Outstanding video on home values now and the future

[GON]

Long video (45 minutes) with Jason Hartman, a very savvy real estate statistician.

Video is long, but if you are looking at buying/ selling, etc...... this video might provide some insight on a six figure (or higher) transaction.

This video discusses where housing is now, and where he sees it going in the future. If you don't want to invest 45 minutes to watch the video, the bottom line is:

• housing is not coming down, as no inventory is going to hit the market as over 25% of all mortgages are under three percent interest- these homeowners simply are not going to sell (on a macro basis)
• 65% of all mortgages are under four percent interest- these homeowners simply are not going to sell (on a macro basis)
• Foreclosures are at historic record low- another sign that housing prices are not coming down
• For many years, the home was the asset, and the mortgage was the liability. Have a mortgage under four percent- the mortgage is actually an asset.
• Inventory is at 500k homes. 1.2million homes is normal. Inventory has to exceed 1.2 million homes to raise a flag that home values may reduce in price. Average days on the market, and home inventory are two key figures that provide critical signals in projecting where the housing market is heading.

​

 

[SC Maintenance]

Not trying to throw stones, but can you find me a realtor that doesn't say real estate only goes up.

Having said that - he might be right on a nominal basis, because dollar values are going to continue to decline likely, meaning real assets will rise in nominal terms.

 

[GON]

Not trying to throw stones, but can you find me a realtor that doesn't say real estate only goes up.

Having said that - he might be right on a nominal basis, because dollar values are going to continue to decline likely, meaning real assets will rise in nominal terms.

I am not a real estate professional whatsoever- far from it. I have been praying housing would come down---it hasn't happened and not a single indicator supports a fall in housing prices on a MACRO basis.

I have been studying 16 west of the Mississippi housing markets for the past four plus years and have posted my observations on BITOG. This video unexpectedly validates what I have been studying weekly for the past four years. Housing is not showing a single indicator it will crash--- every single indicator points to a continued rise in single family home prices.

 

[supton]

Hard to think of a debt as an asset, but it is a point. My mortgage is sub 4% and the wife and I think we pay less than if we were renting. Happy where we are—but if we had to move, it’d be a bitter pill to swallow.

 

[SC Maintenance]

I am not a real estate professional whatsoever- far from it. I have been praying housing would come down---it hasn't happened and not a single indicator supports a fall in housing prices on a MACRO basis.

I have been studying 16 west of the Mississippi housing markets for the past four plus years and have posted my observations on BITOG. This video unexpectedly validates what I have been studying weekly for the past four years. Housing will not crash but will continue to rise.

National rates are flat, according to Case Shiller 20 city survey. Earlier Peak was June of 2022. Inflation since that point has been about 4%, so in real terms housing is down 4% in 18 months. If you want to talk Macro you need to talk real, not nominal dollars.

Individual markets can vary. Possible some markets continue to rise - even in real terms. Others may stay flat which means there falling in real terms, and yet others are actually falling now.

Maybe they will continue to rise, maybe they won't. Its always been a very slow to react market. Predicting the future is hard.

 

[joekingcorvette]

In the long term home prices will continue to rise just like the stock market. Sure there will be some dips however in the long run homes are still a good investment.

 

[Danno]

• For many years, the home was the asset, and the mortgage was the liability. Have a mortgage under four percent- the mortgage is actually an asset.

​

I have a smallish mortgage at 3%, while I can put cash into tax protected interest investments at 5.5%.
Zero incentive to pay the mortgage down early.

 

[LazyDog]

The elephant in the room is Property Taxes, I have 2 friends that had to sell the house because taxes got so crazy.
At some point paying lots of taxes, maintenance and others costs do not make sense anymore.

 

[97K15004WD]

Hard to think of a debt as an asset....

That's the point though. It's not debt, it's money you received at a price lower than it's worth. It's arbitrage....

Arbitrage - Wikipedia

en.wikipedia.org

When I took my money and finance courses in B school, I always watched the price of money on exchanges. It was fascinating to see how to earn money buying money.

