patrick.net

Bitcoiner says

Eman
That’s great stuff! Congrats.

Question, let’s say you purchase a new construction with 10%-15% down and you use the builders preferred lender. Intention is to move in and use as a primary. But after the loan is secured you actually rent it out.
Now it’s used as an investment property. An investor loan would have required a higher down payment and higher rate. any repercussions?

@Bitcoiner,

I call it water under the bridge so don’t bring it up and don’t mention it to other people.

If you bought with the “intention” to live there, but you couldn’t due to job relocation, or unforeseen circumstances, then it’s fine. If you bought with the “intention” to rent it out, then it’s mortgage fraud.

A good underwriter can catch this when they look at your personal financial statement. The best way to stay and grow in this biz is to do biz with integrity. Trust is paramount.

In my market, there’s a whale who falsified rent roll to get the maximum cash-out on the refinance. Chase caught it and banned him from their list. Then rumors circulated. It’s a small world and people talk. Don’t be that guy.

Eman says

Patrick says

$415k is super cheap. In the Bay Area, they go for a lot more than that depending on location.

@Patrick,
Let's assume, the 1200 s.f. gray box is empty box with no value. The price represents the land value only.

I know, but thought it was funny anyway.

Bitcoiner says

An investor loan would have required a higher down payment and higher rate. any repercussions?

Ask Ed Jew...

Al_Sharpton_for_President says

Q2 2020 median home price: $322,600
Q4 2022 median home price: $479,500

That is roughly an appreciation of 30% per year. An aberration caused by poor policies enacted by incompetent leaders.

I don't mean to bash CA all the time but the reality is people are moving out of the state in droves. Median national price is a bad metric to base housing on. As more sell in California the median rise will go up with it as the most populous state and expensive. They likely had equity, buy the nicer places in a new location at a high price.

Say you sell your $1M home in CA and buy a $1M home in Denver that is bigger and nicer. Or Texas. People with $150-$350k homes are staying put locked in at low interest rates. So the sales are on the high end. You have to segregate the data. I can promise you $100k-200k homes didn't appreciate 30% in 2 years in most places or even nationally.

An yes, we do have incompetent leaders. Stats in a country of $330M people in vastly different climates and regions is difficult to judge nationally. There are other datasets in industries that can show you what's happening like the Uhaul example. They can't keep enough trucks in CA and know they can charge a higher price. CA home prices are the highest in the country. Therefore your national median will go up. I'm from IL, we experienced the exodus. That's why the numbers are skewed. Plus low inventory. I'm not seeing a bubble with 90% of people in low interest loans or paid off loans. Commercial office real estate is probably the biggest concern.

Bitcoiner says

Yep. You would need massive unemployment and higher rates and a 3x in inventory for this to have an impact to the housing market.

This thesis seems to be complete rubbish in many markets. A few of many examples follows. Again, I direct you to RJ Talks which covers peak-to-current prices. Current BLS unemployment data in these markets is easily accessible.

Region……………………………..UE rate…………...SFH price change, peak-to-current
Austin, TX………………………….3.00%………………………..-21.21%
Elko County, NV ………………….3.80%………………………..-18.08%
Detroit-Warren-Dearborn, MI……2.80%………………………..-16.57%
Dallas Ft. Worth, TX………………3.90%…………………………-6.27%
Utica-Rome, NY…………………..3.6%……………………………-8.6%
Boise, ID…………………………...2.9%…………………………..-5.2%

Eman says

If you bought with the “intention” to live there, but you couldn’t due to job relocation, or unforeseen circumstances, then it’s fine. If you bought with the “intention” to rent it out, then it’s mortgage fraud.

Yes, that is fraud. I have not checked recently, but FHA and other loans had a provision where the loan is called as soon as the house is rented out. No provision for hard luck stories like job relocation. You had to sell or refinance.

Bitcoiner says

Massive money printing, historic low rates and Covid BS lead to insane housing appreciation.

Then inflation came and the FED increased rates. Mortgage rates more than doubled in a short amount of time.

Yes, I have described the same above. In other words, an unsustainable bubble.Bitcoiner says

Fast forward to today: housing has stabilized

Wrong. I have posted several examples above, and there are many more, where prices are decreasing and even crashing, in spite of low unemployment rates. The same high mortgage rates that have trapped current owners in their homes is decreasing demand.

