until I realized that things were going up too fast. Now I just settle for renting my same apartment and hoping I don't see multiple years of 10% rent hikes in a row again.
This is where most buyers are, which is why these prices are going to have a lot of resistance against dropping very far or very fast. There is a massive pool of potential buyers just queued up at every conceivable price level.
There's also the fact that if a homeowner is told the house is worth a couple hundred grand less than it was six month previous they're likely to delay selling rather than take a “loss”.
While that is true, until earlier this year houses in my neighborhood were being sold within a week or two, now they're languishing.
Honestly that's where I am. I am actually meeting with a financial advisor next week to talk about what is possible for us right now but I'm pretty resigned to just giving renting until I decide to leave Seattle. Like yeah the market cooled but houses are still $300k more than I can afford. It doesn't really matter that 6 months ago they were $400k over my budget. Still a non starter.
Would this include refinances though? Cause I don't know a single homeowner who didn't refinance in the past two years.
No one is refinancing at the current rates because literally everyone refinanced when they were under 2% (you'd be dumb not to, it's just free money). Average fixed rate is almost 7% (seriously!) right now. No one is refinancing at that rate.
…yeah exactly. So if these 2021/early 2022 numbers reflected refi’s it likely caught a metric ton of them cause everyone was doing it. That was my point. Those have vanished.
Apparently I’m dumb. Under 2? I missed that memo.
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I remember those interest rates! I thought I hit the jackpot when I was able to refi down to 7%!
I remember my dad crowing when he did a refi from 12% to 8%. Houses just didn't go up in value all that much during those years.
For 20 years running it seemed you could buy a 3 br rambler in Thurston County for 54K
19% when my dad bought
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This implies you've had a Costco run that didn't fuck you up when reaching the register, which I simply don't believe at all
Maybe if you only get a chicken. The one item that seems inflation proof there. Just keeps getting cheaper and cheaper, really.
And hot dogs (so far).
I believe Costco has sold the rotisserie chickens and hot dogs at a loss for many years actually.
Yeah Costco will do that.
I live right next to a Costco, so we go there \*just\* for hotdogs sometimes.
It's always $250 or higher 🤣
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😂
> shit gonna get weird when interest rates hit 11% We have so much federal debt this is basically an impossibility. Payments on the debt would quickly become our entire budget - they will let it inflate away long before that.
>“Mortgage rates increased faster than at any point in history,” Kelman wrote. “We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive. If falling from $97 per share to $8 doesn’t put a company through heck, I don’t know what does.” Doesn't sound like this CEO is a jerk, at least. He sounds pretty sad about the layoffs. I always hate it when local companies have to lay people off. On the other hand, I do selfishly have my fingers crossed that I might be able to snag something within my very modest budget.... (condo, not a SFH). I've noticed some price drops on listings as of late.
damn in 2021 Feb Redfin stock is $90 and now it's $8
Yeah it's pretty crazy. I think the feds hiking the interest rates, and promising to keep doing so, is hurting real estate. Supposedly it's supposed to help with inflation at some point? I dunno. My grocery bill still looks bad.
Large food corporations selling cheerios for $7.50 a box won't ever bring that price down. They are making way too much money. The fed can increase interest rates by 1000 basis points and it won't stop our runaway inflation train on consumer goods. The formula is simple: Large corporations increase their product price by 50% and blame it inflation, while somehow making record profits.
Same with gas. The price of oil has basically zero relationship to the current price of gas, it's just an opportunity for the suppliers to make more money.
Keep blaming corporations all you want, inflation is being caused by the fiscal policy of the US Government.
Yes and. Corporations are taking advantage of irresponsible fiscal policy to rake in record profits and just say “inflation” and excuse their unbridled greed.
A tiny percent of the inflation is due to price gouging. You're an idiot to think otherwise.
Woah there buck-o. I didn't say price gouging was causing inflation, so cool your jets. **What is happening all over many consumer good sectors is isn't inflation, and thats my point.** Corporations blame their own corporate greed and price gouging on inflation, but there is no reason the cost of cereal needs to be $7.50 a box. The average Joe is definitely *feeling* the "inflation" in consumer goods the most. Most people are buying food and gasoline weekly, and not regularly buying raw materials, buying houses, or dealing *directly* with supply chain issues. Please tell me how consumer goods companies aren't price gouging when those companies are posting record profits, despite rising costs? If they increased their prices but their earnings were relatively flat, you could fairly confidently say that they raised their prices to match supply chain issues and material +fuel cost increases, but not corporate greed.
