COVID + Residential Real Estate?

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Jason

Re: COVID + Residential Real Estate?

Post by Jason »

Seppia wrote:
Sun Apr 05, 2020 3:27 am
At this price, it would be criminal paying cash
Buyers who were in the underwriting process when shit hit the fan have postponed closings in order to take advantage of the lowering of interest rates. If/when things return to normal, interests rates will not instantaneously return to pre-pandemic levels so an aggressive lending environment will remain in effect for the foreseeable future.

classical_Liberal
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Re: COVID + Residential Real Estate?

Post by classical_Liberal »

US specific
Foreclosure process in normal circumstances, in most states, takes at least 6-9 months, usually longer. Given the current protections and the pressure that will be put on banks to help people renegotiate their mortgages, I would guess that the issues surrounding COVID will mostly be resolved via vaccine or herd immunity in the 12-18 months before the first wave of such foreclosures hit.

This makes me believe that real estate prices would only be impacted if there is a post COVID longer term recession. Very low rates will work to add positive pressure to residential real estate. Because again, people buy payment, not price.

IOW, I do not think, generally, residential real estate will be impacted by COVID, except for perhaps increasing prices due to lower rates, and a temporarily slow moving market as transactions have been cancelled or postponed. If there is a post COVID, longer term recession, then we may see impacts on residential real estate as folks will not be able to dig out of the COVID hole, despite probably extraordinary measures to help them do so. This is at least 12-24 months from now though. There may be some select bargains out there though, like @seppias apartment deal, if business who have developments completed, but unsold, have a fire sale due to business cashflow issues and the current swamp around real estate closings.

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Re: COVID + Residential Real Estate?

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giskard
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Re: COVID + Residential Real Estate?

Post by giskard »

I figured I'd update this thread with new information. This week JP Morgan Chase said they were increasing the minimum credit score to qualify for a mortgage to 700, and requiring 20% downpayments. Previously, the average downpayment was 10%.

https://www.housingwire.com/articles/ch ... uy-a-home/

In related news we just had another 5.2 million file for unemployment giving us 22 million in 4 weeks. We are around 15% to 20% unemployment right now --> https://www.cnbc.com/2020/04/16/us-week ... laims.html

So I think this changes things. Now I'm seeing houses on the market and I'm thinking people are trying to dump things while they can. I'm seeing a lot of 10k price cuts on houses on Zillow this week (avg price in this area is 300k). If a 20% downpayment is now required by most lenders, I think the market is going to tighten a lot just for that reason alone.

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

I've got $70k cash sitting in my account from selling stocks in January for the purpose of setting aside cash to buy a house at some point...

The cities I've been considering include:

Tucson, AZ. where:
- Nice house: $130k
- Cheap/crappy house: $90k and up
- Decent house with Casita (ADU): $180k and up
(nice weather. Access to fun outdoors stuff. People ok but not great. Good for bicycling. Long-term water issues)

St Louis, MO:
- Nice house in ok neighborhood: $130k and up
- Nice house in shitty neighborhood: $100k and up
- Shitty house in shitty neighborhood: $50k
(nice weather. Fun and interesting city. Many people to make friends with. Poor access to outdoors stuff, though nice park in city. Not so good for bicycling. Long-term continued problems with crime, segregation, unemployment, racial tension. Exact location/neighborhood very important because ongoing decay in some, gentrification in others)

Wichita, KS:
- Nice house: $80k and up
- Cheap house that is livable: $55k
- Crappy house: $40k
(good weather. Far from large cities. Good for bicycling. Perhaps limited amount of people to make friends with)


Prices have been going up gradually in Tucson and St Louis. Prices in Wichita have had extremely slow growth over decades, which is why they're
so low. So, if there's a significant price drop, Tucson and St Louis seem like better options for buying while the price is low and getting some capital gains. Wichita is still appealing, because of such low cost of housing, but I think prices might not drop as much there because when they're already low, I think they can't go down as much.

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Re: COVID + Residential Real Estate?

Post by black_son_of_gray »

C40 wrote:
Thu Apr 16, 2020 9:31 pm
Poor access to outdoors stuff, though nice park in city. Not so good for bicycling.
Not sure if this was on your radar, or if you were talking about biking within the city, but I discovered this while driving across the country. I love rails-to-trails...
https://en.wikipedia.org/wiki/Katy_Trail_State_Park

We're looking to buy a house coming out of all this COVID stuff too, although probably w/acreage in the PNW.

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

Yes I was aware of that. And if i lived there, might possibly go touring on that trail. But it'd be, idk, 40+ miles from home to get to the trail, so I would not ever ride it for just a normal day bike ride.

But, I was talking about bicycle riding that I could do from home in St Louis. And, comparing to the other two cities, which are WAY better.

