Author Topic: Will we get a RE crash?  (Read 11815 times)

waltworks

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Re: Will we get a RE crash?
« Reply #100 on: June 09, 2020, 10:04:53 AM »
That's a good point. It's always hard to step back from a good story and look at the fundamental reality. A few hysterical articles about Marin and Westchester county aren't necessarily indicative of anything.

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HPstache

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Re: Will we get a RE crash?
« Reply #101 on: June 09, 2020, 10:13:55 AM »
I think we may be somewhat over thinking things wondering if the increase is housing prices is the result of people are fleeing cities for the suburbs in the era of covid.

All things being equal, a drop in interest rates on mortgages will tend to increase the price of houses because a lot of home buyers are shopping based on the monthly mortgage payment they can afford rather than the actual price of the house.

The 30 year fixed rate mortgage declined from about 3.75% this past winter to about 3.2% today, which means the same person with the same finances can pay about 7% more for the same house today than they could a few months ago and have the same monthly payment.

Is there a quick an easy formula you used to figure out that a drop of about 0.55% in interest rates results in being able to afford about 7% more house?  Sounds like an equation I want rattling around in my head to impress someone some day...

maizefolk

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Re: Will we get a RE crash?
« Reply #102 on: June 09, 2020, 11:28:51 AM »
I think we may be somewhat over thinking things wondering if the increase is housing prices is the result of people are fleeing cities for the suburbs in the era of covid.

All things being equal, a drop in interest rates on mortgages will tend to increase the price of houses because a lot of home buyers are shopping based on the monthly mortgage payment they can afford rather than the actual price of the house.

The 30 year fixed rate mortgage declined from about 3.75% this past winter to about 3.2% today, which means the same person with the same finances can pay about 7% more for the same house today than they could a few months ago and have the same monthly payment.

Is there a quick an easy formula you used to figure out that a drop of about 0.55% in interest rates results in being able to afford about 7% more house?  Sounds like an equation I want rattling around in my head to impress someone some day...

There certainly is one*, but no I was plugging dollar values into a mortgage payment calculator to get the payments to match up.

*Keeping in mind the same drop in percentage points has a different effect on the total purchase price buyers can offer with the same payment when mortgage rates are higher than when rates are lower to begin. If mortgage rates went from 3.2% to 0% that'd be enough for people to offer 55% more with the same monthly payment. Going from 10% to 7.8% is only good for letting people offer 22% more while keeping the monthly payment constant.

HPstache

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Re: Will we get a RE crash?
« Reply #103 on: June 09, 2020, 12:29:05 PM »
I think we may be somewhat over thinking things wondering if the increase is housing prices is the result of people are fleeing cities for the suburbs in the era of covid.

All things being equal, a drop in interest rates on mortgages will tend to increase the price of houses because a lot of home buyers are shopping based on the monthly mortgage payment they can afford rather than the actual price of the house.

The 30 year fixed rate mortgage declined from about 3.75% this past winter to about 3.2% today, which means the same person with the same finances can pay about 7% more for the same house today than they could a few months ago and have the same monthly payment.

Is there a quick an easy formula you used to figure out that a drop of about 0.55% in interest rates results in being able to afford about 7% more house?  Sounds like an equation I want rattling around in my head to impress someone some day...

There certainly is one*, but no I was plugging dollar values into a mortgage payment calculator to get the payments to match up.

*Keeping in mind the same drop in percentage points has a different effect on the total purchase price buyers can offer with the same payment when mortgage rates are higher than when rates are lower to begin. If mortgage rates went from 3.2% to 0% that'd be enough for people to offer 55% more with the same monthly payment. Going from 10% to 7.8% is only good for letting people offer 22% more while keeping the monthly payment constant.

What about 10% to 6.8% though :-P

FINate

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Re: Will we get a RE crash?
« Reply #104 on: June 09, 2020, 12:30:20 PM »
Low interest rates are probably the biggest driver for recent overall average price increases. This is why I've never understood the logic of rushing to buy when interest rates are low. One is better off buying when rates are high, which pushes down prices, and then refinancing when/if they move lower.

