Moral imperative for a housing crash... and permanent devaluation

[Tomb1]

I'm doing my first property flip now. Still fixing up and gotta cash out before the market crashes. I keep milking it to boost resale value and want to play it right to the end....cash out just a smidgen before. It is fun. Especially demolition!

 

[ygolo]

I'm doing my first property flip now. Still fixing up and gotta cash out before the market crashes. I keep milking it to boost resale value and want to play it right to the end....cash out just a smidgen before. It is fun. Especially demolition!

Does property flipping work during a crash, or is it only viable when home prices are going up?

Edit: The reason I am asking is because in my area, statistically even the best average cost recoup doesn't reach 100% for remodels

Cost vs. Value 2020 | Pacific Region

This site compares average costs for 22 remodeling projects with the value those projects retain at resale in 136 U.S. markets

www.remodeling.hw.net

Is it that the combination of improvements leads to a combo that works, or is the rising housing market the key, with improvement costs considered part of the customer acquisition?

 

[Tomb1]

Does property flipping work during a crash, or is it only viable when home prices are going up?

I would think it works but less optimally. Certainly on the buying end its cheaper to buy in after a crash.

I am also no real estate agent but I think comparables also come into play....lower income buyers are more phased by high interest rates, so with certain properties the turn around time to sell might not be affected as much in neighborhoods that attract higher income buyers.

Edit: The reason I am asking is because in my area, statistically even the best average cost recoup doesn't reach 100% for remodels

Cost vs. Value 2020 | Pacific Region

This site compares average costs for 22 remodeling projects with the value those projects retain at resale in 136 U.S. markets

www.remodeling.hw.net

Is it that the combination of improvements leads to a combo that works, or is the rising housing market the key, with improvement costs considered part of the customer acquisition?

Depends on what the flipper wants to make. Even in the condition the house was in a month ago, I could have gotten 3 or 4 for it, because of the market, but I want the 7 or 8. Good deal-making, reasonable contractors and DIY increases not necessarily resale value but the profits made off said resale value. With this particular property....the main problem was the fifty-plus years old roof. But I got my insurance company to kick in money for the roof. They estimated the cost of the new roof at about five thousand dollars more than my lowest bidder....so in the end I only paid for about 30-35 percent of the new roof....

Also, I stay away from contractors that have a large overhead and stick with more independent guys who are just starting out and don't have any big advertising costs but are capable, competent and hungry. I beat the hell out of Renewal by Anderson's prices. Contractors with large overheads have ridiculous prices because they got big bills to pay. Then there's DIY projects and boosting resale value purely through inventiveness and an eye for opening/expanding space.

 

[ygolo]

More food for thought:

Lean Urbanism |

leanurbanism.org

What We Do | Lean Urbanism

leanurbanism.org

The nonprofit Project for Lean Urbanism provides free tools, low-cost strategies, and help creating Pink Zones to level the playing field for small projects, allowing more people to participate in building their homes, businesses, and communities. We’re Making Small Possible.

Pink Zone Manual – Making Small Possible | Lean Urbanism

leanurbanism.org

Pink Zones are areas where Lean Urbanism strategies are implemented. They’re areas where red tape is lightened, where barriers are lowered, where it’s easier, faster, and cheaper to create small businesses and develop small properties. When tested and proven effective, those strategies can be applied to other parts of communities. The Pink Zone Manual will guide you through sequential and detailed instructions to help you implement a Pink Zone in your community.

House Hacking Catalog | Lean Urbanism

leanurbanism.org

House Hacking
Housing is a critical component of community-building. It’s the biggest expense for most households, and for most people who own their home, it’s their biggest asset. Housing can create wealth for existing and new residents. It can also create opportunities for growing, improving, or preserving a neighborhood.

But housing has become less and less affordable in recent years. Red tape, in the form of regulatory and bureaucratic barriers, has made it increasingly difficult to find or own suitable housing. (More info here.) The Project for Lean Urbanism is providing tools and technical assistance to municipalities that want to reduce those barriers. We’re helping cities create Pink Zones — areas where the red tape is lightened — to remove barriers in their zoning and building codes and streamline their processes to reduce the burdens that small-scale projects encounter.

