What Can We Expect From Next Housing Crash? Based on 2009 One?

I think as interest rates rise some overpriced markets like San Francisco could fall by 50%.

Not in SF. But google estimates used.

Q1 2018 median home price $1.61M. .8% effective property tax, = $12880. Average down payment 2016 shows 8% for buyers under 35yr old.

Home Insurance I don’t know if it’s just rebuild cost maybe it’s like a couple $100k house elsewhere - so, let’s say $1500.

Mortgage calculator now.
$1.61M, 8% down, 4% rate, $1500 insurance, $12880 property tax, 0.5% PMI (dunno if valid but default in calculator with 8%), 30yr mortgage. $8845.31

Same at 5% rate, $9725. 6% rate, $10,654.

6% vs 4% only increases payment by 20%.

In California, evicting tenants is next to impossible, property tax increase is capped at 1% per year and there is rent control in several cities. This has implications for the supply of rental properties.

For instance, someone who has a 2500 sq ft house and pays $800/yr in property taxes because their family bought the house decades ago, if the owner only lives there a few days a year, still comes out ahead compared to paying for hotels. House is locked up rest of the year. Not uncommon.

Yeah, price to rent in California favors renting, so does price/income ratio, and these have pretty much always favored renting. In Bend3r’s example above, that 1.6 million house would probably rent for about 5k to 6k depending on location, still can’t make the math work. (By the way, property tax is about 1.1 percent.)

One of the issues with pricing in the San Francisco bay area is that as long as tech IPOs are minting millionaires, there is a demand for buying housing which acts as a floor for the price so the price/rent and price/income ratios can remain irrational for a long time.

Yeah, as of now a 50% crash in SF is pretty much wishful thinking. Thing is no one that is buying now, is buying to rent it out. It’s those who bought 5,10,20 years ago and locked in their mortgage as well as their property taxes that are sitting on rentals.

IPO filings on NASDAQ

Think of SF Bay area housing as highly correlated to NASDAQ and number of IPOs rather than to actual price/rent fundamentals. Based on price/rent we should have had a 50% crash already.

Edit: What’s funny is that this situation is no different from your calculation for South Florida, and SF bay area house purchases are not rational economically but there still are buyers propping up the prices. So the music will play on until we get a recession in tech.

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I don’t think SF even lost 50% in the great recession/ housing crash.
I couldn’t see that kind of loss happening anytime soon.

Should not be impossible if the legal process is followed correctly.

2%

Disagree in general, but it depends. For any specific property, owning it can be cheaper than renting it, if you have enough to put down and get a low enough interest mortgage. Yes, even including the opportunity cost of the down payment it can be cheaper.

In my experience someone renting out a $1.6MM house will ask for at least $8K/mo, but usually it’s more than 0.05%. Housing has had a ridiculous ride, but so have rent prices.

Yes, tax increase cap is 2% not 1% as I said before. Still much lower than price appreciation of ~8% per year in SF bay area over the last two decades.

Eviction in SF usually ends up costing a lot of time or money or both, esp if tenant has protected status. Some of the other towns are better in that regard, but overall the rules lean towards tenants than landlords compared to many other states.

If you include opportunity cost of down payment, owning in SF is definitely not cheaper than renting. Price/monthly rent used to be around 200 for a long time (1.6 million house renting for 8k) but in the past few years, 250 is common, even 300 is not uncommon.

This may be true for SF, I don’t know. You originally said “California.”

There are 2 different kinds of evictions. With or without cause. Eviction with cause is when the tenant fails to pay rent or breaks the lease and gives you a valid reason to kick them out for a cause. Eviction without cause means the landlord just don’t want you there anymore regardless if your’e a model tenant or not.

Eviction with cause is certainly possible in SF and CA in general even though its not necessarily as easy as in some places. Eviction is never exactly easy even in places that aren’t so tenant friendly.

Eviction without cause on the other hand is essentially impossible in some situations in SF / CA especially for protected tenants. You often simply can’t just end a lease without a valid reason.

Of course the specifics vary by jurisdiction and SF <> CA

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Why evict if you can raise the rent. Go month to month after initial 1 year lease.

Not when factoring in maintenance and opportunity cost. 1 million in equity put in a 2% savings account is already $20,000 per year.

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Looks like inventory is still tight, even though there is doom and gloom in the news…

3.6% is not a 3-year low, it’s 2 years and 9 months low. 3 years ago the rate was ~3.2%. Maybe I’m using better statistics than Freddie Mac? Mine come from the Zillow chart :slight_smile:

Also I would expect inventory to follow the economy, not lead it. If people have jobs they have no reason to sell, right?

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Gotta love guvment math … guvment edumacation.

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This assumes people buy a house and stay to pay off a 30 year conventional loan. That’s not so much the case in newer generations. Half of my neighbors on my block have sold their houses and moved within the last 5 years. The logic of paying off a mortgage is lost on a lot of people nowadays.

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I phrased that wrong, I meant to say: “if people have jobs, they have fewer reasons to sell than someone who lost their job and is looking for a new one”.

I’d think younger people move more often than older people in general (regardless of their statistical generation label), as they aren’t tied down, get bored more easily, have more energy, are still figuring things out, etc. There could be lots of reasons. I don’t know what normal churn looks like, but half the neighbors in 5 years sounds like a lot. Do you know why any of your neighbors moved? Is your neighborhood changing for the worse? How are the historic inventory levels?

I would think there were also a lot of deferred sales from 2009-2014. Upside down properties are hard to sell if the owner was house-poor (no other assets) to begin with. ~'2015 was when prices locally got back to near where they had been before the small dip in housing prices.

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As Ben3r said, many people in my neighborhood moved after houses prices came back up to even. I’m sure others waited a bit longer to actually have some equity growth again that they could apply to their next down payment.

As for neighbors on my block, I guess it probably doesn’t count as ‘moving’ if you are selling a rental property but two rental owners on my block sold those to new home owners, one of which decided they didn’t care for a nearby loud neighbor and moved out again a year later. Two other neighbors on my street moved out, one to become a landlord and upgrade to a larger house. The other moved because they were downgrading to a smaller one. I’m not sure why a 5th neighbor moved.

These are all typical transactions you would expect to see. None of them due to job loss. I think it’s just a fairly transitory neighborhood, largely due to lack of HOA and that several properties are rentals. Most houses are 4/3 or 5/3 2400sq ft to 2800sq ft so it’s a fairly ‘middle class’ neighborhood but it has declined somewhat in the last 7 years as far as neighborhood tidiness/cleanliness.

Probably because @Corndogg set up his 8’ outdoor speakers and put up signs advertising weekend square dances. :smile:

Hah! No offence to anyone who likes to square dance but it wouldn’t be Country music coming from my speakers.

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