Housing Analysis

[someguy]

The Fed can only control the short term of the curve

Remember they've been manipulating the longer end of the yield curve for some time now via QE (purchasing US treasuries and MBS).  Tomorrow they start the opposite, QT (selling treasuries and MBS).  The New York Fed's trading operation currently owns 38% of all outstanding US Treasury Securities with 10 to 30 year maturities.  A seller that big is unprecedented, so we'll find out what happens together.  Look for the longer end of the yield curve to rise.

https://www.marketwatch.com/story/feds-quantitative-tightening-is-about-to-arrive-what-that-might-mean-for-markets-11654024143

 

[usctrojancpa]

The Fed can only control the short term of the curve

Remember they've been manipulating the longer end of the yield curve for some time now via QE (purchasing US treasuries and MBS).  Tomorrow they start the opposite, QT (selling treasuries and MBS).  The New York Fed's trading operation currently owns 38% of all outstanding US Treasury Securities with 10 to 30 year maturities.  A seller that big is unprecedented, so we'll find out what happens together.  Look for the longer end of the yield curve to rise.

https://www.marketwatch.com/story/feds-quantitative-tightening-is-about-to-arrive-what-that-might-mean-for-markets-11654024143

True, it'll be interesting to see what happens BUT if the market continues to melt down and we continue to give the highest free world interest rates you may see bids come in from foreign buyers.

 

[someguy]

Good point, as our "risk free" yield rises it will attract buyers, which may dampen the yield increase.

 

[Liar Loan]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Well, it was nice while it lasted....

Mortgage Rates Erased a Majority of Recent Drop in Past 2 Days
https://www.mortgagenewsdaily.com/markets/mortgage-rates-06012022

 

[OCtoSV]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

 

[usctrojancpa]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

I've been telling all of my buyers for years that if you aren't gonna be living in the home for 5+ years then you shouldn't be purchasing because the near term can be volatile.  I'm purchasing a home myself with eyes wide open and plan on living in that home for 10+ years as it is the unicorn that I've been searching for over 2 years for.

 

[irvinebullhousing]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

In time of uncertainty, there will be less demand for big ticket items. Couple that with the incoming volatility of the hiking cycles, banks are flush with cash from QT of the FED which banks will reduce the rate to spurs borrowing or encourage more transactions. Mortgage rate is stubborn low and continue.

Rate of 7 or 8 will come into the pictures only if the hot housing begins again, which many on here clearly stated that it is cooling.

Now it?s up to an individual to choose to buy when the market cools and options open up or wait for a bidding war is up to them to decide.

 

[Irvinehomeseeker]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

I guess you are referring to this 1.6M detached condo- https://www.redfin.com/CA/Irvine/127-Charcoal-92602/home/165947551  No upgrades! The other one with some upgrades at 1.7M also went pending. As long as buyers in Irvine are willing to buy at these high prices, buyers market seems like a far stretch for now!

 

[irvinebullhousing]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

I've been telling all of my buyers for years that if you aren't gonna be living in the home for 5+ years then you shouldn't be purchasing because the near term can be volatile.  I'm purchasing a home myself with eyes wide open and plan on living in that home for 10+ years as it is the unicorn that I've been searching for over 2 years for.

Nice. The people that can do it will do it when everyone freak out. Smart move.

 

[irvinehomeowner]

Economics is an art, not a science...

Based on this premise, one cannot accurately predict timing due to the impact of non-fundamental (ie emotional) factors that is usually in play with art vs science.

The last 15 years seens to prove that for real estate.

 

[Liar Loan]

Economics is an art, not a science...

Based on this premise, one cannot accurately predict timing due to the impact of non-fundamental (ie emotional) factors that is usually in play with art vs science.

The last 15 years seens to prove that for real estate.

It's real simple to time the real estate market.  Buy 2-3 years after a recession has ended for the best combo of price/rate.  Conversely, don't buy 1-2 years before a recession begins, because you'll be paying the worst combo of price/rate.

Let's dispense with the strawman that you have to time real estate perfectly to benefit from market timing.  Even if you're within 5% of a peak or valley, you've timed things extremely well.

 

[irvinehomeowner]

I love it when someone uses "strawman" because it usually takes ones to know one.

My point isn't that you need to know the "perfect" timing, it's that timing, circumstances AND conditions are not always in sync and that is very difficult to predict.

2008... bubble popped and people expected a crash of epic proportions. Government intervention, shadow inventory that never hit the market, OARM resets that didn't happen because of plummeting interest rates and instead of massive "over 50% drop in Irvine"... it was more like 20%... or 30% depending on what you are measuring and when.

