Just like 911 prices, COVID is making real estate prices go crazy !

[sugarwood]

Recall where I correctly forecast that 911 prices would skyrocket

Almost every major discretionary spending categories has been eliminated during the quarantine, and will not fully recover until a vaccine is released: Major home improvement projects, new car purchase, vacations, childcare, dining out, new clothing, sports and entertainment, wedding costs, commuting, beauty hair and spa treatments, gym memberships, drinks at bars, daily Starbucks, etc.

Conclusion: 79% of people don't feel their job is in jeopardy, and now have an extra $10k-$20k in unspent cash compared to 2 months ago. If Boomer's kids skip college, that's another $250,000 that can go towards the dream 911. By end of summer, G50 prices will hit 6 figures. Buy now or forever be priced out.

Same logic applies to real estate.

People aren't going anywhere, and aren't spending any money, so they want the absolute best housing they can afford.
What have you observed in your local market?

[biosurfer1]

I agree with most of your list except home improvement projects and Starbucks.

We wanted to have some flooring done and got a quote back in April and they wanted to start the next day. Life got in the way and the project went on the back burner. Fast forward to last week and the flooring guys are 8 weeks out now.

I hardly noticed a change at any local Starbucks.... no, you couldn't sit around all day an enjoy your drink, but the mobile orders, drive throughs, and lines didn't change at all.

[fanaudical]

Home improvement projects are here are booming everywhere you look. I took on two major ones this summer (fencing and external siding repair/painting) and contractors are busier than ever. Construction in my area (both residential and commercial) is very busy.

[craigster59]

Houses in my area are going $30-60k above asking. And it seems everybody in my neighborhood is having some type of landscaping done.

[look 171]

Cheap money at 2.5%. People are staying put inside their home, so they are willing to spend more on it with all the extra cash stashed away from lack of going out spending it.

We are still working on jobs that we signed on last year. Lots of my subs that work smaller, 1-2 weeks jobs, are super busy. Lots of that cheap money to be made. Materials has gone through the roof. In general, materials has increased by 15 % or more on some items. I don't see it coming back down anytime soon.

[look 171]

I know of a couple of people are trying to buy in the past 6 months and have had no luck but been outbid. I am doing some simple things for this woman who bought the week after we announced stay at home due to Covid. Pricing dropped a bit and she lucked out, then it all want back up again

[Bugsinrugs]

Because more people can work from home real estate prices have risen in my area. Despite fire insurance tripling homes are still selling above asking.

[pmax]

What about here ?


and here

[jyl]

Higher demand for the reasons mentioned.

Supply not responding because people who normally would be forced sellers (lost job, can't pay mortgage) are temporarily able to sit tight (mortgage forbearance, moratoriums on foreclosure) and can't move (can't rent with no job).

Hence demand/supply imbalance and prices rising.

Mortgage forbearance and moratoriums won't last forever. The forbearance and delinquency rate is gradually receding from its peak, but the second wave of layoffs is starting - these are the companies that aren't in direct distress but are simply restructuring to maximize efficiency and profit now that they think they see the "new normal" emerging. Everyone from Nike to JP Morgan, these will be the big company layoffs. I would not be surprised if the delinquency rate stabilizes and then rises, or at least doesn't decline that much, by the time banks are free to foreclose. So supply will pick up.

Institutional investors are getting ready to deploy huge sums to buy houses for their rental fleet. That will support demand in certain areas (without much rent control, growing popln) and for certain types of houses (< 15 years old is what they look for).

[sugarwood]

Can you tell us more about institutional investors in residential real estate?
Why is 15 years their magic number?

[fastfredracing]

I have not been paying attention, are 911 prices up again ?

[jyl]

Originally Posted by sugarwood

Can you tell us more about institutional investors in residential real estate?
Why is 15 years their magic number?

