Skilled Receiver ![]() I have seen many housing cycles and always performed well. In one cycle I purchased a home for about 50% of its high price. I believe that we are at a cycle peak at this time. March/April 2022. The 2021/22 Cycle is unique. The historic low interest rates is an anomaly that allowed people to qualify for mortgage loans at greater relative levels than ever before. In other words, lower interest rates supported higher home prices. In financial terms, lower interest rates leads to a lower risk free rate and lower cap rates. Lower Cap rates raises asset values. Real estate is not immune from economics. This DFIN example below demonstrates how an August 2021 $700,000 home sale in Los Angelous, CA may trap owners into the home because of the future price drop. When interest rates go back to 8% the recent $700,000 purchase may result in a loss in value of more than $200,000. Why are we so confident of such a loss? It is the math and payment affordability. When interest rates increase asset prices drop and when interest rates go down asset values go up. The interest rate is a key element for investor Cap Rates.
As US home prices decline, number of buyers with underwater mortgages swells An alarming number of new homeowners are discovering they owe more on their mortgage than their home is worth as surging interest rates send housing prices spiraling down. By Megan Henney FOXBusiness December 13, 2022 12:37pm EST https://www.foxbusiness.com/economy/us-home-prices-decline-number-buyers-underwater-mortgages-swells Homebuilders say they’re on the edge of a steeper downturn as buyers pull back Housing starts for single-family homes dropped nearly 19% year over year in September, according to the U.S. Census. Building permits, which are an indicator of future construction, fell 17%. MON, OCT 31 20222:12 PM EDT https://www.cnbc.com/2022/10/31/homebuilders-say-steeper-downturn-is-coming-as-buyers-pull-back.html More homebuyers look to ARMs to finance their home… CNBC CNBC’s Diana Olick joins Shep Smith to report on rising mortgage rates, which have hit their highest level in 20 years, and the impact it’s having on homebuyers. Thu, OCT 20 2022 7:31 PM EDT https://www.youtube.com/watch?v=9_70uRY_QX4 These 210 bubbly housing markets could crash 25% to 30%—Moody’s again slashes its home price forecast You don’t need a Ph.D. in economics from the University of Chicago to understand that 7% mortgage rates are a threat to the U.S. housing market. BYLANCE LAMBERT October 5, 2022 at 7:02 AM PDT https://fortune.com/2022/10/05/housing-markets-at-risk-of-25-to-30-percent-home-price-crash-moodys/ Think mortgage rates are high now? Homebuyers in the 1980s were paying 19% Strait recalled one couple who were actually relieved when they locked in a 30-year fixed-rate mortgage at 19% in September 1981. By Anna Bahney, CNN Business Published 2:43 PM EDT, Thu September 29, 2022 I took out an adjustable rate loan at about that time and the teaser rate was about 14%. At that time people acted like rates would never come down. I opened a 12% IRA CD at that time. https://www.cnn.com/2022/09/29/homes/1980s-mortgage-rates-home-affordability/index.html Three Hotels Approaching Foreclosure in the Heart of Portland Offer a Warning to City Leaders “The banks are trying to keep these properties off the foreclosure list, because why would you want to take something back that you know is a bloody mess? But eventually they have to.” By Sophie Peel September 07, 2022 at 5:30 am PDT https://www.wweek.com/news/2022/09/07/three-hotels-approaching-foreclosure-in-the-heart-of-portland-offer-a-warning-to-city-leaders/ ‘Poison’ Ivy Zelman—the analyst who predicted the 2008 housing bust—sees U.S. home prices falling in both 2023 and 2024. Here’s how much When Toll Brothers CEO Bob Toll tried to say the housing market had bottomed out in 2006, Zelman famously quipped back, “Which Kool-Aid are you drinking, because I want some.” Of course, Zelman’s housing-bust fears proved more than correct, and all those at the time who thought demographics would continue to propel the aughts’ home prices forward were proved dead wrong. BYLANCE LAMBERT September 6, 2022 at 6:30 AM PDT https://fortune.com/2022/09/06/home-price-forecast-prediction-2023-2024-ivy-zelman-housing-market/ ![]() https://www.dailymail.co.uk/news/article-11144025/US-housing-market-worse-shape-Fed-letting-economist-warns.html
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