Author Topic: Crazy Hot Housing Market  (Read 15564 times)

Roland of Gilead

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Re: Crazy Hot Housing Market
« Reply #50 on: April 25, 2021, 09:32:32 AM »
We have been building a house ourselves for about one year and I have found out two things:

1)  It is a LOT of work.  We are fairly skilled, (but slow) and even if I assigned us a wage of $10 an hour, it is looking like we would have $100,000 or more of labor in a 1400 sq-ft house.   Think about someone with employees that get $30 an hour, even working at 3x our speed it is still a lot of labor costs.

2)  Materials are just insane.  Lumber prices have tripled or more, insulation is expensive, Fiberon composite decking for two 8' x 16' decks on our build was $3600!

All of this doesn't even count the lot or the price to connect to city water/sewer/gas/electricity.

Suddenly $400,000 for a existing home doesn't seem so crazy?

Jon Bon

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Re: Crazy Hot Housing Market
« Reply #51 on: April 25, 2021, 10:55:40 AM »
When are we in the greater fool territory? From south seas company and tulip mania, to crypto and Miami condos. All of these things have some value, but when the speculators are jumping in hard at some point things cannot continue right?

I mean I keep getting (much) richer on paper due to my RE holdings but it sounds like some of these "hot" markets are starting to sound eerily familiar. When people are camping out inline to put down deposits on properties not built yet I'm gonna cash out!

Honestly I just feel bad for the regular people (and first timers) who are just getting absolutely destroyed in the housing market. Maybe in the end its a good thing for them, if we have a repeat of 2008 at least they wont be underwater.








secondcor521

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Re: Crazy Hot Housing Market
« Reply #52 on: April 25, 2021, 11:42:59 AM »
I think there is a bit of a short squeeze effect going on in the local housing market.  Inventory gets reduced, prices start going up, people start getting into bidding wars (never happened around here until recently), buyers see scarcity and prices going up 15%, and they decide they want to BUY NOW before they get priced out of the market, and the cycle intensifies.

What breaks the cycle?  I dunno, but I guess I think it'll be a gradual easing to more typical conditions over a longer period of time than a burst balloon thing.  Although interest rates rising somewhat rapidly could do that, as it would probably cause a slowdown in the financial markets, then the economy, then jobs, then people can't afford their house as easily, and the supply/demand curves shift.

I've also noticed that around here, very nice updated homes (granite/hardwood floors/well staged) are asking the same price as the ones thrown on the market as is with 20 year old carpet and wood paneled walls.  I think I like someone's explanation up thread that the latter are trying to take advantage of the hot market.

Complicating matters, where I live has had and very likely will have an influx of residents from elsewhere for the foreseeable future, and those residents typically sell elsewhere for more money.  So the demand and prices are on a long-term uptrend.

former player

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Re: Crazy Hot Housing Market
« Reply #53 on: April 25, 2021, 12:33:26 PM »
When are we in the greater fool territory? From south seas company and tulip mania, to crypto and Miami condos. All of these things have some value, but when the speculators are jumping in hard at some point things cannot continue right?

I mean I keep getting (much) richer on paper due to my RE holdings but it sounds like some of these "hot" markets are starting to sound eerily familiar. When people are camping out inline to put down deposits on properties not built yet I'm gonna cash out!

Honestly I just feel bad for the regular people (and first timers) who are just getting absolutely destroyed in the housing market. Maybe in the end its a good thing for them, if we have a repeat of 2008 at least they wont be underwater.
Surely it's only going to be a housing bubble if 1) the houses aren't being bought to be lived in (either by homeowners and renters) and 2) the people the houses are being bought for (either as homeowners or renters) stop being able to afford to live in those houses - which could only be in a recession or depression, in which case it's not a bubble at all.

We seem to be in one of those big economic shifts that take place over time and are only recognised in retrospect: this one is a shift from the value of work to the value of capital - including land and houses.  As long as your land and house isn't subject to the big environmental shifts that are coming (drought, fire, flood, storm, etc.) or in an area of irreversible economic decline I don't see a loss in value happening.

SndcxxJ

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Re: Crazy Hot Housing Market
« Reply #54 on: April 25, 2021, 03:18:01 PM »
When are we in the greater fool territory? From south seas company and tulip mania, to crypto and Miami condos. All of these things have some value, but when the speculators are jumping in hard at some point things cannot continue right?

I mean I keep getting (much) richer on paper due to my RE holdings but it sounds like some of these "hot" markets are starting to sound eerily familiar. When people are camping out inline to put down deposits on properties not built yet I'm gonna cash out!

Honestly I just feel bad for the regular people (and first timers) who are just getting absolutely destroyed in the housing market. Maybe in the end its a good thing for them, if we have a repeat of 2008 at least they wont be underwater.
It is time. https://www.google.com/amp/s/www.nbcbayarea.com/making-it-in-the-bay-2/buyers-camp-out-for-new-townhomes-in-santa-clara/2527447/%3ffbclid=IwAR3uZcBrK2bvU6hjDzTVNDGxHXREUzAyCEUNsI7OHZzFXZ4IKdHXnlLPvrI&amp

waltworks

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Re: Crazy Hot Housing Market
« Reply #55 on: April 25, 2021, 04:01:05 PM »
Yeah, but they're camping out for a place to *live*, and they qualify for a real mortgage. There just aren't any houses to buy because we spent a decade not building any. I'd camp out too if I needed a place to live.

People who didn't experience 2005 don't really get it, I think. The price increases are the only thing that is similar. Hairdressers making $25k a year were camping out to buy their 3rd or 4th or 5th condo to flip with a NINJA loan.

