Are we in a housing bubble?

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ballons
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Re: Are we in a housing bubble?

Post by ballons »

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
A bubble is people getting into bidding wars for sight unseen McMansion's that can't even last the duration of a 30 year mortgage. We are nearing the "Suzanne Researched This" FOMO period.

People paid all cash for beanie babies and pets.com stock.
Tingting1013
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Re: Are we in a housing bubble?

Post by Tingting1013 »

djsander2022 wrote: Sun Mar 21, 2021 6:18 pm 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.
Or you will be sorry when you realize you will never be able to buy in.

What folks on this thread are bemoaning has been the norm in the Bay Area for at least a decade. I’m pretty sure someone years ago was thinking about my house “how crazy that a 1600 sqft ranch on an eighth of an acre lot just sold for $1M! I’m sure they’ll be sorry when this market crashes!” Well, I bought that house from those buyers exactly three years ago. For $1.8M.
mnsportsgeek
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Re: Are we in a housing bubble?

Post by mnsportsgeek »

Tingting1013 wrote: Sun Mar 21, 2021 8:30 pm
djsander2022 wrote: Sun Mar 21, 2021 6:18 pm 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.
Or you will be sorry when you realize you will never be able to buy in.

What folks on this thread are bemoaning has been the norm in the Bay Area for at least a decade. I’m pretty sure someone years ago was thinking about my house “how crazy that a 1600 sqft ranch on an eighth of an acre lot just sold for $1M! I’m sure they’ll be sorry when this market crashes!” Well, I bought that house from those buyers exactly three years ago. For $1.8M.
People keep talking about a supply shortage like it’s something that is gonna go away. Where is the supply gonna come from? Builders building houses that are more expensive than what people are already calling overpriced?

That’s fine if people want to believe we’re in a bubble but unless people start getting their homes taken away from them then I don’t see any bubble. People selling homes are going to buy other homes, so that doesn’t increase supply. Just increases transactions. Will be very telling what happens once all foreclosure restrictions are lifted.

I do think you have a point in that much of the country is now seeing what the Bay Area has already seen in some respects.
slidecreek
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Re: Are we in a housing bubble?

Post by slidecreek »

mnsportsgeek wrote: Sun Mar 21, 2021 9:29 pm

People keep talking about a supply shortage like it’s something that is gonna go away. Where is the supply gonna come from? Builders building houses that are more expensive than what people are already calling overpriced?
At least around me, there are a large number of unoccupied homes. People are literally buying them as investments they expect to resell for a profit in a few years, not living in them.
LINY
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Re: Are we in a housing bubble?

Post by LINY »

Tingting1013 wrote: Sun Mar 21, 2021 8:30 pm
djsander2022 wrote: Sun Mar 21, 2021 6:18 pm 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.
Or you will be sorry when you realize you will never be able to buy in.

What folks on this thread are bemoaning has been the norm in the Bay Area for at least a decade. I’m pretty sure someone years ago was thinking about my house “how crazy that a 1600 sqft ranch on an eighth of an acre lot just sold for $1M! I’m sure they’ll be sorry when this market crashes!” Well, I bought that house from those buyers exactly three years ago. For $1.8M.
San Francisco is also a very unique market due to the high level of high paying tech jobs and the recent tech boom/ stock boom and RSUs for employees, etc. NYC (About 1 Hour west of me) is also a unique market or at least it was until this happened.

The issue is both these areas have high demand careers and growing salaries. But on a national level home prices have been ballooning up. There are homes seeing 25-35% over asking and they are over a two to three hour commute to NYC. I get the whole work from home. But some homes in rural areas are getting Multiple offers and are nowhere near a metro area. So what happens if your employer decides that a programmer in India can do your job for 1/4 the salary? Now you’re nowhere near any major sources of employment. In other words, it seems to become more national as opposed to small submarkets which had notable reasons for the high demand. Location, Location, Location vs. WFH.

I don’t know. I think when I hear people are bidding up an asset whether it be housing, stocks, Bitcoin or tulips. It just appears to be more a mania/FOMO, whatever you want to call it, then based on the actual underlying fundamentals and logical beliefs.
Valuethinker
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Re: Are we in a housing bubble?