We’re also providing tools for people to use in their communities. House hacking fits in perfectly with all of our key focus areas. It’s a powerful tool for Lean Urbanism. It helps overcome the barriers to entry, and accomplishes individual and community goals. We created this House Hacking Catalog to show how it’s possible and to provide inspiration, information and ideas to make it happen.

https://leanurbanism.org/wp-content/uploads/2021/05/House_Hacking_Catalog.pdf

Lean Financing – Alternatives to Institutional Capital | Lean Urbanism

leanurbanism.org

Financing Lean Development requires both institutional and non-institutional sources of capital. This paper focuses on project equity from non-institutional sources. Years of observations and anecdotal conversations with developers of small, innovative projects suggest that Lean Development is coming of age, but it has significant hurdles to realizing its potential, and financing is among the more difficult to overcome. Understanding the motivations, requirements and techniques for working with non-institutional investors is critical to overcoming one of the primary hurdles for Lean Development.

Create A Financial Model | Lean Urbanism

leanurbanism.org

New developers should create their own financial models. Only by doing so will they truly understand the variables and how each affects financial performance. This paper attempts to walk new developers through a financial model that includes development budget, annual return, and capital return. It is simple enough to create but sophisticated enough to present to investors and lenders. It represents one small residential rental building — not condo, and not office or retail.

 

[ygolo]

Watch The Future Of | Netflix Official Site

With the help of industry experts, this innovative docuseries examines new and emerging technological trends to imagine revolutionary possibilities.

www.netflix.com

There is a lot of episodes in this Netflix series, but one is the Future of Skyscrapers

Skyscrapers
Skyscrapers are icons of their cities…but with the growth of urban populations, many have become unsustainable, unlivable and unwelcoming. We imagine a clean, high-tech, cutting-edge city of the future, where our buildings themselves are not only communities: they’re living, breathing organisms.

Similarly themed stuff on Curiosity stream:

Urban Planning

Curiosity Stream has thousands of documentaries that enlighten, entertain & inspire. What are you curious about?

curiositystream.com

There may be some binge watching in my near future. (Note: I already have it, and I know some cable provider give it for free with few people remembering...not an endorsement)

edit: This last comment is for both Netflix and Curiosity Stream. I know that the proliferation of streaming services is driving people nuts right now

 

[Pionart]

We need more studio apartments.

Housing for one person.

 

[ygolo]

To highlight how f*cked up and self-contradictory the norms in housing is here is what one of the well known advisors put out.

How much house can I afford? | Fidelity

How much house can I afford is one of the most common question first time homeowners have. Consider these guidelines to see how much house you can afford.

www.fidelity.com

Should you buy a house or keep on renting?

Fidelity’s calculator can help you weigh your options. http://bit.ly/1fatUNp

communications.fidelity.com

Note that advisor says that:
1) your home should be 3-5 times your annual income
2) Their calculator assumes that home values are going up 4%

The only way this is not blatantly self-contradictory is if income is going up at least 4% annually.

This gives some hope:

Median household income U.S. 2022 | Statista

The average salary in the United States has been increasing since 1990. Generally speaking, the median income increases each year.

www.statista.com

But this dashes all of it.

Home Price to Income Ratio - Updated Chart | Longtermtrends

Historically, an average house in the US cost around 5 times the yearly household income. The ratio in this chart divides the Case-Shiller Home Price Index by the US median annual household income.

www.longtermtrends.net

Once again, I advocate a change in norms... to be more like Moore's Law or Wright's law.

Another angle on this is the notion of a complementary good:

Complementary good - Wikipedia

en.wikipedia.org

In economics, a complementary good is a good whose appeal increases with the popularity of its complement. Technically, it displays a negative cross elasticity of demand and that demand for it increases when the price of another good decreases.[1] If A is a complement to B, an increase in the price of A will result in a negative movement along the demand curve of A and cause the demand curve for B to shift inward; less of each good will be demanded. Conversely, a decrease in the price of A will result in a positive movement along the demand curve of A and cause the demand curve of B to shift outward; more of each good will be demanded. This is in contrast to a substitute good, whose demand decreases when its substitute's price decreases.[2]

Housing (and any human right) is a complementary good to basically everything.