That said, I make no predictions about the future value of anyone's house.

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Jon Bon

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Re: Crazy Hot Housing Market
« Reply #56 on: April 25, 2021, 04:16:49 PM »
Yeah, but they're camping out for a place to *live*, and they qualify for a real mortgage. There just aren't any houses to buy because we spent a decade not building any. I'd camp out too if I needed a place to live.

People who didn't experience 2005 don't really get it, I think. The price increases are the only thing that is similar. Hairdressers making $25k a year were camping out to buy their 3rd or 4th or 5th condo to flip with a NINJA loan.

That said, I make no predictions about the future value of anyone's house.

-W

Yeah I was just finishing college and in my first job when this started to happen. So yeah I was not in RE at the time.

That being said the NINA loans were an issue, but it was the collapse of values (read: demand) was what did everyone in. Even if there was a "regular" pullback most of those folks could have sold their houses for something close to what they paid right? Demand just evaporated overnight.

That is kind of my outlook on all of this, as long as we have a baseline level of demand we will likely be fine. Things might go down slightly, but quickly be brought back to an equilibrium. I mean one would think a world wide economy shattering pandemic would hurt RE prices. But WTF do I know?!

 

Jon Bon

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Re: Crazy Hot Housing Market
« Reply #57 on: April 25, 2021, 04:19:20 PM »
Here is case-shiller: Lagging a few months behind as always.

I mean it looks every bit as steep as 2006. I am sure we can all come up with reasons why its matters or it does not. I just like graphs.

waltworks

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Re: Crazy Hot Housing Market
« Reply #58 on: April 25, 2021, 04:32:08 PM »
Yeah, that's a nominal graph. Get a look at an inflation adjusted one and while it still looks kinda crazy, it doesn't look *that* crazy.
Here's the one from November, which was the first one I found:
https://1.bp.blogspot.com/-1ERTSogi7TM/YBAmAQurfXI/AAAAAAAA37g/bzsPh-G5hiUDlZsQkgt8oMnPnUMTYs_6ACLcBGAsYHQ/s1024/RealNov2020.PNG

In real terms house prices have roughly doubled since 1976, and they're about where they were in 2005 at the peak of the bubble.

2005 was very much a mania - lots of demand, but also lots of supply. Once everyone had bought as many houses as they could, prices and demand both collapsed (the demand was generated by the rising prices, not by scarcity of houses - nobody was even living in whole subdivisions!)

Fast forward to today, after a decade of building 50% of less of the usual number of houses each year, and put a reasonably large cohort of 25-35 year old buyers in the market, while simultaneously having a Covid-induced flight to the 'burbs and simultaneous 200% increases in building materials... it's not surprising that prices are mostly skyrocketing.

It's worth noting that supply will eventually catch up, and people may move back to their apartments in the city (which are super cheap to rent right now, don't forget!) And of course interest rates could and probably will eventually go up. All of that means house prices will *probably* stagnate or decline going forward, but it's certainly not guaranteed.

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jeromedawg

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Re: Crazy Hot Housing Market
« Reply #59 on: April 25, 2021, 08:04:19 PM »
I was curious how rents would be impacted. Seems like low rents are primarily being found in city center areas and possibly near universities (well, at least for now... I wonder what the plan is for returning to class in person and how that might impact desirability of apartment living near colleges)

What about suburbs though? Seems rents there might actually be stable or possibly driven up with the increase in WHEN

SndcxxJ

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Re: Crazy Hot Housing Market
« Reply #60 on: April 25, 2021, 10:50:06 PM »
As far as rents go, in my area which is a suburb of Oakland rents are a bit split.  In my experience apartments are basically flat, but demand has dropped way off.  Some of the lack of demand might be that where we have found ourselves flat is far from affordable for the folks that actually reside in apartments.  For houses demand is high, and rents have risen over the last year. 
For example, this spring I had a one bedroom apartment and a two bedroom house for rent.  The one bedroom I asked the same rents that I've been getting for about the last 2 years and finally got a qualified person after a longish wait (about three weeks).  The two bedroom house I had 40 showings on the opening weekend and signed a rental agreement a couple days later.  This was with asking a pretty good sum of money for rent, somewhat higher than what I asked for two bedroom houses in the same area in 2020.

jeromedawg

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Re: Crazy Hot Housing Market
« Reply #61 on: April 26, 2021, 10:37:18 AM »
As far as rents go, in my area which is a suburb of Oakland rents are a bit split.  In my experience apartments are basically flat, but demand has dropped way off.  Some of the lack of demand might be that where we have found ourselves flat is far from affordable for the folks that actually reside in apartments.  For houses demand is high, and rents have risen over the last year. 
For example, this spring I had a one bedroom apartment and a two bedroom house for rent.  The one bedroom I asked the same rents that I've been getting for about the last 2 years and finally got a qualified person after a longish wait (about three weeks).  The two bedroom house I had 40 showings on the opening weekend and signed a rental agreement a couple days later.  This was with asking a pretty good sum of money for rent, somewhat higher than what I asked for two bedroom houses in the same area in 2020.

There was a vacancy in either a 2/1 or 1/1 apartment in the building across from ours and the sign was up for at least a good week or more. I think they just took it down over the weekend. Back when we were looking for places though, it felt more like places were getting taken faster. This is just by general observation though, and not really knowing how fast units were (or are) renting. I don't think the demand is as crazy though, as housing. Currently we're in a 2/1 and it feels tight so debating on if we should size up to a 2/2 or 3/2 even. This is if we don't just buy a place outright. The market is nuts but I think we're in a position where we could make an all cash offer on something higher priced (and therefore less amounts of competition). We may have to concede to doing something like that, as much as I don't want to for the sake of our finances and not overpaying. But we are planning to be here for the long haul at this point.

