Major housing crash coming this winter or sooner

[Deleted User 863]

I am not agreeing or disagreeing with any of these prediction videos ftr. Just throwing them out there.

Some on housing...









Some on concrete and building materials...

[TDub]

Nope. Its only me in "bumfuck" Oregon who has been warned its gonna be hard to get concrete.

The smartest man on the planet told me it means nothing and any thought otherwise is batshit crazy. So, yea, I'm gonna ignore what I have been told by industry experts (even those outside of bumfuck oregon!) and just go with that perfectly sound, infallible and well thought out opinion.

[RainbowsandUnicorns]

if you work hard and put your nose to the grindstone, you can accomplish whatever you want. That’s why this country is the greatest country on earth.

anybody can be and do anything they can dream up.

Yep, even a school shooting mass murderer.

[Overlander]

Awesome post Gutter!

[KUTradition]

^^^^^^
easily potd

[ousdahl]

this prob goes better in the landlords thread but

https://www.npr.org/2022/06/09/11039194 ... -time-ever

[japhy]

I know of a 2000 sf home with a boxing gym and movie theater in it, for sale for $75K. Imagine how impressed the hippie chicks would be when they walk into your home theater and notice you have a 35mm old timey movie projector in the place. I know the people who live next door, the purchaser will have cool neighbors.

[KUTradition]

panty


dropper

[ousdahl]

https://www.npr.org/2022/07/14/11093452 ... here-you-l

There's a massive housing shortage across the U.S. Here's how bad it is where you live

[DrPepper]

If that battery plant is really going in to DeSoto, KS, then Lawrence, Eudora, JOCO just got a bump, right?

[Deleted User 863]

https://www.npr.org/2022/07/14/11093452 ... here-you-l

There's a massive housing shortage across the U.S. Here's how bad it is where you live

Building costs are through the roof, no pun intended. Builders aren't going to build houses for free. And shouldn't build a spec house that won't ever appraise out. Lots of gap clauses going on around here where buyers just accept they are coming out of pocket at closing for however short they are of appraised value.

[ousdahl]

wait, why shouldn't they build a spec home? why wouldn't it appraise out?

what's a gap clause?

what to make of policies about zoning?

and landlords?

[japhy]

Anybody ever heard of these folks? This sounds kind of interesting. If I hadn't already invested all of my money in crypto and hurricane flooding prone coastal property in Florida I might look into this more.

https://coloradosun.com/2022/07/05/fron ... is-valley/

[Deleted User 863]

wait, why shouldn't they build a spec home? why wouldn't it appraise out?

what's a gap clause?

what to make of policies about zoning?

and landlords?

1) right now the cost of materials and labor is so high that it makes it hard for stuff to appraise out. Prices are increasing which means historical sales prices will typically be lower than current sales prices in many (maybe most) areas. So in that environment builders typically focus on pre sold projects rather than spec homes because if they sit for a period of time before selling the carrying cost becomes a burden. Or it becomes hard for the builder to obtain financing through a bank because of issues with the "as complete" appraised value being lower than what it costs to build or projects to sell for.

2) a gap clause is basically put into a sales contract when the seller knows the house is selling over historical market price, meaning the appraisal will come in lower than sales price. It basically requires the buyer to pay the difference between sales price and appraised value so that financing can be obtained. In more typical sales contracts if an appraisal comes back lower than the contract sales price then the buyer can get out of the contract without losing their earnest money. For secondary market financing loan to value is calculated using the lower of sales price or appraised value.


Not sure what you're asking with the other 2 questions.

[ousdahl]

ah. thanks.

I dunno how a spec home would be expected to sit for long considering how quick real estate is apparently selling.

and still not fully understanding gap clauses. I mean OF COURSE a seller would have to pay the difference between the sales price and appraised value? Cuz the sales price is ultimately the price they gotta pay, right?

