Tales from this insane real estate market [Home sales]

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TomatoTomahto
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Re: Tales from this insane real estate market

Post by TomatoTomahto »

Johnny Thinwallet wrote: Fri Mar 26, 2021 8:43 pm One of my favorite stories is my parents had to completely paint that first house before moving in because the previous owners had Frankenstein painted on all the walls. I'm talking life-size, take up the entire wall paintings of Frankenstein.
I’m about 70 years old and somewhat jaded, but you caught me unprepared this fine Saturday morning. I am trying to imagine the backstory, but I’m coming up short.

It reminds me of my kids and friends walking through our first house before we closed. They looked at the hideous wallpaper and, without exception, said “I hope you got a good price on this.” I hope your parents got a good price :beer

I don’t know that it works today, but we have gotten “bargains” in buying our two houses because most people can’t see past bad decorating and room layout choices. My wife has the visual chops to see potential.
I get the FI part but not the RE part of FIRE.
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dogagility
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Re: Tales from this insane real estate market

Post by dogagility »

TomatoTomahto wrote: Sat Mar 27, 2021 7:54 am I don’t know that it works today, but we have gotten “bargains” in buying our two houses because most people can’t see past bad decorating and room layout choices. My wife has the visual chops to see potential.
I agree, Tomato.

Some people view "potential" as work and/or money. Which it is, but we don't mind a little sweat equity.
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JoeJohnson
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Re: Tales from this insane real estate market

Post by JoeJohnson »

I don't think this housing increase is all that shocking given many circumstances. #1 is obviously the biggest reason.

1) We bought three years ago and our rate was 4.25%. Rates were down around 2.5% in 2020. This results in the ability to pay about 20% more for the house and still have the same payment as we did in 2018.

2) Government money: stimulus 1, 2, 3. But let's not forget that many got a reduction in federal income tax, increased child tax credits, etc etc from 2018 to present. This increases ability to cash flow monthly and/or increased cash positions for down payment. Pay off other debts, etc.

3) Stock market boomed instead of busting. See #2. This helps with down payments.

4) Family resources as the greatest generation pass and boomers retire and/or pass. Parents with the means to pay for college (no student loan burden for the young adult). Parents willing to help with the down payment.

5) Mentioned above, we bought less house than we could afford. When we found the one, we put in a strong offer before anybody else saw the home to prevent a bidding war. People like us who have room to increase prices.

6) Mentioned above, supply is tight. The buyers who are winning are the incremental fringe bidders. The ones like ourselves that underspend will have the means to pay more will ultimately "win." I would be more concerned about the increase in prices if the supply was large and many houses were being sold. These bidding wars are not driven by every John Doe buyer.

7) Geographic arbitrage. Big city salaries fleeing to the suburbs.

8) Fewer monthly expenses as a result of the work from home revolution. No gas, less eating out. More time for side hustles. The way of life for white collar is more disconnected from blue collar than ever before.
KlangFool
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Re: Tales from this insane real estate market

Post by KlangFool »

jj45 wrote: Fri Mar 26, 2021 4:30 pm It's easy to say prices are insane and everyone is in an irrational frenzy. It might even be true. But I wonder if something else is going on. Here is one theory that seems consistent with the 30-something professionals I know.

The past few decades have seen an enormous growth in income inequality. Many of the young professionals I know make much more than their parents.There are a lot more people with high incomes and two-income families are the norm. Their household incomes are $200K-$500k. Most of them grew up solidly middle class and don't have expensive tastes. They don't want fancy cars, they don't want huge houses, they don't want private jets. They want to live in a nice house like the one they grew up in and in a nice neighborhood with a tolerable commute. Their middle-class lifestyle means they have a lot of disposable income and they are willing to use it to buy the house they want. So they bid up the price to get what they want.

Spending 50% of your salary on housing may seem insane but other expenses don't scale with salary. Percentage of salary is not the right metric. They don't eat 4 times more food than their lower income friends, they wear jeans and t-shirts like everyone else, and they drive modest cars. So take a family income of $300K, $200K after taxes, spend $150K on housing, and you have $50K for everything else. About the same as someone making $80k, which is 2.5x the median income.

In this picture, there is a large group of people with high salaries living modest middle class lifestyles and the excess income all goes to buy what used to be solid middle class homes. And there are enough of them to bid up the home prices. Is it true?
jj45,

And many of them work in the tech industry and a substantial part of their compensations is based on RSU. This is exactly the thinking that encouraged many of my peers to overspend on their houses before Telecom Bust and DotCom Bust. They felt good about their job security and their salaries could only go up.

Then, Telecom Bust and DotCom Bust happened. The houses destroyed them financially.

Being in the 30s means that those persons are too young to experience Telecom Bust and DotCom Bust. Hence, "this time it will be different".

The story had repeated itself many times.

KlangFool
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TomatoTomahto
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Re: Tales from this insane real estate market

Post by TomatoTomahto »

jj45 wrote: Fri Mar 26, 2021 4:30 pm It's easy to say prices are insane and everyone is in an irrational frenzy. It might even be true. But I wonder if something else is going on. Here is one theory that seems consistent with the 30-something professionals I know.

The past few decades have seen an enormous growth in income inequality. Many of the young professionals I know make much more than their parents.There are a lot more people with high incomes and two-income families are the norm. Their household incomes are $200K-$500k. Most of them grew up solidly middle class and don't have expensive tastes. They don't want fancy cars, they don't want huge houses, they don't want private jets. They want to live in a nice house like the one they grew up in and in a nice neighborhood with a tolerable commute. Their middle-class lifestyle means they have a lot of disposable income and they are willing to use it to buy the house they want. So they bid up the price to get what they want.

Spending 50% of your salary on housing may seem insane but other expenses don't scale with salary. Percentage of salary is not the right metric. They don't eat 4 times more food than their lower income friends, they wear jeans and t-shirts like everyone else, and they drive modest cars. So take a family income of $300K, $200K after taxes, spend $150K on housing, and you have $50K for everything else. About the same as someone making $80k, which is 2.5x the median income.