Regarding unemployment rates, if all laid off well-paid programmers find work stocking produce at Safeway, the unemployment rate rmains unchanged, and yet former potential buyers of high-priced RE have become non-buyers. Demand has decreased, which the unemployment rate cannot capture. This is what post 2229 is hinting at.

HeadSet says

Eman says

If you bought with the “intention” to live there, but you couldn’t due to job relocation, or unforeseen circumstances, then it’s fine. If you bought with the “intention” to rent it out, then it’s mortgage fraud.

Yes, that is fraud. I have not checked recently, but FHA and other loans had a provision where the loan is called as soon as the house is rented out. No provision for hard luck stories like job relocation. You had to sell or refinance.

I literally bought my current house from the Best Man in my weddings Dad. It was a HUD foreclosure. Owner occupants got the first crack at it before investors were allowed to make an offer or at least it be accepted. I didn't know this until years later.

It's government at the end of the day with HUD. He could have bought it in a tiny town and no one would have ever followed up that he wasn't living there. He was a rule follower. He should have lied in all honesty and I wouldn't have my home today. Get crafty is all I'll say. I put an all cash offer in with $10k in the bank. Put yourself in shit spots and figure it out. I was fortunate and did.

People can bitch, rent or complain or figure it out. Everyone is a con and playing a game. Everyone. Until you understand that, you'll generally lose or be average. Buy at $315k two flat in Chicago when you're 22 in 2006. You get your ass kicked in life. Learn from it.

Bitcoiner says

Yes, prices are down from the peak but month over month prices have gone UP.

Let’s review. Your statement that "You would need massive unemployment and higher rates and a 3x in inventory for this to have an impact to the housing market.” has been shown to be wrong in numerous markets where unemployment is low and prices are decreasing and even crashing.

You now point to a momentary blip as proof that the market is going up. You do know that in the financial fraud crash there were also momentary increases in home prices. But the long-term trend was in the opposite direction.

Bitcoiner says

A crash is a free fall in price

An 21% drop is a crash. Bitcoiner says

>Correct, during 2008 and the following years you saw momentary increases.

Yes, the point is that prices do not move in a completely straight line. There are always ups and downs. But the trend is the key.

Bitcoiner says

We should have seen a significant increase in inventory but here we are in May with 1M active listings.

Bit and I have not seen eye to eye on some things. He's not wrong on this. Could we go sideways yes. Expecting or thinking a 2006 housing crash is coming or anything close to that is not logical.

Fact is no one is moving from their 4% or under interest rates in this climate. Lending standards are better, significantly. Fact is home purchasers in their 40-60's got their ass chewed in 2006. They ain't taking any more risk. Housing will not be the catalyst this time and I don't think it moves up or down 10% in either direction for a while. That's not a crash or boom.

The median will change when the 5th largest country (state) has thousands and potentially a million fleeing it. CA is a massive state. Others will gain. The crash is coming for LA and SF. Call me out in 18 months. Data is proving me right so far. As much as Bit has pissed me off, he's probably fine in San Diego region. I'd get out of anything between Carlsbad and Sacramento(ish). There are pockets but it takes $$$$$$ and they're generally less urban.

We'll see. In August might drive up to the Bay area when I'm in San Diego. Wife will be working and I can do what I want, can get a hotel up north. My trip is flexible. I'll meet people, don't be a douce bag. I'm not going to give my real name either as a warning. I'll go by Biff Butterbutt.

I say it’s still a bit early to say we are out of the woods…wait till September.

WookieMan says

The median will change when the 5th largest country (state) has thousands and potentially a million fleeing it. CA is a massive state. Others will gain. The crash is coming for LA and SF.

Let's hope you're right.

It's too crowded here, making life miserable. Miserable congestion, miserable pollution, miserably high cost of living. Our population way exceeds the sustainable carrying capacity of the place.

High housing cost, as ®eal Estate Cool-Aid drinkers here point out, is because of the low liquidity. A miniscule portion of SFH have been bought/sold in recent years of the insane prices. Even if we have a (welcome) massive drop of 50% or more, homes will still be expensive here. And because so few have bought in recent years, very few people will be hurt by such a correction.

