Posted on 05/30/2023 8:05:47 AM PDT by dynachrome
Elon Musk is once again ringing the alarm on the US real-estate sector.
"Commercial real estate is melting down fast. Home values next," the Tesla and SpaceX chief tweeted on Monday.
The tech billionaire made the comment in response to a tweet by the Craft Ventures founder David Sacks, who said that a big chunk of commercial real-estate debt was due to mature soon.
Musk has previously warned that cracks could appear in property markets following turmoil in the banking sector. For example, the clean-energy pioneer said commercial real estate was "by far the most serious looming issue," and cautioned regional banks could experience a wave of defaults because of their huge exposure to the sector.
The debt-fueled industry has kept investors on edge in recent months, given that it faces a raft of headwinds. These include higher interest rates, tighter credit conditions, and work-from-home trends.
(Excerpt) Read more at markets.businessinsider.com ...
We have lived through decades of generally rising prices in housing and the stock market.
To those who invested in these things—congrats.
That said—pigs get fat and hogs get slaughtered.
Now is a great time to cash out and enjoy the profits.
There is just a ton of potential downside out there.
“capture that equity”
Putting that equity safely to work for a reasonable return would require more effort than calling a repair guy.
In 1978 my mother was told to put her money in the bank for 8% interest and rent for $350/month.
She had what is now my house built instead. She made a wise choice.
“There is just a ton of potential downside out there.”
I prefer many tons of rock solid concrete over fixed rate investments whose value is decimated annually.
As for stocks, I only put money I can afford to lose into stocks.
Those thinking of paying big bucks for waterfront property should read up on Crystal Lagoons.
I joke that if it were not for women we would be living in caves. With bean bag chairs. And 80-in screen TVs.
“remote work viability”
If you can do your work from home, so can an Asian Indian, for far less money.
house down the road from me just went up for 600K about twice what zillow and everyone puts it at.
be interesting to see what happens since my house is newer, larger, has a bigger out building and more land.
I paid 250 for it 6 years ago. Everyone puts it in the mid 3s now. (zillow, tax assessor and what not)
if they get the 600 I am selling, I’ll live in my old school bus till I find something in a red state. I’ll also list for 599,999.
Not to more and more people.
Lot of people bought into owning houses as rentals, and a lot of investment bastards did too.
“if they get the 600 I am selling”
Make sure your sale is contingent on your finding and locking in a suitable replacement.
Yes, I bought the Marvin Elevate Series. This is a 100% fiberglass frame door with wood glued to it on the inside.
Plus the jambs are also fiberglass/composite. I will trim it out with PVC. So, it will never rot, shrink or swell.
I have a friend who I will pay cash to help me install it. I have installed several 36” wide and smaller doors myself. Installing a 6’ door is really a two man job. Real men, not trans.
My point with my original post is that anything to do with construction now cost at least 50% more than it did even ten years ago. Try hiring a operator and an excavator these days. What used to be $100/machine hour is now $200 or more.
A few years ago you could get a cement mixer truck to stop at your place for $275-350 minimum. Now that same truck will not come to your site for under $600.
I poured a 13 x 15 concrete floating Alaska slab patio at my house last year. I did all the excavation with my tractor. I hauled all 8 yards of the 3/4” stone that went under the pad again with my tractor. I ended up paying $3000 just to have the pad poured. I had another company quote me $6 and another wanted $8. Two companies never responded to my RFQs.
The other thing that has really driven up real estate prices in many residential areas is nightly rentals. Air B&B and VROB.
Any place within walking distance to the ocean is now worth based on what you can rent it for during the “season”.
Same goes for places in Palm Springs or any other vacation rental area.
Six years ago a buddy bought a house in York Beach, ME. It was brand new. Just a three bedroom house. About 1800 sq ft. It is a five minute walk to the ocean. He rents it for the whole summer. The income from the summer rental more than pays the mortgage/taxes the rest of the year.
During the summer he and his family switch between a trailer/camper on a lake and a condo.
Spoken like a Kiyosaki fan. I don’t disagree.
House price graph for reference: https://fred.stlouisfed.org/series/CSUSHPINSA
Here is a graph of the Home Price to Median Household Income Ratio: https://www.longtermtrends.net/home-price-median-annual-income-ratio/
It has been a bull run since 2012. Most of the increase is post-Covid, and we are way above the 2006 bubble.
The key numbers to look at in the residential housing market is average income vs average mortgage payment on current transactions.
That ratio is the worst for the homebuyer it has been in the modern age.
That means we are at the top of a housing bubble.
At the top of the bubble everybody has made money—and things never looked better....
;-)
You think a decrease in HOME PRICES is going to mean a decrease in MATERIALS PRICES?
Not sure that is real world 2023 logic. It could happen, but I am dubious.
You might be right, but there is simply no way anyone is going to convince me that a property which sits vacant for a year or more isn’t overpriced.
I’ve insured my house for $550 a square foot; here in Norcal that is about correct.
Home prices are not relevant, for those who are debt free.
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