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Started By
Message
credit bubble vs house prices
Posted on 5/9/24 at 9:49 am
Posted on 5/9/24 at 9:49 am
Tl;dr have large cash set aside in hys wondering if invest in S&P or wait for short term bubble to pop
Kinda feels like a doomer here but we have a large sum saved for a house. Challenge is, most good houses around us go 150k+ over and sell in 5 days.
I feel pretty pessimistic about the economy over all but I am unsure if the credit crunch will impact areas where lower to middle class
Income can’t even buy homes anyways. Is it worth holding out a bit longer?
We can afford it now, it will be ~ 25% of our post tax income on a mortgage, but also don’t really think it’s the best value.
Also to further provide info: this is a very expensive area and have gone up 60%+ within past 1 year so even more concerning
Kinda feels like a doomer here but we have a large sum saved for a house. Challenge is, most good houses around us go 150k+ over and sell in 5 days.
I feel pretty pessimistic about the economy over all but I am unsure if the credit crunch will impact areas where lower to middle class
Income can’t even buy homes anyways. Is it worth holding out a bit longer?
We can afford it now, it will be ~ 25% of our post tax income on a mortgage, but also don’t really think it’s the best value.
Also to further provide info: this is a very expensive area and have gone up 60%+ within past 1 year so even more concerning
This post was edited on 5/9/24 at 9:58 am
6
Posted on 5/9/24 at 9:55 am to fareplay
quote:
can afford it now
Then do it, unless you expect to be moving in a few years.
If you're in the house for the long haul don't try to time the market. You're paying for a place to live either way.
Posted on 5/9/24 at 9:56 am to Bestbank Tiger
There’s no real guarantee we will live here forever. I’d plan 5 years then re-evaluate. The issue is the area we live in is expensive and has gone up 60%+ in last 1 year (median sales price)
This post was edited on 5/9/24 at 9:57 am
Posted on 5/9/24 at 10:30 am to fareplay
Values are on pace for another 6-8% this year
2 more bad jobs reports and the Fed is 100% going to cut
Rates will drop 5mil new buyers very low inventory
Barbara Corcoran will be right. Now is the time to buy no matter how mad that gets ppl on here
2 more bad jobs reports and the Fed is 100% going to cut
Rates will drop 5mil new buyers very low inventory
Barbara Corcoran will be right. Now is the time to buy no matter how mad that gets ppl on here
Posted on 5/9/24 at 10:34 am to fareplay
quote:
We can afford it now
LINK
Wait. Foreclosures, delinquencies and bankruptcies have been on the rise since their post-COVID lows. They are still all relatively low but their rise as we look to be heading into a recessionary (or stagflation) period means they are likely to increase (and increase fast if the consumer debt bubble pops). That means more supply, meaning prices drop. Once inflation is tamed the Fed will begin dropping rates, that's when it will be time to buy.
This post was edited on 5/9/24 at 11:24 am
Posted on 5/9/24 at 10:36 am to SDVTiger
quote:
2 more bad jobs reports and the Fed is 100% going to cut
Only if inflation is moving down. They know if they cut while inflation is moving up they will just be pouring gas on the fire.
Generally, summertime means more economic activity and all the prognosticators are expecting a busy summer (based on travel bookings). If we have a strong summer, inflation isn't going down (meaning we aren't getting a cut at least until September).
Posted on 5/9/24 at 10:42 am to Bard
quote:
Wait. Foreclosures, delinquencies and bankruptcies have been on the rise since their post-COVID lows. They are still all relatively low but their rise as we look to be heading into a recessionary (or stagflation) period means they are likely to increase (and increase fast if the consumer debt bubble pops). That means more supply, meaning prices drop. Once inflation is tamed the Fed will begin dropping rates, that's when it will be time to buy.
The market hasn't made logical sense in some time. Depending on the location the OP is in, it may be as good of time as any to buy. If rates go down, you have the option to refinance, and if he's in a good area, home prices will remain static or keep rising.