It's nice riding in Forest Park, though going around the perimeter of the park is only about two miles per loop and there is a lot of traffic (It can be better riding on the roads).... And there are some other trails like a pretty crappy one that goes along the river. But, riding in the city is not good. And getting out of the city takes like 15 miles of riding, or getting across the river

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

bigato wrote:
Thu Apr 16, 2020 9:54 pm
From your description, I’d start doing cash offers for nice houses in Wichita. Finding nice people to be friends with is something that is possible almost everywhere. It may be harder where the numbers are against you, but you don’t need all that many close friends in your life, right. Time is limited and you can’t even have meaningful relationships with more than a certain amount of people.

Also, don’t be so sure that prices in Wichita won’t fall as the prices in other places do, just because their current price is lower. Real estate market is far from being rational. It may actually fall even lower than other places as people with cash cluster on the “opportunities” in the higher cost cities. Just like you, they may think it’s a better deal.

From your list, I’d not go for a place with potential water issues because the climate crisis and population growth may be likely to worsen it in the coming years.
Yes, I am leaning towards Wichita at the moment. I feel it is a bit of a gamble but if I go there and really like it, I'd feel like 'I won'.

Tucson has it really rough on climate change predictions. They have (potential) water issues.. and, I believe the temperature rise predictions there are that the area will be hit with much higher increases than average. 9 Degrees instead of 3. And it's already pretty hot there in summer. The real strong thing about Tucson is that the area is beautiful, and it's out west and close to a lot of fun places that I'd like to go for vacation/camping/road trip adventures/dirt bike vacations

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Re: COVID + Residential Real Estate?

Post by classical_Liberal »

@C40
If you are serious about buying, I would consider financing part of the cost. At least, if you can get financing with your income situation. Fixed rate loans will never be lower, and financing 50-70% of a purchase price at 3% for 30 years is a fantastic deal over time. Particularly if it's something that can potentially yield you some rental income (like a casita on site). Right now I think low leverage rates are the best thing going for purchasing residential real estate.

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

Yeah, I will be considering that. And it might work out especially well if I buy a house in an area where the prices are likely to be going up. IDK if it would work getting a loan. My AGI is about $18k per year. More than half of that is just IRA conversions.

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Re: COVID + Residential Real Estate?

Post by classical_Liberal »

@C40
I've been out of the mortgage biz for too long to know underwriting guidelines these days. I do know that LTV and reserve levels (liquid assets) matter almost as much as credit and income. Since you have 3 of 4, you may be able to find something. It's worth at least checking into, IMO.

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Re: COVID + Residential Real Estate?

Post by sky »

I liked Kansas when we drove through in 2015 and 2016. Because of the distances, it is kind of a world of its own, at least the central and western parts. I think the history of Kansas is interesting, in particular the border war with Missouri before the civil war.

Some downsides, it is in tornado alley. Also, I was surprised to see Wichita on a list of high crime cities. I believe it was a crime per capita type of list. That surprised me. I probably should fact check to see if it is true.

I would like to explore Kansas again. I would look at university towns (Manhattan) near I-70. I would also look at the westernmost towns in the general area of I-70. I have seen that area passing through, and it is unpopulated, but I would like to check out the historic towns. They might be quality living if they are a few hours drive from major Colorado cities. It is normal to drive long distances out west.

I like Tucson and Arizona, but only in winter. The high elevations might be more my choice.

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Re: COVID + Residential Real Estate?

Post by chenda »

I road tripped through Kansas some years ago. I recall be advised to avoid Wichita because it was apparently dangerous. At least according to some trucker we met one morning at an interstate stop (how American does that sound ? : ) No idea if it's true but I have good memories of the Kansas countryside, especially the east it was all very rolling green hills.

At times like these I prefer having my assets predominantly in something tangible like property, even if that's just a psychological benefit.

CS
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Re: COVID + Residential Real Estate?

Post by CS »

Kansas is really, annoyingly windy. I felt more earthquakes there in three months than three years in CA. It also has terrible has/has not signaling. I've never seen people feel the need to spend their year's salary (or more) on a car before - at least not to that level.

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

chenda wrote:
Mon Apr 20, 2020 4:35 pm
I road tripped through Kansas some years ago. I recall be advised to avoid Wichita because it was apparently dangerous. At least according to some trucker we met one morning at an interstate stop (how American does that sound ? : ) No idea if it's true but I have good memories of the Kansas countryside, especially the east it was all very rolling green hills.

At times like these I prefer having my assets predominantly in something tangible like property, even if that's just a psychological benefit.
heh, Wichita is definitely not that kind of dangerous. I looked at it some a could years ago and I as I recall, there is more crime than other small cities in Kansas, but still fairly low crime IMO


@CS - earthquakes from fracking? yeah.. that could be an issue. I should look into it more.

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Re: COVID + Residential Real Estate?

