Mortgage rates and the housing market

[tower912]

Supply, need demand.  Macro-economics 101.   Fed, slow inflation with interest rate hikes without cratering it.   Good talk.

[The Sultan]

...and like everything else are too high.

Someone doesn't understand how the economy works.

[muwarrior69]

Someone doesn't understand how the economy works.

You would think if interest rates are high the price of a home would go down, but that has not happened.

[The Sultan]

You would think if interest rates are high the price of a home would go down, but that has not happened.

Because there is a lack of supply.

[MUBurrow]

Home prices have materially gone down what, once in the past 75 years?  2008 has folks thinking that downward price pressure will actually lower prices, but that was almost unprecedented, and supply is even lower than it was then. Other economic factors may suppress price growth, but folks expecting price drops have another thing coming.

[muwarrior69]

Because there is a lack of supply.

...why is that? High interest rates.

[The Sultan]

...why is that? High interest rates.

Partially yes.

But we also don't have enough housing units. After 2008, new home construction went way down, and we haven't caught up.

[TAMU, Knower of Ball]

Partially yes.

But we also don't have enough housing units. After 2008, new home construction went way down, and we haven't caught up.

Increased life spans, increased availability of hone care, increases in companies buying up SFH as investments,  and increases in homeowners buying a second property to rent out also contribute.

[dgies9156]

My daughter and her husband have been looking for a year for a new home in the Syracuse, NY market.

Houses in that market consistently price above ask. Sometimes by more than 15% above ask. The sellers are rejecting offers with inspection contingencies and getting away with it. Like many markets, there has been limited new housing built in Syracuse in the neighborhoods where people want to live.

The inspection clause issue is interesting. For years, inspections were a binary decision. You inspect a home and then if there's something major, you have an option to walk. But we found when we sold two homes in 2022, the inspection report was used to try to nickel and dime us to death. The buyers used it as leverage. Sellers get angry and in this market, elect not to engage in the inspection negotiation nonsense.

In our market in Florida, buyers with cash deals have a decided advantage. There are many accepted contracts without financing contingencies. That's how we won the bid on our current house. We financed the house (temporarily) but the deal was going through whether we had financing or not. We had to prove we could pay cash from some assets we had.

[The Sultan]

The last house we sold had an inspection contingency, but the buyer agreed ahead of time to cover the first $10,000 of any defects. In other words, they were just looking at the major stuff.

[MU82]

Increased life spans, increased availability of hone care, increases in companies buying up SFH as investments,  and increases in homeowners buying a second property to rent out also contribute.

In the Charlotte area, from about 2013-19, there was an insane amount of corporate buying going on of single-family homes. There was so much that many HOAs enacted rules to limit or even eliminate it, and a few suburbs did, too. It hurt supply and and pushed up prices. Then came the pandemic, and that, combined with the area's rapid growth, made supply even tighter and pushed up prices even higher.

[Pakuni]

B'gosh.

https://finance.yahoo.com/news/midwestern-city-hottest-real-estate-163038539.html

[21Jumpstreet]

Got our Florida assessment under the new laws, it's about $10K. Our building/board has done a very good job maintaining and assessing year over year. I have heard a couple buildings near us are between $90-130K per unit.

I have been looking for a home in Colorado (Denver) and have seen inventory go up and prices come down, even if the prices are already very high. I am leery of buying now as it feels like the top, but then again, home prices have traditionally gone up over time. I know I'm a little late to the Denver boom, perhaps there is a little more to come as parts of the city redevelop.

[dgies9156]

Got our Florida assessment under the new laws, it's about $10K. Our building/board has done a very good job maintaining and assessing year over year. I have heard a couple buildings near us are between $90-130K per unit.

There's a condo building along the water in Jensen Beach that has been declared uninhabitable by Martin County over a really bad foundation that was discovered during the state's new building inspection requirements. The view of the engineers and county building department is the building is about to fall down.

State officials took one of the local television stations in Palm Beach through the condo building and it was bad. Concrete was falling off a wall like paint chips on a weathered wall. The rebar was rusted and falling out as well. Had Florida not acted, this condo building may well have fallen in with catastrophic results.

Not sure how many of these have been found statewide, but, like you, we're aware of big special assessments by HOAs to address state mandated improvements.

[jesmu84]

There's a condo building along the water in Jensen Beach that has been declared uninhabitable by Martin County over a really bad foundation that was discovered during the state's new building inspection requirements. The view of the engineers and county building department is the building is about to fall down.

State officials took one of the local television stations in Palm Beach through the condo building and it was bad. Concrete was falling off a wall like paint chips on a weathered wall. The rebar was rusted and falling out as well. Had Florida not acted, this condo building may well have fallen in with catastrophic results.

Not sure how many of these have been found statewide, but, like you, we're aware of big special assessments by HOAs to address state mandated improvements.

Should the state really be interfering in these matters?

[Herman Cain]

Should the state really be interfering in these matters?

Nothing new for Florida. The State has been through multiple building code revisions over the years.

