patrick.net

https://www.reddit.com/r/RealEstate/comments/y96879/should_i_just_lose_my_earnest_money/

Should I just lose my earnest money?

So I put down 12k deposit for a new build house I signed the papers like 10 days ago. Now I’m seeing literally the exact same house being listed for 50k less. Do I try to negotiate or just tell them I’m Walking. At this point I think I would be better off losing 12k then overpaying by that much more for the same house.

Everybody get familiar with this term:
https://en.wikipedia.org/wiki/Strategic_default

Strategic default

A strategic default is the decision by a borrower to stop making payments (i.e., to default) on a debt, despite having the financial ability to make the payments.

This is particularly associated with residential and commercial mortgages, in which case it usually occurs after a substantial drop in the house's price such that the debt owed is (considerably) greater than the value of the property — the property has negative equity or is underwater — and is expected to remain so for the foreseeable future, such as following the bursting of a real estate bubble. Such borrowers are called walkaways. The process of strategically defaulting on a home mortgage has been colloquially called "jingle mail" — metaphorically, one mails the keys to the bank.

zzyzzx says

Strategic default

I remember reading about this in the last housing crisis. Folks seeing the same house across the street as theirs selling for substantially less that their underwater-bought-at-the-peak-mortgage would buy the cheaper home and walk away from the albatross around thier neck.

There was definitely a double standard about this strategy, where developers like Tishman Speyer were lauded for the smart business move, but small time homeowners vilified, at the time.

"Tishman Speyer Properties, a big and you would think sophisticated real estate outfit, is doing the stroll on a $4.4 billion mortgage. The company is turning over the keys to more than 11,000 apartments in New York City’s sprawling Peter Cooper Village and Stuyvesant Town apartment complex in lower Manhattan, which it bought in 2006 through a partnership that includes investment firm Blackrock."

https://business.time.com/2010/01/25/tishman-speyer-the-grand-walkaway/

zzyzzx says

A strategic default is the decision by a borrower to stop making payments (i.e., to default) on a debt, despite having the financial ability to make the payments.

You short sell it. Mailing in the keys is the dumbest thing you can do. It's generally only a 3-4 year ding for a short sale versus 7 with a foreclosure. Basically without private financing or a personal relationship with a small bank, you ain't buying any property for 7 years. Obviously if you have cash you can buy, but banks can throw a lien on any other property you own. Might be in 3rd position, but it prevents you from selling it in the future.

No one reads loan paperwork. And I'm sure terms have shifted toward the lender side to have the ability to lien other properties an owner has. With a short sale you get a release from all obligations of that loan. A foreclosure just means you didn't pay and don't have to pay but they can come after other assets if they want. Never suggest anyone strategic default via foreclosure and mailing in the keys. You only have one life and close to a decade of it is now fucked up.

Short sales was our bread and butter 2007-2012. Were a total pain in the ass, but the owner could get back into owning much quicker. Never just walk away.

WookieMan says

but banks can throw a lien on any other property you own

In a non-recourse mortgage state?

https://www.reddit.com/r/realtors/comments/y4snh3/how_is_opendoor_still_in_business/

How is Opendoor still in business?

Prices are likely to drop further, but not by as much as they did during the housing bust. From the 2006 peak to the 2012 trough, national home prices fell by 27%, according to S&P CoreLogic Case-Shiller Indices, which measures US home prices.

Wells Fargo’s economists estimate that the median price for an existing single family home to be $385,000 this year, up 7.8% from last year, but the growth will be a lot less than the 19% year-over-year increase seen in 2021.

The economists anticipate the median home price will fall to $364,000, a decline of 5.5% from this year. They predict prices will rebound and rise again in 2024, with the median price ticking up 3.3% to 376,000 by the end of 2024.

https://www.cnn.com/2022/10/22/homes/us-home-prices-falling/index.html

Austin, Texas was ranked as the number one city experiencing declines in home prices. The median home price in the city is $558,275, which is 10.3% lower than where it was in June. Since September 2021, home prices in Austin have increased 2.2%.