In this picture, there is a large group of people with high salaries living modest middle class lifestyles and the excess income all goes to buy what used to be solid middle class homes. And there are enough of them to bid up the home prices. Is it true?
That's an interesting viewpoint. I hope it's the case, because it differs from the housing crisis of 2008. We saw many of DW's employees (i.e., people whose incomes we knew well) buying, building, renovating at levels we could only marvel at, but that ended predictably for most of them.

I have only one child who fits the demographic you're talking about and he falls in line with your theory: makes a lot of money but is considering only much less expensive houses than a realtor/banker would consider him qualified for. Fwiw, though, he is not finding anything yet on Zillow; perhaps in 6 months when he comes back to the East Coast.
I get the FI part but not the RE part of FIRE.
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AerialWombat
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Re: Tales from this insane real estate market

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.....
Last edited by AerialWombat on Thu Apr 01, 2021 10:14 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
Freetime76
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Re: Tales from this insane real estate market

Post by Freetime76 »

FIREchief wrote: Fri Mar 26, 2021 5:40 pm
ddurrett896 wrote: Wed Mar 24, 2021 6:54 am
Normchad wrote: Tue Mar 23, 2021 9:17 pm It sort of feels like that. The big difference I see is that there was an enormous home building boom in our area in 2007, and right now, nothing is getting built.
Something is being built. Have you looked at the price of building materials?

$3 2x4x8 studs selling for $7
$7 sheets of 7/16 OSB selling for $33 and rising every week
$25 sheets of ZIP panels selling for $52 and rising every week
Well it's not like lumber just grows on trees, right? :P
You had to go there. :wink:
Based on the # of logging trucks going past our house, I realize that money does in fact grow on trees. :sharebeer
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regularguy455
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Re: Tales from this insane real estate market

Post by regularguy455 »

It seems like the simplest answer to why markets are hot is inflation. Most middle class households did not lose jobs and saved the various stimulus payments. Their spending was down for 2020. Now we’re trying to turn the economy back on and there’s tremendous pent up demand for everything (housing, cars, building material, etc) without the capacity. Think about how long it took for toilet paper so start reappearing at the store! Let’s hope this is just temporary.
Freetime76
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Re: Tales from this insane real estate market

Post by Freetime76 »

KlangFool wrote: Sat Mar 27, 2021 8:30 am
jj45 wrote: Fri Mar 26, 2021 4:30 pm It's easy to say prices are insane and everyone is in an irrational frenzy. It might even be true. But I wonder if something else is going on. Here is one theory that seems consistent with the 30-something professionals I know.

The past few decades have seen an enormous growth in income inequality. Many of the young professionals I know make much more than their parents.There are a lot more people with high incomes and two-income families are the norm. Their household incomes are $200K-$500k. Most of them grew up solidly middle class and don't have expensive tastes. They don't want fancy cars, they don't want huge houses, they don't want private jets. They want to live in a nice house like the one they grew up in and in a nice neighborhood with a tolerable commute. Their middle-class lifestyle means they have a lot of disposable income and they are willing to use it to buy the house they want. So they bid up the price to get what they want.

Spending 50% of your salary on housing may seem insane but other expenses don't scale with salary. Percentage of salary is not the right metric. They don't eat 4 times more food than their lower income friends, they wear jeans and t-shirts like everyone else, and they drive modest cars. So take a family income of $300K, $200K after taxes, spend $150K on housing, and you have $50K for everything else. About the same as someone making $80k, which is 2.5x the median income.

In this picture, there is a large group of people with high salaries living modest middle class lifestyles and the excess income all goes to buy what used to be solid middle class homes. And there are enough of them to bid up the home prices. Is it true?
jj45,

And many of them work in the tech industry and a substantial part of their compensations is based on RSU. This is exactly the thinking that encouraged many of my peers to overspend on their houses before Telecom Bust and DotCom Bust. They felt good about their job security and their salaries could only go up.

Then, Telecom Bust and DotCom Bust happened. The houses destroyed them financially.

Being in the 30s means that those persons are too young to experience Telecom Bust and DotCom Bust. Hence, "this time it will be different".

The story had repeated itself many times.

KlangFool
Market risk certainly is legitimate. What I see is people taking on vast quantities of personal, individual risk. I don’t like risk, particularly. :D Sure, some people have contingencies and mitigation’s and plans upon plans, however most people do not - falling into the trap of “you don’t know what you don’t know” and using “the norm” as justification. That’s fine, until it’s not.

The special difficulty in these bust periods is that the pendulum swings so widely that it’s nigh on impossible to get out without disaster or loads of pain. Add that to many people involved lack the historic perspective (or, like you said, feel that this time is different because of xyz justification) to realize the risk involved.
Random Example: discussions of interest rates on savings...where 0.25% is beating 0.15%...whoopty-do..historically, those are both nadda earned).

I agree with the conservative view that No Way would I get into the massive mortgages commonplace in some areas, even with multiple 6-figure incomes. No. Way.

In my lifetime, our house and the others (I.e. grandparents’ - properties with a long time horizon for ownership) I know fit the rule of doubling every 10 yrs, but - like the stock market - it can be a wild ride. Our family grew up in the greater DC area - within a commute, but not super close (though, what is a commute, these days?). Anyway, housing generally followed that “double every 10 years” rule, except special circumstances, of course. Dad’s house, bought for about 80K in 1979, once worth (based on neighbors’ actual sales) about $600 pre-bubble, dropped precipitously 2008-9, slowly rose, and sold last fall for about $1.1M with a complete redo to be beautiful, expanded, vault the ceilings, high end marble white and gray everything, custom this and that. I don’t know if the sellers took a loss, but I bet it was close.

So if I’m doing the rule by decade, not actual value, I’d expect:
1979 - $80K
1990 - $160K
2000 - $320K
2010 - $640K
2020 - $1.28M
Not far off. I like that “rule” because it is a broad brushstrokes ballpark that stays out of the details of was the kitchen updated last year, was maintenance pristine...on average and barring something crazy in the market like a pandemic. Long term it’s fit the houses I’ve owned or know of in the family. Obviously,our house is not an investment where we expect to have doubled value in exactly 10.0 years, and the truth is we moved more frequently, but in the very long run, it’s fit.