Since so few properties have changed ownership (ie, been reassessed), if a huge drop in prices creates buying opportunity for local kids here, the overall tax revenues could very well go up on the volume. Jeez, one reason among many for public safety problems here is that the cops cannot afford to live in our communities. They live extremely far out, suffer long miserable commutes, adding stress to the job each day before they even start the job. They are stressed out mercenaries.

What you might think of as ®eal Estate Doom and Gloom will be a welcome relief.

So I am dealing with a “buyer’s agent.” She forwarded a new home that met our criteria that was priced at the extraordinary price per sq.ft. of $417! When I asked for comps for the area, she forwarded me a home that had appreciated 13% per year annually over the last six years. Most likely, a lot of that appreciation was in 2020-2022, when the average home gained 38%/year, due to incompetence at the Fed and in the Oval Office, both Trump and Biden.

So this “buyer’s agent” is attempting to build a house of cards, to justify the over-priced new home using an unsustainable bubble priced comp. Should I just shoot her in the face?

WookieMan says

In August might drive up to the Bay area when I'm in San Diego.

Why in gods name would you do that? For starters you have to drive through LA.

B.A.C.A.H. says

It's too crowded here, making life miserable. Miserable congestion, miserable pollution, miserably high cost of living. Our population way exceeds the sustainable carrying capacity of the place.

Shrinkage B.A.H.A.H....
Both Austin, Texas, and Jacksonville, Fla., surpassed San Jose’s population during the pandemic as the Bay Area’s largest city fell two spots in national rankings.
With an estimated 971,233 residents as of July 2022, San Jose is now the 12th largest U.S. city, according to new U.S. census estimates released Wednesday. Since April 2020, the city has lost a net 42,000 people, or 4.1% of its 2020 population, a major reversal after years of tech-fueled growth.
This Bay Area city is no longer one of 10 biggest in U.S. — booted by cities in Florida and Texas

just_passing_through says

WookieMan says

In August might drive up to the Bay area when I'm in San Diego.

Why in gods name would you do that? For starters you have to drive through LA.

You make a valid point. I literally would have nothing going on though. Don't need to check into work back home. Wife is working 8am-3am each day (not joking). I'm just there because the hotel is free and I do like San Diego.

I've wanted to visit Yosemite since I was a kid. I'm probably going to add days to the trip. I technically have a week. The only thing I got planned is playing Torrey Pines with a group the day after we land. Then I'm a free agent and no kids either. So I could take an eastern route around LA. I don't want to see that or deal with the traffic. Probably will double the drive, but whatever. As the rural patnet advocate I'd like to see more of rural CA anyway.

We'll see. It's basically two full days of driving. Kids will be in school, and if I hit Yosemite on a Monday and it's not on fire, it should be relatively not packed. Then maybe shoot west and meetup. Lots of talk, we'll see if I do it or am up for it.

Yosemite and Glacier are on my must do bucket list parks, so I'm temped to do it (not Glacier this trip). I've been to all the other major ones. Acadia in Maine is #3 on that list, but if I missed it I wouldn't be upset in my coffin. I really, really, really don't like the Northeast. Wife has never been, so I might have to eat my hatred for the region and go.

Maine is where I got my first Pantera CD. The Great Southern Treadkill. Summer of '96. Jesus, it's been almost 30 years since I've been out there.

Bitcoiner says

In which area are you looking to buy? New home meaning new construction? $417 / sqft sounds like California.

Builders are fucking with pricing now because of inflation and all the news of lumber being soooooooo expensive. It was, but it's coming down and their still bidding out previous high lumber prices as a buffer.

My wife's company does the same thing with oil. They say they have to estimate oil prices to be high or like it was last year and charge a higher rate.

Our house got bid out at $309/sq. ft. Waiting on the other builder. And will probably get a 3rd quote. For our area I was expecting $225-250/sf. There are so few custom builders here in IL after the exodus and housing crash, I think they are jacking the prices. My goal is to get it down to $200/sf as I can do some of the work as it's 3 blocks away and my hours are flexible and can do low noise work into the wee hours of the night/morning as an insomniac. Have an electric golf cart so no one would hear me come and go either. Plus I can hit shit that wasn't on the plans in secret.

WookieMan says

There are so few custom builders here in IL after the exodus and housing crash, I think they are jacking the prices.

This. You aren't going to find a builder to do it cheaper.

Booger says

WookieMan says

There are so few custom builders here in IL after the exodus and housing crash, I think they are jacking the prices.

