John Wake
@JohnWake
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Independent real estate analyst. Mostly retired agent. Former agricultural economist - International trade & farming systems.
Arizona, USA
Joined September 2009
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Just watched this again. It's surprisingly good!
And still getting nearly 50 views a day, a year later.
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The U.S. is a mortgage-ownership society, not a home-ownership society.
The U.S. has the 3rd lowest free-and-clear home ownership rate of these 28 countries, according to the OECD.
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"Why Airbnb owners are about to Sell"
Revenue per available listing in Phoenix DOWN 48% in May compared to May last year.
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Real estate attorney says about half his phone calls these days are disputes about buyers canceling contracts.
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Supply Myth
Although the number of single-family units under construction is only 78% of the peak in 2006, the number of multi-family units under construction is DOUBLE the peak in 2008.
Total units under construction is 20% above the 2006 peak.
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AirbnBusted
Heard a story about a landlord buying a house & turning it into a short-term rental.
A neighbor somehow found out the mortgage was for a primary residence = mortgage occupancy fraud.
Neighbor told lender.
House soon put up for sale again.
@texasrunnerDFW
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Interesting take.
"If I knew how, I'd short the real estate market. Right now. Because it's pretty clear that home prices across the country will be falling for years."
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".... about her decision to purchase a house in Palm Springs, California, with her sister and list it as a short-term rental. In 2022, the rental brought in $81,861 but cost $94,967 to run, including a property-management fee."
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"Bank of England finally admits high house prices are determined by finance, not supply and demand"
"Houses are assets not goods"
"They suggest that lower interest rates, which have been pushed onto a downward trajectory by the Bank of England since the early 1990s, account…
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"Phoenix is experiencing an unprecedented increase in apartments, with over 17,100 units delivered in the past year. Around 51,000 more units are under construction, bringing the total new apartment supply to more than 67,000 units. This development is concentrated in Buckeye and…
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It looks like the U.S. mortgage financing system is largely nationalized.
87.5% of mortgages are purchased by govt entities that resell them as MBS, and the Fed has bought ~1/3 of all the MBS they've created?
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Crash in Phoenix single-family home sales.
Down 40% from 2021.
It's safe to say we're in a real estate sales recession.
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Mortgage rate buydowns are price cuts that don't show up in the price.
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Active Listings Moonshot Continues
At current rates, in 3 weeks we'll have the highest number of single-family houses listed for sale in the metro Phoenix MLS that we've seen in 3 years.
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“All of the real, inflation-adjusted U.S. home price appreciation from 1990 to 2021 was due to falling interest rates, at least according to this simple analysis. U.S. mortgage rates may never go lower than they were last year [2021] so the multi-decade …
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"It's a Wonderful Life" and The Weird History of Building & Loans
A little bit of the evolution of the current U.S. mortgage system.
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Stumbled on this.
Did very many Airbnb landlords get mortgages based on their Airbnb business income, not on the value of the property?
If it was common, that would add a lot of downside risk to residential real estate in a recession.
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Something weird is going on in Tempe.
Median sale price, single-family, non-distressed
July = $585,000 (73 sales)
November = $475,000 (53 sales)
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U.S. home prices are disconnected from rents... again.
This rent index may continue to increase but what a huge gap!
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YIKES! Check your home's Zestimate value.
Mine is down 18% since May!
Rent Zestimate is down $500/month since June.
(I wonder why I haven't seen this mentioned in any Zillow press releases. 😉)
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"In Jacksonville, Florida, real estate agent Heather Kruayai said that roughly 25% of buyers who signed contracts for her sales listings backed out after receiving insurance estimates."
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"A $1.8 billion earthquake just hit the real estate industry"
Best discussion of the implications of NAR losing that lawsuit.
"If the typical total commissions for a real-estate sale were to fall to between 3% and 4%, instead of the customary 5% to 6% today... savings for…
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Real estate industrial complex.
Prices are up X%. It's a great time to be a buyer!
Prices are down X%. It's a great time to be a buyer!
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@PEWilliams_
Here are 6 landlord tax breaks that hurt;
1) home ownership,
2) economic growth,
3) economic equality, and
4) stable family wealth creation.