FINate

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Re: Crazy Hot Housing Market
« Reply #62 on: April 26, 2021, 11:47:06 AM »
Thanks for finding that old post, btw! It's an interesting test case.

I dug around and it looks like we netted about $200k after taxes from selling the rentals. That money went pretty much straight into VTSAX or similar index funds though I'll be damned if I'm going to go figure out exactly what went where.

Assuming I invested the money around July 2015, that $200k is now around $440k (all the dividends got reinvested) so I made $240k give or take. S&P total return over that time period was almost 14.5%/year!

Looking at those 2 properties on Zillow (which for SLC is at least reasonably accurate), I would have made roughly the same amount if I'd held onto them, but I would pay quite a bit more in capital gains if I sold them now, so I guess I didn't sell too soon (because I got lucky elsewhere, not because I was particularly smart). So even though the RE appreciation rate was much lower, the leverage/low mortgage rates made up for it.

I will say I haven't had to fix any broken appliances at any rental properties in the last 6 years, though, or stay up late worrying during a windstorm, which is pretty awesome, so I'll call it a win.

-W

Similar situation for us, though we're a couple of years behind you. We were in an extreme HCOL area that was becoming increasingly hostile towards landlords, which made cashing out an easy decision.

So we sold a SFH ~3 years ago and plowed the proceeds into VTSAX and VGSLX. Sold after a quick run-up in prices while the neighborhood was having a bit of a moment, prices have sort of stagnated since despite the pandemic rush to the area. Based on comps/online estimates, it has appreciated ~10% over the past 3 years.

Sold our remaining investment property (duplex) last year and reinvested as before. This was sold in the early months of the pandemic and I had to make peace with selling it for a bit less than originally expected. That's life, an asset is only worth what someone is willing to pay. But multifamily has remained soft, don't believe the value has changed in the last 12 months. Thankful that we bit the bullet and sold when we did.

Even after taxes and depreciation recapture, cashing out and investing in VTSAX/VGSLX has vastly outperformed out real estate holdings. To be clear, I don't think this applies to all RE, but rather is specific to our situation in an extreme HCOL area that didn't have a lot of room for further price appreciation. YMMV.

And, yes, I'm relieved to not have to deal with tenants, dishwashers, tree limbs falling on things, fences falling over, water intrusion issues, and all the inevitable random things that pop up at the worst possible times.

In my humble opinion, prices in many areas will soften if/when mortgage rates increase. This generally will not help with overall affordability, which can only be addressed by fixing the supply and demand imbalance -- some combination of people moving back to the urban core and/or enough new housing getting built.

clarkfan1979

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Re: Crazy Hot Housing Market
« Reply #63 on: April 26, 2021, 12:53:49 PM »
As many have said before every market is local. However, I don't see a bubble in my markets. For my Fort Myers, FL rental, the tenants a couple in their early 30's with 4 kids. Female is a restaurant manager and makes 60K/year. Male has his own business and does kitchen exhaust cleaning for restaurants. He makes around 80k/year. They have been together for about 18 months. They were both previously divorced.

They are trying to buy a home but haven't been able to get anything. There isn't enough inventory. Their credit scores are 750+, they have 20% down and have a combined income of 140K. Median price for a 3 bed/2 bath single family home in Fort Myers is around 275K, but they want a 4 bed/3 bath around 350K. The male has parents that have their own real estate brokerage. The real estate parents are helping them with the search, but they still can't get anything. It's possible they might end up being too picky? 

Captain Cactus

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Re: Crazy Hot Housing Market
« Reply #64 on: April 26, 2021, 01:50:12 PM »
I think there is a bit of a short squeeze effect going on in the local housing market.  Inventory gets reduced, prices start going up, people start getting into bidding wars (never happened around here until recently), buyers see scarcity and prices going up 15%, and they decide they want to BUY NOW before they get priced out of the market, and the cycle intensifies.

What breaks the cycle?  I dunno, but I guess I think it'll be a gradual easing to more typical conditions over a longer period of time than a burst balloon thing.  Although interest rates rising somewhat rapidly could do that, as it would probably cause a slowdown in the financial markets, then the economy, then jobs, then people can't afford their house as easily, and the supply/demand curves shift.

I've also noticed that around here, very nice updated homes (granite/hardwood floors/well staged) are asking the same price as the ones thrown on the market as is with 20 year old carpet and wood paneled walls.  I think I like someone's explanation up thread that the latter are trying to take advantage of the hot market.

Complicating matters, where I live has had and very likely will have an influx of residents from elsewhere for the foreseeable future, and those residents typically sell elsewhere for more money.  So the demand and prices are on a long-term uptrend.

Yes the age old story of people living in HCOL areas viewing Lower COL areas as "high accessible" or cheap to buy.  For my desired area mentioned before, one gets the impression that rich people just snap up condos as a SHTF bugout place, ie "what shall I do today....ho hum... I suppose it shall please me to buy a condo in a ski town today... it will be a charming place to ride out this unfortunate pandemic".

Plus inventory is LOW...something hits the market and it's gone and gone at a 20% premium to previous sale prices. 

So... my plan is to wait things out... might take a few more years but I'm hoping that the panic dies down and inventories go back to their pre-pandemic levels and I'm able to pick up a place of my own without all the competition.     