The demand for everything else should go up when housing becomes more affordable (home price divided by income). A recession is not that. Only a home crash while everything is going well is that. Again, we should aim to make that the new normal.

 

[ygolo]

A lot of people bought a single family house during the last run due to FOMO. Could it also be a Committed Action?

In my mind, raising children in an urban environment (by which I mean walkable, bikeable) is just as supportive (maybe even more) of valuing family life as sub-urban environments (by which I mean total car dependance). The way people classify urban and sub-urban vary quite a bit

Is a detached single family home servicing a value that a more dense (probably smaller) home would? What are the key values that you support in the action of buying a detached single family home in a bedroom community, that other more dense housing (with walkability to work,groceries, etc.)?

This question is not rhetorical. People's values are different. I just want to know what the perceived would be. Perhaps there are solutions to address those values while also addressing the values of reducing climate change, reducing homelessness, providing accessibility for people with disabilities (like not being able to drive after a stroke), etc.

 

[ygolo]

^^^ Hopefully, somebody brave answers that (Or maybe plays devil's advocate). Again the question is not rhetorical. I am actually drawing a blank.
------

The source to follow is a couple of years out, before the affordability crisis got kicked into overdrive the last few years. In it they actually say that some houses are "too cheap" because banks don't give loans for smaller homes. I would say the problem in that case is actually the small home loan being too inaccessible, not the home being too cheap.

I actually think a mark of actual progress in society would be more and more people simply being able to buy a home cash on hand. Imagine if even the poorest people could do that? It would make inequity seem much smaller, if any single person could own a home where they wanted without a need for a loan. I feel like human ingenuity can reach that goal if the norm of a 3rd of income were abolished for something like an expectation of Moore's Law, Wright's Law, or Carlson's curve.

Of food, water, and shelter, my observation (admittedly anecdotal at this point) is that shelter is the greatest source of inequity. If there is any justification for those "Eat the rich" folks, it is to get the housing that is needed. But I cannot abide the language in that movement. I think seeing that we can somehow make it a norm to stack learning curves like we do with semiconductors would completely deflate the motivation behind movements like that one.

How can government make housing more affordable? | Brookings

Jenny Schuetz explains the current housing affordability crisis and how the 2020 Democratic presidential candidates are proposing to fix it.

www.brookings.edu

 

[Luminous]

A lot of people bought a single family house during the last run due to FOMO. Could it also be a Committed Action?

In my mind, raising children in an urban environment (by which I mean walkable, bikeable) is just as supportive (maybe even more) of valuing family life as sub-urban environments (by which I mean total car dependance). The way people classify urban and sub-urban vary quite a bit

Is a detached single family home servicing a value that a more dense (probably smaller) home would? What are the key values that you support in the action of buying a detached single family home in a bedroom community, that other more dense housing (with walkability to work,groceries, etc.)?

This question is not rhetorical. People's values are different. I just want to know what the perceived would be. Perhaps there are solutions to address those values while also addressing the values of reducing climate change, reducing homelessness, providing accessibility for people with disabilities (like not being able to drive after a stroke), etc.

Privacy, space, reduction in noise, increase in peace, possible additional natural beauty with trees and plants, reduction in pests, increase in comfort.

 

[ygolo]

Privacy, space, reduction in noise, increase in peace, possible additional natural beauty with trees and plants, reduction in pests, increase in comfort.

Thanks Luminous! Would you say these values are core to you, or just pleasant things that are nice to have?

I do think all those things are possible in a more dense environment, though. The options aren't only a tiny concrete box or single family home. There are plenty of configurations in between.

• There are single family homes where a neighbor literally called child services for kids playing in the backyard while parents watched from inside. Then there is also this. I am not sure privacy is guaranteed in sub-urban environments. My wife and I, as well as sister-in-law have gotten dirty looks and more in completely suburban environments. In fact, even in dense environments, I would say the main source of privacy is the non-nosiness of the neighbors. People see stuff, and as long as nobody is getting hurt, life goes on. It's actually easier to blend into the crowd.
• Certainly by definition, more dense means less space. But how much space is needed? In addition, some apartments very spacious areas, even though they are in a very tall building by themselves. The location makes them very expensive, but that is the point of this thread. It's become illegal in many places to even move in that direction in the suburbs. If there was more available, they would be cheaper.
• Insulation and materials can go a long way to noise cancelation. But I know that was mentioned early in the thread.
• I am not sure what is meant by peace. The data is messy when it comes to crime. But often, per capita, the more dense areas have less crime. See this map of California
  
