Are we in a housing bubble?

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JBTX
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Re: Are we in a housing bubble?

Post by JBTX »

https://www.nytimes.com/2021/02/26/upsh ... -gone.html

Don't know if this has been posted. The supply of homes has dropped fairly dramatically.

Also informative.

https://www.theatlantic.com/ideas/archi ... wn/618212/
MoonGlow
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Re: Are we in a housing bubble?

Post by MoonGlow »

JAZZISCOOL wrote: Tue Mar 16, 2021 3:02 pm
MoonGlow wrote: Tue Mar 16, 2021 2:07 pm Long time lurker here and just created an account for this thread. I'm a Realtor in the greater Boston Area and the market is getting a little to hot. I just had a closing on a property I sold and got 76K over asking. In which we has 12 offers all over the asking price along with the waiving of inspection and appraisal. I am not in the crystal ball or prediction business but as a Realtor something seems way off.
Thanks for the post. That is just crazy. I would be curious if buyers are coming in with all cash offers as well. :shock:


Yes lots of contractors are coming in with cash offers with no strings attached. I've been working with 2 VA buyer clients and let me tell you trying to get an offer accepted with 0$ down is near impossible. My father is a Veteran so it tugs at the heart strings in this market climate.
rascott
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Re: Are we in a housing bubble?

Post by rascott »

ballons wrote: Tue Mar 16, 2021 3:00 pm
rascott wrote: Sat Mar 13, 2021 10:21 pm We have a serious housing shortage in many/ most decent size housing markets in this country. This is all the outcome of 2007-2010 oversupply crash. Home building over-corrected as result of that crisis..... and never ramped up to account for population growth over the last decade. Many reasons for this..... but we are where we are, where well qualified people can't find homes in their desired areas.

A normal absorption rate in an equally balanced market is 5-7. In that it would take 5-7 months to sell every home currently for sale, at current volume rates. In my market we're at 0.7.... that's a totally crazy, off the charts number indicating a massive shortage of homes available. Naturally prices rice like crazy in these scenarios
They said the same thing in 2006. "They aren't making anymore land!" "It's different this time!" Turns out this was all a lie. That oversupply wasn't bulldozed. US population has been consistently below replacement rate since 2007.

I assure you when the bubble bursts property will magically become available at record numbers for you buy.
Nowhere near accurate, in multiple ways. Available inventory was sky high by 2005-2006. And the only way to keep things afloat was to continue to approve sub-prime borrowers, transitioning historical renter class into buyers.


To give you an example, in my mid-size metro market, by 2005/6 there were upwards of 20,000 active listings. By 2007 that number reached 30,000 active listings.

Today, 15 years later, with thousands more houses having been built and a much larger population, there are 1,600 active listings.

You need to analyze household formation rates...as well as housing units built per 1,000 people to understand the housing shortage.

https://fred.stlouisfed.org/graph/?g=yd ... rce=direct


Prices will likely cool off post-covid when a more normal demand/supply balance is reached. But people calling it a housing 'bubble' implies things are on the precipice of bursting and prices collapsing. There is no evidence of that.
Last edited by rascott on Tue Mar 16, 2021 4:31 pm, edited 2 times in total.
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sergeant
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Re: Are we in a housing bubble?

Post by sergeant »

I have no idea if we are in a bubble. A desirable home came on the market last week. We made a full price offer. Usually I would expect a reply. Our realtor said they are gathering offers until next week and will decide then. Our realtor said we probably won't get it as she thinks there will be multiple offers over asking.
I will update next week how it goes.
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JAZZISCOOL
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Re: Are we in a housing bubble?

Post by JAZZISCOOL »

MoonGlow wrote: Tue Mar 16, 2021 4:07 pm
JAZZISCOOL wrote: Tue Mar 16, 2021 3:02 pm
MoonGlow wrote: Tue Mar 16, 2021 2:07 pm Long time lurker here and just created an account for this thread. I'm a Realtor in the greater Boston Area and the market is getting a little to hot. I just had a closing on a property I sold and got 76K over asking. In which we has 12 offers all over the asking price along with the waiving of inspection and appraisal. I am not in the crystal ball or prediction business but as a Realtor something seems way off.
Thanks for the post. That is just crazy. I would be curious if buyers are coming in with all cash offers as well. :shock:


Yes lots of contractors are coming in with cash offers with no strings attached. I've been working with 2 VA buyer clients and let me tell you trying to get an offer accepted with 0$ down is near impossible. My father is a Veteran so it tugs at the heart strings in this market climate.
Wow. That is sad for those buyers who want to buy a home and are having these types of challenges in this market. :(
59Gibson
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Re: Are we in a housing bubble?

Post by 59Gibson »

The supply is completely choked due to Covid. Many are afraid to list their house and allow people to walk thru. but life goes on and folks need to relocate, trade up, and down for whatever reason. I know of someone who would like to sell and move to another town in same state but cannot find anything close to what they desire, and so they do not list their house for sale and on and on and on. The wheels of motion in a more normal mkt are jammed.
ballons
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Re: Are we in a housing bubble?

Post by ballons »

rascott wrote: Tue Mar 16, 2021 4:16 pm Prices will likely cool off post-covid when a more normal demand/supply balance is reached. But people calling it a housing 'bubble' implies things are on the precipice of bursting and prices collapsing. There is no evidence of that.
Denver metro saw 21% annual jump in price. I'm confident the denver metro didn't see wages increase by that. By "cool off" do you mean they will resume the 3-5% increase in perpetuity, stay flat, or go down?

You can call bubbles a bubble well before they burst. Some even continue to grow before bursting.
Bungo
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Re: Are we in a housing bubble?