Post by Valuethinker »

slidecreek wrote: Sun Mar 21, 2021 10:16 pm
mnsportsgeek wrote: Sun Mar 21, 2021 9:29 pm

People keep talking about a supply shortage like it’s something that is gonna go away. Where is the supply gonna come from? Builders building houses that are more expensive than what people are already calling overpriced?
At least around me, there are a large number of unoccupied homes. People are literally buying them as investments they expect to resell for a profit in a few years, not living in them.
Can you say what geographic region or city that is? ie "around you"

I wasn't aware that the US market was seeing that kind of speculative activity. That implies that we are much later into this cycle than I had thought.

I had concluded given the dimensions of the 2008 downturn, with housing starts dropping to almost a post-WW2 low, that it would take quite a long time for the US housing market in general to get that out of balance again. Decades not years. Particularly given a tighter regulation of housing finance.

I may have overestimated the regulatory changes post Crash.
Valuethinker
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Re: Are we in a housing bubble?

Post by Valuethinker »

LINY wrote: Sun Mar 21, 2021 10:48 pm

I don’t know. I think when I hear people are bidding up an asset whether it be housing, stocks, Bitcoin or tulips. It just appears to be more a mania/FOMO, whatever you want to call it, then based on the actual underlying fundamentals and logical beliefs.
I absolutely share your sentiments re bubbles, but is the US housing market in a bubble?

I would say this is more a supply-demand mismatch induced by Covid-19. Work precautions & disruptions have reduced output of new homes, whereas there is a demand shift (away from city centre condos and towards more suburban/ exurban homes?).

Thus you get local price surges, because supply outweighs demand.

But this is an imbalance that can be addressed. As vaccination levels rise, so too does normal economic activity eg construction and its supply chain.

However I might have missed something. I assumed that because of changes to the system of housing finance, and the shocks of 2008-09, that a repeat of a national US housing bubble was very unlikely - until at least 20 years had passed since the crisis (i.e. 2028+).

It may have been I have my eye off the ball. What is Calculated Risk blog saying?
Auream
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Re: Are we in a housing bubble?

Post by Auream »

Valuethinker wrote: Mon Mar 22, 2021 4:42 am
slidecreek wrote: Sun Mar 21, 2021 10:16 pm At least around me, there are a large number of unoccupied homes. People are literally buying them as investments they expect to resell for a profit in a few years, not living in them.
Can you say what geographic region or city that is? ie "around you"
Indeed, would be interesting to hear where this is going on. Single family homes (hard to believe) or condos? You'd have to be expecting massive appreciation to be worth just letting it sit empty vs. renting it out, even if the rental income doesn't cover the carrying cost (which at current US housing prices is probably the case in most major markets with a 30-year mortgage).
danaht
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Re: Are we in a housing bubble?

Post by danaht »

I don't think we are in a bubble. But, we are in a period where there is NO inventory in certain markets. Until we build more houses - this situation will persist for a few more years. It's definitely a sellers market in those communities. Buyer's are having to bid silently as soon as a house opens and accept conditions as is.
z3r0c00l
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Re: Are we in a housing bubble?

Post by z3r0c00l »

Welp the view from NYC is the opposite from a bubble, this past year there have been steadily declining prices at least at the price points of interest to me. (300K - 1.2M) Regretfully I am still a few years short of ready to buy a place of my own, but this seems like a great time to buy given low interest rates and reduced prices. I wouldn't offer or expect to pay more today for a NYC apartment than 5 years ago, and price histories on listings confirm this.
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ray.james
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Re: Are we in a housing bubble?

Post by ray.james »

Valuethinker wrote: Mon Mar 22, 2021 4:48 am
However I might have missed something. I assumed that because of changes to the system of housing finance, and the shocks of 2008-09, that a repeat of a national US housing bubble was very unlikely - until at least 20 years had passed since the crisis (i.e. 2028+).

It may have been I have my eye off the ball. What is Calculated Risk blog saying?
I very much doubt there is a systemic bubble. I am also a fan of Calculated risk and he did predict the largest cohort of USA buying houses till 2025 would lead to multi-year gains. There are indeed a lot of condos/townhomes that are marked as available in the city. In my view some of these are bought in 2010 lows and retail investors kept them since they qualified for buying SFH with out selling(aka low interest rates).

edit: https://www.calculatedriskblog.com/2021 ... ntory.html
Simply put, no incentive to turn rentals to ownership units. Population demand and low interest rates.
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TheHiker
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Re: Are we in a housing bubble?

