Are we in a housing bubble?

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SuperTrooper87
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Are we in a housing bubble?

Post by SuperTrooper87 »

Currently, in rural New England, homes are and have been selling far above their appraised value. Homes that are “worth” 200k are getting same day as listing offers of 240-270k cash, no inspection, sight unseen.

I know other areas are seeing similar situations as there is a mass exodus out of the urban areas (NY, CA, etc).

In the midst of this influx of urban money to the rural area, locals are trying to compete with homeownership. I lately heard a story from a coworker who has been trying to desperately buy a home before their rental lease ends. (Not being renewed as they plan to sell). Several times they offered on homes, 15%+ over asking, just to lose. He mentioned just offering more next time and using his ability as a first time homebuyer to put 3% down. This is when alarms went off in my head.

This seems eerily reminiscent of 2008. People taking loans to the max, no equity in homes, no EF, etc. What’s this kids chance of refinancing in 5 years because he has to buy a new roof or furnace because he overpaid on the house and has no cash? Well now home prices potentially sunk and his 250k home is really only worth 160k. He and others are screwed.

Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
dboeger1
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Re: Are we in a housing bubble?

Post by dboeger1 »

There are bubble elements, but conditions are also vastly different than those leading up to the housing crisis:

1) Supply is generally much lower relative to demand than it was back then.

2) Construction and material costs are much higher now, reducing the ability of builders to quickly and efficiently meet new demand.


3) Equity of home owners going into 2020 was generally very high across the board. I don't know if that has changed much in the last year, but if we are in a housing bubble, it's likely to still be in the early innings, as lower equity levels tend to increase risk. Recent buyers putting less down may have low equity levels going into the deals, but that doesn't seem to be true of home owners across the board. Many bought homes for incredibly low prices in years like 2012 and will likely be well off for years to come because of it.

4) A lot of foreign money has come into the housing market since the last crash, particularly in coastal metro areas, and the large millennial generation is buying homes, so there are significant demographic tailwinds in the buyer pool.

5) Rates are very low which helps support higher prices. Sure, all else being equal, lower prices and higher rates are better because of the potential to refinance, but ignoring refinance opportunities, higher prices and lower rates can be just as affordable in terms of monthly payments.

6) I don't think this housing boom is nearly as universal or systemic as the last one. Instead, it's largely driven by demand shifts from major coastal cities to suburbs and inland cities. This was to be expected as a result of the pandemic and the shift to remote work. Prices in urban San Francisco have dropped, for example. And if you look at urban rents, they seem to have dropped significantly more in many cities, even if nearby home prices have risen. Basically, people are moving from tight, urban apartments to larger suburban homes. I have a hard time calling that a bubble when many companies are instituting permanent remote work policies.

7) I would argue suburban and inland real estate were somewhat undervalued, or at the very least in a position to see significant appreciation. For years, I've been saying such locations seemed underpriced given the rapid appreciation of coastal cities, stocks, and bonds. Part of that was likely due to millennials and other workers flocking to coastal cities for jobs in thriving industries like big tech. However, that trend seems to be in the process of reversing now. I have family in the Midwest, and I know they look at the current market like it's crazy, but I would argue they are the ones who need to reset their expectations with reality, because I think a large wave of coastal and foreign money is coming, and they don't necessarily have the supply of homes to meet that demand.

Basically, if we're in a housing bubble, I don't think it's anywhere near what the last one was, where banks were giving out NINJA loans left and right for 2nd and 3rd vacation homes. If we're in a bubble, I think it's much more likely that it's more of a general "everything bubble", and housing would just be the latest symptom of that. I think people are just more sensitive to high home prices because of 2008, but it doesn't mean the same thing is happening.
Topic Author
SuperTrooper87
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Re: Are we in a housing bubble?

Post by SuperTrooper87 »

Makes good sense. I appreciate your insights. Luckily we bought 6-7 years ago for a steal and refinanced even lower. I’d hate to be a kid shopping for a home these days.
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JoeRetire
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Re: Are we in a housing bubble?

Post by JoeRetire »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Are we in another bubble?
No.
Is this a national trend due to covid or is this in isolated pockets?
This isn't solely due to COVID. When we sold our primary residence in MA back in early 2019, we got 8 offers - all over the asking price.
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Kagord
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Re: Are we in a housing bubble?

Post by Kagord »

Only if mortgage interest rates rise again, say by 300-400 basis points from where we are today. This would probably put a pin prick in the bubble. But I don't really see that happening, unless there is massive inflation. So the good news, if there's massive inflation, I don't see housing prices going down either.

