Author Topic: How to navigate family housing in a hot real estate market  (Read 2860 times)

tyrannostache

  • Stubble
  • **
  • Posts: 218
How to navigate family housing in a hot real estate market
« on: January 19, 2021, 01:40:55 PM »
I live in a hot market in the mountain west (Missoula, Montana). We are a family of 4 (2 adults, 2 small kids + dog) renting--and lucky to have found a rental that accepts dogs in a town with 0% vacancy.

We are currently renting a SFH. We pay $2050/month; this will probably increase at lease renewal in 6 mos.
We own a house in a different MT town, rented to a stable tenant for another year. We will consider selling when lease is up. Purchasing/financing a new house is not contingent on selling that one.

We're looking at homes in the $350-450k range. At current rates, that puts us at a mortgage payment & taxes, etc of roughly $1700-2100/month. However, the market is so nutty that I don't know whether it's worth our while to fight our way into it. People keep paying over asking, offers in cash, etc. We tried to buy a house here in summer 2020, but gave up after losing out on 2 deals that were already at the top end of our budget. Prices jumped well more than 10% last year alone.


My question: how do you make an intelligent decision in an environment like this? I'm concerned that if we wait much longer, we'll get completely priced out of the market. That is what has happened in Bozeman, for example, a city of comparable size and growth. At the same time, I don't want to be house-poor and locked into a mortgage that eats up our budget and savings.

I know there's no good way to time the market. I'm just trying to figure out how to best evaluate risks. Any advice?


I know that in terms of housing cost, our smartest plan would be to move back to our old town and old house and forget about Missoula. But that would make my spouse's work life a lot more difficult. And if his current job somehow ends, there are far more opportunities for him here than there were in our old town. My job should stay stable no matter what. (Plus, there's a big river, decent bike infrastructure/urban planning, and all the diverse bougie foods that I love.)




Cb1234567

  • 5 O'Clock Shadow
  • *
  • Posts: 53
Re: How to navigate family housing in a hot real estate market
« Reply #1 on: January 21, 2021, 07:05:29 AM »
Wow, I did a quick peek at your market and youíre not kidding! Just a few oddballs sitting that arenít pending or contingent.

This is a philosophical response, not numbers.
1. No matter what, we would not set ourselves up to be house poor.

2. If a market is too expensive to buy, then that is that. The options are to move further out, eat it in rent (at least you have flexibility, and a rent payment = to a mortgage payment means the rent IS cheaper), relocate completely.

3. Do not count on a market to go up OR down. We would decide to buy based on what life we want (do we like the house, the area, community, amenities etc) and what other job we could get if someone lost employment- I.e. am I at the only game in town. Do we want to pay X for the house. Can we afford it. Be aware enough of your own circumstances to not get into a situation you canít get out of or have a safety net for.

4. Iím not having a commute over 30 minutes. Ever. Itís a life choice for us. We move, or the job moves.

Example: Washington, D.C. area. Parents bought 20 miles outside of the city. Now itís all built up, and dadís house is something we would be priced out of. Too bad. Same idea outside of Philadelphia, where we found a niche house as a fixer upper (major issues). No where else there that we liked And also could afford (by our standards). So we moved elsewhere :)

...in the end, if we bought, our own #s and commute time have to work. Period.

In your case, look at the whole picture...2 offers isnít bad at all... I believe that the best path presents itself in the correct time. Suggest not pushing until you see the way you want to go for sure. Give it 1-3 months and reevaluate.

So...Stand pat and see what develops in your life, or go with the move back/commute, or decide that home ownership in your new town is IT and get after it with a vengeance (find the oddball that works, get a more aggressive agent, troll your own network for upcoming listings or people who want to move). Itís more a life choice than a money choice, imho. Also, if youíre not going back, Iíd sell the old house to simplify. Good luck!


waltworks

  • Magnum Stache
  • ******
  • Posts: 4937
Re: How to navigate family housing in a hot real estate market
« Reply #2 on: January 21, 2021, 07:57:58 AM »
If you plan to stay for the long term, I'd just suck it up and fight and claw to get a place.

If you can swing $2000+ a month for rent, and you're ok with some DIY maintenance, your housing costs should be tolerable. And probably more importantly, stable. You can indeed end up priced out - we certainly would be at this point in our own town.

A lot of rich working remote people are moving to the intermountain west. I guess it's *possible* they'll all up and leave in a few years, but I doubt it. Park City went up something like 50% in one year, it's absolutely insane. I'd happily give back the extra equity to have my old town back but that's not an option at this point.

-W

tyrannostache

  • Stubble
  • **
  • Posts: 218
Re: How to navigate family housing in a hot real estate market
« Reply #3 on: January 21, 2021, 09:59:07 AM »
Thanks for the input, Cb and walt.

You are really helping me figure out how to frame this. I appreciate the philosophical responses, because this is more of a question of desire and needs than financials alone. The answer to the financial question is obvious--keep the old house and make my husband work remotely with weekly trips to Missoula. However, this town definitely has more opportunities for both of us if something should go wrong, but it will put us on the high end of our housing budget.

The influx of rich remote workers is really nuts right now. I don't think they are ever moving away; I think this town is changed for good. On top of that, I just heard about a new tech company poised to bring in 350+ new tech workers, and I'm not even someone who's tuned in to new businesses.

Thanks, y'all. We'll give it a few more months--not much is happening until the spring housing market starts rolling anyway.


waltworks

  • Magnum Stache
  • ******
  • Posts: 4937
Re: How to navigate family housing in a hot real estate market
« Reply #4 on: January 21, 2021, 11:53:33 AM »
My wife and I sort of look at it this way - we have a ton of money tied up in the house now, and that's silly. But for now, we need (3 kids) the space. In 17 years (gah...) when they're all hopefully out of the house, we can downsize <1000 square feet and even if we want to stay in Park City, that will cost at most 1/2 of what our current place does, so we'll extract the equity then.