Post by TheHiker »

Tingting1013 wrote: Sun Mar 21, 2021 8:30 pm What folks on this thread are bemoaning has been the norm in the Bay Area for at least a decade. I’m pretty sure someone years ago was thinking about my house “how crazy that a 1600 sqft ranch on an eighth of an acre lot just sold for $1M! I’m sure they’ll be sorry when this market crashes!” Well, I bought that house from those buyers exactly three years ago. For $1.8M.
Right. We moved to the bay area 21 years ago. I remember seeing houses on our street selling for 700K and thinking how crazy that was and that prices were bound to come down because they were so out of line with median incomes. They never did not despite the dot-com crash that followed.
Glockenspiel
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Re: Are we in a housing bubble?

Post by Glockenspiel »

Demand is sooo much stronger than supply right now in the Twin Cities, MN. Houses are getting 10-30 offers in one weekend with no contingencies. Many offering all-cash, above asking offers, or offering appraisal guarantees if the appraisal doesn't come back high enough. Until supply increases, I don't see how this ends unless rates rise a lot. It might take a couple years until supply meets demand in certain markets.

We signed a purchase agreement on a to-be-built new construction home in a suburb in the Twin Cities for over $700k in January, and the big builder has increased the "base price" on their homes by $40k in just the 3 months since we signed.
snowman
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Re: Are we in a housing bubble?

Post by snowman »

ray.james wrote: Mon Mar 22, 2021 11:55 am I very much doubt there is a systemic bubble. I am also a fan of Calculated risk and he did predict the largest cohort of USA buying houses till 2025 would lead to multi-year gains. There are indeed a lot of condos/townhomes that are marked as available in the city. In my view some of these are bought in 2010 lows and retail investors kept them since they qualified for buying SFH with out selling(aka low interest rates).

edit: https://www.calculatedriskblog.com/2021 ... ntory.html
Simply put, no incentive to turn rentals to ownership units. Population demand and low interest rates.
I tend to agree - it's all about low inventory, and the reasons behind it. The one minor element missing in his otherwise excellent analysis is the cost of building materials that pretty much skyrocketed over the last 12 months. It raises the cost of building new housing units substantially, which in turn lifts resale prices. People that cannot grasp current resale prices have likely not visited new developments in their area. The delta is quite large!

Although the market might be changing just a little, at least where I live. This was the first time in 2 months that not all houses sold in a weekend! OTOH, the ones that sold (3 out of 6) were, IMO, insanely overpriced, while the reasonable, cheaper units are still on the market. Go figure!
Jess Saying
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Re: Are we in a housing bubble?

Post by Jess Saying »

Valuethinker wrote: Mon Mar 22, 2021 4:48 am However I might have missed something. I assumed that because of changes to the system of housing finance, and the shocks of 2008-09, that a repeat of a national US housing bubble was very unlikely - until at least 20 years had passed since the crisis (i.e. 2028+).

It may have been I have my eye off the ball.
As of September 2018, prices were up 53% off the 2012 low (40% after adjusting for inflation). https://insights.som.yale.edu/insights/ ... an-it-last

It's amazing to think that from 1950-1997, prices basically tracked inflation.
ballons
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Re: Are we in a housing bubble?

Post by ballons »

mnsportsgeek wrote: Sun Mar 21, 2021 9:29 pm People keep talking about a supply shortage like it’s something that is gonna go away. Where is the supply gonna come from? Builders building houses that are more expensive than what people are already calling overpriced?

That’s fine if people want to believe we’re in a bubble but unless people start getting their homes taken away from them then I don’t see any bubble. People selling homes are going to buy other homes, so that doesn’t increase supply. Just increases transactions. Will be very telling what happens once all foreclosure restrictions are lifted.

I do think you have a point in that much of the country is now seeing what the Bay Area has already seen in some respects.
Falling home prices have the ability to produce a record number of supply.
Cash-Out Refinancings Hit Highest Level Since Financial Crisis
https://www.wsj.com/articles/cash-out-r ... 1615458602

Americans extracted more cash from their homes through cash-out refinancings in 2020 than in any year since the financial crisis.

U.S. homeowners cashed out $152.7 billion in home equity last year, a 42% increase from 2019 and the most since 2007, according to mortgage-finance giant Freddie Mac . It was a blockbuster year for mortgage originations in general as well: Lenders churned out more mortgages than ever in 2020, fueled by about $2.8 trillion in refis, according to mortgage-data firm Black Knight Inc.

Some borrowers viewed cash-out refis as a way to cushion themselves against an uncertain economy last year. Others wanted to build and redecorate, and being stuck at home gave them the time to do the paperwork. Homeowners also had more equity available to tap: Though home prices tend to fall during economic downturns, they jumped during the Covid-19 recession.
Homes are once again ATM's that can't lose value.
drk
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Re: Are we in a housing bubble?