Lately, we’ve looked for a second property and haven’t found what we wanted. So we wait, and we sit on the funds. So be it ! I don’t expect an drop, but I do know that deals can be found in any market if you’re patient. We can be patient.
Please spell out new acronyms. Thank you.
KlangFool
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Re: Tales from this insane real estate market

Post by KlangFool »

regularguy455 wrote: Sat Mar 27, 2021 11:24 am It seems like the simplest answer to why markets are hot is inflation. Most middle class households did not lose jobs and saved the various stimulus payments. Their spending was down for 2020. Now we’re trying to turn the economy back on and there’s tremendous pent up demand for everything (housing, cars, building material, etc) without the capacity. Think about how long it took for toilet paper so start reappearing at the store! Let’s hope this is just temporary.
regularguy455,

I disagreed. Specifically for this area, it is a bubble.

This house could be rented for $3,000 per month. The house could be sold for 766K. It is much cheaper to rent.

https://www.zillow.com/homedetails/6407 ... 8019_zpid/

<< $3,000/mo
4 bd3 ba1,334 sqft
6407 Old Dominion Dr, Mclean, VA 22101>>

<<Other financial information

Tax assessed value: $766,280
Annual tax amount: $9,245>>

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Cycle
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Re: Tales from this insane real estate market

Post by Cycle »

IMO wrote: Fri Mar 26, 2021 10:49 pm
Cycle wrote: Fri Mar 26, 2021 9:32 pm In many urban areas it is illegal to build the kind of house that would be affordable. In urban areas people may want to just get a 3br/2ba in a walkable neighborhood, but the cheapest 3br they can find is over a million dollars.

I see this in my neighborhood where young families will stay in the city with 4 people in a two bedroom apartment, but then they outgrow it as the kids grow and they cant afford the 3br in the city so they have to move to the suburbs.

Places like Portland are getting traction bc they legalized 4-plexes. Here they legalized Triplexes city wide, but the economics don't make sense to tear down to build a triplex UNLESS renting as single room occupancy, and some developer has already broke ground on sro Triplexes (3x 3br/4ba units) under the assumption sros will be legalized.

Within a city, sixplexes have historically been one of the preferred build form for developers and cities, minimal cost per unit. No elevator. Density sufficient to support a walkable neighborhood, so minimal onsite parking required ($20k/space, $50k/space if underground).
In the old days, 2 kids shared a bedroom, and often 4 or more people shared a single bathroom. Much less common nowadays. Not sure if people "have to" move to the suburbs as there is choice involved. Apparently they need a 3 bedroom, 4 bath units?

I get what your getting at, but it really doesn't explain the change from 2019 to 2020/2021 suburban real estate markets. It's not like all of a sudden there was a population boom over the last year. Seems like everyone was okay living in the city prior to 2020. Can't they simply stay in the smaller city living situation and then just walk over to their office building negating the apparent need for a home office? Or maybe with all the empty office space available, city people can start renting a cubicle within walking distance/bus distance of their city living arrangements?
There is a lot of demand and limited supply.

Many of the bidders on homes would choose to bid on something lower cost if it was available, and don't need the requisite 10ksqft yard.

There's a local developer here who put an office in each of his more luxury units and he's seen a lot of demand for those units vs. studios. Studios have been discounted humongously. Point is people definitely want the home office, not necessarily the car dependent lifestyle.

The lack of the $400k 3br/2ba sixplex unit means these buyers are bidding on a $1.2m bungalow. There needs to be diversity of housing options to let the market minimize costs.

Also people have a budget, and when 30yr mortgage rates are below 3% they can bid higher. I just got a 15yr at 2.125%. I haven't had a mortgage in 5yrs, but I just could not pass up such a low rate.

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jj45
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Re: Tales from this insane real estate market

Post by jj45 »

KlangFool wrote: Sat Mar 27, 2021 8:30 am
And many of them work in the tech industry and a substantial part of their compensations is based on RSU. This is exactly the thinking that encouraged many of my peers to overspend on their houses before Telecom Bust and DotCom Bust. They felt good about their job security and their salaries could only go up.

Then, Telecom Bust and DotCom Bust happened. The houses destroyed them financially.

Being in the 30s means that those persons are too young to experience Telecom Bust and DotCom Bust. Hence, "this time it will be different".

The story had repeated itself many times.

KlangFool
You are right. The practice I described is much riskier than traditional 1950's mortgage budgeting. While they are adept at living on modest disposable incomes, if anything happens to their jobs at the same time as a real estate crash, and they are probably correlated in HCOL areas, then disaster looms.
jj45
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Re: Tales from this insane real estate market

Post by jj45 »

TomatoTomahto wrote: Sat Mar 27, 2021 9:35 am
I have only one child who fits the demographic you're talking about and he falls in line with your theory: makes a lot of money but is considering only much less expensive houses than a realtor/banker would consider him qualified for. Fwiw, though, he is not finding anything yet on Zillow; perhaps in 6 months when he comes back to the East Coast.
The other side of the coin are the young professionals who also are adept at living on modest budgets, but, rather than spending large amounts on housing, they are aggressively investing their dispoable income and planning for FIRE. They're probably not even a sizeable minority, but they're definitely a noticeable group. I'm very pleased that my own young professional has fallen into this group. While I sit back and smile as they talk with certainty about how the next 50 years are going to play out, I know that whatever happens, they have a good foundation.
LittleMaggieMae
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Re: Tales from this insane real estate market

Post by LittleMaggieMae »

TomatoTomahto wrote: Sat Mar 27, 2021 7:54 am
Johnny Thinwallet wrote: Fri Mar 26, 2021 8:43 pm One of my favorite stories is my parents had to completely paint that first house before moving in because the previous owners had Frankenstein painted on all the walls. I'm talking life-size, take up the entire wall paintings of Frankenstein.
I’m about 70 years old and somewhat jaded, but you caught me unprepared this fine Saturday morning. I am trying to imagine the backstory, but I’m coming up short.