Post by Bungo »

SmallSaver wrote: Tue Mar 16, 2021 11:49 am I don't have the data to back it up, but I have seen reporting that many millennials actually do have different preferences than earlier generations and are more likely to value the amenities that come with city living. What's driving them out is the cost of housing. If people are really fleeing the cities you'd think housing costs there would decline and I don't think that's the case.
I don't know if this is in fact happening, but it seems possible for a city's population to decline somewhat while housing stays flat or even increases. Particularly in cities where many people were living in roommate situations but now want places of their own. This could result in a sort of "de-densification" where the richer people will be able to stay, and the poorer ones will have to move out.
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SuperTrooper87
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Re: Are we in a housing bubble?

Post by SuperTrooper87 »

MoonGlow wrote: Tue Mar 16, 2021 2:07 pm Long time lurker here and just created an account for this thread. I'm a Realtor in the greater Boston Area and the market is getting a little to hot. I just had a closing on a property I sold and got 76K over asking. In which we has 12 offers all over the asking price along with the waiving of inspection and appraisal. I am not in the crystal ball or prediction business but as a Realtor something seems way off.
Must be good for the wallet with commissions - aside from the shrinking options.
Caduceus
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Re: Are we in a housing bubble?

Post by Caduceus »

Valuethinker wrote: Tue Mar 16, 2021 10:07 am
JAZZISCOOL wrote: Mon Mar 15, 2021 9:43 pm I just read an interesting Bloomberg story about Canada's white-hot housing market. I know little about Canada's RE market but it seems like things are more challenging up there vs. the US. Rates have been lower than the US. 1.97% at the end of 2020 for a common fixed-rate mortgage. Different dynamics and regulations were discussed.

https://www.bloomberg.com/news/articles ... nd=premium
Canada has gone insane.

For over 10 years, Greater Toronto Area and Greater Vancouver area have been in the top 10 most expensive cities in the world against rents or incomes-- The Economist housing price index. GVA is as expensive as London-- but which city is the #2 capital of the world's financial services industry (at least pre Brexit)? There are jobs in London that can pay £1m-2m for a family home, there are not anything like as many jobs in Vancouver that can do that. Except perhaps in Real Estate - Vancouver has become Miami North (downtown Toronto also).

Toronto spiked in 2017 and then had been gradually falling. Now that has been completely reversed by the latest boom. The condo explosion continues unabated.

4 bedroom house, 1920s built - so c 2000 square feet incl finished basement. Went on the market for $1.5m, sold for 2.25m.

The price effect has spread out across southern Ontario. Houses in Barrie (60m north, and that's a long 60 miles when the snow is blowing) for 3/4 million. Hamilton, which was an ex steel town further west along the lake, now booming. Retirement communities like Collingwood ONT just exploding -- $1m condos.

Part of it was money flowing in from offshore. But people have jumped on the bandwagon, leveraged to the hilt.

At the peak of the US bubble in 2006 6-6.5% of GDP was accounted for by housing and housing related activities. This fell to about 2.5% at the bottom and then recovered towards its historic long run average c 4-4.5%.

Canada? Structurally Canada has higher immigration, so you would expect housing to be more important. But housing and housing related activities are now around 9.5% of GDP.

This will not end well.
Valuethinker, I'm going to play devil's advocate here, but I have a vested interest because I'm currently studying the financial statements of several small Canadian savings and loan institutions and although what you say on a macroeconomic level may well be true, I was quite surprised to find out, based on the research that I've done so far, that:

1. The average weighted loan to equity ratio for the companies I'm studying has been around 60%. That's very, very conservative. It means that the average borrower has 40% equity in their homes. The balance sheets of even sub-prime lenders seem better than the large banks in the United States. These are also predominantly owner-occupied properties, not investment properties. It would take a 40% drop or more in housing prices for defaults to rise materially. It also does not seem to square with your observation that they are "leveraged to the hilt." What was surprising to me was that this was true for so-called Alt-A lenders as well. Even the people that banks would not consider prime borrowers are putting down significant amounts of equity.

2. Apart from a few exceptions, Canada doesn't use a non-recourse system (btw, feel free to correct and provide counterpoints to anything I'm saying). That means lenders not only effectively have the house as collateral, but they can also go after other current and future assets.

3. Unlike in the U.S., Canadian loans are primarily adjustable rate and much shorter in term. My understanding is that they do not have, for example, 30-year fixed rate mortgages. It's extremely interesting because when I'm looking at the financial statements, it's clear that the savings and loan institutions can manage their risk at the granular level quite well.

4. If history serves as a guide, even at the height (or rather, trough) of the housing/financial crash in the U.S. and some parts of the world, Canada went through it pretty well. I've looked at the rate of defaults by pulling up financial statements from that period and was absolutely blown away by how few defaults there were. And that makes sense. If you have 40% equity in an owner-occupied property, the last thing you will do is default on it. You will default on a car loan, credit card debt, etc. All of that before absolute desperation makes you abandon your home.

So I'm curious when you say "this is not going to end well" what you think might happen, because in spite of the inflated housing prices, the lenders look like they're in a very sound, conservative position. And the consumers look like they might be overpaying for inflated housing but they also don't look likely to default anytime soon.
a
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Re: Are we in a housing bubble?

Post by a »

This is QUITE annoying. I was getting all ready to buy a house for a LOT of
money because I've spent the last year realizing that the noise in my current
house (airplanes, cars, garbage trucks, gardeners) is debilitating. Well, I
found the perfect house - as a rental - back in
November. EXTREMELY quiet, which is very hard to find in the south bay area.

Well, in November, a week before getting the keys, I'm informed that the owners
wanted to only rent it out for 3 months. I moved out a couple weeks ago so went back
to rental-hunting. It turns out the owners had decided to sell, probably right about
the time I contacted them about taking their rental, and so were being nice about letting
me stay for even 3 months. Well, they couldn't have picked a better time to be nice
because in the past 3 months the housing craziness has increased from red to white hot
as people have been saying on this thread.
A couple houses my wife was looking at in San Jose just sold for 25% over asking.

