Predict how when & how far Real Estate drops

Forward looking comment
To add to this old thread, it is pretty common knowledge that the supply / demand of housing is tight partially driven by many who have low rate mortgages. A good percentage of 3% mortgage notes will have to adjust in 2026-2028 . If rates stay at the 7-8 ( or more ) many will not be able to afford their house . Could this be history repeating itself ?


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Here in Australia I think they said 200,000 people came out of locked 2% interest rates in June this year and they are already starting to struggle at the 6.5% interest rates.

June 2024 another 300,000 people will come out of locked interest rates from 2% up to 6%+ or whatever they will be at that time. So expect more people to default on their loans.

I am one of these guys to come out of my locked 2.29% fixed rate in June 2024 to whatever the going rate is next year. Interest will double and triple for most people including myself.

I should be right to ride it out, but some friends of mine over-leveraged/borrowed and they are starting to struggle already. I hope we don't see 8% or 9% interest rates as that will probably **** me also lol.

 

Almost all of the 3% rates I'm aware of from 2020-2021 are fixed rate 30 year loans, so those folks are staying put for decades unless they absolutely have to move for work. Even then, some very low rate VA loans are assumable - the banks don't want to cooperate so try to slow-walk the process to make the deal fall apart and it takes 3-4 months to close if the buyer and seller both have the staying power. The market is slower due to the higher rates and some distressed properties hitting the market that don't fit people's criteria (you need cash to take on a distressed property), so there's still a shortage of viable inventory. The market is slow for many sellers but still tough for many buyers. Awkward times.

All the best,
Andrew.

 

I haven't ever heard of locked mortgage rates resetting. Around here the rates last the life of the mortgage unless specifically designed as a shorter term. Fixed mortgage rates can float in Australia?

Me, I have a 15 year at 2.125 with plans to have it paid off by 2033. It's a good thing I like my house, rates alone mean I can't afford to move.

 

My understanding of the concept is Adjustable Rate Mortgages. I believe they began in the early 1980s when 30-year rates were ~18% and the alternative ARM was around ~12% for several years before adjustment to another rate at the deadline time.

 

Sure, I understand ARMs. But fixed-rate (which Pap referenced) usually means the same rate throughout the entire loan. He's talking about a "locked fixed-rate", but maybe Australia doesn't do truly long-term fixed-rate mortgages.

 

I agree on locked rates 3% comment, most were conforming loans under 1m.
For the jumbo / super jumbo , different story..

 

There were ARMs offered in 2020-2021, but only complete morons took them. You don't take an ARM when the rate is at a once-in-a-lifetime historic low, you lock it down.

All the best,
Andrew.

 

For the record, I couldn't have been more wrong.

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I refinanced twice during that period, from 4.5% down to 2.9% and then down to 2.1%. 30-year fixed rate, VA.

We bought our house in October 2018 and I wanted to wait. I had no time or patience for the process. First time. Had my wife not persisted we would have been screwed out of anything we would consider nice. Original purchase price was $367k for 2,400 sq. ft, 4 bedroom, single story, 3 car garage. Got as high as $577k during the peak three years later, fell to $499k and has since risen to $530k.

Golden handcuffs.

I'm honestly not sure how I'd feel if this wasn't a house I could see us living in forever though. That would I think, be a painful proposition.

 

There’s a difference between proper Beverly Hills and Beverly Hills PO

Most those houses in the link you sent are BHPO, not actually BH

also a lot of realtors will list for 10-20% higher than they intend to so that they can get the massive price cuts on their listing which can fool buyers

Actual 90210 flats or Trousdale are still strong as ever

mansion tax is the only thing effecting BH at the moment in my opinion

 

Not a good listing strategy. In our market, anyway, we've had better results pricing property attractively, which instigates multiple offers. Then announce to all parties that it's a multiple offer situation and call for their highest and best by a set deadline. Let buyer competition drive the price up above asking.

Of course, sellers can reject that advice and set themselves a high price so they can leave themselves "negotiating room", and those are the ones that tend to languish on the market and sell for less in the end anyway... after all the necessary price cuts. When something is on the market too long and has had numerous price cuts, people here start to wonder what's wrong with it and aren't keen to actually go see it.

All the best,
Andrew.

 

Hey Kevin, not sure what you are looking at but my link includes all of BH including the flats, just click on the map (I'll attach a screen shot), it wasn't long ago when everything was bringing over listing price, now massive price cuts.

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I have a super jumbo that is 30 year fixed at 3.5%. Locked in the rate in November of 2021… right before rates started moving up.


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rock star move !

 

In the long run real estate will never drop, God really isn't making more land.