I mean, I'd prefer not to have a million plus bucks tied up in a house. I threw up a little in the back of my mouth just typing that. But I don't think it'll horribly lose value in the next 15-20 years. Even if it just keeps up with inflation, that's fine, as long as every other house/place we'd like to live doesn't skyrocket in value while our place stagnates. It's not an *ideal* investment, IMO, but it's not terrible either.

Now actually being house poor to the extent you can barely afford to live there would be bad. It does not really sound like that's the case here (especially if you sold the other house).

-W

PMJL34

  • Bristles
  • ***
  • Posts: 280
Re: How to navigate family housing in a hot real estate market
« Reply #5 on: January 21, 2021, 03:15:35 PM »
I agree with CB and Walt,

This is a question of whether or not you want to pay the going rate or not.

Will you be buying at an all time high? It appears so.

Will the prices go up even higher or possibly lower? Who knows.

Will your quality of life improve enough if you move into this more expensive home? Only you can answer that.

Will the price you paid matter in 10 years? Most likely not since you can afford it.

This internet stranger would most likely hold off for another year to see what happens (unless an amazing deal pops up), but that's just me.

Best of luck!

MissPeach

  • Bristles
  • ***
  • Posts: 352
Re: How to navigate family housing in a hot real estate market
« Reply #6 on: January 22, 2021, 01:07:28 PM »
It's an opportunity cost equation IMO. I am in a HCOL area that has been going crazy. They finally just put in a rent cap at 10% in my state. Salaries haven't been going up. Base salaries are about the same and most companies just do a 2-3% increase. For some reason my city is the least paid out of the large cities in my state even though our expenses are comparable.

A few months ago I finally figured the opportunity cost was worth cashing in a lot of my taxable account to get my living costs fixed at a rate I was comfortable with. I had saved a ton in my taxable account (which did really well this year) and was able to get my expenses for a 1,500 square foot house to that of a 1 bedroom rental apartment in my area. I need to stay in this city due to a custody arrangement for another 10 years so it made sense for me to lock things in.

I would look at it as an opportunity cost equation and if you plan to stay there for a long time figure out at what point it's better. In my area I have seen rents go up $200-300 per year for a 2 bedroom which is the minimum I needed. If rents increases had been more modest like $25-50 I wouldn't have given up my investment gains.

In the meantime I would keep building your down payment money. I had enough saved I was able to jump 125%-150% more than the starter home part of the market which helped a lot. Properties were still going quickly (week to a month) but not with multiple offers (often in cash) within a day on the market. As a result the sellers weren't being as crazy on terms and such since they were only getting one offer at a time. It really helped get something I liked quickly without having to do anything crazy like compete against crazy closing deadlines or removing inspections. It seems like most of the cash offers here are investors and most are looking at the lower end of the marketing competing with the people who can only afford that.
« Last Edit: January 22, 2021, 02:01:51 PM by MissPeach »

FINate

  • Handlebar Stache
  • *****
  • Posts: 2175
Re: How to navigate family housing in a hot real estate market
« Reply #7 on: January 22, 2021, 01:35:34 PM »
The recent run-up in prices does increase the risk of buying at the top. But what if it's not really the top?

Plus, there's a big river, decent bike infrastructure/urban planning, and all the diverse bougie foods that I love.

The above, plus other factors like scenery, easy access to the outdoor life, suggest that the city has been "discovered" and is unlikely to be cheap in the future.

My philosophical response: Your answer largely depends on how long you plan to own the house. If you intend to stay 10+ years then push hard to get into something. Otherwise, plan on  the likelihood of getting priced out over the long term.

Less than about 10 years and I would not buy in your market at these prices.

People keep paying over asking, offers in cash, etc. We tried to buy a house here in summer 2020, but gave up after losing out on 2 deals that were already at the top end of our budget. Prices jumped well more than 10% last year alone.

If you do decide to buy, you're going to have to pound the pavement a heck of a lot more than this. Last year we lost out on 2 houses in a hot market. These were over asking all-cash offers. And this was before the pandemic and resulting mass-migration-housing-insanity.

This is a bummer, but if you aren't all cash you will need to go significantly over asking to offset the risk to the sellers that the deal falls through. This also means you need a lot of downpayment to cover the potential that the appraisal comes in lower.  To do this you may need to consider lowing your price search range to small houses and or fixer uppers so you can beat competing offers.
« Last Edit: January 22, 2021, 01:51:31 PM by FINate »

paideuma

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: How to navigate family housing in a hot real estate market
« Reply #8 on: January 23, 2021, 01:12:48 PM »
Don't have any advice, but posting to follow.

I'm in a similar boat. Attempted to buy last summer/fall, but supply is so low we ended up only making one offer and didn't get it. Went in $10k over list in a less desirable suburb that is pretty far out of town (we thought we'd have an easier time there ...ha). Ended up being kind of a shady deal where the seller already had someone lined up to buy via the listing agent, and the house sold at the price we put an offer in so we were a little peeved.

Went and saw some houses this past week and our agent has told us people are forgoing inspections, paying $10-30k+ over list, putting a lot down in due diligence money, and of course all cash offers. We can't do all cash, but have 20% down, two large incomes, no issues getting a loan, etc. Everything we like is gone within a day. I can't justify waiving an inspection, that just seems insane.

At the end of the day, she has told us a lot of the same things Cb1234567 mentioned: "Suggest not pushing until you see the way you want to go for sure. Give it 1-3 months and reevaluate." Straight up told us "unless you absolutely love it I canít recommend paying over list".