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In March 8% of Phoenix single-family MLS listings failed to sell. The listings were canceled or expired without a sale.
In September, 32% failed to sell.
October will likely have the highest listing failure rate since 2011.
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Supply Myth
U.S. Population Per Housing Unit
We probably have the fewest number of people per housing unit in American history.
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"From their May 2022 peak, home prices will need to plunge 40%. In other words, a $1 million home in mid-2022 will be a $600,000 home by 2026."
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Scary.
Number of single-family houses listed for sale in the metro Phoenix MLS should match 2018 and 2019 levels in a week or two.
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Did you know the typical mortgage in France is 15 years? In Switzerland, it's 15-20 years.
The financial sector must hate that.
If you borrowed $400K today in U.S.;
- over 30 years at 2.9% you'd pay $200K in interest.
- over 15 years at 2.2% you'd pay $70K in interest.
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"Homeownership is now $1,000+ per month more expensive than renting."
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My first piece in Barron's came out this morning!
"This Housing Market Won’t Be Like Last Time. History Still Has Lessons."
No paywall. Click on the X to remove that ad.
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The Zillow Zestimate on my house is down $125,000 since May.
How about yours?
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I love this interactive graphic from the New York Fed on house price appreciation from 2003 through last December.
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"NYC Airbnb reckoning: New restrictions will make life more difficult for hosts, and some may find their listings banned altogether"
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I'm the luckiest dad in the world!
My son is 12 years sober today.
🙏
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"updating the development code to clarify that short-term rentals are a commercial use that doesn’t belong — and should no longer be allowed — in residential areas."
"In 2021, nearly half of all home purchases in Dallas County went to investors."
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66% of Americans say they want extended European-style vacation policies at work
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What do YIMBYs say about this?
The way to high rates of home ownership isn't to get rid of zoning, it's to tax the heck out of non-owner-occupied home purchases.
Seems to work. Singapore's home ownership rate is almost 90%.
Singapore gets it.
20% land transfer tax on a second home, 30% on the third. 60% duty on foreign investment, 65% on entities and trustees.
If you want to encourage home ownership, you have to regulate/curb the financialization of the housing stock.
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2 different real estate markets in metro Phoenix.
Single-family houses < 2,000 square feet.
7% MORE houses for sale than same week in 2019.
Single-family houses 4,000-6,000 square feet.
55% FEWER houses for sale than same week in 2019.
What's going on?
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I agree with Bill. Right now, this looks like the most likely scenario.
"I think the most likely scenario now is nominal house prices declining 10% or more from the peak, and real house prices declining 25% or so over the next 5 to 7 years."
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Phoenix median house price down 4% in 1 month to $452,000.
Down $63,000 in 6 months!
Metro Phoenix median single-family non-distressed house sold price is the same as a year ago ($452,000 vs $450,000 a year ago).
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Dallas Bans Short-Term Rentals in Single-Family Neighborhoods
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"Landlords moved to evict more metro Phoenix renters in July than any month since the Great Recession."
Here's how much income Arizonans need to afford rent and what leaders are doing about it via
@azcentral
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Just noticed an unusually high number of houses taken off the market unsold.
About 1/3rd of houses taken off the Phoenix MLS were unsold. 2/3rds were because the homes sold.
In recent years, about 10%-20% of houses taken off the MLS were unsold, that is, the listings expired.
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Houston vs. San Francisco
If getting rid of zoning is so good for housing supply and house prices, why have house prices increased more in Houston than in San Francisco since 2010?
Has demand been more important than supply for house prices?
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This is bad.
Mike Orr of the Cromford Report on June 17.
"I just heard today that one of these big players has cancelled every purchase they have in escrow, forfeiting their earnest money in order to not complete their purchases. This is ominous."
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Short-term rental provider Frontdesk lays off entire staff, on the verge of shutting down
"The startup’s business model, which is leasing apartments at market rental rates and furnishing them for short-term rentals in more than 30 markets"
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The key to NAR monopoly power isn't having sellers pay the buyers agent.