  California Crime Rates and Statistics - NeighborhoodScout

  Detailed crime rates and statistics information from cities within California. Find the top 10 safest places to live in CA.

  www.neighborhoodscout.com
  You can see some of the most sparse regions (essentially the biggest in area) are actually the most dangerous.
• I think natural beauty in shared parks, groves, trails are quite possible in dense spaces. Some condo complexes actually have a lot more greenery than sparse often artificial lawns on sparse single family ant the shared water per person can have large impressive trees and gardens. But I get it. I think purely rural places(rather than suburban) would be better in this sense as well as many others.
• I am not sure I understand the reduction in pests. If you have more backyard, dirt, etc. I think you are likely to have more pests.
• Comfort is I suppose a conglomeration of the others, unless you have something in mind

Thanks once again for providing some insight. Unfortunately, I have heard the reasons before, but I don't believe they are necessarily confined to car dependant areas.

 

[ygolo]

I am not saying that Singapore is a utopia, and I wonder if we can end up with a situation where the property is not state owned legally, but actually owned by residents.

This is more food for thought.

edit: more Singapore fandom (the more gushing the more skeptical I become, so I need to look into it more)

 

[ygolo]

Problem 1 meet problem 2, your solution.
Problem 2 meet problem 1, your solution.

Most of this thread has focused on the lack of housing supply (leading to expensive homes, homelessness, development patterns that exacerbate climate change, etc.).

But people are complaining about something else post-pandemic. People working from home shuttering business etc.

I see it all around my suburb, on one side of the strode, tons of tons of commercial space for lease as businesses have shuttered, and despite nobody wanting to buy a house, tons and tons of houses on the others that at least on paper are well over what financial advisers say a home should be worth based on income.

The complaint is that people working from home (ultimately meaning more time with family, and not polluting) is leading to people not having foot traffic.

Everyone's over remote work except for the workers themselves

It would be easier for many CEOs, and their business models, to turn the clock back to 2019, per their comments during second-quarter earnings season.

fortune.com

Solution, convert all the commercial space that is available to mix use. Sell the living space part of it for much cheaper than those expensive places with single family homes, and viola, foot traffic. Your customers may just be living literally above you. This would especially be great for the urban-core which the prior article says is getting extremely reduced foot traffic.

 

[yeghor]

https://twitter.com/i/web/status/1559811768842477568

 

[yeghor]

US rent price change for 1BR and 2BR units on Month on Month and Year on Year bases as of July 2022.

Darker shades of blue indicate higher percentage of Year on Year increase in rent. The data set indicates as of July 2022, 1BR rent ranges from 800 USD (Sioux Falls, SD) to 5800 USD (New York)

Full report here https://www.rent.com/research/average-rent-price-report/

 

[yeghor]

1st tweet: After 2006 housing boom, house prices fell by 25%, what about this time?

2nd tweet: 10 years ago median home price in US was around 160K USD, now it is around 400K USD. That's like 10% increase in house prices every year over 10 years. If the prices come down by 25% here, the median house price will be around 300K, still almost twice of what it was back in 2012.

This is the result of excessive and irresponsible dollar printing by the FED and the Senators (elected by the people) approving that. This is a testimony to the failure and dysfunctionality of the (so-called) Democratic system, while you are being lulled by the system that it is the best thing there is. Yeah, the best ponzi scheme that is.

https://twitter.com/i/web/status/1560460287454633986

https://twitter.com/i/web/status/1560471835283787779

 

[yeghor]

FED hasn't properly started shrinking its balance yet. Once it starts shrinking the balance sheet, money roaming around will get more scarce, meaning asset and equity prices will start coming down.

https://twitter.com/i/web/status/1561064584823582720

 

[ygolo]

I know there has been talk of a coming housing crash, but a recession simultaneous with a housing crash is not the point.

