Ethics of Real Estate Investment, NIMYism and the Housing Crisis

In reply to Snowdoggie (Forum Supporter) :

Boost_Crazy said:

Like others have mentioned, affordability is highly dependent on location. And as I've said before, it can be misleading comparing the same location with it's past history, because while the physical location might be the same, the market is likely different. 
 

It seems to me like an established area with demand would have trouble supplying more entry level homes. While more homes would help with demand, the new homes themselves would command a premium on existing entry level homes. Say an existing entry level home in town was built in the '60's and is 1200 sq. ft.. So you build more 1200 sq. ft. homes. They are still going to cost more. If a buyer has to choose between a 60's home and a brand new home, they are going for the new home. It's new, has 60 years of advancements, and is likely in a newer, nicer neighborhood.

Not always. I own a house in Dallas that is 1,000 square feet that was built in 1954. You can get to Downtown Dallas from there in 20 minutes. Or you can buy a bigger brand new house with all the goodies far out in the suburbs and spend two hours a day driving to your office through some really nasty traffic. 

The prices for these 1.000 square foot homes are now pushing $300,000 if you can find one for sale, but most of the time you can't. I get three calls a week from realtors.
 

I'm sorry, I'm not following- not always what? I theorized that it's hard to lower housing prices in an in demand area simply by building more houses there. The new house will be more valuable then the comparable older house in the same area, so you didn't lower the cost of entry into the market. But I did miss that it should still add more available houses to the lower end of the pool, so more could theoretically buy from the lower end. I just made up a sq. ft. number for entry level homes. I wasn't trying to comment on the size of entry level homes, I'm sure they vary. 
 

 I live in the CA Bay Area. I could drive 40 miles in one direction and my house would cost $2 million. I could drive 40 miles in another direction and my house would be $600k, maybe under. I chose to live in the Goldilocks zone of close enough to get some of the benefits, far enough to keep prices down. 

In reply to calteg :

Where and what options you have for a commute are important. Housing is more expensive, but if you buy a house, it isn't automatically just gobbling up your pay increases. Your money is still there, it's just locked away in your home's value. In can be beneficial if you plan on moving elsewhere or retiring elsewhere down the road. You do need to factor in things like the increased interest rate. There is also a chance that if the market does drop, you could get "stuck" there until it rebounds.  Seattle does appear to be in decline like other west coast cities. Crime and high cost of living is driving away employers. I was in Seattle last year and it was significantly worse than my last visit. That was in the city itself, I have no idea about the suburbs. 

In reply to Boost_Crazy :

Well said.  Inflation is raising the value of your house while the payments for that house   remain fixed. 
  In the stock market that would be like always being able to buy that stock at the same price you originally paid. 
  Without the minute to minute ( second to second?) fluctuations  the  stock market brings.  
  Besides, while stock is simply numbers in some ledger, a home provides you shelter. 

Boost_Crazy said:

In reply to Snowdoggie (Forum Supporter) :

Boost_Crazy said:

Like others have mentioned, affordability is highly dependent on location. And as I've said before, it can be misleading comparing the same location with it's past history, because while the physical location might be the same, the market is likely different. 
 

It seems to me like an established area with demand would have trouble supplying more entry level homes. While more homes would help with demand, the new homes themselves would command a premium on existing entry level homes. Say an existing entry level home in town was built in the '60's and is 1200 sq. ft.. So you build more 1200 sq. ft. homes. They are still going to cost more. If a buyer has to choose between a 60's home and a brand new home, they are going for the new home. It's new, has 60 years of advancements, and is likely in a newer, nicer neighborhood.

Not always. I own a house in Dallas that is 1,000 square feet that was built in 1954. You can get to Downtown Dallas from there in 20 minutes. Or you can buy a bigger brand new house with all the goodies far out in the suburbs and spend two hours a day driving to your office through some really nasty traffic. 

The prices for these 1.000 square foot homes are now pushing $300,000 if you can find one for sale, but most of the time you can't. I get three calls a week from realtors.
 