So, I have looked at 20 something rentals all around the south bay, and just nothing
compares to this one quiet rental-turned-for-sale. It's an A and the next best is a B+.
It stinks. If I want to buy this house now, I'm going to be getting a mortgage for
(not the exact numbers) $1,600,000 for a house that's only really worth $1,250,000.

I think what happened is that for the past 4-6 months people have been "waking up".
Covid forced people and their brains into a sort of hibernation mode.
They were too fraught by yelling kids, cabin fever, like being locked in a room
with annoying roommates 24/7 for a year. At such times you're just trying to survive
and keep your brain from frying, not thinking about undertaking large projects like
applying to buy a house.

Now that people are seeing the light at the end of the tunnel - vaccines schedules
and things re-opening and the kids having been back in school for a little while
or going back to school - their brains are waking up again and the only priority
on their minds is "getting out of this tiny apartment and into a house." With
low interest rates, everyone wants to buy instead of rent (the rentals are an
absolute steal right now*, relative to buying prices - I don't understand why people
are so set on buying - foolhardy psychology of wanting to own and thinking renting is
flushing money down the toilet - I agree that these people are going to be feeling
regretful a year from now when house prices have returned to reality and they are
stuck with $2,500,000 mortgages on $2,000,000 houses.)

*For example you can rent a $2,500,000 house for $5,000 a month. A 30 year mortgage
plus expenses (maintenance, property taxes etc.) will run you $12,000 a month. Are
there THAT many people so sure they are going to stay in this house, and current
conditions are going to stay the same**, for the next 10 years? (It would take 10
years before buying would have saved you money over renting, when you factor in the
2.5-5% transaction costs of buying a house.)

**This work from home thing is not going to stick. People weren't enduring
1/2 hour to 1 hour commutes 250 days a year because no one thought of anything better.
In 2 years companies will have gone back to in-person. MAYBE there might be an increase
of 10% in WFH.
It's not so much that your co-workers _need_ to talk to you in-person so much as you
need a mental physical location separation of "Work Spot" and "Home Spot" to be 100%
productive. It's like putting on a business suit.
RJ5
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Re: Are we in a housing bubble?

Post by RJ5 »

in my area, single family homes that were going for 380K's in 2018 are now selling for $550K and above. one that has a 2 story addition just sold for $700K. the one with 1 story addition sold for $650K. the small single family twin homes that sold for $220K's in 2018 are now selling for $340K.

the multi-family properties that used to be $280K and $500K, are now going for $360K and $700K.


it's only a bubble if there is some sort of significant retraction from where we are now. i have a feeling in my area, there won't be a retraction, there wasn't one in 2009...it just stopped increasing as much and it just will stop going up as much if this "bubble" popped too. if i look 35 mins away to philadelphia that was seeing bidding wars pre-covid for those renovated luxury condos and luxury rowhomes in the upcoming neighborhoods, that turned out to be a bubble (covid caused). prices have fallen significantly, rents have fallen, inventory is up. people are leaving the city. will they return? not if they already left and bought something in the suburbs and are situated
RJ5
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Re: Are we in a housing bubble?

Post by RJ5 »

a wrote: Wed Mar 17, 2021 8:32 am

**This work from home thing is not going to stick. People weren't enduring
1/2 hour to 1 hour commutes 250 days a year because no one thought of anything better.
In 2 years companies will have gone back to in-person. MAYBE there might be an increase
of 10% in WFH.
It's not so much that your co-workers _need_ to talk to you in-person so much as you
need a mental physical location separation of "Work Spot" and "Home Spot" to be 100%
productive. It's like putting on a business suit.
Work from home actually results in increased productivity, but decreased innovation
Companies will find the happy balance, as those who have successfully implemented covid work from home schedules have demonstrated that they can continue business as usual with people remotely working. Companies will have to evaluate if they can grow the business with people remotely working from home. Some will find that certain segments within their business can stay home, others will need to come in to avoid innovation and new business rot.

If your job is task-based with 0 innovation, your chances of continuing to work from home full time are significantly higher
If your job is development-based with lots of innovation, your chances of continuing to work from home are significantly lower

My particular technical field is both development based and task based. My department is tasked based though, so I will continue to be able to work from home full time at least into the foreseeable future. I know many over in development and once everyone is vaccinated and all of this blows over, they are going back in the office full time (with the allowable 1 day work from home per week that was already in place pre-covid. fridays)
a
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Re: Are we in a housing bubble?

Post by a »

That makes sense, RJ5. I'm not a manager so you have more experience than I in the types of work.
Bungo
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Re: Are we in a housing bubble?

Post by Bungo »

a wrote: Wed Mar 17, 2021 8:32 am This is QUITE annoying. I was getting all ready to buy a house for a LOT of
money because I've spent the last year realizing that the noise in my current
house (airplanes, cars, garbage trucks, gardeners) is debilitating. Well, I
found the perfect house - as a rental - back in
November. EXTREMELY quiet, which is very hard to find in the south bay area.
I'm very curious to know where in San Jose you found a neighborhood that is free of these noises! I'm in Cambrian Park and over the past year of working from my patio have become all too familiar with the daily gardener/garbage truck/neighbor kids playing basketball noise. There's a cacophonous weed whacker running on the other side of my fence as I type this.

Still, I'll happily take this racket over the even noisier open-plan office that I've been on reprieve from since March 5, 2020! I've been dreading the end of WFH because I hate the office so much. Fortunately(?) the pandemic was so mismanaged that I will end up reaching my early retirement magic number (less than one month from now) before ever having to return to the office, and therefore I never shall!
a
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Re: Are we in a housing bubble?

Post by a »

Oh, I'm sorry I haven't found a San Jose one yet. The Eden I
mentioned is in Sunnyvale*. I'm sure there are pockets in
San Jose and every city _but_ it's like rocks in a haystack.
But I am very glad to hear that a fellow
sufferer has found freedom! (i.e. retirement money) In the
sense that having a nest egg gives one the freedom to move,
money really does buy happiness. That's my current feeling :)

*I thought I had written that but must have edited it out. Sorry to mislead you.
toomuchRE
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Re: Are we in a housing bubble?

