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Foreclosures are on the rise. Here’s what that says about the housing market

Fiat Metaler

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I responded because you posted a chart of the affordability index that only covered the last 13 months. The longer term perspective is informative.

I disagree with you that people or home prices are maxed out. An index of 100 means the median family can afford the median home. To afford a median home, you generally need 3X the income to cover the mortgage payment. So they are not maxed out per se; just maxed out by banks' rules of thumb. They have other discretionary income.

Also, affordability can go much lower. Look at prices in the 70s. Gas quadrupled.

Also, today's houses are a lot larger than the average house in the 80s. The median house today has much more square footage, central heat and air, a 2-car garage. People can trade down to smaller homes, and then the median home will be more affordable. You are seeing some of that with milennials opting for tiny homes, off grid homes, van life, etc.' its just a trickle but its interesting. On the other hand, upper income folks are trading up to larger homes becaues they are working from home and homeschooling. Others are trading tiny homes in NY and California for larger homes in Texas and Florida. The only point here is that the so called median home is not static.

I'm interested in arguments that say home prices will fall, becaue then I would alter what I am doing; the affordability index is not a good argument for this though, imho.
 

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I'm interested in arguments that say home prices will fall, becaue then I would alter what I am doing; the affordability index is not a good argument for this though, imho.

except that home prices dont have to actually 'fall'. the (nyc shysters) with their magic money machine can/do make falling look like rising
 

Fiat Metaler

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Agreed. Wages are rising but housing, interest rates, and everything else are rising faster than wages. So everyone other than the top 1% feels more poor.
 

Casey Jones

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except that home prices dont have to actually 'fall'. the (nyc shysters) with their magic money machine can/do make falling look like rising
Oldest psychological trick in the books, as regards wealth and money.

You buy a property. And its price appreciates. Hey, whoppee.

Except not NEARLY as much as the cost-of-living, market-basket test.

You do NOT immediately think you lost money. You just think it didn't go so great. Think you might have picked better.

The feeling of losing money is not there. Not unless you've dealt with this situation considerably and have fine-tuned your thinking.

Another evil manifestation of "The Wealth Effect."
 

EO 11110

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Oldest psychological trick in the books, as regards wealth and money.

You buy a property. And its price appreciates. Hey, whoppee.

Except not NEARLY as much as the cost-of-living, market-basket test.

You do NOT immediately think you lost money. You just think it didn't go so great. Think you might have picked better.

The feeling of losing money is not there. Not unless you've dealt with this situation considerably and have fine-tuned your thinking.

Another evil manifestation of "The Wealth Effect."
indeed. and in this case, if home prices drift up from here at low single digits, the roaring inflation is inflicting significant losses - esp when considering the leverage employed

i see that as best case. base case is worse
 

RebelYell

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I responded because you posted a chart of the affordability index that only covered the last 13 months. The longer term perspective is informative.
If you are talking to me, I didn't post any charts - I just commented on a chart someone else posted.

I disagree with you that people or home prices are maxed out.
I didn't say that people or home prices are maxed out, and I agree that they are not. I merely pointed out that if and when the affordability index hit 100, that would be an indicator that home prices were high relative to income.

An index of 100 means the median family can afford the median home. To afford a median home, you generally need 3X the income to cover the mortgage payment. So they are not maxed out per se; just maxed out by banks' rules of thumb. They have other discretionary income.
An index of 100 means that the median family exactly qualifies for the median mortgage assuming a 20% downpayment. This is maxed out to all intents and purposes - the bank will not lend them any more than this so they cannot buy a house which is more expensive than this. I have pointed out various reasons why this is not an absolute floor and affordability can fall below 100 in previous posts, but nevertheless this is unusual and rarely happens.

Also, affordability can go much lower. Look at prices in the 70s. Gas quadrupled.
The affordability index hit 111 in 1978 and 98 in 1979, but was in the 120-155 range for the remainder of the decade. It did fall appreciably below 100 in the early 1980s when Volcker pushed interest rates very high (and basically doubled the income required to qualify for the median house), but bounced back again quickly when interest rates fell.

Also, today's houses are a lot larger than the average house in the 80s. The median house today has much more square footage, central heat and air, a 2-car garage. People can trade down to smaller homes, and then the median home will be more affordable. You are seeing some of that with milennials opting for tiny homes, off grid homes, van life, etc.' its just a trickle but its interesting. On the other hand, upper income folks are trading up to larger homes becaues they are working from home and homeschooling. Others are trading tiny homes in NY and California for larger homes in Texas and Florida. The only point here is that the so called median home is not static.