I'm sorry, I'm not following- not always what? I theorized that it's hard to lower housing prices in an in demand area simply by building more houses there. The new house will be more valuable then the comparable older house in the same area, so you didn't lower the cost of entry into the market. But I did miss that it should still add more available houses to the lower end of the pool, so more could theoretically buy from the lower end. I just made up a sq. ft. number for entry level homes. I wasn't trying to comment on the size of entry level homes, I'm sure they vary. 
 

 I live in the CA Bay Area. I could drive 40 miles in one direction and my house would cost $2 million. I could drive 40 miles in another direction and my house would be $600k, maybe under. I chose to live in the Goldilocks zone of close enough to get some of the benefits, far enough to keep prices down. 

Then we can change mortgage payments for transportation costs.  
I live 30 minutes from downtown.  Travel an extra 30 minutes and comparable houses would be more than a million dollars cheaper.  
    Live 5 minutes from downtown and a comparable house is roughly that million dollars less.  But the taxes would be 10 times higher. 
      The reduced transportation costs  would be really significant. 
    Plus time lost would go up too.  
   So the further out the lower the real estate, the higher the transportation costs and the higher the personal time lost costs.   Annual time 1000 hrs /500 hours /42 hours. 
  Then costs.  There is a great deal of SWAG here.   $50/year   $5000/ $10,000/ year. 
  That's assuming $4 a gallon fuel. + 80% maintenance/80% depreciation on a $30,000 over a 10 year life span / 80% annual insurance/ 80% annual license etc. 

  your numbers will vary. 

Saw this. Thought of you. 
 

samdisamedy said:

It's been quite an eye-opener for me personally. Navigating the balance between making a profit and considering the broader impact on the housing market can be a real challenge. I work in the surveying sphere (link removed), so It's a bit different for me. Finding that middle ground and contributing positively to the community is important. Let's keep sharing insights and learning from each other's experiences.

Here's an idea to help positively impact the community: maybe don't post non-related links into threads. Maybe don't be an AI bot. Maybe buy a canoe and cross the English Channel with it, or better yet, the Atlantic? 

Follow up on a early topic in this thread: 

The local state university in town bought a property at a major intersection adjoining it's property. 

Said property was at one point approved for a CVS, but that developer never went through with those plans, so it was sold to the university about 6-7 years ago. 

It sat for 6-7 years vacant. A former pawn shop and chinese buffet. It looked like hell, but the university did just enough to avoid the ire of the city. 

It took the university 7 years to decide that they would just turn the property into a parking lot. 7 years of it ruining the surrounding property values and looking blighted. 

Higher taxes on vacant or under-utilized property wouldn't have done anything due it being "state owned land", but a fine or fees might have at least motivated someone to work more quickly on it's re-use. 

There are a few similar cases across our town that aren't owned by the university, but are derelict buildings just sitting with owners speculating and neighbors living with those eyesores. 

I don't want to punish PEOPLE for under utilizing their primary residence, but I have no qualms against punishing investments companies into "crapping or get off the pot."

In reply to pheller :

Pretty sure we already beat this dead horse. . 
 

Did you call Code Enforcement in the last 7 years?  Have you called your commissioner yet?

Nothing more to say. 

In reply to pheller :

Do you know that it took them 7 years to decide to turn it into a parking lot? Or is that an assumption on your part? It might have taken 7 years to get approval for for the parking lot. As I posted earlier, all of this is public record. For my town, I can look up a vacant property and see if there is anything out for approval. Most take years. Maybe it's not the Universities' fault, but the city dragging it's feet? Maybe instead of more intervention like you propose, less would actually get you the results that you want more quickly? 

Ran across an interesting video highlighting some facts that suggest a real estate crash may be coming. The REIT situation is starting to sound a lot like tulipmania:

(Warning - Language)

I don't know who, but somebody is buying them... as I'm looking at my time in NH getting extended (again...), I happened to ride past a small house the other day.  Average looking 1300 sqr. ft cape style on a small lot with a 1 car detached unfinished garage.  Had thoughts until I looked it up: $680K - and already under contract. Holy berk...  Makes the larger ranch near by (w/ 2-car attached and 2-car detached garages) for $750K look like a deal. 

But it seems there are so few houses on the market right now sellers can ask for the moon with a solid chance of getting it.  The lack of available homes in many areas is what may mitigate a real estate crash, despite the prices and higher interest rates.  Folks who already have low rate mortgages aren't moving unless they have to. 