At some point you have to be right. I believe there will be a correction, but when is the biggest question. He could be waiting for years. Or days.
Posted on 5/9/24 at 11:00 am to WhiskeyThrottle
I live in Seattle area in Kirkland. Market seems to be extremely strong here and it’s relatively a bubble due to tech
Posted on 5/9/24 at 11:06 am to Bard
quote:
Wait. Foreclosures, delinquencies and bankruptcies have been on the rise since their post-COVID lows. They are still all relatively low but their rise as we look to be heading into a recessionary (or stagflation) period means they are likely to increase (and increase fast if the consumer debt bubble pops). That means more supply, meaning prices drop. Once inflation is tamed the Fed will begin dropping rates, that's when it will be time to buy.
Your article is from 2019...
Posted on 5/9/24 at 11:09 am to fareplay
quote:Yes, it's an extremely difficult market. I think some areas are actually more expensive than SF now.
I live in Seattle area in Kirkland. Market seems to be extremely strong here and it’s relatively a bubble due to tech
MSFT doing what it's done the past 5 years really feels like it's put a new, much higher floor on the Eastside. Rates moving higher has barely done anything.
How far out can you go? Issaquah is expensive, but less so than Bellevue/Kirkland/MI. Snoqualmie Ridge is sort of less expensive - but the traffic at the interstate exit is crazy.
Lots of people doing North Bend now - and the municipality has been investing in infrastructure pretty nicely.
It's hard for me to imagine it going down much, but up 60% in the past year doesn't sound right. That was awhile back.
Posted on 5/9/24 at 11:13 am to fareplay
I’m completely torn in this one. Anyone that looks at housing price charts can see this is unsustainable but there’s no way to tell how long it will go on. I’m holding out for an investment property but that’s different from a residence.
An old manager of mine told me to always stretch just a little on your house as it will go up in value and you’ll make more over time. We could see another 5 years of pricing going up at least so if you’re in a good market and find something you like and can afford buy it. If rates start getting cut refinance and keep rolling. Equity is king in housing as long as you don’t stretch too much.
An old manager of mine told me to always stretch just a little on your house as it will go up in value and you’ll make more over time. We could see another 5 years of pricing going up at least so if you’re in a good market and find something you like and can afford buy it. If rates start getting cut refinance and keep rolling. Equity is king in housing as long as you don’t stretch too much.
Posted on 5/9/24 at 11:24 am to Big Scrub TX
quote:
Your article is from 2019...
Fixed. Thanks.
Posted on 5/9/24 at 11:26 am to fareplay
quote:
I live in Seattle area in Kirkland. Market seems to be extremely strong here and it’s relatively a bubble due to tech.
Several here are mentioning macro factors relating to the U.S. economy and how they may affect housing prices in general. The economy at large may certainly affect the level of interest rates, but average or median nationwide home prices mean nothing to local markets. For buyers and sellers, real estate is local. And the condition of the economy in your area is what you need to focus on.
Posted on 5/9/24 at 11:31 am to Big Scrub TX
Wife is Edmonds I’m in Bellevue so Kirkland is ideal. We can commit but man spending 2M on these homes is a tough pill to swallow
Posted on 5/9/24 at 11:38 am to fareplay
quote:What about Bothell/Mill Creek?
Wife is Edmonds I’m in Bellevue so Kirkland is ideal. We can commit but man spending 2M on these homes is a tough pill to swallow
Kirkland is pretty insane.
(although seems hard to imagine it going down a lot)Posted on 5/9/24 at 11:40 am to Big Scrub TX
Bothell crossed my mind but school district is worse and appreciation seems stagnant vs Kirkland. What’s better 1.3 mediocre or 2 nice right?
Posted on 5/9/24 at 12:13 pm to Bard
quote:
Foreclosures, delinquencies and bankruptcies have been on the rise since their post-COVID lows
The article you linked states that 46% of mortgages are equity rich, meaning the value of the home is at least twice what is owed on the home. 2.7% are seriously underwater. I don’t see the correlation between those numbers and your suggestion that OP should wait.