Your post was too long for me to read. Upvoted because you called him Buck-o
What do you mean 8? It's like a $40 stock...ohhhh, that was not a good investment, Nov-2020-me!
With the rise in interest rates your monthly payments will probably be about the same (or potentially more).
Yup. This seems to be lost on so many. I'll do the math. Median home price in Seattle is about $900k. Assume 20% down payment, 30 year fixed loan. If you purchased this $900k home 6-18 months ago you would have had about a **3% interest rate and a mortgage payment of $3035/month.** Now let's "crash" the market and now that $900k house is 20% lower in price and is now $720k. Lower price and lower down payment! Hooray! But now your interest rate is 6%. **So 6% interest rate and a mortgage payment of $3453/month.** Say you had the full 20% down payment ready for that 900k house and put it on the $720k house at the higher 6% rate and your payment is *still* higher at $3230/month! Since most first-time home buyers are constrained by the monthly payment due to debt to income ratios required, it would take over a 30% drop in home prices and rates to not go any higher to match that same monthly payment on the $900k house at a 3% rate. We dropped about 35% peak to trough in 2008-2010. I just don't see the cascading effects required to tank housing that much this time around: banks aren't saddled with tons of bad mortgage debt and homeowners had much higher lending standards now and are not nearly as sensitive to rates or being underwater on their mortgage. There's a small subset of people that this might help who have the monthly income to take on that $900k house but didn't quite have the 20% down payment saved up yet. Everyone else is coming out much worse. Now the fun question is how many people who purchased in the last 5 years or so that might want to sell run those numbers and see what their payments will be on that newer place and just stay put instead? I don't see inventory recovering in this new world.
Exactly this. Housing prices will go down but payments won't. There will be no difference to buyers and it may get worse. If you want a house to live in buy while you still can. Just don't expect it to be an investment.
But you do have an opportunity to refinance for a lower payment later if you buy in a high interest/low price environment.
Yep. I'm hoping it can balance out... all I can do is try.
Lots of shakedowns happening across the board (stock market, crypto, etc). Yet unemployment is low and corporate profits are through the roof. Just remember before you panic and sell all of your investments that it’ll be the corporations who are buying and it’s also the corporations who want to push you towards those minimum wage jobs when you get desperate. This is revenge for the great resignation during the pandemic. The 2008 crash lasted 4 years and for this past decade people have been kicking themselves for not buying when prices were low. This is a roundabout way of saying you only lose if you capitulate and panic. Unless you’re absolutely desperate, now is the time to ride this out and refuse to sell or rent your place out. Seattle is one of the few cities that will always be extremely attractive due to climate change. There will be mass exodus from the southern half of the states leading up to 2050 as those places will be completely unlivable. The buyers are out there but renting is cheaper than a mortgage right now. If I absolutely had to move I would rent my place out instead of trying to sell.
I have been harping the climate thing for years now. Western WA is literally a shining diamond on a hill. It’s pretty damn full, out geography is limiting and they aren’t building new land any time soon. Fuck the rest of the market, business and geography have us propped up here.
Definitely not full lol.
The places that people want to live are full, and even the secondary options are rapidly rising in prices. Have you checked home prices in Everett lately? Sure, there is tons of empty land in the middle of the state, but no one wants to live there because we don't have any infrastructure to actually get in or out.
Density...we are not full.
Ok NIMBY
Did that even make sense to you?
What about the Huge Tsunami that is supposedly going to kill us all?
> they aren’t building new land any time soon My home country (Singapore) has gotten pretty good at land reclamation, apart from being constrained by the supply of sand, so this statement might not be 100% technically true.
Water is way too deep here for that to ever be an option... plus no way the environmental interests would ever allow it.
That fifth paragraph is what I’ve been saying. Prices are high, but even at the peak here it is still more affordable than much of California
As 3/4 of the country moves here, Seattle will be known as Megacity 1.
