Interactive map at link, as real estate is local. For most it’s pretty low probability until supply meets demand, but look for your specific area.
https://fortune.com/2022/05/20/these-regional-housing-market…
IP
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Interactive map at link, as real estate is local. For most it’s pretty low probability until supply meets demand, but look for your specific area.
Interesting. Looking at Florida and Texas, which I thought were hot markets, there’s only one area (Destin/Ft. Walton) that is medium risk with rest of the two states low or very low.
DB2
Interesting. Looking at Florida and Texas, which I thought were hot markets, there’s only one area (Destin/Ft. Walton) that is medium risk with rest of the two states low or very low.
I wonder how current their data is. We have a vacation home in the FL panhandle, just for kicks I get updates on home sales from a local realtor. Starting to see many price drops on homes for sale. And no just a $10-20k, many $100k and a few $500k.
But does this really count as a housing price drop when things have doubled in the area the past 5 years?
JLC
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I wonder how current their data is. We have a vacation home in the FL panhandle, just for kicks I get updates on home sales from a local realtor. Starting to see many price drops on homes for sale. And no just a $10-20k, many $100k and a few $500k.
But does this really count as a housing price drop when things have doubled in the area the past 5 years?
Some houses have been placed on the market with an out of this world asking price. It’s not surprising when they then have to lower their pricing.
I know that June-August is a slow season for home sales typically in our area. If the same seasonality happens in your area, the price declines could be in an effort to avoid keeping the house on the market for the summer, particularly with the storms your area gets.
Properties still need to be priced well to sell, but with how quickly prices have risen, it’s hard to know what that price really is.
IP
I wonder if we are going to see a “split” phenomenon? By split, I mean different behavior at lower prices points than at higher price points. For people buying their first home (lower price points), and requiring a hefty mortgage (no equity from previous home yet), their monthly costs have gone up significantly. Seems that those costs have already gone up enough to remove quite a few people from the market (they will continue renting, living with parents/in-laws, etc). But at the higher end, where less (or none) of the purchase price consists of mortgage money, the monthly costs don’t go up quite as much. This cohort will mostly continue buying as usual.
So the perverse effect, because of the way “average home prices” are reported, will be that home prices will continue to go up (average home prices are the average of homes that actually sell, not the average value including homes that did not sell). Meanwhile, volume of sales will go down. Once this happens, if it persists, there become more and more people who “have to” sell their home (retiring, moving for work, can’t afford taxes anymore, kids moved out, spouse died, etc) … and they will drop their asking price, and the home sale will occur at a lower price. BUT this only is a marginal effect most of the time. If it persists for a VERY long time (like a few years) then the numbers of sales at lower prices start rising, and the averages are finally affected to show “lower average prices”.
Does this make sense? (I’m not a real estate person, so this is all conjecture)
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Interesting. Looking at Florida and Texas, which I thought were hot markets, there’s only one area (Destin/Ft. Walton) that is medium risk with rest of the two states low or very low.
From what our business-side boffins tell us about the Florida real estate market, Covid created a massive exogenous demand-side shock to our market. It created a significant shift in demand towards single-family detached residential product with larger units (to accommodate home office) and private outdoor recreational space (yard and pool), both by shifting consumer preferences and with the broader adoption of remote work. Those are housing types that can be found more readily in Sun Belt markets.
Because of tightness in both labor markets and building materials (especially lumber for a good while there, but also for certain specific specialized building components that have long supply lines), it’s been hard for homebuilders to increase product in response to that exogenous demand shock. So while higher interest rates will dampen demand (and an economic slowdown would do even more), the underlying tightness in the market is expected to keep prices high.
Albaby
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For people buying their first home (lower price points), and requiring a hefty mortgage (no equity from previous home yet), their monthly costs have gone up significantly. Seems that those costs have already gone up enough to remove quite a few people from the market (they will continue renting, living with parents/in-laws, etc).
This is where the corporate buyers continue to escalate prices in their efforts to buy SFH to rent out to those who cannot afford to buy. And as interest rates escalate, those who already own a starter home may only be able to afford to buy another “starter” home. Money goes less far and if you must move you may need to settle for less.
So the perverse effect, because of the way “average home prices” are reported, will be that home prices will continue to go up (average home prices are the average of homes that actually sell, not the average value including homes that did not sell). Meanwhile, volume of sales will go down.
Home prices will continue to go up because of the supply/demand imbalance. Because people do not want to trade in their now low rate fixed mortgage for a newer higher rate, they will only move if they absolutely have to do so, or are incentivized enough by a high purchase offer. This is what will continue to decrease supply and keep cost of sales high. The main issue is the Supply/Demand imbalance with high rates being contributing factors.
