The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: jehovasfitness23 on April 06, 2021, 01:39:44 PM
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https://www.youtube.com/watch?v=EBb9zf_zWvU
case in point, 1940-50s house just outside DC in rough rough shape. Listed for $275k sold for $500k with 88 offers with 70 of those all cash.
What in the world is going on, this can't end well.
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I like these hosts' energy but I'm not satisfied with the depth of their arguments. As a young person it's really easy to get mad at the continually increasing difficulty of owning, but I would love to understand the facts a little bit better - is it really "BlackRock and Japan" buying 1 in 5 houses or is it more like individual rich(-ish) people looking to increase their wealth through landlording a couple of places that would otherwise be owner-occupied? I feel more strongly against the former than the latter.
I wonder all the time, if it's really Big Landlord© and/or wealth-obscuring schemes from Russia and China driving up real estate prices everywhere, won't those properties still eventually have to be sold? Older generations buying in cash still usually have to sell their old houses, and eventually they'll pass away and even more housing stock will be available, right? Or are already-rich families and companies just holding on to housing stock and converting it all to rentals to preserve wealth? If so, that sucks, but doesn't that mean rents have to stay low because there are too many rentals competing with each other for tenants? Or that construction supply for starter homes eventually has to catch up to ownership demand?
Unless some Housing Monopoly somehow comes into being, rent prices always have to at least stay competitive with purchase prices, right? Or is there already a Housing Monopoly that I don't know about? If more housing gets built, then rents will fall, and landlords will not want to hoard so many houses anymore because the math won't work out in their favor anymore, so house sale prices have to come down... right? Or will NIMBY zoning regulations become too strict in desirable cities and neighborhoods to reasonably increase nearby stock?
As for their "case study," in Silver Spring MD, I'm not swayed. It was probably a bunch of young DC families earning >$200K combined who had a >$100K DP saved up and were thrilled just at the possibility of owning a SFH in that area for below the national average home price that drove all those offers. That's my guess anyway. There's not a single listing on Zillow in Silver Spring for less than $300K right now, fixer-upper or not. It's a booming metro area anchored by highly stable government work so I'm not surprised investment banks got in on the action of just owning the land for that cheap, since they could afford to hold onto it and build something livable there once construction is cheaper.
Anyway, good grace those youtube comments are depressing.... I just have more questions now.
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I like these hosts' energy but I'm not satisfied with the depth of their arguments. As a young person it's really easy to get mad at the continually increasing difficulty of owning, but I would love to understand the facts a little bit better - is it really "BlackRock and Japan" buying 1 in 5 houses or is it more like individual rich(-ish) people looking to increase their wealth through landlording a couple of places that would otherwise be owner-occupied? I feel more strongly against the former than the latter.
That 1 in 5 number actually corresponds with the stats my county has released.
If you look at the background article about this particular house, it reads something like, "The land alone is worth that price." I expect this house will be torn down and replaced.
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IMO that's an outlier that the asking price was just way out of whack. The land was worth it, someone will build a nice house on it, and lots of people wanted to. Not that weird, really.
As someone who invested through and profited from the 2007 crash, I can say that this doesn't feel similar, really. There are no NINJA loans, no flippers (or at least none in my area), etc.
That said, it's obviously not sustainable. At some point people can't afford the payment even at 2.5% interest. Most people already can't. And the demographics of the USA are pretty grim in the medium/long term.
My preference, personally, would be for a long stagnation with minimal disruption to the larger economy, rather than another crash. Though if there is a crash, I'll make out like a bandit again.
-W
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Are foreign investors, or domestic corporations contributing to price increases? Sure, probably to some extent. But I still think the biggest drivers are super low interest rates, low new housing construction, and high material/labor prices raising the cost of new construction. It's just a supply and demand problem at it's core.
If we look at the supply side, here are new housing starts over time for the US:
(https://d3fy651gv2fhd3.cloudfront.net/charts/united-states-housing-starts@2x.png?s=unitedstahousta&v=202104132315V20200908&d1=19210509)
Look at the times when housing was below the '1000' line on that chart and we see a handful of very brief, very shallow drops. Historically that was the low point. And then it plummets to 500 in 2008 and stays below 1000 basically from 2008-2014. That's low production for an incredibly long time historically speaking. So we've spent the last decade+ with less construction than historical average and we're just now returning to around average new construction numbers. Supply is limited and has been for a long time.
Now demand is a little trickier, but population and interest rates are certainly important variables so lets look at them:
(https://www.statista.com/graphic/1/183457/united-states--resident-population.jpg)
Here we see more people needing places to live
(https://assets.themortgagereports.com/wp-content/uploads/2021/01/30-year-mortgage-rates-chart-1975-2021.jpg)
And here we see historically low rates since 2009ish. In simplistic terms, that means we've had super low supply and super high demand for over a decade now. I'm not convinced that foreign or corporate money is really playing as large a role as some argue.
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I'd argue that local and foreign corps are affecting the market tremendously. Way more than we even know, especially in major cities.
Now, it's hard to quantify it because I don't have insider info, but I'd wager that it's even higher than the 20% figure provided in terms of total purchases. Not only the 20% number, but the way they acquire the homes (all cash offers and deeper pockets) are certainly doing damage to the owner occupier as well.
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I live near Silver Spring and it's been a sellers market for at least the past 12 years. My mother wanted to buy in Silver Spring in 2004 and she was basically priced out. I remember when I was buying in the county next to Silver Spring over 8 years ago and I kept being out bid by all cash offers. The houses would get maybe a handful of bids. Now it's dozens and the media has "noticed" the result of structural issues that have been going on for years.
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I'd argue that local and foreign corps are affecting the market tremendously. Way more than we even know, especially in major cities.
Now, it's hard to quantify it because I don't have insider info, but I'd wager that it's even higher than the 20% figure provided in terms of total purchases. Not only the 20% number, but the way they acquire the homes (all cash offers and deeper pockets) are certainly doing damage to the owner occupier as well.
I mean, it could affect things a little. But there zero supply and a ton of demand. Occam's razor says there's not some secret conspiracy of foreign buyers.
-W
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I mean, it could affect things a little. But there zero supply and a ton of demand. Occam's razor says there's not some secret conspiracy of foreign buyers.
-W
I agree, I don't think there is a conspiracy of foreign buyers. I meant more along the lines of mega corps/ultra wealthy (both domestic and international) were/are buying up properties the way they are allegedly pouring in money into crypto. For example Donald Sterling owned like 200+ properties (not units) in LA. Whoever MMA group is owns 100,031 apartments in US. In my area, there are very few small time mom and pop rental owners.
I also agree that the zero supply + low interest rate is also wreaking havoc during covid.
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Agree that the short supply is a huge problem, especially now that millennials are old enough to be buying homes and they're the largest generation: https://www.statista.com/statistics/797321/us-population-by-generation/
If we take the middle of the millennials, that means people born in 1990, which puts them at 31 years old now. That's smack dab at exactly the typical age of first marriage in the USA now, which is exactly what causes people to buy homes. They're suddenly dual income and looking to have kids, which is the #1 reason you settle down and buy a house.
It's demographics as much as any of the other things mentioned above. So not just population growth alone: it's the fact that the generation which is 30 years old now is the largest generation which is especially relevant.
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I agree, I don't think there is a conspiracy of foreign buyers. I meant more along the lines of mega corps/ultra wealthy (both domestic and international) were/are buying up properties the way they are allegedly pouring in money into crypto. For example Donald Sterling owned like 200+ properties (not units) in LA. Whoever MMA group is owns 100,031 apartments in US. In my area, there are very few small time mom and pop rental owners.
https://www.huduser.gov/portal/pdredge/pdr-edge-frm-asst-sec-061118.html
"According to data from the 2015 American Housing Survey, there are nearly 48.5 million rental units in the United States, 43.9 million of which are occupied. The 2015 Rental Housing Finance Survey (RHFS) shows that these units are in 22.5 million properties. The RHFS identifies two primary types of ownership:
Individual investors. About 22.7 million units in 16.7 million properties are owned by individual investors. Individual investors are more likely to own single-family and duplex rental homes. We often describe these investors as “mom and pop” landlords.
Business entities. The remaining 25.8 million units are owned by businesses, primarily limited partnerships, limited liability companies, and limited liability partnerships. Businesses are more likely to own the multifamily rental inventory."
That data set may be a bit dated, but I think it shows that while a single entity owning 100k units is an awful lot of doors, it's a pretty small percentage of the total units in the US.
Here's an interesting list of entities that own the most apartments in the US as of 2020 (MAA is Mid America Apartment Communities):
https://www.statista.com/statistics/603416/leading-apartment-owners-in-the-us-by-units-owned/
If my math is right, the top 20 largest rental owners combined own 1,280,661 apartments, or roughly 2.6% of the total rental doors in the US.
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"Mega corps" and wealthy people have always invested in RE, though.
If what you mean is that people are investing in RE that otherwise wouldn't bother because of high stock prices/low bond yields, then I'd agree with you. But again, supply and demand is the story here. A billionaire buying 100 houses doesn't move the needle.
-W
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"Mega corps" and wealthy people have always invested in RE, though.
If what you mean is that people are investing in RE that otherwise wouldn't bother because of high stock prices/low bond yields, then I'd agree with you. But again, supply and demand is the story here. A billionaire buying 100 houses doesn't move the needle.
-W
If 20% of the houses in one year in one city/MSA are bought by institutional investors*, over many years, how could that not move the needle? Some private buyers who miss out will continue looking the next year, further increasing demand.
This article is from 2013 and the II* % has continued and increased since then.
In April, institutional investors bought 10% of the houses sold in the nation's 100 busiest real estate markets, up from 5% the year before, according to real estate tracker Radar Logic.
The increase underscores how important investors such as Wall Street investment funds are to the national housing recovery. Their appetite for homes has helped drive prices up faster than many real estate forecasters expected even a year ago.
What we're seeing is that IIs were/are taking advantage of the housing crash and the Gen Y demographics, as Sid mentioned. Supply is definitely a problem but IIs are taking significant homes off the market and keeping them in the rental pool.
* Freddie defines an "institutional investor" as an organization that owns more than 2000 units.
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Oh, more institutional buyers will move the demand higher, of course. Lots of big hedge funds and investment firms bought lots of houses post-crash (so did I). Many of those houses have since been sold to realize profits, of course. But the story of supply/demand is not just about demand.
We're not building any houses and we didn't build any for more than a decade, basically.
It's the scarcity that is the issue here, and the scarcity is driving the demand from investors because prices keep rising while that ratio stays out of whack.
-W
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Thank you Paper chaser for the info. I'd wager that mom and pop places have significantly decreased since 2015 report and corps have gained significant ground.
I agree with Bacci that 20% certainly moves the needle. Again, not just in volume, but the way they obtain the homes (buying in cash, deeper pockets, etc.). I also disagree that the investors have sold since the 2009 crash. I think the corps holding on to the housing stock contributes to the limited supply. An average home owners moves what every 7 years? I bet the corps aren't selling every 7 years, especially during this bull run and great rents.
However, if I were to assign blame/reason for this run up I would say it's 75% limited supply 15% corps 10% interest rate. But keep in mind, the growing corp rentals certainly contributes to the limited supply imo.
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I like these hosts' energy but I'm not satisfied with the depth of their arguments. As a young person it's really easy to get mad at the continually increasing difficulty of owning, but I would love to understand the facts a little bit better - is it really "BlackRock and Japan" buying 1 in 5 houses or is it more like individual rich(-ish) people looking to increase their wealth through landlording a couple of places that would otherwise be owner-occupied? I feel more strongly against the former than the latter.
I wonder all the time, if it's really Big Landlord© and/or wealth-obscuring schemes from Russia and China driving up real estate prices everywhere, won't those properties still eventually have to be sold? Older generations buying in cash still usually have to sell their old houses, and eventually they'll pass away and even more housing stock will be available, right? Or are already-rich families and companies just holding on to housing stock and converting it all to rentals to preserve wealth? If so, that sucks, but doesn't that mean rents have to stay low because there are too many rentals competing with each other for tenants? Or that construction supply for starter homes eventually has to catch up to ownership demand?
Unless some Housing Monopoly somehow comes into being, rent prices always have to at least stay competitive with purchase prices, right? Or is there already a Housing Monopoly that I don't know about? If more housing gets built, then rents will fall, and landlords will not want to hoard so many houses anymore because the math won't work out in their favor anymore, so house sale prices have to come down... right? Or will NIMBY zoning regulations become too strict in desirable cities and neighborhoods to reasonably increase nearby stock?