Post by toomuchRE »

beyou wrote: Mon Mar 15, 2021 10:14 pm
toomuchRE wrote: Mon Mar 15, 2021 7:18 pm
InvestorHowie wrote: Mon Mar 15, 2021 6:00 pm DW is always looking at listings in the area of Northern New England where we hope to retire and has become a HOT market like so many during COVID. Today she remarked on seeing her first real estate listing stating 'Owners are sad to have to sell after 6 months as they are being called back by their employers.' Back to Manhattan or Boston, I presume. And they'll probably still make money on the purchase turned sale.

First sign for me that things might settle down a bit soon.
This is what I suspect will happen. A lot of people buying in far away land will repent. Buy in a commutable town even if you over pay.
The commutable suburb prices will spike even more..
This is what I am hoping ! I am still in commute range of NYC, hoping people have rural fire sales where I want to retire and bid up near the city where I will soon stop working.
Yes... There will be a rural sale if not a fire sale in 3-5 years... We were asked to come back in August as vaccine rollout is almost done.. Of course my company is working on flexible work place and I would suspect that means 1-2 days in office.. How will the far away people commute for 2 days?? Half of them will come back to a commuter town because they are used for a nice house and a yard which you wont get in the cities..

Think about it. Everyone is caught in the heat of the moment and making knee jerk reactions. All that it takes is an email from HR to come back.. I suspect 15-20% will allowed to WFH fully and maybe another 30-40 flexible and rest need to show up daily...Why would you pay someone living in the mountains in mains the same $$ as someone in NY/SFO suburbs. You can always pay someone in Timbktu or Chennai 1/10th the Salary and they are also technically remote..
jackbeagle
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Re: Are we in a housing bubble?

Post by jackbeagle »

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?
Couple things you've said that are at odds with one another:
- "getting same day as listing offers of 240-270k cash", then "people taking loans to the max"
- "refinancing in 5 years because he has to buy a new roof or furnace", then "home prices have sunk and his 250k home is really only worth 160k"

If you finance the entire home (you said rural, you can get 100%) and refi 5 years into a loan, it sure as heck isn't going to be a cash-out refi because the interest is front-loaded in mortgages. You won't be getting much of anything if it hasn't significantly appreciated. Closing costs will eat up $2-3k he has if only minimum payments were made. There are plenty of people with cash. Now is an INCREDIBLY bad time to take a loan. There's never really a good time for debt. It's either inflated prices with low interest rates, or lower prices with higher interest rates.
Jess Saying
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Re: Are we in a housing bubble?

Post by Jess Saying »

I think the mind-bending examples of Canada and Australia show the ultimate futility in attempting to spot a housing bubble.

If a global catastrophe that causes 20% of the USA population to lose their jobs results in prices rising 15%, then I don't know what could cause them to go down. Maybe a rapid rise in rates combined with an end to government stimulus/supplemental unemployment aid?

When my friend announced they were buying last April, I thought they were a sucker.
bostonboglehead123
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Re: Are we in a housing bubble?

Post by bostonboglehead123 »

Well this is all very depressing reading but we finally made the jump and bought a house around Boston. Yes it was probably partly due to COVID but mostly we've saved up our down payment and were sort of vaguely looking at houses before the Pandemic but plans accelerated quite a bit.

I feel like this is true of a lot of other things - the shift to grocery delivery, remote work etc etc have all been part of an existing trend but got pulled forward significantly because of the lockdowns. I'm suspecting that homes are the same - people that were going to buy in the next 3-4 years are just all jumping in at the same time coupled with the fact that there's no inventory at all.

I'm guessing things will continue to go this way for this year at the very least because I still see houses going off market in 7-8 days and long lines at open houses. Also hoping we'll have a little bit of quiet consolidation for the next 2 years after that if not a correction.
NYCaviator
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Location: NYC

Re: Are we in a housing bubble?

Post by NYCaviator »

This has to be a bubble. If you look at median housing prices all around the country and compare that with median income levels, it doesn't compute. Housing costs are quickly outpacing income, and something has to give. It's not like the average American is going to wake up tomorrow suddenly make a lot more money. How many people can really afford the $500,000+ that it takes - at minimum - to buy a house in most metro/suburban areas? You are even seeing this in some rural areas as well.

The demand is fueled by a couple of things. First is our collective inability to learn from past bubbles. People see friends and family who have huge amounts of equity in their homes and want to get in the market thinking that it is guaranteed income. They've forgotten 2008. Second is the perceived need for a bigger house after being stuck at home during the pandemic. Low interest rates are pushing people to stretch their housing budgets. Once things open back up, I would bet a lot of people are going to realize that they don't have much money left over for dining out/travel/entertainment because their new mortgage payments are huge. Just look at how many people ask "can I afford this house" on here, and try to justify a bad purchase.

Long story short, this cannot last. \ What goes up must come down. At some point the market will correct itself. Will it be this year, next year, or 5 years from now? Who knows. I personally would not be buying residential property right now.
toomuchRE
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Re: Are we in a housing bubble?

Post by toomuchRE »

bostonboglehead123 wrote: Thu Mar 18, 2021 12:42 am Well this is all very depressing reading but we finally made the jump and bought a house around Boston. Yes it was probably partly due to COVID but mostly we've saved up our down payment and were sort of vaguely looking at houses before the Pandemic but plans accelerated quite a bit.

I feel like this is true of a lot of other things - the shift to grocery delivery, remote work etc etc have all been part of an existing trend but got pulled forward significantly because of the lockdowns. I'm suspecting that homes are the same - people that were going to buy in the next 3-4 years are just all jumping in at the same time coupled with the fact that there's no inventory at all.