It reminds me of my kids and friends walking through our first house before we closed. They looked at the hideous wallpaper and, without exception, said “I hope you got a good price on this.” I hope your parents got a good price :beer

I don’t know that it works today, but we have gotten “bargains” in buying our two houses because most people can’t see past bad decorating and room layout choices. My wife has the visual chops to see potential.
Yeah, I'm not sure why a house with wallpaper would be a big turn off (unless it's an 1890's Victorian with original plaster walls covered in layers of wall paper - and well, you might be taking down the plaster walls anyway so it doesn't really matter...) Or what colors the previous owners painted the walls. This is all "decorating" and some of the easiest DIYs (removing wall paper - well, outside that Victorian example) and painting.)
I'm guessing even if you have to hire out the work - it wouldn't be cost prohibitive. I guess at some point you have enough money and don't enjoy the DIY stuff - so you just pay to not have to do it.

If you have high ceilings or cathedral ceilings - it's not so much a DIY - as you may need special ladders or scaffolding.

(A young relative just got an awesome house well below market value - they are going room by room - removing the "wall paper boarder" and removing the tacky ceiling fans and repainting. The 30 year old carpeting was pulled out first (turns out there's a really nice flooring under the carpet. No refinishing or replacing needed. ). I guess it comes down to if you can DIY stuff - or have relatives/friends who can help with it. ) It's got an 80's kitchen with high end cabinets and a really good layout and good counter tops. They repaired the "working parts" on a couple of drawers and some pull out things in the cabinets, replaced the kitchen faucet and put up a curtain over the sink window (got rid of the shade). They like the kitchen. It's a really good house for them.)
ChrisC
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Re: Tales from this insane real estate market

Post by ChrisC »

jj45 wrote: Sat Mar 27, 2021 12:53 pm
TomatoTomahto wrote: Sat Mar 27, 2021 9:35 am
I have only one child who fits the demographic you're talking about and he falls in line with your theory: makes a lot of money but is considering only much less expensive houses than a realtor/banker would consider him qualified for. Fwiw, though, he is not finding anything yet on Zillow; perhaps in 6 months when he comes back to the East Coast.
The other side of the coin are the young professionals who also are adept at living on modest budgets, but, rather than spending large amounts on housing, they are aggressively investing their dispoable income and planning for FIRE. They're probably not even a sizeable minority, but they're definitely a noticeable group. I'm very pleased that my own young professional has fallen into this group. While I sit back and smile as they talk with certainty about how the next 50 years are going to play out, I know that whatever happens, they have a good foundation.
You can do both; 2 of my children are spending large amounts on housing and aggressively investing their disposable income and planning for FIRE, and they are concerned about whether they are saving too much and not enjoying themselves enough! My other child has modestly spent on housing and saves a lot. But in these cases, the spending on housing is a function, primarily, of the real estate markets they are in: two are in VHCOL and one in MCOL. Real estate, like politics, is all local! And if you lose the steady income flow from employment, you're going to be up the creek without a paddle, regardless of the real estate market you're in especially if you've leveraged the home purchase and have no back-up plans to cushion the loss of income,

I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
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Re: Tales from this insane real estate market

Post by KlangFool »

ChrisC wrote: Sat Mar 27, 2021 1:25 pm
I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
ChrisC,

There are 2 groups of people in terms of evaluating whether to buy a house.

A) Folks that assuming housing as an expense. Not as an investment. They buy a house assuming ZERO appreciation. They would only buy a house when it is substantially cheaper than renting. Hence, the formula of PITI = 20% or 30% lowered than renting.

B) Folks that assume the house as an investment. They can justify buying a house based on X% of appreciation per year. Folks at this group can justify buying a house at price Y if they can assume a high enough appreciation.

I am in group (A). You are in group (B). As per group (A), I believe that we are in a housing bubble because at current price level, it is much cheaper to rent.

Then, you have people between (A) and (B). The answer is dependent on their assumption of appreciation rate.

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foo.c
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Re: Tales from this insane real estate market

Post by foo.c »

The Zestimate graph for my home has gone hyperbolic. I'm inclined to think Zillow is way off, but stories like these add some anecdotal support for it.
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Re: Tales from this insane real estate market

Post by lazynovice »

LittleMaggieMae wrote: Sat Mar 27, 2021 12:56 pm
TomatoTomahto wrote: Sat Mar 27, 2021 7:54 am
Johnny Thinwallet wrote: Fri Mar 26, 2021 8:43 pm One of my favorite stories is my parents had to completely paint that first house before moving in because the previous owners had Frankenstein painted on all the walls. I'm talking life-size, take up the entire wall paintings of Frankenstein.
I’m about 70 years old and somewhat jaded, but you caught me unprepared this fine Saturday morning. I am trying to imagine the backstory, but I’m coming up short.

It reminds me of my kids and friends walking through our first house before we closed. They looked at the hideous wallpaper and, without exception, said “I hope you got a good price on this.” I hope your parents got a good price :beer

I don’t know that it works today, but we have gotten “bargains” in buying our two houses because most people can’t see past bad decorating and room layout choices. My wife has the visual chops to see potential.
Yeah, I'm not sure why a house with wallpaper would be a big turn off (unless it's an 1890's Victorian with original plaster walls covered in layers of wall paper - and well, you might be taking down the plaster walls anyway so it doesn't really matter...) Or what colors the previous owners painted the walls. This is all "decorating" and some of the easiest DIYs (removing wall paper - well, outside that Victorian example) and painting.)
I'm guessing even if you have to hire out the work - it wouldn't be cost prohibitive. I guess at some point you have enough money and don't enjoy the DIY stuff - so you just pay to not have to do it.
....
As someone who spent a solid month scraping wallpaper out of our first house, I regret to inform you that wallpaper is making a comeback.
vinhodoporto
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Re: Tales from this insane real estate market

Post by vinhodoporto »

Lots of reasons why this is happening now:

1. Supply and demand. Various things over the last year made big cities less attractive places to live and suburbs and second tier cities more attractive. Add to this fewer people selling than usual, low rates of new construction, and restrictive zoning laws and you have more people chasing fewer properties.

2. Lowest mortgage rates ever mean people can buy a much more expensive house for the x monthly payment. Like 40% more than you could get a few years ago.

3. Higher income groups are doing very well. Incomes are up and growing ahead of inflation for several years in a tight labor market for certain skill sets. People with an equity based component of compensation (RSUs etc) are doing even better given the market’s performance.

4. Demographics. The key home buying age groups are in that stage where people typically think about buying a house in the burbs. The hangover from the previous bust and the impact of COVID probably compressed a lot of things that would have happened over a few years into the last year.