As for their "case study," in Silver Spring MD, I'm not swayed. It was probably a bunch of young DC families earning >$200K combined who had a >$100K DP saved up and were thrilled just at the possibility of owning a SFH in that area for below the national average home price that drove all those offers. That's my guess anyway. There's not a single listing on Zillow in Silver Spring for less than $300K right now, fixer-upper or not. It's a booming metro area anchored by highly stable government work so I'm not surprised investment banks got in on the action of just owning the land for that cheap, since they could afford to hold onto it and build something livable there once construction is cheaper.
Anyway, good grace those youtube comments are depressing.... I just have more questions now.
Very good analysis. I can't believe you are only 25 years old.
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However, if I were to assign blame/reason for this run up I would say it's 75% limited supply 15% corps 10% interest rate. But keep in mind, the growing corp rentals certainly contributes to the limited supply imo.
Probably. Also keep in mind that institutional buyers need to justify their purchases with numbers. Example: they need to be able to justify spending $X on a house by showing that it's going to be occupied Y% of the time at $Z/year of net income. While rents are up, rents are not increasing anywhere near as fast as the cost of homes, which means that it gets harder and harder for institutional buyers to justify buying properties that do not perform and thus drag down the profitability of the company/fund.
Individual people and families however do not need to justify their purchases in any way. It can be entirely emotional and so long as they qualify for the loan, they can buy the most expensive home that they are able to qualify for. They do not need to show what it would rent for or build a risk profile for if rents or home values go down. If anything, rapidly rising home prices while rents are not increasing pushes those institutional buyers to the sidelines and ensures that a greater proportion of the homes sold go to owner/occupants.
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I've been saving diligently for a condo in a small resort town in the White Mountains, New Hampshire. Condos in this place would sometimes sit on the market for months and sometimes years...some would sell but it wasn't anything crazy. NOW, since last year, condos come on the market and they're going "contingent" or "pending" within 18 hours. And the prices are about 20% higher than in the past.
So frustrating, because I've fantasized for years about getting a 2nd home here and now that 1) I have FINALLY saved enough money to buy one outright and 2) I finally have my wife on board with the idea... we don't even get the chance to see a place before it's "gone".
So what's happening up there? Low inventory and high demand from rich people in Boston who feel comfortable paying higher prices and sight unseen. Some people are even moving there and putting their kids in the local school during the pandemic. It's definitely a "crazy hot housing marketing". Oy vey.
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
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However, if I were to assign blame/reason for this run up I would say it's 75% limited supply 15% corps 10% interest rate. But keep in mind, the growing corp rentals certainly contributes to the limited supply imo.
Probably. Also keep in mind that institutional buyers need to justify their purchases with numbers. Example: they need to be able to justify spending $X on a house by showing that it's going to be occupied Y% of the time at $Z/year of net income. While rents are up, rents are not increasing anywhere near as fast as the cost of homes, which means that it gets harder and harder for institutional buyers to justify buying properties that do not perform and thus drag down the profitability of the company/fund.
Individual people and families however do not need to justify their purchases in any way. It can be entirely emotional and so long as they qualify for the loan, they can buy the most expensive home that they are able to qualify for. They do not need to show what it would rent for or build a risk profile for if rents or home values go down. If anything, rapidly rising home prices while rents are not increasing pushes those institutional buyers to the sidelines and ensures that a greater proportion of the homes sold go to owner/occupants.
This is my thinking as well. If corporations are setting the market ever higher by outbidding everyone else and often paying cash, that seems like quite the gamble. So what's their goal? Rents are tied to incomes. They can only climb so high. The margins only get smaller as the purchase price rises. If they're hoping to more or less flip these places to harvest appreciation in a couple of years that also seems pretty shaky vs 10 years ago.
VTSAX is up about 70% in the last 12 months. Why would corporations choose RE over the market? Tons of smaller landlords in my area have been selling off properties that they bought for peanuts from 2009-2012 because the numbers make more sense to sell than to keep renting. If small time landlords in the middle of nowhere are figuring that out, then how are big time investors making the numbers work to buy in rather than sell out and harvest the massive appreciation? It's been a seller's market for years now. Why would smart, seasoned institutional investors be buying rather than selling?
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
The houses in my area of desire aren't quite that high, but still fairly pricy. After much anguish and reflection I'm thinking I just need to take a step back for a while...the thought being that the frenzy will eventually die down, inventory will increase, and hopefully some of the people that "panic bought" a condo last year to escape the pandemic will get bored and want to move back to the city again. Prices may not drop down, because nobody likes selling "for less than what it's worth" and the new anchor is always the market peak, but if there's an inventory to choose from and less demand... maybe that'll make it easier for us to get a place?
Egocentric I know, but I can't help but feel like these people buying up these properties don't have the same skin in the town that I have...we've been going there for years (though don't own our own place obviously) and have a long-term appreciation for the town. Whereas these rich newcomers just flippantly bought a SHTF bugout condo with their pocket change. Somehow I'm more deserving since I've been saving up for so long. LOL. I'm crazy, I know.
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
The houses in my area of desire aren't quite that high, but still fairly pricy. After much anguish and reflection I'm thinking I just need to take a step back for a while...the thought being that the frenzy will eventually die down, inventory will increase, and hopefully some of the people that "panic bought" a condo last year to escape the pandemic will get bored and want to move back to the city again. Prices may not drop down, because nobody likes selling "for less than what it's worth" and the new anchor is always the market peak, but if there's an inventory to choose from and less demand... maybe that'll make it easier for us to get a place?
Egocentric I know, but I can't help but feel like these people buying up these properties don't have the same skin in the town that I have...we've been going there for years (though don't own our own place obviously) and have a long-term appreciation for the town. Whereas these rich newcomers just flippantly bought a SHTF bugout condo with their pocket change. Somehow I'm more deserving since I've been saving up for so long. LOL. I'm crazy, I know.
Totally sympathize with that feeling. Here in Eastern WA/North ID, it is really hard not to feel resentment towards those who have moved in from high earning areas (California being the obvious example), and have done a lot to drive up prices out of reach for the younger generation that has grown up here.
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
Exactly...it's like those with large amounts of money can capriciously drop some change on a getaway without really having to think/agonize/save for years, thus blocking out those of us who have been working towards the goal for years.
The houses in my area of desire aren't quite that high, but still fairly pricy. After much anguish and reflection I'm thinking I just need to take a step back for a while...the thought being that the frenzy will eventually die down, inventory will increase, and hopefully some of the people that "panic bought" a condo last year to escape the pandemic will get bored and want to move back to the city again. Prices may not drop down, because nobody likes selling "for less than what it's worth" and the new anchor is always the market peak, but if there's an inventory to choose from and less demand... maybe that'll make it easier for us to get a place?
Egocentric I know, but I can't help but feel like these people buying up these properties don't have the same skin in the town that I have...we've been going there for years (though don't own our own place obviously) and have a long-term appreciation for the town. Whereas these rich newcomers just flippantly bought a SHTF bugout condo with their pocket change. Somehow I'm more deserving since I've been saving up for so long. LOL. I'm crazy, I know.
Totally sympathize with that feeling. Here in Eastern WA/North ID, it is really hard not to feel resentment towards those who have moved in from high earning areas (California being the obvious example), and have done a lot to drive up prices out of reach for the younger generation that has grown up here.
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
The houses in my area of desire aren't quite that high, but still fairly pricy. After much anguish and reflection I'm thinking I just need to take a step back for a while...the thought being that the frenzy will eventually die down, inventory will increase, and hopefully some of the people that "panic bought" a condo last year to escape the pandemic will get bored and want to move back to the city again. Prices may not drop down, because nobody likes selling "for less than what it's worth" and the new anchor is always the market peak, but if there's an inventory to choose from and less demand... maybe that'll make it easier for us to get a place?
Egocentric I know, but I can't help but feel like these people buying up these properties don't have the same skin in the town that I have...we've been going there for years (though don't own our own place obviously) and have a long-term appreciation for the town. Whereas these rich newcomers just flippantly bought a SHTF bugout condo with their pocket change. Somehow I'm more deserving since I've been saving up for so long. LOL. I'm crazy, I know.
When I bought my personal residence on Kauai in 2018, my co-worker and best friend on the island told me to keep it a secret. I tried my best, but the secret got out. Among some, but not all, I was now considered to be an evil rich person that was indirectly denying locals housing opportunities. Some people completely cut ties with me because I was no longer "one of them." At the time our household income was around 85K/year. I guess that makes me an evil rich person. What about my hard work and sacrifice over the past 20 years?
On a similar note, many people on Kauai had to execute a 5-10 year plan to make the move happen from the mainland to Kauai. When they ask me why I moved to Kauai, I told them that I got a job offer and moved 6 weeks later. Before that, I had no intentions of moving to Kauai. Because it was easy for me and difficult for them, I'm the bad guy.
As a human being, I can understand emotional disappointment. However, I really struggle hearing the entitlement stories of why someone deserves x, y or z that does not follow any objective logic.
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It also seems that people may be rushing to buy RE as a hedge against inflation. There are plenty of theories on how all the stimulus will affect the dollar going forward, but if you feel that the long term outlook of our currency is bad, what better way to short it than by taking out a 30 year mortgage? Especially if you can find something that cash flows...
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
The houses in my area of desire aren't quite that high, but still fairly pricy. After much anguish and reflection I'm thinking I just need to take a step back for a while...the thought being that the frenzy will eventually die down, inventory will increase, and hopefully some of the people that "panic bought" a condo last year to escape the pandemic will get bored and want to move back to the city again. Prices may not drop down, because nobody likes selling "for less than what it's worth" and the new anchor is always the market peak, but if there's an inventory to choose from and less demand... maybe that'll make it easier for us to get a place?
Egocentric I know, but I can't help but feel like these people buying up these properties don't have the same skin in the town that I have...we've been going there for years (though don't own our own place obviously) and have a long-term appreciation for the town. Whereas these rich newcomers just flippantly bought a SHTF bugout condo with their pocket change. Somehow I'm more deserving since I've been saving up for so long. LOL. I'm crazy, I know.
When I bought my personal residence on Kauai in 2018, my co-worker and best friend on the island told me to keep it a secret. I tried my best, but the secret got out. Among some, but not all, I was now considered to be an evil rich person that was indirectly denying locals housing opportunities. Some people completely cut ties with me because I was no longer "one of them." At the time our household income was around 85K/year. I guess that makes me an evil rich person. What about my hard work and sacrifice over the past 20 years?
On a similar note, many people on Kauai had to execute a 5-10 year plan to make the move happen from the mainland to Kauai. When they ask me why I moved to Kauai, I told them that I got a job offer and moved 6 weeks later. Before that, I had no intentions of moving to Kauai. Because it was easy for me and difficult for them, I'm the bad guy.
As a human being, I can understand emotional disappointment. However, I really struggle hearing the entitlement stories of why someone deserves x, y or z that does not follow any objective logic.
I see your point, but I don't think it is so much a feeling of entitlement (though maybe there is some of that), as frustration with the government manipulation of the system. Take forbearance as an example: many people definitely need it, and I think that it is a good thing for them to have access to it. But there are likely even more people taking it who don't need it, since no proof is required. I'm not saying I wouldn't do the same thing in their shoes, but the policy is causing a severe distortion in the housing market, and is (in my opinion) an injustice towards prospective first time homebuyers. Add to that the ongoing devaluation of the dollar, and those of us who have been saving for years to afford a downpayment are likely going to struggle with feeling resentment. I am trying to combat the feelings by doing what I can to increase my earning power, instead of focusing on what is out of my control.
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That happened to all the mountain/ski towns, especially ones (like here) that kept their schools open. You should feel lucky prices only went up 20% there, it was more like 50-100% here (from a baseline of a $1 million median house!)
It'll be interesting to see if all those folks stick around. I'd trade my extra million bucks of equity for them to leave, honestly.
-W
The houses in my area of desire aren't quite that high, but still fairly pricy. After much anguish and reflection I'm thinking I just need to take a step back for a while...the thought being that the frenzy will eventually die down, inventory will increase, and hopefully some of the people that "panic bought" a condo last year to escape the pandemic will get bored and want to move back to the city again. Prices may not drop down, because nobody likes selling "for less than what it's worth" and the new anchor is always the market peak, but if there's an inventory to choose from and less demand... maybe that'll make it easier for us to get a place?
Egocentric I know, but I can't help but feel like these people buying up these properties don't have the same skin in the town that I have...we've been going there for years (though don't own our own place obviously) and have a long-term appreciation for the town. Whereas these rich newcomers just flippantly bought a SHTF bugout condo with their pocket change. Somehow I'm more deserving since I've been saving up for so long. LOL. I'm crazy, I know.
When I bought my personal residence on Kauai in 2018, my co-worker and best friend on the island told me to keep it a secret. I tried my best, but the secret got out. Among some, but not all, I was now considered to be an evil rich person that was indirectly denying locals housing opportunities. Some people completely cut ties with me because I was no longer "one of them." At the time our household income was around 85K/year. I guess that makes me an evil rich person. What about my hard work and sacrifice over the past 20 years?