This. You aren't going to find a builder to do it cheaper.

Agree. I can do a lot though. I'm not gonna do the actual plumbing pipes and all (I can), but I can install a toilet, sink/cabinets, bath/shower fixtures, low voltage stuff (a lot....), flooring, tile, etc. Labor is the biggest cost and whatever the GC/builders wants to jack the price to pad his pockets. We'll see what this 2nd bid comes in at.

My mom is assuming our mortgage so I'm in no rush. Her current house is paid off so she's not in a rush there. I'm in the literal miracle/unicorn of house building. I have time and money.

Bitcoiner says

In which area are you looking to buy? New home meaning new construction? $417 / sqft sounds like California.

Southeast. Downtown. Walking distance to all.

The “buyer’s agent” also told us to pay no attention to the price per sq. ft. Asked her for comps, sends me this one over-priced 6-year old home to justify the over-priced 2023 new home. I think we will sever ties with her.

Al_Sharpton_for_President says

Bitcoiner says

In which area are you looking to buy? New home meaning new construction? $417 / sqft sounds like California.

Southeast. Downtown. Walking distance to all.

The “buyer’s agent” also told us to pay no attention to the price per sq. ft. Asked her for comps, sends me this one over-priced 6-year old home to justify the over-priced 2023 new home. I think we will sever ties with her.

She should prepare a buyers CMA denoting actives, pended and recently sold of all relevant properties. If she can't or won't - fire her - she's not working for you!

desertguy says

She should prepare a buyers CMA denoting actives, pended and recently sold of all relevant properties. If she can't or won't - fire her - she's not working for you!

Truth. My shortest comment ever.

Bitcoiner says

is a buyers agent actually interested in working for you?

Valid point. They should inform you of the market either way. Do they want a higher price? Fuck yeah. But they still should inform what the market is doing for what you're looking for. Sounds like this might be a case with Al and he should can the agent as you mention.

Bitcoiner says

One of the reasons why I like to buy new construction: you don’t need a buyers agent.

OTOH: https://www.youtube.com/watch?v=HsZudozVgcw

Bitcoiner says

One of the reasons why I like to buy new construction: you don’t need a buyers agent. Any issues you have with new construction (and there can be a lot) will be covered. I bought several and all you have to do is be persistent and keep bugging the builder until it’s fixed.

It’s a mistake IMO. Bring your friend/buyer’s agent in to help you buy it and ask for 1% credit and use it to pay closing costs. Your friend would be more than happy you did as s/he didn’t have to do much to earn the commission. Win-win-win.

Bitcoiner says

Al_Sharpton_for_President says

So I am dealing with a “buyer’s agent.” She forwarded a new home that met our criteria that was priced at the extraordinary price per sq.ft. of $417! When I asked for comps for the area, she forwarded me a home that had appreciated 13% per year annually over the last six years. Most likely, a lot of that appreciation was in 2020-2022, when the average home gained 38%/year, due to incompetence at the Fed and in the Oval Office, both Trump and Biden.

So this “buyer’s agent” is attempting to build a house of cards, to justify the over-priced new home using an unsustainable bubble priced comp. Should I just shoot her in the face?

In which area are you looking to buy? New home meaning new construction? $417 / sqft sounds like California.

$417/sq is cheap for existing houses by Bay Area standard. It’s a bargain for new construction. 😅

Just sold this flip for $975k. Left $75k on the table as the next 2 offers came in higher than the first after we accepted it. The $1.05M offer had no contingencies.

https://redf.in/rdeBNa

Bitcoiner says

Some builders like lennar don’t even work with agents anymore.

They never did. They don't need licenses if they're W-2 employees and get paid additional commission. Usually they don't don't as well, it's hourly. it's a shit job for the person that didn't get a degree and had no idea how to do a trade. It's a gas station job for selling houses is the easiest way to put it. Ain't retiring working for Lennar.

Bitcoiner says

It’s a good strategy. Thanks!
The builders in Phoenix are giving out discounts and pay closing costs but during a “normal” market I will try your strategy.
Some builders like lennar don’t even work with agents anymore.

Based on my experience, if an agent brings in a buyer, or if the buyer signs in when go to check out the model homes and notes/states that s/he has an agent, the agent will get his/her 2.5-3% commission, or whatever the builder offers. In slow times, I’ve seen up to 4% commission.

