Our electric bill was over $400 last month. We live in a 1600sqft house with 3 people and keep it at ~79* Average California household income is $78k. After taxes probably end up around $64k. Average Sacramento rent for a 3 bedroom house is $2495 So the average family needs to live on ~$2500 a month. Car payment, CC bills, utilities, food, $100 fill ups, cell phone etc etc. I don't know how people that were living paycheck to paycheck before inflation are making it these days.
Short answer: They ain't. I think we're about to see it in the car market first, where folks can't make payments. That bubble is about to burst hard. The housing market has slowed way down, but I think the larger issue is still looming: companies that can buy houses in cash, use them as a tax write-off and simply wait for an asset that will always appreciate to do so to their satisfaction. Rent if it makes sense to rent, Airbnb or whatever, but corporations owning so much of the housing stock is a huge fucking problem. We'll see a breaking point one way or another by fall, but....nah, son. Ain't nobody fighting to work harder to pay higher bills that they never finish paying or get out from underneath.
I think it already is. Used car prices are going down fast around my neck of the woods, and the amount of "take over my lease/payments" sales on Autotrader are noticeably higher. As it sits right now, all three vehicles I paid cash for (the Cayenne, Ram 3500, and the Tin Can) have appreciated in value since I bought them. Every month or so I get a call from the dealer asking if I want to sell, and they quote prices above what I paid. I doubt that will last too much longer, and I have zero desire to sell any time soon, but it's somewhat satisfying nonetheless.
I've already noticed the housing market slowing. I keep an eye on housing in my area, another area of Oregon we considering moving to (job offer in a company with a close friend, but housing was stupid), and Vermont. Obviously loan rates play a huge part of this particular slowdown. Stuff I've seen that would have been on the market a week and sold at asking or over, is now sitting for a month or more before moving, or the owners are slashing the price in an effort to sell. I stopped looking at used vehicles so I can't speak to that. From what I know about this area's COL, and how much people are making.... they were making it, but barely. Now the cheap credit train is halting and inflation is rocketing. People can get by in these conditions for a little while with the help of their community but at what point is everyone in your community in the same boat? How long does that take? Guess it depends on the strength and resources of your community, but I live in a fairly rural and poor area. I read online someone who works at a food bank is seeing a huge uptick in people coming in, and they are having to kind of ration what they give out to stretch it through a day, and it's still not quite enough.
I see those calls as going from "supply constraint" and trying to avoid calamity by re-purchasing from someone who can no longer afford their purchase, and back to their intended marketing function here pretty soon. Out of everyone I know who has received those calls, the ones where the deal actually goes through and they make money on it has declined dramatically. I think the interest rates being high also means the difference in profit between a financed vehicle and a cash price is probably pretty significant too. The writing on the wall has been recession for quite some time. Also, I can see the record high gas prices as a sign that the market for some of the gas-guzzlers is going to be sparse, even as supply catches up, and we'll be in a recession that will hit the car manufacturers hard as fuck. I remember the abysmal quality of some of the 2008-2012 Bailout era cars, and for the prices they are asking on some of those trucks, (and the demographics buying them), that shit is going to dry up real fast. I'd look at Harley Davidson as the canary in that particular coal mine.
Shit, I tried to raise our credit limit on the CC just for shits. Just to keep that % usage super low. We have excellent credit, have a decent length of time on record, have never been late, pay off weekly, typically keep the usage pretty low, have cash in the same bank we have the CC. If this were 2 years ago it would have allowed us to raise the limit but we got automatically rejected.
It has slowed HUGE here in my area. My mom was a real estate broker for decades, and her ex business partner still calls daily to talk real estate shit. Dude is one of the top 5 in our area for sales, fantastic agent, great guy. He's talking like a night and day change. Like a switch just clicked. He was doing $150k over listing a couple of weeks ago, and now he's taking $50k under listed. And a ton of houses just aren't moving. No interest. No more quick sales, with zero conditions. What he DOES think is going to happen is a ton of houses that sold at the peak will come on the market in a few months. So many people bought crazy expensive houses at the edge of what they can afford, and now that the market is dropping, those appraisals they had for their mortgage is now going into the toilet, and they are so backwards on their mortgage that the bank might come calling looking for more collateral.
I have always tried to max out my credit when times are good... just trying to get as much as I can just in case I need it.
2nd in the nation. Suck it. https://investors.redfin.com/news-e...ports-bay-area-housing-market-is-cooling-more
Ha. That's your country/nation. Means fuck all compared to Canada, and our huge interest hike that just hit.
The thing that really sucks is that one of my developers just bought his first house, in Kelowna, BC, for $1.2m. ONE POINT TWO MILLION DOLLARS FOR A FIRST HOUSE. Right when the market is starting to tank. Dude is a bit nervous, I just keep telling him... "dude, zoom out... it'll always go up and to the right... just enjoy the new place, and look at the long term." Not sure that's helping him.... his mortgage payments are nuts.
I think there was a discussion on this board that I found particularly eye-opening about the difference in loans in the US versus Canada. Correct me if I'm wrong but Canada does loan adjustments every 10 or 15 years? So kind of like our ARMs. Whereas here you can get what we call a conventional loan which locks you in at the same rate for the length of the loan. Y'all about to have some people getting fucked up on their loans on houses that were way too expensive to begin with.
There are a ton of loan types... I am no pro when it comes to them, but you can lock in for full term, or go monthly variable, or multi-year term, or something in between.
Ah, I may have read or remembered wrong then. I remembered that our version of a conventional loan just did not exist in Canada.
Again, I am SO not informed on this shit, you could very well be correct. I just know that I have a "banking guy" that looks after me, and navigates the banks channels to get me the best deals. Apparently I have enough invested/deposited with them that I get some sort of special rate that is 1% below their prime. I don't know.... I suck at finances.
Could be worse. We could be in Europe where they have to slow-roll the rate increases because there aren’t enough consumers for it to make a difference. Then again we’re stuck with a moron like Jerome Powell, so maybe it isn’t better?
I saw something on the nightly news about people who got those six figure mortgages with an ARM. Fuck. That. They are in for a rude awakening.
in Canada it's a bit of a hybridization between an ARM and a conventional. It's a 25 year amortized loan that's re-assessed every 5 years to be less risky for banks and more fluid to economic changes. Obviously in a market where rates keep going up, it's better for the banks than the homeowners, but it also works in reverse when rates go down again. And as someone that's been in the mortgage field for 17 years now, it's been a real fun past few months. By which I mean, I'm still unsure every morning whether or not I'll actually have a job.
In the US a lot of houses were bought for cash by investment firms. It's going to be interesting to see what effect a recession has on housing here. I for one hope they lose their collective asses. We need some laws passed against this shit IMO.