It is the incentive structure that needs addressing for a permanent fix. Just like with gas prices going up and then down are just temporary things till we finally just ditch the whole system for renewables (because we have to).

California is one of the worst offenders for the housing situation for sure. There is some evidence that they have now become aware of their own NIMBY extremes termed BANANA(Build Absolutely Nothing Anywhere Near Anyone).

NIMBY, BANANA, CAVE and other acronyms

Since the races for mayor in both Battleford and North Battleford are over thanks to acclamations for Derek Mahon and Ian Hamilton respectively, I am going to talk about the other campaigns going on elsewhere in the province.

www.sasktoday.ca

But really the aspirational incentive structure is the core of the problem.

Shows like Vanderpump Rules, Shahs of Sunset, Selling Sunset, Selling the OC and other similar shows valorize and create aspiration for the most wasteful and harmful form of housing. If we want real change, the culture needs to shift to mocking relentlessly places like this.

Highlighting directly:
1) how many homeless people could be housed on the same land?
2) how much public funding actually goes to the roads, plumbing, cable, post delivery, etc. compared to more dense areas?

I am not saying endorsing a specific spirituality, but I know many traditions have the same message:

Indian spiritual guru, followed by Will Smith and Tom Brady, says it's life rather than lifestyle that really matters

Sadhguru, the yoga master turned social media celebrity with over 8.6 million Instagram followers, says his philosophy is to always feel "blissed out."

www.cnbc.com

 

[ygolo]

Beyond perverse social incentives to hoard shelter from other people as a narcissistic flex (imagine doing this for water or air... look I can breathe as much as I want and you got to spend most of your paycheck just to get enough air to not pass out from moment to moment), there is a structure of how the supply of shelter is handled.

I am wondering why there isn't an "International Roadmap of Affordable Housing"

Instead, we get piecemeal and weak-sauce roadmaps like these:

HUD Research Roadmap Finalized | HUD USER

www.huduser.gov

A road map to more affordable housing

Vanderbilt University researchers have released a report that points the way to strong, stable neighborhoods with affordable housing.

www.habitat.org

These aren't roadmaps, they are wishes. I applaud that there are organizations that wish these things.

Locally, there is more teeth

Welcome to Habitat Nashville | Habitat Nashville

www.habitatnashville.org

But one charity pulling a whole industry's weight hardly seems like enough.

For comparison, see how an fully international effort in a far less important industry is done.

International Roadmap for Devices and Systems (IRDS™) 2021 Edition - IEEE IRDS™

irds.ieee.org

A body of standards, data-based predictions, outlines of challenges, direction of research to a great degree of detail, and international acceptance.

 

[ceecee]

Beyond perverse social incentives to hoard shelter from other people as a narcissistic flex (imagine doing this for water or air... look I can breathe as much as I want and you got to spend most of your paycheck just to get enough air to not pass out from moment to moment), there is a structure of how the supply of shelter is handled.

I am wondering why there isn't an "International Roadmap of Affordable Housing"

Instead, we get piecemeal and weak-sauce roadmaps like these:

HUD Research Roadmap Finalized | HUD USER

www.huduser.gov

A road map to more affordable housing

Vanderbilt University researchers have released a report that points the way to strong, stable neighborhoods with affordable housing.

www.habitat.org

These aren't roadmaps, they are wishes. I applaud that there are organizations that wish these things.

Locally, there is more teeth

Welcome to Habitat Nashville | Habitat Nashville

www.habitatnashville.org

But one charity pulling a whole industry's weight hardly seems like enough.

For comparison, see how an fully international effort in a far less important industry is done.

International Roadmap for Devices and Systems (IRDS™) 2021 Edition - IEEE IRDS™

irds.ieee.org

A body of standards, data-based predictions, outlines of challenges, direction of research to a great degree of detail, and international acceptance.

I agree. I had heard about Houston but I didn't know much background. And this is permanent housing, not transient accommodations. But this is what is seen in other countries that are far more successful in providing for unhoused people (Finland is one, Denmark and Singapore like you mentioned earlier).

Houston’s unhoused population decreased due to a $200 million investment, a new report says | Houston Public Media

The report found a 19% decrease in overall homelessness in the Houston area since 2020, and a 64% decrease since 2011.

www.houstonpublicmedia.org