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Real estate pricing
#1
One thing that your average person never seems to give much thought to is how dependent US real estate prices are on the availability of mortgages.  Consider a suburban house today (well, pre-pandemic today).  Now consider the same house in an alternate world which is identical, but mortgage availability is much more limited (40% down, 10 year loan was common before the 30-year loan was invented by the federal government during the Depression).
What % of value do you suppose that would knock off the house?  Quite a bit, I think.
A significant percentage of the workforce has suddenly lost their jobs, and may not regain jobs anytime soon.  Owner-occupiers can't pay mortgages, tenants can't pay rent (and can't be evicted right now, and even when they can be, finding another tenant who can pay could be very hard).  That means a lot of mortgages will be going into arrears, and houses may be foreclosed.

Unsurprisingly, banks are getting stingy with loans.  They are raising minimum credit scores, down payments, cutting off new HELOCS and cash-out refis, etc.


Mortgage Lenders Tighten Screws on U.S. Credit in Echo of 2008

https://finance.yahoo.com/news/mortgage-...00684.html
Guns don't kill people, the government does.
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#2
Confused  The evil virus is a disaster for just about everyone.



[Image: coronavirus-evil-virus-cartoon-character...407042.jpg]
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#3
(05-08-2020, 02:43 PM)aqua Wrote: Confused  The evil virus is a disaster for just about everyone.



[Image: coronavirus-evil-virus-cartoon-character...407042.jpg]


.
Not "everyone"!

Envioro Wackos are happy as "pollution" production is down dramatically,



and Socialists are happy that we have FREE MONEY welfare for the masses
and small private business people dying off en masse

(05-08-2020, 02:17 PM)Herring Wrote: One thing that your average person never seems to give much thought to is how dependent US real estate prices are on the availability of mortgages.  Consider a suburban house today (well, pre-pandemic today).  Now consider the same house in an alternate world which is identical, but mortgage availability is much more limited (40% down, 10 year loan was common before the 30-year loan was invented by the federal government during the Depression).
What % of value do you suppose that would knock off the house?  Quite a bit, I think.
A significant percentage of the workforce has suddenly lost their jobs, and may not regain jobs anytime soon.  Owner-occupiers can't pay mortgages, tenants can't pay rent (and can't be evicted right now, and even when they can be, finding another tenant who can pay could be very hard).  That means a lot of mortgages will be going into arrears, and houses may be foreclosed.

Unsurprisingly, banks are getting stingy with loans.  They are raising minimum credit scores, down payments, cutting off new HELOCS and cash-out refis, etc.


Mortgage Lenders Tighten Screws on U.S. Credit in Echo of 2008

https://finance.yahoo.com/news/mortgage-...00684.html

.
YES

finding a true price for Real Estate has to be near IMPOSSIBLE right now!

I just plain would not deal with it for a while,

UNLESS some HELLUVA deal came along - and I mean pennies on the dollar,
that "10% off" crap would be DANGEROUS STILL.
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#4
(05-08-2020, 02:47 PM)DaveGillie Wrote: Envioro Wackos are happy as "pollution" production is down dramatically,



and Socialists are happy that we have FREE MONEY welfare for the masses
and small private business people dying off en masse




finding a true price for Real Estate has to be near IMPOSSIBLE right now!

I just plain would not deal with it for a while,

UNLESS some HELLUVA deal came along - and I mean pennies on the dollar,
that "10% off" crap would be DANGEROUS STILL.

Rolleyes  I have to agree with you about the real estate being a mess at this time.

But......

Everyone around here is happy to see blue skies again (less polution).

Free money should make everyone receiving it happy as well.  Speaking of which, didn't they pass 3 or so (I have kind of lost count) bills giving hundreds of billions to small businesses ?
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#5
(05-08-2020, 03:01 PM)aqua Wrote: Everyone around here is happy to see blue skies again (less polution).

Free money should make everyone receiving it happy as well.  Speaking of which, didn't they pass 3 or so (I have kind of lost count) bills giving hundreds of billions to small businesses ?

.

the skies I remember have ALWAYS been very clear clean looking blue.


