The inefficient pricing and the slowly updating pricing allows for the HIGHEST amount of leverage to work for people.

In any other market, unsophisticated investors would have been margin called overnight. Instead they get to sit for years on slowly moving prices, and use those years to continue boosting their collateral as if nothing happened.

So you can't expect a significant drop in home prices just yet. But definitely pay attention to foreclosure auctions. The court houses are not even processing these yet until the economy turns back on in the local municipality. You're too early, but wait for it.

For now we are all trying to quantify just how leveraged people were. Many people don't think there were that many AirBnB speculators to affect the housing market. So every article to the contrary just helps form the picture.

For the 2008 great financial crisis, it only took 7% of mortgage holders defaulting to cause the market convulsions (as in there really weren't that many "bad" borrowers, people overwhelmingly played by the expected rules to the best of their ability). Expect that the % necessary to cause distress to banks to be bit a higher these days, due to some marginal reforms, but also watch to see how many are going to default because that could also be a much higher percent its interesting because so many more people already won't be able to pay their mortgages because the unemployment already happened first.

Don't forget the tax incentives (at least from a US centric view). There aren't many investments where you can depreciate the basis for tax write-off, while also realizing gains in tangible value.

> In any other market, unsophisticated investors would have been margin called overnight. Instead they get to sit for years on slowly moving prices, and use those years to continue boosting their collateral as if nothing happened.

This is a really interesting point. I've never thought of it this way.

Aka: shenanigans of the financial industry

Banks were leveraged 40 to 1 and the value of their collateralized bonds fell a few percentage points, that's it. Yes, that is what our entire society is based around, the assurance that this doesn't happen.

I am more interested to see what happens to commercial real estate. I have a feeling that hotels are kind of unhappy about their real estate holdings right now. The question is whether they can get rid of it (and if someone can turn a hotel into apartments successfully, which sounds like a challenge to me). Ultimately, I think the status quo will prevail and nothing will change. The cost of change is too high.

yeah and that remains true when real estate is exchanged for the amount of cash people have on hand, instead of how much cash they could theoretically produce in 30 years.

the game is trying to figure out how much of that intrinsic value is relevant right now, or how close is the current price to that 'intrinsic value' since they can be far far far away from each other. its just a commodity no matter how married you are to the asset class: if there is a glut of supply because people can't afford the mortgages or property taxes then prices go down. The banks and states don't care, they already earned what they wanted from the mortgage/property owner and are derisked. when you default they will get the property off their book as fast as possible.

It can be done, but I've more often seen apartments built over ground scraped clean than retrofitting an existing building. Honestly, hotels are probably the closest kind of building design that one could get that might be worth converting into apartments.

There are two buildings near downtown in my city. One was converted into studios, the other now bills itself as "student housing".

Even if I went along with the panic, it would take probably three months to go through with any transaction that would throw a desirable property onto the market. The demand is still so strong that the low price would likely chum the waters and competitive bidding would drive the price up.

I think these Airbnb liquidation sale headlines are being sensational and end up wasting buyers time.

From airline's standpoint it's logical - as some states and countries lift the lockdown order the flights might actually take place on normal schedule. From traveler's standpoint it's also rational - I get a full refund if United cancels the flight, but "store credit" if I cancel the trip on my own. I also get the same United voucher whether I cancel the trip a month in advance or 48 hours in advance.

This affects any lodging reservation in a negative way, though - what looks like a steady supply of bookings months out turns into a series of cancellations closer to the dates of the stay.

An insightful comment, and it's exactly why I booked a vacation flight for late this year already. United in particular was offering very generous terms - they were offering book now, and no penalties or fees for changing the flight within the next 2 years.

The answer to that question has been a definite "no" for lots of people during this latest and recent first wave (which has now started retreating a little) and I suspect lots of people will think twice before vacationing in a different country (even if that second country it's also in the Schengen area).

>Alas, the price barely moved in my area, much to my surprise and frustration.

I suspect it's because foreclosure take a few months to do, and are probably suspended right now due to the lockdown, so those distressed houses haven't translated into supply yet.

The second and third waves of the economic crisis will be worse, and I'm sure we'll see all sorts of cronyism pushing this stuff. We haven't seen anything yet.

I have a fairly mature financing operation from collateral I’ve grown over a decade and cash on hand, so I can move quick (48hr closing). I also make it worth the seller’s time with a shared equity model. I lock in my gain, they get a share of any upside in the future.

Less “We buy houses!” and more “you need a business partner with deeper pockets”.

