OT: Southern housing bubble?

PooPopsBaldHead

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New homes alone is a hollow number. We need to see how many existing and new homes are available combined. Historically speaking new homes only represent about 20% of the available inventory....

These days, that's going to likely be a lot higher as nobody wants to walk away from those 2.5-3.5% mortgages unless they really have too.

The other thing to consider... Are these actually homes for sale or listings? I can list a dozen new construction homes for sale without having started a single one.

ETA: that reventure consulting douchebag is only an expert in social media views. That durk has been calling for a collapse since 2020 warning people not to buy.... Those who listened are paying rent at double what their mortgage would be.
 
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mstateglfr

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Housing bubble on the horizon? I bet Blackstone, Brookfield, Starwood, etc are just creaming to get a piece of that!
Good to see they will finally have an opportunity to buy low and rent high.**
 

DesotoCountyDawg

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Housing bubble on the horizon? I bet Blackstone, Brookfield, Starwood, etc are just creaming to get a piece of that!
Good to see they will finally have an opportunity to buy low and rent high.**
No doubt about it. They will be hammering that.
 
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Was the volume of people that moved to the South during the pandemic large enough to move the needle in the housing market, let alone cause a bubble? I find that hard to believe.
 
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mstateglfr

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"Creaming"?

 

TrueMaroonGrind

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Not happening. Supply is still too low.
For sure. There doesn’t seem to be enough supply to create a true housing value downturn. Maybe something else will happen that will make the market turn. It will let up some when the boomers start passing away or going to nursing homes. Idk how long that will take but we aren’t building out of this thing at the rate we are heading.
 
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Perd Hapley

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New homes alone is a hollow number. We need to see how many existing and new homes are available combined. Historically speaking new homes only represent about 20% of the available inventory....

These days, that's going to likely be a lot higher as nobody wants to walk away from those 2.5-3.5% mortgages unless they really have too.

The other thing to consider... Are these actually homes for sale or listings? I can list a dozen new construction homes for sale without having started a single one.

ETA: that reventure consulting douchebag is only an expert in social media views. That durk has been calling for a collapse since 2020 warning people not to buy.... Those who listened are paying rent at double what their mortgage would be.
The US population as a whole has also grown 14% since 2006. And I’m not sure what this guy is calling the “South”, but the clear implication of the article is that the growth of the southern population has outpaced the overall country over the past 5 years or so.

You also have the largest generation with the biggest spending power all coming into retirement age and wanting to downsize into a newer but smaller “forever” home, likely with a cash purchase.

So, for it to truly be the same as 2006, you’d have to have a lot of things different:

1) 340k ~ 350k new houses on the market…..not just 300k.

2) All boomers still actively working without paid off mortgages, many with kids still at home.

3) Completely deregulated lending environment with zero DP mortgages available to anyone with a pulse.

4) No decade-long period beforehand of friendly rates that increased existing homeowner equity to historic highs.

5) No 15 year period of underbuilding beforehand that builders are still drastically trying to compensate for.

Nothing is the same except for 2 numbers, and even those aren’t really the same when you consider they are totally unadjusted for 20 years of population and economic growth and change.
 

OG Goat Holder

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For sure. There doesn’t seem to be enough supply to create a true housing value downturn. Maybe something else will happen that will make the market turn. It will let up some when the boomers start passing away or going to nursing homes. Idk how long that will take but we aren’t building out of this thing at the rate we are heading.
I think you're right, especially in vacation/retirement areas. Won't really see it in booming cities.

And if the artificial interest rates ever come back down to the 4-5 range, the market will explode yet again.

On the other hand, I don't think we see a price spike either. But the mechanics of 2008 are just not there. This guy just wants clicks.
 

Anon1704414204

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I think you're right, especially in vacation/retirement areas. Won't really see it in booming cities.

And if the artificial interest rates ever come back down to the 4-5 range, the market will explode yet again.

On the other hand, I don't think we see a price spike either. But the mechanics of 2008 are just not there. This guy just wants clicks.
Why are the rates "artificial"? does inflation have any impact on rates?
 

Boom Boom

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I think you're right, especially in vacation/retirement areas. Won't really see it in booming cities.

And if the artificial interest rates ever come back down to the 4-5 range, the market will explode yet again.

On the other hand, I don't think we see a price spike either. But the mechanics of 2008 are just not there. This guy just wants clicks.
I think we could have a downturn without repeating anything like 2008. I think the question is will prices come down 20%? I wouldn't think we've built enough for that, but i am in MS and this guy is tracking other states, all states with high growth. I could see building rates having been higher there, and prices poised for a downturn, especially as building costs have probably come down.