It varies by geography but in general I think today’s market is very different from the pre-2008 bubble

1. Lending is much tighter - not seeing the liar loans, NINJA loans, low introductory rate loans or any of the other garbage that was common circa 2006. Most people today are buying with vanilla fixed rate mortgages and passing stringent underwriting

2. Much less speculation today. Back in 2005 all kinds of people were buying houses to flip. Often with little money down and even less understanding of real estate markets, renovations, landlording, and financing

3. Much less building today. Fewer houses being built per year now and at least in my area they’re not being built until they’re sold. In the ‘00s lots were being built on spec
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ResearchMed
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Re: Tales from this insane real estate market

Post by ResearchMed »

KlangFool wrote: Sat Mar 27, 2021 1:48 pm
ChrisC wrote: Sat Mar 27, 2021 1:25 pm
I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
ChrisC,

There are 2 groups of people in terms of evaluating whether to buy a house.

A) Folks that assuming housing as an expense. Not as an investment. They buy a house assuming ZERO appreciation. They would only buy a house when it is substantially cheaper than renting. Hence, the formula of PITI = 20% or 30% lowered than renting.

B) Folks that assume the house as an investment. They can justify buying a house based on X% of appreciation per year. Folks at this group can justify buying a house at price Y if they can assume a high enough appreciation.

I am in group (A). You are in group (B). As per group (A), I believe that we are in a housing bubble because at current price level, it is much cheaper to rent.

Then, you have people between (A) and (B). The answer is dependent on their assumption of appreciation rate.

KlangFool
There is at least one other group: (C) Those who are not counting on any appreciation when they decide to buy a house, and also expect that it may or will be more expensive than renting.

However, they want the stability of knowing that there won't be changes such that they would be required to move. Additionally, it would be nice to be able to customize things a bit (or a lot) as time goes on, such as getting different/extra kitchen appliances or add cabinets, or nicer bathroom fixtures, or even add a bathroom, or finish a basement or attic, or add a garage - and not need to move to get these additional features/amenities. And then in another year or a few, make some other changes. Or plant nice(r) trees/bushes/etc., or maybe add a hot tub or outdoor cooking area. Obviously, at some point, moving might make more sense than "fixing it up" more, or the changes desired may not be possible in that particular place, etc.
Or yes, perhaps remove wallpaper - or even add some! :wink:
The possibilities - and preferences - are endless.

For some, it can be quality of life reasoning, not simply economics.
Even if it costs more, it might be a more satisfying or secure place to live.

And IF there is any profit when they sell (or even simply "not a loss"), then all the better!

RM
This signature is a placebo. You are in the control group.
ChrisC
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Re: Tales from this insane real estate market

Post by ChrisC »

KlangFool wrote: Sat Mar 27, 2021 1:48 pm
ChrisC wrote: Sat Mar 27, 2021 1:25 pm
I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
ChrisC,

There are 2 groups of people in terms of evaluating whether to buy a house.

A) Folks that assuming housing as an expense. Not as an investment. They buy a house assuming ZERO appreciation. They would only buy a house when it is substantially cheaper than renting. Hence, the formula of PITI = 20% or 30% lowered than renting.

B) Folks that assume the house as an investment. They can justify buying a house based on X% of appreciation per year. Folks at this group can justify buying a house at price Y if they can assume a high enough appreciation.

I am in group (A). You are in group (B). As per group (A), I believe that we are in a housing bubble because at current price level, it is much cheaper to rent.

Then, you have people between (A) and (B). The answer is dependent on their assumption of appreciation rate.

KlangFool
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership — I would hardly consider myself in group B. I don’t view housing as an investment. I view it as a consumption item much the same way I would view the purchase of any other expensive consumption item. But housing and home ownership are different from most major consumption items because you’re paying yourself rent and shelter is so important to our emotional well-being. I like to have some appreciation, but my enjoyment in the house is far more significant than whether I make a profit if I sell my primary residence.

But I don’t consider myself in your group A or in between yours groups A and B, either. And many people just don’t go to the NYTimes rent/buy calculator to figure out if it’s within their best interests, financial and otherwise, to purchase a house! I recognize that you operate that way and perhaps it’s good guidance for your friends and family; it wouldn’t be the most important guidance I would provide to my friends or family.
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Re: Tales from this insane real estate market

Post by smitcat »

KlangFool wrote: Sat Mar 27, 2021 1:48 pm
ChrisC wrote: Sat Mar 27, 2021 1:25 pm
I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
ChrisC,

There are 2 groups of people in terms of evaluating whether to buy a house.

A) Folks that assuming housing as an expense. Not as an investment. They buy a house assuming ZERO appreciation. They would only buy a house when it is substantially cheaper than renting. Hence, the formula of PITI = 20% or 30% lowered than renting.

B) Folks that assume the house as an investment. They can justify buying a house based on X% of appreciation per year. Folks at this group can justify buying a house at price Y if they can assume a high enough appreciation.

I am in group (A). You are in group (B). As per group (A), I believe that we are in a housing bubble because at current price level, it is much cheaper to rent.

Then, you have people between (A) and (B). The answer is dependent on their assumption of appreciation rate.

KlangFool
Northern Virginia home price appreciation over the years...
$58.7K - 1975
$579.7 - 2017
A multiple of 9.9 times increase over 42 years. Details and descriptions found at this site:
https://www.insidenova.com/news/arlingt ... 0c2f3.html
KlangFool
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Re: Tales from this insane real estate market

Post by KlangFool »

ResearchMed wrote: Sat Mar 27, 2021 3:26 pm
KlangFool wrote: Sat Mar 27, 2021 1:48 pm
ChrisC wrote: Sat Mar 27, 2021 1:25 pm
I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
ChrisC,

There are 2 groups of people in terms of evaluating whether to buy a house.

A) Folks that assuming housing as an expense. Not as an investment. They buy a house assuming ZERO appreciation. They would only buy a house when it is substantially cheaper than renting. Hence, the formula of PITI = 20% or 30% lowered than renting.

B) Folks that assume the house as an investment. They can justify buying a house based on X% of appreciation per year. Folks at this group can justify buying a house at price Y if they can assume a high enough appreciation.