Scotty Con Queso said:

Saw this. Thought of you. 
 

Depends... I don't buy avocados, but I happened to notice a local store selling them for 79 cents each, so that basket (16 by my count) is under $13. 

In reply to Ian F (Forum Supporter) :

Yeah, but any dude who is buying 16 avocados at once probably has a wife that is making sure he lives in a high rent district! 

I have a friend that is a mortgage broker. He says a lot of the houses are over priced and going for insane money over actual Zillow market prices. The big thing he said that it is a cash buyer.  NOT someone trying to get a mortgage. He also mentioned that a lot wouldn't get approved because the appraisal valuation of the home would be off. Only chance for anyone trying to get the mortgage for the overpriced house will have to pony up more cash to get it. 
 

That YouTube video is off for the current market valuation now. It is actually $200k more. I am seeing a lot of home flippers right now trying to cash in on the cheap houses they got a year or 2 ago and actually getting a "real" buyer paying $200k or more than they actually bought it for in such a short time. 

Land values also went up with low interest rates, so even if you could build a house cheaper than existing, you'd likely not save much because labor prices, materials, and land haven't fallen yet. 

There is also the thought that as housing demand dries up, trades will start charging more to make up for having less clients, rather than getting desperate for work and lowering their bids. 

It's all messed up. 

In reply to pheller :

I think you just said that it would be normal, and not "messed up" if tradesmen were desperate and undercharged for their labor....

On that, sir, we disagree. 
 

I think it's messed up that anyone should expect a quality tradesman should charge sub-par rates for the skills it took him decades to learn. 

What's the alternative? 

I know, people could lose money on their land investments. I'd be ok with that too.

I'd also be ok with the entire population to get a huge pay bump so people could afford housing. 

Something has to give, somewhere. Personally, I think those best able to weather a downturn would be all the investors, but what motivation does someone with vacant land have to sell if they think it's only a matter of time before the market rebounds and they can continue to profit on their investment? 

How long does the slump need to be before people are willing to lose money?

If I lost my job tomorrow, I wouldn't be able to sit idle for more than a few months before I'd need income, and at a certain point, I'd take less pay or less profit. 

To be clear, I'm suggesting that the trades have the "most realistic" ability to increase their demand by managing their costs. 

We all know, and this thread has proven, that targeting and/or "motivating" land holders, land investors, etc, is unpopular. 

Materials businesses will lower prices as they approach over supply conditions. 

Labor will lower bids to get jobs. 

When do the investors suffer? 

I hear Venezuela has nice weather and may suit your ideals better. I bet you could even buy a house there if you wanted at a price you'd be willing to pay. 

pheller said:

What's the alternative? 

 

I'd also be ok with the entire population to get a huge pay bump so people could afford housing. 

 

You do understand that if everyone gets a pay bump, housing prices would go up right?

I am surprised the higher end houses are not sitting though. I've seen a good number of $1.5-$2m cash deals in the last few months, that's nuts.

In reply to Steve_Jones :

I think most people either failed basic econ or the public school systems never bothered to teach it. 

Yea I guess that's the problem. If we all got paid better, that would likely spark more inflation. 

The Fed really wants to push down inflation by seeing both wage and employment numbers taper off. 

Meanwhile, there is still plenty of profit to be made if you hold land, rentals, etc. 

How do we get more affordable housing without skyrocketing unemployment or continued inflation? 

Millions of people can't move from hot employment centers to places with no jobs, unless there is some incentive for businesses to allow millions of workers to work remote. 

SV reX said:

In reply to pheller :

I think you just said that it would be normal, and not "messed up" if tradesmen were desperate and undercharged for their labor...

He did not. 
 

There's a little thing called the market that decides what the appropriate price is. That's normal. 

pheller said:

To be clear, I'm suggesting that the trades have the "most realistic" ability to increase their demand by managing their costs. 

Doublespeak. 
 

I think you mean "sell more services by dropping their price".

Ill be happy to drop my price when you take a voluntary pay cut. 

In reply to pheller :

What's your beef with investors?  I mean, seriously.  WTF?