10 ms·
US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says
- dijit 8y agoAt some point you hit the cap of what people can possibly spend. Depressed earnings in all but a tiny sector, and incredibly inflated house prices. Perpetual growth is unsustainable in this manner, but is expected by investors. I hope the market corrects. Not for my sake (I live in Sweden and have no US desires) but for those who hope to have a life and family near their ancestral home. I am not preaching to the choir of HN, people on this site generally have it a lot better than the people who also live in the places that are huge tech hubs.
- refurb 8y agoNot sure why you’re being downvoted. Nothing you said is controversial. Agree that incomes put an upper limit on housing prices...they can’t go up forever at the same rate as the past 5 years.
- nutjob2 8y agoPretty sure my ancestral home is somewhere on Mayfair. I demand access to an affordable London flat thereabouts! Also if you're talking about the Bay Area, much of the real estate pricing there is driven by the anti-development tendencies of the owners of ancestral homes, either lining their own pockets or pushing some misguided political wheelbarrow (especially in SF). In that sense it's largely self inflicted. In other places even uneven economic growth tends to create bigger cities as the wealth spreads through the economy via construction and services and the like. It's when you try to fight the market that you get unintended consequences.
- JumpCrisscross 8y ago> Pretty sure my ancestral home is somewhere on Mayfair. I demand access to an affordable London flat thereabouts! We’d better get around to ceding Manhattan back to the Lenape, too.
- dijit 8y agoMaybe I chose poor words. Ancestral meaning “where my mother/father and grandparents, nieces, nefews etc live. I come from a city in England called Coventry. Family ties are what keep most of the population in place- perhaps “familial” is a better word. The idea of not being able to live close to family is distressing to many of my fellow city dwellers. You can argue the semantics of how valuable such a thing is. You can even argue that the entire family unit should probably move somewhere cheaper, or that commuting to see your mum isn’t all that bad. But honestly; it would take a lot for me to revisit the idea that I am not able to live amongst my family. Even if I personally did not choose to.
- r00fus 8y ago> At some point you hit the cap of what people can possibly spend. Local population can be priced out if external buyers (ie, foreign cash) can pick up the slack / drive up demand. Foreign investment is likely why case-shiller is so high since mid-2000s.
- refurb 8y agoMeh... even in super hot markets like Vancouver, foreign purchases were 10% of transactions. And a lot of it was in the very expensive houses. It’s locals who are driving most of the price appreciations (and flippers).
- rspeer 8y ago10% of the expensive houses sitting unoccupied also drives up prices. People are flipping moderately-priced houses because they have a chance of becoming the new expensive ones. There aren't two different housing markets.
- ficklepickle 8y agoA lot of these same folks are abusing the primary residence exemption on capital gains by pretending to live in an income property. (The gains on your primary residence are not taxed at all in Canada) They get their mail delivered there while renting it out to help bolster their residency claims. So they are getting a nice tax shelter while pricing legit home buyers out of the market. Nobody wants to actually do anything about it, so we pass laws that are easy to work around. Like a foreign buyers tax that is easily circumvented by using a shell corporation.
- posixplz 8y ago10% more overall transaction volume is huge, especially for something as illiquid as real estate.
- refurb 8y agoForeigners have been buying property in Vancouver for a long time. Problem is, the volume was never measured so we don’t know what the increase was.
- redisman 8y agoI don't know how the housing market doesn't affect you - Stockholm is one of the most expensive real estate markets in the world. Much move expensive than most US cities.
- dijit 8y agoWho said I live in Stockholm? I live in Malmö. The housing market is pretty dire in most of the westernised-European capitals.
- greglindahl 8y agoMisleading label from HN - article is amp from Market Watch, not actually google.com. Ideally, HN would point at the original. Personally, my phone Adblock prevents google from spying on my traffic in general, but these cached amp links get tracked by google.
- khuey 8y agoThis is one of the reasons AMP is terrible.
- deleted 8y ago[deleted]
- dang 8y agoYes. Url changed from https://www.google.com/amp/s/www.marketwatch.com/amp/story/guid/5038160C-9C1F-11E8-A46C-BBDE1A6795F5 https://www.google.com/amp/s/www.marketwatch.com/amp/story/g.... Submitters: please don't post those! It's important that readers see what domain a story is coming from.