Post by Campitor »

My personal opinion is the residential real estate prices will remain within the pre-COVID ballpark. The high cost of real estate is a result of excessive regulations that limit new construction, minimum plot size, and restrictions on multi-unit construction in single family zones. Also, any new construction can be tied up in court for any number of reasons: blocking a view, too close to property line, etc. Unless these laws are changed, the price of real estate will remain steady in most areas.

https://www.citymetric.com/fabric/tokyo ... hoice-4623

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Re: COVID + Residential Real Estate?

Post by wheatstate »

Lots of interesting thoughts.

I agree, Katy trail is totally awesome and a great resource. The Rock Island spur just connected Katy trail to KC. Kansas is doing some rail to trails with Prairie Spirit Trail and Flint Hills trail. Riding the Katy trail shows how a rail trail develops. Now, the Katy is super nice with good surface, drainage, smooth road crossings. Towns every 10 miles have water, food and restrooms. Some of these other trails are a lot younger and less developed.

Wichita overall, I think it is nice. I would confirm the area you wanted to live before purchasing. Do vanlife there for a month. Do a rental like you did in the southwest. Real estate is not liquid and has transaction costs on both sides. Some of Wichita's development was a flight to the suburbs with the "best" schools for midwest families with good aviation jobs. With no geographic barriers and minimal traffic, this created a ring around the city. There has been some redevelopment in the center with old town and along the river. Wichita is a big aviation town. The aviation industry has its ups and downs. I am not sure how the aviation industry will come out of Covid.

Fracking. Yes, I feel fracking earthquakes a couple times a year in Kansas. If Covid halts fracking oil production, that would be a positive for me.

If you say Kansas is too windy, you should find some wind sports. I like kiteboarding and sailing. On no wind days, you bike. :) A cool plus. Recently on a particular day, Kansas recently produced more wind power than coal power.

There is definitely a lot of positives for a Midwest life.

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

wheatstate wrote:
Wed Apr 22, 2020 7:05 pm
Wichita overall, I think it is nice. I would confirm the area you wanted to live before purchasing. Do vanlife there for a month. Do a rental like you did in the southwest. Real estate is not liquid and has transaction costs on both sides. Some of Wichita's development was a flight to the suburbs with the "best" schools for midwest families with good aviation jobs. With no geographic barriers and minimal traffic, this created a ring around the city. There has been some redevelopment in the center with old town and along the river. Wichita is a big aviation town. The aviation industry has its ups and downs. I am not sure how the aviation industry will come out of Covid.

Fracking. Yes, I feel fracking earthquakes a couple times a year in Kansas. If Covid halts fracking oil production, that would be a positive for me.

If you say Kansas is too windy, you should find some wind sports. I like kiteboarding and sailing. On no wind days, you bike. :) A cool plus. Recently on a particular day, Kansas recently produced more wind power than coal power.

There is definitely a lot of positives for a Midwest life.
Thanks for the info. I already sold the van. I have hung out in Wichita with the van for 2-3 weeks total. Long enough to see that I'm cool with the city. Not yet sure about the people. Wherever I do go, I will probably rent there for ~6 month to make sure I like it enough and then/also to have somewhere to live while I search for a home to buy. In Wichita, I'd probably rent a house since they are so cheap.

As for the flight out of the center of the city - that's perfect for me, in large cities at least, like St Louis. It results in the child-less people congregating there, which I appreciate.

(wasn't me who mentioned the wind). That's not a big deal for me. Even when bicycling. I just go slower one direction and faster the other. No big deal. Sometimes a lot of wind is a problem for me with allergies, but so far I've been able to eliminate my allergies by eating honey.

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C40
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Re: COVID + Residential Real Estate?

Post by C40 »

Also, Wheatstate - have you spent much time in Topeka? What do you think of it?

A year or two ago, when I was down in Oklahoma, I saw a dream property for sale in Topeka. (2 or 3 acres in the city, a combination mechanics shop / home, really cheap)

wheatstate
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Re: COVID + Residential Real Estate?

Post by wheatstate »

That sounds like a good visit to Wichita and a great way to test the market. I would probably do the same with Topeka.

With the wind on the bike, We climb mtns of wind and then enjoy the tailwind home.

I like Topeka. Good mtb, road and gravel options. Pro bike racer, Steve Tilford lived there and built a good cycling community.Swing dance club. Huge Mexican Fiesta 5-block street party in June. NoTo, North Topeka art district. Art walks on first Friday of the month. Local breweries opening up, currently four. River access to the Kaw. Community bike co-op. Washburn University.

The negative. I am sure you can handle this. Part of this is you probably won't find a "perfect" place with the lowest cost of living. A bike friend was killed in his home in Topeka last year. Young, active, likeable. Shot at night, not many clues. Probably won't be solved. The bike Topeka FB page frequently has stolen bikes, probably from drug users.

I have friends living great lives in Topeka. I might add Emporia, Kansas to the list. Dirty Kanza bike community has exploded. Huge disc golf scene. Emporia State University.

Lawrence and KC suburbs is where I have spent the most time, and there are good options here.

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