Shit is about to hit the fan

[MtnHusker]

What's your take on the best way to invest in real estate on a smaller scale, if you don't have 'buy another house' levels of capital?

Or here is a creative idea that we do with real estate. Find a partner. My brother and his business partners have hundreds of rental units. They owned a bunch of bars in lawrence, KS and started buying the homes around the bars as a way to prevent the neighbors from complaining about noise. They rent them out to college students who don't care. Figured out they were making mad bank on the rentals so started buying more. Friends of theirs started approaching them about wanting to buy rental properties. They wanted to buy them but didn't feel comfortable running them.

So the business plan on those is they form a partnership. The other party puts the down payment money and my brother or one of his partners manage the property. They pay back the down payment money out of profits and once it is paid off they are 50/50 partners. So if a friend puts in $30,000 (20% of a $150,000 home) they pay them back the $30,000 over 2-4 years. Once that is paid off they are equal partners with my brother still managing the property. They actually set up a Property Management business because they have so many properties and they cover that cost. So Sweat Equity from 1 party and Down Payment $$$ from the other party.

 

[Herbie]

Household Debt to GDP for United States

View the ratio of debt incurred by resident households of the U.S. economy as a percentage of economic output.

fred.stlouisfed.org

 

[Drue629]

I'm a Realtor. Projections we are getting is housing prices will continue to increase on average. Some will depend on location as many big cities are seeing people move out due to high crime rates, high taxes, cost of living, politics...... but most areas should be flat at worst in price. Our group follows 5 Real Estate Economists closely as they have a great track record. 4 are projecting continued price increases. 1 is predicting a 1-2% short term decrease for dense populated urban cities/areas but 1-4% increases for more Rural areas (towns/areas of 100,000 or less). But projects a positive price increase for all categories after 3+ years.

Lower Middle Class and below are the ones being hurt by the higher interest rates. I feel for families with limited finances that want to buy a house because our government has really made it difficult for them. On average Rents are increasing at a much higher rate than home prices. Rich getting richer off of real estate right now, especially if they can pay cash. In our market 40% of the homes sale have been Cash and 51% of the homes over $1,000,000 were Cash purchases. Believe it or not the age category that is buying the most homes over $1,000,000 in the US is the Millennials. That surprised me.

Keep in mind 2 Economic Factors:
-Supply & Demand
-Inflation increasing Cost of Materials & Labor

On Supply & Demand this might sound strange but it is somewhat common sense. More new buyers are coming into the market than owners are dying off, by a ratio of roughly 2:1. There is a housing shortage across the country. The age group that is reaching the age they are dying or going into Nursing Homes is half of what the new buyer market is. Maybe parents are finally kicking their kids out of their basements. Also VRBO/AirBnB have made it so much easier for Investors to purchase homes to rent out Short Term. I have my phone ringing off the hook for Investors looking for good VRBO opportunities. Literally showed 13 homes/condos the last 2 days to a couple different investors.

Inflation, well prices of materials and building are increasing. Supply Chain still has some materials that haven't recovered causing delays in building. Ordering Windows or Glass right now can take 6-8 weeks if you are lucky. With the increased costs of materials New Builds have to increase in price as their costs do. This increases the value of existing homes.

Some want to compare our current market to the 2008 Crash, which is not an Apples to Apples comparison. In 2008 Inventory was so much higher, and Demand was lower. In my market Inventory was literally 6 times higher in 2008 than it is today. Now I have easily 5 Buyers for every Seller I have. Also in 2008 there was still the guidelines of the "Everybody Should be able to Buy a House" programs from the 1990's. You could get 125% refi's so literally pull cash out. We could get loans for people who had a 520 credit score. New home buyers could easily qualify for a loan with no money down even though they had a bad credit history. Most of these Loan Loopholes that were taken advantage of have been closed.

I'll tell anyone who would listen that if I would win $2,000,000 in the Lottery tomorrow I would put it all into real estate. During Inflationary Times 2 of the best investments historically are Gold and Real Estate. Don't make a rookie mistake and let Interest Rates dictate if you are going to buy or not. Marry the House, Date the Rate. If you find your Dream Home or a good investment property buy it even though rates are high as you can refinance later. Rates go up and down so if they decrease then refi and if they increase then you got a great deal with your lower rate.

I agree with all of this 100%. Plus they were doing stated income/no credit check loans back in 08. Something like 70% of loans in 07/08 were ARM's. Right now 65% of homes are owned free and clear. That was not the case in 08. From a mortgage standpoint, we feel like we've seen the worst of it and I'm more optimistic about 2023/24.

It sounds like the Biden administration is set to reduce the monthly mortgage insurance on FHA loans from .85% to .55%(as soon as tomorrow). This is great for the low/middle class. Rates will stabilize eventually. There's cause for concern on short-term loans but the housing market is not in danger imo.

 

[dsbigred1]

I’m on my way to Wal-Mart to buy some Google Play cards that will somehow bail my nephew out of a jam according to this Indian fellow on the phone. But when I get back, I’ll probably be looking at available land and rentals. Just had 16 Sec. 8s sent over to peruse. Hard to turn down getting paid by any level of government.

 

[BIGSTICK67]

The Poors are especially gonna get hurt. Middle Class and higher should be fine as long as they aren't carrying huge DTI ratios. Not obvious to many of the people with credit cards is that the increased interest rates cause an increase in the Interest Rates they charge. So the financially struggling people barely making the minimums on CC payments are going to see them get even higher. Banks and financially stable are going to win while the rest are going to be set back financially.

It's unfortunate how so many of the current government trends hurt the middle to lower class. I don't know how lower class families can even afford to feed their families with the skyrocketing food costs. Most of us can afford a loaf of bread whether it is $1.99 or $4.59 but to someone feeding a family on a limited budget that is a huge kick to the nuts.