Has a big one after Hurricane Andrew that periodically gets updated , think the Code is on version 8. Also things like New Window specification mandates to protect sea turtles for homeowners facing the ocean etc .

Condo boards now having to fall in line

[Scoop Snoop]

Should the state really be interfering in these matters?

Focusing only on the state's involvement in determining whether a building is inhabitable, I think the answer is yes. Your question is very fair though. It is important that the decisions are only technically political. Structural engineers, architects, etc. are the ones who should be the decision makers. Peoples' lives may be at stake if a building's maintenance has been neglected.

The next question is... if the condos were built to the then current codes approved in Florida and are now declared uninhabitable, should the state (aka taxpayers) compensate the condo unit owners?

[dgies9156]

Should the state really be interfering in these matters?

Are you serious?

The state has a responsibility to protect its citizenry. Ensuring buildings don't fall in on people and kill people is definitely a state's responsibility. Liberals and conservatives can debate how far a state should go (and they do), but this is the obligation of a government. Period. We're trying to prevent house fires, electric shock, disease from bad plumbing or having a home blown over in a hurricane.

Brother Herm is right about our state's building codes. Once upon a time, Florida was relatively lax in its building codes. Hurricane Andrew blew through in 1995 and leveled the City of Homestead. Almost nothing was left. Today, our state has some of the toughest building codes anywhere. My house, for example, has foot thick, steel reinforced concrete walls and a roof that could not blow off the house if God himself came calling. The windows we have are impact resistant to 160 miles per hour.

When you see hurricane damage on television, it's usually to older, pre-Andrew buildings or homes that were built in places where they should not be built.

Brother Snoop, when ordinances change, or laws change, older structures that don't comply usually are grandfathered, unless there is a serious life safety issue. Sprinklers are a good example. Large buildings that didn't have sprinklers were grandfathered so long as other fire suppression systems were available. When those buildings sought permits for new construction or changes, sprinklers were a requirement for the permit.

But when the concrete falls away on the foundation and the rebar is rusted out, something has to happen. In Jensen Beach, the issue has less to do with regulatory conformance and more to do with HOAs being unwilling to spend money to properly maintain a property. So, no, the state should NOT reimburse the homeowner.

[Scoop Snoop]

But when the concrete falls away on the foundation and the rebar is rusted out, something has to happen. In Jensen Beach, the issue has less to do with regulatory conformance and more to do with HOAs being unwilling to spend money to properly maintain a property. So, no, the state should NOT reimburse the homeowner.

Yeah, that's kind of what I was thinking, but I was just tossing the question out. The first property I bought in my twenties was a townhouse/condo unit. The wood siding began to be delaminate and the association struggled to get approval to replace the bad panels. The manufacturer went bankrupt, so we were on our own. Only the damaged panels were replaced, even though anyone with 2 brain cells operating at the same time could see the others would soon delaminate. My unit and all the others needed to eventually be rewired, because briefly (when the place was built) aluminum wire was considered safe.

One of the problems back then (and maybe now) is that the state required 3/4 approval for "capital improvements". It made it easy for a relatively small group of condo owners to refuse to approve the expenditures. I sold shortly before the wiring had to be replaced and the road dug up and rebuilt properly. I will never buy another condo!

[Hards Alumni]

...and like everything else are too high.

Get used to it, because nothing ever goes back down... unless really bad things happen.

[warriorchick]

In Las Vegas, there are several large companies that are buying up thousands of single family homes.  In many neighborhoods it is nearly impossible for an individual to buy a home because these companies swoop in and put in an all-cash offer above list with no contingencies.

Then they rent them out to the people who are unable to buy their own home because of this practice.

[Jockey]

In Las Vegas, there are several large companies that are buying up thousands of single family homes.  In many neighborhoods it is nearly impossible for an individual to buy a home because these companies swoop in and put in an all-cash offer above list with no contingencies.

Then they rent them out to the people who are unable to buy their own home because of this practice.

It's happening all over the country.

The ultra-rich destroy everything they touch.

[Hards Alumni]

It's happening all over the country.

The ultra-rich destroy everything they touch.

It turns out that using housing as an investment tool is a terrible idea.

Also, for the record, these are investment firms, not ultra rich individuals.

[Skatastrophy]

It turns out that using housing as an investment tool is a terrible idea.

Also, for the record, these are investment firms, not ultra rich individuals.

It makes sense. Corporations have a profit timeline of many generations. No matter what price/rate they purchase homes, the asset will pay off in spades. They just need to manage their cashflow now and they will inevitably reap huge profits because of their ownership of a limited resource.

It needs to be regulated at the federal level. Many of the firms buying homes are not US-based, so at the very least, they should be regulated out of the market.

[Hards Alumni]

It makes sense. Corporations have a profit timeline of many generations. No matter what price/rate they purchase homes, the asset will pay off in spades. They just need to manage their cashflow now and they will inevitably reap huge profits because of their ownership of a limited resource.

It needs to be regulated at the federal level. Many of the firms buying homes are not US-based, so at the very least, they should be regulated out of the market.

Plus about 10 other things we could do to bring housing prices down.