Phoenix, Arizona ranked second on the list.

Stockton, located in San Joaquin County in Northern California, was ranked as the 8th city to experience notable home price reductions. According to the website, the median home price in Stockton is $581,725, a 7.7% decrease from home prices in June.

https://ktla.com/news/california/california-home-prices-have-fallen-most-in-this-city-since-june-study/

In our area prices started rising again, we're maybe 5% off the peak now. Inventory is tightening again but that's normal for fall. It's a pretty normal market here right now, neither buyers nor sellers market.

I was in Austin in the early naughties. Housing prices were increasing at ridiculous rates. Finally I said "Fuck it!" and just continued to rent. Because I was in TX at the time, I didn't get to enjoy the full extent of the "cash-out" refi housing bust - TX does not allow cash-out refis.

If I'm lucky, 30-year fixed rate MTG will top 8% and persist for at least 2-3 years. That might be enough to bring prices down to where I can hold my nose and pony up cash.

stereotomy says

I was in Austin in the early naughties. Housing prices were increasing at ridiculous rates. Finally I said "Fuck it!" and just continued to rent. Because I was in TX at the time, I didn't get to enjoy the full extent of the "cash-out" refi housing bust - TX does not allow cash-out refis.

If I'm lucky, 30-year fixed rate MTG will top 8% and persist for at least 2-3 years. That might be enough to bring prices down to where I can hold my nose and pony up cash.

I know a few who sold into the craziness in Austin and relocated. Austin was definitely more overheated than any city in CA.

mell says

I know a few who sold into the craziness in Austin and relocated. Austin was definitely more overheated than any city in CA.

I used to go to Austin 3-4 times a year since Keller Williams RE was based out of there for their national training. Sat at 10 top wedding style tables with Gary Keller,
Jay Papasan, and Dave Jenks. It was interesting to say the least. They were businessmen and not real estate brokers. They have the game down of fleecing their brokers of their commissions. It was kind of funny that all these morons didn't realize what they were doing.

Tangent aside, Austin sucks. I don't like any major metro in Texas. San Antonio I haven't been to, but I've heard good things. I imagine I'd like rural TX, but fuck Austin. Houston is a shit pit. Haven't been to Dallas since I was a kid, but I'm pretty sure it sucks. I think I'd like some of the border towns. I know enough Spanish to get by and between BBQ and Mexican/Central American food I'd be in heaven.

Not that I'm moving out of state, but I'm down on popular states. Places like TN, TX, ID, MT, etc. Basically if a great job opportunity came up to move to them I'd probably decline. My state is fucked, but it's just not worth moving. My buddy has been in MT for 5-6 years now. He really has no friends. He's a super social dude too. You'll shoot the shit with people on the trail, fly fishing, etc. but it has a lonely vibe to it. Bozeman and Missoula specifically.

https://finance.yahoo.com/news/not-time-greedy-home-flippers-110000999.html

'Not the time to get greedy': Home flippers are now getting burned by the US housing downturn, slashing prices to cut losses — here are two big reasons why

https://thepricklypear.org/housing-bubble-woes-plunge-in-buyer-traffic-homebuilder-confidence-a-lot-faster-than-during-housing-bust-1/

Holy-moly mortgage rates of 7% slash demand for new houses due to super-inflated prices, but prices are now coming down.

Traffic of prospective buyers of new single-family houses plunged to the lowest since 2012, excluding the two lockdown months April and May, and is now approaching even the levels of those two lockdown months, according to data today from the National Association of Home Builders.

WookieMan says

Tangent aside, Austin sucks. I don't like any major metro in Texas. San Antonio I haven't been to, but I've heard good things. I imagine I'd like rural TX, but fuck Austin. Houston is a shit pit. Haven't been to Dallas since I was a kid, but I'm pretty sure it sucks. I think I'd like some of the border towns. I know enough Spanish to get by and between BBQ and Mexican/Central American food I'd be in heaven.