2010-2012... if you were hoping prices would keep going down, if you waited 2-3 years, you would have hit 2013 when prices jumped and kept going.

2018... indicators and many posters here predicted a *SIGNIFICANT* slowdown in housing prices... to the point where people were ridiculing me for saying "any time is a good time to buy". What happened? Even 2 years later... with a global pandemic, you would think that would finally do it... nope... even higher.

So where in there was that +/- 5% timing that could have been done? In 2010-2012, people were saying to wait because prices are still going down... 2013+ people said wait because prices were going up so fast that they had to come down again. 2018 is when many of you said it would be going down so don't buy yet. 2020-2022 rolled around and all the bears were hibernating (while LL was buying his own home and not telling anyone they should be buying too... which by the way means you paid more in 2020 than if you better timed it and bought in 2012... that's more than 5%).

So Mr. I Can Time Within 5% Perfection... when do you buy? Next year? The year after that? 2025?

The only strawman here is "the market can be timed".

 

[OCtoSV]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

I've been telling all of my buyers for years that if you aren't gonna be living in the home for 5+ years then you shouldn't be purchasing because the near term can be volatile.  I'm purchasing a home myself with eyes wide open and plan on living in that home for 10+ years as it is the unicorn that I've been searching for over 2 years for.

congrats on finding your unicorn property

 

[usctrojancpa]

I love it when someone uses "strawman" because it usually takes ones to know one.

My point isn't that you need to know the "perfect" timing, it's that timing, circumstances AND conditions are not always in sync and that is very difficult to predict.

2008... bubble popped and people expected a crash of epic proportions. Government intervention, shadow inventory that never hit the market, OARM resets that didn't happen because of plummeting interest rates and instead of massive "over 50% drop in Irvine"... it was more like 20%... or 30% depending on what you are measuring and when.

2010-2012... if you were hoping prices would keep going down, if you waited 2-3 years, you would have hit 2013 when prices jumped and kept going.

2018... indicators and many posters here predicted a *SIGNIFICANT* slowdown in housing prices... to the point where people were ridiculing me for saying "any time is a good time to buy". What happened? Even 2 years later... with a global pandemic, you would think that would finally do it... nope... even higher.

So where in there was that +/- 5% timing that could have been done? In 2010-2012, people were saying to wait because prices are still going down... 2013+ people said wait because prices were going up so fast that they had to come down again. 2018 is when many of you said it would be going down so don't buy yet. 2020-2022 rolled around and all the bears were hibernating (while LL was buying his own home and not telling anyone they should be buying too... which by the way means you paid more in 2020 than if you better timed it and bought in 2012... that's more than 5%).

So Mr. I Can Time Within 5% Perfection... when do you buy? Next year? The year after that? 2025?

The only strawman here is "the market can be timed".

LL talks about how you can time the market sorta like you can with the stock market.  What about my situation where I looked for 2+ years and only made offers on 3 homes in that time (got the 3rd one)?  How do I time when the right home that checks 90%+ of my boxes?  I was literally looking for a needle in a haystack so that makes it almost impossible to time and comes down to when that unicorn home actually hits the market.  As I mentioned, to many buyers a home is much more than a financial investment. 

 

[Kenkoko]

Even if it's "almost impossible" to time the market, you should probably still try.

I frankly don't get the "too difficult why bother" narrative that keeps getting parroted on TI. Why live your life with such a defeatist attitude?

And are we seriously using problems unicorn hunter faces to make a broad based connection to regular buyers in Irvine?

Most Irvine buyers would probably be ok with cookie cutter homes.

 

[Ready2Downsize]

Economics is an art, not a science...

Based on this premise, one cannot accurately predict timing due to the impact of non-fundamental (ie emotional) factors that is usually in play with art vs science.

The last 15 years seens to prove that for real estate.

It's real simple to time the real estate market.  Buy 2-3 years after a recession has ended for the best combo of price/rate.  Conversely, don't buy 1-2 years before a recession begins, because you'll be paying the worst combo of price/rate.

Let's dispense with the strawman that you have to time real estate perfectly to benefit from market timing.  Even if you're within 5% of a peak or valley, you've timed things extremely well.

LOL!!!!

HOW do you know when a recession is coming? What about in the 70's when there were three recessions while the fed was trying to tame inflation? Just wait till u r 10+ years older and 10 years a renter wondering if there is yet another one on the way?

Then u got to depend on SOMEONE having a house that YOU want with a floorplan YOU want, in a neighborhood YOU want to live in with landscaping YOU like and then YOU get to spend the $$$$ to take out stuff that someone else put in that YOU don't like. Ask Calbear's wife if she'd be happy with that scenario. LOL!