I'm guessing things will continue to go this way for this year at the very least because I still see houses going off market in 7-8 days and long lines at open houses. Also hoping we'll have a little bit of quiet consolidation for the next 2 years after that if not a correction.
Depressing why ??. The market will keep going up as long as the interest rate doesn't spike big and inflation. Unless you bought in a very far away place..
Jags4186
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Re: Are we in a housing bubble?

Post by Jags4186 »

NYCaviator wrote: Thu Mar 18, 2021 8:15 am This has to be a bubble. If you look at median housing prices all around the country and compare that with median income levels, it doesn't compute. Housing costs are quickly outpacing income, and something has to give. It's not like the average American is going to wake up tomorrow suddenly make a lot more money. How many people can really afford the $500,000+ that it takes - at minimum - to buy a house in most metro/suburban areas? You are even seeing this in some rural areas as well.

The demand is fueled by a couple of things. First is our collective inability to learn from past bubbles. People see friends and family who have huge amounts of equity in their homes and want to get in the market thinking that it is guaranteed income. They've forgotten 2008. Second is the perceived need for a bigger house after being stuck at home during the pandemic. Low interest rates are pushing people to stretch their housing budgets. Once things open back up, I would bet a lot of people are going to realize that they don't have much money left over for dining out/travel/entertainment because their new mortgage payments are huge. Just look at how many people ask "can I afford this house" on here, and try to justify a bad purchase.

Long story short, this cannot last. \ What goes up must come down. At some point the market will correct itself. Will it be this year, next year, or 5 years from now? Who knows. I personally would not be buying residential property right now.
I think a lot of what you’re seeing is a further divide between the haves and have nots. People in the top 20% and especially top 10% of income range have for the most part thrived during the pandemic. People at the bottom have severely suffered. People at the bottom weren’t buying $300,000 let alone $500,000 houses.

Low interest rates also fuel a temporary price increase. I bought a house in mid-2018. I’ve cut my monthly mortgage payment by $300, over 20%, just by refinancing several times over the past 3 years.
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Re: Are we in a housing bubble?

Post by ohboy! »

Jags4186 wrote: Thu Mar 18, 2021 10:01 am
NYCaviator wrote: Thu Mar 18, 2021 8:15 am This has to be a bubble. If you look at median housing prices all around the country and compare that with median income levels, it doesn't compute. Housing costs are quickly outpacing income, and something has to give. It's not like the average American is going to wake up tomorrow suddenly make a lot more money. How many people can really afford the $500,000+ that it takes - at minimum - to buy a house in most metro/suburban areas? You are even seeing this in some rural areas as well.

The demand is fueled by a couple of things. First is our collective inability to learn from past bubbles. People see friends and family who have huge amounts of equity in their homes and want to get in the market thinking that it is guaranteed income. They've forgotten 2008. Second is the perceived need for a bigger house after being stuck at home during the pandemic. Low interest rates are pushing people to stretch their housing budgets. Once things open back up, I would bet a lot of people are going to realize that they don't have much money left over for dining out/travel/entertainment because their new mortgage payments are huge. Just look at how many people ask "can I afford this house" on here, and try to justify a bad purchase.

Long story short, this cannot last. \ What goes up must come down. At some point the market will correct itself. Will it be this year, next year, or 5 years from now? Who knows. I personally would not be buying residential property right now.
I think a lot of what you’re seeing is a further divide between the haves and have nots. People in the top 20% and especially top 10% of income range have for the most part thrived during the pandemic. People at the bottom have severely suffered. People at the bottom weren’t buying $300,000 let alone $500,000 houses.

Low interest rates also fuel a temporary price increase. I bought a house in mid-2018. I’ve cut my monthly mortgage payment by $300, over 20%, just by refinancing several times over the past 3 years.
Housing is a crisis in my opinion. I hope it doesn’t get worse. I own my home and it’s worth a stupid amount. I don’t care at all if it goes down in value. Houses as investments is a crappy narrative. And it’s become a complete mania over the past 20 years.
Coltrane75
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Re: Are we in a housing bubble?

Post by Coltrane75 »

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/
I'd also like to add to this that there are lots of studies that show permanent WFH jobs have lower job security and higher turnover. You're just a number with not much of a networking presence.
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sergeant
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Re: Are we in a housing bubble?

Post by sergeant »

sergeant wrote: Tue Mar 16, 2021 4:22 pm I have no idea if we are in a bubble. A desirable home came on the market last week. We made a full price offer. Usually I would expect a reply. Our realtor said they are gathering offers until next week and will decide then. Our realtor said we probably won't get it as she thinks there will be multiple offers over asking.
I will update next week how it goes.
Update #1: Our realtor phoned us saying there are others who bid over asking but they may be contingent. She suggested we make a better offer somewhere between 70k-100k over asking. We decided to increase our offer by about 10k. Realtor said current owners are now going to put out a notice for all potential buyers to give a last and final offer. WTH? We won't be making another offer.

The home is desirable due to it's architecture, condition, and location. I have seen multiple showings every day since it hit the market. Some folks are from Silicon Valley. The home is in Southern California. Updates to follow.
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SoullessMinions
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Re: Are we in a housing bubble?

Post by SoullessMinions »

If I could post my anecdotal experience from looking for a house in PDX:

Our housing market has been crazy for several years, but for the past few months of the pandemic it has gotten worse. Our housing supply is at the lowest levels in 40 years (since MLS records began).
The Portland Metro area is virtually sold out up to the $1.5 million price point, according to John L. Scott Real Estate. Correctly priced homes up to $1 million, where 94 percent of sales activity occurs, is predominantly at the frenzy stage and the $1- to $3-million range has strong sales activity. (https://www.oregonlive.com/realestate/2 ... xodus.html)
Median home price increased by $19k from January 2021 to February 2021, an increase of 4% in one month.

I've been trying to purchase a house, and though I'm offering anywhere from $25k-$50k over list price, I have not yet had an offer accepted. The ones I'm seeing completed were at $60k-$70k over list, and even including a concession to have no inspections (which is, frankly, nuts!). I am not conceding inspections!