I'm interested in arguments that say home prices will fall, becaue then I would alter what I am doing; the affordability index is not a good argument for this though, imho.
I'm not predicting that home prices will necessarily fall from their current level. The long term average affordability is 130 which is round about where we're at so that is not an indicator either way. In addition there are reasons to believe that the affordability index may become a less useful indicator going forwards because more and more homes are being bought by investors, not occupiers.

My point was very specific and narrow - that an index value of 100 would be a reason to be cautious because it is difficult (although not impossible) for the index to fall much below this and indeed history shows that it has rarely happened. That's the extent of what I was saying in response to an earlier post where you appeared (at least to me) to imply that even 100 was a normal value and nothing to be worried about.
 

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I recently looked up rents in my neighborhood. Very desirable location, home prices have always been high here. Rents for apartments seem average, maybe a little high, but whole homes for rent seem cheap to me. Maybe when you get to that level you can’t ask for too much as someone would just get a mortgage instead of rent.
 

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that link takes you to posts I made with the charts of new home construction,

last year we peaked at 1800 in lumber price or so, and this year 1400 or so, currently about 900 in the futures market
that current is still double of historical high points

so input costs are way up, and suppliers are being hit with all manner of price increases as you all know

then you look at that, we are still way below any building rate that was going on in the early 2000's, even with the covid spike,
which then one could infer that there still are not enough replacements making it to market at current activity levels,

leaving our real question, is current supply greater than need or are we running at a negative market clearing number of units?

if we are still negative, the demand will remain there until rates go so high, that affordability craters, and demand vaporizes

for now, the charts just aren't showing we have reached that level

arguably, we aren't overbuilt, leaving price and interest rates as the primary variables

even with current pricing, builders aren't working on mega margins like a apple or a sales force, because the inputs have risen so high

the price per labor hour is way up, way up, and the productivity per person is way down.

the builders are paying much more per hour of labor and getting a lot less done in that hour, in many cases 40-50% less output per hour from just a decade ago.
 

Fiat Metaler

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I recently looked up rents in my neighborhood. Very desirable location, home prices have always been high here. Rents for apartments seem average, maybe a little high, but whole homes for rent seem cheap to me. Maybe when you get to that level you can’t ask for too much as someone would just get a mortgage instead of rent.

The market for executive level homes for rent is small. Most people who can afford the rent can afford to buy and prefer to buy. With more modest homes, the monthly rent is often close to 1% of the purchase price, while for luxury homes it might be half that. The latter is a poor investment and is why most homes at that level are put up for sale rather than rented.
 

hammerhead

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This may have been shown in the previous 5 pages but how would one get the real number of foreclosures in ones area?
 

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In most jurisdictions they have to make public notices ie in the newspaper. Honestly that’s about all that’s left of most papers…death and legal notices. It’s VERY expensive to run them now.
 

hammerhead

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In most jurisdictions they have to make public notices ie in the newspaper. Honestly that’s about all that’s left of most papers…death and legal notices. It’s VERY expensive to run them now.
I typed an internet search for the county. Got lots of sales pitches. Hadn't tried registry of deeds.
 

Usury

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If you’re looking for props to buy, good luck. There are ten vultures for every foreclosure these days. They sell for what they’re worth, so no huge bargains in most cases.
 

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This may have been shown in the previous 5 pages but how would one get the real number of foreclosures in ones area?

Zillow will usually have them. Not perfect but just to gage the numbers it works fine.

1650372953903.png
 

southfork

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Just looking at 30 year mtg rates , most over4% and cd rates suck
 

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Usury

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5%
 

Voodoo

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This guy seems to produce Excellent videos on the housing markets. Clearly he shows price cuts are way up, especially in some blue cities like Boise ID and Austin TX.

 

EO 11110

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more signs of topping. check out the bloodbath on the chart for homes below 250k. the high and super high end is up - driving the median price up.

not my bold


After crashing in March, existing home sales were expected to keep slumping in April as mortgage rates have done nothing but accelerate and mortgage applications collapse. Analysts were right as existing home sales fell to 5.77mm SAAR (as expected), sliding 2.7% MoM, slightly better than expected (but only because of a downwardly revised 8.6% MoM drop in March). Existing home sales are now down year-over-year for the eight straight month...

All-cash sales accounted for 28% of transactions in March, up from both the 25% recorded in February and from 23% in March 2021.

"With rising mortgage rates, cash sales made up a larger fraction of transactions, climbing to the highest share since 2014," Yun said.
Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago (1.05 million). Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.

"Home prices have consistently moved upward as supply remains tight," Yun said.
"However, sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside."
The median existing-home price for all housing types in March was $375,300, up 15.0% from March 2021 ($326,300)...