I am in group (A). You are in group (B). As per group (A), I believe that we are in a housing bubble because at current price level, it is much cheaper to rent.

Then, you have people between (A) and (B). The answer is dependent on their assumption of appreciation rate.

KlangFool
There is at least one other group: (C) Those who are not counting on any appreciation when they decide to buy a house, and also expect that it may or will be more expensive than renting.

However, they want the stability of knowing that there won't be changes such that they would be required to move. Additionally, it would be nice to be able to customize things a bit (or a lot) as time goes on, such as getting different/extra kitchen appliances or add cabinets, or nicer bathroom fixtures, or even add a bathroom, or finish a basement or attic, or add a garage - and not need to move to get these additional features/amenities. And then in another year or a few, make some other changes. Or plant nice(r) trees/bushes/etc., or maybe add a hot tub or outdoor cooking area. Obviously, at some point, moving might make more sense than "fixing it up" more, or the changes desired may not be possible in that particular place, etc.
Or yes, perhaps remove wallpaper - or even add some! :wink:
The possibilities - and preferences - are endless.

For some, it can be quality of life reasoning, not simply economics.
Even if it costs more, it might be a more satisfying or secure place to live.

And IF there is any profit when they sell (or even simply "not a loss"), then all the better!

RM
ResearchMed,

<<There is at least one other group: (C) Those who are not counting on any appreciation when they decide to buy a house, and also expect that it may or will be more expensive than renting. >

In order to be in (C), the person would need to have

A) Complete job security. Aka, not force to move to gain new employment.

B) Complete financial security. Aka, the house could be underwater and the person would be fine.

KlangFool
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smitcat
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Re: Tales from this insane real estate market

Post by smitcat »

KlangFool wrote: Sat Mar 27, 2021 3:50 pm
ResearchMed wrote: Sat Mar 27, 2021 3:26 pm
KlangFool wrote: Sat Mar 27, 2021 1:48 pm
ChrisC wrote: Sat Mar 27, 2021 1:25 pm
I think it is generally hazardous to generalize on the basis of personal, anecdotal information, like saying the entire market in NoVa can be in a bubble based on the list price of one house in McClean, Virginia, or based on the trend of multiple over-asking price offers on single family homes in Vienna, Virginia. Or that real estate could be in a bubble because Baby Boomers aren't selling their houses and because Millennials are bidding up housing that becomes available.
ChrisC,

There are 2 groups of people in terms of evaluating whether to buy a house.

A) Folks that assuming housing as an expense. Not as an investment. They buy a house assuming ZERO appreciation. They would only buy a house when it is substantially cheaper than renting. Hence, the formula of PITI = 20% or 30% lowered than renting.

B) Folks that assume the house as an investment. They can justify buying a house based on X% of appreciation per year. Folks at this group can justify buying a house at price Y if they can assume a high enough appreciation.

I am in group (A). You are in group (B). As per group (A), I believe that we are in a housing bubble because at current price level, it is much cheaper to rent.

Then, you have people between (A) and (B). The answer is dependent on their assumption of appreciation rate.

KlangFool
There is at least one other group: (C) Those who are not counting on any appreciation when they decide to buy a house, and also expect that it may or will be more expensive than renting.

However, they want the stability of knowing that there won't be changes such that they would be required to move. Additionally, it would be nice to be able to customize things a bit (or a lot) as time goes on, such as getting different/extra kitchen appliances or add cabinets, or nicer bathroom fixtures, or even add a bathroom, or finish a basement or attic, or add a garage - and not need to move to get these additional features/amenities. And then in another year or a few, make some other changes. Or plant nice(r) trees/bushes/etc., or maybe add a hot tub or outdoor cooking area. Obviously, at some point, moving might make more sense than "fixing it up" more, or the changes desired may not be possible in that particular place, etc.
Or yes, perhaps remove wallpaper - or even add some! :wink:
The possibilities - and preferences - are endless.

For some, it can be quality of life reasoning, not simply economics.
Even if it costs more, it might be a more satisfying or secure place to live.

And IF there is any profit when they sell (or even simply "not a loss"), then all the better!

RM
ResearchMed,

<<There is at least one other group: (C) Those who are not counting on any appreciation when they decide to buy a house, and also expect that it may or will be more expensive than renting. >

In order to be in (C), the person would need to have

A) Complete job security. Aka, not force to move to gain new employment.

B) Complete financial security. Aka, the house could be underwater and the person would be fine.

KlangFool
Or "C" - buy a two family (or mutifamily) home and live in one half.
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Re: Tales from this insane real estate market

Post by KlangFool »

ChrisC wrote: Sat Mar 27, 2021 3:33 pm
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership
ChrisC,

That part is not true. I had seen too many of my peers financially destroyed by their houses. Hence, emotionally, I seen the house ownership as a huge negative. It destroyed financial stability. And, that is a major difference between you and me.

You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool
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smitcat
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Re: Tales from this insane real estate market

Post by smitcat »

KlangFool wrote: Sat Mar 27, 2021 3:56 pm
ChrisC wrote: Sat Mar 27, 2021 3:33 pm
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership
ChrisC,

That part is not true. I had seen too many of my peers financially destroyed by their houses. Hence, emotionally, I seen the house ownership as a huge negative. It destroyed financial stability. And, that is a major difference between you and me.

You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool

"You seen the house ownership as emotionally positive. I seen it as emotionally negative."
Klang - how many homes have you owned? How long did you own them?
How has the financials of each one of the homes worked out for you?
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FIREchief
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Re: Tales from this insane real estate market

Post by FIREchief »

What will happen if/when mortgage rates increase 2% from today's record low rates? For those who buy today and stay put. Probably nothing. For those who buy today and then need to sell in 3 - 5 years, the same buying demographic will likely be forced to offer a lot less due to their abilities to qualify and make payments. "Underwater" may again become part of the vernacular in the residential real estate realm.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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FIREchief
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Re: Tales from this insane real estate market

Post by FIREchief »

KlangFool wrote: Sat Mar 27, 2021 3:56 pm You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool
This is an interesting perspective, and one that I happen to agree with 100%. I've owned three houses in my life. Now I rent. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Cosmo
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Re: Tales from this insane real estate market

Post by Cosmo »

finite_difference wrote: Tue Mar 23, 2021 8:52 pm NoVa is turning into CA?! :wink:

It’s hard to beat sight unseen offers 15 to 20% above ask. It makes sense to stay put. A big house will be a lot of work and money.
Not sure about that. Everyone seems to be leaving CA and moving to Texas and other more tax friendly states.
ChrisC
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Location: North Carolina

Re: Tales from this insane real estate market

Post by ChrisC »

KlangFool wrote: Sat Mar 27, 2021 3:56 pm
ChrisC wrote: Sat Mar 27, 2021 3:33 pm
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership
ChrisC,

That part is not true. I had seen too many of my peers financially destroyed by their houses. Hence, emotionally, I seen the house ownership as a huge negative. It destroyed financial stability. And, that is a major difference between you and me.