Inflation is only at 1.5%, per the last CPI fed report, which is proof that inflation is in control and nothing has really gone up in price.
Last edited by Kagord on Fri Mar 12, 2021 7:21 am, edited 1 time in total.
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Metsfan91
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Re: Are we in a housing bubble?

Post by Metsfan91 »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Currently, in rural New England, homes are and have been selling far above their appraised value. Homes that are “worth” 200k are getting same day as listing offers of 240-270k cash, no inspection, sight unseen.
Trend is same in the rust belt. Even in urban areas.
I lately heard a story from a coworker who has been trying to desperately buy a home before their rental lease ends. (Not being renewed as they plan to sell). Several times they offered on homes, 15%+ over asking, just to lose. He mentioned just offering more next time and using his ability as a first time homebuyer to put 3% down.
Just because someone offers sky high price doesn't mean house will appraise for that much. In my part of the country, houses are appraising for less than the purchase price. Buyers are forced to come up with cash to make up for the difference at closing in addition to down payment.
This seems eerily reminiscent of 2008. People taking loans to the max, no equity in homes, no EF, etc.
This time people are putting in more of their own money. They are vested. Less likely to see a repeat of 2008.
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jfn111
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Re: Are we in a housing bubble?

Post by jfn111 »

A lot of what's going on is just simply supply and demand. There are fewer houses for sale, in desirable neighborhoods, which drives the price up. (I just listed a house in a less desirable neighborhood and it sold for asking price but no bidding war on it).
When inventory is low it causes a chain reaction. Folks that would normally be move up buyers and sellers are reluctant to list their current house if they aren't confident in finding a new house.
AZAttorney11
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Re: Are we in a housing bubble?

Post by AZAttorney11 »

It sure feels like another housing bubble here in Phoenix.
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MinnGuyInvesting
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Re: Are we in a housing bubble?

Post by MinnGuyInvesting »

I wouldn't call it a bubble.

I think demand is a bit over-demandish right now. I think that will level off for those who want to wait. But I also see the value of the dollar decreasing in comparison to other goods (real estate, stocks, Crypto, college education) by 25-40% over the next few years.

It is not a bubble where anyone who is buying right now will feel they've overpaid in the next 2 - 10 years.
I think some real estate will reset, but it won't be a bubble bursting.
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Re: Are we in a housing bubble?

Post by z3r0c00l »

Around here it is very clear, people making good money in NYC panicked and ran to the formerly summer vacation spots like the Hamptons early on in the pandemic. The difference between the folks with a vacation home and those without was stark, being stuck in NYC during April 2020 was nightmarish and seeing friends by the beach with a laptop must have been strong motivation to move. They were competing for a limited supply of homes and make enough money to not care that much about the price. If the pandemic is gone in a year and they are asked to return to the office, will they regret it? And how will that impact prices?
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checkyourmath
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Re: Are we in a housing bubble?

Post by checkyourmath »

Check back after June 30th, 2021 or six months after that if they decide to extend it for a third time. Mortgage forbearance eventually will end. A couple million homes being held out of the supply is a big deal. The honeymoon stage is over. We were all generally poor before this and will be after this too. The system works as long as home prices appreciate more than the loans but going back a few thousand years home prices rise with inflation rates. This time is no different. VHCOL and HCOL set the price of everything. New Yorkers moving to rural Vermont and Californians moving to Colorado will eventually affect the system.
whereskyle
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Re: Are we in a housing bubble?

Post by whereskyle »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Currently, in rural New England, homes are and have been selling far above their appraised value. Homes that are “worth” 200k are getting same day as listing offers of 240-270k cash, no inspection, sight unseen.

I know other areas are seeing similar situations as there is a mass exodus out of the urban areas (NY, CA, etc).

In the midst of this influx of urban money to the rural area, locals are trying to compete with homeownership. I lately heard a story from a coworker who has been trying to desperately buy a home before their rental lease ends. (Not being renewed as they plan to sell). Several times they offered on homes, 15%+ over asking, just to lose. He mentioned just offering more next time and using his ability as a first time homebuyer to put 3% down. This is when alarms went off in my head.

This seems eerily reminiscent of 2008. People taking loans to the max, no equity in homes, no EF, etc. What’s this kids chance of refinancing in 5 years because he has to buy a new roof or furnace because he overpaid on the house and has no cash? Well now home prices potentially sunk and his 250k home is really only worth 160k. He and others are screwed.

Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
Bought in July. Lender's debt-to-income review was rigorous. I don't think they're handing out loans based on the premise that equity will explode and therefore one doesn't really need to show ability to make mortgage payments based on actual income.
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dboeger1
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Re: Are we in a housing bubble?