We rent for the equivalent of what we'd aim our mortgage payment to be. We don't NEED to buy, but I've lived in the area for 15 years, and finally reached a place where I am financially stable AND ready to put down roots, but now I am afraid I'm getting priced out of my hometown. It's a bummer for sure.

I'm terrified of missing out on a great house by not looking, so I still peek at the MLS daily. If it were the right house at the right price we would go for it, but I can't get excited about putting an offer in anymore. We've already increased our budget by $50k since last summer, and while it is still something we could afford, it sets off a red flag. But at the same time, the area is growing, and I think will continue to grow so it doesn't feel like a bad decision. Ugh!

waltworks

  • Magnum Stache
  • ******
  • Posts: 4937
Re: How to navigate family housing in a hot real estate market
« Reply #9 on: January 23, 2021, 04:47:23 PM »
If you have strong community connections, it's worth putting the word out. We know several folks here who have found off-market deals by being beloved local teachers/community members who some sellers strongly prefer to sell to, even if they're not getting as much money from the deal.

-W

Fuzz

  • Bristles
  • ***
  • Posts: 421
Re: How to navigate family housing in a hot real estate market
« Reply #10 on: January 24, 2021, 05:07:42 PM »
It's not just coastal techies. There are also a second wave of people who are cashing out of Park City, Jackson Hole, and the Colorado equivalents and moving to Montana for the lifestyle/community that used to be more prevalent in those towns. If you got into a condo for 400K in Park City 5 years ago and it's now worth $800K, then taking that money and going to Whitefish, Big Sky or Bozeman makes a lot of sense for some people. Just saying. Same if you were in Jackson Hole 30 years ago. You could have 1M in equity (or more) on a home you purchased on a raft guide income.

If you can get a house that fits your family and lifestyle in Missoula, even if you have to fight and claw for it, I would try really hard to make it happen. That second piece--the fact that the job market is better in Missoula is key too. Frankly, Bozeman still seems underpriced for what you can get. Missoula is not far behind.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4937
Re: How to navigate family housing in a hot real estate market
« Reply #11 on: January 24, 2021, 05:50:37 PM »
Yeah, we've lost some cool neighbors already. Hard to justify working full time/not seeing your kids when you could tap the equity and move somewhere that's becoming cool.

It's a negative feedback loop of sorts, too. Park City was never very hip to begin with, but it's getting worse as long-time locals bail. I'd guess we're in it for the long run given our connections/friends/school for the kids, but you never know. We're FI anyway, so we'd only move if we no longer liked it, and we liked somewhere else better. But it's certainly in the back of my mind a lot now.

-W

Finances_With_Purpose

  • Pencil Stache
  • ****
  • Posts: 948
    • Finances With Purpose: deploying resources wisely to live vigorously
Re: How to navigate family housing in a hot real estate market
« Reply #12 on: February 18, 2021, 11:05:36 PM »
If you plan to stay for the long term, I'd just suck it up and fight and claw to get a place.

If you can swing $2000+ a month for rent, and you're ok with some DIY maintenance, your housing costs should be tolerable. And probably more importantly, stable. You can indeed end up priced out - we certainly would be at this point in our own town.

...

-W

As usual, I agree with @waltworks on this one. 

I would be wary of becoming house poor, but it sounds like you're within or close to the margin to be fine if you can DIY (and want to).  It will work out better and better the longer you stay, as your costs stay lower.  (Caveat: if you don't buy old/high-maintenance/a fixer-upper)  And you've said you want to be there for the job market, which is even more reason to stay. 

I won't get too specific here, but let's just say we own a place we probably couldn't afford today (or wouldn't want to, at least), largely because we bought before the market exploded.  My only regret is that we didn't opt for a slightly larger place back then, when we could have afforded it, because we can't now if we ever want to upgrade slightly, even with the incredible equity we now have (we bought a small, very mustachian place).  I'm sort of opposite where @waltworks is: we have the smaller house and are adding kids, finding it too small, rather than eventually having too much room.  But oh well: hindsight is 20/20. 

And nobody knows what the future is, especially in this era: you may have bought high, but it'll be OK since you're staying long-term, or you may find that you bought at the bottom of a long-term increase, and couldn't afford anything like it later. 

Like you, we also moved and bought here due to the market and long-term stability, and that has borne itself out, even in difficult times.  So do what's best for you considering the long-term factors. 
« Last Edit: February 18, 2021, 11:16:59 PM by Finances_With_Purpose »

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 3221
Re: How to navigate family housing in a hot real estate market
« Reply #13 on: March 01, 2021, 01:56:02 PM »
You didn't mention anything about life goals. Most folks on this board intend to FIRE, so I will assume that. Other people, however, want to live in a particular, specific place no matter what it costs them.

Assuming you want to FIRE, I suggest broadening the perspective. In Kansas City, Toledo, or Syracuse, a typical house goes for <$150k and your all-in payment would be half what you're now paying in rent, even on a 15 year note. If you like smaller cities and towns, the options are even more vast. There are cool little towns with rock-bottom housing costs all over the South, Midwest, Northeast, and even some mountain areas.

For example, I live in a secret LCOL area where my pre-pandemic commute was/is 10-15 minutes each way. My 3/2 SFH on a quarter-acre in a good public school zone cost me and is worth $160k. My all-in monthly payment on a 15 year mortgage + taxes is a little over $1k. I live within minutes of many miles of mountain biking or hiking trails, within a couple hours of seasonal white water canoeing/kayaking, and within 2 hours of large, clear freshwater lakes. My tap water tastes better than most people's bottled water. My city has hundreds of restaurants, a couple of comedy clubs, a couple of theatre companies, a symphony orchestra,  My total annual family spending (3ppl, 2 cars, + pets) is about $50k, vacations included. Do some research on all these clues and you might narrow my location to a few dozen places. The point is, it's a big country.