You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool
From what I gather in your posts in this thread, loss of income made the housing unaffordable for your peers. If the house was never affordable when initially purchased or became unaffordable because of changed financial circumstances, then that would certainly affect financial stability, but to say the house purchase itself destroyed financial stability seems like a stretch to me,

But yes, I view my home as providing emotional support to my well-being. I don’t go crazy on this, but it is certainly my goal to love the house I consider my home. This was important when raising children and equally important to me now in retirement.
tim1999
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Re: Tales from this insane real estate market

Post by tim1999 »

dogagility wrote: Sat Mar 27, 2021 8:24 am
TomatoTomahto wrote: Sat Mar 27, 2021 7:54 am I don’t know that it works today, but we have gotten “bargains” in buying our two houses because most people can’t see past bad decorating and room layout choices. My wife has the visual chops to see potential.
I agree, Tomato.

Some people view "potential" as work and/or money. Which it is, but we don't mind a little sweat equity.
Right now I'd say these are only bargains if you have the skill and time to do the work yourself. At least where I live, local home improvement contractors now typically have huge large backlogs of work, are quoting everything high, and are flat-out refusing many smaller jobs. The only contractors that seem to have availability are the bad ones with questionable qualifications and business practices that you don't want working for you anyway. I don't think buying a fixer-upper with the idea of paying other people to do the work ends up being much of a bargain right now.

In slower housing markets and economies, however, I have had some success with buying cosmetically-outdated fixer-uppers with good bones (typically owned by an elderly person who bought it and did zero cosmetic updating for 40-50 years, but maintained the systems and exterior meticulously) and hiring contractors to upgrade them to my liking to live in myself or for resale. Sometimes involving adding/removing walls due to odd layouts.
KlangFool
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Re: Tales from this insane real estate market

Post by KlangFool »

ChrisC wrote: Sat Mar 27, 2021 4:12 pm
KlangFool wrote: Sat Mar 27, 2021 3:56 pm
ChrisC wrote: Sat Mar 27, 2021 3:33 pm
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership
ChrisC,

That part is not true. I had seen too many of my peers financially destroyed by their houses. Hence, emotionally, I seen the house ownership as a huge negative. It destroyed financial stability. And, that is a major difference between you and me.

You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool
From what I gather in your posts in this thread, loss of income made the housing unaffordable for your peers. If the house was never affordable when initially purchased or became unaffordable because of changed financial circumstances, then that would certainly affect financial stability, but to say the house purchase itself destroyed financial stability seems like a stretch to me,

But yes, I view my home as providing emotional support to my well-being. I don’t go crazy on this, but it is certainly my goal to love with the house I consider my home. This was important when raising children and equally important to me now in retirement.
ChrisC,

<<but to say the house purchase itself destroyed financial stability seems like a stretch to me,>>

A) Your house is underwater. You cannot sell because you have to pay the bank in order to sell the house. And, you cannot rent out the house.

B) Your industry/region had gone to hell. You need to leave the region in order to find a job.

C) If you are lucky, you find a new job in location (B). You are paying the mortgage in the old location (A) while paying rent in the new location (B). Because the industry had gone to hell, you are underemployed and underpaid.

D) If you are lucky, you survive long enough to sell the house in (A) without a huge loss. If you are unlucky, you lose the house plus everything else.

KlangFool

P.S.: The average gross saving rate of the American is less than 5%. It does not take much unemployment to get a "House Poor" person into serious trouble.
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dogagility
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Re: Tales from this insane real estate market

Post by dogagility »

dogagility wrote: Sat Mar 27, 2021 5:35 am Put our sixth house (midwest) on the market yesterday. Very desirable city and neighborhood; listing at 40% more than we paid 3 years ago. Agent expects multiple bids and mentioned many of the current buyers are young professionals. Non-stop showings yesterday with more today.
Multiple offers after one day. Offer accepted was 6% over asking, all closing costs paid by buyer, no contingencies, no appraisal, and cash buyer. :moneybag
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Normchad
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Re: Tales from this insane real estate market

Post by Normchad »

dogagility wrote: Sat Mar 27, 2021 5:55 pm
dogagility wrote: Sat Mar 27, 2021 5:35 am Put our sixth house (midwest) on the market yesterday. Very desirable city and neighborhood; listing at 40% more than we paid 3 years ago. Agent expects multiple bids and mentioned many of the current buyers are young professionals. Non-stop showings yesterday with more today.
Multiple offers after one day. Offer accepted was 6% over asking, all closing costs paid by buyer, no contingencies, no appraisal, and cash buyer. :moneybag
Honestly, when I hear stuff like this, I always think “the sellers set the price too low”. It seems the market is definitely willing to pay more.

Everybody gets happy when this happens; they love the quick sale. I’d rather wait two weeks and get more $$$.
finite_difference
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Re: Tales from this insane real estate market

Post by finite_difference »

Cosmo wrote: Sat Mar 27, 2021 4:07 pm
finite_difference wrote: Tue Mar 23, 2021 8:52 pm NoVa is turning into CA?! :wink:

It’s hard to beat sight unseen offers 15 to 20% above ask. It makes sense to stay put. A big house will be a lot of work and money.
Not sure about that. Everyone seems to be leaving CA and moving to Texas and other more tax friendly states.
Let me know when everyone moves so I can buy an inexpensive home and experience perfect weather year round. ;)
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
Tingting1013
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Re: Tales from this insane real estate market

Post by Tingting1013 »

Normchad wrote: Sat Mar 27, 2021 6:14 pm
dogagility wrote: Sat Mar 27, 2021 5:55 pm
dogagility wrote: Sat Mar 27, 2021 5:35 am Put our sixth house (midwest) on the market yesterday. Very desirable city and neighborhood; listing at 40% more than we paid 3 years ago. Agent expects multiple bids and mentioned many of the current buyers are young professionals. Non-stop showings yesterday with more today.
Multiple offers after one day. Offer accepted was 6% over asking, all closing costs paid by buyer, no contingencies, no appraisal, and cash buyer. :moneybag
Honestly, when I hear stuff like this, I always think “the sellers set the price too low”. It seems the market is definitely willing to pay more.