Post by drk »

ballons wrote: Mon Mar 22, 2021 5:37 pm Homes are once again ATM's that can't lose value.
Eh, look beyond the headline numbers at the context, and things seem fine:

Image
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HE Pennypacker
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Re: Are we in a housing bubble?

Post by HE Pennypacker »

I am curious if the demand is mostly in the SFH segment or across the board "housing". Is there really demand for condos out there ? I tend to think that most people are looking for some type of yard and space due to the pandemic but haven't seen any data in support.
Slacker
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Re: Are we in a housing bubble?

Post by Slacker »

As soon as I see comparable homes going for more than 2x what we paid in our neighborhood, the rental property will be put up for sale immediately. Looks like it is getting close. We weren't expecting these prices for another 5 years.
tj
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Re: Are we in a housing bubble?

Post by tj »

HE Pennypacker wrote: Mon Mar 22, 2021 6:13 pm I am curious if the demand is mostly in the SFH segment or across the board "housing". Is there really demand for condos out there ? I tend to think that most people are looking for some type of yard and space due to the pandemic but haven't seen any data in support.

Condo prices are nutty too.
stoptothink
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Re: Are we in a housing bubble?

Post by stoptothink »

tj wrote: Mon Mar 22, 2021 6:52 pm
HE Pennypacker wrote: Mon Mar 22, 2021 6:13 pm I am curious if the demand is mostly in the SFH segment or across the board "housing". Is there really demand for condos out there ? I tend to think that most people are looking for some type of yard and space due to the pandemic but haven't seen any data in support.

Condo prices are nutty too.
We're in a townhome, value up >65% since 2016. We bought a townhome because there were zero SFH within a mile of my office (but several condo and townhome complexes) and I was determined to walk to work. Biddings wars and sales way above assessments are all over our neighborhood.
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sergeant
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Re: Are we in a housing bubble?

Post by sergeant »

sergeant wrote: Thu Mar 18, 2021 3:19 pm
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.
Update #2: Our realtor phoned us saying we didn't get the home. The owners were supposed to put out a request for last and final but an offer came in that "blew everyone away", she didn't know the accepted offer.
The listing realtor will let our realtor know if our 10.5k over asking, all cash, any closing date they want, and 3 weeks free rent back to seller :annoyed offer is acceptable as a back-up offer.
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rage_phish
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Re: Are we in a housing bubble?

Post by rage_phish »

Went to visit a house today that listed yesterday
They hadn’t even decided a day for offers yet
After touring it we were in the driveway talking when my phone dinged...Redfin letting my know the house I was at just went pending. Guess they received and offer they couldn’t turn down
:(
Tingting1013
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Re: Are we in a housing bubble?

Post by Tingting1013 »

sergeant wrote: Mon Mar 22, 2021 7:57 pm
sergeant wrote: Thu Mar 18, 2021 3:19 pm
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.
Update #2: Our realtor phoned us saying we didn't get the home. The owners were supposed to put out a request for last and final but an offer came in that "blew everyone away", she didn't know the accepted offer.
The listing realtor will let our realtor know if our 10.5k over asking, all cash, any closing date they want, and 3 weeks free rent back to seller :annoyed offer is acceptable as a back-up offer.
In CA you have to make an offer that you know in your gut is overpaying by $100k to have any chance of winning.
jarjarM
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Re: Are we in a housing bubble?

Post by jarjarM »

rage_phish wrote: Mon Mar 22, 2021 8:03 pm Went to visit a house today that listed yesterday
They hadn’t even decided a day for offers yet
After touring it we were in the driveway talking when my phone dinged...Redfin letting my know the house I was at just went pending. Guess they received and offer they couldn’t turn down
:(
This sounds like 2013-2018 in the bay area.
rage_phish
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Re: Are we in a housing bubble?

Post by rage_phish »

Tingting1013 wrote: Mon Mar 22, 2021 8:08 pm
sergeant wrote: Mon Mar 22, 2021 7:57 pm
sergeant wrote: Thu Mar 18, 2021 3:19 pm
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.
Update #2: Our realtor phoned us saying we didn't get the home. The owners were supposed to put out a request for last and final but an offer came in that "blew everyone away", she didn't know the accepted offer.
The listing realtor will let our realtor know if our 10.5k over asking, all cash, any closing date they want, and 3 weeks free rent back to seller :annoyed offer is acceptable as a back-up offer.
In CA you have to make an offer that you know in your gut is overpaying by $100k to have any chance of winning.
Yup. When we look at houses we assume $100-200k over asking and very real chance we still lose
rage_phish
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Re: Are we in a housing bubble?

