6 ms·

People are cashing out of expensive markets and moving to cheaper markets, paying all cash. There will be no price drop.

SV_BubbleTime 4y ago
Among other reasons I’ve been thinking the same. I have two coworkers looking to buy. They both keep “waiting for the crash”. But I’ve tried to explain to them, they’re getting beat out on every place they look at with over-asking cash offers. If there “is a crash” they will be at the same place they are now. They need new construction to improve availability, or they need a scenario with there is mass unemployment that doesn’t effect their jobs. IDK anything. But I’m not sure I see how they get into a house.
01100011 4y ago
What happens when buyers disappear for the homes in the expensive markets? The prices drop, and the cash available to buy in a cheaper market dries up. You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home. I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining.
- lmm 4y ago
  > You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home. > I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining. The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss. That panic sell dynamic you mentioned doesn't seem to happen in housing, and foreclosure sales etc. can always be dismissed as unrepresentative.
  - 01100011 4y ago
    > The houses sit empty Who can afford to let a > $1 million USD asset sit idle? There is an opportunity cost to that. You also have to service any outstanding debt on the property and pay the property taxes. There are also life changes(i.e. retirement, illness, children, etc) which force relocations. The owner could try renting the unit, but that involves risk and still has issues with opportunity cost. What if the home sits idle and the owner relies on the income to afford a rental in another market?
    - teeray 4y ago
      > Who can afford to let a > $1 million USD asset sit idle? People that own >$1 million USD assets. Some of these folks have multi-million dollar properties that they only actually use for a week or two per year.
    - almost_usual 4y ago
      I know someone who had a 2m+ home sit empty in SF for years. A 2m+ home in the Peninsula where the tenants stopped paying rent during COVID and still live there today. The tenant not paying rent annoys them but they’re not financially impacted by any of it. They own a business and make enough money that it’s not worth their time or energy to deal it. They have no connection to tech and work in a niche industry.
      - 01100011 4y ago
        That's great. That's one data point. Most folks owning homes in CA aren't rich beyond their real estate.
      - cudgy 4y ago
        Does this person have any other rentals? Sound like a good deal for the renter to have a landlord that doesn’t care if they pay rent.
    - rcpt 4y ago
      Since he's talking about California the answer is boomers. They bought decades ago and locked in miniscule property tax rates which don't go up because of Prop 13.

SV_BubbleTime 4y ago

Among other reasons I’ve been thinking the same. I have two coworkers looking to buy. They both keep “waiting for the crash”. But I’ve tried to explain to them, they’re getting beat out on every place they look at with over-asking cash offers. If there “is a crash” they will be at the same place they are now. They need new construction to improve availability, or they need a scenario with there is mass unemployment that doesn’t effect their jobs. IDK anything. But I’m not sure I see how they get into a house.

01100011 4y ago

What happens when buyers disappear for the homes in the expensive markets? The prices drop, and the cash available to buy in a cheaper market dries up. You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home. I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining.

lmm 4y ago
> You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home. > I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining. The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss. That panic sell dynamic you mentioned doesn't seem to happen in housing, and foreclosure sales etc. can always be dismissed as unrepresentative.
- 01100011 4y ago
  > The houses sit empty Who can afford to let a > $1 million USD asset sit idle? There is an opportunity cost to that. You also have to service any outstanding debt on the property and pay the property taxes. There are also life changes(i.e. retirement, illness, children, etc) which force relocations. The owner could try renting the unit, but that involves risk and still has issues with opportunity cost. What if the home sits idle and the owner relies on the income to afford a rental in another market?
  - teeray 4y ago
    > Who can afford to let a > $1 million USD asset sit idle? People that own >$1 million USD assets. Some of these folks have multi-million dollar properties that they only actually use for a week or two per year.
  - almost_usual 4y ago
    I know someone who had a 2m+ home sit empty in SF for years. A 2m+ home in the Peninsula where the tenants stopped paying rent during COVID and still live there today. The tenant not paying rent annoys them but they’re not financially impacted by any of it. They own a business and make enough money that it’s not worth their time or energy to deal it. They have no connection to tech and work in a niche industry.
    - 01100011 4y ago
      That's great. That's one data point. Most folks owning homes in CA aren't rich beyond their real estate.
    - cudgy 4y ago
      Does this person have any other rentals? Sound like a good deal for the renter to have a landlord that doesn’t care if they pay rent.
  - rcpt 4y ago
    Since he's talking about California the answer is boomers. They bought decades ago and locked in miniscule property tax rates which don't go up because of Prop 13.