1650472183162.png
 

Voodoo

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more signs of topping. check out the bloodbath on the chart for homes below 250k. the high and super high end is up - driving the median price up.

not my bold


After crashing in March, existing home sales were expected to keep slumping in April as mortgage rates have done nothing but accelerate and mortgage applications collapse. Analysts were right as existing home sales fell to 5.77mm SAAR (as expected), sliding 2.7% MoM, slightly better than expected (but only because of a downwardly revised 8.6% MoM drop in March). Existing home sales are now down year-over-year for the eight straight month...

All-cash sales accounted for 28% of transactions in March, up from both the 25% recorded in February and from 23% in March 2021.


Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago (1.05 million). Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.


The median existing-home price for all housing types in March was $375,300, up 15.0% from March 2021 ($326,300)...

View attachment 255159

This makes sense. What I've seen in strong markets, it is the low end homes that benefit the most. This kind of compresses the range. It also makes sense from a logical point of view. People aren't making more money but they are competing with each other on the affordable homes. So they start bidding up the "best" of the lower value homes they can find. Condition and other decor choices seem to become less important.

That will reverse. I would expect the low end to drop more and inferior condition homes will get hit harder.
 

EO 11110

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(nyc shysters) continue to buy in bulk

https://www.ft.com/content/8e6ba0f7-66f7-4e98-82c9-976fe82d8fb7

Blackstone has struck a $13bn deal to acquire one of the biggest portfolios of student housing in the US, extending a streak of real estate transactions that has already made the private equity company one of the biggest owners of inner-city apartment blocks and suburban homes. The purchase of American Campus Communities will give Blackstone a presence near the campuses of Princeton University, University of California, Berkeley and other institutions where the company owns more than 100 halls of residence and housing units.*

Blackstone executive Jacob Werner said the transaction also presented an opportunity to use capital from the Wall Street group’s $279bn real estate unit to build new university facilities in areas that were not adequately served. The deal underscores how Blackstone, one of the biggest real estate investors in the US, is seizing on coronavirus pandemic-related disruptions to make large-scale investments in American housing, a strategy the firm pioneered during the last financial crisis, when it set up a new venture called Invitation Homes. That venture involved dispatching executives to foreclosure auctions to make piecemeal acquisitions of recently vacated homes.

But Blackstone’s recent deals have largely focused instead on buying ready-made portfolios from other real estate developers. Last July, Blackstone acquired a $5.1bn portfolio of apartments that have received government subsidies geared towards low-income families in a transaction that prompted unease among non-profit groups that provide affordable housing. The same month, Blackstone spent $6bn to buy Home Partners of America, which operates a rent-to-buy scheme for suburban houses, and promises a path to home ownership for families with low credit ratings. Some critics of that deal said the Home Partners business model was primarily a way of sourcing properties to create a new breed of corporate landlord.

The company now owns 17,000 houses across America. ACC’s sale to Blackstone comes after months of pressure exerted on the housing company’s board by Land & Buildings Investment Management, a real estate-focused activist fund led by former Citigroup analyst Jonathan Litt. Just last week, Litt wrote to the board stating that there was “significant untapped potential in ACC’s assets”, adding that he had been “seriously concerned that the board . . . were not sufficiently focused” on creating shareholder value. For Blackstone, the new push into university housing represents a bet that students will keep showing up for in-person learning at leading US universities despite high tuition costs, the rise of distance learning during the pandemic and a long-term decline in enrolment.

About 2.1mn students embarked on a US university education last autumn, according to data from the National Student Clearinghouse Research Center. This represents only a slight rebound from pandemic-hit 2020 and a decline of 22 per cent since 2015. But the most prestigious universities have fared far better and nearby landlords have benefited. Students were paying rent of $791 a bedroom last December at 200 sought-after institutions tracked by Yardi Matrix, a real estate research company. Rents at UC Riverside rose 15 per cent to $1,004, the company said. Blackstone is paying $65.47 a share for American Campus Communities, a 14 per cent premium to the price at Monday’s close.
 

Casey Jones

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Who the hell ever heard of a private student-housing company?

When I was doing that, you had a choice. The dorm, if there was room. And there were rules...oh, gawd, were there rules.

Or out in town. Someone turns a bedroom into an "apartment" and charges you a hundred a month for it. That was serious money in the late 1970s.

Or, third option, couch-surf somewhere or find a roommate. I knew a few guys (casually) who were playing the gigalo to older (late 20s) divorced single mums. How that worked with a normal social life, I don't know.

