About a week ago I was having a short conversation with @taskmaster4450 as result of writing this post.
His research was showing that over the past four weeks or so the number of mortgages have been dropping. My opinion was, that couldn't be the case because my friend who manages a title company has been seeing a record number of closings over the past year.
It turns out we were both right. Probably Taskmaster more so than me, but I'd like to hang my hat on the fact that I wasn't completely wrong.
You see, the number of closings has been skyrocketing over the past year or so. The thing is, the majority of these home purchases have been cash sales. That could certainly be the reason that mortgage applications have been on the decline, more people are buying with cash as opposed to taking out a loan.
My wife and I were camping with our friend again this weekend, and one night around the fire we happened to be talking about this subject. The friend mentioned the fact that so many people are doing cash sales.
She said that one of her realtor friends was intrigued by the fact that so many cash sales were taking place and he started doing some investigating to see what was happening. After doing some digging he ultimately figured out that it was all Covid money that is driving the cash sales.
Upon hearing that you might nod and say "ah, that makes sense", or you might be thinking "now wait a minute, there is no way a $4000 stimulus check is going to pay for a house". Trust me, I went through the same process in my head.
It turns out, Covid is definitely the case here, but it isn't the stimulus money. I think even the people who still don't believe in Covid can agree that lots of people have passed away over the last year. Whether from Covid or complications from Covid, or some other reason, they are no longer here. What happens to older people when they pass away? Their assets if they have any get distributed via their will or probate or whatever to their family, friends, etc.
That is where this influx of cash is coming from apparently. People who had their parent or sometimes parents die prematurely due to Covid have suddenly gotten their inheritances much sooner than they had expected. This has led to a huge boom in house sales paid full in cash.
Personally, I thought this was really interesting and it was a facet I had never considered before. I knew immediately that I needed to write a post about it, so here I am. It has a be a bit bittersweet for some of these people to think that they are buying their dream home thanks to such huge loss.
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This is very good observations and I do know that the market is ridiculous. My fiance and I are in the process of getting married next month and he has a house to sell and we would like to buy the rental that I'm currently living in with four and a half acres of land. We were just at Home Depot the other day and looking at would it's just so ridiculously priced we are changing our minds as far as how we're going to proceed. I don't see a purpose in purchasing wood for that kind of expense. I'm praying for a solution going forward but I figure we'll do what we feel best. That would be, we are going to just sit on his house while making some repairs and see what happens in a little bit and then decide. If he can get what he wants for his house ( it is right by a vacation area for Pittsburgh boaters) it still needs a lot of work, he would just sell it outright and we buy this land which we wanted to tear this old house down and rebuild with the profit. We shall see.
If the house is livable now I would just bide your time. My wife and I have talked about selling our house due to the prices being so high, but we would have nowhere to go. Their is a huge shortage because everyone is buying and paying a pretty penny to do it. Sell the other one and hold the money until the prices come down.
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Thanks, that's pretty much what we have discussed doing. Have a blessed evening.
You too!
Thanks 😊
Blimey, that's a little on the morbid side.
It is, but that is what is happening...
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True is true though
A good youtuber I follow (Alessio Rastani) says that we are possible headed towards deflation. He does not dare to predict if it is a bubble that is going to pop soon, but he supports the idea that eventually prices will drop as cash rises in value, so less cash can buy more things (including gold and real estate, both would drop in price)
That makes a lot of sense. I don't know a ton about it beyond what I have been told, but I think something is going to happen eventually and it likely will not be very good.
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I don't know either, that is why I try to stay liquid, to avoid risks and increase opportunities. I don't know the side effects of deflation, but I know it is not all sunshine and rainbows, as governments try to aim for an around 3% annual inflation for a healthy economy, but again, this has not worked very well, capitalism suffers from huge crashes every 10 years or less, regardless of inflation, so will be interesting to see a deflation crisis, how that would play out, and if it would be good for the people (it may be terrible for businesses, but I am a person, not a company, so I am biased)
I don't do a very good job of keeping my crypto liquid. I tend to stake it and then I am kicking myself when an opportunity comes that I could have taken advantage of.
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I know that feeling, I have spend some Ethereum and fees are high, so when using Ethereum lending I am stuck, it is not worth it withdrawing because the network fees are so high, I will probably only be able to withdraw when/if ETH 2.0 roll out and fees go down (as most expect)
Yeah, I think ETH 2.0 is going to change the game a lot. I hope so anyway. I have avoided ETH for the very reason you mention here.
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That makes sense, but it's kind of dark. It also explains the ridiculous bubble the market is going through right now. People are buying houses for more than they're worth without even doing inspections.
I suppose the good news for people who paid cash for houses is that even if the bubble bursts, since they don't have a mortgage, if they NEEDED to, they could take out an equity loan later on if they need to make repairs and can't afford it.