This happened back in the late 70's too. My parents had a house with a mortgage at a low rate, then inflation went through the roof under Ford and then Carter. They not only didn't want to move, they couldn't afford to move.

Same as today. Fast forward 50 years and here we are again.

 

[Passport1]

How will the recent court case removing the realtors 6% fee affect home prices?

 

[alarmguy]

How will the recent court case removing the realtors 6% fee affect home prices?

Uhhh ohhhh, that was another thread.
There will be no change to home prices or realtors incomes. But there is another thread or two in here.

 

[alarmguy]

I have a smallish mortgage at 3%, while I can put cash into tax protected interest investments at 5.5%.
Zero incentive to pay the mortgage down early.

Can’t disagree with that as long as others understand that you have the same amount of money in those investments paying 5.5% as you do money owed on your mortgage and that will not change until the mortgage is paid off.

 

[GON]

@SC Maintenance

National rates are flat, according to Case Shiller 20 city survey. Earlier Peak was June of 2022. Inflation since that point has been about 4%, so in real terms housing is down 4% in 18 months. If you want to talk Macro you need to talk real, not nominal dollars.

Individual markets can vary. Possible some markets continue to rise - even in real terms. Others may stay flat which means there falling in real terms, and yet others are actually falling now.

Maybe they will continue to rise, maybe they won't. Its always been a very slow to react market. Predicting the future is hard.

,
Over dinner tonight (Sunday night) eating alone, I took a few minutes to think why the Case Shiller survey is different to what I am seeing.

The below is on a MACRO basis:

My speculation is that good houses are simply not hitting the market (MACRO basis). All that is hitting the market are the less than desirable homes. Any good home I have seen is under contract in 72 hours or less, most in under 24 hours. And good homes hitting the market are rare. What is hitting the market are homes with bad lots, bad locations, poorly built, bad floorplans. These less than desirable homes are selling, but not necessarily at a premium.

In the past year, my Wife I have flown out on a moment's notice at a hefty expense to view a home, in hopes of simply getting a decent home. every flight was in vain, although the pictures and marketing of the home were top shelf, the homes all were not desirable for a seasoned home buyer. You would be blown away at the condition of some of the homes we visited- we have so many examples, but maybe the worse was an owner-occupied home that had large sized dog feces on the floor of the master bedroom. I can't believe the listing agent let us tour this home... the smell was just tremendously bad.

 

[JHZR2]

Hard to think of a debt as an asset, but it is a point. My mortgage is sub 4% and the wife and I think we pay less than if we were renting. Happy where we are—but if we had to move, it’d be a bitter pill to swallow.

That always happens in time.

Notionally tax and insurance rise slower than incomes, so in time the payment is lower relative to take-home.

I have a smallish mortgage at 3%, while I can put cash into tax protected interest investments at 5.5%.
Zero incentive to pay the mortgage down early.

To net not only 2.5%?!? You must have a big payment for that to much matter.

I get the concept, but in the practical sense, the amortization table says that hanging on to that mortgage lets you pay 50% more than the asset value at 3%, and over 100% at 6%

I marginally get the concept if you were getting a sustained after tax return of >>10%. For a 2.5% delta that doesn’t even surpass inflation, I don’t…

 

[c502cid]

@SC Maintenance

,
Over dinner tonight (Sunday night) eating alone, I took a few minutes to think why the Case Shiller survey is different to what I am seeing.

The below is on a MACRO basis:

My speculation is that good houses are simply not hitting the market (MACRO basis). All that is hitting the market are the less than desirable homes. Any good home I have seen is under contract in 72 hours or less, most in under 24 hours. And good homes hitting the market are rare. What is hitting the market are homes with bad lots, bad locations, poorly built, bad floorplans. These less than desirable homes are selling, but not necessarily at a premium.