But this doesn't explain regional differences, such as the article I linked above. Home prices and rent have both decreased in SF, whereas they've increased in outlying areas.

maizefolk

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Re: Will we get a RE crash?
« Reply #105 on: June 09, 2020, 12:40:30 PM »
I think we may be somewhat over thinking things wondering if the increase is housing prices is the result of people are fleeing cities for the suburbs in the era of covid.

All things being equal, a drop in interest rates on mortgages will tend to increase the price of houses because a lot of home buyers are shopping based on the monthly mortgage payment they can afford rather than the actual price of the house.

The 30 year fixed rate mortgage declined from about 3.75% this past winter to about 3.2% today, which means the same person with the same finances can pay about 7% more for the same house today than they could a few months ago and have the same monthly payment.

Is there a quick an easy formula you used to figure out that a drop of about 0.55% in interest rates results in being able to afford about 7% more house?  Sounds like an equation I want rattling around in my head to impress someone some day...

There certainly is one*, but no I was plugging dollar values into a mortgage payment calculator to get the payments to match up.

*Keeping in mind the same drop in percentage points has a different effect on the total purchase price buyers can offer with the same payment when mortgage rates are higher than when rates are lower to begin. If mortgage rates went from 3.2% to 0% that'd be enough for people to offer 55% more with the same monthly payment. Going from 10% to 7.8% is only good for letting people offer 22% more while keeping the monthly payment constant.

What about 10% to 6.8% though :-P

Oh wow. Well thanks for catching that. This is why I should leave math entirely to excel or python. Can't even do simple subtraction in my head.

Anyway, it'd be paying 35% more for the same house with the same payment between 10% and 6.8%

HPstache

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Re: Will we get a RE crash?
« Reply #106 on: June 09, 2020, 12:55:57 PM »
I think we may be somewhat over thinking things wondering if the increase is housing prices is the result of people are fleeing cities for the suburbs in the era of covid.

All things being equal, a drop in interest rates on mortgages will tend to increase the price of houses because a lot of home buyers are shopping based on the monthly mortgage payment they can afford rather than the actual price of the house.

The 30 year fixed rate mortgage declined from about 3.75% this past winter to about 3.2% today, which means the same person with the same finances can pay about 7% more for the same house today than they could a few months ago and have the same monthly payment.

Is there a quick an easy formula you used to figure out that a drop of about 0.55% in interest rates results in being able to afford about 7% more house?  Sounds like an equation I want rattling around in my head to impress someone some day...

There certainly is one*, but no I was plugging dollar values into a mortgage payment calculator to get the payments to match up.

*Keeping in mind the same drop in percentage points has a different effect on the total purchase price buyers can offer with the same payment when mortgage rates are higher than when rates are lower to begin. If mortgage rates went from 3.2% to 0% that'd be enough for people to offer 55% more with the same monthly payment. Going from 10% to 7.8% is only good for letting people offer 22% more while keeping the monthly payment constant.

What about 10% to 6.8% though :-P

Oh wow. Well thanks for catching that. This is why I should leave math entirely to excel or python. Can't even do simple subtraction in my head.

Anyway, it'd be paying 35% more for the same house with the same payment between 10% and 6.8%

 I was just kidding with you.  I was thinking maybe you were originally thinking 3.2% to 1.0% and 10.0% to 7.8% which would be a more likely scenario.  Anyway, I set up a little spreadsheet that calculates the increase in house you can afford based on the starting interest rate and it varies by each drop of 0.125%... because you are right, it totally depends on your starting interest rate.  You would need more of a table or a graph with multiple slopes to effectively be able to tell someone "off the cuff" how much more house could be afforded if the interest rate dropped by X%.
« Last Edit: June 09, 2020, 01:00:56 PM by v8rx7guy »

marble_faun

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Re: Will we get a RE crash?
« Reply #107 on: June 09, 2020, 01:35:14 PM »
Well, after months of covid-related house-shopping difficulties, we finally put in an offer on a fixer-upper home in the more rural area where we want to live.