Such a move would involve changing jobs and probably a pay cut, but you can snipe at jobs in a few targeted locales from the comfort of your rental property. If you do your homework, you'll be sitting in a nice house, with a high savings rate, FIRE within reach, and not worrying about if an interest rate hike or recession is going to chop $250k off the value of your home. IMO that beats the hell out of being house-poor or commuting 2-4 hours a day.

tygertygertyger

  • Stubble
  • **
  • Posts: 210
Re: How to navigate family housing in a hot real estate market
« Reply #14 on: March 01, 2021, 03:19:36 PM »
Don't have any advice, but posting to follow.

I'm in a similar boat. Attempted to buy last summer/fall, but supply is so low we ended up only making one offer and didn't get it. Went in $10k over list in a less desirable suburb that is pretty far out of town (we thought we'd have an easier time there ...ha). Ended up being kind of a shady deal where the seller already had someone lined up to buy via the listing agent, and the house sold at the price we put an offer in so we were a little peeved.

Went and saw some houses this past week and our agent has told us people are forgoing inspections, paying $10-30k+ over list, putting a lot down in due diligence money, and of course all cash offers. We can't do all cash, but have 20% down, two large incomes, no issues getting a loan, etc. Everything we like is gone within a day. I can't justify waiving an inspection, that just seems insane.

At the end of the day, she has told us a lot of the same things Cb1234567 mentioned: "Suggest not pushing until you see the way you want to go for sure. Give it 1-3 months and reevaluate." Straight up told us "unless you absolutely love it I canít recommend paying over list".

We rent for the equivalent of what we'd aim our mortgage payment to be. We don't NEED to buy, but I've lived in the area for 15 years, and finally reached a place where I am financially stable AND ready to put down roots, but now I am afraid I'm getting priced out of my hometown. It's a bummer for sure.

I'm terrified of missing out on a great house by not looking, so I still peek at the MLS daily. If it were the right house at the right price we would go for it, but I can't get excited about putting an offer in anymore. We've already increased our budget by $50k since last summer, and while it is still something we could afford, it sets off a red flag. But at the same time, the area is growing, and I think will continue to grow so it doesn't feel like a bad decision. Ugh!

Posting to follow. Our situation is almost exactly like @paideuma above. My brother is a lawyer who specializes in real estate, so he tries to give me advice, but ultimately it's a major seller's market right now. He was telling me stories about people paying over list price this morning and nobody knows how long that will last.

joe189man

  • Bristles
  • ***
  • Posts: 373
Re: How to navigate family housing in a hot real estate market
« Reply #15 on: March 01, 2021, 05:30:03 PM »
You didn't mention anything about life goals. Most folks on this board intend to FIRE, so I will assume that. Other people, however, want to live in a particular, specific place no matter what it costs them.

Assuming you want to FIRE, I suggest broadening the perspective. In Kansas City, Toledo, or Syracuse, a typical house goes for <$150k and your all-in payment would be half what you're now paying in rent, even on a 15 year note. If you like smaller cities and towns, the options are even more vast. There are cool little towns with rock-bottom housing costs all over the South, Midwest, Northeast, and even some mountain areas.

For example, I live in a secret LCOL area where my pre-pandemic commute was/is 10-15 minutes each way. My 3/2 SFH on a quarter-acre in a good public school zone cost me and is worth $160k. My all-in monthly payment on a 15 year mortgage + taxes is a little over $1k. I live within minutes of many miles of mountain biking or hiking trails, within a couple hours of seasonal white water canoeing/kayaking, and within 2 hours of large, clear freshwater lakes. My tap water tastes better than most people's bottled water. My city has hundreds of restaurants, a couple of comedy clubs, a couple of theatre companies, a symphony orchestra,  My total annual family spending (3ppl, 2 cars, + pets) is about $50k, vacations included. Do some research on all these clues and you might narrow my location to a few dozen places. The point is, it's a big country.

Such a move would involve changing jobs and probably a pay cut, but you can snipe at jobs in a few targeted locales from the comfort of your rental property. If you do your homework, you'll be sitting in a nice house, with a high savings rate, FIRE within reach, and not worrying about if an interest rate hike or recession is going to chop $250k off the value of your home. IMO that beats the hell out of being house-poor or commuting 2-4 hours a day.

you have me google searching

waltworks

  • Magnum Stache
  • ******
  • Posts: 4937
Re: How to navigate family housing in a hot real estate market
« Reply #16 on: March 01, 2021, 05:43:29 PM »
UP of Michigan has nice houses at <$100k, tons of cool outdoor activities of every kind, decent schools, awesome winter stuff, etc.

It's isolated if you like air travel, and you have to love winter, but man, it's tempting to move there sometimes. If I was a young up and comer instead of an over the hill FIRE person, I'd be moving there for sure.

-W

englishteacheralex

  • Magnum Stache
  • ******
  • Posts: 2801
  • Age: 41
  • Location: Honolulu, HI
Re: How to navigate family housing in a hot real estate market
« Reply #17 on: March 01, 2021, 06:19:04 PM »
Posting to follow. From what I've read in the NYT, the housing shortage and odd real estate market due to Covid is a nation-wide issue.

We bought a $364k condo in Honolulu in 2015. The housing market here is bananas. We have two small children and would like to upgrade to a nicer condo or a SFH, but it would mean at least $850k for a house that wouldn't even be that great. It's hard to know what to do because there are no great options, so we've chosen to just sit on a growing down payment/equity and hope that maybe in a year or two prices will stabilize and we'll have more money.

Or maybe we'll just live in an 850 sf condo for our entire lives.

joe189man

  • Bristles
  • ***
  • Posts: 373
Re: How to navigate family housing in a hot real estate market
« Reply #18 on: March 01, 2021, 07:23:43 PM »
UP of Michigan has nice houses at <$100k, tons of cool outdoor activities of every kind, decent schools, awesome winter stuff, etc.