- ChuckMcM 8y agoThere are all sorts of reasons that house sales slow down, not the least of which are reduced tax benefits, higher interest rates, and a general market forces. The interesting thing to watch for is the flipper sales. Which is to say if a significant chunk of the market in your area is actually being held by people who bought the house just to flip it, then when you get two or three months of flat to downward pressure on house prices they will all yell "Peak!" and run for the exits. Then you'll see a nice flurry of downward movement as these folks try to unwind their position before the market falls into a hole that loses them money. Pro tip, there aren't enough chairs and the music is no longer playing :-). That could bring some welcome relief for home buyers who have struggled in the 'no contingency cash only' markets like parts of the Bay Area.
- danjoc 8y agoThat's not really what happened in the last crash though. The people who bought, held. The only people who got hurt were home owners who go underwater and then lose a job. They can't afford to wait it out, they can't afford to make the payment, so they end up in foreclosure. Then the bank holds and it ends up as a zombie home.[1] The zombie falls to pieces, so the bank gets a bail out, the home is written off, and the market is just as tight as it ever was. All the flippers are going to do is rent the places out while they hold on for the next run up. At least, that's what I witnessed in the last crash. https://newyork.cbslocal.com/2014/07/25/zombie-homes-without-owners-forgotten-by-banks/ https://newyork.cbslocal.com/2014/07/25/zombie-homes-without...
- ChuckMcM 8y agoAll true, I was thinking about the 'home price recessions' that happen periodically as opposed to the mortgage crisis which was precipitated in part by synthetic CDOs masking poor lending processes.
- danjoc 8y agoAh, understood. I remember shopping for houses after the crash, and it seemed everything was either a trash heap, or in foreclosure. The bank wouldn't take an offer, preferring to cash auction to investors at the starting price of the highest offer they had. No cash, no house, no matter how good the credit rating. The cheap house thing was basically a myth from my vantage point.
- CamTin 8y agoJust today (in Austin) I saw a banner by the road outside a bank offering "100% financing" for homebuyers. If banks breathlessly pitching to lend buyers the entirety of a home's price is not a sign of an overheated debt-led housing market, I don't know what is.
- danjoc 8y agoIt gets worse than that, https://www.lendingtree.com/home/mortgage/interest-only-mortgages/ https://www.lendingtree.com/home/mortgage/interest-only-mort...
- twoheadedboy 8y agoWhat the hell did I just read..?
- mark212 8y agoIs this the first you’re hearing of an interest only mortgage? They have been very popular in Southern California for a couple of decades. The theory is that it allows the speculator / owner to get a much more expensive home and just pay the interest for 3 to 10 years. Then sell and reap the massive appreciation. Except of course when the market goes the other way and you’re underwater and then whoops! the payment flips to fully amortized (interest and principal) and you can’t afford it. Welcome to 2007! But don’t worry you’ll be unemployed in another year too!
- frankc 8y agoThere are also perfectly valid use cases for interest only mortgages. The classic case is for people with highly variable incomes, for instance people working on commission or people working in bonus driven industries. In lean years you pay just then interest and in healthy years you pay down some principle.
- matheweis 8y ago“Adjustable-rate interest-only mortgage“ ... how is that even legal?
- Animats 8y agoThe article title needs punctuation.
- dang 8y agoWe changed the title from "Housing hit unexpected slowdown Shares of Redfin drop 20%". Submitters: please don't rewrite titles like that. If an article title is neither misleading nor linkbait, the site guidelines ask you not to change it. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- mortenjorck 8y agoThe Case-Shiller Index currently has home prices rising at 2-3x inflation: https://www.housingwire.com/articles/46307-case-shiller-home-prices-rising-at-least-twice-the-rate-of-inflation https://www.housingwire.com/articles/46307-case-shiller-home... That would certainly seem to be unsustainable.
- debacle 8y agoWe're still post-crash, and China is putting a lot of money into American real estate.
- monkmartinez 8y ago"is == were" from what I understand
- anonymous5133 8y agoWe aren't at post-crash anymore. House prices have fully recovered and now exceed the previous housing bubble peak. Foreign buyers could be a catalyst that has inflated the home prices to new heights.
- perl4ever 8y agoI've never understood how stock market returns can exceed inflation in the long run either...it seems inescapable logically that if you can come up with an asset with a guaranteed return, people will flock to it until the real return equals approximately zero.
- mmt 8y agoTime (aka risk) matters. The fact that certain assets only have a "guaranteed" return over periods of 30 years or longer significantly limits the kind of people that are willing to flock to them.
- perl4ever 8y agoIf that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? Like a corporation that sells annuities? It seems like a minor detail of financial engineering, just like figuring out how to profit from a perpetual motion machine. It still seems obvious to me that any asset with perpetual outperformance must revert to the mean before or after it eats the world and people just have gotten very accustomed to denying this fact because the boom in the US stock market has outlived any human who doubted it. Look at Moore's law - it became an article of faith, but things that can't go on forever the same way don't.