Post by dboeger1 »

SuperTrooper87 wrote: Fri Mar 12, 2021 5:06 am Makes good sense. I appreciate your insights. Luckily we bought 6-7 years ago for a steal and refinanced even lower. I’d hate to be a kid shopping for a home these days.
My wife and I bought our first home in 2020. It was expensive, lol. Part of me wishes we had bought earlier, but we waited till we were comfortable and felt it was the right time. Life moves on.
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Re: Are we in a housing bubble?

Post by Wanderingwheelz »

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Chris K Jones
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Re: Are we in a housing bubble?

Post by Chris K Jones »

AZAttorney11 wrote: Fri Mar 12, 2021 7:23 am It sure feels like another housing bubble here in Phoenix.
Ditto for Atlanta, Georgia area
hg064754
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Re: Are we in a housing bubble?

Post by hg064754 »

The RE market does smell like something stinky is brewing. We offered $10k more than the asking price and we did not get the house. Apparently someone else offered even higher. My realtor told me someone offered $25k and did not get the house (separate property).
staustin
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Re: Are we in a housing bubble?

Post by staustin »

Perhaps 50 same day bids, up to 20% over asking price is indicative of a bubble. As is 60+ p/e multiples. Zero bound interest rates and debt monetization is a beautiful thing..... The party continues unabated for the moment.
stoptothink
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Re: Are we in a housing bubble?

Post by stoptothink »

whereskyle wrote: Fri Mar 12, 2021 7:43 am
SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Currently, in rural New England, homes are and have been selling far above their appraised value. Homes that are “worth” 200k are getting same day as listing offers of 240-270k cash, no inspection, sight unseen.

I know other areas are seeing similar situations as there is a mass exodus out of the urban areas (NY, CA, etc).

In the midst of this influx of urban money to the rural area, locals are trying to compete with homeownership. I lately heard a story from a coworker who has been trying to desperately buy a home before their rental lease ends. (Not being renewed as they plan to sell). Several times they offered on homes, 15%+ over asking, just to lose. He mentioned just offering more next time and using his ability as a first time homebuyer to put 3% down. This is when alarms went off in my head.

This seems eerily reminiscent of 2008. People taking loans to the max, no equity in homes, no EF, etc. What’s this kids chance of refinancing in 5 years because he has to buy a new roof or furnace because he overpaid on the house and has no cash? Well now home prices potentially sunk and his 250k home is really only worth 160k. He and others are screwed.

Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
Bought in July. Lender's debt-to-income review was rigorous. I don't think they're handing out loans based on the premise that equity will explode and therefore one doesn't really need to show ability to make mortgage payments based on actual income.
I have a few friends that have bought homes at 6x-7x HHI in the last six months or so...in Utah. My brother bought in Pasadena, California in October, at almost 8x income. Not that it is any of my business, but would be interesting to know how exactly they are able to make the payments with their other expenses.

Our home was paid off last year, the plan was to start looking in the next 3-5yrs (wife wants "dream home", I have no want to move). I overheard wife tell her parents yesterday that she's recently lost interest in moving anytime in the next few years unless there is a crash. Said she'd rather have the option to retire at 40 then still be worried about a mortgage. Made me very happy.
nydoc
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Re: Are we in a housing bubble?

Post by nydoc »

Unless you really have to buy a house there is no need to. Price may go up or come down in future. When you absolutely need it buy it then at a price you can afford. You can save for more downpayment until then and get less mortgage then rising interest rates won’t matter that much.
knowledge
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Re: Are we in a housing bubble?

Post by knowledge »

I know it's not dominant in the news cycle, but US households are flush with cash. Combine that with the demographic wave of millenials reaching home-buying age, a shift in preference away from urban, and a general lack of housing supply and you get the current market. In a local market, you don't need much of an increase in buyers to much skew the market.

When you start hearing about speculators coming into to flip into this market, then I'll start thinking bubble.
finfire
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Re: Are we in a housing bubble?

Post by finfire »

Oh, we're in a bubble.

We need more space, so instead of buying a new home, we're building..even with expensive lumber etc, it's going to be much cheaper...
stocknoob4111
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Re: Are we in a housing bubble?

Post by stocknoob4111 »

The price is nuts but it may not be a bubble... just look at Toronto, the prices there are absolute bonkers and makes no sense but it's been that way for a long time and shows no signs of coming down.
ohboy!
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Re: Are we in a housing bubble?

