BofA says–it's a housing recession, 1980s-style | Hacker News Reader

BofA says–it's a housing recession, 1980s-style

fortune.com

21 pointsfairytalemtg49 comments

Prices need to utterly collapse tbh

But they most likely won't, just like they didn't in the 80s. What will collapse will be home sales, but not prices (as so stated in TFA). Houses will just sit on the market for months. I see that happening now in the Seattle suburb of Redmond. I go for a lengthy run six days a week, so I see the real estate signs. And I see the same signs (in some cases) going on months now. Whereas not that long ago I'd see a sign, and in a couple of weekends it would be gone.

This seems like a strange way to decide homes aren't being sold. Couldn't this just as easily be an indicator of people buying with loans rather than cash? In the former case, it can take a long time to close the transaction (on the order of months -- especially if there's any back and forth on fixups or appraisals), and realtors aren't allowed to make it a 'SOLD' sign until that happens.

This seems like a strange way to decide homes aren't being sold.

This comment is so HN. If you were expecting me to publish a full report with links to MLS data, you'll be sorely disappointed. It's just one dude running around the neighborhoods in his fancy underwear, making a mental note of the short little "home for sale->this way" signs at the corners over the course of a year. All I can tell you is, a year ago those signs disappeared in a few weeks. Now they take over a month or more to disappear. Full analysis will not be forthcoming.

Make of it what you will, or make nothing of it at all and enjoy the rest of your day.

Why....why were you running in your underwear?

One can spend US$100 on some fancy Nike running shorts, but they're still just one step away from boxer underwear. And that shirt with the name of the last race you ran? Yeah, fancy t-shirt, i. e., underwear.

IOW, I was being facetious. And a little self-denigrating, to make sure I don't take myself too seriously as an athlete.

> And that shirt with the name of the last race you ran? Yeah, fancy t-shirt, i. e., underwear.

looks at Spartan race t-shirt from 2014 I use as my gym shirt

No need to call me out like that!

> "home for sale->this way"

I see, that makes a bit more sense. I thought you were talking about the big signs on posts that are placed on the lots for sale, but if you were talking about those open house markers then it might be a better indicator of difficult sales.

> This comment is so HN.

I'm new to HN, so I don't know what you mean by this. Can you elaborate? I wasn't expecting you to post some kind of research, rather I was looking to figure out what I misunderstood, and it seems like that part was a success?

...so HN

Oh, it's just that folks here can expect a lot when one posts an anecdote. Like how I didn't think all the way through the implications of what I saw, and did I consider...? "Dude, it's just a story."

Not intended as an insult, and not quite a compliment, either. But it is one of the things I appreciate about HN most of the time. Take your typical "studies have shown..." post. I appreciate that folks with more experience in statistics and how studies work will post that "it might not be that bad, considering variable Y...", or "with that sample size?".

It was just an off-hand comment, perhaps too much of an inside joke.

Possibly, but it still be an indication of a change. My understanding is a lot of markets at a high amount of cash offers. Cash offers were more attractive since they didn’t tie the deal to financing the switch to financing based sales with indicate that deals are less competitive intern, that would likely indicate that less people are buying.

WA licensed realtor here, working outside the I-5 corridor... what you say is an accurate reflection of what I see in my rural market - sales are slower, but prices aren't dropping. When I talk to my colleagues who are in the Puget Sound market, they all indicate that inventory is almost tighter than it was previously - people are in a 3% rate and unwilling to move unless life forces them to do so.

I'm not an economist, but I see it as a basic function of supply and demand. So long as demand is high and supply is stable, prices must remain high. Sales may be slower (IE: you see properties sitting on market longer...) but that is a reflection of constrained borrowing / access to capital, not decreased demand.

Never going to happen unless a law gets passed with severe penalties for investment purchases (i.e. not an individual's primary residence).

too many stories out there where folks are buying as primary and they putting it on rent 4-6months in, and then picking another primary. There are some states that restrict such activity, others do not flag and allow for it.

Investment properties aren't the problem, supply is

For people looking to buy. What about us poor saps that own homes.

You continue to own a home. It keeps protecting you from the rain.

Which is great until you need to move after a price collapse. Then you are very likely screwed.

As someone who has had to foreclose due to a steep price decline after the GFC and inability to sell the house, them’s the breaks of capitalism.

Not if prices collapse everywhere you might want to move to. Then it’s not a problem.

They're talking about having to sell the current house, obviously.

And it’s not a problem to sell at a lower price if you can also buy at a similarly low price. I’m in the same situation myself.

It's a problem if you can't sell at all, which happens to many people in a collapse like this.

That is the actual problem, yes. But it’s a problem if prices fail to drop when they should, not if they’ve already dropped and so sales happen again.

Depends. Can you transfer the loan? If not, you may not be able to get the loan, because you may need to borrow more money than the bank is willing to lend with the current prices.

I wasn’t aware there even are non-transferable loans. Transfer and second charge is the common way to sell and buy while you still have a mortgage, around here.