Captain Cactus

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Re: Crazy Hot Housing Market
« Reply #65 on: April 27, 2021, 09:40:38 AM »
PS...another condo hit the market over the weekend and it's gone today.  Not even "pending" or "contingent".  LOL!  Is it possible there are SO many people out there with cash in hand ready to pull the trigger if ANYthing hits the market?

jeromedawg

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Re: Crazy Hot Housing Market
« Reply #66 on: April 27, 2021, 09:45:11 AM »
PS...another condo hit the market over the weekend and it's gone today.  Not even "pending" or "contingent".  LOL!  Is it possible there are SO many people out there with cash in hand ready to pull the trigger if ANYthing hits the market?

Could be - I wonder if it's a combination of people having saved up over the years and also courtesy of the Bank of Mom/Dad/Grandparents. OR, maybe it's all the lucky ones cashing out on their BTC, DOGE and or GME "investments" lol.

theoverlook

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Re: Crazy Hot Housing Market
« Reply #67 on: April 27, 2021, 12:14:47 PM »
There's a derelict house two doors north of me in a very hot area of suburban Columbus, Ohio. At one time it was a beautiful 3600sf mid-century house with some amazing features but the original owner still lived in it and suffered from hoarding and age and the house is a complete mess. It sits on just shy of 2 acres. It was up for auction in late 2019 with an opening bid of 225k and nobody bid. It went back up for auction ending yesterday and it went for $370k, plus a 10% buyer's premium, so $407k plus any closing fees / etc. It's a complete shambles with most of it gutted to the studs and some obvious major structural problems. 2 acres is certainly worth at least that much around here, but you're probably going to face $50k - $100k in demo costs if you're building new and the sky's the limit if you're going to save what's there.

I'm not complaining, but thought it was an interesting comparison. $225k - no sale in 2019. 2021 - $370k - sold! They did no work on the house but did haul off some (but by no means the majority) of the hoarded stuff.

Jesstache

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Re: Crazy Hot Housing Market
« Reply #68 on: April 27, 2021, 03:10:02 PM »
Thank you.  This is what was recommended by our realtor as well.  She's on it and knows the market well.  The "coming soon" sign is officially up as of Thursday at noon.  Our realtor, by Friday morning had already received 4 calls and we live on a pretty out of the way street.   

We did allow one early showing yesterday to a family where they currently have a set of twins and the mother is due in one week with another set of twins (yikes) and they are set on our neighborhood but are unsure of how easily they will be able to view properties once the babies are born (no kidding!).  Even if they were to make an offer, they'd have to submit it in May with everyone else.

We did find out the house down the street listed at $685k pre-market and accepted offer is $775k with seller willing to pay $75k over appraisal.   They never went on the market officially.  Another house in our neighborhood sold last week, it did come on the market for a couple days at $770k and just closed at $805k.  It is 400 sqft smaller but is on a court and has solar. 

A couple more houses have popped up but man, you can tell people that would normally have trouble selling are trying to dump their terribly maintained places while they can.  For example, the master bathroom in one has plywood flooring with a strip of what remains of the previous wall to wall carpet and visible water stains on the plywood in the listing photos.  Listed at $650k.

Meanwhile, we continue to get a continuous stream of post cards, letters and text messages (?) from investors, realtors, and hopeful home buyers about our houses in OR and are we thinking of selling (no).

Update:  The couple with two sets of twins let it be known that "when the time comes for offers" they'd like to offer $830k or $35k over appraisal and if there are other offers they'd like a chance to "know what it's going to take".   It's crazy.  We'll see what happens once the house actually gets on the market in 2 weeks. 

Dicey

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Re: Crazy Hot Housing Market
« Reply #69 on: April 27, 2021, 05:17:24 PM »
Another data point:

We are preparing right now to put our house on the market in a couple weeks and are located about 45 minutes outside of San Francisco.  We bought 2 years ago for $630k (5 bed, 3 bath, 3 car garage, fully updated, pool, ~2700 sqft) and we were the winning bid over 5 other offers at the time.  We live in a development with many houses with the same floor plan.  A couple weeks ago a house went on the market a block from ours that is the same floor plan.  Actually, it had a "Coming soon" sign so I have been religiously checking real estate listings since it would be an excellent comp as it is also updated and has a pool (pools are huge selling points here in the hot central valley).  We went out of town for the weekend and when we got back the sign changed to "pending" without it ever hitting the market.  There are 0 houses currently for sale in the entire valley area where we live.

Talking with our agent, she said the price of the property is listed at $775k and she has a call in to see what the actual accepted offer is for (likely more since it never hit the market).  I'm not sad about it but I'm also trying not to count our chickens before they hatch.  She cited people moving from the center of the bay area to "more affordable" outer areas driving the price up, combined with the many people who recently lost their homes to fires last summer are now receiving their insurance settlements and are choosing to buy existing houses instead of rebuilding. 

This is all working crazily in our favor as we have 3 houses in OR that are currently rented and we will be moving back into the one we lived in before moving here (which is paid off so the net is all gravy).  The housing market there is actually even crazier than it is here since it's an outdoorsy, second home, remote worker dream area for a lot of people.  We have heavily considered selling one of our three rentals as each of them (worth at least $500k).  We also want our two children to be able to live in the town some day so hanging on to our two rentals (in addition to the house we'll be moving into) is a way to ensure that can happen and rent from the houses has increased substantially so is a nice income stream (plus we don't need the equity for RE).  One is close to being paid off, the other we are building a garage/adu on to add a rental unit (even at today's construction prices it pencils out).
Erm, which part of the Central Valley is 45 minutes from San Francisco?