On a similar note, many people on Kauai had to execute a 5-10 year plan to make the move happen from the mainland to Kauai. When they ask me why I moved to Kauai, I told them that I got a job offer and moved 6 weeks later. Before that, I had no intentions of moving to Kauai. Because it was easy for me and difficult for them, I'm the bad guy.
As a human being, I can understand emotional disappointment. However, I really struggle hearing the entitlement stories of why someone deserves x, y or z that does not follow any objective logic.
I see your point, but I don't think it is so much a feeling of entitlement (though maybe there is some of that), as frustration with the government manipulation of the system. Take forbearance as an example: many people definitely need it, and I think that it is a good thing for them to have access to it. But there are likely even more people taking it who don't need it, since no proof is required. I'm not saying I wouldn't do the same thing in their shoes, but the policy is causing a severe distortion in the housing market, and is (in my opinion) an injustice towards prospective first time homebuyers. Add to that the ongoing devaluation of the dollar, and those of us who have been saving for years to afford a downpayment are likely going to struggle with feeling resentment. I am trying to combat the feelings by doing what I can to increase my earning power, instead of focusing on what is out of my control.
Tell me more about this forbearance...not a topic I'm familiar with.
For me, the fact that the my desired real estate market is on fire and everything is getting snapped up by wealthier people from HCOL area, thus driving up prices and taking inventory before anyone can even look at a property and digest it's candidature... for me it's entirely sour grapes because I wish I could do what they're doing when they buy a condo like I would buy a new push lawn mower...with seemingly little thought or consequence to my net worth. LOL but not really LOL, but LOL.
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I like these hosts' energy but I'm not satisfied with the depth of their arguments. As a young person it's really easy to get mad at the continually increasing difficulty of owning, but I would love to understand the facts a little bit better - is it really "BlackRock and Japan" buying 1 in 5 houses or is it more like individual rich(-ish) people looking to increase their wealth through landlording a couple of places that would otherwise be owner-occupied? I feel more strongly against the former than the latter.
I wonder all the time, if it's really Big Landlord© and/or wealth-obscuring schemes from Russia and China driving up real estate prices everywhere, won't those properties still eventually have to be sold? Older generations buying in cash still usually have to sell their old houses, and eventually they'll pass away and even more housing stock will be available, right? Or are already-rich families and companies just holding on to housing stock and converting it all to rentals to preserve wealth? If so, that sucks, but doesn't that mean rents have to stay low because there are too many rentals competing with each other for tenants? Or that construction supply for starter homes eventually has to catch up to ownership demand?
Unless some Housing Monopoly somehow comes into being, rent prices always have to at least stay competitive with purchase prices, right? Or is there already a Housing Monopoly that I don't know about? If more housing gets built, then rents will fall, and landlords will not want to hoard so many houses anymore because the math won't work out in their favor anymore, so house sale prices have to come down... right? Or will NIMBY zoning regulations become too strict in desirable cities and neighborhoods to reasonably increase nearby stock?
As for their "case study," in Silver Spring MD, I'm not swayed. It was probably a bunch of young DC families earning >$200K combined who had a >$100K DP saved up and were thrilled just at the possibility of owning a SFH in that area for below the national average home price that drove all those offers. That's my guess anyway. There's not a single listing on Zillow in Silver Spring for less than $300K right now, fixer-upper or not. It's a booming metro area anchored by highly stable government work so I'm not surprised investment banks got in on the action of just owning the land for that cheap, since they could afford to hold onto it and build something livable there once construction is cheaper.
Anyway, good grace those youtube comments are depressing.... I just have more questions now.
Very good analysis. I can't believe you are only 25 years old.
@clarkfan1979 I am just trying to convince myself that housing might eventually become a reasonably accessible investment for more people in my generation, LOL
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I like these hosts' energy but I'm not satisfied with the depth of their arguments. As a young person it's really easy to get mad at the continually increasing difficulty of owning, but I would love to understand the facts a little bit better - is it really "BlackRock and Japan" buying 1 in 5 houses or is it more like individual rich(-ish) people looking to increase their wealth through landlording a couple of places that would otherwise be owner-occupied? I feel more strongly against the former than the latter.
I wonder all the time, if it's really Big Landlord© and/or wealth-obscuring schemes from Russia and China driving up real estate prices everywhere, won't those properties still eventually have to be sold? Older generations buying in cash still usually have to sell their old houses, and eventually they'll pass away and even more housing stock will be available, right? Or are already-rich families and companies just holding on to housing stock and converting it all to rentals to preserve wealth? If so, that sucks, but doesn't that mean rents have to stay low because there are too many rentals competing with each other for tenants? Or that construction supply for starter homes eventually has to catch up to ownership demand?
Unless some Housing Monopoly somehow comes into being, rent prices always have to at least stay competitive with purchase prices, right? Or is there already a Housing Monopoly that I don't know about? If more housing gets built, then rents will fall, and landlords will not want to hoard so many houses anymore because the math won't work out in their favor anymore, so house sale prices have to come down... right? Or will NIMBY zoning regulations become too strict in desirable cities and neighborhoods to reasonably increase nearby stock?
As for their "case study," in Silver Spring MD, I'm not swayed. It was probably a bunch of young DC families earning >$200K combined who had a >$100K DP saved up and were thrilled just at the possibility of owning a SFH in that area for below the national average home price that drove all those offers. That's my guess anyway. There's not a single listing on Zillow in Silver Spring for less than $300K right now, fixer-upper or not. It's a booming metro area anchored by highly stable government work so I'm not surprised investment banks got in on the action of just owning the land for that cheap, since they could afford to hold onto it and build something livable there once construction is cheaper.
Anyway, good grace those youtube comments are depressing.... I just have more questions now.
Very good analysis. I can't believe you are only 25 years old.
@clarkfan1979 I am just trying to convince myself that housing might eventually become a reasonably accessible investment for more people in my generation, LOL
I'm seeing a lot of parents help out their Gen Y children. The house across the street was just bought by the parents of a 30 year old. I'm not sure if he's renting it (or "renting" it) from his parents or if it's an early inheritance.
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Its becoming harder and harder to understand this crazy real estate market. Most people with common sense would not be buying a house right now IMO. Whether it is the lack of housing, low interest rates or high rents or ???, it is hard to fathom what is driving this any further. But if you are looking to unload a property for whatever reason, it is a great time to get it sold.
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I live in a rural vacation area not too far from Seattle but not that close either. People come here for the slow pace and beauty.
Since Covid properties have been going into contract as fast as I have ever seen. Currently there is LOW inventory and no house on the market under $500K. Double wide trailers are selling for $400-500K
A 720 SQFT one bedroom just sold for $530K and I noticed another one-bedroom is in contract for 1.3 million(a nice house but......)
That's all dandy for the sellers and millionaires but for all the young people who grew up here who'd like to come back from college or wherever to raise families it's getting more and more impossible. It's weird. I can't force what the affects of this will be. It's always been hard to afford property but now it just seems downright impossible. I am just happy I got in while I could a few years back but feel for those that did not.
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It also seems that people may be rushing to buy RE as a hedge against inflation. There are plenty of theories on how all the stimulus will affect the dollar going forward, but if you feel that the long term outlook of our currency is bad, what better way to short it than by taking out a 30 year mortgage? Especially if you can find something that cash flows...
I teach at a community college without a salary schedule. Raises average 1% to 2% per year. However, to be competitive with hiring new faculty, starting salaries will keep pace with inflation (2.5%). It's not completing crazy for someone with 0 years of full-time teaching experience to get hired at a starting salary higher than someone who has been teaching at the college for 4-5 years. We call this "salary inversion" and it's not completely uncommon.
Because of my personal career choice, I have been buying RE as a hedge against inflation for the past 14 years. It's not possible for me to grind at work and get a raise. I get paid based on what the state budget allows. I work 1,000 hours/year at my day job and I put my extra time into my rental RE portfolio. I self-manage and look for ways to maximize rents and minimize costs.
Because my rentals do not meet the 1% rule, my path has been heavily criticized. I do not take it personally. They are arguing against "the path" or "overall strategy" not me. Rentals are not 100% passive and they are not for everyone. My rentals might require 100-150 hours/year of my time. However, I have the time available, so it's not a big deal. If you are making big bucks at a corporate job and already working 50 hours/week, the rental game might not be the best fit.
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Any RE investor did fantastic for the last decade+, even if they did nothing smart at all. I'm assuming the party is over going forward, but who knows. I personally would not buy a house right now if I was in the market. I definitely wouldn't buy an investment property (in fact I sold all mine a couple of years ago, which was apparently too soon, but whatever).
-W
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Any RE investor did fantastic for the last decade+, even if they did nothing smart at all. I'm assuming the party is over going forward, but who knows. I personally would not buy a house right now if I was in the market. I definitely wouldn't buy an investment property (in fact I sold all mine a couple of years ago, which was apparently too soon, but whatever).
-W
Woot! Congrats GG!
On the flip side, we just sold rental #2 (1 left to go) within 6 hours with multiple offers - and got a tad over asking price. Rental #1 hits the market June 1st.
-W
By a couple of years, you mean May 2015, right? That was 6 years ago. Prices in my markets have increased around 50% since May 2015. Using zillow data, the national average looks to be around 42%.
You made your money and got out when it was best for you. Nothing wrong with that. However, there are some young people that are really struggling with this current problem.
Will there be a correction at some point? Absolutely. However, I don't see housing prices going back to May 2015 levels, ever again.
My Kauai tenant closed on a home purchase last week. He paid 895K for a small house with a car-port. It was a good move for him. He borrowed money at 2.875% to buy it. He can comfortably afford the payments. His PITI is $3,200/month and he has $1255/month going toward principle. He was paying $2,900/month in rent, but I'm raising the rent to $3,200/month after he moves out. His mortgage payment is about the same as rent. His house is smaller than my rental, but it's closer to the beach.
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We'll either see a very long stagnation, or more run-up followed by a crash. May 2015 prices were already not "affordable" by historic standards.
Again, I wouldn't buy a house right now. Worst case scenario (my crystal ball is just as useless as anyone else's, of course) is that you'll pay the same inflation adjusted amount for most houses in the US in a decade as you would pay today. Best case scenario you'll pay quite a bit less.
But we could all be turning into Sydney, tool, I suppose, and housing could double again. It's a terrible drag on all the rest of the economy and keeps people moving to start a new job and such, so I sort of hope we see a decline in some form. Hopefully a gradual one where houses become boring again (remember that?) and just a place to live.
If there's a violent crash I'll buy some rentals again. Maybe. At this point I don't need the money for anything so maybe it's not worth the effort.
-W
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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
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A DC friend shared this reddit thread (https://www.reddit.com/r/washingtondc/comments/ms0xhr/feels_like_florida_in_the_2000s/?utm_medium=android_app&utm_source=share) today and I've been puzzling over these comments:
$750k @ 2.25% = $2867/mo
$650k @ 4% = $3103/mo
this is why people are paying so much more, when that rate goes back up it's going to kill prices, but you'll still be paying more per month
right, when the news keeps repeating "historically low rates" for months on end it sort of loses its impact. but even 4% is historically a really good rate. 2.25% is as someone else said essentially nothing when you adjust for inflation.
for fun assuming a $250k house in 1980 (which is probably going to be a somewhat nicer house than $741k today) gains 30% value per decade, mostly from inflation. There were several months in the early 80s where the rate was in the 17-18% range, which is closer to your default rate on a credit card when you miss a payment than to even regular credit card rates, let alone mortgages today.
Jan 1980 - $250k @ 12.9% = $2746/mo ($8,827/month adjusted for inflation!)
Jan 1990 - $325k @ 9.9% = $2828/mo ($5,731/month adjusted for inflation)
Jan 2000 - $422.5k @ 8.4% = $3219/mo ($4,951/month adjusted for inflation)
Jan 2010 - $549,250 @ 5.0% = $2948/mo ($3,581/month adjusted for inflation)
Jan 2020 - $714,025 @ 3.6% = $3246/mo ($3,322/month adjusted for inflation)
today - $741,667 @ 2.8% = $3047/mo
​
so even though our price of the house has tripled, adjusted for inflation we pay less per month than any other time in the past 40 years (except the recent dip that bottomed out 2.68% in Dec 2020)
There's more discussion there. My brain hurts! The lower prices make entry easier (lower down payments) but payments higher? I would have assumed making a higher DP on a cheaper property would lower the total owed amount enough to make up for increased interest, but I guess over such a long time scale that's not necessarily true
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A DC friend shared this reddit thread (https://www.reddit.com/r/washingtondc/comments/ms0xhr/feels_like_florida_in_the_2000s/?utm_medium=android_app&utm_source=share) today and I've been puzzling over these comments:
$750k @ 2.25% = $2867/mo
$650k @ 4% = $3103/mo
this is why people are paying so much more, when that rate goes back up it's going to kill prices, but you'll still be paying more per month
right, when the news keeps repeating "historically low rates" for months on end it sort of loses its impact. but even 4% is historically a really good rate. 2.25% is as someone else said essentially nothing when you adjust for inflation.
for fun assuming a $250k house in 1980 (which is probably going to be a somewhat nicer house than $741k today) gains 30% value per decade, mostly from inflation. There were several months in the early 80s where the rate was in the 17-18% range, which is closer to your default rate on a credit card when you miss a payment than to even regular credit card rates, let alone mortgages today.
