Interesting comments from one of my former students on housing

[GON]

I taught for four years at a top 30 university- I know hard to believe. And for note, I was not smart enough to be a student at this university.

Anyways, one of my students was a chemical engineer. Super smart guy, probably could hold his own with Elon Musk. You could just tell this young man had the goods and was going to be successful in any endeavor he selected. I would tease him I wanted to be a security guard at his firm when I retired.

This young man traded being a chemical engineer to be a real estate developer. He is developing properties from the East Coast of the U.S. to Hawaii. Yesterday he published an article to his investors stating that the shortage in residential real estate will take decades to correct, but due to many factors, may never correct. He further stated that the shortage in residential housing became apparent to the general public in 2021, but that the charts show the decline in residential real estate development started in 2009 and never recovered. And year over year the lack in residential real estate starts has added up to a backlog that nobody can or is trying to fill.

His bottom line to his investors- residential real estate is both a near term and long-term golden goose. This also means that for individuals looking to buy a home, it may be tough today, and get even tougher going forward. Those private equity firms buying millions of residential properties over the past decade likely knew the shortfalls in new construction starts, and that the backlog could not actually be filled, creating more demand for a product that is a basic necessity. A good place to be for an investor.

 

[Vil_Riker]

They knew because they had the policy designed that way. The successor to that policymaker placed tariffs on basic supplies needed for construction. So yes, your former student is absolutely correct about the short and mid term future.

 

[wpod]

His bottom line to his investors- residential real estate is both a near term and long-term golden goose. This also means that for individuals looking to buy a home, it may be tough today, and get even tougher going forward. Those private equity firms buying millions of residential properties over the past decade likely knew the shortfalls in new construction starts, and that the backlog could not actually be filled, creating more demand for a product that is a basic necessity. A good place to be for an investor.

I would hope it is so.

 

[thastinger]

They are throwing up some real junk around here, not neighborhoods, multi story condo junk that is destined to be rentals in a few years.

 

[JeffKeryk]

It is a circular problem. People migrate to where the better paying jobs are which increases housing demand, which forces employers to increase wages.

I am working on an 1100 sq ft, 2/2, small lot home, OK area; asking price $575K. Offered $590K. Crazy.
In Silicon Valley proper, that would be $1.5M easily. In a better area, maybe $2M.

 

[PimTac]

A likely scenario but the problem is the changing of neighborhoods. Nobody is immune. You finally get to buy your dream home in a quiet area and ten years later you have multi story apartments/condos next to you along with the problems.

Just ask Steph Curry.

 

[Fordiesel69]

Very concerned with what I see getting thrown up in a hurry. In 2002 when I was setting foot in new construction homes the quality was not fantastic, but was quite fair. They are using even cheaper disposable concealed stuff that cannot be replaced. Most notable a HVAC duct solution called Rheia. Its an octopus of some kind of flex pipes that are certainly not "Lifetime" this material will fail at some point and it will become non replaceable. Where the ducts get routed you would essentially need to gut your entire home down to studs to gain access to this.

Also has anyone seen the recent quality of construction grade cabinets, counter tops, plumbing fixtures, appliances, fans, windows, and doors. Utterly disgusting.

 

[JohnnyG]

You certainly can't fault the developers for not trying. Almost everyone I know is having virgin land destroyed and homes being built on it.
I'm not just talking about Florida either. Around Raleigh NC it's a madhouse of developers!

I feel another 2007 crash to happen if wages don't pick up. In fact, your investor friend is reciting the exact same words that my (now deceased) nephew did when he was a mortgage broker in 2005-7. The stress finally got to him.

 

[Astro14]

It is a circular problem. People migrate to where the better paying jobs are which increases housing demand, which forces employers to increase wages.

I am working on an 1100 sq ft, 2/2, small lot home, OK area; asking price $575K. Offered $590K. Crazy.
In Silicon Valley proper, that would be $1.5M easily. In a better area, maybe $2M.

In many parts of the country, that would be a $150K home.

What’s crazy is your implication that nearly $600,000 for a shack like that is a reasonable price.