PMJL34

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Re: Crazy Hot Housing Market
« Reply #70 on: April 27, 2021, 05:29:47 PM »
There is no central valley within 45 minutes of SF. I'm guessing the home is in deep Livermore closer to Tracy.

Regardless, sounds like you will be making a pretty penny on your sell!  Best of luck!
« Last Edit: April 27, 2021, 05:31:59 PM by PMJL34 »

FINate

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Re: Crazy Hot Housing Market
« Reply #71 on: April 27, 2021, 05:40:09 PM »
Pittsburg? W/o traffic, of course.

Dicey

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Re: Crazy Hot Housing Market
« Reply #72 on: April 27, 2021, 10:36:26 PM »
There is no central valley within 45 minutes of SF. I'm guessing the home is in deep Livermore closer to Tracy.

Regardless, sounds like you will be making a pretty penny on your sell!  Best of luck!
Yes, my comment was completely tongue in cheek. I'm fairly certain that there are close to zero homes with those amenities at that price within 45 actual commuting minutes of SF, in any direction.

Jesstache

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Re: Crazy Hot Housing Market
« Reply #73 on: April 27, 2021, 10:46:22 PM »

Erm, which part of the Central Valley is 45 minutes from San Francisco?

Haha I'm in Solano county.  Maybe I'm bad with my CA geography since I've lived here a relatively short time but our friends and neighbors seem to consider us to be Central Valley.  Either way, it's stinking hot here starting right about now and going until September.  People want a pool.  Yeah and that 45 minutes was without traffic and probably not to the city center haha.   

Captain Cactus

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Re: Crazy Hot Housing Market
« Reply #74 on: April 28, 2021, 11:09:41 AM »
Even in "normal" times, the California real estate market has fascinated me.  I used to watch those house hunting shows on TV and they would feature two young kids just starting out in life..."Oh, we're just looking for a modest starter home.  So we're limiting our search to simple homes around $800,000". 

I mean, do people just get paid THAT much more in California, and the real estate market simply reflects that?

Paper Chaser

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Re: Crazy Hot Housing Market
« Reply #75 on: April 28, 2021, 12:45:05 PM »
Even in "normal" times, the California real estate market has fascinated me.  I used to watch those house hunting shows on TV and they would feature two young kids just starting out in life..."Oh, we're just looking for a modest starter home.  So we're limiting our search to simple homes around $800,000". 

I mean, do people just get paid THAT much more in California, and the real estate market simply reflects that?

Not really.
Median income per capita in the LA metro is $37,764
For the SF metro, it's $60,223
For the SD metro, it's $40,389
For CA overall, it's $39,393
For the US overall, it's $35,672

This site has tons of interesting census data compiled by metro area:

https://censusreporter.org/profiles/31000US31080-los-angeles-long-beach-anaheim-ca-metro-area/

zolotiyeruki

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Re: Crazy Hot Housing Market
« Reply #76 on: April 28, 2021, 01:11:02 PM »
So, from all the discussions and articles and such that I've seen, here are the factors driving prices up in many areas:
1) Buyers moving out of the city
2) Buyers moving from HCOL areas to LCOL areas (like CA -> UT or WA->ID)
3) Buyers "needing more space" because of WFH
4) Speculators ("investors")
5) Materials cost increase (due to people WFH and taking on more projects, and higher demand is driving prices higher)
6) FOMO/perceived shortages
7) Low interest rates (4->3% interest rate drop increases the buying power by 13%)
8) (to a small extent) Money from Uncle Sam
9) Several years of under-building (overcorrection from the housing boom/bust?) leading to short supply
10) Several months in 2020 when home sales were down a lot

Moving forward, here's what I sort of expect to see:
1) won't last forever.  As people move out, prices in the city will correspondingly fall or stagnate, discouraging others from following
2) won't last forever, but I expect a long, slow migration
3) won't last forever
4) limited supply of speculators and their money, and they're generally looking to make a quick buck and get out
5) the market will catch back up
6) as soon as we stop talking so much about Covid, this will go away
7) absent another huge economic hit (like another pandemic or natural disaster), I see interest rates only going up
8) I don't think this is much of a factor anyway, and really hope they don't open the spigot again.
9) This one could take a few years for the market to work out
10) This will work itself out fairly quickly

In short, beyond the next year or two, I only see the following factors at play:
2) longer-term migration from HCOL to LCOL
9) shortage of new homes

I don't expect a massive crash a la 2007/8, given the high incidence of all-cash offers, tighter lending standards, etc.  That said, I wouldn't be surprised if we see a modest-to-moderate price drop once we exhaust current demand, followed by long-term stagnation or low growth.

bacchi

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Re: Crazy Hot Housing Market
« Reply #77 on: April 28, 2021, 01:22:07 PM »
Demographics? The Gen Y cohort is at the "house buying" stage and they're a large group.

zolotiyeruki

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Re: Crazy Hot Housing Market
« Reply #78 on: April 28, 2021, 02:02:52 PM »
Demographics? The Gen Y cohort is at the "house buying" stage and they're a large group.
Good point, I had missed that one.  (And I shouldn't--I have probably a dozen nieces and nephews in that range!)

For the curious, I looked up US population distribution, and sure enough, the 25-29-year-old demographic is bigger.

It's interesting to see another spike in the Baby Boomer generation.  I suppose as that generation passes, we'll see a long-term softening influence in the market.

calimom

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Re: Crazy Hot Housing Market
« Reply #79 on: April 29, 2021, 07:20:59 PM »

Erm, which part of the Central Valley is 45 minutes from San Francisco?