Jan 1980 - $250k @ 12.9% = $2746/mo ($8,827/month adjusted for inflation!)
Jan 1990 - $325k @ 9.9% = $2828/mo ($5,731/month adjusted for inflation)
Jan 2000 - $422.5k @ 8.4% = $3219/mo ($4,951/month adjusted for inflation)
Jan 2010 - $549,250 @ 5.0% = $2948/mo ($3,581/month adjusted for inflation)
Jan 2020 - $714,025 @ 3.6% = $3246/mo ($3,322/month adjusted for inflation)
today - $741,667 @ 2.8% = $3047/mo
​
so even though our price of the house has tripled, adjusted for inflation we pay less per month than any other time in the past 40 years (except the recent dip that bottomed out 2.68% in Dec 2020)
There's more discussion there. My brain hurts! The lower prices make entry easier (lower down payments) but payments higher? I would have assumed making a higher DP on a cheaper property would lower the total owed amount enough to make up for increased interest, but I guess over such a long time scale that's not necessarily true
I can relate to these numbers. "High" sticker price, but low payment.
I moved to Pueblo West, CO in August 2019. We bought a home in November 2019 for 280K. Long term residents freaked out when they heard the price. I think the median price for the neighborhood was 250K at the time, but the house was 100% renovated from it's original build in 1998. Zero updates needed. It's all done. It now looks like a Joanna Gaines house. It's a ranch with a finished basement. It's 1250 sq. ft. upstairs 3 bed/2 bath. Downstairs it's another 1200 sq. ft. (2 bed/1 bath). Oversized garage (27 x 22) and a shed in the backyard. Yard is .28 acres. It's 5 bed/3 bath in total. I'm guessing the house is worth 310K to 325K.
We refinanced in December 2020. Our new loan is $227,600 at 2.875%. Our PITI right now is $1156/month with $400 going toward principle. Doesn't that seem crazy low to you? It does to me.
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Fun with graphs! I am in.
I believe we are talking about two different things.
1. Is the reason for high prices, I think this has been pretty well established (interest rates, pandemic demand, lack of supply, QE, etc)
2. Is how long the party will continue? My crystal ball is just as defective as everyone else, but nothing lasts forever.
Personally I like the median home price chart, kind of a bit eye opening to me. Add in historical interest rates and QE. Well I think you get the point.
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Jon Bon and others,
So inflation adjusted the median home prices are barely where they were in 2005-06? Plus now we have lowest interest rate ever? We have more money out there than ever and least amount of homes for sale than ever.
I don't see how this is a bubble.
But I do agree, nothing lasts forever.
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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).
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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).
My step-sister has her own real estate brokerage in Fort Myers, FL (Lee County). She is reporting 20% increases in sales price over the past year and about 80% of her deals are cash with no financing contingency.
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My step-sister has her own real estate brokerage in Fort Myers, FL (Lee County). She is reporting 20% increases in sales price over the past year and about 80% of her deals are cash with no financing contingency.
Sounds about right. The latest (February 2021) release from the NAR shows prices up 15.8% nationally, which includes plenty of places far less hot than Florida. https://www.nar.realtor/infographics/existing-home-sales-housing-snapshot I guess the part that surprises me is hearing 80% of purchases being all cash. Is that all the New Yorkers fleeing the city/state and selling their million dollar homes to buy half-million dollar homes outright in Florida?
We'll see what the next few years holds for housing. There's so many moving pieces that we can only guess at which variables turn out to be the most important variables determining if we continue to see aggressive price growth, leveling, or declining from here to, say, 2025. Or if looking versus other asset classes, it remains to be seen if real estate or equities provide the best returns over that same medium-term time period. There's been plenty of good cases made in this thread and elsewhere for all sorts of outcomes.
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My step-sister has her own real estate brokerage in Fort Myers, FL (Lee County). She is reporting 20% increases in sales price over the past year and about 80% of her deals are cash with no financing contingency.
Sounds about right. The latest (February 2021) release from the NAR shows prices up 15.8% nationally, which includes plenty of places far less hot than Florida. https://www.nar.realtor/infographics/existing-home-sales-housing-snapshot I guess the part that surprises me is hearing 80% of purchases being all cash. Is that all the New Yorkers fleeing the city/state and selling their million dollar homes to buy half-million dollar homes outright in Florida?
We'll see what the next few years holds for housing. There's so many moving pieces that we can only guess at which variables turn out to be the most important variables determining if we continue to see aggressive price growth, leveling, or declining from here to, say, 2025. Or if looking versus other asset classes, it remains to be seen if real estate or equities provide the best returns over that same medium-term time period. There's been plenty of good cases made in this thread and elsewhere for all sorts of outcomes.
My step-sister has always had a steady stream of retirees, mostly from the Midwest (Minnesota, Wisconsin, Illinois, Ohio). In my personal opinion, because of the pandemic she got 3 years worth of retirees calling her within 1 year. Anyone that had plans of retiring in Florida and was within 3 years of retirement decided to pull the trigger early.
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Jon Bon and others,
So inflation adjusted the median home prices are barely where they were in 2005-06? Plus now we have lowest interest rate ever? We have more money out there than ever and least amount of homes for sale than ever.
I don't see how this is a bubble.
But I do agree, nothing lasts forever.
Demand is a fickle as a teenager?
I mean in 2005 we had people sleeping in line to put deposits down on condos that were not even built yet right? That sounds like insane demand to me. But demand completely fell off a cliff in 2008. Its not like 10% of the population died or left the country or anything right?
At some point the only people that are going to be able to afford houses are the ones who already own houses you know? If I was a lifelong renter with 100k saved for a DP I'm not sure there is anything I would currently buy. However, I have several 100k in "equity" in my house, so if I wanted to trade up or down I could because I have a ton of unrealized capital gains sitting in my house. Wages did not move, but houses did. So unless you had a house that increased by 50% in 3 years how are you suppose to buy one when your wages might have gone up 15% in those 3 years.
So perhaps what ends this incredible run up is that we out of first time buyers and that starts to effect the 2nd home and forever homes downstream? Or perhaps inflation (I have heard of it, never seen it!) will actually start to show up at some point. The simple act of pushing interst rates into normal territory (5-6%) might knock home prices down very quickly.
I have no idea, and am not advocating for any of these. I just enjoy the exchange of ideas.
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New housing starts: Someone smarter than me tell me if we are underbuilt or overbuilt.
I am sure there is some ratio of population growth/Houses built.
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Our current building pace is about "normal" historically. It was well below normal for more than a decade. So we are underbuilt, and we should expect to see both SFH and multi starts up considerably for at least the next several years.
Calculated Risk does lots of good analysis of this sort of housing data if you're bored.
-W
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I agree Walt with the analysis. Also, thanks for putting me on to calculated risk. I enjoy his blog.
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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).
My advice - do NOT accept an offer before it goes live.
Your best option is to go "Active" for at least 3-4 days and wait for the offers to roll in. You will be more confident of getting the highest offer this way.
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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).
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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?
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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.
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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.
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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.
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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&
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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
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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?!
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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.
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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.
-W
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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
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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.
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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.
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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.
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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?
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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.
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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?
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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.
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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.
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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.
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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?
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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!
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Pittsburg? W/o traffic, of course.
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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.
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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.
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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?
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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/
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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.
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Demographics? The Gen Y cohort is at the "house buying" stage and they're a large group.
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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 (https://www.statista.com/statistics/241488/population-of-the-us-by-sex-and-age/), 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.
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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.
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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
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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.
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A big difference 2005-6 and today is that lending standards are far more strict.
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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.
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" 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.
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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.
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" 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.
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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.
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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!?
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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).
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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.
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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.
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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.
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What about credit for building new homes? I look at a lot of the current energy credits and new construction doesn't always qualify.
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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 🙄
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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)
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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.
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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? :(
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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
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No Maine, actually.
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Montana too.
https://nbcmontana.com/news/local/housing-crisis-leaves-out-montanas-middle
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I've heard Tahoe as well.
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And Idaho...
https://www.krem.com/article/money/economy/boomtown-inland-northwest/coeur-dalene-hottest-emerging-housing-market-wall-street-journal/293-2993a3d6-b5c6-4a7f-8e4c-7e20ba206582
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And Idaho...
https://www.krem.com/article/money/economy/boomtown-inland-northwest/coeur-dalene-hottest-emerging-housing-market-wall-street-journal/293-2993a3d6-b5c6-4a7f-8e4c-7e20ba206582
A coworker of mine, who lives in Coeur d'Alene, handed in his two-week notice last week. He's an engineer, and wants to dive into being a real estate agent.
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Highest over asking bid I've seen to date (it just closed today) is $177k over on a home listed at $1.03mm. it sold for over $1.2mm. this is a 4/3 2000sq ft sfh with a small yard and $200 HOA
Not as crazy as the bay area but starting to get that way pretty quickly
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A house I toured back in 2015 that struggled to sell for $600k (it was on the market for a while, over 30 days I believe) just went up for sale for $1.1M and was in contract in 3 days. I do wonder what it sold for.
I was struggling with maybe putting an offer in on a commercial building that was asking $225k. It sold for $365k! That's 60% over asking.
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Highest over asking bid I've seen to date (it just closed today) is $177k over on a home listed at $1.03mm. it sold for over $1.2mm. this is a 4/3 2000sq ft sfh with a small yard and $200 HOA
Not as crazy as the bay area but starting to get that way pretty quickly
We had one listed in our area-ish for $1mm. Sold for $1.3mm (AKA $300K over asking)!
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Highest over asking bid I've seen to date (it just closed today) is $177k over on a home listed at $1.03mm. it sold for over $1.2mm. this is a 4/3 2000sq ft sfh with a small yard and $200 HOA
Not as crazy as the bay area but starting to get that way pretty quickly
We had one listed in our area-ish for $1mm. Sold for $1.3mm (AKA $300K over asking)!
That's crazy - where are you located?
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House nearby, in a hot real estate market and on a lake had a Zestimate of $1.4m, listed for $1.8m and sold in 1 day for $2.1m with an all cash offer no contingencies or inspection. King County, WA. insane.
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House nearby, in a hot real estate market and on a lake had a Zestimate of $1.4m, listed for $1.8m and sold in 1 day for $2.1m with an all cash offer no contingencies or inspection. King County, WA. insane.
That's bay area crazy
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Is this madness ever going to end?
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Not as long as the acccumulation and inheritance of capital remains as lowly taxed as it is.
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I've heard that assisted living, nursing homes, etc., have a bad reputation right now because of COVID, and that elderly homeowners are staying in their SFR's in order to avoid moving to congregate living. This is a temporary plug on supply.
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Highest over asking bid I've seen to date (it just closed today) is $177k over on a home listed at $1.03mm. it sold for over $1.2mm. this is a 4/3 2000sq ft sfh with a small yard and $200 HOA
Not as crazy as the bay area but starting to get that way pretty quickly
We had one listed in our area-ish for $1mm. Sold for $1.3mm (AKA $300K over asking)!
That's crazy - where are you located?
DFW
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I am lucky enough to not be property hunting during this time. But what do you tell people(friends) who want to put roots down in a town they have lived in for years and are just now ready to buy?
Nobody can say with confidence this will pass. Maybe prices stay elevated, then what? For some, owning isn't just for ownership sake, its the ability to build a shop to be more creative or a home to raise a family.
So the idea of staying on the sidelines is just as scary as jumping into a crazy market because what if it never comes back and now was the time all along?
I really feel for young families who just want a place to call their own and put energy into, but simply cannot and I wonder if they ever will be able to at this rate.
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I am lucky enough to not be property hunting during this time. But what do you tell people(friends) who want to put roots down in a town they have lived in for years and are just now ready to buy?
Nobody can say with confidence this will pass. Maybe prices stay elevated, then what? For some, owning isn't just for ownership sake, its the ability to build a shop to be more creative or a home to raise a family.
So the idea of staying on the sidelines is just as scary as jumping into a crazy market because what if it never comes back and now was the time all along?