It has some nice hoods and summer party ropftop bar lanes, like the Domain, and some nice mansion on the hills, and a good yuppie scene, though too gay for me. I wouldn't say it sucks but it's def overpriced. Downtown is filthy like SF, and the rest is just urban sprawl, not that pretty.

Property tax increases basically turn any conventional loan into an ARM-like situation where homeowners are seeing a huge increase in their monthly payments.

https://www.reddit.com/r/RealEstate/comments/yb91se/bought_in_april_2022_hate_it_want_to_sell_how/

Bought in April 2022. Hate it. Want to sell. How fucked am I?

I live in a really rural area about 1.5 hours outside Chicago. Not a nice neighborhood but not bad. Typical smaller town vibes. Nothing to do. Kinda hickish.

I bought in April for 330k which was actually fair at that time. Comps at the time in the same neighborhood were selling at 335-340k. It’s a 1600 sqft ranch on about 1/4 acre in a typical suburb like cul de sac. My property taxes are killing me and already went up from $700ish/month to 800/month.

I also fucking hate this house. It just sucks. Problem is, comps for my house right now are selling for 300-305k. I owe 305k. A neighbor 2 houses down has basically the exact same copy of my house just styled a little different but size, yard, layout, all the same and listed for 295k this week.

So basically my home has lost over 10% of its value from when I bought but I want out. How fucked am I?

zzyzzx says

My property taxes are killing me and already went up from $700ish/month to 800/month.

Da Fuq? In a rural area?

I pay less than $1000/YEAR on a beachside apartment. And no income taxes at all.

WookieMan says

San Antonio I haven't been to, but I've heard good things

Nice but on the way to becoming Austin II. Will take a decade or so to be Austinized. Increasingly woke policies and dictatorship of the Homeless Drug Addicts.

https://www.reddit.com/r/RealEstate/comments/ybj6me/stressed_seller_looking_for_advice/

Stressed seller looking for advice

zzyzzx says

Stressed seller looking for advice

Isn't that called 'lowering your asking price' to obtain instant relief?

It's interesting in California watching the die hards, clinging to their fiat equities, try to command imaginary prices while stubbornly holding on to their swanning delusions of brilliance and wealth. The wailing and gnashing of teeth this winter will be legendary.

Real estate hoarders will be putting their stuff on the market, trying to capture an equity chair when the music stop. Recent buyers will be going into default and handing the keys back as they pay inflated taxes on negative valued properties that swallowed up their down payments. Happened before, will happen again.

zzyzzx says

I live in a really rural area about 1.5 hours outside Chicago. Not a nice neighborhood but not bad. Typical smaller town vibes. Nothing to do. Kinda hickish.

Nope. No way that person bought a house for $330k 90 minutes outside of Chicago. Yes there are big houses and acreage, but no, not a 1,600sf ranch for $340k. That's 250-280k all day. Even new construction. Once you're past 50 miles of Chicago prices plummet. North of Chicago into Wisconsin and South to Indiana are the only exceptions.

Where I'm at $350k gets you a 4/3.1 with a 3 car garage. Probably 3,200sf. Sure taxes are a cunt, but price wise it's not what this guy is talking about. He bought a hill billy McMansion if he paid $330k. That's on him.

We were close 6 years ago to buying 14 acres with a 4k sq ft. home with walkout basement on a pond. Gated. Tennis court. $650k list. I regret not doing it. That reddit dude is full of shit unless it's a legit ghetto rural area and overpaid. And that's 48 miles from Chicago, or 50-60 minutes.

I just got back from photographing a 5,000 square foot home in a very nice subdivision. The Realtor told me the seller is going to get $250,000 less for the home than the same home in the same neighborhood sold for 6 months ago. About a 20% loss. This is in Northern Virginia. The Realtor said she told them to hurry and sell before the spring because in the spring prices will be even lower.

GNL says

The Realtor said she told them to hurry and sell before the spring because in the spring prices will be even lower.

This could be a seller's agent trick in order to try to make a quick sale now. Or the seller's agent sees the 30 year mortgage rate increasing from around 6.5% to 8.5%. The 30 year rate historically has been about 2.25% above the Fed Funds rate.