It turned out we were one of three offers the seller had.  Ours was declined.

We tried to pivot to our second-choice home, which had been on the market for only a few days.  But while we had been putting together our offer for the first one, the second got snapped up.

There aren't any other houses that we really like now available in our target destination.  They are all gone.

I feel frustrated and am honestly grieving, because I loved that first house so much and had been imagining our lives there.  Trying to stay positive but it's wild how quickly things are moving.

betsbillabong

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Re: Will we get a RE crash?
« Reply #108 on: June 09, 2020, 01:55:58 PM »
@marble_faun I hear this so much. I put it an offer yesterday that was 60K (sixty thousand dollars!!!!!) above the listing price. With only heath and safety specified for the inspection. And willing to pay up to 20K of appraisal difference. On a house listed at 482K.

I will know in ten minutes, but the listing agent is not returning my agent's call. I am so sad. It was the perfect house for my daughter to grow up in, and the only one I've ever seen with woods bordering open space out here in Colorado.

Will be really curious what the winning offer will be. So hard to figure out anything stronger than what I offered, unless it's cash (which I suspect).


marble_faun

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Re: Will we get a RE crash?
« Reply #109 on: June 10, 2020, 08:30:59 AM »
@marble_faun I hear this so much. I put it an offer yesterday that was 60K (sixty thousand dollars!!!!!) above the listing price. With only heath and safety specified for the inspection. And willing to pay up to 20K of appraisal difference. On a house listed at 482K.

I will know in ten minutes, but the listing agent is not returning my agent's call. I am so sad. It was the perfect house for my daughter to grow up in, and the only one I've ever seen with woods bordering open space out here in Colorado.

Will be really curious what the winning offer will be. So hard to figure out anything stronger than what I offered, unless it's cash (which I suspect).

My sympathies.  It's so sad to have a dream slip through your fingers like that.

The house we wanted was also a really special property.  A quaint old cottage with a rustic, secluded feeling, with access to nature but located only a few minutes away from a small city. It felt like the best of all worlds.

The sale seems to have gone through very quickly, so I think the buyer might have waived the inspection contingency.  And that suggests to me that the buyer might be tearing down the cottage.  The area is starting to sprout McMansions, and now maybe there will be another one. 

The idea that this cute little cottage might be destroyed adds to my overall sense of tragedy.  We would have carefully restored it for another generation.

We'd been waiting to buy a house for years, and I'm so bummed how covid has ruined the process for us, from the difficulties in visiting properties, to this explosion of demand that we now have to contend with. 

We have a baby who needs a home to grow up in, and a lease ending soon, and I'm so stressed and crestfallen about the whole thing.

betsbillabong

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Re: Will we get a RE crash?
« Reply #110 on: June 10, 2020, 09:53:59 AM »
@marble_faun I'm so sorry. In my case, it turns out the buyer waived all risk of low appraisal. Arggh.

I'm in a similar position, being kicked out of faculty housing on 8/31, need a place for my daughter and I to live in an preferably before I start teaching again on 8/15. It's so hard to buy a place right now, bidding wars everywhere.

It sounds like our properties were similar. Where are you? I'm in Boulder County.

Good luck!

marble_faun

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Re: Will we get a RE crash?
« Reply #111 on: June 10, 2020, 01:00:34 PM »
@betsbillabong : I'm in the northeast!  Competing with other people migrating out of cities in the region.

KarefulKactus15

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Re: Will we get a RE crash?
« Reply #112 on: June 10, 2020, 05:24:12 PM »
The entire real estate market in PA was frozen until recently, and now prices are shooting up. A bad time to be buying, which is unfortunately exactly what I need to do as I'm looking to buy my first home.

It feels like a bubble, but when it will pop is anyone's guess.

I feel like its a bubble also. It will pop when people can no longer afford the housing being sold.  As long as interest is low the price will remain high. As long as credit is easy the demand will stay strong.