Haha I'm in Solano county.  Maybe I'm bad with my CA geography since I've lived here a relatively short time but our friends and neighbors seem to consider us to be Central Valley.  Either way, it's stinking hot here starting right about now and going until September.  People want a pool.  Yeah and that 45 minutes was without traffic and probably not to the city center haha.

I was wondering that too! And I was also curious about someone with twins/also expecting twins who is interested in a house with a pool. When I was househunting in hot, inland CA with a just-walking toddler, the last thing I wanted was a pool. In more recent years I've longed for one on a string of 100+ deg. days though.

And overall, it does seem there will be a market correction of sorts when some large companies, tech and otherwise, start calling their currently WFH employees back to the office. So those in say, Tahoe, who moved from Mountain View to ride out the pandemic might be facing an unfathomable commute or having to sell off a property. This has played out all over the country. It should be interesting. Some jobs will be WFH for the long term, others not.

waltworks

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Re: Crazy Hot Housing Market
« Reply #80 on: April 29, 2021, 08:53:07 PM »
And overall, it does seem there will be a market correction of sorts when some large companies, tech and otherwise, start calling their currently WFH employees back to the office. So those in say, Tahoe, who moved from Mountain View to ride out the pandemic might be facing an unfathomable commute or having to sell off a property. This has played out all over the country. It should be interesting. Some jobs will be WFH for the long term, others not.

I know a bunch of high-level tech folks who have moved to cool places like Tahoe (and my town). They are not going back to the office unless they decide to, if their job tries to make them they'll just quit and find another (which they can easily).

For an average cubicle drone, that leverage doesn't exist. But the Tahoe house buyers are in the driver's seat. They might all decide to go back to Palo Alto but I doubt it.

-W

clifp

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Re: Crazy Hot Housing Market
« Reply #81 on: April 30, 2021, 12:38:31 AM »
Yeah, but they're camping out for a place to *live*, and they qualify for a real mortgage. There just aren't any houses to buy because we spent a decade not building any. I'd camp out too if I needed a place to live.

People who didn't experience 2005 don't really get it, I think. The price increases are the only thing that is similar. Hairdressers making $25k a year were camping out to buy their 3rd or 4th or 5th condo to flip with a NINJA loan.

That said, I make no predictions about the future value of anyone's house.

-W

A big difference 2005-6 and today is that lending standards are far more strict.  The hairdresser may think she should be able to afford a $500K house, but you won't find a bank that will give her the money for the first house much less the 2nd or 3rd.  It was night/day difference between get qualified for a mortgage in the time period and today.  While not every loan officer or underwriter ignored the rules, there were plenty who would outright lying on your mortgage application.  In 2017, the first lender I went to get a $500K mortgage on $1.1 million dollar house, but wouldn't qualify me due to lack of income despite have a $2 million stock and bond portfolio and more in an IRA. Nor was my story unusual for early retirees with no pension etc.  As far as the bank is concerned a $2 million of stock only generates $40K in income as reported to the IRS.

srad

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Re: Crazy Hot Housing Market
« Reply #82 on: April 30, 2021, 11:04:53 AM »

[/quote]

A big difference 2005-6 and today is that lending standards are far more strict. 
[/quote]

And a lot of these sales are cash buyers, to quote mr Dave Ramsey, "100% of the homes that went to foreclosure had a mortgage"

And you think buying a home is tough now, wait till Biden enacts the 15k first time tax credit and the 25k first time home buyer grant.  Last I checked demand wasn't the issue with this market, supply is.  So choosing to stimulating the buyers over the builders?  That's just classic government.   So in my theme of quotes for this response  " Government is not the solution to our problem, government is the problem" -  R Regan.

achvfi

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Re: Crazy Hot Housing Market
« Reply #83 on: April 30, 2021, 11:26:10 AM »
" Government is not the solution to our problem, government is the problem" -  R Regan.
Non sense.

I believe cheap housing market we had from 2009-2016 is an anomaly, once in a lifetime depression and an opportunity.

For any new homebuyer if your horizon is 5-10 years, buy the home you need, dont wait for the market to turn.

Sid Hoffman

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Re: Crazy Hot Housing Market
« Reply #84 on: April 30, 2021, 12:21:42 PM »
Yeah, that's a nominal graph. Get a look at an inflation adjusted one and while it still looks kinda crazy, it doesn't look *that* crazy.
Here's the one from November, which was the first one I found:
https://1.bp.blogspot.com/-1ERTSogi7TM/YBAmAQurfXI/AAAAAAAA37g/bzsPh-G5hiUDlZsQkgt8oMnPnUMTYs_6ACLcBGAsYHQ/s1024/RealNov2020.PNG

That's one side of it. The other is that people don't actually buy houses, they buy monthly payments. So another way to adjust to real dollars would be a graph of the typical mortgage payment as a percentage of monthly income per year. That automatically adjusts everything for inflation without getting into things like "But wages grew in this time period and were stagnant in this time period!" or "but interest rates were 14% here and only 3% here!"

Mortgage payment as a percentage of income is the graph that tells what people are really doing. That also means that all-cash buyers don't count (as it's impossible to default when you don't have a loan) and games like 20% down versus 3% down are also automatically adjusted for because we're looking at the mortgage payment, which means it's the amount actually at risk. I've been unable to find a quality graph of this type, but that is what is needed to compare against large time scales.

srad

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Re: Crazy Hot Housing Market
« Reply #85 on: April 30, 2021, 01:24:51 PM »
" Government is not the solution to our problem, government is the problem" -  R Regan.
Non sense.