So......... since u r so into not losing money on something that you use every day, how do u ever buy a car? Those depreciate on day one (cept during the pandemic when they became scarce). Oh, u USE that, like a house u USE to LIVE in.

How do you even buy food? What a dang waste! U eat it and it's GONE! U lost ALL your money and what u get for that? Bunch of poopie down the drain.

 

[Ready2Downsize]

Market is going to melt up, not down.

Fed's hands are tied in raising rates. Government can't really afford higher rates so they'll fold like a cheap suit with another few increases which are baked in.

Inflation yoy numbers are going to look not too bad (assuming gas prices don't rise too much). Sure prices are high and will remain high but the rate they go up is going to be not that bad, hence rates are not going as high as u think.

New highs coming. BUT THEN........... the big drop comes and the pain begins but not from here. JMO, of course but it's been my view for a long time.

 

[CalBears96]

Even if it's "almost impossible" to time the market, you should probably still try.

I frankly don't get the "too difficult why bother" narrative that keeps getting parroted on TI. Why live your life with such a defeatist attitude?

And are we seriously using problems unicorn hunter faces to make a broad based connection to regular buyers in Irvine?

Most Irvine buyers would probably be ok with cookie cutter homes.

It's not about "too difficult why bother" narrative.

I mean, sure, you can try to time the market, but there are OTHER criteria to check off when you buy a house. It's not buying a stock or a car.

Location, floorplan, new or resale, availability. You have to check off all those boxes when you buy a house. For my wife, new construction is a must. Then it's location. She really loves Portola Springs. Now, with these two boxes to check off, HOW exactly do you time the market? Wait until next year, hoping that the housing price will drop 20%? Oops, no more new construction in PS.

As Martin, R2D, and IHO mentioned, buying a house to live in is NOT an investment. Therefore, if you find one that you really like and you've already done all the math to make sure that you can afford it even through difficult times, then you buy the house.

 

[Ready2Downsize]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

I've been telling all of my buyers for years that if you aren't gonna be living in the home for 5+ years then you shouldn't be purchasing because the near term can be volatile.  I'm purchasing a home myself with eyes wide open and plan on living in that home for 10+ years as it is the unicorn that I've been searching for over 2 years for.

I hope u got this one:
https://www.redfin.com/CA/Tustin/10710-Plumas-Way-92782/home/5769067

Pretty big but when I saw that hit the market, I thought.......... this is a Martin home. lol!

 

[usctrojancpa]

What happens if interest rates fall (which will happen when the economy and inflation slow)?

Lower interest rates will stimulate the economy, but I'm not expecting that for awhile.  With inflation so high, interest rates are still very much negative, which is fanning the flame of further inflation.  The Fed wants the headline inflation number back to 2.5% and that's going to require a lot more tightening.

The Fed can only control the short term of the curve and if it gets too aggressive with the raising the Fed funds rate too high they'll cause longer term rates to fall and the yield curve invert because market participants will start pricing in a recession which is when longer term rates will fall.  The more aggressive the Fed gets by increasing rates higher the lower longer term rates will go and the deeper the recession will be, simple economy 101 at work.  Longer term interest rates are already down about 30-40bps from the peak a few weeks ago.  Unlike your average realtor, I actually have an undergrad econ degree. 

Economics is an art, not a science, unlike my computer science degree which trains the brain to operate via raw logic, especially the USC undergrad program where I coded an OS, a compiler and designed and simulated a CPU in a TTL design package, then went into sales. The long end is going to get pummeled by massive open market MBS sales (can't be rolled over as rates are so high refi market is frozen) and lack of Japanese buyers for UST due to rising rates in Japan (finally!)

I'm pretty sure you know 7-8% mortage rates are coming soon, and anyone buying now will face many years of being technically underwater based on purchase price. A responsible agent would be putting that scenario in front of buyers that are emotionally attached to their purchases, especially wives that demand paying $1.6M for a detached condo.

I've been telling all of my buyers for years that if you aren't gonna be living in the home for 5+ years then you shouldn't be purchasing because the near term can be volatile.  I'm purchasing a home myself with eyes wide open and plan on living in that home for 10+ years as it is the unicorn that I've been searching for over 2 years for.

I hope u got this one:
https://www.redfin.com/CA/Tustin/10710-Plumas-Way-92782/home/5769067

Pretty big but when I saw that hit the market, I thought.......... this is a Martin home. lol!

I do like those single level Emerson homes but no, I got this Turtle Rock home....
https://www.redfin.com/CA/Irvine/5712-Oakley-Ter-92603/home/4741437