PDX was just named as one of the most desirable locations to move to post-pandemic on the TODAY show, so we'll probably have more people moving here. (https://www.oregonlive.com/entertainmen ... demic.html) :oops: :shock: :happy

It feels like we're watching the "greater fool theory" play out. Don't know how our housing market is going to end, and perhaps it can and will keep going for quite a while, but it's disheartening to see the city you grew up in become utterly unaffordable.
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unclescrooge
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Re: Are we in a housing bubble?

Post by unclescrooge »

Valuethinker wrote: Tue Mar 16, 2021 10:07 am
JAZZISCOOL wrote: Mon Mar 15, 2021 9:43 pm I just read an interesting Bloomberg story about Canada's white-hot housing market. I know little about Canada's RE market but it seems like things are more challenging up there vs. the US. Rates have been lower than the US. 1.97% at the end of 2020 for a common fixed-rate mortgage. Different dynamics and regulations were discussed.

https://www.bloomberg.com/news/articles ... nd=premium
Canada has gone insane.

For over 10 years, Greater Toronto Area and Greater Vancouver area have been in the top 10 most expensive cities in the world against rents or incomes-- The Economist housing price index. GVA is as expensive as London-- but which city is the #2 capital of the world's financial services industry (at least pre Brexit)? There are jobs in London that can pay £1m-2m for a family home, there are not anything like as many jobs in Vancouver that can do that. Except perhaps in Real Estate - Vancouver has become Miami North (downtown Toronto also).

Toronto spiked in 2017 and then had been gradually falling. Now that has been completely reversed by the latest boom. The condo explosion continues unabated.

4 bedroom house, 1920s built - so c 2000 square feet incl finished basement. Went on the market for $1.5m, sold for 2.25m.

The price effect has spread out across southern Ontario. Houses in Barrie (60m north, and that's a long 60 miles when the snow is blowing) for 3/4 million. Hamilton, which was an ex steel town further west along the lake, now booming. Retirement communities like Collingwood ONT just exploding -- $1m condos.

Part of it was money flowing in from offshore. But people have jumped on the bandwagon, leveraged to the hilt.

At the peak of the US bubble in 2006 6-6.5% of GDP was accounted for by housing and housing related activities. This fell to about 2.5% at the bottom and then recovered towards its historic long run average c 4-4.5%.

Canada? Structurally Canada has higher immigration, so you would expect housing to be more important. But housing and housing related activities are now around 9.5% of GDP.

This will not end well.
This is so bizarre. Canada has roughly the land area of the US but with the population of California. Real estate should be cheaper.

But it might go on for a while. Between 2000 and 2007, 50% of all new job growth came from housing in California. I remember being in a movie theater in late 2005 in San Diego and everyone in the lobby was talking about jumping into real estate. Apparently everyone was going to quit their jobs and become real estate investors, mortgage brokers or real estate agents. Are at the same level of euphoria in Canada yet?
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Re: Are we in a housing bubble?

Post by LINY »

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zaboomafoozarg
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Re: Are we in a housing bubble?

Post by zaboomafoozarg »

ballons wrote: Tue Mar 16, 2021 5:09 pmDenver metro saw 21% annual jump in price. I'm confident the denver metro didn't see wages increase by that. By "cool off" do you mean they will resume the 3-5% increase in perpetuity, stay flat, or go down?
Crazy, it seemed like Denver was seeing 20% price jumps the last couple times I visited there too.

Yikes, just looked up a development next to my hotel that was advertising houses for $250k in 2013 and $350k in 2016. Now the places are selling for $650k.
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Re: Are we in a housing bubble?

Post by Valuethinker »

unclescrooge wrote: Fri Mar 19, 2021 9:22 am
Valuethinker wrote: Tue Mar 16, 2021 10:07 am
JAZZISCOOL wrote: Mon Mar 15, 2021 9:43 pm I just read an interesting Bloomberg story about Canada's white-hot housing market. I know little about Canada's RE market but it seems like things are more challenging up there vs. the US. Rates have been lower than the US. 1.97% at the end of 2020 for a common fixed-rate mortgage. Different dynamics and regulations were discussed.

https://www.bloomberg.com/news/articles ... nd=premium
Canada has gone insane.

For over 10 years, Greater Toronto Area and Greater Vancouver area have been in the top 10 most expensive cities in the world against rents or incomes-- The Economist housing price index. GVA is as expensive as London-- but which city is the #2 capital of the world's financial services industry (at least pre Brexit)? There are jobs in London that can pay £1m-2m for a family home, there are not anything like as many jobs in Vancouver that can do that. Except perhaps in Real Estate - Vancouver has become Miami North (downtown Toronto also).

Toronto spiked in 2017 and then had been gradually falling. Now that has been completely reversed by the latest boom. The condo explosion continues unabated.

4 bedroom house, 1920s built - so c 2000 square feet incl finished basement. Went on the market for $1.5m, sold for 2.25m.

The price effect has spread out across southern Ontario. Houses in Barrie (60m north, and that's a long 60 miles when the snow is blowing) for 3/4 million. Hamilton, which was an ex steel town further west along the lake, now booming. Retirement communities like Collingwood ONT just exploding -- $1m condos.

Part of it was money flowing in from offshore. But people have jumped on the bandwagon, leveraged to the hilt.

At the peak of the US bubble in 2006 6-6.5% of GDP was accounted for by housing and housing related activities. This fell to about 2.5% at the bottom and then recovered towards its historic long run average c 4-4.5%.

Canada? Structurally Canada has higher immigration, so you would expect housing to be more important. But housing and housing related activities are now around 9.5% of GDP.

This will not end well.
This is so bizarre. Canada has roughly the land area of the US but with the population of California. Real estate should be cheaper.