They want newer houses for lower maintenance costs. Their model is to have a critical mass of rental houses in a metro (like at least 10,000) that they can manage with in-house rental, maint, legal teams and upsell yard, security, insurance services. Don't want to deal with old houses. Look for suburban locations and renters with good incomes. INVH is the largest, there are two smaller ones publicly traded, and various privately held ones. They started with huge buys of distress sales in 2009-2010, have been raising capital to repeat now. Tend to be biggest in Sunbelt and SE. Have been expanding in CA and West. Starting to do more build-to-lease deals, more duplexes. Have been securitizing mortgages to lower financing costs.

I've looked at buying INVH stock. On the fence as the dividend yield isn't particularly high, but the potential growth and occupancy rates are attractive. Have left $ on table by being indecisive.

[CalPersFatCat]

Originally Posted by sugarwood

Can you tell us more about institutional investors in residential real estate?
Why is 15 years their magic number?

Because they almost without exception, fall within the repair/replace norms for both labor and materials. Way easier to forecast annual capitalization costs at scale.

DL

[look 171]

Originally Posted by pmax

What about here ?


and here

You know better since you are from the bay area.

Sure, there are the tents and that pic there is on San Pedro is Skidrow. That's been like it for the past 40 years. Nothing new. Once out in the more residential areas, there are no tents, yet, slowly they are creeping in.

[sugarwood]

Originally Posted by jyl

and upsell yard, security, insurance services. .

To whom? The renters? Isn't that stuff the owner's cost?

[jyl]

Originally Posted by sugarwood

To whom? The renters? Isn't that stuff the owner's cost?

Nope, tenant resp for yard care, security system, renters insurance - and the company markets those as ancillary services.

Other parts of their model: target 5% effective rent increase / yr, through avg 3 yr turnover, partner with iBuyers like Redfin to acquire houses, sell houses when they get overvalued. Their fleets weren't growing in 2018-19, they were selling more than buying. Now they expect to have buying opportunities in mass scale.

My issue remains that even with a mature fleet of 80,000 houses, INVH still wasn't generating much of a payout. 2% ish IIRC. I can buy DOW or PFE and get 5%, or GS preferred and get 4-5%. Makes me wonder how profitable the actual operating business is.

[jyl]

Originally Posted by look 171

You know better since you are from the bay area.

Sure, there are the tents and that pic there is on San Pedro is Skidrow. That's been like it for the past 40 years. Nothing new. Once out in the more residential areas, there are no tents, yet, slowly they are creeping in.

That looks like the park in my neighborhood :-(

[rockfan4]

I went looking with my step-daughter and her husband on Saturday. They live on the Illinois / Iowa border, and there's lots of people moving from Illinois to Iowa, I presume to escape high taxes, so the market on the Iowa side is especially hot. The thing is, I think all the good houses are gone, and the ones coming on the market now seem to be marketed by Beverly Hills Car Club. Fair to good looking on the outside, but rotten underneath.
Also, every flipped house we see has the same monochromatic paint scheme. White cabinets, trim, doors, gray walls, and either gray LVP or carpet. I don't like any of them.
We didn't tour, but there was a nice Mid-Century Modern house online that someone totally ruined, gutted the entire thing, ripped down some walls, and re-did it with the cheapest materials you could imagine.
She's in no hurry to move, so we are going to wait unless some screaming deal comes along, except all of those seem to be snapped up the same day they're listed.
I wish I wasn't 4 hours away.

[sugarwood]

Originally Posted by jyl

Their fleets weren't growing in 2018-19, they were selling more than buying. Now they expect to have buying opportunities in mass scale.
.

How? Home prices are going crazy. Houses being sold in one day with bidding wars $50k over asking. Seller's market bordering on a FOMO mania.

[GH85Carrera]

The daughter of one of my buddies bought a house about a year ago in nice neighborhood. Three bedroom, two bathroom, two car garage. She found a guy that she is now engaged to, and sold her house after 11 months of ownership and banked 50 grand. She and her soon to be husband just bought a place with 2 acres of land just on the edge of town.