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Message
re: Home sales tanked in May
Posted on 6/26/25 at 7:24 pm to Longhorn Actual
Posted on 6/26/25 at 7:24 pm to Longhorn Actual
DP.
This post was edited on 6/26/25 at 7:27 pm
0
Posted on 6/26/25 at 8:28 pm to LSU Delirium
quote:
Why would someone take a loan on (potential) future income when they don’t have to?
If they overestimated the profit margin they baked into the loan, and they have to sell lower than the loan, I assume it won’t be the bank holding the bag?
the builder already has a buyer under contract for an agreed upon price. The bank is taking the risk that the buyer doesn't crawfish.
Posted on 6/26/25 at 8:31 pm to LSU Delirium
quote:
Why would someone take a loan on (potential) future income when they don’t have to?
If they overestimated the profit margin they baked into the loan, and they have to sell lower than the loan, I assume it won’t be the bank holding the bag?
It's cash flow games. They treat CF from Financing Activities as if it's CF from Operating Activities (actual revenue generated from core business activities). It's not, of course, but that boat ain't gonna pay for itself.
In other words, because they baked profit into the costs they presented to the bank, they behave as if the house has already sold. They take as much of the profit as they can get away with up front and pay it back slowly in the form of carrying costs (interest), hoping it sells before they've given it all back.
If it gets tight, they'll just take an interim on a new house and use the fluff in that loan to pay the carry on the other house. Basically a Ponzi scheme (paying off old investment with new investment vs. profits from business operations; in this case, it's loans).
As long as they can keep it going, they treat CFs from Financing Activities like it's Revenue.
Prices stay astronomically high because on top of 25% margin (margin on top of margin on top of fluff on top of baked in profit), there's 10-15% of pure bullshite baked into the budget/cost.
And they can't aggressively reduce prices when demand plummets because the bank's basis was artificially high to begin with. Remaining a going concern while selling at what appears to be a paper loss would raise flags.
The banks are either being duped into assuming the risk or they're in on it and the underwriters are the ones holding the bag.
Posted on 6/27/25 at 9:39 am to STLhog
I've had my mother's townhome, located in the Fort Collins metro, for sale for a week without even a showing, and while it might be priced slightly above comp, it's not enough for zero showings. Comps are roughly $395K and I'm at $400K.
Realtor said it's quite slow right now.
Realtor said it's quite slow right now.
Posted on 6/27/25 at 11:10 am to bigjoe1
Waiting for a destin beachfront condo for $250k.
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