It's isolated if you like air travel, and you have to love winter, but man, it's tempting to move there sometimes. If I was a young up and comer instead of an over the hill FIRE person, I'd be moving there for sure.

-W

a friend of a friend lives up there and flies out every week or so for a week for work then has a week off to enjoy the woods to ride quads, fish, hunt and have as many toys as he wants, he isnt married from what i remember

joe189man

  • Bristles
  • ***
  • Posts: 373
Re: How to navigate family housing in a hot real estate market
« Reply #19 on: March 02, 2021, 02:53:50 PM »

My question: how do you make an intelligent decision in an environment like this?


i would hypothesize that the market in the larger montana cities isnt going to cool down or lose much value over the next 15-20 years, you have young kids, Missoula is a good place with a college and good schools

so if i were you and liked the city and had stable jobs or other opportunities, i would buy even if you have to stretch the budget or concede on a few must have items on your home buying wish list


mountainfamily

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Location: Seattle
Re: How to navigate family housing in a hot real estate market
« Reply #20 on: March 07, 2021, 05:15:05 PM »
My sympathies. It's really difficult/complicated to be looking in a hot market. If it makes you feel any better, we dallied and made half-hearted efforts for TWO years before finally buying a fixer for $145,000 OVER asking at a hot time in the market in an expensive city in 2017. We should have just bitten the bullet and gotten one at the beginning of our search when starter-ish houses were in the 500s. It felt unbelievable at the time, but the mortgage payment was similar (or lower) than comparable rent, we like remodeling, it was a perfect 3 mile bike to one job and central for the other job's clients. Plus the city had the jobs we needed and we predicted we'd be staying for 5-7 years minimum. Definitely research aggressive or creative strategies like looking for off-market deals, submitting your best offer before the review date, consider getting a pre-inspection (we paid $400 a pop for those every time we entered a bidding war), and write a nice letter. Get a really, really sharp real estate agent who will regularly check in with the listing agent every time you make an offer. Get to know house and their issues more, clarify what work you're willing to do, let go of some of your wish list...Eventually, your turn will come up.

tygertygertyger

  • Stubble
  • **
  • Posts: 210
Re: How to navigate family housing in a hot real estate market
« Reply #21 on: March 08, 2021, 08:42:35 AM »
Ouch @mountainfamily. But a good turnout in the end for you. We are currently looking, but everything is snapped up within one day at list or over. Our neighbor is quite insistent that she wants us to stay in our neighborhood (we currently rent here; we're outpriced to buy), so she's doing everything she can. Including calling a two-flat owner who lives in Florida to see if she wants to sell the building. Having her in our corner makes me feel supported, though it still only gives us a 1-2% chance of staying around.



 

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 3221
Re: How to navigate family housing in a hot real estate market
« Reply #22 on: March 08, 2021, 09:42:18 AM »
Jeez. What would a housing bubble look like?

FINate

  • Handlebar Stache
  • *****
  • Posts: 2175
Re: How to navigate family housing in a hot real estate market
« Reply #23 on: March 08, 2021, 10:25:51 AM »
A bubble looks like 2006-2008: loose lending standards, speculative frenzy of people flipping homes, and cash out refis to fund lavish lifestyles. I mean, we could be in the early stages of a bubble, but I don't see it yet. Lending standards are still reasonable and I don't get the sense people are generally speculating. Not saying prices won't soften. If mortgage rates increase this will put downward pressure on prices.

IMO, what we're experiencing is a geographic and home-type rotation caused by a shift in preferences. Apartment dwellers wanting more room and/or a yard and workers in major metro markets that can now remote work and would really rather be in another location.

I know, I know, this narrative is overhyped by the media. There isn't really a "mass exodus" from the major metro markets. However, prices are set on the margins of the supply and demand curve. So a modest increase in demand paired with a modest decrease in supply can cause large price increases, especially if buyers are flush with cash from selling in a HCOL area or historically low mortgage rates. So for example, consider just the NYC and SF metro markets, about 16M people combined. Let's say 1% of these folks decide they'd like to live someplace with LCOL. Definitely not a mass exodus. However , that's still 160,000 new home buyers fanning out across the US. And fewer people are listing houses in these LCOL areas because they are either afraid of getting priced out and/or fewer people are relocating to these major metro markets. So, yeah, this all seems more like a new market equilibrium in response to changes in preferences.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4937
Re: How to navigate family housing in a hot real estate market
« Reply #24 on: March 08, 2021, 11:38:13 AM »
It doesn't feel like a bubble. I don't know anyone buying a house with the intention of flipping it (I'm not talking about fixer-uppers), I don't know anyone qualifying for a $800k loan on a $50k income, etc.

There is just a supply/demand imbalance, basically. Add super low interest rates and there you go.

I personally expect a LOOONG period of RE price stagnation going forward, but I don't expect a crash absent some triggering event (another pandemic, big war, etc).

-W

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 4156
  • Location: Orange County, CA
Re: How to navigate family housing in a hot real estate market
« Reply #25 on: March 11, 2021, 08:16:39 PM »
How much longer do you guys think before people quit with the overbidding madness? It's just insanity around here. Places are gone anywhere from within hours to days to less than a week or two at most and multiple bidding wars driving prices upwards of $50k ($30-50k minimum for below average turnkey and upwards of $100k for the excellent condition/upgraded turnkey homes). Super super greedy.