For MS, I don't see things changing, on average. But if you're near a couple new developments, your local area may be saturated.
 
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The Cooterpoot

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I think we could have a downturn without repeating anything like 2008. I think the question is will prices come down 20%? I wouldn't think we've built enough for that, but i am in MS and this guy is tracking other states, all states with high growth. I could see building rates having been higher there, and prices poised for a downturn, especially as building costs have probably come down.

For MS, I don't see things changing, on average. But if you're near a couple new developments, your local area may be saturated.
Home prices aren't falling at crazy levels. FL and TX are getting hit the hardest but the rest is pretty close to normal right now. And even FL and TX aren't in the negative overall either.
 

TrueMaroonGrind

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Home prices aren't falling at crazy levels. FL and TX are getting hit the hardest but the rest is pretty close to normal right now. And even FL and TX aren't in the negative overall either.
They were the hottest markets so they are cooling off more than other places. Like you stated it’s not representative of the market as a whole. Florida apparently had a ton of people starting leveraged VRBO businesses that may have not worked out like they anticipated. Especially now that travel is cooling off.
 

johnson86-1

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They were the hottest markets so they are cooling off more than other places. Like you stated it’s not representative of the market as a whole. Florida apparently had a ton of people starting leveraged VRBO businesses that may have not worked out like they anticipated. Especially now that travel is cooling off.
Florida is building a lot, which is good and the way it's supposed to work. They are also having people get hammered by insurance. Combination of plaintiff lawyer (or maybe just sketchy contractor) friendly environment for insurance claims and no real low risk area of the state to subsidize a high risk pool. Not sure how much of an effect that is compared to just building a lot though.
 
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The Cooterpoot

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Florida is building a lot, which is good and the way it's supposed to work. They are also having people get hammered by insurance. Combination of plaintiff lawyer (or maybe just sketchy contractor) friendly environment for insurance claims and no real low risk area of the state to subsidize a high risk pool. Not sure how much of an effect that is compared to just building a lot though.
That FL condo market is about to be something else real soon
 

Perd Hapley

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I think we could have a downturn without repeating anything like 2008. I think the question is will prices come down 20%?
Considering that they only came down like 10-12%, on average, in 2008…..I’m going out on a limb and saying no chance in hell of a 20% drop. You’re talking about a $600,000 house dropping to $475,000….and the owner of said house being totally fine with that. All while sitting on a sub-3% rate on a principal from when he bought it at $350,000, when he’s buying into a 6-7% rate. There’s just no runway for such an event to happen.
 
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Boom Boom

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New homes alone is a hollow number. We need to see how many existing and new homes are available combined. Historically speaking new homes only represent about 20% of the available inventory....

These days, that's going to likely be a lot higher as nobody wants to walk away from those 2.5-3.5% mortgages unless they really have too.

The other thing to consider... Are these actually homes for sale or listings? I can list a dozen new construction homes for sale without having started a single one.

ETA: that reventure consulting douchebag is only an expert in social media views. That durk has been calling for a collapse since 2020 warning people not to buy.... Those who listened are paying rent at double what their mortgage would be.
Poopops right again

 

Boom Boom

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Considering that they only came down like 10-12%, on average, in 2008…..I’m going out on a limb and saying no chance in hell of a 20% drop. You’re talking about a $600,000 house dropping to $475,000….and the owner of said house being totally fine with that. All while sitting on a sub-3% rate on a principal from when he bought it at $350,000, when he’s buying into a 6-7% rate. There’s just no runway for such an event to happen.
Yeah, but "on average" glosses over a lot of variation, as we had states with 30%+ drops. And that was after rates went to zero.

But yeah, especially considering the above that existing home inventory is low, it's not happening. Prices should stay stable. As always, isolated areas where there's been a lot of building and a lot of run up, are primed for a drop.

So when rates drop, will there be a lot of people looking to trade up? Maybe, but i really don't think there's a glut of people with less house than they need (myself and my 3 kids in 3 years being an exception).

Is there a point when the glut of houses built in the mid 2000s boom hits an age that it spurs price drops? Hmm.
 

Leeshouldveflanked

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My pile of bricks is paid for but I need to get a new roof that will last me till I die and a new heat pump.
 

thatsbaseball

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"Yeah, but "on average" glosses over a lot of variation, as we had states with 30%+ drops. And that was after rates went to zero."

In the Atlanta area lenders would have "creamed" over a 30% drop. It was really a lot worse than that in some areas.
 