Post by ohboy! »

dboeger1 wrote: Fri Mar 12, 2021 4:56 am There are bubble elements, but conditions are also vastly different than those leading up to the housing crisis:

1) Supply is generally much lower relative to demand than it was back then.

2) Construction and material costs are much higher now, reducing the ability of builders to quickly and efficiently meet new demand.


3) Equity of home owners going into 2020 was generally very high across the board. I don't know if that has changed much in the last year, but if we are in a housing bubble, it's likely to still be in the early innings, as lower equity levels tend to increase risk. Recent buyers putting less down may have low equity levels going into the deals, but that doesn't seem to be true of home owners across the board. Many bought homes for incredibly low prices in years like 2012 and will likely be well off for years to come because of it.

4) A lot of foreign money has come into the housing market since the last crash, particularly in coastal metro areas, and the large millennial generation is buying homes, so there are significant demographic tailwinds in the buyer pool.

5) Rates are very low which helps support higher prices. Sure, all else being equal, lower prices and higher rates are better because of the potential to refinance, but ignoring refinance opportunities, higher prices and lower rates can be just as affordable in terms of monthly payments.

6) I don't think this housing boom is nearly as universal or systemic as the last one. Instead, it's largely driven by demand shifts from major coastal cities to suburbs and inland cities. This was to be expected as a result of the pandemic and the shift to remote work. Prices in urban San Francisco have dropped, for example. And if you look at urban rents, they seem to have dropped significantly more in many cities, even if nearby home prices have risen. Basically, people are moving from tight, urban apartments to larger suburban homes. I have a hard time calling that a bubble when many companies are instituting permanent remote work policies.

7) I would argue suburban and inland real estate were somewhat undervalued, or at the very least in a position to see significant appreciation. For years, I've been saying such locations seemed underpriced given the rapid appreciation of coastal cities, stocks, and bonds. Part of that was likely due to millennials and other workers flocking to coastal cities for jobs in thriving industries like big tech. However, that trend seems to be in the process of reversing now. I have family in the Midwest, and I know they look at the current market like it's crazy, but I would argue they are the ones who need to reset their expectations with reality, because I think a large wave of coastal and foreign money is coming, and they don't necessarily have the supply of homes to meet that demand.

Basically, if we're in a housing bubble, I don't think it's anywhere near what the last one was, where banks were giving out NINJA loans left and right for 2nd and 3rd vacation homes. If we're in a bubble, I think it's much more likely that it's more of a general "everything bubble", and housing would just be the latest symptom of that. I think people are just more sensitive to high home prices because of 2008, but it doesn't mean the same thing is happening.
Where are people moving out of coastal coties? Im in San Diego and the market is always crazy but the past 6 months are twice as nuts. Id like to see where prices are going down in major cities because I don’t think it’s happening on the west coast.
montanagirl
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Re: Are we in a housing bubble?

Post by montanagirl »

Oh no, it's different this time!

Isn't it always? 😂
UnLearnYourself
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Re: Are we in a housing bubble?

Post by UnLearnYourself »

There's a housing loophole that I see in addition to the many good points raised above. What I mean by that is many of us were suddenly thrust into work from home situations, many of which will remain permanantly. Yet, employers never adjusted the incomes of people who were living in high cost cities and earning a high wage as a result. Therefor they now get to take their big city salary and go buy small town homes.

Over time I suspect that many employers are going to adjust wages per the residential zip code of its employees. My brother who works in tech in SF is already starting to hear some of this taking place.

For the time being this is CRUSHING small town and younger homeowners, locals, lower wage folks who used to be able to live in their own towns.

This time last year my wife and I were looking at upgrading our 1,600 sq ft home in Western MA to ~ 2,000 sq ft with a garage and extra bedroom...now these home have all popped over $100k in cost and we simply can't afford this upgrade that our growing family could really benefit from.

Selfishly I hope we are in a bubble that pops so I can afford to live in my town again.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

AZAttorney11 wrote: Fri Mar 12, 2021 7:23 am It sure feels like another housing bubble here in Phoenix.
Doesn't feel at all like the one prior to the great recession. I think, this is combination of low supply and the pandemic. If I was going to enter this market now, I'd probably rent. I'm glad I got back here before the pandemic struck. Inventory was low when I looked. I can't imagine now.
snowman
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Re: Are we in a housing bubble?

Post by snowman »

I don't think we are, even though the market is super crazy right now. Post number 2 explained it pretty well. It most definitely is not 2006 where anyone breathing qualified for a loan.

We live in desirable neighborhood in suburban Denver. Prices are going up by the week. There is no inventory. The few houses that hit the market on Thursday are under contract by Sunday. Now, I understand that the same thing is happening everywhere. What makes our market different (although there are other markets like ours) is the influx of refugees (mostly) from California.