Post by rage_phish »

jarjarM wrote: Mon Mar 22, 2021 8:11 pm
rage_phish wrote: Mon Mar 22, 2021 8:03 pm Went to visit a house today that listed yesterday
They hadn’t even decided a day for offers yet
After touring it we were in the driveway talking when my phone dinged...Redfin letting my know the house I was at just went pending. Guess they received and offer they couldn’t turn down
:(
This sounds like 2013-2018 in the bay area.
We’re in the East bay. It’s unreal
Tingting1013
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Re: Are we in a housing bubble?

Post by Tingting1013 »

rage_phish wrote: Mon Mar 22, 2021 8:38 pm
Tingting1013 wrote: Mon Mar 22, 2021 8:08 pm
sergeant wrote: Mon Mar 22, 2021 7:57 pm
sergeant wrote: Thu Mar 18, 2021 3:19 pm
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.
Update #2: Our realtor phoned us saying we didn't get the home. The owners were supposed to put out a request for last and final but an offer came in that "blew everyone away", she didn't know the accepted offer.
The listing realtor will let our realtor know if our 10.5k over asking, all cash, any closing date they want, and 3 weeks free rent back to seller :annoyed offer is acceptable as a back-up offer.
In CA you have to make an offer that you know in your gut is overpaying by $100k to have any chance of winning.
Yup. When we look at houses we assume $100-200k over asking and very real chance we still lose
It’s even worse than that, I start with the assumption that the asking price is always underpriced by 10-20%, and then I add the $100k on top of that.
jarjarM
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Re: Are we in a housing bubble?

Post by jarjarM »

rage_phish wrote: Mon Mar 22, 2021 8:39 pm
jarjarM wrote: Mon Mar 22, 2021 8:11 pm
rage_phish wrote: Mon Mar 22, 2021 8:03 pm Went to visit a house today that listed yesterday
They hadn’t even decided a day for offers yet
After touring it we were in the driveway talking when my phone dinged...Redfin letting my know the house I was at just went pending. Guess they received and offer they couldn’t turn down
:(
This sounds like 2013-2018 in the bay area.
We’re in the East bay. It’s unreal
Yeah, I noticed the price went up significantly from 2019 to this year, supply is very limited. I used to see 5+ for sale signs on the corner every spring during normal year. This year there were 1. And that house sold for $500k more than comps in 2019. Crazy.
Random Walker
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Re: Are we in a housing bubble?

Post by Random Walker »

Was surprised to read recently, think it was Jonathon Clement’s article, that the volatility of housing prices is about the same as stocks.

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Ron Ronnerson
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Re: Are we in a housing bubble?

Post by Ron Ronnerson »

rage_phish wrote: Mon Mar 22, 2021 8:39 pm
jarjarM wrote: Mon Mar 22, 2021 8:11 pm
rage_phish wrote: Mon Mar 22, 2021 8:03 pm Went to visit a house today that listed yesterday
They hadn’t even decided a day for offers yet
After touring it we were in the driveway talking when my phone dinged...Redfin letting my know the house I was at just went pending. Guess they received and offer they couldn’t turn down
:(
This sounds like 2013-2018 in the bay area.
We’re in the East bay. It’s unreal
We’re in the East Bay as well. We live in a townhome community and prices are up 15% in the last 2-3 months alone. We’ve been here since 2010 but haven’t ever seen prices go up this fast before. It really is something.
masteraleph
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Re: Are we in a housing bubble?

Post by masteraleph »

Wow, after reading 5 pages I feel like I still have a few things to contribute/consolidate in this thread!

1) As people have noted, supply is very constrained. Some of that will open up due to foreclosures (though I'd expect that to be something of a trickle rather than a rush- they still have to work their way through the court system even after they're allowed again). Some of that will open up in the next 10 or so years as more and more Baby Boomers reach a point where their house doesn't work for them physically- I don't mean downsizing, I mean needing assisted living facilities. But there is also a constraint of new houses being very sparse in the last decade, and those typically not at the low end of the market.

2) The COVID issues are definitely significant, but we're also naturally at the point of millennials wanting larger dwelling places, especially those with families. And that's not disappearing. As one of those millennials, I'll add that I think there are some minor differences to what Baby Boomers preferred- yes, plenty of folks out in rural areas, but also people wanting relatively walkable suburbs and close-by amenities. Wouldn't surprise me if neighborhoods with vs without sidewalks diverge a bit in the future.