When people cant afford the houses the price will come down. I thought Covid would do it but everything was artificially kept up. Will be interesting after the election.

Additionally alot of people needed to move but couldnt for covid.  They are relocating with a family and summer is really the logical time to move. It appears inventory is low because sellers are sitting on stuff but the spring / summer buyers pretty much need to buy regardless of price. If they can afford it, they will buy it.

December 2020 - That should be a good time to buy a house this year...  (Lets see if this post ages well) I imagine all this new construction inventory will hit the market and the sellers who are skiddish now may come around.

evme

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Re: Will we get a RE crash?
« Reply #113 on: June 10, 2020, 06:30:52 PM »
@marble_faun I hear this so much. I put it an offer yesterday that was 60K (sixty thousand dollars!!!!!) above the listing price. With only heath and safety specified for the inspection. And willing to pay up to 20K of appraisal difference. On a house listed at 482K.

I will know in ten minutes, but the listing agent is not returning my agent's call. I am so sad. It was the perfect house for my daughter to grow up in, and the only one I've ever seen with woods bordering open space out here in Colorado.

Will be really curious what the winning offer will be. So hard to figure out anything stronger than what I offered, unless it's cash (which I suspect).

My sympathies.  It's so sad to have a dream slip through your fingers like that.

The house we wanted was also a really special property.  A quaint old cottage with a rustic, secluded feeling, with access to nature but located only a few minutes away from a small city. It felt like the best of all worlds.

The sale seems to have gone through very quickly, so I think the buyer might have waived the inspection contingency.  And that suggests to me that the buyer might be tearing down the cottage.  The area is starting to sprout McMansions, and now maybe there will be another one. 

The idea that this cute little cottage might be destroyed adds to my overall sense of tragedy.  We would have carefully restored it for another generation.

We'd been waiting to buy a house for years, and I'm so bummed how covid has ruined the process for us, from the difficulties in visiting properties, to this explosion of demand that we now have to contend with. 

We have a baby who needs a home to grow up in, and a lease ending soon, and I'm so stressed and crestfallen about the whole thing.

So sorry to hear this. I hate when perfectly good older homes are destroyed so someone can put up some monstrosity on the land. Capitalism at its finest.

the_fixer

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Re: Will we get a RE crash?
« Reply #114 on: June 11, 2020, 09:05:11 AM »
The entire real estate market in PA was frozen until recently, and now prices are shooting up. A bad time to be buying, which is unfortunately exactly what I need to do as I'm looking to buy my first home.

It feels like a bubble, but when it will pop is anyone's guess.

I feel like its a bubble also. It will pop when people can no longer afford the housing being sold.  As long as interest is low the price will remain high. As long as credit is easy the demand will stay strong.

When people cant afford the houses the price will come down. I thought Covid would do it but everything was artificially kept up. Will be interesting after the election.

Additionally alot of people needed to move but couldnt for covid.  They are relocating with a family and summer is really the logical time to move. It appears inventory is low because sellers are sitting on stuff but the spring / summer buyers pretty much need to buy regardless of price. If they can afford it, they will buy it.

December 2020 - That should be a good time to buy a house this year...  (Lets see if this post ages well) I imagine all this new construction inventory will hit the market and the sellers who are skiddish now may come around.
That would be good timing for me, just finished filling up my 401k for the year and now everything is going towards building up a fund so we are ready to pull the trigger if something interesting in a beach town, island or mountain town pops up at a good price.

Mainly watching for a condo or small house that was a short term rental and someone needs to unload it.

I need to start watching how Air BnB bookings are doing to see if my assumptions match reality.


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waltworks

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Re: Will we get a RE crash?
« Reply #115 on: June 11, 2020, 09:50:16 AM »
Interestingly, I spoke with a friend yesterday who is going to come visit us with his family for a mountain bike trip soon - he's very concerned to maintain social distance, though, so he wanted to know about AirBnBs in the area of our house (which is easy since there are a ton).

He specifically wanted to avoid hotels, when I suggested that option.