So you no longer have traditional RE market where local housing prices have to be afforded by local people's salaries. WFH has changed RE completely, and I think the "repricing" of RE has just begun. Unless CA employers adjust WFH employees' wages, our RE price increases can continue for a long time to come. For us "locals", paying $700K for a large house with large yard, excellent schools and fairly low property taxes is a lot. For a Californian, it's a bargain!

When will this insanity end? I don't know. I feel bad for younger "locals" everywhere who are now priced out of their local RE market, especially in smaller, rural towns. But if WFH is here to stay, then I think high RE prices in desirable areas are here to stay as well, even when the rest of the country goes through some "bubble bursting" process.
MrBeaver
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Re: Are we in a housing bubble?

Post by MrBeaver »

UnLearnYourself wrote: Fri Mar 12, 2021 8:47 am This time last year my wife and I were looking at upgrading our 1,600 sq ft home in Western MA to ~ 2,000 sq ft with a garage and extra bedroom...now these home have all popped over $100k in cost and we simply can't afford this upgrade that our growing family could really benefit from.

Selfishly I hope we are in a bubble that pops so I can afford to live in my town again.
We are in a similar situation. Even if interest rates just go up and prices stay steady I’d consider that a win. We would dump more equity in a down payment, I wouldn’t be worried about reducing equity through a sale + purchase at 20% down and dumping previous equity into a market that at least feels inflated, payments would be about the same (smaller loan), and the future possibility of refinancing to reduce cost in the future.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Flannelbeard wrote: Fri Mar 12, 2021 9:06 am
UnLearnYourself wrote: Fri Mar 12, 2021 8:47 am There's a housing loophole that I see in addition to the many good points raised above. What I mean by that is many of us were suddenly thrust into work from home situations, many of which will remain permanantly.
I really think people are overestimating how much of WFH will remain. Here in MA you've got people moving 30 miles outside of Boston and driving housing prices up 25-30% along the I-495 belt on the verbal promise that they'll be able to work from home forever. Yeah man, enjoy that 1.5 hour commute each way once your employer tells you to come back in 3 days a week.

Overall I think it's mostly a fantasy that most white collar employees feel they have the power to dictate what their working arrangement will be. We'll see what happens when it comes down to "come back into the office or you're fired; we'll replace you with a fresh college grad at half the cost and have them up to speed in 2 years." Employees in a select few knowledge fields may truly have the upper hand here, but in my experience many people vastly overestimate their value to the workplace.

https://www.wired.com/story/work-going- ... -building/
We are targeting having everyone return to the office by the end of July.
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Re: Are we in a housing bubble?

Post by case_of_ennui »

Flannelbeard wrote: Fri Mar 12, 2021 9:06 am
UnLearnYourself wrote: Fri Mar 12, 2021 8:47 am There's a housing loophole that I see in addition to the many good points raised above. What I mean by that is many of us were suddenly thrust into work from home situations, many of which will remain permanantly.
I really think people are overestimating how much of WFH will remain. Here in MA you've got people moving 30 miles outside of Boston and driving housing prices up 25-30% along the I-495 belt on the verbal promise that they'll be able to work from home forever. Yeah man, enjoy that 1.5 hour commute each way once your employer tells you to come back in 3 days a week.
I think it'd be foolish for someone to do this just on a verbal promise. I'm in the middle of negotiating permanent WFH and will get something in writing before making decisions that would affect my finances. Management had already told us we would be permanent WFH, but wanted us to remain somewhat local in case we were needed in the office maybe 3-4 times a year. There are others on my team that have no intentions of leaving the area (due to kids in school, spouses job, etc.) that can cover that potential need so I'm pretty much green-lighted to move much further away (from DC area to a smaller town in the Rockies). Just waiting until it's official before making any moves.

I've found that prices in most smaller towns and cities out by the mountains aren't even that much cheaper than the DC metro area which has been kind of surprising/disappointing as someone younger and looking to buy their first home. I am hoping prices in these areas will drop once there is either more inventory, less demand in the aftermath of COVID, or if rates go up. If I'm wrong and prices keep marching upward it's not the end of the world. I'm still saving good money living in small apartments.
tim1999
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Re: Are we in a housing bubble?