- paulie_a 8y agoRedfin didn't exactly do anything interesting or unique. It was literally yet another real estate app/website. It's not surprising.
- tompetry 8y agoTo be fair, Redfin is a technology focused MLS member and agency, not just a listings aggregation app. You're entitled to your opinion if you don't think that is interesting or unique, but their offering is far more than just a website and app. Interesting data on their agent stats and comp here: https://www.redfin.com/blog/2018/01/how-much-do-redfin-agents-earn.html https://www.redfin.com/blog/2018/01/how-much-do-redfin-agent...
- paulie_a 8y agoI worked in that industry. It really is a pretty "meh" company. Also there is no MLS, there are a lot of them.
- debacle 8y agoThough the MLS is pretty distrubuted, these days you can consider it as a single entity for the most part, though the shenanigans from the early 2000s still happen every day.
- tomrod 8y agoShenanigans from the early 2000s?
- debacle 8y agoThere's windows that you have to put a property up in (e.g. 72 hours), but if your company can act as both buyer and seller you can double(ish) your commission, so you either: 1. Try and get an offer before that window is up. or 2. Put the listing up with enough wrong information that you get 2-3 more days to try and sell the property. Apart from that, there's a lot of minor lying when it comes to these listings. Maybe the lot was 2 acres before it was subdivided, so you say on the listing that it's 2 acres. Maybe you jiggle the handle on the listing for the first week or so so it shows up as new/updated every day. Maybe you say that the listing has "central window unit AC" to try and confuse people into showing up. It's mostly a lot of light treason against buyers and sellers. Real estate is a bit of a dogfight and much of it falls into the "technically illegal but not worth suing" bucket.
- ProfessorLayton 8y agoThe upcoming changes in the tax code certainly did not help the housing market: - The new SALT cap is extremely low, particularly if you own a home in the Bay Area. 10K! Mitigative solution: Stay put and keep current tax base, hampering both supply and demand (for a nicer home) - The doubled standard deduction made owning with a mortgage less attractive (But a win overall once your loan is paid off enough). - Mortgage interest deduction lowered from 1M to 750K (I believe it's 1/2 if you're buying alone). Houses are so expensive here this actually matters. On the supply side: More post-tax money + higher interest rates means those who locked into great rates won't want to sell, or want to buy a more expensive home. On the demand side: All of the above means everything just got even more expensive. EDIT: Regardless of what your stance is on mortgage interest deductions, there's no doubt that the upcoming tax code changes threw cold water onto the housing market. This wouldn't be such an issue if there was more supply in the first place, but here we are.
- jeffbax 8y agoThis is all true, but the mortgage interest deduction should be $0, particularly in the rich cities that refuse to let enough homes get built and fix things like zoning. It's an awful distortion that's a handout to the wealthy to the penalty of renters (generally less well off)
- aceon48 8y agoIt also encourages debt and is effectively a subsidy to banks
- AnthonyMouse 8y ago> It also encourages debt and is effectively a subsidy to banks I have no idea who is downvoting you. That's absolutely correct. If they really wanted to subsidize ownership they would make it tax deductible to pay down principal. (And then give you zero tax basis so it's all taxable income when you sell, and cap the maximum sunk deduction per person at the median home value so rich people don't buy twelve houses to avoid their taxes.)
- pcagency 8y agoTHANKS FOR THE HACKER NEWS
- yalph 8y agoJeez what do you expect? This is interesting news and comments are pretty thoughtful as well.
- nielsbot 8y agonon-AMP link: https://www.marketwatch.com/story/housing-market-has-hit-a-significant-slowdown-in-recent-weeks-redfin-ceo-says-2018-08-09 https://www.marketwatch.com/story/housing-market-has-hit-a-s...
- ntkachov 8y agoI can put some perspective on this. We got priced out of the market in Feb. According to the bank, we can't get a mortgage where the overall cost of the payments on all our debt can't exceed 41% of our pre-tax income. Given that our student loans eat about 20% of our pre-tax income, that means we only have 20% of our income left for housing. Rising interest rates means that more of our house payment goes to interest which means less of it is left for principal, so we cannot afford the same home we could last Oct. The tax incentives used to mean that we could deduct a good chunk of our housing costs from our taxes and use some of that money to live, bringing it inline with what we would pay for rent. However, that changed and made renting easier on us financially. High student loan payments and high mortgage rates means that the only thing left to give is the price of the home. Or the bank can be cool with us leveraging ourselves to 50+% income.