In the end he decided he'd camp in our yard, lol.

If everyone else thinks the same way, nightly rentals might skyrocket instead of crash. Maybe I should list our yard/trampoline (who hasn't wanted to sleep on a trampoline?) on AirBnB...

-W


the_fixer

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Re: Will we get a RE crash?
« Reply #116 on: June 11, 2020, 03:13:13 PM »
I spent a few hours today looking at past places we have stayed for the Christmas time frame and they are listed for about a 1/2 - 1/3 of the price we paid last time and there are a bunch available where normally they would be pretty sparse by now.

Everywhere except Costa Rica, the prices seem about the same there as last year still plenty of inventory though. My friend told me today that they are not allowing anyone in from outside the country to come in including him until late June / early July and he is married to a Costa Rican so maybe they are just not adjusting things yet.

- On a tangent this morning they had an air bnb employee of some kind in the news talking about how hosts were being given tips on how to clean and a quiz to certify them or the option to have a 72 hour between rental buffer.

Honestly I would trust the buffer the most, then a hotel and then the bnb cleaning crew. If I could get the before at a bnb or hotel I would feel comfortable making plans and taking some trips within driving distance.


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marble_faun

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Re: Will we get a RE crash?
« Reply #117 on: June 13, 2020, 10:10:21 AM »
We've switched from trying to identify our "dream home" to just trying to find A Home.  Someday maybe we will buy an interesting old house on an acre or more of land, but for now we just need a roof over our heads.

Our expectations are lower, so we figured we'd have no problem.  But no. 

We are discovering that even the lower-end, starter-home market in our target area is intense. Suburban ranch houses are flying like hot cakes, after only a day or two on the market, at significantly higher prices than their neighbors went for in past years. 

We identified a small house that looked pleasant enough but was totally unremarkable.  Our realtor warned us we might need to make an offer above asking price to have a shot at it.

UghhHHHHHH.

waltworks

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Re: Will we get a RE crash?
« Reply #118 on: June 13, 2020, 12:06:10 PM »
I don't know how sexy it is, given that it's usually littered with stuffed animals and dolls in various states of undress/disrepair. There's a sprinkler underneath it you can turn on for a reverse-shower, though!

I would love to see the reaction from the HOA if we listed the trampoline on AirBnB. Might be worth it just for the lulz.

I think we were both wrong about AirBnBs, at least in resort areas. But we'll see for real come ski season. Rob Katz did a... not impressive interview talking about Vail's plans for next year which amounted to, basically: "Well, you know, less skiers, gotta social distance, you know, but, maybe 50% less skiers, you know, we'll still be profitable."

I think a lot of the businesses and AirBnBs might beg to differ on the 50% cut in visitors still being profitable, but what do I know.

-W



canadianrose

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Re: Will we get a RE crash?
« Reply #119 on: June 13, 2020, 12:56:43 PM »
I live outside a rural hamlet in the interior of BC, Canada. On the shore of a lake so it is a semi-popular summer tourist area, with no stoplights. The local gas station is also the post office, liquor store, hardware store, grocery, and deli. Primary school only, and after grade 5 the kids are bussed an hour to the next big town. Closest clinic is 20 minutes away, closest hospital with an emergency room is an hour away, depending on traffic. My realtor friend is super busy, she's back up to fully staffed.

I suspect there is a lot of interest from folks who have realised that they can work from home, as long as the internet is good. Also, there could be some folks returning after leaving for the big cities for job opportunities that are not available here, but with internet and work from home, they can come back. I hope we don't get a fallout next year when people new to the area suddenly realise that off-season, this place is a ghost town, and the winter roads are hair-raising when you don't know how to drive them.

FINate

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Re: Will we get a RE crash?
« Reply #120 on: June 15, 2020, 11:27:08 AM »
The plural of anecdote is not data, but interesting stories nonetheless...

https://www.sfgate.com/sf-locals/slideshow/I-m-finally-leaving-Stories-of-Bay-Area-203670.php