In the past year, my Wife I have flown out on a moment's notice at a hefty expense to view a home, in hopes of simply getting a decent home. every flight was in vain, although the pictures and marketing of the home were top shelf, the homes all were not desirable for a seasoned home buyer. You would be blown away at the condition of some of the homes we visited- we have so many examples, but maybe the worse was an owner-occupied home that had large sized dog feces on the floor of the master bedroom. I can't believe the listing agent let us tour this home... the smell was just tremendously bad.

Having looked at over 100 homes before we bought, all of them 2-4 hours away (fortunately have a best friend as a realtor), the number one thing we got out of if is that pictures lie and wishful thinking makes the anticipation of finding a home make the pictures lie even worse.

 

[Tharber]

I have not watched the video but he echo's what I have been saying as well.

Prices are not coming down, supply is drying up so prices will stay higher. An easy indicator is to find a agent that will give you the absorbtion rate in the area you are looking at. Absorbtion rate considers the current inventory of houses and the number of houses selling to arrive at a percentage. This should be calcluated on a monthly and yearly basis to have the trend and then these numbers can be calculated to show you how many months of inventory an area has.

I use what is called a GAP analysis when considering, for example the need for an apratment comnplex in any given area. Stats show housing, market and expendatures and from that combined with population numbers you can pin point the need for new apartments or dental offices, fast food, etc in any given area.

 

[Wrenchturner44]

The elephant in the room is Property Taxes, I have 2 friends that had to sell the house because taxes got so crazy.
At some point paying lots of taxes, maintenance and others costs do not make sense anymore.

You are absolutely correct. Homeowners insurance and rising multi-family unit HOA fees are other reasons some markets seeing increased sales activity.

 

[alarmguy]

I am not a real estate professional whatsoever- far from it. I have been praying housing would come down---it hasn't happened and not a single indicator supports a fall in housing prices on a MACRO basis.

I have been studying 16 west of the Mississippi housing markets for the past four plus years and have posted my observations on BITOG. This video unexpectedly validates what I have been studying weekly for the past four years. Housing will not crash but will continue to rise.

I remember more periods in the time over decades that buyers waiting for real estate to come down got burned far more than those who went out and bought a house no matter market conditions.
I’ll never forget the time on Long Island riding the wave up for just shy of a decade starting around 1997
Come early 2000s Couples who put off buying a house after looking around and liking some of them became depressed in the sense the rising prices were outpacing the money they could save.

If you want a house and can afford to buy one, buy it, if you dont, you are speculating>

 

[alarmguy]

BTW- in this national and international forum, real estate is highly dependent on the local area. No difference than trying to compare car insurance.
NEW Homes are available and being built by the boatloads here. Sure they are selling fast but they are coming on the market way faster than selling. Prices are pretty much to no different from over 1 year ago BUT the new homes do have less options now, meaning pretty much held the line on pricing but included options have been eliminated mostly in our immediate area.

With that said, this is what happens when we have artificial historical low rates for a period of up to 15 years, now it's time to pay. Let's not forget Covid after effects are still in plan too.
We have now entered what I would call a normal interest rate market, if anything still a tiny bit low rates but more normal. A whole almost generation doesnt understand this because it went on for so long. Propping up the economy that they never stopped propping since 2008 and finally back to normal.
It's all fake money, someone will pay someday, I say get in a house now as soon as you can.
P.S. dont listen to me ..

 

[CKN]

The elephant in the room is Property Taxes, I have 2 friends that had to sell the house because taxes got so crazy.
At some point paying lots of taxes, maintenance and others costs do not make sense anymore.

If one of them was over 65 years of age-they didn't need to sell the house to pay taxes.Reverse mortgages and how they actually work is very misunderstood.
Maybe keeping up your home and paying taxes doesn't make sense in some parts of the country. I paid $200,000 (12 years ago-in foreclosure) for my home and it's now worth over $550,000. But Utah is a hot market.
I could easily take out a reverse mortgage to subsidize my standard of living-or to pay for major repairs, taxes, or insurance.