The corporations will stop buying SFHs when the demand for rentals fall, possibly impacted by affordability given higher expenses, or when the perks of buying is impacted by tax changes, such as rental properties having higher property taxes than owner occupied.
IP
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There is another risk.
Insurance.
We have had an unprecedented 6 active hurricane seasons back to back. Also, we have had more land falling major hurricanes in the last few years than we had in all of rest of the years with records, combined.
Add in that building repair has gone up with labor and materials, and insurance reserves have plummeted with losses both in equities and bonds and you are seeing dramatic rises in insurance rates on the Gulf Coast and Florida.
Our condo insurance tripled. This dramatically increases the HOA fee, add in a higher mortgage rate and there must be serious price compression to allow the purchaser the meet loan to income requirements.
If this hurricane season is as bad as it is shaping up to be, we could see a very big problem throughout Florida and all along the Gulf Coast and the eastern seaboard.
If I were to rate places that can have serious economic impacts from rising insurance rates and declining housing prices, Florida would be candidate number one, Louisiana would be next and Texas number 3.
From a NOAA tweet
“ The increased activity anticipated this hurricane season is attributed to several climate factors, including the ongoing La Niña that is likely to persist throughout the hurricane season, warmer-than-average sea surface temperatures in the Atlantic Ocean and Caribbean Sea, weaker tropical Atlantic trade winds and an enhanced west African monsoon. An enhanced west African monsoon supports stronger African Easterly Waves, which seed many of the strongest and longest lived hurricanes during most seasons”
Note: Just because we have an active season, does not mean we will have a lot of losses. We could see most of the storms recurve out to sea. It had happened before. Or we could have completely devastating season leaving thousands and thousands of retirees pining for Michigan.
Who knows?
Cheers
Qazulught
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The increased activity anticipated this hurricane season is attributed to several climate factors, including the ongoing La Niña that is likely to persist throughout the hurricane season…
Nasty La Nina keeps popping up
https://phys.org/news/2022-05-weather-unwanted-guest-nasty-l…
Something weird is up with La Nina, the natural but potent weather event linked to more drought and wildfires in the western United States and more Atlantic hurricanes…The current double-dip La Nina set a record for strength last month and is forecast to likely be around for a rare but not quite unprecedented third straight winter…
An Associated Press statistical analysis of winter La Ninas show that they used to happen about 28% of the time from 1950 to 1999, but in the past 25 winters, they’ve been brewing nearly half the time. There’s a small chance that this effect could be random, but if the La Nina sticks around this winter, as forecast, that would push the trend over the statistically significant line, which is key in science, said L’Heureux. Her own analysis shows that La Nina-like conditions are occurring more often in the last 40 years…
What’s bothering many scientists is that their go-to climate simulation models that tend to get conditions right over the rest of the globe predict more El Ninos, not La Ninas, and that’s causing contention in the climate community about what to believe…
DB2
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https://www.gcrc.uga.edu/notices/events/webinar-eye-on-the-2…
Dr Jeff Masters and Mr. Bob Henson will host a zoom based webinar on the up coming hurricane season in June 3rd at 2 pm Eastern.
The only person I wish they would add would be Levi Cowan of Tropical Tidbits. However Levi tends to stick to storms that are named and does little else. Still Levi explains things in ways that most can understand.
Cheers
Qazulight
1 Like
One of my prizewinning “properties where rich people will want to move” is a large condominium I bought “pre-sale” and even pre-excavation, perched on cliffs overlooking the Pacific Ocean in Huatulco. It has gone up in value 220% in the three years since I signed the papers.
I had carefully reviewed the structural plans and was present for the pouring of the foundations and wiring of rebar for the main structural supports because it is located in a very very active earthquake zone. I had no problem with that as I am a Los Angeles engineer with lots of civil engineering and planning experience as well as certificed by the Los Angeles Dept of Building and Safety as competent to inspect construction sites.
However, Huatulco is also in a hurricane zone, and the first hurricane to hit since I signed the contract is just starting to approach the property as I write, with the eye expected to pass nearby tonight.
https://www.washingtonpost.com/weather/2022/05/30/hurricane-…
The eye of the storm is projected to pass just a little inland of my investment… and I am actually feeling pretty secure. You see, although a novice with hurricane design I found a bright good old boy drainage and hurricane expert engineer from “the other L.A.” aka Lower Alabama. He helped me do “max nightmare” rainfall estimates for the location and I made sure the drainage conduits underlying parking and housing features was capable of handling triple that estimate.
Now I will see.
david fb
(gotta stop doing whimsical rain dances with the dog, he is too powerful)
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