When people remove their hatred for realtors from the equation, the answer becomes clear. It’s a business transaction. Why short change ourselves and leave 1% credit on the table while helping out a friend to make some easy money. That’s a lot of free lunches and dinners right there. I love eating good food so I tend to equate to meals. 😋

Just came back from a sushi buffet in Concord. $30.99/person plus drinks. Great food and service for a reasonable price.

@Bitcoiner,

I keep repeating this, but people keep disputing it. It’s the buyer, who determines the price, not the seller. I live and breathe the real estate market everyday. Unfortunately, people believe what they want to believe. I know I can’t convince anyone of anything. I just do what I can control.

I have another million dollar flip hitting the market next week. This one is probably going to sell for $1,400-$1,500/sq. Now you know why I said $417/sq for new construction is a bargain. Cheap or expensive is relative.

WookieMan says

if I hit Yosemite on a Monday and it's not on fire, it should be relatively not packed.

It's the water you have to worry about this time around.
On Thursday, the Merced River was brushing against the bottom of the Swinging Bridge as water levels reach 10 feet... Water was already creeping across parts of Wawona Road and filling the meadow between Northside and Southside drives.
As the water continues to rise, there is a possibility that the roads will flood and have to be closed.
That typically happens when levels reach 12 and a half feet, which is expected to happen early Monday.

EBGuy says

if I hit Yosemite on a Monday and it's not on fire, it should be relatively not packed.

It's the water you have to worry about this time around.

He'll be able to tube all the way to Modesto.

Bitcoiner says

Congrats! I have no idea what you put into the remodel but I am sure you made a nice profit. Bought for 585k….!

Well, he did have to add a bedroom and bathroom (over 400 sq.ft.). Nerves of steel that Eman. Not sure I could have handled that while the Case Shiller Home Price Index was doing this... Well done sir!

EBGuy says

Bitcoiner says

Congrats! I have no idea what you put into the remodel but I am sure you made a nice profit. Bought for 585k….!

Well, he did have to add a bedroom and bathroom (over 400 sq.ft.). Nerves of steel that Eman. Not sure I could have handled that while the Case Shiller Home Price Index was doing this... Well done sir!

Wait until I share the next flip, which will hit the market next week. This has also taught me a valuable lesson.

As I repeatedly said, I do what I can control. Whining and bitching won’t get us far in life. Being self-employed is a choice. I have no one to blame for my failures. The last 14 years of self-employment have been wonderful. If you recalled, I was clueless when I joined Patnet back then. Then I learned about buying trustee sale/auction properties; then buying fell through short sales when foreclosures dried up at the courthouse steps; then I transitioned into buying multifamily and increasing their value through “value-add”; at the same time, I got back into flips to generate active income to offset the phantom losses aka non-taxable income on the flips; then I got into adding square feet to increase value on flips, etc….

Been working on adding more units on existing multifamily parcels to increase value. The land and utilities are already there so no holding costs like buying vacant land. It’s just a matter of going through entitlement and getting the new construction to pencil out. 😅

Bitcoiner says

is a buyers agent actually interested in working for you?

I dated someone who was (among other things) a real estate agent. She informed me that there's a "listing agent" and a "selling agent." No such thing as a "buyer's agent." If you're buying a house, "your" agent is selling you the house. Let that sink in.

@EBGuy,

What I’ve learned is that adding square feet to a house in a $700/sf market cost about the same as $1,500/sf market. The question is do I have the balls to flip in $1,500/sf market?

Building multifamily in an expensive market costs almost the same as the lower end market. This is why there aren’t much building interest in the lower end markets. The numbers don’t pencil out while our politicians are not helping with their landlord hatred policies.

From The Disturbing Details Of The 2023 Housing Crash (Explained In Detail)
https://www.youtube.com/watch?v=fhJg6SplJ-s

I have to admit I’m surprised with the resiliency of buyers in the current market. My guess is two folds: 1) low inventory while people have to buy due to their life circumstances, and 2) bet interest rate will drop again in the near future where they can refinance and lower their mortgage payments. The sales pitch is “buy the house, date the rate.” History suggests there’s a high probability #2 will happen. Even the bond market suggests this.

Eman says

I have to admit I’m surprised with the resiliency of buyers in the current market.

No such thing.