I believe cheap housing market we had from 2009-2016 is an anomaly, once in a lifetime depression and an opportunity.

For any new homebuyer if your horizon is 5-10 years, buy the home you need, dont wait for the market to turn.

I agree entirely with you regarding everything but the non sense part. Government is not going to fix the housing crisis the way they are currently trying to attack it.

clifp

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Re: Crazy Hot Housing Market
« Reply #86 on: May 01, 2021, 01:59:20 PM »
Yeah, that's a nominal graph. Get a look at an inflation adjusted one and while it still looks kinda crazy, it doesn't look *that* crazy.
Here's the one from November, which was the first one I found:
https://1.bp.blogspot.com/-1ERTSogi7TM/YBAmAQurfXI/AAAAAAAA37g/bzsPh-G5hiUDlZsQkgt8oMnPnUMTYs_6ACLcBGAsYHQ/s1024/RealNov2020.PNG

That's one side of it. The other is that people don't actually buy houses, they buy monthly payments. So another way to adjust to real dollars would be a graph of the typical mortgage payment as a percentage of monthly income per year. That automatically adjusts everything for inflation without getting into things like "But wages grew in this time period and were stagnant in this time period!" or "but interest rates were 14% here and only 3% here!"

Mortgage payment as a percentage of income is the graph that tells what people are really doing. That also means that all-cash buyers don't count (as it's impossible to default when you don't have a loan) and games like 20% down versus 3% down are also automatically adjusted for because we're looking at the mortgage payment, which means it's the amount actually at risk. I've been unable to find a quality graph of this type, but that is what is needed to compare against large time scales.

Yup, exactly. Other than cash buyers, and few others like flippers, most everyone else focuses on monthly payments. Which is another benefit of lower interest more of your payments go toward repaying principal.  At 3% 30 year mortgage, you've repaid 23% of the loan amount after 10 years,  if the interest rate is 5% that drops to 19%, and for my insane 13.75% mortgage only 5% of the principal is paid off. There are plenty of markets in the US where the mortgage payments are no more than rentals. Even if they are a few hundred more, principal repayments, tax deductibility of interest, and the possibility of price appreciate more than make up for it.

zolotiyeruki

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Re: Crazy Hot Housing Market
« Reply #87 on: May 01, 2021, 04:27:49 PM »
Quote
And you think buying a home is tough now, wait till Biden enacts the 15k first time tax credit and the 25k first time home buyer grant. 
Wait, that's an actual proposal?  Golly, let's solve the problem of high housing prices by....giving people even more money to spend on housing!?  What kind of economic ignoramus came up with that one!?

secondcor521

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Re: Crazy Hot Housing Market
« Reply #88 on: May 01, 2021, 05:14:57 PM »
Quote
And you think buying a home is tough now, wait till Biden enacts the 15k first time tax credit and the 25k first time home buyer grant. 
Wait, that's an actual proposal?  Golly, let's solve the problem of high housing prices by....giving people even more money to spend on housing!?  What kind of economic ignoramus came up with that one!?

I disagree with the policy personally for multiple rasons, but in my area and environment it would probably help my son out.  He's a FTHB and would probably qualify for the grants and tax credits, whereas other buyers presumably are not FTHBs, so it would tilt the playing field away from them and toward my son (and others like him).

onecoolcat

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Re: Crazy Hot Housing Market
« Reply #89 on: May 02, 2021, 12:56:08 AM »
Demographics? The Gen Y cohort is at the "house buying" stage and they're a large group.

On the other hand, baby boomers are aging out and that is a very large group as well.  I think it has more to do with historically low interest rates, COVID-inflation (almost every asset has seem massive gains), stimulus money, foreclosure moratoriums, and student loan deferment.

clarkfan1979

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Re: Crazy Hot Housing Market
« Reply #90 on: May 02, 2021, 07:49:33 AM »
Yeah, that's a nominal graph. Get a look at an inflation adjusted one and while it still looks kinda crazy, it doesn't look *that* crazy.
Here's the one from November, which was the first one I found:
https://1.bp.blogspot.com/-1ERTSogi7TM/YBAmAQurfXI/AAAAAAAA37g/bzsPh-G5hiUDlZsQkgt8oMnPnUMTYs_6ACLcBGAsYHQ/s1024/RealNov2020.PNG

That's one side of it. The other is that people don't actually buy houses, they buy monthly payments. So another way to adjust to real dollars would be a graph of the typical mortgage payment as a percentage of monthly income per year. That automatically adjusts everything for inflation without getting into things like "But wages grew in this time period and were stagnant in this time period!" or "but interest rates were 14% here and only 3% here!"

Mortgage payment as a percentage of income is the graph that tells what people are really doing. That also means that all-cash buyers don't count (as it's impossible to default when you don't have a loan) and games like 20% down versus 3% down are also automatically adjusted for because we're looking at the mortgage payment, which means it's the amount actually at risk. I've been unable to find a quality graph of this type, but that is what is needed to compare against large time scales.


For my last purchase of a personal residence (November 2019), I looked at it from a perspective of monthly payments and future repairs. I paid 280K and the median cost of the neighborhood was 250K. However, my house was an 11-month flip by a contractor. It needed zero work and the contractor fully finished the basement. A typical 250K house would be original work from 1998 and a partially finished basement.

I just refinanced in December 2020 and I got 2.875%. My PITI is $1156/month. This is for a 5 bed/3 bath house with 2450 sq. ft. An oversized garage (27 x 22) and a shed in the backyard (.28 acres). While many others complained that I overpaid, I have been very happy with the house and monthly payments.
 