I really feel for young families who just want a place to call their own and put energy into, but simply cannot and I wonder if they ever will be able to at this rate.
I feel the same way :( We are in the process of putting an offer in on a place that we think we have a decent chance at. We've already put offers on a handful of other places and have gotten beat out every time. It's really dejecting and frustrating. Part of me says "why subject ourselves to this? Just wait it out" but there's this background FOMO and a lot of "what ifs?" that also creeps in... is it *really* going to get better anytime soon? Anytime soon might mean 2-3 years...maybe longer. All the while, we still have our lives to live and our kids are growing older. I know we're not supposed to compare ourselves to others but a majority of our friends (and in many cases where the husbands are younger than me) already have homes that they're settled into and their kids are happily able to play in their own yard and they all pretty much do what they want. And they've had this for years. So yea, FOMO is a real thing... on top of that, we were planning to move to this area for the past few years *before* COVID hit and the bum-rush of people buying in the suburbs (when they would never have considered this in many other situations) and driving the prices up sucks and feels unfair.
Anyway, we're in a position where we *can* buy - it will be expensive but we can do it. The thought of paying much more for a home than we should, on top of having to claw at it and compete for it with others, is pretty sucky but I guess that's what it takes :T
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The Montreal housing market is nuts. We love our neighbourhood but anything listed under the $2M mark is snapped up in a week or less. Taxes are about 11K/year, rent is 32K/year. Being close to retirement, we can't get our heads around buying something. Cash out investments, pay cash and have a lot less investments to live on? Or take a sky-high mortgage and spend (literally) the rest of our lives to pay it off? Or something in between?
The only thing to do is ... hope for more language strife and another anglo exodus. I am less than half-joking.
A sour-grapes take re. not buying: Contractors won't rip us off; no maintenance to do. We don't risk buying next to bad neighbours. We can spend all our $ before we die and enjoy ourselves more. $1.5M earning 5%/year more than covers the cost of rent. Yet still, there's something to be said about buying ...
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I agree prices sound totally crazy in many markets, but I can see how people can “afford” it even on normal salaries. Two people who plan to work for the rest of their lives and don’t really save anything have the vast majority of their net worth tied up in their homes. If they continue to pay the mortgage until their old age, then down size to something cheaper/smaller, then they will still be alright in the end. Assuming they will continue to work until they can’t, which is what most people here are trying to avoid.
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I agree prices sound totally crazy in many markets, but I can see how people can “afford” it even on normal salaries. Two people who plan to work for the rest of their lives and don’t really save anything have the vast majority of their net worth tied up in their homes. If they continue to pay the mortgage until their old age, then down size to something cheaper/smaller, then they will still be alright in the end. Assuming they will continue to work until they can’t, which is what most people here are trying to avoid.
Kind of like being a sharecropper.
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Available housing inventory has stopped falling. New home starts are rising. Not expecting significant price drops, but the rate of price increase may be slowing:
https://www.theatlantic.com/ideas/archive/2021/05/us-housing-market-records/619029/
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I am lucky enough to not be property hunting during this time. But what do you tell people(friends) who want to put roots down in a town they have lived in for years and are just now ready to buy?
Nobody can say with confidence this will pass. Maybe prices stay elevated, then what? For some, owning isn't just for ownership sake, its the ability to build a shop to be more creative or a home to raise a family.
So the idea of staying on the sidelines is just as scary as jumping into a crazy market because what if it never comes back and now was the time all along?
I really feel for young families who just want a place to call their own and put energy into, but simply cannot and I wonder if they ever will be able to at this rate.
I feel the same way :( We are in the process of putting an offer in on a place that we think we have a decent chance at. We've already put offers on a handful of other places and have gotten beat out every time. It's really dejecting and frustrating. Part of me says "why subject ourselves to this? Just wait it out" but there's this background FOMO and a lot of "what ifs?" that also creeps in... is it *really* going to get better anytime soon? Anytime soon might mean 2-3 years...maybe longer. All the while, we still have our lives to live and our kids are growing older. I know we're not supposed to compare ourselves to others but a majority of our friends (and in many cases where the husbands are younger than me) already have homes that they're settled into and their kids are happily able to play in their own yard and they all pretty much do what they want. And they've had this for years. So yea, FOMO is a real thing... on top of that, we were planning to move to this area for the past few years *before* COVID hit and the bum-rush of people buying in the suburbs (when they would never have considered this in many other situations) and driving the prices up sucks and feels unfair.
Anyway, we're in a position where we *can* buy - it will be expensive but we can do it. The thought of paying much more for a home than we should, on top of having to claw at it and compete for it with others, is pretty sucky but I guess that's what it takes :T
This echoes my sentiment completely.
At this point, you'd have to give me some seriously well put together arguments if you're trying to convince me that this market is going to drop within the next few years. At best, it's going to be flat from this point forward.
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Not as long as the acccumulation and inheritance of capital remains as lowly taxed as it is.
Citation, please.
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Not as long as the acccumulation and inheritance of capital remains as lowly taxed as it is.
Citation, please.
Try Piketty, Capital in the Twenty-First Century.
https://journals.sagepub.com/doi/full/10.1177/0308518X19873673
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I am lucky enough to not be property hunting during this time. But what do you tell people(friends) who want to put roots down in a town they have lived in for years and are just now ready to buy?
Nobody can say with confidence this will pass. Maybe prices stay elevated, then what? For some, owning isn't just for ownership sake, its the ability to build a shop to be more creative or a home to raise a family.
So the idea of staying on the sidelines is just as scary as jumping into a crazy market because what if it never comes back and now was the time all along?
I really feel for young families who just want a place to call their own and put energy into, but simply cannot and I wonder if they ever will be able to at this rate.
I feel the same way :( We are in the process of putting an offer in on a place that we think we have a decent chance at. We've already put offers on a handful of other places and have gotten beat out every time. It's really dejecting and frustrating. Part of me says "why subject ourselves to this? Just wait it out" but there's this background FOMO and a lot of "what ifs?" that also creeps in... is it *really* going to get better anytime soon? Anytime soon might mean 2-3 years...maybe longer. All the while, we still have our lives to live and our kids are growing older. I know we're not supposed to compare ourselves to others but a majority of our friends (and in many cases where the husbands are younger than me) already have homes that they're settled into and their kids are happily able to play in their own yard and they all pretty much do what they want. And they've had this for years. So yea, FOMO is a real thing... on top of that, we were planning to move to this area for the past few years *before* COVID hit and the bum-rush of people buying in the suburbs (when they would never have considered this in many other situations) and driving the prices up sucks and feels unfair.
Anyway, we're in a position where we *can* buy - it will be expensive but we can do it. The thought of paying much more for a home than we should, on top of having to claw at it and compete for it with others, is pretty sucky but I guess that's what it takes :T
This echoes my sentiment completely.
At this point, you'd have to give me some seriously well put together arguments if you're trying to convince me that this market is going to drop within the next few years. At best, it's going to be flat from this point forward.
Something else I've thought about is how many of us are often driven by value when making purchases, and buying a home is often not an exception in most instances. The problem, I feel, is that the current market has produced this narrative that "buying a home is invaluable" so the dilemma for a lot of people becomes "how do I placed value on something that's invaluable?"
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I am lucky enough to not be property hunting during this time. But what do you tell people(friends) who want to put roots down in a town they have lived in for years and are just now ready to buy?
Nobody can say with confidence this will pass. Maybe prices stay elevated, then what? For some, owning isn't just for ownership sake, its the ability to build a shop to be more creative or a home to raise a family.
So the idea of staying on the sidelines is just as scary as jumping into a crazy market because what if it never comes back and now was the time all along?
I really feel for young families who just want a place to call their own and put energy into, but simply cannot and I wonder if they ever will be able to at this rate.
I feel the same way :( We are in the process of putting an offer in on a place that we think we have a decent chance at. We've already put offers on a handful of other places and have gotten beat out every time. It's really dejecting and frustrating. Part of me says "why subject ourselves to this? Just wait it out" but there's this background FOMO and a lot of "what ifs?" that also creeps in... is it *really* going to get better anytime soon? Anytime soon might mean 2-3 years...maybe longer. All the while, we still have our lives to live and our kids are growing older. I know we're not supposed to compare ourselves to others but a majority of our friends (and in many cases where the husbands are younger than me) already have homes that they're settled into and their kids are happily able to play in their own yard and they all pretty much do what they want. And they've had this for years. So yea, FOMO is a real thing... on top of that, we were planning to move to this area for the past few years *before* COVID hit and the bum-rush of people buying in the suburbs (when they would never have considered this in many other situations) and driving the prices up sucks and feels unfair.
Anyway, we're in a position where we *can* buy - it will be expensive but we can do it. The thought of paying much more for a home than we should, on top of having to claw at it and compete for it with others, is pretty sucky but I guess that's what it takes :T
This echoes my sentiment completely.
At this point, you'd have to give me some seriously well put together arguments if you're trying to convince me that this market is going to drop within the next few years. At best, it's going to be flat from this point forward.
Something else I've thought about is how many of us are often driven by value when making purchases, and buying a home is often not an exception in most instances. The problem, I feel, is that the current market has produced this narrative that "buying a home is invaluable" so the dilemma for a lot of people becomes "how do I placed value on something that's invaluable?"
The FOMO factor isn't helping one bit, either. Like TP last March, the constant coverage just plants that seed in more and more people who might otherwise be comfortable where they are.
Not that reducing media coverage would have a discernable effect in the short term, but it's a pretty compelling tool to make people antsy to move.
I am aware that a lot of people have a genuine lack of space or a need to relocate but low rates, helicopter money, flexibility and FOMO are just creating a bonfire of housing interest.
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A 550 sqft one room, off-grid cabin just went into contract after 5 days on the market for $525,000 in the place I live.
It does not have an indoor toilet and has a dorm room style mini-fridge and would likely not be able to be financed conventionally. It's a pretty cool cabin, but my god this is bonkers.
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A 550 sqft one room, off-grid cabin just went into contract after 5 days on the market for $525,000 in the place I live.
It does not have an indoor toilet and has a dorm room style mini-fridge and would likely not be able to be financed conventionally. It's a pretty cool cabin, but my god this is bonkers.
lol that's nuts. what is the general location? West Coast? Midwest? East coast?
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A 550 sqft one room, off-grid cabin just went into contract after 5 days on the market for $525,000 in the place I live.
It does not have an indoor toilet and has a dorm room style mini-fridge and would likely not be able to be financed conventionally. It's a pretty cool cabin, but my god this is bonkers.
lol that's nuts. what is the general location? West Coast? Midwest? East coast?
PNW
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A 550 sqft one room, off-grid cabin just went into contract after 5 days on the market for $525,000 in the place I live.
It does not have an indoor toilet and has a dorm room style mini-fridge and would likely not be able to be financed conventionally. It's a pretty cool cabin, but my god this is bonkers.
lol that's nuts. what is the general location? West Coast? Midwest? East coast?
PNW
Is there any land with it?
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A 550 sqft one room, off-grid cabin just went into contract after 5 days on the market for $525,000 in the place I live.
It does not have an indoor toilet and has a dorm room style mini-fridge and would likely not be able to be financed conventionally. It's a pretty cool cabin, but my god this is bonkers.
lol that's nuts. what is the general location? West Coast? Midwest? East coast?
PNW
Is there any land with it?
Yes, It's on 5 wooded acres. Which sounds great but that is pretty standard around here. This is a rural vacation area so people come for some seclusion and privacy. And when I say woods i mean woods, there is not even a sunny clearing. Last I was aware there was not a permitted water source either.
It's just nuts. Over half a million dollars for someone's unpermitted art project in the woods.
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It seems like the only people actually able to buy houses in our area are offering all cash. Most houses are going to all cash offers with all contingencies waived. It's pretty nuts. But if they are paying all cash, why do the mortgage interest rates matter? Or are they just turning around and getting a mortgage after closing?
We have been lifelong renters but want to buy before RE, which is around the corner. (So we have jobs/income to get a mortgage, IDK, but I think I'm in stay invested and don't pay off the mortgage camp.) We've been open to buying for the last dozen years and just haven't pulled the trigger. We don't need to buy now and we aren't trying to time the market, we just want something suitable for our family. I almost feel like the price is secondary, because another $100K on a house price when you have the leverage of a mortgage and a $2M nest egg probably shouldn't really matter, right?
Would it be crazy to get a mortgage on my parents' paid off home and invest the cash so that when we want to buy, we will have locked in a low rate, but rates will have gone up so prices will be less out of whack? IDK, just thinking out loud. I know there is then the question of what to do with that cash and risk until we find a home we want to buy...