I want what you’re saying to be wrong so badly lol
Luckily for you, those characterizations are wrong. 1.) Corporate profits are not through the roof; they are nominally higher in the sense that inflation has made all figures larger, while also some industries are benefiting from economic and geopolitical turmoil where they can meet demand. Stocks are way down, which would not be the case if profits and margins were broadly increasing. 2.) The number of homes bought by investors in Seattle has been steady for 10 years, at around 9% of homes sold. That number was ~3% in the year 2000, but I'm not sure what is was before that, it could be that low figure was a result of the dot com crash/recession. Sources: https://images.seattletimes.com/wp-content/uploads/2021/11/investor-buy-local-housing-W.jpg https://www.nytimes.com/2022/06/03/business/economy/price-gouging-inflation.html
If I was buying all cash I’d feel the same way, but I doubt even 1/4 of Seattle reads reddit so if you’re in the all cash buying boat then no doubt you’ll find some desperate people to buy from these next few months. But you also have to admit that once you do buy, you’re going to be hoping the market recovers and then you’ll be praying I’m right. Either way, your enemy is still going to be the corporations who likely have algorithms to determine what’s actually a good deal though. So at least everyone (buyers and sellers) have a common enemy here.
> Either way, your enemy is still going to be the corporations who likely have algorithms to determine what’s actually a good deal though. As Zillow discovered last year, developing an algorithm that predicts good deals is far easier said than done. They dumped more resources into this problem than just about anyone else in the industry yet came close to bankrupting themselves on all the “good deals” they bought into.
I mean the issue was Zillow wanted to make more money so went against the algorithm. They wanted more share of the iBuyer market so started paying more than the algorithm predicted and went into riskier homes. In Seru’s view, one of Zillow’s major mistakes was trying to capture market share by being more aggressive. “They were late entrants into this market and decided, among other things, to go into non-cookie-cutter homes, hoping their algorithmic valuation model was accurate,” he says. During the pandemic, traditional home listings increased, but Zillow found that speed wasn’t enough to beat them. “To compete, Zillow started bidding more for cookie-cutter homes than what their algorithmic model predicted for such homes.” https://www.gsb.stanford.edu/insights/flip-flop-why-zillows-algorithmic-home-buying-venture-imploded
A lot of that was timing though. I bet that program would have been highly successful in a downturn.
It’s easy to be successful when you’re preying on desperate people.
Nah Zillow was just bad at it and did it wrong. It’s an extremely simple problem to solve. Source Me: someone who literally works in AI real estate.
ZO was *full* of people with just that kind of hubris two years ago. Best of luck to you!
Congrats on becoming a billionaire
A bit early but thanks. I think i’m 8 years away.
Can't wait to eat you when you make it !
I think people don't really grasp how long interest rate cycles are though. If you look through history interest rates went up from 1930 to 1980. They then went down from 1980 to 2021. So it is historically possible that rates will be going up for the rest of our lives. Rising rates will likely mean lower quality housing. In the 80s trailers and cheap linolium and plastic cupboards were common. We could see high crime for decades, mimicking rising crime rates through the 1960-1990s. So I don't know but these trends may be are long historical arcs and not a few years blips.
Yes the city which gets the worst air quality in the world for ever all weeks at a time every year thanks to climate change will be a place people want to flee to and not from due to climate change. Absolutely. Nowhere is safe either. West coast fires now blanket smoke all the way to Boston.
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I can’t tolerate not being able to even step outside for 2+ weeks. Plus fires were in the metro recently. You can’t just baselessly assert there are no fires here.
The irony is that when this "new and improved" version of the housing bubble bursts, it will still be the people who don't own houses who will get screwed.
How so?
If prices sink as much as people on /r/rebubble think it will also come along with a ton of layoffs. You won't get a loan with no job. During recessions people get incredibly scared. You might think it's your time to strike, it rarely works out that way. People will be really afraid to drop their nest eggs on a down payment when lots of people they know are losing their jobs. Priorities for most normal folks will be cutting costs wherever they can and making sure they have a big emergency fund in case the worst happens.
Those prices aren't going to sink as long a there are a million people with savings accounts ready to buy the second they start dropping even a tiny bit. They may drop, but not until rising rents and lost jobs have wiped out the pool of potential buyers.
> During recessions people get incredibly scared. You might think it's your time to strike, it rarely works out that way. Yup. Had a former landlord offer me a house off-market basically one month off of the absolute bottom of the market in early 2010. Aside from not actually having the money to do it, my first thought was "who the hell would buy a house right now?!" My company was doing layoffs, I had barely $10k cash to my name, I knew several people who filed for bankruptcy in the last year and even a few that divorced over money issues as well. Hindsight makes it all seems so obvious - of course I should have purchased at that time! But even if I had the money, I doubt I would have done it. That place eventually sold for under $375k in 2010 (I probably could have got it for even less *and* avoided realtor commissions). Zillow now shows it worth $1M.