Post by tim1999 »

I, like many here, own a home in a neighborhood with zero inventory right now, in a city with inventory at an all-time low (way lower than the mid 2000s bubble) where anything that comes on the market gets snapped up the same day with dozens of offers way over asking price. Most recent example was a really beat up house someone bought for 160k in 2013, did almost nothing to since then besides paint and cheap flooring, listed for 300k last month, just settled this week for 325k. In January 2020 pre-pandemic he would have been lucky to get 250k. If I look at the dozen or so homes that actually sold most recently, probably 9 were sold to people in the age 20-40 bracket with mortgages, 1 was sold to senior citizens paying cash, and 2 were sold to investors (who are now renting them out) paying cash.

I am very tempted to put my home on the market for 50% over the last comp (exact same floor plan, similar lot and condition) that sold a few weeks ago just to see if there is a big enough sucker out there that is desperate enough. Where would I go? I don't know, but I'd have a lot of money in my pocket to figure it out.
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mrmass
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Re: Are we in a housing bubble?

Post by mrmass »

Flannelbeard wrote: Fri Mar 12, 2021 9:06 am
UnLearnYourself wrote: Fri Mar 12, 2021 8:47 am There's a housing loophole that I see in addition to the many good points raised above. What I mean by that is many of us were suddenly thrust into work from home situations, many of which will remain permanantly.
I really think people are overestimating how much of WFH will remain. Here in MA you've got people moving 30 miles outside of Boston and driving housing prices up 25-30% along the I-495 belt on the verbal promise that they'll be able to work from home forever. Yeah man, enjoy that 1.5 hour commute each way once your employer tells you to come back in 3 days a week.

Overall I think it's mostly a fantasy that most white collar employees feel they have the power to dictate what their working arrangement will be. We'll see what happens when it comes down to "come back into the office or you're fired; we'll replace you with a fresh college grad at half the cost and have them up to speed in 2 years." Employees in a select few knowledge fields may truly have the upper hand here, but in my experience many people vastly overestimate their value to the workplace.

https://www.wired.com/story/work-going- ... -building/
Our office is in downtown Boston. We’ve had a person move to Worcester another to Springfield and another to the Cape. I’d say it a bad bet that we can WFH for more than 1 or 2 days when this is over.
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BolderBoy
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Re: Are we in a housing bubble?

Post by BolderBoy »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am This seems eerily reminiscent of 2008. People taking loans to the max, no equity in homes, no EF, etc. What’s this kids chance of refinancing in 5 years because he has to buy a new roof or furnace because he overpaid on the house and has no cash? Well now home prices potentially sunk and his 250k home is really only worth 160k. He and others are screwed.

Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
I don't know if we are in "a bubble" now or not, but this time in the housing market is nothing like what popped in 2008.

2008 was the culmination of years of lending money to people who couldn't possibly pay it back.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
fortunefavored
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Re: Are we in a housing bubble?

Post by fortunefavored »

Flannelbeard wrote: Fri Mar 12, 2021 9:06 am
UnLearnYourself wrote: Fri Mar 12, 2021 8:47 am There's a housing loophole that I see in addition to the many good points raised above. What I mean by that is many of us were suddenly thrust into work from home situations, many of which will remain permanantly.
I really think people are overestimating how much of WFH will remain. Here in MA you've got people moving 30 miles outside of Boston and driving housing prices up 25-30% along the I-495 belt on the verbal promise that they'll be able to work from home forever. Yeah man, enjoy that 1.5 hour commute each way once your employer tells you to come back in 3 days a week.

Overall I think it's mostly a fantasy that most white collar employees feel they have the power to dictate what their working arrangement will be. We'll see what happens when it comes down to "come back into the office or you're fired; we'll replace you with a fresh college grad at half the cost and have them up to speed in 2 years." Employees in a select few knowledge fields may truly have the upper hand here, but in my experience many people vastly overestimate their value to the workplace.

https://www.wired.com/story/work-going- ... -building/
Megacorps all seem to coalesce around the same trends/strategies, from talking to senior leaders at a few of the big megatechs, the go forward strategy seems to be:
1) All small (<200 person) remote offices closed to save real estate costs
2) People will rotate into the office for 1 to 2 days per week on assigned "collaboration" days (again, to save real estate costs - fewer big buildings required)

Now the big one:
3) New hires must be within commute distance of those (far fewer) offices so they can show up for collaboration days

I think there will be a weird in-between time where you have a lot of full time WFH, but eventually companies are going to want to assert their authority (and of course superstars will continue to do whatever they want, but that was true before too.)
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