I'm wishing I could sell both of my houses right now in this market but then not buy a new one for a while. That'd be a lot of work. haha.
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Yeah, it got me thinking about the "bubble" as well. It might not be as much of a bubble as we think it is. It is really going to hurt the people who aren't paying in cash. Also the bystanders who are just going to see their taxes go up.
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I dunno
I think inflation might make it worth having a mortgage. But we’ll see
I have one, whether I like it or not, so I guess we will see!
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Very interesting indeed - I never thought about the indirect correlation to covid. It is sad but true. I am waiting patiently for the bubble to burst - price are unrealistic and over-inflated - it will be a matter of time.
Yes they really are. It has been a crazy ride these past two years.
Houston currently pulling a 7% inventory on single family home. It’s a all time low. Houston is generally a very flat market, nothing happens here in terms of housing. But I know people are paying $50-60K above asking. Also houses are getting sold before they are listed.
Yeah, that is happening here too. People are also waiving home inspections just to seal the deal. Could end up being very costly for them down the road...
Part of it could be that investment firms that have so much cash that they don’t need mortgages are buying houses like crazy:
https://slate.com/business/2021/06/blackrock-invitation-houses-investment-firms-real-estate.html
That could be part of it too.
It's sad but it makes sense. On another note, I also read several stories of people investing their stimulus check and creating a company that's doing well. So there will most likely be plenty examples of people investing smart, starting companies, maybe had a few crypto coins mooning.. either way, it's great that less people are closing on mortgages. Even if the taste may be bitter sweet :(
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Yeah, there is the possibility that some people made some really good investments with the stimulus money. Mine went mostly to paying off debt and building my emergency fund.
we didn't get any of that here, what we did get was also great and didn't hear it anywhere else honestly, we didn't have to pay loans/creditcards/mortgages etc.. so that's why I didn't pay any of that since the pandemic at first, to give ourselves some financial relief. Now things are going uphill financially, I took the first opportunity to pay off the creditcard first half, and will pay the remaining off in the next week. but the fact that people didn't have to pay that stuff was something that helped a lot of people, I'm sure..
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That is really cool that they did that for you. Sounds like you used that benefit wisely!
I think a lot of people were helped, because for example, home owners didn't have rental income to cover their mortgages. Normally they would receive rent most of the months, but now they didn't have anyone renting their apartments because they had to leave the country or were stuck somewhere in the world (a lot of this happened during first wave)..
I can imagine they were defo helped by this moratorium. They also extended it and it will now end in August, but families with small children can continue using it as well as other people that are struggling financially. Honestly, it's probably one of the most helpful things they've done during the pandemic to help the people out. Unfortunately, still many businesses didn't survive, as they can't survive on being open just a few months a year. It's sad..
I think the only problem I see with this is you are just postponing things, you aren't really eliminating the problem. Just pushing it. Perhaps I am wrong. Mortgage/Loan forgiveness would have had a greater impact I think.
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Its kind of a negative way of looking at it but I have seen so many articles from the mainstream media about why not to own houses. So I think it probably influenced what people did with their inheritances.
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That could be. It is definitely a lot of money for upkeep. I like that it can be an investment and it gives me some security for quality of life too.
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That's something I never really considered, which is odd since I'm one of those people who got their inheritance sooner than expected due to covid...
I guess it's because we are still dealing with all the legal bs that the government throws at us in those cases... as if losing a loved one didn't already suck enough...
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I am sorry you are having to go through this. That does suck about all of the red tape. I totally hear you. When I had cancer the red tape made was almost worse than having the actual disease.
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Thanks.. it's just frustrating knowing that life could have been spared if we have a more competent government...
I'm sorry about your struggle too! I hope all is well
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It isn't always about the government. The state I live in was pretty strict compared to the rest of the country and the people couldn't handle it. While in some cases it is definitely the government, in others it is the vast number of morons on the planet that cause the most trouble.
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But overall death rates are not higher over the Last 18 months as a whole.
So there is no more money coming via inheritance than normal.
But maybe people have had a lot more time to go house hunting.
It could just be that the death rate has shifted. There may not be more deaths, but they are just in a different subset that has more money to dole out. My friend is a pretty credible source, so I have little reason to doubt her.
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Well mortgage applications did increase last week so the near month-long trend was broken, at least for one week.
We will see how things go.
Death does tend to stimulate some real estate activity. My mom is a real estate attorney so that is good for business. Morbid yes but it is the reality.
Real estate people and funeral homes do well when people are dying in large numbers.
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I guess that makes a lot of sense. I didn't intend for this post to be morbid, but many have pointed out the fact that it is :)
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ha! thought it was gunna be due to selling their crypto
That may have been part of it. All of those DOGE flippers!
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Very likely yes.