Podgy

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The South is a great place to live. Unlike other parts of the country, especially the left coast, we build new housing. Just need to get crime down in some urban areas and we'll be even better.
 

OG Goat Holder

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Yeah, but "on average" glosses over a lot of variation, as we had states with 30%+ drops. And that was after rates went to zero.

But yeah, especially considering the above that existing home inventory is low, it's not happening. Prices should stay stable. As always, isolated areas where there's been a lot of building and a lot of run up, are primed for a drop.

So when rates drop, will there be a lot of people looking to trade up? Maybe, but i really don't think there's a glut of people with less house than they need (myself and my 3 kids in 3 years being an exception).

Is there a point when the glut of houses built in the mid 2000s boom hits an age that it spurs price drops? Hmm.
Again, the mechanics aren’t same. I’d say most mortgages right now are good, rather than the subprime whatever stuff back in 2008. You don’t see the ARMs and all that nowadays.

A crash will come but it’s a ways off. When was the last one before 2008?
 
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Perd Hapley

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Yeah, but "on average" glosses over a lot of variation, as we had states with 30%+ drops. And that was after rates went to zero.
The corrections were the most severe in the places where the errors were the largest. And by “errors”, I mean departures from the normal market dynamics. There wasn’t a property that dropped by 30% that also didn’t increase by 20-25% in the years leading up to the crash….whereas the valuations in more healthy markets only increased by like 5-10% over the same period.

Overall though, only people that both bought AND sold at the exact wrong times got truly screwed. Any long term owners who had a 30% drop from 2009-2010 still weren’t any worse for wear if they had been in their home for 5 years or so, and also were not in an unrecoverable position unless they took out a shady, high risk mortgage even if they had bought at the wrong time.

But yeah, especially considering the above that existing home inventory is low, it's not happening. Prices should stay stable. As always, isolated areas where there's been a lot of building and a lot of run up, are primed for a drop.
Prices are actually still increasing in all the more healthy markets.

So when rates drop, will there be a lot of people looking to trade up? Maybe, but i really don't think there's a glut of people with less house than they need (myself and my 3 kids in 3 years being an exception).
Well on a monthly payment basis, there’s realy no such thing as “trading up when rates drop”. It’s a zero sum game. Rate drops will yield home price increases across the board, due to demand increases. The payments on any given house will stay the same or maybe even go up when rates go down. The only thing favorable for the buyer is increased equity, but a lot of that is offset by higher real estate agent fees, closing costs, etc. So they have to lock in for awhile to assume the benefits. They are arguably just as well served by buying now and refinancing when the rate drops enough times to make it beneficial to do so.

Regarding the rest of this, I agree. I think its more likely that many seasoned homeowners will actually want to trade down. They’ll leverage their equity from their COVID rate (plus the very favorable rates that existed pre-COVID) into cash heavy buying positions on newer, smaller homes. Looking at all the retiring boomers here. This will drive the more entry level new house prices through the roof, and create a small vacuum in the mid-sized / established neighborhood home demand. That segment may dip a little bit, but many younger owners with these homes will realize their current set up is likely as good financially as it will ever get for them in their lifetimes….and will stay put. So I’d expect smaller increases in the prices for these homes….but continued increases regardless.

Is there a point when the glut of houses built in the mid 2000s boom hits an age that it spurs price drops? Hmm.
As someone who lived in 2 such houses, I can say very likely not….at least in major cities. More rural areas are a different story, but there will likely be fewer options in both categories anyway. While those homes are now older, they are generally in much more favorable locations than all the existing new construction in most mid-sized or larger cities. Their values will continue to appreciate greatly relative to new construction.

I’m more curious as to whether the more discretionary pursuits in the housing market return anytime soon. I’m talking about individuals or families that move 30 miles or less….just to get a quality of life improvement of some kind that is not driven by a job or economic fortune change, family change, etc. Any truly “booming” housing market has a lot of this kind of movement. Its been dead as hell for these folks wanting to do anything for the past 12-18 months….but prices haven’t budged.
 

TrueMaroonGrind

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People have been predicting the next bubble since 2008… eventually, someone will be right.
I heard someone say that the news has predicted 8 out of the last 3 recessions haha. More like 10,000 out of the last 3 but the sentiment is the same. Bad news gets clicks whether it’s true or not.
 

Boom Boom

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Again, the mechanics aren’t same. I’d say most mortgages right now are good, rather than the subprime whatever stuff back in 2008. You don’t see the ARMs and all that nowadays.

A crash will come but it’s a ways off. When was the last one before 2008?
Agreed, but I did not mean to imply a 2008-level crash.
 