Sid Hoffman

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Re: Crazy Hot Housing Market
« Reply #91 on: May 02, 2021, 07:29:02 PM »
Quote
And you think buying a home is tough now, wait till Biden enacts the 15k first time tax credit and the 25k first time home buyer grant. 
Wait, that's an actual proposal?  Golly, let's solve the problem of high housing prices by....giving people even more money to spend on housing!?  What kind of economic ignoramus came up with that one!?

I understand the point of it. So on the proponent side, first time home buyers will tend to be the lowest income, thus only shopping at the cheapest end of housing. So the theory is that FTHB credits only go to a small segment of home buyers, thus the impact is reduced. Also I couldn't find specifics on what version is most likely to pass, but if it's set up in such a way that it only funds the 11-20% portion of a 20% down payment, then in theory it is limited even more, simply by getting more people into the home buying pool sooner rather than later in life. It's not meritless, but it's not perfect either.

So moving on from the proponents, let's look at why one could oppose it. Firstly, all government money is our own money from our future selves. So getting a tax credit now simply means we have even less money available to spend in the future after our taxes go up to pay for the tax credit we just took advantage of. Second, when I mentioned FTHB tend to be only at the cheap end of the housing market, well that also means that there is now a huge crush of buyers all in the exact same price segment, which can easily have the effect of doing exactly what you said: simply making the exact same homes more expensive for the buyers who are least able to afford them in the first place. Third, this is absolutely the wrong time for such a credit. As mentioned, it moves up somebody from buying 2-3 years from now to buying right now. Well there's horrible inventory levels and raw material costs are literally up >200% in some cases, such as lumber is up 232% right now. So announcing a credit now could shove 3 years of FTHB demand into a single year thus pushing prices up even more.

No, FTHB credits should not be used in a market like this. The last time I saw them effectively used was around 2010-2011 or so when the housing market was crippled, banks were still trying to unload REOs, and many people were still doing short sales to get whatever they possibly could from their underwater loans. That is the RIGHT time for FTHB credits. Right now is the wrong time. You don't do stimulus to a market that's already red hot, all that does is overheat it even more.

Roland of Gilead

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Re: Crazy Hot Housing Market
« Reply #92 on: May 03, 2021, 08:22:31 AM »
What about credit for building new homes?   I look at a lot of the current energy credits and new construction doesn't always qualify.

Captain Cactus

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Re: Crazy Hot Housing Market
« Reply #93 on: May 23, 2021, 08:11:04 PM »
The White Mountains in New Hampshire continues to be low inventory, high demand situation.  Hardly anyone selling anything!  Got me thinking about paying off my mortgage with my cash stockpile and just waiting fir the market to cool off in NH 🙄

jeromedawg

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Re: Crazy Hot Housing Market
« Reply #94 on: May 23, 2021, 09:24:52 PM »
Interesting metrics here:

https://wallethub.com/edu/cities-where-people-are-most-overleveraged-on-their-homes/88592

I'm not sure if median income" is median household income of mortgage debtors in each city versus median income per person who generally resides in each city. If the latter, I would think this would severely skew the data and misrepresent the findings



Thinking about it more, just a couple points/questions of curiosity:
1) Back during the Great Recession, were a lot people already carrying high amounts of non-mortgage debt before and during qualifying for NINJA and even normal conventional loans? And could this have been one of the factors that contributed to people defaulting on their loans?

2) If so, couldn't people theoretically just run up non-mortgage debt *after* they have their loan approved and granted (aka lifestyle inflation: "let's finance a whole-house makeover because I hate these floors, and we'll need a Tesla X and Tesla Cybertruck to transport all the furniture we'll be buying from Crate & Barrel and Anthropologie, and after that's all done I think we'll need a large RV for post-COVID vacationing and to fill the RV spot, also have to buy some electronics for the new entertainment systems we'll have to rig up in the living room, family room, garage and mancave" etc etc etc)
« Last Edit: May 23, 2021, 10:26:35 PM by jeromedawg »

Captain Cactus

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Re: Crazy Hot Housing Market
« Reply #95 on: May 24, 2021, 11:48:09 AM »
I just saw an interesting post on Linkedin about newly remote workers bringing their big city salaries to traditionally remote but desirable vacation-like destinations... buying up all the real estate so locals (who don't have the transplanted big city salaries) can't afford to live in nice areas anymore.


jeromedawg

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Re: Crazy Hot Housing Market
« Reply #96 on: May 24, 2021, 11:49:37 AM »
I just saw an interesting post on Linkedin about newly remote workers bringing their big city salaries to traditionally remote but desirable vacation-like destinations... buying up all the real estate so locals (who don't have the transplanted big city salaries) can't afford to live in nice areas anymore.

Let me guess... Hawaii? :(

former player

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Re: Crazy Hot Housing Market
« Reply #97 on: May 24, 2021, 12:20:09 PM »
I just saw an interesting post on Linkedin about newly remote workers bringing their big city salaries to traditionally remote but desirable vacation-like destinations... buying up all the real estate so locals (who don't have the transplanted big city salaries) can't afford to live in nice areas anymore.

Let me guess... Hawaii? :(
Happening in my part of the world too.  There are no rural rentals available within 10 miles and only a few overpriced houses for sale. Fortunately there are some affordable houses to rent coming on line for locals in the next few weeks

Captain Cactus

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Re: Crazy Hot Housing Market
« Reply #98 on: May 24, 2021, 12:55:21 PM »
No Maine, actually.

JLee

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Wow, a phone plan for fifteen bucks!