Out of curiosity, where is "here" in this case. I've never heard of someone transferring a mortgage here (in the US). I'd _love_ to transfer my low-interest loan considering the current rates.

In the UK all providers allow it, except for a few specialist ones. I know of people in some continental Europe countries that have done it, too.

Not if you have a mortgage. You may end up owing hundreds of thousands all of a sudden with no equity backing it.

Where do mortgages work like that?

The loan is backed by the property, regardless of fluctuations in its price. The bank takes the risk that the property may be worth less (or more) than when they gave out the loan.

But you purchased a property at value X and likely have a mortgage to cover the majority of that purchase. The lender takes a risk, sure, but if you want to sell the property, you still owe the lender whatever the principal balance on the mortgage happens to be, regardless of the sell price of the property. If you sell the property for 50% of what you paid, you still owe the full amount. If you default, the lender takes a loss, but you also take a loss in your credit and won't be able to get a new loan. (And they will continue to try to collect.)

Sure, I continue to pay the mortgage based on my purchase price. But I’m in the same situation if I simply stay in the property I bought, as its price drops.

My point was that a drop in all property prices doesn’t stop you from selling and buying in order to move. Just like an increase in all property prices.

That’s the risk of buying.

Realistically, if home prices trend down in a significant way, that’s going to be a nationwide issue.

The house you’re selling will be sold at a discount. The house you are buying will be night at a discount.

The issue is that you are unlikely to own your property outright. In that scenario it doesn't matter if the property you want to purchase is also depressed in price, you are very likely stuck with an upside-down mortgage.

sounds like a bank owns your home

the purpose of language is to convey a shared concept, saying “own” when you’re actually under stress from over leveraged debt speculation does not convey that concept

No I own it outright.

then why do price fluctuations bother you?

Congrats! Then it is impossible for you to be underwater on it.

That would somehow actually make things worse.

As it is, at least in unaffordable California real estate areas, the cost of construction is far higher than the price of a comparable house.

We need permitting and zoning reforms and also need to train more construction workers.

That would lower the price of new construction to below the price of existing houses, which would make it economically rational to build houses.

I’m not speaking hypothetically. The temporary house price collapse in 2008 caused a lot of tradespeople to move to other fields. That is directly responsible for the current construction labor shortage.

Construction work isn't worth doing for the wage. It isn't a problem of training. I would rather do construction myself but programming and IT pays significantly better without the travel and the bodily destruction.

a massive collapse may just never happen. states where prices have gone up that locals cannot afford, yet outside folks are moving in because it is very much in affordable range for outsiders. So demand will always be high.

So supply must match demand

Either prices collapse or nominal incomes rise to make housing affordable.

In the 80s the latter occurred... however wage inflation is not running hot enough for this to repeat on a reasonable timeline, unless wages reaccelerate. Which is entirely possible if e.g. Fed backs off before labor market loosens and we have a second wave of inflation (just as happened in the 70s and 80s)

Am I reading incorrectly, or the author legitimately believes that low inventory and selling to milenials is going to stop all out recession? High interest rates are going to keep inventory so low that newer generations that should be buying homes and starting new families won't be able to afford it. Homes will only come into the market once there current occupants pass or move and there has been unprecedented amount of holds/hold to rents in this cycle (since the previous recession).

I'm curious too about how Bofa analysts or speculators would evaluate current home building or if there is some primer recently up to date.

This is a looney article. In Canada, 80s rates hit over 20%. Rates today are not even remotely high, they're lower than the late 90s!

If you were expecting a 1:1 comparison, you will be disappointed. But if the only counter-argument is that interest rates aren't as high (and give it time, rates didn't hit 18% in the 80s right away), we're just talking about magnitude. The underlying environment today sure has a bouquet similar to the 80s, with slight hints of recession, and a stagnant-housing-market finish.

The relative change is what matters. If rates were 20% for the last few decades then house prices would be lower, but mortgage payments would be approximately the same percentage of people’s income.

Property tax rates would probably also need to be higher, since they are based on property value and not mortgage payments.

Rate is only relevant in relation to price... real home prices are much higher today than they were the in the 80s.

Would you buy a $100 home on a 1000% rate? Yes, most people would. Would you buy a $100,000,000 2000sqft home on a 0% rate? No, most people wouldn't

For most people, Home is a long-term monthly expense. All that really matters is the monthly cost, most directly a combination of sale price and interest rates (with consumables like gas, water, and electric playing a smaller role.

Interest rates and sale price are pretty closely tied together. As interest goes down, people can pay more for the sale price. The sellers in the market realize that and raise their asking price.

After all, if you could afford a $350k house at 5% interest, you could afford that same house at $500k with 2% interest (numbers aren’t correct, just an example).

That exactly what happened over the recent past. Now interest rates are rising, so people can’t afford the same amount of house they could two years ago.

This is compounded by the fact that many people are sitting on low interest loans. Unless they’re forced to sell, they’re not going to.

https://archive.today/hdVuy

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