Originally Posted by
Bluto
Whatever you think of the current housing market, it's pretty much here to stay...
My wife and I are realtors in south Florida. She has been doing residential real estate for about 12 years and I have been doing commercial for about 6 although the last year or so has been primarily residential as well.
To say the market has been good to us and others in similar situations is an understatement.
Right before covid we bought 4 houses for investment. We were in the process of converting them into duplexes and triplexes to rent out. When covid hit we panicked over the mortgage payments and tried to sell with no buyers. We thought we were done for.
Fast forward a few months and the housing market took off like crazy. All units are rented for top dollar and we are getting cash offers to buy the places in some cases 2.5x what we paid for them, all cash. We did sell 2 of them and turned around to buy 4 condos.
I am explaining our situation because WHO is buying these houses is the problem. Blackrock is one of these outfits along with invitation homes and several others. Most of these are REIT funds where people pool their funds for investment real estate. Some large, like blackrock, some small like a large family.
Their huge advantage is cash. Without worrying about getting loans to pay over-estimate they are just crushing normal home buyers. That’s the reality and every agent knows this. Families looking to buy a home face an uphill battle and are losing.
What no one is talking about is the huge consolidation in the marketing of homes. Zillow is buying up MLS’s across the country. When you list a property on the MLS now and it is published to Zillow the buyer is presented with an agent to contact. Its NOT the listing agent, but a Zillow employee or contractor.
This is a HUGE problem for all involved, especially the buyer.
Zillow charges large fees across the board; the agent, buyer, seller, etc., increasing the closing costs dramatically. In one case we observed they charged 2% in fees on a 600k house. That’s 12k for absolutely nothing. They make it impossible to contact the listing agent directly and we have seen firsthand buyers having their agents call the Zillow agent only to be told they do not work with other agents. They are basically telling buyers to fire their agent, work with the Zillow agent, pay more fees and have less tools for negotiation.
In the end, the buyer pays more, the seller gets less and the agent makes a pittance salary.
This is in addition to Zillow buying up houses themselves BEFORE the house is even presented for public sale. In those cases, you don’t even have a chance. It’s like trying to win the lottery without buying a ticket.
Zillow is crushing the market for everyone. There are several lawsuits in process right now going after the MLS and Zillow for this.
As far as a market “crash”… not gonna happen. This is not the same as 2008. There are no subprime mortgages. No derivative swaps happening. The market got this way because of what you have all seen. Joe Blow in NY sells his house for 1M at a huge profit. He comes down to FL and pays $500k cash for a $450k house. He enjoys nicer weather, lower taxes and no mortgage so has zero incentive to sell.
How will this end? The thought is that interest rates will go up, forcing lower housing prices. If you all recall in the 70’s when the producer price index finally made its way into the consumer price index and inflation went crazy interest rates shot up. Feds raised rates, housing went down to match and the fed burned the cash until inflation stabilized. That’s what they hope will happen again EXCEPT you now have the absolutely vast majority of owners not selling and the absolutely vast majority of buyers paying cash. Therefore no mortgages. If that happens, current housing availability will not increase. In addition, without more mortgages being taken out, inflation will stay high or even go higher. Don’t forget, the largest source of fed inflation tools are in the mortgage industry.
Less transactions = less mortgages = stagnant inflation = less transactions, etc.
What about new construction? As you all have very clearly noticed, it’s nuts. Super expensive materials, ridiculous lead times, etc. The same type of consolidation will likely happen in that market. I read a couple of posts from members in the building material industry, one whose father owns a mill. Can you ask him if he’s been approached by a developer to buy his operation? I can guarantee that they have. Likely Alliance partners or Toll brothers. They are buying up the entire supply industry to keep their operations going. What do you think will happen when these companies own everything? That local home builder? Crushed due to material cost or just the complete lack of it as the developer is hoarding it all. Loans? Forget it. Ever try to buy a developer’s house? They have their own lending agencies and set their own ridiculous terms.
Even ACE hardware is expanding their building materials. They are snapping up suppliers and not even offering these products to their retail customers or even small home builders. Google it. It’s a paradigm shift for the company and the home builders that no one even knows about.
Sorry to be all doom and gloom, but this will only get worse. Not just the near term, but for decades and likely a generation. As crappy as it sounds, it’s still the best time to buy because tomorrow will be even worse.
If you are in south Florida and have any real estate questions, I’ll be happy to help a fellow member out. This isn’t a commercial and I’m not trying to pimp myself out. I’m pretty busy as it is, but I see a lot of the same pain first time home buyers are going through that we did and my wife and I do try to help as much as possible. Sometime a 15 minute phone call can ease one’s mind much better than a Google search.
Good luck all!
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