Meanwhile, my parents and my in-laws have started pressuring us just to go all in and buy something (part of it is my mom being selfish about having a place to stay when they visit again and the other part of it is all of them feeling fulfilled that we've finally reached the 'American Dream' smh).
We're already planning on delaying FIRE as it is with a home purchase down here, so going all in (closer to what our ceiling is) on something that we can "afford now" sounds like a bad idea if I'm also trying to somewhat 'future-proof' things a little in case of job-loss, etc... I have to keep the principles of "not buying more house than you need" and "not overpaying" clear and present - it's difficult to do this in current conditions, with all the FOMO and Ebay-mentality going around out there. It doesn't help that the immediate area we're in has somehow become probably one of the most desirable places to live in South OC :(
« Last Edit: March 11, 2021, 08:22:18 PM by jeromedawg »

tygertygertyger

  • Stubble
  • **
  • Posts: 210
Re: How to navigate family housing in a hot real estate market
« Reply #26 on: March 12, 2021, 07:07:32 AM »
We're working with two different realtors - one in our HCOL city, and another for the suburban MCOL outside the city. We've tried to see two serious fix-em-ups this week in the city - the first was under contract within 12 hours, so we didn't get to see it. The other we're heading to see in 2 hours, assuming it's not under contract yet. When I say fixer-up, I mean 60s carpet in every room, including the kitchen, and a listing note that suggests "Livable now" with new roof, gutters, fascia. I am thinking there was major roof damage for years which makes me nervous about our DIY capabilities if someone really just slapped a new roof on top. It is priced and listed to appeal to flippers. We have very little hope of buying in the city.

On the other hand, we toured some houses in the suburbs last night, and while our realtor acknowledged how difficult the market is, he expects that my partner and I will be able to stay out of any bidding wars. He also thinks that after mortgage forbearance lifts, we'll see a lot more houses on the market next year. He says he won't let us buy a place that's currently going for a lot more than it's worth, because he wouldn't want us in the position next year of seeing empty houses around us with our own house value having dropped significantly.

YMMV of course, depending on location, but sharing our recent experience.

FINate

  • Handlebar Stache
  • *****
  • Posts: 2175
Re: How to navigate family housing in a hot real estate market
« Reply #27 on: March 12, 2021, 08:41:56 AM »
Places are gone anywhere from within hours to days to less than a week or two at most and multiple bidding wars driving prices upwards of $50k ($30-50k minimum for below average turnkey and upwards of $100k for the excellent condition/upgraded turnkey homes). Super super greedy.

Frustrating? Yes. Greedy? Not sure about that. California intentionally underbuilt housing over 3-5 decades and now there's an estimated ~3.5M shortage of homes. Too many buyers, too few houses. So a seller gets 10+ offers, what is the fairest way to decide who gets the house? Pick at random? A family that "looks like them," aka implicit bias? IMO, the strength of the offer is the least unfair criteria. The real problem is the collective mindset of voters (and yes, homeowners are a big contributor) trying to stop growth and keep people out by refusing to build.

My answer opinion on your question about bidding wars: In an undersupply situation houses mostly sell for what people can afford to pay, which is a function of income and mortgage rates. This is because the market essentially behaves like an auction, with prices getting bid up to whatever monthly payments people can make. Eventually prices and/or mortgage rates will no longer support further price increases. When will this happen? Difficult to say, but also, not sure it really matters for you since it's really just an question of how quickly prices find their new equilibrium.

I agree with waltworks, I think this probably means a long period of stagnation, though I think we could see modest price drops if mortgage rates increase, though I think it's reasonable to suspect that the Feds won't allow this to happen for a long time. Disclaimer: Real estate is local and I don't know the SoCal market well, YMMV.

From your other posts I know you have good reasons for staying in SoCal. But we looked at the housing situation and figured it was veeery unlikely to be resolved within 1-2 decades, if ever. So we decided to move someplace more reasonable. Sometimes the only way to win the game is not to play.

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 4156
  • Location: Orange County, CA
Re: How to navigate family housing in a hot real estate market
« Reply #28 on: March 12, 2021, 09:25:19 AM »
Places are gone anywhere from within hours to days to less than a week or two at most and multiple bidding wars driving prices upwards of $50k ($30-50k minimum for below average turnkey and upwards of $100k for the excellent condition/upgraded turnkey homes). Super super greedy.

Frustrating? Yes. Greedy? Not sure about that. California intentionally underbuilt housing over 3-5 decades and now there's an estimated ~3.5M shortage of homes. Too many buyers, too few houses. So a seller gets 10+ offers, what is the fairest way to decide who gets the house? Pick at random? A family that "looks like them," aka implicit bias? IMO, the strength of the offer is the least unfair criteria. The real problem is the collective mindset of voters (and yes, homeowners are a big contributor) trying to stop growth and keep people out by refusing to build.

My answer opinion on your question about bidding wars: In an undersupply situation houses mostly sell for what people can afford to pay, which is a function of income and mortgage rates. This is because the market essentially behaves like an auction, with prices getting bid up to whatever monthly payments people can make. Eventually prices and/or mortgage rates will no longer support further price increases. When will this happen? Difficult to say, but also, not sure it really matters for you since it's really just an question of how quickly prices find their new equilibrium.

I agree with waltworks, I think this probably means a long period of stagnation, though I think we could see modest price drops if mortgage rates increase, though I think it's reasonable to suspect that the Feds won't allow this to happen for a long time. Disclaimer: Real estate is local and I don't know the SoCal market well, YMMV.

From your other posts I know you have good reasons for staying in SoCal. But we looked at the housing situation and figured it was veeery unlikely to be resolved within 1-2 decades, if ever. So we decided to move someplace more reasonable. Sometimes the only way to win the game is not to play.

Very true... maybe it's time to get out of Dodge lol

Someone on Biggerpockets also mentioned unemployment driving value, which makes sense in conjunction with your point about monthly payments. We certainly don't wish for more unemployment but if that number were to go up, I think that would have some impact.