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It seems like the only people actually able to buy houses in our area are offering all cash. Most houses are going to all cash offers with all contingencies waived. It's pretty nuts. But if they are paying all cash, why do the mortgage interest rates matter? Or are they just turning around and getting a mortgage after closing?
Some probably do plan to finance after they’ve taken ownership as a way to not have their cash locked up. At these rates it’s not an unattractive idea.
Even if a lot of successful buyers are all cash, they’re still competing against people that need to finance and those buyers may bid up hoping to beat out cash offers. This of course means cash offers have to rise to at least be close to those planning to finance.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
It wouldn’t surprise me. There is certainly an incentive for dishonesty in such a competitive market. Another factor that may be increasing ability to make all cash offers in low and medium cost markets is the doubling of the cap for 401k loans last year.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
It wouldn’t surprise me. There is certainly an incentive for dishonesty in such a competitive market. Another factor that may be increasing ability to make all cash offers in low and medium cost markets is the doubling of the cap for 401k loans last year.
Well it's not really dishonesty in my view. They're just risking their earnest money deposit if they can't fulfill the contract. Of course, earnest money deposits are apparently huge these days, so I still don't understand it fully.
Back in The Old Days (tm), we put down earnest money when we wrote the contract. I learned recently from a new home buyer that nowadays they write the earnest money into the contract but the funds are only supplied if they win the bid. And I think I read here that now the approach is to offer a bunch, have them accept your offer out of the pile, then whittle it down with repairs ("Yeah, we'll pay you $400K for this, but our inspector says you need to replace the HVAC and roof.") after all the other bidders have wandered off to the next house up for auction sale.
Kids these days.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
It wouldn’t surprise me. There is certainly an incentive for dishonesty in such a competitive market. Another factor that may be increasing ability to make all cash offers in low and medium cost markets is the doubling of the cap for 401k loans last year.
Well it's not really dishonesty in my view. They're just risking their earnest money deposit if they can't fulfill the contract. Of course, earnest money deposits are apparently huge these days, so I still don't understand it fully.
Back in The Old Days (tm), we put down earnest money when we wrote the contract. I learned recently from a new home buyer that nowadays they write the earnest money into the contract but the funds are only supplied if they win the bid. And I think I read here that now the approach is to offer a bunch, have them accept your offer out of the pile, then whittle it down with repairs ("Yeah, we'll pay you $400K for this, but our inspector says you need to replace the HVAC and roof.") after all the other bidders have wandered off to the next house up for auction sale.
Kids these days.
Sellers can, and should, require evidence of funds from prospective buyers before accepting an offer. Things such bank account and or brokerage statements. And if my memory serves correctly, these are sent along with a signed statement or some such thing. I suppose there's nothing preventing a buyer from forging these statements and lying, but this would cause a host of legal issues for them.
ETA: RE whittling down the price over repairs: If the sellers didn't adequately disclose major issues then that's a problem of their own creation.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
It wouldn’t surprise me. There is certainly an incentive for dishonesty in such a competitive market. Another factor that may be increasing ability to make all cash offers in low and medium cost markets is the doubling of the cap for 401k loans last year.
Well it's not really dishonesty in my view. They're just risking their earnest money deposit if they can't fulfill the contract. Of course, earnest money deposits are apparently huge these days, so I still don't understand it fully.
Back in The Old Days (tm), we put down earnest money when we wrote the contract. I learned recently from a new home buyer that nowadays they write the earnest money into the contract but the funds are only supplied if they win the bid. And I think I read here that now the approach is to offer a bunch, have them accept your offer out of the pile, then whittle it down with repairs ("Yeah, we'll pay you $400K for this, but our inspector says you need to replace the HVAC and roof.") after all the other bidders have wandered off to the next house up for auction sale.
Kids these days.
Sellers can, and should, require evidence of funds from prospective buyers before accepting an offer. Things such bank account and or brokerage statements. And if my memory serves correctly, these are sent along with a signed statement or some such thing. I suppose there's nothing preventing a buyer from forging these statements and lying, but this would cause a host of legal issues for them.
ETA: RE whittling down the price over repairs: If the sellers didn't adequately disclose major issues then that's a problem of their own creation.
I'm learning it all depends on where (and when) you live. Real estate transaction practices vary all over the map.
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I'm learning it all depends on where (and when) you live. Real estate transaction practices vary all over the map.
Very true.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
My parents are buying a house, in cash. They had to provide proof of funds along with the offer. They also got proof of funds with the cash offer when they sold their house. Based on that, in MI and IN, cash offer = have cash.
For people trying to buy - parents have an accepted offer on a house. Full asking price, not over. It can happen.
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
It wouldn’t surprise me. There is certainly an incentive for dishonesty in such a competitive market. Another factor that may be increasing ability to make all cash offers in low and medium cost markets is the doubling of the cap for 401k loans last year.
Well it's not really dishonesty in my view. They're just risking their earnest money deposit if they can't fulfill the contract. Of course, earnest money deposits are apparently huge these days, so I still don't understand it fully.
Back in The Old Days (tm), we put down earnest money when we wrote the contract. I learned recently from a new home buyer that nowadays they write the earnest money into the contract but the funds are only supplied if they win the bid. And I think I read here that now the approach is to offer a bunch, have them accept your offer out of the pile, then whittle it down with repairs ("Yeah, we'll pay you $400K for this, but our inspector says you need to replace the HVAC and roof.") after all the other bidders have wandered off to the next house up for auction sale.
Kids these days.
Sellers can, and should, require evidence of funds from prospective buyers before accepting an offer. Things such bank account and or brokerage statements. And if my memory serves correctly, these are sent along with a signed statement or some such thing. I suppose there's nothing preventing a buyer from forging these statements and lying, but this would cause a host of legal issues for them.
ETA: RE whittling down the price over repairs: If the sellers didn't adequately disclose major issues then that's a problem of their own creation.
I consider it dishonest to make an offer that’s all cash when you have to finance to get the funds. And yes, sellers should require proof of funds before accepting a cash offer. We did.
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Maybe waiving the financing contingency is what people mean when they say cash offers? I could certainly supply bank and brokerage statements and waive the financing contingency if it would make my offer more attractive. The tax hit on liquidating investments sounds yucky to me. So I still would want to get a mortgage, though, but does the buyer care if they get their $?
Also, re: sellers not disclosing major issues... People are waiving all sorts of contingencies, inspections, etc. It's crazy around here. I guess they figure if they are going to offer $100K over asking already, why bother haggling over a $10K repair? IDK. Like I said, it's crazy.
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I have been posting my rentals on zillow. I'm pretty sure they sell your information. I'm now getting hammered with phone calls from investors wanting to buy my houses.
Zillow does provide some analytics (number of clicks). For my Fort Collins rental, I got around 300 clicks on day 1. For Kauai, about the same. For Fort Myers, FL, I got 1,500 clicks on day 1. I got about 50 requests for a showing in about 3 days.
I think this cycle is different. In 2006, unqualified buyers were buying houses and apartment complexes were experiencing vacancy. During this cycle it seems like rentals are tight as well, at least for my areas.
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I have been posting my rentals on zillow. I'm pretty sure they sell your information. I'm now getting hammered with phone calls from investors wanting to buy my houses.
Zillow does provide some analytics (number of clicks). For my Fort Collins rental, I got around 300 clicks on day 1. For Kauai, about the same. For Fort Myers, FL, I got 1,500 clicks on day 1. I got about 50 requests for a showing in about 3 days.
I think this cycle is different. In 2006, unqualified buyers were buying houses and apartment complexes were experiencing vacancy. During this cycle it seems like rentals are tight as well, at least for my areas.
Everybody sells your information. I used my desktop to look up an acronym for a very specialized insurance company I wanted to recommend to someone on the forum. Now I get bright orange ads for them every time I open my phone. Grr...
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@catccc and @JetBlast , I am familiar with the nuts and bolts of real estate transactions in Illinois and Ohio. An all cash offer does not mean the buyer is REQUIRED to use their cash, merely to demonstrate they have cash resources to push the deal through to close -regardless of financing. It is common for cash offers, in the end, to close with financing (i.e. a mortgage). There is nothing shady about it. The buyer is giving the seller assurances that the closing will not be imperiled or delayed by the mechanics of obtaining a mortgage.
If the cash buyer is seeking financing that doesn't materialize by the agreed upon closing date, they must perform using their cash. They are free to acquire financing after close in this case. Again, there is nothing shady or dishonest about it.
I hope I am not over-explaining or misconstruing the point in question. There is terminology in near every domain that is misleading to outsiders. A family member of mine worked for years in real estate, becoming so familiar with their domain they lost touch with how an outsider/their client might interpret "all cash offer". This family member was blind sided by the seller's disappointment at the closing table. They thought they were getting a duffel bag full of cash!
-RLT
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@catccc and @JetBlast , I am familiar with the nuts and bolts of real estate transactions in Illinois and Ohio. An all cash offer does not mean the buyer is REQUIRED to use their cash, merely to demonstrate they have cash resources to push the deal through to close -regardless of financing. It is common for cash offers, in the end, to close with financing (i.e. a mortgage). There is nothing shady about it. The buyer is giving the seller assurances that the closing will not be imperiled or delayed by the mechanics of obtaining a mortgage.
If the cash buyer is seeking financing that doesn't materialize by the agreed upon closing date, they must perform using their cash. They are free to acquire financing after close in this case. Again, there is nothing shady or dishonest about it.
I hope I am not over-explaining or misconstruing the point in question. There is terminology in near every domain that is misleading to outsiders. A family member of mine worked for years in real estate, becoming so familiar with their domain they lost touch with how an outsider/their client might interpret "all cash offer". This family member was blind sided by the seller's disappointment at the closing table. They thought they were getting a duffel bag full of cash!
-RLT
Thanks for your input! I thought this was the case. And I don't think it is shady at all - you could do all cash, you say so. And LOL at a duffel bag full of cash!!
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@catccc and @JetBlast , I am familiar with the nuts and bolts of real estate transactions in Illinois and Ohio. An all cash offer does not mean the buyer is REQUIRED to use their cash, merely to demonstrate they have cash resources to push the deal through to close -regardless of financing. It is common for cash offers, in the end, to close with financing (i.e. a mortgage). There is nothing shady about it. The buyer is giving the seller assurances that the closing will not be imperiled or delayed by the mechanics of obtaining a mortgage.
If the cash buyer is seeking financing that doesn't materialize by the agreed upon closing date, they must perform using their cash. They are free to acquire financing after close in this case. Again, there is nothing shady or dishonest about it.
I hope I am not over-explaining or misconstruing the point in question. There is terminology in near every domain that is misleading to outsiders. A family member of mine worked for years in real estate, becoming so familiar with their domain they lost touch with how an outsider/their client might interpret "all cash offer". This family member was blind sided by the seller's disappointment at the closing table. They thought they were getting a duffel bag full of cash!
-RLT
I don't think it's shady if the buyer is willing and able to fulfill with cash if they can't arrange financing within the agreed timeline.
If they are not willing or able and intend to just forfeit their earnest money in the event they can't get the financing done, I do think that's shady. While it abides by the letter of the contract, I'm sure most buyers would rather just get the deal done and may have selected a different offer if they knew the sale was actually contingent on financing. People don't list their home for sale in hopes of collecting earnest money on deals that fall through.
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Back in The Old Days (tm), we put down earnest money when we wrote the contract. I learned recently from a new home buyer that nowadays they write the earnest money into the contract but the funds are only supplied if they win the bid.
I bought my first house in the early 2000s. I've now bought property in multiple US states. I've never paid earnest money up front. I've always paid it only if and after I won the bid.
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We made an offer on a home earlier today - the home is listed just under $900 and we offered $925k w/ no inspection or appraisal contingency 30+ days rentback and $3k escalation. Seller's agent says there are offers of $950k on the table supposedly... in the same neighborhood there's a home down the street that's 700sq ft bigger (they added on an extra living area) and on a slightly bigger lot but backing a street and they just lowered the price to $950k. I'm scratching my head that anyone would offer more on this place than they would on the other place. They're furnished/appointed the same IMO. But I guess people are willing to pay the same price or more for less square footage and the 'privilege' of maintaining a pool for the sake of not having to live backed up to a street (I think it can get busy on that street but I don't think it's as bad as other streets around here). The last home that sold in the neighborhood is 1800sq ft (also added a living area/room on) and the lot is even bigger than both aforementioned homes (no pool). That one sold for $960k. I viewed it and it wasn't that nicely appointed IMO. So apparently the interior square footage means very little to the people outrageously overbidding on these homes...
