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Real Estate Is in an Interesting Place Right now. Not enough of it and People R Losing Jobs. :0


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2020 Jun 16, 8:29pm   2,026 views  23 comments

by bill   ➕follow (2)   💰tip   ignore  

We gotta lobby Patrick to bring back all the CHATTER about REAL ESTATE because I honestly think Inflation may EXPLODE and REal (Unreal) Estate my GO UP. Rates are extremely low but are BANKS lending. And f banks are lending, to whom -- Maybe I should call Wells Fargo HUGE WEALTH RICH RICH GUYs and a few gals and ASK?!

https://www.wellsfargo.com/the-private-bank/insights/cv19-real-estate-impact/

Real estate: a potential safe haven or the next shoe to drop?
So where could all of this economic carnage leave real estate? Just as the world is in many ways in uncharted waters with the coronavirus pandemic, the shelter-in-place orders and closing of non-essential businesses across much of the country and globe has led many classes of real estate into uncertainty over at least the short term. As an asset class, direct-owned real estate has many desirable features when included in a diversified portfolio—namely as a potential hedge against inflation, potentially stable income, and non-correlated risk-adjusted total returns over market cycles.

On the downside, direct-owned real estate has ongoing cash requirements for operating expenses, debt service, capital improvements, and costs associated with renewing and attracting tenants. This cash need is what we feel could be the greatest risk faced by direct-owned real estate investors and is driven by the health of the tenant base. If the predicted recession is short-lived and ends with a steep and robust recovery, the health of the tenant base may recover to levels prior to the onslaught of COVID-19. Pre-COVID-19, market trends were already impacting real estate asset classes in diverse ways, creating relative winners and losers. The pandemic may accelerate and enhance those trends that we will explore in subsequent paragraphs but in the near term, the stability of cash flow will be on every investor’s mind.

Comments 1 - 23 of 23        Search these comments

1   richwicks   2020 Jun 16, 8:35pm  

I see that's from Wells Fargo.

It's the next big shoe to drop. They are selling their book.
2   Misc   2020 Jun 16, 8:50pm  

In the residential space, 8.4% of outstanding loans are in forbearance. That's higher than the top delinquency rate during the housing crash

Wells Fargo tipped its opinion on where it expects housing to go by not making any more HELOCs. https://www.housingwire.com/articles/wells-fargo-joins-chase-in-halting-helocs/

Commercial real estate is just a mess with tenants vacating or not paying rents across the broad swath of properties.

It is possible for inflation to come, but the shear amount of free money Congress would have to send out is mind boggling.
3   anonymous   2020 Jun 16, 9:03pm  

I have no idea what is going on at this point...I hope for a crash. https://nationalmortgageprofessional.com/news/74989/reverse-mortgage-inquiries-rise-heloc-market-cools
4   Patrick   2020 Jun 16, 10:24pm  

Misc says
Wells Fargo tipped its opinion on where it expects housing to go by not making any more HELOCs. https://www.housingwire.com/articles/wells-fargo-joins-chase-in-halting-helocs/


Exactly!

Ignore what they say and watch what they do.
5   AD   2020 Jun 16, 11:22pm  

.
Patrick says
Wells Fargo tipped its opinion on where it expects housing to go by not making any more HELOCs. https://www.housingwire.com/articles/wells-fargo-joins-chase-in-halting-helocs/


For them to halt HELOCs, then they believe it is too much risk (in near term) to lend money to people who use their home equity values as collateral since home values are projected to decline significantly. That combined with a weakening job market which would make it more difficult for servicing the loan.

Again, this is all based on economic recovery. I'm seeing more and more positive news like about retail sales rebounding, and also airline traffic increasing. The Florida panhandle is back to normal as far as tourism. Just read about tourism and hotel rates in Destin, Florida. Watch the web cameras for Panama City Beach and see the local tourist spots like Pineapple Willies (Restaurant and Bar) packed.