Yea, it's going to be tough to leave if it comes down to making that decision... if we decide to go all in, we'll have to look at it in the long-term most definitely. And that's risky as well because a lot of things could change around here (and not in a good way).

BTW: when you refer to "stagnation" what exactly are you referring to in the context of the housing market and pricing? Are you saying that prices will steadily increase and keep climbing for a long period of time at a slower rate than the historical rate of appreciation?
« Last Edit: March 12, 2021, 09:30:45 AM by jeromedawg »

FINate

  • Handlebar Stache
  • *****
  • Posts: 2175
Re: How to navigate family housing in a hot real estate market
« Reply #29 on: March 12, 2021, 02:02:05 PM »
Places are gone anywhere from within hours to days to less than a week or two at most and multiple bidding wars driving prices upwards of $50k ($30-50k minimum for below average turnkey and upwards of $100k for the excellent condition/upgraded turnkey homes). Super super greedy.

Frustrating? Yes. Greedy? Not sure about that. California intentionally underbuilt housing over 3-5 decades and now there's an estimated ~3.5M shortage of homes. Too many buyers, too few houses. So a seller gets 10+ offers, what is the fairest way to decide who gets the house? Pick at random? A family that "looks like them," aka implicit bias? IMO, the strength of the offer is the least unfair criteria. The real problem is the collective mindset of voters (and yes, homeowners are a big contributor) trying to stop growth and keep people out by refusing to build.

My answer opinion on your question about bidding wars: In an undersupply situation houses mostly sell for what people can afford to pay, which is a function of income and mortgage rates. This is because the market essentially behaves like an auction, with prices getting bid up to whatever monthly payments people can make. Eventually prices and/or mortgage rates will no longer support further price increases. When will this happen? Difficult to say, but also, not sure it really matters for you since it's really just an question of how quickly prices find their new equilibrium.

I agree with waltworks, I think this probably means a long period of stagnation, though I think we could see modest price drops if mortgage rates increase, though I think it's reasonable to suspect that the Feds won't allow this to happen for a long time. Disclaimer: Real estate is local and I don't know the SoCal market well, YMMV.

From your other posts I know you have good reasons for staying in SoCal. But we looked at the housing situation and figured it was veeery unlikely to be resolved within 1-2 decades, if ever. So we decided to move someplace more reasonable. Sometimes the only way to win the game is not to play.

Very true... maybe it's time to get out of Dodge lol

Someone on Biggerpockets also mentioned unemployment driving value, which makes sense in conjunction with your point about monthly payments. We certainly don't wish for more unemployment but if that number were to go up, I think that would have some impact.

Yea, it's going to be tough to leave if it comes down to making that decision... if we decide to go all in, we'll have to look at it in the long-term most definitely. And that's risky as well because a lot of things could change around here (and not in a good way).

BTW: when you refer to "stagnation" what exactly are you referring to in the context of the housing market and pricing? Are you saying that prices will steadily increase and keep climbing for a long period of time at a slower rate than the historical rate of appreciation?

By "stagnation" I mean I don't see a lot of upside potential in HCOL real estate. People are already tapped out with what they can pay. Mortgage rates are already at historically low levels, so not a lot of potential there. So unless wages increase substantially, where does the money come from? I suppose the Fed could keep dumping truckloads of cash on the system, which would likely further inflate the stock market and/or stoke inflation, which could drive housing prices higher.

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 4156
  • Location: Orange County, CA
Re: How to navigate family housing in a hot real estate market
« Reply #30 on: March 12, 2021, 02:20:20 PM »
Places are gone anywhere from within hours to days to less than a week or two at most and multiple bidding wars driving prices upwards of $50k ($30-50k minimum for below average turnkey and upwards of $100k for the excellent condition/upgraded turnkey homes). Super super greedy.

Frustrating? Yes. Greedy? Not sure about that. California intentionally underbuilt housing over 3-5 decades and now there's an estimated ~3.5M shortage of homes. Too many buyers, too few houses. So a seller gets 10+ offers, what is the fairest way to decide who gets the house? Pick at random? A family that "looks like them," aka implicit bias? IMO, the strength of the offer is the least unfair criteria. The real problem is the collective mindset of voters (and yes, homeowners are a big contributor) trying to stop growth and keep people out by refusing to build.

My answer opinion on your question about bidding wars: In an undersupply situation houses mostly sell for what people can afford to pay, which is a function of income and mortgage rates. This is because the market essentially behaves like an auction, with prices getting bid up to whatever monthly payments people can make. Eventually prices and/or mortgage rates will no longer support further price increases. When will this happen? Difficult to say, but also, not sure it really matters for you since it's really just an question of how quickly prices find their new equilibrium.

I agree with waltworks, I think this probably means a long period of stagnation, though I think we could see modest price drops if mortgage rates increase, though I think it's reasonable to suspect that the Feds won't allow this to happen for a long time. Disclaimer: Real estate is local and I don't know the SoCal market well, YMMV.

From your other posts I know you have good reasons for staying in SoCal. But we looked at the housing situation and figured it was veeery unlikely to be resolved within 1-2 decades, if ever. So we decided to move someplace more reasonable. Sometimes the only way to win the game is not to play.

Very true... maybe it's time to get out of Dodge lol

Someone on Biggerpockets also mentioned unemployment driving value, which makes sense in conjunction with your point about monthly payments. We certainly don't wish for more unemployment but if that number were to go up, I think that would have some impact.

Yea, it's going to be tough to leave if it comes down to making that decision... if we decide to go all in, we'll have to look at it in the long-term most definitely. And that's risky as well because a lot of things could change around here (and not in a good way).

BTW: when you refer to "stagnation" what exactly are you referring to in the context of the housing market and pricing? Are you saying that prices will steadily increase and keep climbing for a long period of time at a slower rate than the historical rate of appreciation?