3) People have mentioned tech money and biglaw money, but I thought I'd mention a couple of other sources I've seen. First of all, the bank of mom and dad- most people don't have this to a significant degree- but the upper income tier of Baby Boomers lived through some pretty hot stock markets and may be opening up their wallets. There are also definitely a bunch of people who are making cash offers but actually using hard money loans and then taking out mortgages after the fact to pay them back. And of course- and this is really, really morbid, and I apologize for bringing it up, but it's real- COVID has probably increased the number of inheritances by a new generation.

4) The interest rates definitely make a difference. There are tons of threads on here with "can I afford this house?", and lots of different advice. But it's important to remember how drastically they've changed. At 9% (way below the early '80s in the mid teens!), a $500,000 loan is $4023/month. At 5%, it's $2684. At 3.25% (good rate today), $2176. At 2.75% (good rate a month ago), $2041. Now, obviously there are property taxes and insurance and utilities and so on. But back when the home at 3x earnings thing was coined, loans were 100% more expensive per month. Heck, a 15 year loan at 2.75%- you can get that rate today- is $3393/month, so still way cheaper than at 9% interest over 30 years. That makes a big difference on who can afford monthly payments, and skews the appropriate advice significantly (DTI is probably a much better metric). Or to put it another way- at 3.25%, an extra $100,000 purchase price is a $500/month increase.
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Re: Are we in a housing bubble?

Post by angelescrest »

ohboy! wrote: Thu Mar 18, 2021 10:25 am
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.
Hear hear, it’s about time someone called out the real problem. Housing is indeed in a crisis in our country and it needs solving. Close friend the day said they hoped their home spikes in value and I said I didn’t want to see that for our home and neighborhood.
angelescrest
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Re: Are we in a housing bubble?

Post by angelescrest »

What about rentals? The price of rentals has increased dramatically in CA at about the same pace as selling prices. I’m seeing fairly humble properties that would normally rent at $3.5k, now getting listed and snatched up at $5k per month.
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Re: Are we in a housing bubble?

Post by Nathan Drake »

angelescrest wrote: Mon Mar 22, 2021 10:43 pm What about rentals? The price of rentals has increased dramatically in CA at about the same pace as selling prices. I’m seeing fairly humble properties that would normally rent at $3.5k, now getting listed and snatched up at $5k per month.
This goes against the broader trend in the country which shows decreasing rents.

The divergence of rents vs home prices recently should basically dissuade any potential buyer to hold off.

I don’t understand why people get so caught up in home buying mania in the short term. There’s an artificial supply shock. Wait until it settles down. Throwing 100k over asking with all cash deals is just insanity. There is very little harm in renting until things get back to normal, but it seems gone buyers get completely wrapped up in FOMO like anything else right now.
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dboeger1
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Re: Are we in a housing bubble?

Post by dboeger1 »

There's a common misconception that home prices and median income are tightly linked. They influence each other, no doubt, but there is no guarantee, at least in the US, that housing will remain affordable for most. Private jets are most certainly not affordable for the average American, but that market has been doing quite alright for many years. To anyone in major cities since the GFC, it's been pretty obvious that basic housing in those areas has been turning into a luxury good. I've been saying for a while now that this wave of unaffordability was on its way to other parts of the country, but I had no idea the pandemic would accelerate it so much. My father and I both independently bought homes earlier in 2020 before the madness reached its peak, mainly because we were both looking to buy anyway, but the spark was when interest rates bottomed out and we sensed the flood of cheap money that was about to pour in alongside all the supply constraints. It's sad but that's the nature of capitalist America. If builders can't affordably turn a profit meeting the demand for new homes, there simply won't be enough to go around. Public housing is starting to sound good again, but that's a whole can of political worms with a rough history in the US.
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physixfan
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Re: Are we in a housing bubble?

Post by physixfan »

dboeger1 wrote: Tue Mar 23, 2021 12:01 am There's a common misconception that home prices and median income are tightly linked. They influence each other, no doubt, but there is no guarantee, at least in the US, that housing will remain affordable for most.
Agree. I think a person with a median income being able to afford a house in the suburb of a first/second tier city is a historical abnormality. A house with a backyard and a reasonable commute time to the center of a city is almost always a luxury in many countries. That wasn't a luxury in the US in the past is mainly because USA has relatively short history of civilization therefore land is quite abundant compared to other countries with a long history; also because since 1945 USA is basically the world leader and has a lot of advantages compared to other normal countries. In my understanding, it is more realistic for a normal country that a person with a median income can only afford a 1,000 sqft condo.
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Ketawa
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Re: Are we in a housing bubble?