- scarface74 8y agoWhy would you want to? Is a house really worth it?
- jakelarkin 8y agoif youre paying 20% of your income to student loans, buying a house isnt exactly the best play. Student loan interest is a scam. Dig deep and pay that jam off as quickly as a you can.
- wyclif 8y agoBest advice in this thread, IMO.
- ajmurmann 8y agoWith a tight budget like that, imagine you had bought the house and then the tax code changes and now the math doesn't work anymore.
- parrellel 8y agoWhy does this link say Google?
- shoo 8y agoFrom the url it looks like marketwatch.com site is using google's AMP thing to implement a lightweight site, then google is mirroring it / distributing it through some AMP CDN hosted from a google domain. (this explanation is perhaps only 60% right, someone who actually knows about AMP may like to weigh in and correct me)
- mjevans 8y agoHousing is only an 'investment' because of how expensive it inherently is. However, my opinion has been that housing /has been/ in a bubble since at least the mid 2000s (pre recession); and it didn't actually deflate (at least in the area I live in) /during/ that recession. It would really be nice if some way of fixing this bubble chasing nonsense happened. Maybe if healthcare and retirement were fully socialized this would be less of an issue.
- deleted 8y ago[deleted]
- gt_ 8y agohttp://dsausa.org http://dsausa.org
- ummonk 8y agoWell, Prop 13 in California particularly incentivizes housing bubble chasing.
- gnicholas 8y agoDoesn’t Prop 13 incentivize buy and hold? That’s the only way to keep your low property tax basis. Or am I misunderstanding your comment?
- mjevans 8y agoThe effect on the market is to make the market even less liquid than it would be since sales cost such huge benefits. Plus insulating existing homeowners from the rising market value of land is a tax on literally everyone that does NOT live there.
- gnicholas 8y agoThanks for clarifying — I didn't realize what you meant by bubble chasing. I agree that Prop 13 can reduce available inventory and drive prices up. Though note that at age 55, you can move into a less-expensive home and keep your old property tax basis (if you meet certain restrictions). This provides somewhat of an escape valve that allows empty-nesters to downsize and new families to move in.
- benatkin 8y agoIf they were assuming that because I turned 30 this decade I'd suddenly become interested in owning a home, they were wrong! If the financial pundits believed all the articles the culture pundits were writing about millennials they could have known.
- arenaninja 8y agoI wonder if the trade hostilities are affecting foreign (particularly Chinese) real estate purchases in the US. I suspect this is the case, but it's probably not enough to significantly contribute to the slowdown (at least not more so than rising mortgage rates and overheated prices)
- anonymous5133 8y agoIMO, I think the foreign buyers will be a bigger factor than many think primarily because it was an external force not directly reliant on local wages to buy. In essence, the foreign buyers were able to prop up or increase prices much higher than the market equilibrium. If you take away those buyers then the whole thing quickly loses its foundation and falls in on itself. I think this will be the case. People think the foreign buyers are always going to be there but this is hardly the truth.
- 56chan4 8y agoThere are lots of factors at play, some are more significant that others in one area of a country than another. Take Brexit, 5th largest economy, if you look at UK car stats (SMMT website) businesses are in recession as far as car manufacturers are concerned. Another factor, the GBP has dropped, this makes investing in London attractive for overseas buyers who may have invested in the US market. Plus as London house prices have dropped this also becomes attractive to overseas buyers. In turn as London property is very expensive, this drags the average's up for the price of property in the rest of the country. These factors will be repeated in many countries around the world, but one thing the US has lots of which counts against the US housing market, is land. The UK is highly populated, England is densely populated, the demand for land in the UK is at a much higher premium than in other parts of the world like Europe or the US. In turn, the UK landowners benefit from this global demand ie stability to park money in UK assets due to the reputation of the UK on the global stage, ie no major revolutions in recent history, one of the oldest legal & financial systems in the world. All this stability to park money in the UK pumps up property prices, so with Trump getting into office, is he lowering your property prices considering his flip flopping around with what he says? I see Trumps election as a desperate attempt to consolidate the US position on the global stage as the rest of the world wants detach itself from the petrodollar. As the dollar declines much of your money has to now be spent on things to help you live instead of just going into property. Be prepared for inflation and hedge accordingly, property prices falling is good for the wider US economy, as high property prices where a great % of income is going on servicing the property is bad for the wider economy. Besides there are more Basel requirements coming in next year and many banks have not got themselves ready for that either. One other thing, Brexit, 5th largest economy, if the EU doesnt allow the UK to stay in the single market, what sort of effect on the global economy will the UK market crashing out of the EU single market and going into major recession have on the global economy. Brexit in a way has the global economy by the balls and the EU led by Germany will be seen as the bad guys for not budging on their philosophy.