By "stagnation" I mean I don't see a lot of upside potential in HCOL real estate. People are already tapped out with what they can pay. Mortgage rates are already at historically low levels, so not a lot of potential there. So unless wages increase substantially, where does the money come from? I suppose the Fed could keep dumping truckloads of cash on the system, which would likely further inflate the stock market and/or stoke inflation, which could drive housing prices higher.

So you're saying that soon enough you would expect pricing to 'stabilize' in the sense that people eventually are going to stop with the overbidding and driving up of prices as in the current state? It would just be nice if there were a period of time where 20 people weren't making offers and driving prices on a $750k home up to $850k. My realtor just told me this property, https://www.redfin.com/CA/Mission-Viejo/23852-Lindley-St-92691/home/4841136 (listed at $650k), had an offer accepted today at $740k either all cash or high down... looks like an investor fix and flip. A home across the street (on a much bigger lot though) is listed at $890k currently and my realtor believe it's slightly below fair market... meaning it'll probably go for $930-$950k :T We checked out the home across the street from Lindley and it's nice but I'd call it 'average' as far as turnkey is concerned. EDIT: A home two doors down from the one listed at $890k sold 3 weeks ago for $820k - same exact floorplan and sq footage but the difference is the $890k one is a corner lot and has "upgrades" (they're probably factoring in having spent $50-70k worth of upgrades since living there and added that to the $820k price the other home saying for, trying to justify the price increase without accounting for depreciation...)
« Last Edit: March 12, 2021, 11:22:58 PM by jeromedawg »

FINate

  • Handlebar Stache
  • *****
  • Posts: 2175
Re: How to navigate family housing in a hot real estate market
« Reply #31 on: March 12, 2021, 09:31:02 PM »
Prices in my city are up ~30% YoY, sounds similar in your area. That kind of increase isn't sustainable long term unless a lot more money is making its way into the hands of buyers, i.e. inflation. I think it has to level off at some point, no idea when that might happen.

MayDay

  • Magnum Stache
  • ******
  • Posts: 4716
Re: How to navigate family housing in a hot real estate market
« Reply #32 on: March 14, 2021, 03:52:31 PM »
I don't know what I'd say if the prices you were talking were 6-7-8-900k. That just seems just so high to the point that I don't know if I could do it.

But in the 300-400k range, we bought in a similar but slightly less intense market at that price point. And I thank my lucky stars every day, 4 years later, that we went for it. We like our house, it fits our family, it is very stable compared to renting. I wouldn't change a thing. And financially we are at a point where I am not worried about whether or not it appreciates. I am here to love here, not as an investment.  Of course I hope it doesn't depreciate, but it's an amount relative to our net worth where I am not stressing over half my assets being in a single house.

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 4156
  • Location: Orange County, CA
Re: How to navigate family housing in a hot real estate market
« Reply #33 on: March 25, 2021, 01:45:42 PM »
Just stumbled across this nightmare of a story:

https://www.youtube.com/watch?v=Gykb1pJ_iXA


That's not the only report of this happening - I read somewhere that this has happened at least half a dozen times across CA already. I'm wondering if more people will end up doing this and if the govt/authorities will step in to fix the problem before this comes a widespread situation. EDIT sounds like this is probably more of an issue for the cash-buyers out there - the couple in the story supposedly paid cash and had a hard money loan to make up the rest (so basically an all cash offer). They may have offered rent-back to the seller and he took them up on it in addition to taking full advantage of the moratorium.
« Last Edit: March 25, 2021, 03:03:21 PM by jeromedawg »

tyrannostache

  • Stubble
  • **
  • Posts: 218
Re: How to navigate family housing in a hot real estate market
« Reply #34 on: May 05, 2021, 05:13:07 PM »
Thanks for the fascinating discussion, y'all. I'm hearing that most folks agree this is not necessarily a real estate bubble like 2007, but that prices will probably continue to rise for a while before they even out.

In case anyone wants an update on our situation, we have decided to wait it out. We might regret that and might get priced out in the future, but it makes sense for us. And if people like us get priced out of this city, it might not be the place we want to stay anyway.

As much as I would love to jump on the bandwagon and buy before costs go any higher, my partner has legitimate concerns about a correction or about committing too much of our income to house payments for something we don't love. Since this is a 2 yes/1 no situation, we're staying put unless the perfect house comes up.

Here's why I'm OK with that: We are renting a house in a spot that we love, our landlord has been decent and doesn't seem inclined to raise rent too much. Our home in our old town is continuing to appreciate--even if prices aren't as high there as they are here, the rate of increase tracks (comps are up 30-40% over the same time last year). Conventional wisdom would have had us sell that house when we moved last year, but my partner was set on holding on to it until we could secure something here. That turned out to be a pretty safe choice. We have solid renters in place for another year. We'll be able to sell at that point and have a bigger downpayment to plow into housing here, or we can just stay the course. Whether the market slows or not, we'll still be in a solid position.

I'm feeling really, really fortunate to have benefited from a series of lucky and smart decisions that allowed us to buy a cheap house in 2008, which allowed us to buy a better but still super-affordable house in 2016.

PMJL34

  • Bristles
  • ***
  • Posts: 280
Re: How to navigate family housing in a hot real estate market
« Reply #35 on: May 05, 2021, 08:47:17 PM »
Very reasonable choice OP!

Thanks for the update.

MrMoneySaver

  • Stubble
  • **
  • Posts: 191
Re: How to navigate family housing in a hot real estate market
« Reply #36 on: May 05, 2021, 10:07:52 PM »
Quote
My question: how do you make an intelligent decision in an environment like this?

You don't. I have the same problem. You can't time the housing market.

I would say: If you need a house, try to get a house. Otherwise, don't. Trying to figure out what's going to happen even six months from now if futile.