But it might go on for a while. Between 2000 and 2007, 50% of all new job growth came from housing in California. I remember being in a movie theater in late 2005 in San Diego and everyone in the lobby was talking about jumping into real estate. Apparently everyone was going to quit their jobs and become real estate investors, mortgage brokers or real estate agents. Are at the same level of euphoria in Canada yet?
The comparison is not exact because most of Canada is fundamentally uninhabitable (from memory, total land area is 1.5x the USA, only Russia is larger) or only sparsely habitable.

Vancouver sits on a river delta with mountains on 2 sides and the sea on the third. So there are land supply issues.

Toronto it's more complex but in the urban sprawl covers an area say 60-70 miles wide and 40 miles deep. However there have been recent restrictions on land supply for new single family housing. It also had more condos under construction than any other North American city (more than Miami, or NY + Chicago combined).

These things always start with a story, and a reasonable one. e.g. Canada has relatively liberal immigration policies and its biggest cities rise in population. There are constraints on land supply.

But eventually "bubble logic" takes hold. New explanations are created to explain ever more stretched valuations. Fear of Missing Out (FOMO) comes to dominate.

I haven't been able to travel to Canada in over a year (strangely ;-)) but I don't know if the mania has gotten that euphoric, but there is a lot of the economy (nearly 10% of GDP) devoted to housing, housing finance and other related activities. Comparable figure for USA was 6-6.5% at the 2006 peak, and 2.5% at the absolute bottom. If Canada merely reverts to "normal" of say 4-5%, that's a nasty recession in and of itself.

Most Canadian investors have portfolios stuffed full of the Big 5 bank stocks, at 10x book cost. Just as in 2000 Nortel was 25% of the index (and later reached 0). It will not be pretty if that goes down.
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Re: Are we in a housing bubble?

Post by WS1 »

BUILD MOR HOUSING
BarryZuckerkorn
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Re: Are we in a housing bubble?

Post by BarryZuckerkorn »

As someone in the market for a single family house in the DC area, it is hard to not feel like there is something off here. We have put four different offers on four different houses recently. Each offer was over asking and without contingencies. Two offers were 20% over asking. We lost all four offers to all cash buyers. We have toured houses that later sell for almost 40% over asking and one that sold for $250k more than the next highest house that has ever sold in the neighborhood. Effectively, list prices don't mean anything, except start the bidding.

It is hard not to feel like this is something like a bubble, which indicates we should pull back from our search. We have diligently saved for many years to buy a house, so it is discouraging to just wait and hope it gets better. Not much else we can do except stay in the hunt and don't let the excitement or fatigue drive a bad decision. At some point renting may become the best option, but prices are high there too for single family houses with limited inventory.

Two cents on how it is going out here.
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Tingting1013
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Re: Are we in a housing bubble?

Post by Tingting1013 »

BarryZuckerkorn wrote: Sat Mar 20, 2021 1:52 pm As someone in the market for a single family house in the DC area, it is hard to not feel like there is something off here. We have put four different offers on four different houses recently. Each offer was over asking and without contingencies. Two offers were 20% over asking. We lost all four offers to all cash buyers. We have toured houses that later sell for almost 40% over asking and one that sold for $250k more than the next highest house that has ever sold in the neighborhood. Effectively, list prices don't mean anything, except start the bidding.

It is hard not to feel like this is something like a bubble, which indicates we should pull back from our search. We have diligently saved for many years to buy a house, so it is discouraging to just wait and hope it gets better. Not much else we can do except stay in the hunt and don't let the excitement or fatigue drive a bad decision. At some point renting may become the best option, but prices are high there too for single family houses with limited inventory.

Two cents on how it is going out here.
A bubble would be if those winning bids were funded by zero-down interest only mortgages

All cash offers implies instead that there are just a lot of people with a lot more money than you
rage_phish
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Re: Are we in a housing bubble?

Post by rage_phish »

That’s fascinating
drk
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Re: Are we in a housing bubble?

Post by drk »

Flannelbeard wrote: Sat Mar 20, 2021 2:39 pm I have found a couple other companies like this with similar 2 - 3% fees (and operating in other states), but their names escape me at the moment.
Fly Homes is another.
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LINY
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Re: Are we in a housing bubble?

Post by LINY »

BarryZuckerkorn wrote: Sat Mar 20, 2021 1:52 pm As someone in the market for a single family house in the DC area, it is hard to not feel like there is something off here. We have put four different offers on four different houses recently. Each offer was over asking and without contingencies. Two offers were 20% over asking. We lost all four offers to all cash buyers. We have toured houses that later sell for almost 40% over asking and one that sold for $250k more than the next highest house that has ever sold in the neighborhood. Effectively, list prices don't mean anything, except start the bidding.

It is hard not to feel like this is something like a bubble, which indicates we should pull back from our search. We have diligently saved for many years to buy a house, so it is discouraging to just wait and hope it gets better. Not much else we can do except stay in the hunt and don't let the excitement or fatigue drive a bad decision. At some point renting may become the best option, but prices are high there too for single family houses with limited inventory.

Two cents on how it is going out here.

Going though the same thing on Long Island. Saved for many many years just to be essentially pushed out of the market. We saved to put 20% down on a home vs. rushing a few years back and putting down 5%. Now those same homes are selling for 25-35% above the 2018-19 level.

I truly don’t understand it. In 2018-2019 we had friends offer 5% below asking on these homes and we’re able to take their time shopping different deals. Now there is a mad rush and a run up in values. I understand the inflation aspect of the gov’t dumping a ton of money into the economy. But still just doesn’t seem right.
rage_phish
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Re: Are we in a housing bubble?

Post by rage_phish »

Dealing with it in the Bay Area. Postponed selling our house last March due to covid. Listing it now this month and prices are nuts nuts.

Really excited about selling
Terrified about buying

We’ve made one offer. $100k over asking with 50% down. We lost out to an offer $200k over asking
tim1999
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Re: Are we in a housing bubble?