EDIT: after thinking about it more, we may have to classify ourselves as "people outrageously overbidding on these homes" as we're now considering just revising and increasing our offer to $950-$960k :(
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BTW: What do you guys think of this? https://www.youtube.com/watch?v=VCHS4IW0LBo
In summary, his opinion (based on data he is looking at and explaining through the video) is that it's not institutional investors (Blackrock, etc) who are buying up all the homes. It's small time investors who are essentially speculating and driving home prices up... presumably the data he's gathering is excluding homeowners with one primary home. It is interesting that the activity of the institutional investors appears to have declined though.
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BTW: What do you guys think of this? https://www.youtube.com/watch?v=VCHS4IW0LBo
In summary, his opinion (based on data he is looking at and explaining through the video) is that it's not institutional investors (Blackrock, etc) who are buying up all the homes. It's small time investors who are essentially speculating and driving home prices up... presumably the data he's gathering is excluding homeowners with one primary home. It is interesting that the activity of the institutional investors appears to have declined though.
An interesting analysis - I fully agree that there is a glaring hole in his narrative: what's the gross # of homes that are being sold to investors vs. owner-occupied buyers? And what are those numbers relative to the total housing market activity per year?
As for why institutional investors are sitting on the sidelines? Well, Blackrock increased their investment at least $0.5Bn YOY and Blackrock isn't the only game in town, so I'd hardly call that sitting on the sidelines. The other two dedicated REITs are probably waiting because they can wait - it's so much more difficult to buy a home right now and I'm sure they don't want to overbid on every property & waste time losing out on homes.
I disagree with his confidence that this is a bubble though - part of the challenge is that there is little inventory, and when you can't buy another home after you sell your primary then what's the incentive to sell?
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I know there are a lot of people in America with a lot of money, but I don't think there are *that* many.
I think what's happening is that people making "cash" offers are essentially just waiving the financing contingency. They're taking on the risk that they can't get a mortgage in order to win the bidding wars.
Desperate times and all that.
More and more I think this market is nuts and am going to advise my son to bide his time.
It wouldn’t surprise me. There is certainly an incentive for dishonesty in such a competitive market. Another factor that may be increasing ability to make all cash offers in low and medium cost markets is the doubling of the cap for 401k loans last year.
Well it's not really dishonesty in my view. They're just risking their earnest money deposit if they can't fulfill the contract. Of course, earnest money deposits are apparently huge these days, so I still don't understand it fully.
Back in The Old Days (tm), we put down earnest money when we wrote the contract. I learned recently from a new home buyer that nowadays they write the earnest money into the contract but the funds are only supplied if they win the bid. And I think I read here that now the approach is to offer a bunch, have them accept your offer out of the pile, then whittle it down with repairs ("Yeah, we'll pay you $400K for this, but our inspector says you need to replace the HVAC and roof.") after all the other bidders have wandered off to the next house up for auction sale.
Kids these days.
Sellers can, and should, require evidence of funds from prospective buyers before accepting an offer. Things such bank account and or brokerage statements. And if my memory serves correctly, these are sent along with a signed statement or some such thing. I suppose there's nothing preventing a buyer from forging these statements and lying, but this would cause a host of legal issues for them.
ETA: RE whittling down the price over repairs: If the sellers didn't adequately disclose major issues then that's a problem of their own creation.
We bought a condo for cash last fall and were required to furnish a brokerage account statement.
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We made an offer and waived the mortgage contingency, but intended to get a mortgage after putting 20% down, about $100K. We listed assets to show about $400K, and the seller asked us to disclose additional assets to prove we could pay cash if our financing fell through. So we disclosed those assets. Still getting a mortgage. I wonder if the offer we beat will be told they lost to an all cash offer?
Earnest money was paid a day after the agreement of sale was signed.
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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.
To close the loop on this, we decided to stick to the plan of putting the house on the market and then reviewing all offers after the deadline to submit. We had 15 showings in like 3 days and ended up with 4 offers. One was at list price of $795k, one was at $810k, one was at $820k, no loan or appraisal contingency, the last one was the initial $830k willing to pay $35k over appraisal. We took the $820k offer. It was "same as cash" and they did show they COULD pay cash but ended up getting a loan. There was an appraisal but I don't know what it came in at because it didn't matter. We thought hard about going with the $830k offer but a very similar stats house (same floor plan, with pool, nicely updated) down the street had sold about a month before ours for $775k (they sold off market) and it was risky (to us) to rely on the appraisal for the final sale price so we went with the sure thing. Inspections came up with nothing we didn't disclose so the rest of the transaction went smoothly. The thing that surprised me was they cut down the inspection period to 5 days (standard is like 14?) and had a 21 day close. I was impressed that it all got done in that time frame. They also gave us 2 weeks free rent back, but we only needed one.
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Ok so the most popular/common rhetoric and explanation I keep hearing about why the current housing market frenzy *isn't* a bubble is probably this:
"lending standards are wayyy stricter than they were in 2008, and supply is constrained while demand is pent up, so we can't possibly be in a bubble"
Given that bubbles are more or less discovered in hindsight though, are there any other factors here we might be overlooking? Not trying to promote bearism here, just asking an honest question...hahahaha
Was just reading through this, https://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp, and it seems regardless of specific conditions that we'd *think* would prevent a bubble from happening again, the general 'tried and true' rule of thumb is that there are still 5 stages of a bubble. Period. And it's hard to deny that the current housing market is feeling a lot like a bubble...
1. Displacement
A displacement occurs when investors get enamored by a new paradigm, such as an innovative new technology or interest rates that are historically low. A classic example of displacement is the decline in the federal funds rate from 6.5% in July 2000, to 1.2% in June 2003.2 Over this three-year period, the interest rate on 30-year fixed-rate mortgages fell by 2.5 percentage points to a then-historic low of 5.23%, sowing the seeds for the subsequent housing bubble.3
2. Boom
Prices rise slowly at first, following a displacement, but then gain momentum as more and more participants enter the market, setting the stage for the boom phase. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be a once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of investors and traders into the fold.
3. Euphoria
During this phase, caution is thrown to the wind, as asset prices skyrocket. Valuations reach extreme levels during this phase as new valuation measures and metrics are touted to justify the relentless rise, and the "greater fool" theory—the idea that no matter how prices go, there will always be a market of buyers willing to pay more—plays out everywhere.
For example, at the peak of the Japanese real estate bubble in 1989, prime office space in Tokyo sold for as much as $139,000 per square foot.4 Similarly, at the height of the Internet bubble in March 2000, the combined value of all technology stocks on the Nasdaq was higher than the GDP of most nations.5
4. Profit-Taking
In this phase, the smart money—heeding the warning signs that the bubble is about at its bursting point—starts selling positions and taking profits. But estimating the exact time when a bubble is due to collapse can be a difficult exercise because, as economist John Maynard Keynes put it, "the markets can stay irrational longer than you can stay solvent."
In Aug. 2007, for example, French bank BNP Paribas halted withdrawals from three investment funds with substantial exposure to U.S. subprime mortgages because it could not value their holdings.6 While this development initially rattled financial markets, it was brushed aside over the next couple of months, as global equity markets reached new highs. In retrospect, Paribas had the right idea, and this relatively minor event was indeed a warning sign of the turbulent times to come.
5. Panic
It only takes a relatively minor event to prick a bubble, but once it is pricked, the bubble cannot inflate again. In the panic stage, asset prices reverse course and descend as rapidly as they had ascended. Investors and speculators, faced with margin calls and plunging values of their holdings, now want to liquidate at any price. As supply overwhelms demand, asset prices slide sharply.
One of the most vivid examples of global panic in financial markets occurred in Oct. 2008, weeks after Lehman Brothers declared bankruptcy and Fannie Mae, Freddie Mac, and AIG almost collapsed. The S&P 500 plunged almost 17% that month, its ninth-worst monthly performance.7
I guess I should ask it another way:
Historically, are there any other instances similar (not the same) to the current housing market frenzy, where it *seemed* as though there was a crazy bubble but in reality it didn't turn out to be one at all?
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Ok so the most popular/common rhetoric and explanation I keep hearing about why the current housing market frenzy *isn't* a bubble is probably this:
"lending standards are wayyy stricter than they were in 2008, and supply is constrained while demand is pent up, so we can't possibly be in a bubble"
Given that bubbles are more or less discovered in hindsight though, are there any other factors here we might be overlooking? Not trying to promote bearism here, just asking an honest question...hahahaha
Sure. Inflation really takes hold, and the Fed raises rates to 5+%. Sales volume would decline massively, and there would be some price discounting on what was sold. Toss in a correction in the job market and equities simultaneously, and we could see lots of defaults and a price correction of 30-40% again. But that hypothetical scenario is basically that all the bad things happen at once and there's no effective policy action in response.
I'd guess that the far more likely outcome is that rates rise moderately and everyone is locked into their 2-3% mortgages forever, with both the housing and job markets becoming sclerotic as everyone is frozen in place.
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Ok so the most popular/common rhetoric and explanation I keep hearing about why the current housing market frenzy *isn't* a bubble is probably this:
"lending standards are wayyy stricter than they were in 2008, and supply is constrained while demand is pent up, so we can't possibly be in a bubble"
Given that bubbles are more or less discovered in hindsight though, are there any other factors here we might be overlooking? Not trying to promote bearism here, just asking an honest question...hahahaha
Sure. Inflation really takes hold, and the Fed raises rates to 5+%. Sales volume would decline massively, and there would be some price discounting on what was sold. Toss in a correction in the job market and equities simultaneously, and we could see lots of defaults and a price correction of 30-40% again. But that hypothetical scenario is basically that all the bad things happen at once and there's no effective policy action in response.
I'd guess that the far more likely outcome is that rates rise moderately and everyone is locked into their 2-3% mortgages forever, with both the housing and job markets becoming sclerotic as everyone is frozen in place.
This is what one realtor I was talking to was thinking: we're going the route of Europe where everyone is going to end up owning the same home(s) for potentially generations... does this translate to "buy the best you can afford NOW" then ?
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does this translate to "buy the best you can afford NOW" then ?
I don't think so.
Don't forget that the possibility of a major price correction isn't zero, and even in the best case scenario you're locking yourself into a location (and high maintenance, maybe taxes) for the long haul.
It might translate into buying the housing you need for the next 10-20 years rather than the next 5 years, though. However, you could likely build an addition or remodel if your needs outgrow whatever you buy now.
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does this translate to "buy the best you can afford NOW" then ?
I don't think so.
Don't forget that the possibility of a major price correction isn't zero, and even in the best case scenario you're locking yourself into a location (and high maintenance, maybe taxes) for the long haul.
It might translate into buying the housing you need for the next 10-20 years rather than the next 5 years, though. However, you could likely build an addition or remodel if your needs outgrow whatever you buy now.
True... might be good to continue waiting while looking for a "deal" relatively speaking. I was thinking about the possibility of thinking more of it as buying the lot for the land, and making the additions later if, say, we were to buy a 3/2 that happens to be on a larger lot with space to expand. The problem is the thought of how disruptive an extension like that could potentially be but I think it depends on the current layout and if there would be room for an "easy add" versus one that would be more prone to being super disruptive. By "disruptive" I mean: "not being able to use the kitchen for a number of weeks" or "having to move out and live elsewhere for an extended period of time" or something along those lines. Of course, I don't know enough about major home remodels/extensions to know if those are real issues. The closest thing I have heard/seen is the big remodel my brother/SIL did on their place where they basically gutted their entire living/dining/kitchen area downstairs and re-did a lot (opened up walls, other repairs, etc) but also had all the windows replaced in their home (which also involved upstairs). It was highly disruptive and they had to live there while the work was being done. Their kids are older in middle school and late elementary though, which perhaps in their case allows for more 'flexibility' - there's no way I'd want to deal with things like that in our current stage of life with a 5 and 4 year old and considering trying to expand the family to add one more...
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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.
To close the loop on this, we decided to stick to the plan of putting the house on the market and then reviewing all offers after the deadline to submit. We had 15 showings in like 3 days and ended up with 4 offers. One was at list price of $795k, one was at $810k, one was at $820k, no loan or appraisal contingency, the last one was the initial $830k willing to pay $35k over appraisal. We took the $820k offer. It was "same as cash" and they did show they COULD pay cash but ended up getting a loan. There was an appraisal but I don't know what it came in at because it didn't matter. We thought hard about going with the $830k offer but a very similar stats house (same floor plan, with pool, nicely updated) down the street had sold about a month before ours for $775k (they sold off market) and it was risky (to us) to rely on the appraisal for the final sale price so we went with the sure thing. Inspections came up with nothing we didn't disclose so the rest of the transaction went smoothly. The thing that surprised me was they cut down the inspection period to 5 days (standard is like 14?) and had a 21 day close. I was impressed that it all got done in that time frame. They also gave us 2 weeks free rent back, but we only needed one.
Aaah, I love a happy ending!