...I know, it's become big business. A business here (ROAM Student Housing) bought a warehouse and renovated it into a group of "housing pods" - basically, common areas with bedrooms and shared bathrooms (losing most of the point of living off-campus, IMHO). They rent by the semester or by the month; but, although they're new and furnished, it doesn't sound like an attractive picture.

Nor is it especially cheap.

Now it becomes as institutional and exploitative as anything in modern Amerika.
 

EO 11110

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Who the hell ever heard of a private student-housing company?

When I was doing that, you had a choice. The dorm, if there was room. And there were rules...oh, gawd, were there rules.

Or out in town. Someone turns a bedroom into an "apartment" and charges you a hundred a month for it. That was serious money in the late 1970s.

Or, third option, couch-surf somewhere or find a roommate. I knew a few guys (casually) who were playing the gigalo to older (late 20s) divorced single mums. How that worked with a normal social life, I don't know.

...I know, it's become big business. A business here (ROAM Student Housing) bought a warehouse and renovated it into a group of "housing pods" - basically, common areas with bedrooms and shared bathrooms (losing most of the point of living off-campus, IMHO). They rent by the semester or by the month; but, although they're new and furnished, it doesn't sound like an attractive picture.

Nor is it especially cheap.

Now it becomes as institutional and exploitative as anything in modern Amerika.

blackstone is acting as the fed's and the feds' agent

they are buying up huge swaths where the free shit flows. the low/mid income housing and now a giant portfolio of college town apartments. the common thread = both are rife with free shit money stolen from taxpayers and given to their dumbass minions that live in the things
 

Fiat Metaler

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I disagree about those who say we are seeing signs of topping. We may see slowing, but medium to long term prices are going higher. (I don't dispute that price declines might occur in markets that were extremely hot, like Boise or Austin; I just don't think any current declines in those markets are representative of most markets, just as their extreme increases were not representative).

If you look at the last row of the last chart posted by EO 11110, you see that the days on market is still very low. In normal times that runs 30+. It means that people are snapping up homes quickly, even at current (elevated) prices. It means there is room to elevate prices further. This makes sense because new home starts had been below trend for a decade.
 

BackwardsEngineeer

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Fiat,
you sound just like my buyers, its going to go higher, then higher.... to the moon(are RE buyers Ag investors?)....

Yes, prices continue to increase, I'll get more current data next week as I list a place I sold to a couple late 2019 mid 400's, we are going live mid 700's. Market data says 650, zillow closer to 700... they have done little to nothing to improve the place, it was new and still looks good.

It seems you are in florida, you are living in what could be considered textbook case a market bubble. Prices driven to the braking point by the retired class seeking an exit from the reality of hundreds of northern markets. Your point is they are going to keep coming, they might... for a while but Fed tightening is crimping buyers and your primary market drivers die often. Meaning higher turns than growing family dominated markets, more turns need more buyers. As long as the stock market continues rising, your market drivers will continue their assault on your properties... But most are still second home buyers and the second home market has slowly died in most markets external to yours as rising costs and maintenance cost/headaches have extracted most of the fun from the model. So you have several whirlwinds surrounding you, its just that none have yet reached your shore but they are still there, just as they are here in our market.

Agree/disagree, invest away... my team lead sells condos in Myrtle beach, several hundred a year, only works sellers. He tells me point blank, if ever you are tempted to do a second place, call me... I'll talk you through the real numbers.. 2nd homes are like boats and airplanes better to rent than own..
 

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(are RE buyers Ag investors?

Haha, NO. Ag has gone nowhere for decades hardly. RE has stomped PM's in total return for a long time. But these same people Will be buyers of Silver at similar stoopid prices. In fact, I'm betting on it as I'd like to buy some RE with my 100 oz bar. Sold to them.
 

EO 11110

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I disagree about those who say we are seeing signs of topping. We may see slowing, but medium to long term prices are going higher. (I don't dispute that price declines might occur in markets that were extremely hot, like Boise or Austin; I just don't think any current declines in those markets are representative of most markets, just as their extreme increases were not representative).

If you look at the last row of the last chart posted by EO 11110, you see that the days on market is still very low. In normal times that runs 30+. It means that people are snapping up homes quickly, even at current (elevated) prices. It means there is room to elevate prices further. This makes sense because new home starts had been below trend for a decade.

frbny is seeking demand destruction. the everything bubble is unwinding, stocks and bonds have already topped and have had significant price drops. i think real estate will follow.

the RE market manipulation by (nyc shysters) is holding back free market forces....so far.

can/will they continue to buy in bulk? if so, it might take the looming recession for the RE market to deflate. tick tock...
 