 

[JeffKeryk]

A likely scenario but the problem is the changing of neighborhoods. Nobody is immune. You finally get to buy your dream home in a quiet area and ten years later you have multi story apartments/condos next to you along with the problems.

Just ask Steph Curry.

He lives in Atherton, considered the wealthiest zip code in the United States. Any properties in the Palo Alto/Stanford area will likely be multi million dollar properties.

Atherton is gated, by the way. Steph will be OK. Perhaps you know the Curry's recently sold their Atherton mansion for a cool $31M. They stayed in Atherton, buying a 17.7K square-foot home on 1.7 acres of land.

 

[JeffKeryk]

In many parts of the country, that would be a $150K home.

What’s crazy is your implication that nearly $600,000 for a shack like that is a reasonable price.

Here's the property. The craziest thing is, this is a great deal. I doubt we will win the bidding war.
The reason is is so low is, it is in a 55+ community.

 

[PimTac]

He lives in Atherton, considered the wealthiest zip code in the United States. Any properties in the Palo Alto/Stanford area will likely be multi million dollar properties.

Atherton is gated, by the way. Steph will be OK. Perhaps you know the Curry's recently sold their Atherton mansion for a cool $31M. They stayed in Atherton, buying a 17.7K square-foot home on 1.7 acres of land.

Was the house they sold the one with the apartments being built next door? They made their complaint to the city too.

Steph has money that 99.9% of the population doesn’t have. What about the person living in a city in a quiet single family home’s neighborhood that suddenly has multi story apartments going up next door?

 

[Astro14]

Here's the property. The craziest thing is, this is a great deal. I doubt we will win the bidding war.
The reason is is so low is, it is in a 55+ community.

And yet, to most of the country, as well as most of the world, that’s insanely high.

 

[JeffKeryk]

Was the house they sold the one with the apartments being built next door? They made their complaint to the city too.

Steph has money that 99.9% of the population doesn’t have. What about the person living in a city in a quiet single family home’s neighborhood that suddenly has multi story apartments going up next door?

I am not sure about what was being built in Steph's neighborhood, but you can bet the prices would be sky high. And it was not next door, just withing the Atherton city limit. I think it was an existing property that would be broken into smaller units.

Steph is the 5th highest paid athlete in the world, I believe. He will be OK.

 

[PimTac]

Steph is the 5th highest paid athlete in the world, I believe. He will be OK.

I used him as an example. Even high end neighborhoods are not immune from the new inclusive zoning laws.

 

[JeffKeryk]

And yet, to most of the country, as well as most of the world, that’s insanely high.

Astro, it is insanely high. Is it nice to know that I have incredible wealth in my homes? Sure. My neighbors put their children through Stanford, Santa Clara, etc. My next door neighbors' 2 kids just got accepted into Cal.

They all tell me their kids will never be able to live in Los Gatos.
Call me woke, but I believe anyone who gets up and goes to work in the morning, plays by the rules, deserves the American dream to own their own property. Just my 2 cents.

 

[JeffKeryk]

I used him as an example. Even high end neighborhoods are not immune from the new inclusive zoning laws.

Sure. The town of Atherton voted to allow the new housing over the Curry's and others' written objections.
We love the Currys, but if he is not happy with what he has, he needs to suck it up. He also has a $50M place on the Malibu coast...

Just Google up his mansion. Here's the one he just sold...

Here's Malibu bungalow...

 

[PimTac]

Sure. The town of Atherton voted to allow the new housing over the Curry's and others' written objections.
We love the Currys, but if he is not happy with what he has, he needs to suck it up.

Just Google up his mansion. Here's the one he just sold...
View attachment 175856

So I take it that you would be happy having a 3 or 4 story apartment building go up next to your home?

 

[alarmguy]

Anyone in America can own their own home and the proof is, in much of the country they cant build them fast enough, though a lot of this is catching up from the lack of construction due to covid.

 

[DougR]

In my neighborhood, single story ranch houses built on small lots in the 50's are torn down and replaced with two story homes selling for about $2M.