I know it's hard for - non Economist trained - to understand about "lots of free money" but try thinking of it as a mental excersize
THIS Way: 
Quote:Everyone gets a million dollars AND economic information dissapears, what happens next???
As to the "giving to small business",

all the ones I've hard of are LOANS not "money given"
(I even got one!)
while the loan CAN be forgiven, that is ONLY true if that money is given to EMPLOYEES (and a few others) and NONE of it Kept by the small business.
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#6
An economist here has predicted a rout in the apartment/condo sector because so many people bought them on spec as Airbnb ventures. These mostly rely on fly in foreign tourists and that sector is dead for a long time. Those with big mortgages they can't support off their day job will fold and drive the price down.
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#7
Melbourne has huge apartment complexes, mainly centred around the casino (2nd biggest in the world). Lots of Chinese investors bought into these because the government wouldn't allow them to purchase quality real estate. Many are/were occupied by students who now can't afford to live there because their real gig was not study but casual work, which has gone.

After lockdown ends, many organisations will realise that working from home is better and cheaper and will terminate their office leases. People who moved to the city will have no travel advantage over all those working from home. Very bad for inner city property owners/investors.

I'm looking at a a block of land in a country town where we already own a house which is rented out at $220 a week. The land is 800 Square Metres. This is double the size that city suburb blocks are these days. In the suburbs a block of land is $300,000, this block is $15,000 with sewage and services already connected. I plan to buy this and put a 40' container home on it. All up it will cost me about $70,000 and I can rent that out for upwards of $150 a week or use it for a holiday home. The town is close to wine country and is in the middle of the plantation timber industry. I foresee a lot of people taking flight to these towns, cheap to live, nice environment. The nearest hospital is 20 minutes away, not really much different from big city transit times. It has a school, a football club and a nice swimming pool.

People on welfare need somewhere to live and Australia pays unemployed people enough to rent in places like this. Not so for the city where rents are upwards of $300 a week.
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#8
(05-08-2020, 02:17 PM)Herring Wrote: One thing that your average person never seems to give much thought to is how dependent US real estate prices are on the availability of mortgages.  Consider a suburban house today (well, pre-pandemic today).  Now consider the same house in an alternate world which is identical, but mortgage availability is much more limited (40% down, 10 year loan was common before the 30-year loan was invented by the federal government during the Depression).
What % of value do you suppose that would knock off the house?  Quite a bit, I think.
A significant percentage of the workforce has suddenly lost their jobs, and may not regain jobs anytime soon.  Owner-occupiers can't pay mortgages, tenants can't pay rent (and can't be evicted right now, and even when they can be, finding another tenant who can pay could be very hard).  That means a lot of mortgages will be going into arrears, and houses may be foreclosed.

Unsurprisingly, banks are getting stingy with loans.  They are raising minimum credit scores, down payments, cutting off new HELOCS and cash-out refis, etc.


Mortgage Lenders Tighten Screws on U.S. Credit in Echo of 2008

https://finance.yahoo.com/news/mortgage-...00684.html

I have had second hand experience with how people do not consider this point.

I helped my wife with a university paper in about 1988, when we were in a real estate boom while coming off high interest rates. The basic thesis was "decreased mortgage payments per dollar of mortgage principle resulting from the lowering of interest rates is consistent with 100% of the increase in house prices".

She had government stats, and I helped out with the math and had some suggestions as to how to graph the results.

She received an uncharacteristically low mark of a B on the paper, accompanied with a sole comment along the lines of "that's not how it works". So much for the scientific method in the economics department.
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#9
Wayne, let me know when your place is ready and I'll rent it from you once the covid thing passes and NZ/Aussie open up for travel.

Another thing about apartment living - it seems this is where the virus transmission was worse, with the exception of the hospital wards themselves. Causes?

Close proximity in elevators
Having to press elevator buttons
Shared facilities?
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#10
(05-09-2020, 07:33 PM)andrew_o Wrote: Wayne, let me know when your place is ready and I'll rent it from you once the covid thing passes and NZ/Aussie open up for travel.

Another thing about apartment living - it seems this is where the virus transmission was worse, with the exception of the hospital wards themselves. Causes?

Close proximity in elevators
Having to press elevator buttons
Shared facilities?

.
Some articles blamed connected plumbing in apartments, or air handling systems
I'd day because they tend to be in dense Cities (itself a big risk factor)
could be passing in the hallways or other surfaces in addition to elevators
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