Post by Ketawa »

HE Pennypacker wrote: Mon Mar 22, 2021 6:13 pm I am curious if the demand is mostly in the SFH segment or across the board "housing". Is there really demand for condos out there ? I tend to think that most people are looking for some type of yard and space due to the pandemic but haven't seen any data in support.
It's clearly not across the board. I am in DC and just bought a 2 bed/2 bath apartment in a 300+ unit co-op. I knew which building I wanted to buy in and toured a few of the listed places including the one I liked the most.

The unit I wanted was on the market a little over a week and I submitted an offer 3% below asking. The sellers received another offer the same day, so the other bidder and I submitted escalation clauses. I based my escalation cap on similar units listed for sale in the same building; my cap was 2% over asking since I thought it was priced a little low. The seller accepted my offer at my cap, which was actually $1K less than the other bidder's cap, stating they appreciated my career. I also waived property inspection contingencies (not sure if other bidder did) and had 20% down with plenty of extra cash available in case of issues with the appraisal, vs 10% down for the other bidder.

Prices appear to be entirely reasonable for places in the city without outdoor space or in large buildings. When I run my purchase figures through a rent vs buy calculator, I get equivalent rent about 20% lower than what I could find on the rental market. I think it was an excellent time for me to buy.

A friend also listed her 1 bed/1 bath condo she purchased new (developed/converted in an older building) about 12 months ago, and it was on the market for 4 months before she accepted an offer at her original purchase price.
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Re: Are we in a housing bubble?

Post by vfinx »

Given that there has been so little inventory (and presumably a low volume of transactions), then if there is a bubble, there aren't that many recent buyers (at highly inflated prices) that will actually be burned by it. This is probably wishful thinking, but my hope is that this means that a popping of the bubble would have more limited impact, and it won't bring down the broader economy like the GFC. The vast majority of homeowners will have purchased their homes at significantly lower prices, and many are even more financially secure now after re-financing at lower rates.
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sergeant
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Re: Are we in a housing bubble?

Post by sergeant »

Tingting1013 wrote: Mon Mar 22, 2021 8:40 pm
rage_phish wrote: Mon Mar 22, 2021 8:38 pm
Tingting1013 wrote: Mon Mar 22, 2021 8:08 pm
sergeant wrote: Mon Mar 22, 2021 7:57 pm
sergeant wrote: Thu Mar 18, 2021 3:19 pm

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.
Update #2: Our realtor phoned us saying we didn't get the home. The owners were supposed to put out a request for last and final but an offer came in that "blew everyone away", she didn't know the accepted offer.
The listing realtor will let our realtor know if our 10.5k over asking, all cash, any closing date they want, and 3 weeks free rent back to seller :annoyed offer is acceptable as a back-up offer.
In CA you have to make an offer that you know in your gut is overpaying by $100k to have any chance of winning.
Yup. When we look at houses we assume $100-200k over asking and very real chance we still lose
It’s even worse than that, I start with the assumption that the asking price is always underpriced by 10-20%, and then I add the $100k on top of that.
We already have a really nice home a couple miles from the house we wanted to buy. It's hard for me just to throw money at the sellers hoping they take our offer. We realized it was a unique home and might command a premium but set a limit on what we would offer. We had hoped being a cash offer with liberal closing terms might get us the house. We were wrong and are disappointed but appreciate that we already have a home. We feel bad for folks that actually really need to buy a place.
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NKOTB
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Re: Are we in a housing bubble?

Post by NKOTB »

A 5 page long discussion on this form and ongoing comments means the housing market is behaving unnaturally or unhealthy.
Agree that low supply and low inventory is causing a bottleneck but it also cannot be neglected that there are bidding wars at multiple markets nationwide, people bidding hundreds of thousands above asking price. My friend recently moved to Tampa/ St. Petersburg area and the house prices there have gone up almost 20-25% in past 2 years. The neighborhood they want to live are either full of million dollar mid century old homes with plain upgrades to expensive condos or townhouses. Even those are shown pending within 1-2 of listing or are sold several thousands above asking price.
It is scary and foolish to throw away so much money on housing above their real value and buy them without any inspection. I feel sorry for people really in need/ want a house and are priced out in current market. If you have patience and can wait, it might be worthwhile staying put or rent for a year until things calm down.
The market may not be in a bubble and heading for a crash, but overinflated yes, and could see an appropriate correction.
brianH
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Re: Are we in a housing bubble?

