The problem @vanzandt is many people are locked into a very low interest rate fixed mortgages. The market is essentially frozen. In our local zip code, in a normal year, there are at least couple of hundred home listed for sale at any time. Today, only 26 are available. With supply so tight and almost full employment in SoCal. prices are not coming down. When mortgage interest rate came down to under 3%, I told everyone willing to listen, to refi whether they needed it or not. All my kids refi into 2.5%-2.6% 30 year fixed rate mortgages. It is free money from our Government for this generation of homeowners.
I agree with you. Even CA is in a similar situation, even when many claimed people are abandoning CA for TX, NV, FL, AZ....
It's funny you mention the regional's. I just had this conversation with someone last week. And I was warning them. Anyone who has navigated their way thru the daily bs on Stoney's thread knows I have been a bull on PNC, FITB, and the sector in general. But last week, I kinda went "hmmmm?"... The reason being, that move down is a big deal. Lets use FITB as an example here. At $25 going back several months, I said it was steal. Numerous times as it would go up, but then come right back down. I repeated the call. Every time it hit $25ish, I said buy it. Finally, last month or so, it started up with some conviction. And this is not just FITB, the whole sector did. As an aggregate, they all pretty much move in lockstep with each other. But lets just use FITB as a proxy here.. When it was making a run at $30, I thought to myself, ok the banking crisis of 2023 is over. The worst was behind us, and now it will just trade like any other stock. But then, a few gurus came out and screamed wolf. Next thing you know, FITB, had gone from $29 right back to $25ish. That is a huge move for a bank stock at this point--- post the March scare at least. I hate to say it, but this might be some bad juju. When any other stock pulls something like that, ask any technical analyst, the next stop will be much lower. Now if that's the stock of company XYZ... who cares. But a bank stock, if you believe the TA guru's are right and that TA knows something we don't.... uh-oh. If the herd smells fear in the banks... we're heading lower once again. I honestly didn't like the XLF and its components recent drop. It better hold this level, or see a sell-off with a super high volume bounce, or we're in trouble. But one has to wonder... what is it? What spooked bank stocks right back down after it appeared we were out of the woods? Was it what I said in the original post? "Watch foreclosure rates." It might just be. The CRE risks are priced in, but all of what we discussed above never really covered the average Joe that is staying put, who wasn't smart enough to refi at 3.5%. There might be a lot of those types of loans out there. And adjustable rate loans that people signed assuming rates would stay down, opting for the carrot of a low five year rate, thinking they could do it agin in 5 years. Those folks right now are screwed. If they can afford the additional funds, no problem. But are there enough out there that can't? The TA on the bank stocks suggest there might be more than we think. These stocks aren't representative of any other run of the mill type stock. Bank stocks are kind of unique. Any other stock can do that but when a bank stock, and the whole sector, does that... ... it gives rise to a "hmmmm?" I mean if >>>(insert the stock of your choice here)<<<< does that, well, it is what it is. Stocks are gonna stock. They burn players routinely. but for bank stocks to that.... it is certainly worth noting.
I did the exact same thing. And told them to take the 15 year or 20 year refi if they could swing it.
I don’t like the bank stocks here, either technically or fundamentally, big or small. I just don’t think any of that has an anything to do with house prices going down. Let’s face it, banks have a lot of issues: 1) Commercial real estate loans coming due in the next couple of years, 2) Assets on their books had much higher prices 3) deposits cost going up 3) new federal legislation coming etc If you asked me where the problem in real estate is I’d say it is the office or shopping center where the loan is coming due. And btw, commercial loans are completely different than residential loans ie they mostly come due in 7 years. That means a lot of are coming due soon. Even apartment loans, coming due in 7 years, this when there’s going to be an increase in outstanding apartment units as new builds come on stream. Don’t misunderstand bank stock prices for home prices.
Good advice. Personally, I had a loan at 3 1/4 %, and decided to pay it off because I couldn’t get a high enough rate on my funds. I’m about at a break even right now after tax if I were investing those funds over 5%.LOL!
I don't think home prices will deteriorate significantly over the next 18 months. They may flatten in some places or see very modest declines in others... but nothing material. In addition to supply being terribly constrained by points folks made above, there are a few other things I see. 1) People that aren't buying right now are just saving cash with their 3% note while their home creeps up in value. It's like Covid times, when people aren't spending in normal patterns due to market conditions all that cash is building up. When rates come back down, that dam will break. 2) No one talks about it, but every year in the US about 1.5M - 1.8M people die as the last/sole owner of their house. Many of these homes get sold with (largely) tax free cash windfalls going to heirs. That's a huge amount of cash inflow every year. 3) Many are paying with cash today so interest rates are irrelevant. For those that aren't my feeling would be that if you MUST buy at this point...that rates will come back down in a few years and you just refi then anyway. Back in the 80's no one would ever have believed that interest rates could be sub 6% for mortgages. It had never happened and economists said it was impossible. Today we can't believe rates would stay above 6% beyond corrective monetary measures. Of course with monetary efforts being thwarted by fiscal irresponsibility, maybe we will have much higher rates for much longer. I know the country will be in huge trouble if the Treasury has to refi all that debt in the coming years at current rates.
Salaries haven't been keeping up since the 70s. That's never going to happen. Something needs to give in order for things to turn around, but it won't be that. Ultimately, supply and demand will win the day. If people aren't buying, then eventually prices (and rates) will have to come down to compel would-be home buyers to take the plunge.
Makes for a good discussion but I don’t see it VZ… at least here in the Northeast… Inventory is razor thin, inflation is running rampant with Owners long RE are locked into lo rate notes… In inflationary environments, tangible assets, particularly RE, will remain hi… wether it’s residential or especially rental portfolio holders, with rents pulling in top dollar, creating handsome ROI monthly/ annual returns extremely appealing to sit tight! I don’t see a substantial shift in RE transactions or prices for at least another 3-4 years out. I’ve been in the RE racket now for 27 yrs & pride myself in keeping ahead of the curve with trends, liquidity, transactions, data, housing starts, etc… that said, I forecast a status quo environment with a continued uptick in inflation!
I know you have. It's subtle, but fwiw.. and I am 1000% paying attention, I'm starting to see "For Sale" signs stay up longer. We'll see. Won't be the first time I was wrong on stuff like this if I am. All that said, the big date going into the FOMC, won't be Weds the 20th. It'll be Weds the 13th.CPI.