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Ok so the most popular/common rhetoric and explanation I keep hearing about why the current housing market frenzy *isn't* a bubble is probably this:
"lending standards are wayyy stricter than they were in 2008, and supply is constrained while demand is pent up, so we can't possibly be in a bubble"
Given that bubbles are more or less discovered in hindsight though, are there any other factors here we might be overlooking? Not trying to promote bearism here, just asking an honest question...hahahaha
I think we are in boom, but certainly not a bubble. Neither reason has to do with lending standards.
1) Fundamentals: TINA. Rents are also setting all time highs again and again (certainly locally). The cost to build a new house is definitely at an all time high. House building has not been matching demand for new houses over the last 15 years. There is just not enough of anything right now including rentals. Until TIAA, the high prices are justified. Once TIAA we might say there was a bubble, but I think I would still disagree. A boom/bust cycle is not the same as a bubble because it is driven by fundamentals, whereas bubbles are built on nothing but hot air. There might be hot air somewhere in the system, but it is not originating from the real estate sector.
2) There is no euphoria. Home buyers hate that they are buying homes at these prices. I know many people looking for homes and nobody likes the situation. They are definitely not buying multiple houses or more than they need, they are trying to buy anything. People are not buying with the intention of flipping to an even greater fool, they are buying to owner occupy. All the price support in the market is at the bottom, generally (locally at least) looking at houses a $100K more will get a lot more house for the money ... that is why we got a large house and rent out part of it: it gives a monthly payment lower than literally any SFR available, and much lower than the average apartment even after costs, but we actually have a really nice home.
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Ok so the most popular/common rhetoric and explanation I keep hearing about why the current housing market frenzy *isn't* a bubble is probably this:
"lending standards are wayyy stricter than they were in 2008, and supply is constrained while demand is pent up, so we can't possibly be in a bubble"
Given that bubbles are more or less discovered in hindsight though, are there any other factors here we might be overlooking? Not trying to promote bearism here, just asking an honest question...hahahaha
I think we are in boom, but certainly not a bubble. Neither reason has to do with lending standards.
1) Fundamentals: TINA. Rents are also setting all time highs again and again (certainly locally). The cost to build a new house is definitely at an all time high. House building has not been matching demand for new houses over the last 15 years. There is just not enough of anything right now including rentals. Until TIAA, the high prices are justified. Once TIAA we might say there was a bubble, but I think I would still disagree. A boom/bust cycle is not the same as a bubble because it is driven by fundamentals, whereas bubbles are built on nothing but hot air. There might be hot air somewhere in the system, but it is not originating from the real estate sector.
2) There is no euphoria. Home buyers hate that they are buying homes at these prices. I know many people looking for homes and nobody likes the situation. They are definitely not buying multiple houses or more than they need, they are trying to buy anything. People are not buying with the intention of flipping to an even greater fool, they are buying to owner occupy. All the price support in the market is at the bottom, generally (locally at least) looking at houses a $100K more will get a lot more house for the money ... that is why we got a large house and rent out part of it: it gives a monthly payment lower than literally any SFR available, and much lower than the average apartment even after costs, but we actually have a really nice home.
What is "TINA/TIAA"?
How would you explain the differentiation between a boom/bust vs bubble (not in terms of what it's driven or caused by but in terms of what the outcome [or fallout] is)?
In terms of euphoria, I would agree that buyers aren't happy about all this. But sellers sure are... but if anything, buyers are acting in pretty *extreme* desperation aren't they? Waiving all contingencies w/ cash offers then over half the time regretting those decisions?
Buying the larger house and renting out a room or two isn't such a bad idea... that might work for us if prices weren't so ridiculous right now.
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There Is No Alternative
When everyone is certain that we're not in a bubble is a sign that we might be in a bubble. "Fundamentals" change.
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There Is No Alternative
When everyone is certain that we're not in a bubble is a sign that we might be in a bubble. "Fundamentals" change.
I thought I read somewhere (or several places) that bubbles are the kinds of things that you find out about in hindsight when it's already too late. Sounds about right to me... I guess we won't know till we know haha
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What is "TINA/TIAA"?
How would you explain the differentiation between a boom/bust vs bubble (not in terms of what it's driven or caused by but in terms of what the outcome [or fallout] is)?
In terms of euphoria, I would agree that buyers aren't happy about all this. But sellers sure are... but if anything, buyers are acting in pretty *extreme* desperation aren't they? Waiving all contingencies w/ cash offers then over half the time regretting those decisions?
Buying the larger house and renting out a room or two isn't such a bad idea... that might work for us if prices weren't so ridiculous right now.
As above, There Is No Alternative, and There Is An Alternative (last one maybe not common usage) (sorry debated spelling that out but it didn't seem as fun)
In terms of effect, there is really no difference between a bust and a bubble pop. Presumably a bubble pops at a higher point, but the other half of the equation is how far it falls after. Given that a market can lose 20% as many times as it wants from either situation, there isn't much difference in practice.
There are some ways around a bubble. In the Tech Bubble while Schiller PE went to 44 and trailing 10-year inflation was under 3% US long term government bonds were yielding like 7%. Value stocks had been crushed for a decade. So there were great alternatives.
In the Housing Bubble, rents were quite reasonable the whole time, so using an early rent-vs-buy calculator before making a choice would have given much more satisfactory results than buying. So would have not buying more house than you could afford.
In the Nifty Fifty craze it is not so clear what the alternative would have been, as bonds and stocks were priced somewhat but not extremely high, and crashed together. Other options were not investable, or the average investor would not have been able to access any data to inform their choice. Harder to say that was a bubble, outside I guess the nifty fifty stocks.
IMO if sellers are happy and buyers are reluctant, that indicates downward pressure on prices by the participants. A bubble would be the other way around. Which is why I think prices are likely high for more fundamental reasons.
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This is what one realtor I was talking to was thinking: we're going the route of Europe where everyone is going to end up owning the same home(s) for potentially generations...
I'm not sure Europe would be the closest analogy for an America that ends up fixed in place.
We already have whole swaths of rural and especially Rust Belt America that's locked into their current location because of low housing costs. It's a bad dynamic because as the distribution of economic opportunity changes, cheap housing acts as an anchor to keep people from moving to it. As people are downwardly mobile, the political pressure mounts to lower property taxes so that people can hold onto their housing. The downward spiral continues as all manner of public services are then gutted, reducing human capital, social capital, and any attractiveness to outside investment.
A world where people who are just trying to hang onto the status quo is nasty, nasty, and I'm concerned these low mortgage rates could be the basis for it spreading to previously-dynamic areas of the country.
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I don't understand how cheap housing is a factor there. To me it would seem that the lack of job prospects and lack of education would be the key factors. Not the affordable housing.
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I don't understand how cheap housing is a factor there. To me it would seem that the lack of job prospects and lack of education would be the key factors. Not the affordable housing.
But cheap housing keeps many from even being able to try their luck in a more economically viable area. A family of 4 making $46k a year in West Virginia with a house 'worth' $120k and/or renting a house at $800 a month just simply won't have the resources to move to another higher cost of living area, much less to do so without a job prospect lined up.
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I think that recent studies have shown that there is no longer a wage advantage to lower income workers in high COL areas, though. Housing expenses eat that up now.
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I don't understand how cheap housing is a factor there. To me it would seem that the lack of job prospects and lack of education would be the key factors. Not the affordable housing.
Like @chemistk says, cheap housing and a lack of opportunity have a reciprocal relationship.
@Cranky Yes, I've seen some of those studies. And the extension of them is that even if someone is able to make some absolute economic gains by moving to a more dynamic area of the country, they almost certainly lose relative social standing. $30k might make you middle class in a small midwestern town, but moving to a city and making $40k moves you from rural middle class (a status you probably don't think about) to urban underclass (a status you will definitely notice). The incentives all point toward doubling down on your existing location.
My experience growing up in a tiny isolated town and then living in four or five of them for work is that the dynamic described above has gotten more and more toxic/hopeless over time as their political and social identities have now been defined in opposition to the parts of the country with opportunity. It's not just that the grandparents and parents are stuck, it's that many of the kids don't move toward opportunity, and instead replicate their parents' lives with even fewer prospects.
I'm of the general position that social dynamism and churn are net positive forces, and that the alternative to mass movement and a willingness to change to find a better future is an embittered stasis that we see in lots of left behind areas of the country now. A mortgage climate that heavily incentivizes staying put over moving seems likely to slow the movement of people. That movement has been slowing for generations, and I'm not sure that as a society we can handle much less movement.
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While I agree dynamism is good for the economy and the country, I don't think moving from a LCOL to a HCOL area to chase opportunity is necessarily the answer. One must have marketable skills to take advantage of the opportunity a HCOL area offers for this to make sense.
I grew up in an very HCOL area and I saw the opposite problem: lower income folks fighting paycheck to paycheck just to make ends meet, falling further behind as rent increases continued to outpace pay raises. As an example, Costco pays about the same regardless of location. Why pay San Jose, CA rent prices when you can make about the same in Reno and buy a house in nearby Sparks, NV for less than $400k?
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I remain unconvinced that concentrating population and economic development in a few very expensive areas generates an improved quality of life for many people. I think we need to encourage more regional development.
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Warning: public whining ahead.
So I've previously posted on this thread about how we've been saving up for a condo in a resort town in the White Mountains (New Hampshire). Beyond our retirement and non-retirement accounts we've been saving over the years to get a place of our own.
So this little town, pre-pandemic, would have condos sitting on the market for long periods. They would eventually sell but it wasn't a "hot" market per se. So then covid hits and the prices are just completely haywire and inventory is very low...the previously slow-moving inventory disappeared (bought up I presume) and over the last 12+ months as inventory slowly trickles in it gets snapped up right away.
Some examples:
Condos that used to sit on the market for $180,000K are now priced at $336K...and they will likely sell for that. A house that sold for around $450K in 2019 is now on the market for $1.2 million (probably won't sell for that, but the realtors are willing to try). Condos that previously sold for $215K are now selling for $330K.
Super frustrating...just when we were getting within range of buying our own, the prices go up. Will this ever end? Will prices ever go back down again? Or are they now anchored at the elevated price range?
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Someone fatfingered something, but I still thought this was pretty funny:
https://www.zillow.com/homedetails/10-Boulder-Creek-Ct-Danville-CA-94526/18438839_zpid/
Only $959,950,000 - a "Fabulous opportunity in Brookview!" that even has LVP flooring and plantation shutters!
-W
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Warning: public whining ahead.
So I've previously posted on this thread about how we've been saving up for a condo in a resort town in the White Mountains (New Hampshire). Beyond our retirement and non-retirement accounts we've been saving over the years to get a place of our own.
So this little town, pre-pandemic, would have condos sitting on the market for long periods. They would eventually sell but it wasn't a "hot" market per se. So then covid hits and the prices are just completely haywire and inventory is very low...the previously slow-moving inventory disappeared (bought up I presume) and over the last 12+ months as inventory slowly trickles in it gets snapped up right away.
Some examples:
Condos that used to sit on the market for $180,000K are now priced at $336K...and they will likely sell for that. A house that sold for around $450K in 2019 is now on the market for $1.2 million (probably won't sell for that, but the realtors are willing to try). Condos that previously sold for $215K are now selling for $330K.
Super frustrating...just when we were getting within range of buying our own, the prices go up. Will this ever end? Will prices ever go back down again? Or are they now anchored at the elevated price range?
I am also looking to buy a vacation rental in my regional mountains of Colorado. I'm looking in Park County about 30 minutes south of Breckenridge. A house that sold for 489K in September 2020 is now for sale for 699K with no improvements. Based on comps, it should sell for 699K, maybe more. This equates to a price increase of 43% over the past 12 months for the same exact thing with no improvements.
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We're under contract right now for a 2/1 condo for around $550k (which is a fairly cheap unit for my area). Am I worried about prices dropping? Yeah, definitely. I don't know if a 2008-style drop seems likely, if only on the principle that every downturn tends to have its own reasons and patterns, but I could definitely see a long, slow drift downwards happening if interest rates go way up or there's a recession that hits white-collar workers hard.
On the other hand, our PITI + condo fees for a nice 2 bedroom is $100 more per month than we were paying for a crappy 1 bedroom rental. So our worst case is less "we're underwater and the loan is eating us alive" and more "we can't afford to move for 5 or 10 years but we're in a decent situation."
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Someone fatfingered something, but I still thought this was pretty funny:
https://www.zillow.com/homedetails/10-Boulder-Creek-Ct-Danville-CA-94526/18438839_zpid/
Only $959,950,000 - a "Fabulous opportunity in Brookview!" that even has LVP flooring and plantation shutters!
-W
Lol, the "mistake" was fixed the next day. it sold for $1,075,000 and closed in less than 2 weeks, which means cash buyer. It's a townhouse, with $350/month HOA fees. Sadly, its also relatively affordable for the area.