Jeep Jam is taking place now and there is no indication it less of an event compared to previous years: https://www.wjhg.com/content/news/Jeep-Jam-officially-in-drive-at-Panama-City-Beach-571286951.html

.
6   bill   2020 Jun 17, 3:54am  

So I could not borrow against my house if I had one and I don't! A tip of the hat to Patrick tkx for the tip. Another tell is RENTs are going DOWN, ergo . . .

https://www.foxbusiness.com/real-estate/san-francisco-rents-plunge-tech-employees-work-elsewhere

Cavoto says it FASCINATING, but ha, I've watched him a lot and "fascinating" is his favorite word and he uses it to good effect at the END of the VIDEO. Be sure to watch it! Sometimes FOX tells the truth!! But, beware Stuart Varney who likes to kiss Trump's RUMP! :)
7   GNL   2020 Jun 17, 4:00am  

Newbie123 says
In SoCal, the market is hot. Very, very low inventory and strong demand. Low rates are part of the story. In my area, homes below 750k fly off the shelves.

For prices to drop you need inventory to significantly increase. Rates aren’t going up. There is too much downward pressure.

How is there too much downward pressure if there is no inventory?
8   PeopleUnited   2020 Jun 17, 4:29am  

Houses are flying off the shelves in our market too. I offered $20,000 over asking price on a nice but basic property and was beat out by an offer to pay $20,000 more than appraisal.
9   Al_Sharpton_for_President   2020 Jun 17, 4:35am  

Folks who have RE wealth at stake are biased reporters, just like stock touts.
10   theoakman   2020 Jun 17, 7:14am  

The state of NJ is in complete financial disarray and we have the worst property taxes in the nation. I purchased my home for $435k 7 years ago and pay $11k a year in taxes. That being said, the past month, there have been bidding wars from New Yorkers trying to flee the city on every property in NJ. They already had done this after being fed up from the Wuhan virus and DeBlasio's mission to return to the crime/drug/homeless infested city of the 70s. These riots accelerated the process to the point where the crappiest houses that have been on the market for 6 or 7 months are disappearing very rapidly.
11   GNL   2020 Jun 17, 8:25am  

Newbie123 says
WineHorror1 says
Newbie123 says
In SoCal, the market is hot. Very, very low inventory and strong demand. Low rates are part of the story. In my area, homes below 750k fly off the shelves.

For prices to drop you need inventory to significantly increase. Rates aren’t going up. There is too much downward pressure.

How is there too much downward pressure if there is no inventory?


Historically, the 10y treasury yield has been a solid indicator to where mortgage rates are headed. Yields found a bottom but are still below 1%.
There is enough spread to re-sell 2.5-3% mortgages with a profit. Rates won’t go higher unless treasury yield improve significantly.

Got it. I misread. I thought you were saying too much downward pressure on prices.

I guess prices will go up forever. As patrick has been saying forever, it's all about inventory and housing just isn't being built.
12   AD   2020 Jun 17, 11:25am  

.
WineHorror1 says
I guess prices will go up forever. As patrick has been saying forever, it's all about inventory and housing just isn't being built.


That will be impacted from work from home (WFH) policies by San Fran Bay Area companies.

If those companies find WFH advantageous to productivity and their bottomline, then this disruption can lead to a noticeable demand destruction for local San Fran Bay Area housing.

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13   bill   2020 Jun 18, 11:12am  

I don't think "prices will go up forever," either. The venerable Wall St. Journal weighs in with a weighty and lengthy take. My feeling and I'm not always right, is that the HOUSiNG MARKET and the RENTAL MARKET are linked at the HIP! It does seem that we have good stats now on RENTs ARE GOING DOWN, but I always find it hard to believe that Murdock (the guy owns FOX News) also owns THE WALL ST. JOURNAL. I haven't read it for some time and they did not bug me with a paywall, you, on the other hand, could encounter a paywall. https://www.wsj.com/articles/once-booming-san-francisco-apartment-market-goes-in-reverse-11592472602
14   GNL   2020 Jun 18, 11:16am  

So far, my sister inlaw and my brother inlaw have lost jobs. Good white collar jobs here in the DC area. 1 was a marketing executive at Marriott and the other was an IT guy with good pay.
15   Shaman   2020 Jun 18, 11:27am  

Check out my post here:
https://patrick.net/post/1333113/2020-06-18-stocks-i-m-out

