Coordinated Intervention, Meet Sellers 9/27/22

[fxfox]

This somehow feels like either we crash in the next 3 days or we gonna bomb several hundred points higher.

[DrStool]

1 hour ago, Jimi said:

The math is so simple & devastating.  Let's say since the start of the pandemic that a 30-year mortgage for a $1m home required 20% down & you could finance the balance at 3.0%.

N = 360

FV = $0

PV = $800,000

i = 3.0/12 = 0.25

Calculate PMT = $3,372.83

Let's say that the $3,372.83 monthly mortgage payment reflects the maximum some couple can afford to buy a house.  Well then, at 7.0%, what is the maximum loan they can afford?

PMT = $3,372.83

N = 360

FV = $0

i = 7.0/12 = 0.58888

Calculate PV = $506,962.

Assume 80% LTV, maximum closing price is... ($506,962./0.8)= $633,702.

That's a 37% cut in purchasing power for our couple from 3.0% to 7.0%.  This is so gruesome.

So then, you can sorta say, "Everyone who bought after [Enter Year] is underwater, because of the financing costs."

The productive benefit of American mobility within a continental economy should not be underappreciated.

A lotta young workers are stuck for the foreseeable future in their first homes.

 

Don't think so, because the prices will adjust. They'll have no equity, and jingle keys, jingle keys, jingle all the way, oh what fun it is to say, fuck you house, and walk away. Hey! Jingle keys, jingle all the way, equities gone, so what da fuck, I'm gonna walk away. 

[Jimi]

Want to share another component of the rural Californian real estate thing.  Consider this place:

https://www.redfin.com/CA/Upper-Lake/13306-Elk-Mountain-Rd-95485/home/58413704

Okay... transacted in May 2018 for $465K after a $50K price cut. Just eyeballing the graph above, and mortgage rates then were ~4.5%.

The price history is opaque on Redfin, but you can see where they whacked the price by ~$100K a couple days ago, from $795K to $699K.

Now, look at the photos of the place. Photos 20-22 show that this was... a pot farm.

I know an old-school Humboldt grower, who was illicitly active 30 years ago, and who gave it up about 10 years ago, just before legalization. He still lives in the Emerald Triangle, and I saw him about a month ago. Asked how things were going.  He said the locals are getting killed.  Why? Because this listing is not unique: I have seen a lot of listings statewide that were equally designed to cultivate weed.  Here's the deal: the market for pot has been positively flooded by enthusiasts like the listed-owner above who thought they were going to turn a casual profit by growing & selling a dope harvest.  Unsurprisingly, price/pound has collapsed. For the locals of the Emerald Triangle who have their "secret spots" deep in the Redwood Curtain, and who enjoyed very handsome returns on their illicit activity much to the benefit of the local economy, their livelihood has been ambushed by indoor or licensed supply.

Now, I'm not shedding tears for anyone on this score: the market is a ruthless mistress for us all with a commercial angle.

But you tell me: I'm going to assume that the May 2018 price presupposed net-positive income at $465K transaction price. Now, that land is just... another piece of California dirt.  Now, I loves me some California & her dirt, but there's plenty of it like this up north.

So, why with the mortgage rate move from 4.5% when it transacted to 7.0% today does $699K make sense... even if seller cut $100K off the price a couple days ago?

And you know who's even worse-exposed than the naive commercial dope-growers?

Those who fancied themselves VRBO empire builders, leveraging short-term rentals into ever additional purchases.

Down around Joshua Tree, them people are gonna get hammered by a downturn.

 Wile E. Coyote 

[sandy beach]

7 minutes ago, Jimi said:

Want to share another component of the rural Californian real estate thing.  Consider this place:

https://www.redfin.com/CA/Upper-Lake/13306-Elk-Mountain-Rd-95485/home/58413704

Okay... transacted in May 2018 for $465K after a $50K price cut. Just eyeballing the graph above, and mortgage rates then were ~4.5%.

The price history is opaque on Redfin, but you can see where they whacked the price by ~$100K a couple days ago, from $795K to $699K.

Now, look at the photos of the place. Photos 20-22 show that this was... a pot farm.

I know an old-school Humboldt grower, who was illicitly active 30 years ago, and who gave it up about 10 years ago, just before legalization. He still lives in the Emerald Triangle, and I saw him about a month ago. Asked how things were going.  He said the locals are getting killed.  Why? Because this listing is not unique: I have seen a lot of listings statewide that were equally designed to cultivate weed.  Here's the deal: the market for pot has been positively flooded by enthusiasts like the listed-owner above who thought they were going to turn a casual profit by growing & selling a dope harvest.  Unsurprisingly, price/pound has collapsed. For the locals of the Emerald Triangle who have their "secret spots" deep in the Redwood Curtain, and who enjoyed very handsome returns on their illicit activity much to the benefit of the local economy, their livelihood has been ambushed by indoor or licensed supply.

Now, I'm not shedding tears for anyone on this score: the market is a ruthless mistress for us all with a commercial angle.

But you tell me: I'm going to assume that the May 2018 price presupposed net-positive income at $465K transaction price. Now, that land is just... another piece of California dirt.  Now, I loves me some California & her dirt, but there's plenty of it like this up north.

So, why with the mortgage rate move from 4.5% when it transacted to 7.0% today does $699K make sense... even if seller cut $100K off the price a couple days ago?

And you know who's even worse-exposed than the naive commercial dope-growers?

Those who fancied themselves VRBO empire builders, leveraging short-term rentals into ever additional purchases.

Down around Joshua Tree, them people are gonna get hammered by a downturn.

 Wile E. Coyote 

Getting killed? It does look beautiful. I'm getting sick of no rain in the SF Bay Area these last few years and the brown East Bay hills.

[Jimi]

Here's simple cultivation in the SoCal desert... but pvc greenhouses can also be found:

"Unpermitted cannabis used to grown in garage, but cleared already."

https://www.redfin.com/CA/Landers/55623-Jesse-Rd-92285/home/3856650

 

[Jimi]

Just stumbled on this:

Quote

• The previously high-flying cannabis REITs have been slammed this year on concerns over rent payment from their cannabis cultivator tenants, which have been struggling amid a plunge in wholesale cannabis prices.
• The 30-50% plunge in pot prices comes amid a flood of new entrants to the cannabis retail and cultivation industry and as institutional capital to multi-state operators has driven production-efficiencies.

https://seekingalpha.com/article/4543293-cannabis-reits-too-cheap-to-get-high?source=all_articles_title

[Jimi]

4 hours ago, sandy beach said:

Getting killed? It does look beautiful. I'm getting sick of no rain in the SF Bay Area these last few years and the brown East Bay hills.

July & August 2020 when the wildfires caused the smoke in the Bay Area to shut everyone indoors for 6 weeks or whatever, I tried to convince my family to move away right before our eldest was to start high school. I couldn't get buy-in from our eldest, for whom the move would be most disruptive... so we stayed. But, yeah... quality of life is not as attractive as it was 20 years ago when we moved back to the Bay Area from SaMo. The hills are brown, the city is a pit, and the bohemian & weirdos that helped make the place interesting for decades have been replaced by tech 20-something millionaires & the RV homeless. 

 

[Jimi]

Here's another - 3 days on the market - that I just stumbled on....

"It's also a fully licensed cannabis production property."

https://www.redfin.com/CA/Ukiah/4001-Boonville-Rd-95482/home/181948013

All these "Gentleman Farmer" places are being surrendered, because... well, it turns out, the economics suck.

[fxfox]

DAX below 11950, thats what happens when tripple bottoms fail (was at 12390)