I don't know if bubble is the right word, but the situation does feel untenable. I'm in western MT and prices are insane, inventory is extremely low, and first time buyers are having a very hard time. I get that I live in a desirable area, but it's rural out here in a way that doesn't really exist on the east coast. I had a call with someone who works on housing in Pablo MT and the first thing she talked about was the explosion in prices and how locals can't afford it. It doesn't get much more rural than Pablo (google it) and if locals can't afford to live there I don't know what's going to happen. You can't run a whole community on remote tech workers, regular income people have to live somewhere.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

SmallSaver wrote: Fri Mar 12, 2021 9:43 am I don't know if bubble is the right word, but the situation does feel untenable. I'm in western MT and prices are insane, inventory is extremely low, and first time buyers are having a very hard time. I get that I live in a desirable area, but it's rural out here in a way that doesn't really exist on the east coast. I had a call with someone who works on housing in Pablo MT and the first thing she talked about was the explosion in prices and how locals can't afford it. It doesn't get much more rural than Pablo (google it) and if locals can't afford to live there I don't know what's going to happen. You can't run a whole community on remote tech workers, regular income people have to live somewhere.
The higher home prices make it easier for recent buyers to refinance out of PMI if they were paying it.
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JoMoney
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Re: Are we in a housing bubble?

Post by JoMoney »

There are a lot of factors that go into housing prices. I've heard several 'expert' pundits hypothesize that we'll be broadly in a sellers market (high prices) for the next year or more for a variety of fundamental supply/demand reasons.
I don't know that we're in a "bubble", all asset prices seem very inflated relative to the past, but all prices or 'valuations' are done with dollars as the numeraire and there's a whole lot more dollars floating around these days. The government is literally handing out dollars for doing absolutely nothing, and there's not a whole lot of options on what to do with those dollars - the bank won't give you anything to keep dollars there. I'm not necessarily complaining about the helicopter money, by some estimations it's the right thing to do given the government is also prohibiting me from going to work and earning money... but it's also creating all kinds of distortions in the market for all kinds of things valued in dollars, and will be interesting to see how it plays out going forward.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Aged Maduro
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Re: Are we in a housing bubble?

Post by Aged Maduro »

No we are not in a bubble. There is just rising demand with limited supply. I do expect that next year when rates rise that prices will level off, but they will not plummet.
badger42
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Re: Are we in a housing bubble?

Post by badger42 »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am
Several times they offered on homes, 15%+ over asking, just to lose. He mentioned just offering more next time and using his ability as a first time homebuyer to put 3% down. This is when alarms went off in my head.
I suspect that a lower cash offer, or a lower 20%+ down offer, would win out over a 3% down FHA offer. Doubly so if the seller isn't 100% confident on the house appraising - 20% or more down can always kick in more cash.

I know when we were last selling (many years ago) we had two offers at our ask. One was 35% down, conventional mortgage - the other was FHA and needed help with closing costs. We went with the former - far less chance of drama - even though the latter wrote us a letter about how much they love the house.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

rockstar wrote: Fri Mar 12, 2021 9:46 am
SmallSaver wrote: Fri Mar 12, 2021 9:43 am I don't know if bubble is the right word, but the situation does feel untenable. I'm in western MT and prices are insane, inventory is extremely low, and first time buyers are having a very hard time. I get that I live in a desirable area, but it's rural out here in a way that doesn't really exist on the east coast. I had a call with someone who works on housing in Pablo MT and the first thing she talked about was the explosion in prices and how locals can't afford it. It doesn't get much more rural than Pablo (google it) and if locals can't afford to live there I don't know what's going to happen. You can't run a whole community on remote tech workers, regular income people have to live somewhere.
The higher home prices make it easier for recent buyers to refinance out of PMI if they were paying it.
Yes, this is all great if you already own a home.
Scooter57
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Re: Are we in a housing bubble?

Post by Scooter57 »

I'm also in rural Mass, and yes, it is a bubble, but it is also represents some catching up as in our region, at least, housing prices were still were they were in 2003 as late as 2019, while my son's house in Ohio had seen its appraisal rise by $100K.

It looks like where we are should be a comfortable drive to Boston, but it isn't, due to the lack of functional highway. It's a good 2 hour drive to most places where the jobs are over curvy roads engineered in the 1930s with too many trucks and very heavy commuting traffic. Driving it in the snow is horrible.

A lot of what is driving prices here is the lack of homes available for sale. There are rarely very many listed and anything nice has always been snapped up immediately. (I bought mine years ago the day it appeared on the MLS). Usually there is a very brief Real Estate Season that lasts from April-June, then the rest of the year, almost nothing. So you have people from the City who suddenly can work from home rushing out here, marveling that they can get a 4 br house on a couple acres for "only" $450,000 (and a lifetime of grief from the needed repairs, but they don't know that.) They may also not realize that the house doesn't have cable (but that's another story. You can see them outside the libraries or, when open, working at tables in the coffee shop in the town that has cable.)