Post by tim1999 »

Bon Jovi came out with this song about 5 years too early. I've had to tell at least 3 people inquiring about my property in the last month that "this house is not for sale."

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Re: Are we in a housing bubble?

Post by goaties »

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bighatnohorse
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Re: Are we in a housing bubble?

Post by bighatnohorse »

Yes we are in a bubble. There is a fifteen year cycle for real estate by my reckoning.
2023 will prove me right or wrong.
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Re: Are we in a housing bubble?

Post by Wanderingwheelz »

Delete
Being wrong compounds forever.
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unclescrooge
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Re: Are we in a housing bubble?

Post by unclescrooge »

Tingting1013 wrote: Sat Mar 20, 2021 2:24 pm
BarryZuckerkorn wrote: Sat Mar 20, 2021 1:52 pm As someone in the market for a single family house in the DC area, it is hard to not feel like there is something off here. We have put four different offers on four different houses recently. Each offer was over asking and without contingencies. Two offers were 20% over asking. We lost all four offers to all cash buyers. We have toured houses that later sell for almost 40% over asking and one that sold for $250k more than the next highest house that has ever sold in the neighborhood. Effectively, list prices don't mean anything, except start the bidding.

It is hard not to feel like this is something like a bubble, which indicates we should pull back from our search. We have diligently saved for many years to buy a house, so it is discouraging to just wait and hope it gets better. Not much else we can do except stay in the hunt and don't let the excitement or fatigue drive a bad decision. At some point renting may become the best option, but prices are high there too for single family houses with limited inventory.

Two cents on how it is going out here.
A bubble would be if those winning bids were funded by zero-down interest only mortgages

All cash offers implies instead that there are just a lot of people with a lot more money than you
Not necessarily true, although it is likely.
When I bought my current home, I initially lost out to professional home flippers who were paying cash, despite being the highest offer.
I revised my offer, and said I would pay all cash, no contingencies, close in 21 days.
Then I had 21 days to find someone to lend me an extra $1 million dollars.
I did. But it cost an arm and a leg.
supalong52
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Re: Are we in a housing bubble?

Post by supalong52 »

Flannelbeard wrote: Tue Mar 16, 2021 3:24 pm
MoonGlow wrote: Tue Mar 16, 2021 2:07 pm Long time lurker here and just created an account for this thread. I'm a Realtor in the greater Boston Area and the market is getting a little to hot. I just had a closing on a property I sold and got 76K over asking. In which we has 12 offers all over the asking price along with the waiving of inspection and appraisal. I am not in the crystal ball or prediction business but as a Realtor something seems way off.
Funny, also in Greater Boston Area and as I was reading your post I was thinking of an open house we went to where we showed up 10 minutes early and there were already about 3 dozen different groups lined up to see it. We drove right on by. Just checked and it went $76k over asking. Could it be the same one?

The market truly makes no sense here. Median home prices are over 6x the median household income in towns out by the I-495 belt which isn't even commutable to Boston. Less desirable towns such as Marlborough, Maynard, Hudson, Billerica, and even Lowell have seen outsized price increases due to no inventory in the towns people actually want to live in like Chelmsford, Westford, Burlington, Acton.

Meanwhile rents are flat or declining, while home prices up 25-35% in many of these towns...
I went to high school in Chelmsford. Didn't know people actually want to live there! I was always looking to leave!
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kenyan
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Re: Are we in a housing bubble?

Post by kenyan »

It feels like a bubble. I have no idea what stage of the bubble, and there are fundamental reasons for a lot of the price increases - but aren't there (almost) always?

I'm buying a house for an interstate move right now, and will be selling our current one shortly. Just hoping that if it is a bubble, it doesn't pop in the next few months! Housing is hot where I live, but definitely hotter where I'm moving to. If the post-COVID economy comes roaring back, then I'm hoping things at least stay flat...or continue to go up for at least a bit longer.

I do think price/rent ratios are perhaps your indicator that things are getting out of whack.
Retirement investing is a marathon.
DB2
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Re: Are we in a housing bubble?

Post by DB2 »

We may be in a housing bubble, but I think it's fairly small and certainly nothing like pre-2008. I refi'd recently and it's a lot harder now (in terms of requirements) than it was back in those days.
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TxFrog
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Re: Are we in a housing bubble?

Post by TxFrog »

No, I don’t believe we’re in a housing bubble.

Housing valuations are most likely extremely high right now due to combination of limited supply, WFH employees not losing income during pandemic (and their high savings rate due to reduced spending during pandemic), and city dwellers in the 30-39 age bracket looking to move out of the city.

Housing prices may cool off and there might be a small correction in 2022 or 2023. But to me a bubble means valuations are irrationally high and that the bubble will “pop”. It’s probably just anecdotal, but the family and friends I know that are looking to buy right now are high income earner who weren’t financial impacted by the pandemic.
dsasdg
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Re: Are we in a housing bubble?

Post by dsasdg »

House price index/gdp per capita is still not so high. It is not a general housing bubble or it won't be a problem in 2~3 years.
Calhoon
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Re: Are we in a housing bubble?

Post by Calhoon »

We've been looking to downsize in wisconsin for the last few years and the housing market has been crazy here for a while now. Same as everywhere else, the housing supply is low so people are beating up each to overpay for property. The thing that drives me crazy is that if you have to react usually the same day otherwise it will be gone. I'd be spending more time deliberating over buying a guitar than i will a 400,000 house. That's a little insane.
djsander2022
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Re: Are we in a housing bubble?

Post by djsander2022 »

I believe it’s out of whack due to interest rates. Also, people are getting ridiculous with FOMO on the interest rates. We are relocating for retirement and looking at the area it is overpriced compared to a year ago and the realtor we are working with has a good idea of the market. A few bid wars, but not too bad. We told her we would not bid up as we don’t have to buy right now. We want to move but the house has to be exactly what we want. The people that want to pay over the inflated price will be sorry in short time when the market settles out.
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