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SHRED

(28,136 posts)
Fri Jan 4, 2019, 12:27 PM Jan 2019

The upcoming recession

I just talked in-depth with a real estate friend yesterday and the conversation shook me.
Turns out lending institutions have still been writing bad mortgages for people who really should not qualify and real estate investment companies are dumping their properties as fast as they can while the real estate market, at least here in San Diego County, is starting to crawl to a stop.
He asked one of the top companies why they are dumping so much property and they said they want to cash out and wait for this housing market to tank again then buy back in.
He said that 2019 may be okay but that a crisis by 2020 is all but a sure thing.
He added that when the media catches on to this it will accelerate.
He said banks are already drying up refinance cash outs as interest rates rise and uncertainty grips the market.

When people can no longer afford homes and can't use their equity as a bank then look out. The economy is in for a rough ride.

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Auggie

(31,067 posts)
1. My sister-in-law is a realtor near San Diego ...
Fri Jan 4, 2019, 12:37 PM
Jan 2019

she was warned of the same situation last year, but counseled the crisis begins in 2019.

Wish I could cash out. I'd make a lot of money on my house.

 

SHRED

(28,136 posts)
3. We'd like to also
Fri Jan 4, 2019, 12:43 PM
Jan 2019

But we don't want to be without a home, living in our motorhome while the market drops.
Plus we're spoiled living west of the 5 here in Encinitas. It's tough to leave this location knowing we'd never be able to afford coming back.

Auggie

(31,067 posts)
9. Yeah, but if the market drops as promised you could re-purchase your old home for a song
Fri Jan 4, 2019, 01:25 PM
Jan 2019

I saw it happen to us (Northern California). Purchased for $300,000. In five years it was worth $600,000 -- no lie! After the crash it was down to about $320,000. And you guessed it -- it's now up (surpassed) that $600,000 mark.

It's nuts.

 

SHRED

(28,136 posts)
15. Not this area
Fri Jan 4, 2019, 03:27 PM
Jan 2019

It will fall. We lived through 2008.
However this coastal area in Southern California is insulated a bit from the big fluctuations due to location.
If we sold and they did drop a lot we'd never find one here.
They'd be scooped up too fast.

unblock

(51,974 posts)
2. there is no sector that's optimistic about 2020.
Fri Jan 4, 2019, 12:39 PM
Jan 2019

every sector is predicting a contraction by 2020, if not by late 2019.

since october, the financial markets have gone from effectively predicting 2-3 fed rate hikes in 2019 (based on continued economic expansion) to predicting 0-2 rate *cuts* in 2019 (based on expectation of very slow expansion or contraction).

it's not clear that there will be anywhere safe to invest. maybe the old "cash is king" maxim will return.


but really, what do you expect when you start with a concentration of wealth worse than during the 1920s and add an incompetent president hell-bent on a jacking up tariffs just like during the great contraction that started in 1929?

ScratchCat

(1,957 posts)
5. It has begun
Fri Jan 4, 2019, 12:54 PM
Jan 2019

here in Florida as well. The bottom fell out of the residential market just as Hurricane Michael made its way through. Prices aren't dropping per se, but there has been significant "price compression&quot lower priced homes continue to rise, higher priced homes not increasing and going back down in some cases). Much fewer buyers than back in the spring. Back then, at any given time, at least 75% of "Active" homes were already under contract. Now, its no better than 25% under contract. This is suburban, not coastal. One of the largest buying segments was young couples with two incomes who "qualify on paper" but have no savings, can't afford closing costs and wont be able to afford the mortgage if one borrower's income decreases or is eliminated. It could get ugly if there is a prolonged dip with high unemployment.

onethatcares

(16,133 posts)
16. yep, I'm watching the same thing
Fri Jan 4, 2019, 04:13 PM
Jan 2019

and at this point I'm glad our house hasn't sold. We were hoping to tap into the profit and live without a payment. I think we'll stay here and just cover what we got.