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frbny is seeking demand destruction. the everything bubble is unwinding, stocks and bonds have already topped and have had significant price drops. i think real estate will follow.

the RE market manipulation by (nyc shysters) is holding back market forces....so far. can/will they continue to buy in bulk?

The RE market has probably already suffered more damage than the stock market. It's just a VERY slow market and so it takes much longer for anyone to notice and the data to actually change. Then it takes longer for the dumbasses (your average buyer) to notice as well.
 

Fiat Metaler

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frbny is seeking demand destruction. the everything bubble is unwinding, stocks and bonds have already topped and have had significant price drops. i think real estate will follow.

The one thing I think will fall is interest rates.

The Fed jawboned about rates and tapering, but their balance sheet actually increased while they were supposed to be shrinking it.

If interest rates come down, or level off, I think asset prices will rise further.

If interest rates rise further, then you are right the entire enchilada could crash.
 

EO 11110

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Lancers32

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So I guess the consensus is that this time is different? When the economy softens even more the fun will begin. Nothing goes up forever people paying well over ask is a classic sign of a market topping out.
 

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So I guess the consensus is that this time is different? When the economy softens even more the fun will begin. Nothing goes up forever people paying well over ask is a classic sign of a market topping out.

It's always rationalized because look at all the people making Bank commissions... Banksters for starters get a nice upfront % and long-term income, RE agents with their 5-6% (actually a big chunk to the NAR), then add in some flat fee services. Then the whole construction industry does well.
 

Fiat Metaler

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So I guess the consensus is that this time is different? When the economy softens even more the fun will begin. Nothing goes up forever people paying well over ask is a classic sign of a market topping out.

I frame the issue differently. I see a decade of price inflation in front of us, and no reason why housing costs won't go up as much or more than other prices. If lumber, cement, electricity, and labor costs double, I would expect the cost of a house to more than double.
 

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So I guess the consensus is that this time is different? When the economy softens even more the fun will begin. Nothing goes up forever people paying well over ask is a classic sign of a market topping out.
Definitely taking a pause now. People who wanted to buy/were in a position to buy already did.
Rising rates X higher prices means those who were not in a position to buy are even further priced out.
Inflation in fuel, food, etc. take their toll. We're headed for recession.

On the other hand, you don't have nearly the levels of debt leverage from 2008. We're not going to see another subprime bust.
I think RE will be down or flat for a few years. But local factors will rule.
 

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I think rates will be lower by end of year so I expect higher prices
 

Scorpio

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talking with a friend yesterday that was listing his house,

just a simple place on small acreage, but on the right side of the tracks,

regardless, listing went live a 8am, by 830, first showing for 9 am

by end of day, 17 showings, first day

ended up going for 20 over

the couple that bought it, apparently while walking it, couldn't take their eyes off it,
wrote a letter with the offer stating 'whatever it takes' just let us know

he didn't push them to their breaking point, just signed off on it, and they are the happiest couple ever
they wrote another letter after they found out it was signed, happier than can be

good for them

edit to add, for reference, list was $480k, so it went at $500k
now this is a young couple, and having access to that kind of ching lickety split, continues to make me wonder
 
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BackwardsEngineeer

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Scorp,
Amen, good for them...
Point is what about the 16 lookers who walked away frustrated? Metaler would say proof of continued bull market, prices are going much higher! In a weird usd is worthless sort of way they might. We both know all too well that normal healthy markets have a constant push/pull, ying/yang to them. This one doesn't it is all one sided.

What scares me most is that everyone... I mean everyone is a real estate expert. I'v had properties 40+ years, done it for others 20+ and honestly some days I'm feel like I don't know squat about it. Yet, people talk property, rentals, 1031's like its their deal, yet they know zilch about affordability, repair and the despair of being upside down and house poor....

Those 16 walkaways are the key, one day they will be back in charge and they will want their pound of flesh with interest on the sellers.... Today a shoeshine boy told me to get into real estate.... Joe Kennedy take note
 

Scorpio

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that is the thing, this has been going on for at least 3 years now,

same story over and over, prior to covid and the rest of this

many moons ago, spoke of the need for the slaves to get paid, or the dream would simply end,
that they could not afford the constant theft by corporations from all sides
that something had to give

so what happens? they spike the punch, give the slaves their raises, push the numbers higher, and the peasants are no better off than they were before as .corp sucks them dry

a guy in cali, bought his home for a buck fifty back in the day, recently sold it for almost a million,
coming to this area to retire, and is bitching about the price of housing, expected to get one in the 250-300 range

so it is aok for someone to pay you a cool mill for a pos ranch in cali, but it is not aok for some person here to charge a third of that in this area............got it asshole

go back to where the f@#e you came from