- farnsworth 8y agoI closed on a condo in Seattle literally this morning. Did I buy at the exact worst possible time?
- NegativeK 8y agoOnly if you're concerned about external validation of your purchase -- i.e., you might be moving and the market tanks.
- raincom 8y agoUsually, lots of people buy homes in a hot market. Definitely, not worst, if you plan to live in that condo and if your commute is 15 minutes.
- shoo 8y agoIt depends why you were buying it. Were you buying to flip it as a short term investment, or a place to live in for the next 5-10-20+ years? the market price only matters if you're forced to sell or forced to buy. if you dont need to sell or dont need to buy, you can ignore it
- farnsworth 8y agoA few downsides from my perspective - I plan to rent out the second bedroom, and rents are dropping. And I plan to rent out the whole place within a few years - I miss out on cheaper rent in nicer buildings (also because rents are dropping) or on buying a cheaper or nicer condo I'm fortunate enough that I can am more or less comfortable paying for it as long as I have my job but if I can't find a renter at a decent price, I'm going to be hurting a little bit.
- brandall10 8y agoI bought my last place in 2006, intending to live there at least 5-10 years. I ended up living there for 11 years, with the majority of the time being there with it some $120k underwater. It was terrible and I wished I had waited a year or two - not only did I pay more to service a more expensive mortgage, I walked away with considerably less equity than I would have if I just waited. I don't know how anyone could possibly be thinking about purchasing a place right now. It's been 12 years since the last crash started and real estate is traditionally on a 10 year boom/bust cycle. Even if you think you want to live in your place for decades, things happen. As always, if you can help it, buy low, sell high, don't pander to emotion on what is one of the biggest purchases you can make.
- pyoung 8y agoAnecdote, but my wife and I dropped out of the market recently and rented instead. The rent was 30-40% cheaper than a mortgage would have been on a similar place (including taxes, insurance, etc...). So we figured we would just put the after-tax difference into a 401k (because 401k is pre-tax, for every dollar we 'saved' in housing cost, we are putting ~1.4 dollars into 401k). I figure that building equity in a house has similar investment timeline to the 401k, so it doesn't really bother me whether my net worth comes from one or the other, and unlike a house I can diversify the 401k via different index funds. In terms of ROI, the buy vs rent calculators are all starting to lean towards renting[1], so unless we are going to be in the same house for 12-15 years (unlikely) renting seems to win (and this assumes fairly good/neutral economic outlook, if you turn some of the knobs on the calculator to assume negative growth, oh boy...) . Add to the fact that most folks don't really know how the new tax laws will impact them until they do the calculations early next year, and the fact the rising interests rates should put downward pressure on the market, and the rather volatile political situation (who really knows where this tariff thing is going to go, and how it will impact the economy), and it just made more sense to wait it out. [1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
- debacle 8y agoYou'll only be able to take advantage of that downward pressure if you have a large downpayment (and finance as little as possible).
- pyoung 8y agoI get what you are saying, but I think interest rates have a broader impact beyond just monthly payments. Real estate investors will start getting squeezed for example, so demand will dry up there. Also, I think downward prices impact the psychology of the market. Even if those price drops are entirely due to the rate increases (such that the monthly payment is the same), I imagine people will start getting nervous about jumping into a highly leveraged investment with falling prices, I know I would.
- all_blue_chucks 8y ago
- blairanderson 8y agoSeattle has significantly slowed.
- stephengillie 8y agohttps://www.seattletimes.com/business/real-estate/more-seattle-area-home-sellers-lower-list-prices-as-market-cools-way-down/ https://www.seattletimes.com/business/real-estate/more-seatt...
- h4b4n3r0 8y agoAbout time it slowed down. My house is over 2x what I paid for it 6 years ago. I pay $10k/yr in taxes just to live in it, WTF.
- SomewhatLikely 8y agoTeachers have to live somewhere too.
- h4b4n3r0 8y agoI agree. But I don't see how it has any bearing on the situation: they are affected by the extremely high housing prices as well, to a much greater extent, and real estate taxes, while high, represent only a small fraction of state revenue. Sales and business taxes dominate there. Then there's the issue of the explosion of administrative personnel. As a parent, I'm not even sure what most of those folks do. I'm sure they "have to live somewhere", but I'd rather spend the money on teachers, schools, and supplies, TBH.