Post by brianH »

masteraleph wrote: Mon Mar 22, 2021 9:40 pm First of all, the bank of mom and dad- most people don't have this to a significant degree- but the upper income tier of Baby Boomers lived through some pretty hot stock markets and may be opening up their wallets.
The inter-generational wealth transfer between Boomers and X/Millennials has been estimated to be almost 70 trillion (that's TRILLION) dollars. The disparity between those in the X/Y generations that are lucky enough to tap into their rich parents' estates and those that don't will be massive.

Consider those all-cash house offers as an early inheritance.
Priam
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Re: Are we in a housing bubble?

Post by Priam »

LINY wrote: Sun Mar 21, 2021 10:48 pm San Francisco is also a very unique market due to the high level of high paying tech jobs and the recent tech boom/ stock boom and RSUs for employees, etc. NYC (About 1 Hour west of me) is also a unique market or at least it was until this happened.

The issue is both these areas have high demand careers and growing salaries. But on a national level home prices have been ballooning up. There are homes seeing 25-35% over asking and they are over a two to three hour commute to NYC. I get the whole work from home. But some homes in rural areas are getting Multiple offers and are nowhere near a metro area. So what happens if your employer decides that a programmer in India can do your job for 1/4 the salary? Now you’re nowhere near any major sources of employment. In other words, it seems to become more national as opposed to small submarkets which had notable reasons for the high demand. Location, Location, Location vs. WFH.

I don’t know. I think when I hear people are bidding up an asset whether it be housing, stocks, Bitcoin or tulips. It just appears to be more a mania/FOMO, whatever you want to call it, then based on the actual underlying fundamentals and logical beliefs.
This is what I am seeing too. My area is being reported as 21% overpriced and my sister’s city, with a population of about 100,000 and 1 hour away from a major city is seeing homes selling at $300k and there are no sustainable jobs there.

I said the same thing to her; when these tech people lose their jobs they will be flocking back to major cities because the small cities are not where the jobs are at.

Google has already stated they value in office work over working from home and will be asking their employees to return to the office.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Checked inventory today. I found very few homes for sale (65) in my immediate area. I don't see home prices normalizing until we back to normal for sale inventories. And it doesn't help that lumber prices have gone up for new builds.
angelescrest
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Re: Are we in a housing bubble?

Post by angelescrest »

Nathan Drake wrote: Mon Mar 22, 2021 11:07 pm
angelescrest wrote: Mon Mar 22, 2021 10:43 pm What about rentals? The price of rentals has increased dramatically in CA at about the same pace as selling prices. I’m seeing fairly humble properties that would normally rent at $3.5k, now getting listed and snatched up at $5k per month.
This goes against the broader trend in the country which shows decreasing rents.

The divergence of rents vs home prices recently should basically dissuade any potential buyer to hold off.

I don’t understand why people get so caught up in home buying mania in the short term. There’s an artificial supply shock. Wait until it settles down. Throwing 100k over asking with all cash deals is just insanity. There is very little harm in renting until things get back to normal, but it seems gone buyers get completely wrapped up in FOMO like anything else right now.
To be more specific, yes, urban apts have dropped in price. But I’m noting that SFHs in the suburbs are also spiking due to the demand and limited supply. E.g., one rental just showed up yesterday and the contact said it isn’t taking anymore emails because they already received 30 inquiries and multiple applications in a few hours.
joaquin168q
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Re: Are we in a housing bubble?

Post by joaquin168q »

quite possibly in a bubble.

I just sold several of my ~5 year old rental properties for ~160% over purchase price.
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retireIn2020
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Re: Are we in a housing bubble?

Post by retireIn2020 »

NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
https://www.merriam-webster.com/dictionary/abide
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physixfan
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Re: Are we in a housing bubble?

Post by physixfan »

retireIn2020 wrote: Thu Mar 25, 2021 7:53 pm NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
Thanks! These data are very informative.
m@ver1ck
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Re: Are we in a housing bubble?

Post by m@ver1ck »

We were looking to buy a bigger home last year. Balked at the $1.5M price. Same homes are now going for $2.2M. Seattle Suburbs (Sammamish).
WhiteMaxima
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Re: Are we in a housing bubble?

Post by WhiteMaxima »

Building material and labor cost are all up. Covid limit supply. Low interest rate. 5 TB money into the American pocket. No we are not in bubble.
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