96% of commercial and 97% of residential loans are in good standing. That is strong.
Bankruptcy filings were up 14% in the first quarter, so there is some anecdotal evidence that more are coming, but these are based on YOY filings, which have been low since Covid.
Foreclosures in Q1 were actually down YOY (they were up compared to Q4 2023, but down YOY). Also, WA foreclosures rank very low nationally.
I am not sure this data supports the suggestion to wait.
Posted on 5/9/24 at 2:56 pm to go ta hell ole miss
quote:
The article you linked states that 46% of mortgages are equity rich
That article makes zero sense
Defaults are down again. More supply cause of rates dipping is going to cause multiple offer sceanario like Covid
1% drop in rates = 5mil new buyers with 1mil homes available
Posted on 5/9/24 at 4:49 pm to Big Scrub TX
quote:
quote:Wait. Foreclosures, delinquencies and bankruptcies have been on the rise since their post-COVID lows. They are still all relatively low but their rise as we look to be heading into a recessionary (or stagflation) period means they are likely to increase (and increase fast if the consumer debt bubble pops). That means more supply, meaning prices drop. Once inflation is tamed the Fed will begin dropping rates, that's when it will be time to buy. Your article is from 2019...
2009…
Posted on 5/9/24 at 6:38 pm to go ta hell ole miss
quote:
Also, WA foreclosures rank very low nationally.
When I posted that, I didn't know he was in WA so I just went with what's going on nationally. Also, if we get into a consumer-debt bubble pop I don't think many places are going to remain untouched.
Still, real estate is very local so I should have gotten a little more info first.
quote:
The article you linked states that 46% of mortgages are equity rich, meaning the value of the home is at least twice what is owed on the home. 2.7% are seriously underwater.
Yes, but that's in a steady decline.
quote:
The portion of mortgaged homes that were equity-rich in the first quarter of 2024 is down from 46.1 percent in the fourth quarter of 2023 (to 45.8% in Q1), marking the third straight quarterly decline. The latest figure also was down from 47.2 percent in the first quarter of 2023, hitting the lowest point in two years.
Granted, it's not a massive drop but it's a drop happening as inflation is rising, wages are having a tough time keeping up, consumer debt has skyrocketed to help carry the inflation burden and that debt is at historically high interest rates. All this while Unemployment is creeping up.
Speaking of Unemployment, in the Seattle area it went from 3.0% in April of 2023 to 3.9% in December, then jumped to 4.7% in January. It finally came down .2% in March but the trend is still upward for the area (and a bit above the national average).
quote:
96% of commercial and 97% of residential loans are in good standing.
quote:
Foreclosures in Q1 were actually down YOY (they were up compared to Q4 2023, but down YOY).
Residential? Sure. CREs though? CRE foreclosures began a stark rise last year. Full disclosure: CRE delinquency rates are still near historic lows but have been trending up for the last year and a half-ish and as the economy slows due to returning inflation growth (if that continues, and I have no reason to think it won't for at least the next couple of months) that is likely to continue (thus also pushing foreclosures up).
quote:
Bankruptcy filings were up 14% in the first quarter, so there is some anecdotal evidence that more are coming, but these are based on YOY filings, which have been low since Covid.
Agreed on that as well, but again: the economic environment we're in means there's little to stop it from continuing to rise. If we get the consumer-debt bubble pop like I believe we will, that number will rise quickly.
quote:
I am not sure this data supports the suggestion to wait.
For his area, maybe not. Tech has been a market juggernaut this year but that's been on the back of the Mag7... errr 6... uhm... 5... 3? Meanwhile, the tech sector has been shedding jobs for the last year or so (for 2024 that number is already over 64k). Granted, not all of them have been in the Seattle area, nor even in the US, but it points to the tech industry moving to downsize and that means a slower economy for tech-driven areas.
At the very least, rates very likely aren't coming down until the September meeting. Waiting until then means not only putting more money back, but also a possibly lower interest rate (meaning their purchasing range increases).
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