St Pete area

Wounded Bear

(58,440 posts)
7. Real estate market in Seattle area is softening big time...
Fri Jan 4, 2019, 01:04 PM
Jan 2019

was until recently one of the hottest markets in the country. Since about mid year 2018, not so much.

The Trump Slump is deepening.

Market is doing a dead cat bounce again today.

Ilsa

(61,675 posts)
8. I'm pissed. My MIL who has dementia got a Walmart credit
Fri Jan 4, 2019, 01:10 PM
Jan 2019

Card. They increased the limit on it at least once. She has very limited income. Her minimum payment is now over ten percent of her income. I have talked to my husband about helping her with her bill paying to get a handle on how bad it is including other credit cards.

The banks are pissing me off.

shanti

(21,670 posts)
11. Heard that
Fri Jan 4, 2019, 02:34 PM
Jan 2019

My mother also has dementia. My brother has had control of her finances for about the last 2 years, because mother cannot handle money anymore. We had to cut up ALL of her credit cards, and take away her checkbook. She was frustrated that she couldn't buy things anymore at first, but has adjusted. Also, cancelled her landline as she was constantly getting calls begging for money. Same with her mail. She loved to buy things from catalogs, but now Bro sorts thru it first.

My sympathies to you and your husband as you go thru this awful condition. I wouldn't wish it on anyone

Ilsa

(61,675 posts)
13. Thanks for your sympathies.
Fri Jan 4, 2019, 03:13 PM
Jan 2019

She isn't ready for us to take away her ability to control her finances, so we are going to try and move towards it gradually.

haele

(12,581 posts)
10. Son in Law's family is trying to sell two residences and 35 rental properties owned since the 90's.
Fri Jan 4, 2019, 02:25 PM
Jan 2019

His grandfather and father own over 35 units that have been the "family business" since 1990.
SiL doesn't understand why they're selling out. I thought it was because the grandparents had been leveraging those units and their other property to pay for their lifestyle (maids, "lifestyle advisors" and facilitators, quarterly vacations, vacation property and expensive outdoor toys) and knew the debt on the properties would outlast the grandparents passed, leaving the father and SiL, who have known no other lifestyle, with nothing. The 2009 crash really seemed to have affected them; that's when they started scaling back and talking about leaving "Expensive Socialist California" for Texas or Florida (states with no income tax, as it were).

The problem they're experiencing is that they are still insisting on selling at 2016/2017 prices when they finally decided they had to sell - and the units are pretty much still the same condos they picked up during the S&L crash in the late 80's, early 90's from pension money with just a bit of cosmetic improvement to them being the primary investments and maintenance done. Those units, and the family houses they are now talking about selling at 2016 prices when they last talked casually to a relator friend, desperately need extensive work to get up to code - plumbing, wiring, roofing...
I suspect it's due to second/third mortgages. If so, they're going to have to take a loss in that case.

It's going to be tough to sell distressed, out of code properties at full "turn-key" price to anyone.
People looking for a place to live aren't going to be able to get loans for the asking price once the home inspector has gone through - especially not a VA or HUD loan.
Developers are going to want to gut and build new - so they're going to be looking for deep discounts when they're buying.
The foreign "park excess money in California real estate" investments seem to be drying up, and they were looking at new construction anyway, not run down condos or homes from the 1970's.

Even mobile homes are dropping in prices, and they were shooting up to over $100K for units built in the '70's and '80's there for a couple years; Freddie Mac now covering mobile home units, but pretty much all the units that have been listed over the past couple months are now showing they've gone through listing updates once or twice with $5 - $10K price reductions before they finally sell.

Haele

 

Wellstone ruled

(34,661 posts)
12. Two of Trump's Buddy's
Fri Jan 4, 2019, 02:38 PM
Jan 2019

are unloading Properties here in the Vegas Valley. These are Houses that were Foreclosures and Repo's from 2008-2011.

Oh btw,does the names Mnuchin and Barrett ring a bell,well it should ,they together run the largest Rental Housing Business's in Vegas.

Response to SHRED (Original post)

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