RE has been in a bull market since around 2000. That bull run may be ending. It's even possible that the true bubble ended in 2008-2010 and what we have seen since then is a large bear rally a.k.a. "double top." RE is a very slow market where things that could happen in days or months in stocks take years.

Bubbles are basically naturally occurring Ponzi schemes. They are not driven by fundamentals.

There are systemic issues with regulatory capture in real estate, those who benefit from limited supply (landowners) have blocked land from being used more efficiently, dramatically driving up its prices.

Replace “land” with “dwelling unit” and I might agree with you.

Massive chunks of our cities are restricted to a single or two dwelling unit per parcel, which creates a huge bubble in land prices.

So in summary, landowners use law to inflate land values by restricting the number of dwelling units that are allowed. (And ironically, by unfairly capping the population density, they force overcrowding of people into existing units, which is what studies are finding to be the true factor the geographic distribution of COVID19 cases in places like NYC, rather than density... but I digress)

Critics will see this as un-democratic when in reality it's much more democratic. Most local zoning is controlled by tiny opaque cabals of land owners who use all kinds of tactics to prevent participation by anyone beyond other sympathetic land owners with a vested interest in raising prices.

These cartels have sat around while an entire generation has been ruined by their practices. It's time to take their little fiefdoms away.

Neighborhood Defenders by Katherine Einstein et al

Segregation By Design by Jessica Trounstine (recently won a planning book of the year award)

And though it's not about loca control, as much, The Color of Law by Richard Rothstein is an essential for looking at the federal policies that forced segregation in housing.

What tactics do they use and why would that not apply at the state level? We already saw huge influence of big interest groups at the state level for many decades now, e.g. with the most recent passage of the rent control legislation in CA (benefiting developers). State-level legislation results in a much more damage than any local legislation could.

On a different topic, I'm surprised people keep bringing up the notion that restrictive zoning benefits landowners. If anything, upzoning always increases land prices as it allows more economic value to be extracted from it (think how big the cash flow would be from a 20 unit apartment building developed on a 10000 sq ft lot compared do a duplex even assuming that per-unit rent goes down). I know plenty of landowners and landlords, and none of them favor restrictive zoning.

The only people supporting low-density zoning are homeowners living in these neighborhoods as they extract value from the neighborhood character and scenery and could not care less what they real estate is worth (until they are selling). These are not the people you whose voice in the matter of town governance you'd want to take away. That would be a textbook definition of tyranny of majority.

For example:

> with the most recent passage of the rent control legislation in CA (benefiting developers).

This doesn't benefit or harm developers at all, it just limited the economic rents that wealthy people can extract from the less wealthy. Demonization of developers may be able to persist for a while, but landowners and homeowners are clearly the culprits of wealth inequality here and the developer blame game won't last much longer. For example, take a look at this recent NYT opinion article, which shows the sea-change of opinion about who is to blame for housing:

https://www.nytimes.com/2020/05/11/opinion/coronavirus-us-ci...

> If anything, upzoning always increases land prices as it allows more economic value to be extracted from it (think how big the cash flow would be from a 20 unit apartment building developed on a 10000 sq ft lot compared do a duplex even assuming that per-unit rent goes down).

That "always" is completely wrong, which is evidenced by basically everywhere else in the world that has enacted fairer zoning schemes and achieved far better housing results.

Upzoning only vastly increases land values where there has been massive downzoning, which creates massive market pressures in the few places that allow tiny amounts of upzoning. This combination of downzoning wealthy neighborhoods then doing targeted upzoning of lower income neighborhoods has resulted in massive destruction of the few places that were affordable. But policy makers are getting wise to the wealthy people saying NIMBY; future upzonings will increasingly require affordable housing in wealthy neighborhoods, or there will be massive city- or state-wide upzonings as in Oregon or Minneapolis.

The playbook of the wealthy white suburbs has been shown to be disastrous for society, and the next generation of planners, seeing an entire generation locked out of the chance at building homes, is increasingly rejecting the disastrous arguments you put forward. Society can not survive another 20 years of what has happened to housing, which is the disastrous effects of homeowners saying NIMBY to any newcomers. Exclusion of that sort is creating both economic inequality and massive societal disruption (except for the homevoters who directly benefit from this while slyly claiming that they don't care about property values, just about excluding any new people and preventing change.)

This might be true in some markets. In the LA market, my friends who were using the "wait a few years" strategy have been very, very disappointed.

You are early. Banks aren't becoming aggressive quite yet.