But I'm prob just not getting those concepts cuz I'm dumb.

as for the zoning question, that article mentions in many areas (it lists Atlanta as an example), zoning calls for either large apartment buildings in urban areas, or single family dwellings on big lots, nothing in between. Again, I'm dumb about real estate shit, but I can't help but wonder if more progressive zoning regs could go a long way toward affording more and better housing options for folks who need it. I also recall an article a while back (prob posted in this very thread) mentioning builders are building either big luxury McMansions or economy apartments, nothing in between. Is there a market for starter homes and more modest middle class abodes and such? Should there be?

and as for landlords, the subjects of the article mention their rent is going up by $450. Is that to cover a landlord's increased expenses too? Their property is already built, so I dunno if increased material costs factor much. Is it increase in mortgage payments? Or taxes? Or just cuz landlords can?

and how much of the issue is created by these big corporate landlords now, who apparently buy up and hoard real estate and shit?

and, in some general bigger picture, how much of the housing issue is created by some artificial scarcity? Our housing policies generally value excess for those who can afford it, more so than essentials for those who can't. Are we better off letting more evil rich people own/rent/possess multiple properties, or letting more average folks possess one?

[Deleted User 863]

ah. thanks.

I dunno how a spec home would be expected to sit for long considering how quick real estate is apparently selling.

and still not fully understanding gap clauses. I mean OF COURSE a seller would have to pay the difference between the sales price and appraised value? Cuz the sales price is ultimately the price they gotta pay, right?

But I'm prob just not getting those concepts cuz I'm dumb.

1) it's not necessarily that it would sit, it's problems with front end financing (for the builder) + risk of potential buyers having trouble getting financing. Banks don't loan unlimited amounts (at least not anymore). We are seeing almost no specs currently in any market i work. All presolds (under contract before it is even built).

2) the gap clause is about the financing not the buyer and seller agreeing on a purchase price. Banks only loan up to a certain % of value. If the value is below the agreed upon purchase price then the buyer has to cover that "gap" on the front end at closing. Which is something many people can't do.

[Deleted User 863]

Q here is an overly simple gap clause example.

Buyer is approved for 90% financing.
Buyer and seller agree to purchase price of $100k.
House appraisal comes in at $90k.
That means bank will loan 90% of $90k which is 81k loan amount.
So instead of putting 10% down the buyer has to cover the "gap", which means they have to bring $9k + $10k to closing.

[Deleted User 863]

Zoning in my opinion is usually a good thing. Say you want "progressive zoning" (whatever that means) so that low income houses can be built. Sounds good right...but without zoning now an industrial property can be built next to that development which would negatively impact those property values.

Minimum house sizes (McMansions) would be in a developments bylaws/covenants. That probably isn't a zoning issue. That's because if you have a nice house and someone is allowed to put a mobile home on the lot next to yours it negatively impacts the value of your home.

There is also a concept called highest and best use (which is impacted by both zoning and also concepts of money). Some of these make believe scenarios wouldn't fit the highest and best use of a piece of land, so no investor (in theory) would pick an inferior use for the land.

[Overlander]

Q here is an overly simple gap clause example.

Buyer is approved for 90% financing.
Buyer and seller agree to purchase price of $100k.
House appraisal comes in at $90k.
That means bank will loan 90% of $90k which is 81k loan amount.
So instead of putting 10% down the buyer has to cover the "gap", which means they have to bring $9k + $10k to closing.

Another reason I work in cash

[Deleted User 863]

Q here is an overly simple gap clause example.

Buyer is approved for 90% financing.
Buyer and seller agree to purchase price of $100k.
House appraisal comes in at $90k.
That means bank will loan 90% of $90k which is 81k loan amount.
So instead of putting 10% down the buyer has to cover the "gap", which means they have to bring $9k + $10k to closing.

Another reason I work in cash

Good luxury to have...but some people do pull off the financing game well and in theory I understand why it makes sense to finance if the properties cash flow.

Truthfully, I think buying properties above what their market value is doesn't make much sense in most instances. Guess it depends on the motivations behind the purchase. Patient investors are smart investors.