But the mortgage rates are being set based on anticipation of higher rates, so even if the Fed Funds rate is at 5% at end of this year, the 30 year mortgage rate may reach 8%.

This is what happens when there is a lot of flux or lack of steadiness with the Fed Funds rate such as with these 0.75% increases every few months.
.

Married With Children TV show reference:

ad says

This is what happens when there is a lot of flux or lack of steadiness with the Fed Funds rate such as with these 0.75% increases every few months.

“We are holding to our view that this is a spike right now, driven by financial-market dislocation, heightened level of volatility in the market and this global slowdown we’re about to experience, the likelihood of recession in the U.S. will begin to pull this number,” Fratantoni (of the Mortgage Bankers Association) said.

The Mortgage Bankers Association predicts a 5.3% rate for 30 yr mortgage at the end of 2023.

zzyzzx says

Detroit and the US are more overvalued than SF, SD, NY and LA? 😂😂😂

I'm loving the PANIC.

According to the Case-Schiller, prices are higher now than before financial crisis, by a LOT


YEEHAH! Cash on the sidelines looking for cheap, cheap, cheap. Buy when there is blood on the streets!

I think 5.3 percent holding into 2023 on 30 years mortgage would qualify as 'Realtor's optimism' i.e. designed to keep turnover going and people buying.

If they get serious about inflation, I think rates could bob back up to 6 to 8 percent. That's not so bad. All my mortgages were around that before I paid them off and I thought those were good rates at the time.

Even NAR can't put lipstick on the pig.


"B-b-but, prices aren't coming down"

Well yeah, because sellers need to borrow at 7%+ to buy the next property and they need that $300k sale to make the math work.

They'll either sit on it and take $200k in two years, or be smart and drop it 10% right now.

Ceffer says

I think 5.3 percent holding into 2023 on 30 years mortgage would qualify as 'Realtor's optimism' i.e. designed to keep turnover going and people buying.

If they get serious about inflation, I think rates could bob back up to 6 to 8 percent. That's not so bad. All my mortgages were around that before I paid them off and I thought those were good rates at the time.

It depends on the principal lol. Back then houses were cheaper, glad we locked in 3%.

Nothing that 6 million more illegals can't cure.

Misc says

Nothing that 6 million more illegals can't cure.

Yeah, I've seen in the Florida panhandle a couple with 2 daughters who seem recent arrivals from Central America renting a townhome in my HOA. I think both work and easily make $17 an hour each for a combined $34 an hour for household. Husband works as a helper in construction, and the wife cleans vacation rentals and hotel rooms. Both construction and tourism are booming in the Florida panhandle.

They probably earn at least $58,000 a year. Their rent is about $1600 a month for a 2 bedroom, 2.5 bath townhome.

.

mell says

I think 5.3 percent holding into 2023 on 30 years mortgage would qualify as 'Realtor's optimism' i.e. designed to keep turnover going and people buying.

That is what I am thinking as far as liquidity and not seeing a drop off in sales volume.

The seller's agents could convince enough (reasonable) owners to drop the prices 17% (from 2021 peak levels) over 4 to 6 months with steady price drops.

I think the Fed is eyeing at least a 17 to 20% drop in house prices. Prices should fall 10% for every 1% increase in the 30 year mortgage rate.

I just don't see the Nat'l Assoc of Realtors (NAR) (and the Federal Reserve) siting idly during a 25% drop cause then buyers will just remain on sidelines patiently for a 35% to 45% drop as housing may go into a deflation death spiral.

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The household and small business sectors of the economy are in surprisingly good shape. They have learned to deal with government fuckery. They are sitting on about $17 trillion in cash (not stocks or bonds or bitcoin...cash!). There is a record low number of houses being listed for sale. The prices may be more sticky than usual because everyone thinks the Fed will lower rates again when some other sector blows up.

There are trillions of dollars in ponzi schemes outside of housing. The Fed will panic when they start to collapse. At least that's what a lot of homeowners think.