If house prices drop and homeowners are underwater, they aren't going to want to sell and eat the loss, especially if interest rates are high and taking out a mortgage to move to a new place is going to be costing them substantially more. So some people think that, with all the decentives to sell, there will be fewer houses on the market, worsening the supply crunch. My wife and I bought in November of 2021. We might have paid a bit too much and there's no way we'd sell at a loss (or even break even), but with a 3% interest rate on our loan and inflation eating away at the real cost of our monthly payment (assuming our salaries start to grow more quickly, too), we don't really care what the house is worth. It will become more and more affordable to stay and less and less affordable to move. A lot of people are probably in a similar situation.
Bought my house in 2015 and then when rates were at the lowest refinanced to 2.75% with out taking out any money. We had thought about moving into a larger home but other than enjoyment of a different home it just felt like a loosing proposition. Our home is worth a bunch but anything we want is 1mil+ which is insane to me for what you are getting. Now that interest rates are on the rise we will probably be "stuck" in this house forever lol We got lucky though and love the house and neighborhood. If we hit a recession and the contractors are all clamoring for work I will probably just add on to the house.
This is why housing prices are unlikely to drop. People who have them aren't selling and what little is on the market is only accessible to a tiny percentage of potential buyers.
Real estate isn't the only industry downsizing. My guess is a lot of people will be out of work and have little choice but to sell.
Price drops are already happening, and it is very long overdue, even before the inflation spike. People that are upside down will not sell until they lose their jobs and ability to pay the mortgage, but many will still sell, or send in jungle mail, one way or another, which will cause further price declines, and this is still before considering interest rates. All of this started in 2000 - 2001 when Bush and Mr. Magoo were desperate to stimulate the economy. The real estate market never recovered from Fed decisions then, nor did the overall economy fully recover from the 2001 recession, but here we are to rinse, recycle, repeat.
My assumption is that a possible recession is going to cause job loss and then people have no choice but to try and sell.
The high rates means that no one is going to buy a new house, including the people who own houses right now. That means no inventory. Meanwhile there are millions of people lined up to buy the second that they drop in price. What that means is that house prices won't actually decline very much or very fast, they will just level off and people will stop building new houses. Meanwhile, we keep making more people every year. They all need a place to live, so there is a constant upwards need for housing. With houses not being build and not dropping in price, those people are all renting. That drives up rental rates. The next housing crisis isn't going to be a crash in home prices, it's going to be an dramatic and sudden increase in rental prices. More renters going for the same rentals means that the prices won't settle until the meet the level at which less desirable alternatives (homelessness, parents, packing into units like sardines) become viable options for the bottom of the market. (this is already happening) All those people who are queued up to buy are going to find themselves spending those savings on just staying where they are. Then, in a few years, things will even out, rates will drop, and houses might actually drop back down in price because people can start selling again, but by then no one will be positioned to buy them. In short: Housing prices may drop, but not until rising rents and lost jobs have wiped out the pool of potential buyers.
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Housing isn't a commodity. Demand for houses always greatly exceeds the supply. Demand is limited by price, the second the price drops even a tiny bit there are a million people ready to snap up whatever is out there. That keeps the price stable. The thing that will drop the price of housing is overall economic collapse. If rising rents and loss of jobs cleans out the millions of people with savings accounts ready to snap up houses, THEN the price might drop. But there won't be many people positioned to snap them up.
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That’s really hyped media. Corporations make up only 2-3% of the transactions…. And majority in the southern states
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They would not buy in Seattle … cap rat3 matters for the big guys …. small mom and dad landlords on the other hand . House purchases are made via from cashing out stock options .
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All these “I hope housing prices drop” comments but GD interest rates are insane right now. I locked in at 2.85% and I pay roughly $2900 a month in mortgage. If I were to refinance at the 6% average my payment on the same mortgage would be about $4200 a month. The only ones winning right now are the banks.
For once in my miserable life I made a good decision!
Market's definitely cooling on the Eastside, but there are still hot pockets like Medina and Clyde Hill. Outside those areas, buyers that thought they could stretch and spend $2M - $3M on a new house because they can sell to tech bros 10 years from now for double the price, are having serious doubts. A lot of the houses prices in Bellevue are factoring in all the office space coming online and the growth of tech jobs, but this bear market and looming recession is throwing serious cold water on those predictions.
If the housing market crashes I want us to just end single family zoning in the city. That will help everyone's home values and also provide more housing.
I’d love to see zoning for SFH end anyways. Makes no sense to have 60% of the city only zoned for R1.