Boom Boom

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The corrections were the most severe in the places where the errors were the largest. And by “errors”, I mean departures from the normal market dynamics. There wasn’t a property that dropped by 30% that also didn’t increase by 20-25% in the years leading up to the crash….whereas the valuations in more healthy markets only increased by like 5-10% over the same period.

Overall though, only people that both bought AND sold at the exact wrong times got truly screwed. Any long term owners who had a 30% drop from 2009-2010 still weren’t any worse for wear if they had been in their home for 5 years or so, and also were not in an unrecoverable position unless they took out a shady, high risk mortgage even if they had bought at the wrong time.
Yeah, my parents. Traded up in 2006, more so than was advisable for their worth, forced to sell in 2020 due to illness. Sold it for what they bought it for, so out a ton on interest. Looked the property up today, it's up 35%.
Prices are actually still increasing in all the more healthy markets.


Well on a monthly payment basis, there’s realy no such thing as “trading up when rates drop”. It’s a zero sum game. Rate drops will yield home price increases across the board, due to demand increases. The payments on any given house will stay the same or maybe even go up when rates go down. The only thing favorable for the buyer is increased equity, but a lot of that is offset by higher real estate agent fees, closing costs, etc. So they have to lock in for awhile to assume the benefits. They are arguably just as well served by buying now and refinancing when the rate drops enough times to make it beneficial to do so.
I don't think this applies to people with little equity. Trading in a $400k mortgage at 3% for a $600k one at 7% causes yearly interest to go from $12k to $42k. When the rate goes down to 3.5 that comes down to only $24k. A difference of $2k per month. The change in home price mostly evens out, as they are selling one property and buying another.
Regarding the rest of this, I agree. I think its more likely that many seasoned homeowners will actually want to trade down. They’ll leverage their equity from their COVID rate (plus the very favorable rates that existed pre-COVID) into cash heavy buying positions on newer, smaller homes. Looking at all the retiring boomers here. This will drive the more entry level new house prices through the roof, and create a small vacuum in the mid-sized / established neighborhood home demand. That segment may dip a little bit, but many younger owners with these homes will realize their current set up is likely as good financially as it will ever get for them in their lifetimes….and will stay put. So I’d expect smaller increases in the prices for these homes….but continued increases regardless.
That's the conventional wisdom....but it keeps not happening. I think its because Boomers may be finding themselves with more house than they need....but they are sitting on million dollar 401ks and aren't quitting their jobs....so why trade down?

I also don't expect younger homeowners to do the smart thing. In my experience 90% of Americans will buy as much as they can afford...or more.
As someone who lived in 2 such houses, I can say very likely not….at least in major cities. More rural areas are a different story, but there will likely be fewer options in both categories anyway. While those homes are now older, they are generally in much more favorable locations than all the existing new construction in most mid-sized or larger cities. Their values will continue to appreciate greatly relative to new construction.

I’m more curious as to whether the more discretionary pursuits in the housing market return anytime soon. I’m talking about individuals or families that move 30 miles or less….just to get a quality of life improvement of some kind that is not driven by a job or economic fortune change, family change, etc. Any truly “booming” housing market has a lot of this kind of movement. Its been dead as hell for these folks wanting to do anything for the past 12-18 months….but prices haven’t budged.
Sounds right.
 

johnson86-1

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That's the conventional wisdom....but it keeps not happening. I think its because Boomers may be finding themselves with more house than they need....but they are sitting on million dollar 401ks and aren't quitting their jobs....so why trade down?
I don’t know that it has to do with not quitting their jobs as much as just change being hard. For most of them, they don't want to go from say a 3200 sq ft house to an 1500 sq ft house. They're usually comfortable with the idea of dropping a bedroom and bath, which doesn't move the needle much compared to the cost of moving. Even if they do want to downsize significantly, people tend to be pickier about a house they are buying than the house they are leaving, so they end up looking at houses that are more per sq ft. And I do know several people who are dealing with parents who probably should have downsized a while ago and now that they really need to be in a 1300 sq ft patio home, they are just at that age where they are stubborn and the idea of that kind of change is too hard, so it just ends up being suboptimal and something of a burden on their relatives until they die. I had relatives that wouldn't consider a 2,200 sq ft house with a smallish yard when they were downsizing. I can understand not being comfortable with a patio home or condo because of not having lived that close to neighbors before, but 2,200 sq ft for one couple that doesn't need to host a lot of out of town family at holidays seems like more than enough. Hell, 1,400 sq ft seems like more than enough if the layout is good.
 
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