Until now the urbanites have usually clustered in what I think are the least appealing towns in our region. The ones that are the most built up and have the smallest, most suburban lots. We got a big influx after 9/11. The newcomers did not improve what was available to every one in the area. We got a deli with $60/lb cheeses, and a few bistros, but that was about it. If anything, the culture seemed to deteriorate, as these were not the creatives who used to live in these areas due to cheap rent.

It will be interesting to see how this unfolds. I hope it doesn't ruin a small corner of the state that was one of the last places around that had not been ruined by tourism or gentrification.
tj
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Re: Are we in a housing bubble?

Post by tj »

I know other areas are seeing similar situations as there is a mass exodus out of the urban areas (NY, CA, etc).
The housing prices in coastal SoCal definitely do not suggest a mass exodus.
secondopinion
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Re: Are we in a housing bubble?

Post by secondopinion »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
According to my sources, this is a trend that started before COVID and certainly is worse in certain areas; and it is bubbling due to cheap debt. Deals can be found, but they are sparse (populated US desert southwest).
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aristotelian
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Re: Are we in a housing bubble?

Post by aristotelian »

I see people buying as much as they can afford with low interest rates. I would expect as interest rates rise, prices will come down. That is different than being in a bubble where speculators will buy at any price in blind faith the market will keep going up. In '07 you had interest rates level at around 5% and people still buying at any cost hoping to flip in a few months. I don't see that happening.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

secondopinion wrote: Fri Mar 12, 2021 10:47 am
SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
According to my sources, this is a trend that started before COVID and certainly is worse in certain areas; and it is bubbling due to cheap debt. Deals can be found, but they are sparse (populated US desert southwest).
The southeast is cheaper than the southwest right now.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

aristotelian wrote: Fri Mar 12, 2021 10:48 am I see people buying as much as they can afford with low interest rates. I would expect as interest rates rise, prices will come down. That is different than being in a bubble where speculators will buy at any price in blind faith the market will keep going up. In '07 you had interest rates level at around 5% and people still buying at any cost hoping to flip in a few months. I don't see that happening.
But unlike stocks this will be a delayed reaction. Mortgage rates are still really low right now.
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JoMoney
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Re: Are we in a housing bubble?

Post by JoMoney »

tj wrote: Fri Mar 12, 2021 10:42 am
I know other areas are seeing similar situations as there is a mass exodus out of the urban areas (NY, CA, etc).
The housing prices in coastal SoCal definitely do not suggest a mass exodus.
People are definitely leaving, they're just being replaced by people moving in, which is and has been the case pretty typicaly... but the statistics more recently suggest some of the lowest net population growth rate.
Image

And there are economic concerns regarding changes in the jobs and tax revenue demographics of the population.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
runner540
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Re: Are we in a housing bubble?

Post by runner540 »

montanagirl wrote: Fri Mar 12, 2021 8:44 am Oh no, it's different this time!

Isn't it always? 😂
It’s always different this time, and in the Bay Area :oops: :sharebeer
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SuperTrooper87
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Re: Are we in a housing bubble?

Post by SuperTrooper87 »

snowman wrote: Fri Mar 12, 2021 9:05 am I don't think we are, even though the market is super crazy right now. Post number 2 explained it pretty well. It most definitely is not 2006 where anyone breathing qualified for a loan.

We live in desirable neighborhood in suburban Denver. Prices are going up by the week. There is no inventory. The few houses that hit the market on Thursday are under contract by Sunday. Now, I understand that the same thing is happening everywhere. What makes our market different (although there are other markets like ours) is the influx of refugees (mostly) from California.

So you no longer have traditional RE market where local housing prices have to be afforded by local people's salaries. WFH has changed RE completely, and I think the "repricing" of RE has just begun. Unless CA employers adjust WFH employees' wages, our RE price increases can continue for a long time to come. For us "locals", paying $700K for a large house with large yard, excellent schools and fairly low property taxes is a lot. For a Californian, it's a bargain!

When will this insanity end? I don't know. I feel bad for younger "locals" everywhere who are now priced out of their local RE market, especially in smaller, rural towns. But if WFH is here to stay, then I think high RE prices in desirable areas are here to stay as well, even when the rest of the country goes through some "bubble bursting" process.
This explanation makes sense. Would the argument then be that local employers may be forced to increase wages for folks who live and work in the area? otherwise they will be forced to move to LCOL areas and maybe seek alternative employment?
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