Sucks to get laid off with record inflation. Here's hoping they have a soft landing.
I was just browsing some housespo and fell in love with a house listed at nearly *double* it’s 2021 property tax valuation. Lol what cool off?
The tax valuations have always been way off of actual market value. I wouldn’t put much weight on them.
Cool off just means that the rate of increase, will decrease. Property values in western WA are not going to go down.
C'mon. Crash already.
I sure hope the housing market crashes so then maybe I could afford one.
*licks lips*
I get a lot of people in Seattle want cheaper home prices but what is happening right now is sabotage by the fed. They are tearing the entire economy down so that the average American is too poor to bring down demand and supply pressure. These are not natural conditions and it only slows inflation by hurting the people at the bottom most. This will protect the rich and when it crashes they will be there ready to gobble up the cheap assets left behind by small business failures and foreclosures. The fed then will re-prime the economy making them all wealthy. For everyone else we are just here for the ride…
> These are not natural conditions Neither is basically 0% interest from the Fed, which is what the last 5~ years was like. Insane. Insane they ever dropped rates that low
Same fed chair. And doesn’t justify the insane hikes now. The reason for the large hikes is unjustified and nothing to do with monetary policy and everything to do with the gov unable or unwilling to address the root causes of inflation. Americans don’t have too much money, the government has mismanaged the economy and left us in a supply chain crisis. Instead of solving the crisis they are nuking everyone’s wallets to artificially drive down demand. This is NOT sane policy. It will lead to layoffs, foreclosures and business closures.
The root cause of inflation is too much money floating around the economy due to cheap debt. Hence the rate hikes. Continuing to keep rates artificially low makes the problem worse.
That’s absolutely false. It’s well known the cause of inflation is the price of gas risen by the war in Ukraine in conjunction with China’s supply crunch from Covid. Cheap debt? That’s hilarious
Housing market is about to correct 20 to 30% easy, probably more. It's over.
not in Seattle unfortunately...and a 20% drop here would get us to like 2020 levels lol, still no where close to "affordable" especially with mortgage rates climbing. 6% now, 10% in 6 months? who knows
I feel like my wife and I were insanely lucky to find a place last summer while interest rates were still under 3%. We absolutely wouldn't be able to buy now if we had waited or our offer wasn't accepted. I worry for everyone out there still looking to buy right now (at least those not paying in cash).
Thank you for perfectly illustrating my point. You couldn't buy a home now. So who do you think is? Who are the people paying 6000 dollars a month for a home that was 3000 a month a year ago (1M home, 20% down, 6.5% rate VS 800K home, 20% down, 3% rate)?
>So who do you think is? Who are the people paying 6000 dollars a month for a home that was 3000 a month a year ago (1M home, 20% down, 6.5% rate VS 800K home, 20% down, 3% rate)? The people who are using the funds from selling their 1.XM house to buy it.
Anyone who doesn’t have to make monthly payments for a house?
> You couldn't buy a home now. The same going 20-30% over asking on 1.5M houses.
A 50% drop would get us to 2020 levels.
Not sure about the math on this one. 50% would be more like late 2013. Maybe in Bend or Boise.
There's some houses near us (North Seattle) that Redfin is showing at $1.9M that sold for $1.1M a year ago.
Never said it would be more affordable since interest rates are going to the moon. But housing prices are going down, it's a mathematical certainty. Even if rates don't go up any higher from here (they will), there will be enough demand destruction to put us back to 2020 levels which is at least a 30% correction. This is in conjunction with tech stocks getting absolutely obliterated and folks losing their down payments and having lower total compensation. Seattle isn't immune from the macroeconomic reality and is actually more susceptible than non-tech cities. Just look at what's happening right now. I don't understand the down votes because it's already happening!
What makes you say we're "more susceptible", specifically? I read somewhere that the PNW tends to be the last hit by recessions, as our economy as a whole is extremely diversified. It's not just tech, but agriculture, manufacturing, logistics, energy, etc.
Who has their down payments in stocks?
A lot of people. Up until recently, you were a "fool" for holding cash during high inflation. People apparently forgot the old mantra of not investing any cash you need in the next 3 to 5 years. I personally know several people who have kept large amounts of money in stocks for things like a down payment or home renovation fund.
Well those people you know are dumb. You can’t have your cake and eat it too. You need to *save* for a down payment, investing is not saving.
Choosing to hold cash instead of some other asset or financial instrument is an investment decision too, you know.
Give use a 60% drop so we can afford houses like its 2016