Excellent and accurate post. We need healthy consumers from the bottom up.....including the middle class.

 

[Faux Sean Callahan]

Household debt at 2008 mortgage meltdown levels and that doesn’t include credit card debt. Keep shopping at Hyvee, leasing Escalades and taking those every 2 week Scottsdale and Mexico trips people 😂😂😂😂😂

 

[betsch]

I’m on my way to Wal-Mart to buy some Google Play cards that will somehow bail my nephew out of a jam according to this Indian fellow on the phone. But when I get back, I’ll probably be looking at available land and rentals. Just had 16 Sec. 8s sent over to peruse. Hard to turn down getting paid by any level of government.

Tell that Indian motherfucker he's late on paying me the Indian national lottery he promised me. I'll give him 2 more months and that's all.

 

[BBTown Bomber]

Household debt at 2008 mortgage meltdown levels and that doesn’t include credit card debt. Keep shopping at Hyvee, leasing Escalades and taking those every 2 week Scottsdale and Mexico trips people 😂😂😂😂😂

We leave on March 16th for three weeks in Scottsdale. How in tf did you know.?


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[Baron Winnebago]

View attachment 20657

Me pretending I understand how the macroeconomy works

 

[Ext. 55]

But hasn’t our President recently told us we are living in the best economy we’ve ever seen?

 

[Samkellers_69]

I for one will welcome the mad max future. I recommend you all embrace it. Grow out your hair and soup up your muscle cars

 

[Cash68847]

most of the airbnbs I've see started charging exorbitant cleaning fees, while also giving a list of chores that need to be done before checkout. it's driving away their customer base, even if airbnb's share of those fees is temporarily making their earnings look good

here in Phoenix there was a ridiculous amount of vacancies during Super Bowl week (which was also Phoenix Open week). if they are having vacancies for a week like that it's not a good sign for their longer-term prospects

I’ll stick with hotels.

 

[Jim14510]

Off topic but is the airbnb/vrbo bubble going to burst? With all of the attached fees they aren't nearly the deal they were a few years ago.

All of the VRBO people I've seen so far made good money last year. Still booked pretty solid for this year.

 

[Jim14510]

Or here is a creative idea that we do with real estate. Find a partner. My brother and his business partners have hundreds of rental units. They owned a bunch of bars in lawrence, KS and started buying the homes around the bars as a way to prevent the neighbors from complaining about noise. They rent them out to college students who don't care. Figured out they were making mad bank on the rentals so started buying more. Friends of theirs started approaching them about wanting to buy rental properties. They wanted to buy them but didn't feel comfortable running them.

So the business plan on those is they form a partnership. The other party puts the down payment money and my brother or one of his partners manage the property. They pay back the down payment money out of profits and once it is paid off they are 50/50 partners. So if a friend puts in $30,000 (20% of a $150,000 home) they pay them back the $30,000 over 2-4 years. Once that is paid off they are equal partners with my brother still managing the property. They actually set up a Property Management business because they have so many properties and they cover that cost. So Sweat Equity from 1 party and Down Payment $$$ from the other party.

I see that quite a bit with jack of all trade guys locally too. Don't even have to manage the property just be the guy that does the renovations and maintains it. Both parties get what they want.

 

[Toe]

The difference between 2008 and now is that the credit profile of the average borrower in the last few years is dramatically different (and way better) than it was in the 00s. They also almost exclusively took out fixed-rate mortgages, so they're not so vulnerable to rising rates. In other words, they're way more secure and less likely to default on their loans than the previous generation.

2008 was about a lot of loans being given to people who shouldn't have been able to get them, and financial institutions taking on way too much risk tied to those loans. The last few years was about a generation that should have been able to buy a house a long time ago finally getting a decent opportunity to do so.

 

[Toe]

Of course, we're still nowhere near making up for the dip in housing construction over the past 15 years or so, so the supply shortage will continue and prices will remain inflated for the foreseeable future. Gen Z will probably get fucked even harder by this than Millennials did.

 

[BIG TONE SOPRANO]

We leave on March 16th for three weeks in Scottsdale. How in tf did you know.?


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I’ve got eyes everywhere brother

 

[BIG TONE SOPRANO]

I’ll stick with hotels.

Agree. I’m not cleaning up for myself if I’m paying

 

[alt f4]

The automotive market is going to crash before the housing market, especially those who purchase a new or used vehicle from Q3 2020 to Q4 of 2022. Most new cars were going for MSRP up to 10k over MSRP, even domestics. Used car prices skyrocketed to a shortage of trade and artificial bump by vroom/Carvana buying up vehicles for over 10%-20% retail values, not trade values. They had a strategy for volume and try and starve out dealerships from gaining inventory.

Example the same 2022 F-150 XLT purchased in mid 2022 would go for $64,500-$70,000 @ 4.9% for 60 mos, now can be purchased for $56,600 @ 1.9% for 60 mos. Similar built 2023 F-150 XLT will be around $57k-$58k @ 1.9%.

 

[BIG TONE SOPRANO]

The automotive market is going to crash before the housing market, especially those who purchase a new or used vehicle from Q3 2020 to Q4 of 2022. Most new cars were going for MSRP up to 10k over MSRP, even domestics. Used car prices skyrocketed to a shortage of trade and artificial bump by vroom/Carvana buying up vehicles for over 10%-20% retail values, not trade values. They had a strategy for volume and try and starve out dealerships from gaining inventory.

Example the same 2022 F-150 XLT purchased in mid 2022 would go for $64,500-$70,000 @ 4.9% for 60 mos, now can be purchased for $56,600 @ 1.9% for 60 mos. Similar built 2023 F-150 XLT will be around $57k-$58k @ 1.9%.

History will certainly repeat itself.