Basically this: I now expect a Great Depression style event to take the place of the Covid emergency, as businesses do not rebound as expected due to ongoing and stoked Covid panic. As is cited earlier in this thread, there are vast numbers of delinquent properties. Only 62% of businesses are paying rent right now. Many people aren’t paying rent or mortgage and preforeclosures are on the rise. We are only 3 months into this crisis. That’s March 2008. Remember what the rest of that year was like?
I do.
It sucked.
This time you can add food riots and race riots to the mix. Banks are good right now, thanks to the stimulus, but won’t be for long once those mortgage backed securities start failing and being called in! Remember how that went last time?
Meanwhile the service sector is mostly unemployed, and likely to stay that way as governors in lefty states hem and haw over reopening, and the wealthier older consumers hoard their money and hide at home from the Covid.

But this is a left-right issue now. Conservatives mostly want to reopen and get back to normal. Leftists think this is the new normal. So conservative areas are reopening and residents are spending and things are getting better. Leftist areas are not, and things are getting steadily worse.
16   AD   2020 Jun 18, 3:21pm  

.
Shaman says
Basically this: I now expect a Great Depression style event to take the place


I see signs of recovery like this article: https://www.usatoday.com/story/travel/airline-news/2020/06/18/jetblue-flights-airline-adding-30-new-routes-mint-out-newark/3213655001/

https://www.al.com/business/2020/06/alabamas-car-dealers-see-demand-picking-back-up-after-lockdown.html

And I see the Florida panhandle being overrun and swamped with tourists.

,
17   AD   2020 Jul 5, 11:06pm  

bill says
We gotta lobby Patrick to bring back all the CHATTER about REAL ESTATE because I honestly think Inflation may EXPLODE


Bloomberg has warned about inflation.

https://www.bloomberg.com/news/articles/2020-07-04/low-income-american-households-suffer-inflation-shock-from-virus?sref=V47xycDY

The coronavirus is inflicting a price shock on low income Americans that risks further driving up inequality.

In a study released this week, Bloomberg Economics estimated higher grocery and housing costs for lockdown necessities meant those households whose incomes are in the bottom 10% currently face inflation of 1.5% compared with 1.0% for the top 10% and the official 0.1% overall average recorded in May.
18   Bd6r   2020 Jul 6, 3:47pm  

APOCALYPSEFUCKisShostakovitch says
Failing that, we can eat FACE! straight off of attacking survivors.

I take you are not a vegetarian!!!
P.S. Glad to see that you are not pre-moderated any more.
19   SunnyvaleCA   2020 Oct 6, 11:54am  

Shaman says
I now expect a Great Depression style event to take the place of the Covid emergency
Now that China sees this as a brilliant method of asymmetric economic warfare, think about how much worse the next "accidental" lab escapee is going to be.
20   Patrick   2020 Oct 6, 12:11pm  

I do suspect China of instigating all three disasters, perhaps upon explicit request by Democrats who profit by moving US jobs to China:

- Wuhan virus
- BLM/pantyfa
- unusual number of forest fires

The timing is extremely suspect in any case, coming right after the failed impeachment, with the Dems/media running out of anything left to throw at Trump.
22   joshuatrio   2020 Oct 7, 5:49pm  

My sister and brother in law are heavy in real estate. He is a realtor and she is a teacher and he is swamped.

They just bought a half million dollar home and 6 investment properties over the last 2 years. I would say they are about 1.5-2 million in the hole. He is buying a tesla this year. I don't know if they are planning for the future, but I remember when covid hit, they freaked as the state banned short term rentals (which almost killed one of their Airbnb units). My guess is they are tighter than they appear to be, but who knows.

I don't see how this gravy train can keep running but I've been wrong before.

He said the people buying are leaving states like NY and NJ for tax havens like Delaware. If things keep going that way, it's expect that trend to continue for a while in certain areas.
23   BayArea   2020 Oct 7, 6:16pm  

APOCALYPSEFUCKisShostakovitch says
The house is paid and I've got 142 year supply of yams for 8 people and enough ammo for fire fights running three shifts a day for 80 years.

We've been practicing on cadavers but all of us can behead an attacking cannibal with two swings of a hand ax if we run out of ammo.

Failing that, we can eat FACE! straight off of attacking survivors.


Fucking LOL

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