It's requiring NAR real estate agents to list all of their houses for sale in the local NAR-affiliated MLS.
Real estate agents can't put houses in the local MLS unless they are members of NAR.
AND…
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Metro Phoenix median single-family house price up $100,000 from June 2020 to June 2021.
$325,000 to $425,000
A 31% increase in 12 months.
Or 5 to 10 years of "normal" appreciation in 1 year.
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Single-family, non-distressed, houses for sale in the Phoenix area MLS.
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"In January, 7,031 eviction filings were recorded. According to court spokesperson Scott Davis, that number is the largest since September 2008, the time of the last housing crash."
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Wow! After 2 days this piece has over 150,000 views and already has more views than anything else I've ever written for Forbes .com.
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@don_esteban_cfa
A lot of the countries with the highest home ownership rates were former communist countries that more or less just gave people the housing they were living in when communism fell.
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"Nearly a quarter of homeowners say they are considering selling their home in the next three years or have their home currently listed for sale, a significant increase from a year ago."
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@WashoeBasics
@PEWilliams_
Open to the idea but the U.S. has had a terrible track record with public housing for whatever reason.
I'm fascinated with community land trusts & coops.
Also, Australian Capital Territory where govt didn't sell the land, they long-term leased it for houses. Keeps prices down.
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A lot of things about mortgages are a LOT safer now than last time but this risk factor is a LOT worse.
The number of FHA purchase mortgages where the home buyer has a Debt-to-Income ratio of 50% or more was 9 times higher in 2022 than in 2005.
129 page PDF -…
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Supply Myth
Total Housing Units Per Person has never been higher.
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"The number of people 80 years of age or older is expected to more than double between 2022 and 2040, increasing from 13 million to 28 million. As the baby boomer generation ages into their 80s, starting slowly in the late 2020s and picking up speed in the 2030s, they will likely…
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The 4 takeaways from every real estate industry press release ever.
- Prices up. Buy before they go higher.
- Price down. Buy before they go up.
- Interest rates up. Buy before they go higher.
- Interest rates down. Buy before they go up.
In short, "Buy now!"
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Implications of NAR losing lawsuit?
Will agent commissions become part of the negotiations between buyer and seller!
If they do, the first thing buyers and sellers will agree on is to cut their agents' commissions.
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Airbnbs
"'It's the most overheated market I've ever seen.'"
"Then, her bookings began to drop. At its peak, her townhouse was bringing in $10,400 a month in 2017. In April 2023, bookings totaled just $2,000."
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Seems there's a lot of interest in comparing U.S. mortgages to mortgages in other countries!
The U.S. industry NEVER mentions how mortgages are done elsewhere & how different they are.
They want everyone to think the current U.S. mortgage system is the only way it can be done.
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The standard industry pitch is, "The demographics for housing demand are very strong and will continue".
Very few explain the whole story, "... until they peak in 3 or 4 years. After that the demographics will weaken demand for many years."
@hms1759
@ag_trader
The years 2020-2024 have the most significant housing demographic patch ever. Once in a lifetime, that will never happen again.
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July
"The Stop Predatory Investing Act..., would restrict investors who purchase 50 or more single-family rentals from deducting interest or depreciation on those properties from their taxes."
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“Everybody was doing it.” Miami agent sentenced to prison for PPP fraud
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We have the most homes for sale for this time of year for 4 years, since 2019.
And the number of homes for sale is still slowlyg increasing which is unusual for this time of year and shows the market is slowly softening.
@holden_bukowski
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@AdvisorJohn
@windgineering
"... more recent mortgage originations revealing the same troubling behavior: Rather than live in the homes being purchased, dishonest borrowers treated them solely as investments. In doing so, they committed occupancy fraud"
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@Tegoventuri
But does going from 20-year to 30-year mortgages just mean houses prices get bid up until they're as affordable/unaffordable as prices were with 20-year mortgages but with 10 more years of mortgage payments?
When home ownership increased fastest in U.S., mortgages were 20 years.
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"Arizona’s top legal officer is accusing multiple apartment companies of conspiring to raise rents on hundreds of thousands of residents in the Phoenix and Tucson areas."
This story seems to be gaining momentum.
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They're saying skyrocketing Fed rates caused the demise of Silicon Valley Bank so the Fed is bailing out all SVB customers.
But skyrocketing Fed rates also caused the median house price in Phoenix to fall by $75,000 since May. Will the Fed fail out all home owners, as well? No.
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Months of Supply has been skyrocketing the last 3 weeks in Phoenix.
Have 30-year mortgage rates approaching 8% caused a market capitulation?
Also remember, 3 months supply is a lot more today than last time. Well-priced houses sell a lot faster (internet, electronic sigs, etc)
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House a block from me.
12/30/2021. Owner sells to an online buyer for $475,000.
New owner does zero repairs or updates.
3/1/2022. New owner sells it for $645,000.
This flipper owner does MAJOR remodeling.
6/1/2022. Home listed for $849,000.
6/24/2022. Home listed for $749,900.
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Okay, this is old news but the number of homes for sale continues to increase at a time of year it usually falls.
To go against seasonality shows a big underlying force despite the small increases.
We could see big inventory increases this autumn when seasonality turns upward.
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"Palm Springs home values in "free-fall" after city cracks down on Airbnb"
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"The US housing market is headed for the largest sales slowdown since 2011, Fannie Mae says"
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"Residential homes should be for families to live in, not vehicles for speculation"
Absentee homeowners = byproduct of capital being too cheap
Cheap capital chases assets and creates an illusion of scarcity
Residential homes should be for families to live in, not vehicles for speculation
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The number of houses listed for sale in the Phoenix MLS are still incredibly low but they're up 35% in 4 weeks during a time of year they don't normally increase.
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"March US corporate bankruptcy filings push Q1 total to highest since 2010"
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"Palm Springs capped short-term rentals. Now some home prices are in free-fall"
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@DouglasTodd
Get rid of ALL possible government incentives (taxes, laws, policies, etc.) to own single-family homes and condos that aren’t incentives for citizens to own those homes as their primary residences.
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"Immigration is fueling the largest one-year population increase in US history"
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I think we'll see mortgage forbearance in all future down markets.
We'll probably never again see a bust with such a large number of foreclosures like we saw last time.
The downside is prices don't adjust and real house prices stay crazy high.
.
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"Every time a home changes hands, realtors (known as estate agents in Britain) charge a staggering 5-6% of its value, two or three times more than they can get away with in any other rich country."
Paywall -?
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Is Canada headed toward a U.S. style 2008 recession?
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My latest on Forbes .com.
"U.S. Has 3rd Lowest Percentage Of Households That Own Their Homes Without Mortgages"
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@paulg
@ATabarrok
@sfmcguire79
Economics students get fewer "A" grades than any other major!
Now let's look at student loan delinquency rates.
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"these fraudulent borrowers make up one-third of the effective investor population."
"defaulting at a 75 percent higher rate."
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Lower mortgage rates quickly increase house prices.
But higher mortgage rates do NOT quickly lead to lower house prices.
At first, higher mortgage rates often lead to more houses being sold, and even higher house prices as buyers try to buy before rates go even higher.
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"U.S. Has 3rd Lowest Percentage Of Households That Own Their Homes Free And Clear Without Mortgages"
I finally wrote a piece based on the tweet that went viral.
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WOW! Despicable!
Do other developed countries have this problem?
If not, why not? How do they prevent it?
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Phoenix median single-family house sold price is down 15% from the peak last May so, as they say, we're in a price "correction."
If prices fall another 5% and reach -20%, do we call it a price "crash" then?
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20% of Phoenix single-family houses for rent are owned by large institutional landlords (own at least 1,000 houses).
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"Of the 1.2 million Airbnb listings in the US, 62% have been added since 2020"
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Cromford Report
"We just recorded the largest ever year-over-year percentage increase in the rate of new rental listings"
"There were 3,449 active rental listings (excluding short-term rentals) yesterday. This is up 149% from the same date last year and up 15% from a month ago"
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"California house payment hits record $4,332 a month
Median price of $838,260 in June is sixth-highest"
Notice that last time sales tanked a LONG time before prices.
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