Everybody gets happy when this happens; they love the quick sale. I’d rather wait two weeks and get more $$$.
It appears they listed exactly 6% too low. Within the margin of error?
Tingting1013
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Re: Tales from this insane real estate market

Post by Tingting1013 »

KlangFool wrote: Sat Mar 27, 2021 4:22 pm
ChrisC wrote: Sat Mar 27, 2021 4:12 pm
KlangFool wrote: Sat Mar 27, 2021 3:56 pm
ChrisC wrote: Sat Mar 27, 2021 3:33 pm
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership
ChrisC,

That part is not true. I had seen too many of my peers financially destroyed by their houses. Hence, emotionally, I seen the house ownership as a huge negative. It destroyed financial stability. And, that is a major difference between you and me.

You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool
From what I gather in your posts in this thread, loss of income made the housing unaffordable for your peers. If the house was never affordable when initially purchased or became unaffordable because of changed financial circumstances, then that would certainly affect financial stability, but to say the house purchase itself destroyed financial stability seems like a stretch to me,

But yes, I view my home as providing emotional support to my well-being. I don’t go crazy on this, but it is certainly my goal to love with the house I consider my home. This was important when raising children and equally important to me now in retirement.
ChrisC,

<<but to say the house purchase itself destroyed financial stability seems like a stretch to me,>>

A) Your house is underwater. You cannot sell because you have to pay the bank in order to sell the house. And, you cannot rent out the house.

B) Your industry/region had gone to hell. You need to leave the region in order to find a job.

C) If you are lucky, you find a new job in location (B). You are paying the mortgage in the old location (A) while paying rent in the new location (B). Because the industry had gone to hell, you are underemployed and underpaid.

D) If you are lucky, you survive long enough to sell the house in (A) without a huge loss. If you are unlucky, you lose the house plus everything else.

KlangFool

P.S.: The average gross saving rate of the American is less than 5%. It does not take much unemployment to get a "House Poor" person into serious trouble.
In California where most of the RSU heavy buyers are, you can just hand the keys back to the bank and run away. Hardly "financially destroyed"
KlangFool
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Re: Tales from this insane real estate market

Post by KlangFool »

Tingting1013 wrote: Sat Mar 27, 2021 6:40 pm
KlangFool wrote: Sat Mar 27, 2021 4:22 pm
ChrisC wrote: Sat Mar 27, 2021 4:12 pm
KlangFool wrote: Sat Mar 27, 2021 3:56 pm
ChrisC wrote: Sat Mar 27, 2021 3:33 pm
You appear to view this solely from the perspective of a rational decision-maker devoid of the emotional aspects of housing ownership
ChrisC,

That part is not true. I had seen too many of my peers financially destroyed by their houses. Hence, emotionally, I seen the house ownership as a huge negative. It destroyed financial stability. And, that is a major difference between you and me.

You seen the house ownership as emotionally positive. I seen it as emotionally negative.

KlangFool
From what I gather in your posts in this thread, loss of income made the housing unaffordable for your peers. If the house was never affordable when initially purchased or became unaffordable because of changed financial circumstances, then that would certainly affect financial stability, but to say the house purchase itself destroyed financial stability seems like a stretch to me,

But yes, I view my home as providing emotional support to my well-being. I don’t go crazy on this, but it is certainly my goal to love with the house I consider my home. This was important when raising children and equally important to me now in retirement.
ChrisC,

<<but to say the house purchase itself destroyed financial stability seems like a stretch to me,>>

A) Your house is underwater. You cannot sell because you have to pay the bank in order to sell the house. And, you cannot rent out the house.

B) Your industry/region had gone to hell. You need to leave the region in order to find a job.

C) If you are lucky, you find a new job in location (B). You are paying the mortgage in the old location (A) while paying rent in the new location (B). Because the industry had gone to hell, you are underemployed and underpaid.

D) If you are lucky, you survive long enough to sell the house in (A) without a huge loss. If you are unlucky, you lose the house plus everything else.

KlangFool

P.S.: The average gross saving rate of the American is less than 5%. It does not take much unemployment to get a "House Poor" person into serious trouble.
In California where most of the RSU heavy buyers are, you can just hand the keys back to the bank and run away. Hardly "financially destroyed"
Virginia is a recourse loan state. It is not a non-recourse loan state like CA. OP is in Virginia.

KlangFool
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lws
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Re: Tales from this insane real estate market

Post by lws »

Excellent decision.
sabhen
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Re: Tales from this insane real estate market

Post by sabhen »

by Cosmo » Sat Mar 27, 2021 4:07 pm

It’s hard to beat sight unseen offers 15 to 20% above ask. It makes sense to stay put. A big house will be a lot of work and money.
Not sure about that. Everyone seems to be leaving CA and moving to Texas and other more tax friendly states.
Everyone?

How do you explain then the current house price boom in CA?
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Beensabu
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Re: Tales from this insane real estate market

Post by Beensabu »

sabhen wrote: Sat Mar 27, 2021 9:23 pm
by Cosmo » Sat Mar 27, 2021 4:07 pm

It’s hard to beat sight unseen offers 15 to 20% above ask. It makes sense to stay put. A big house will be a lot of work and money.
Not sure about that. Everyone seems to be leaving CA and moving to Texas and other more tax friendly states.
Everyone?

How do you explain then the current house price boom in CA?
That would be the people leaving and selling their houses to FOMO suckers who are going to end up in foreclosure in the next bust. At least, the non trust fundies are... Also renters. Renters leaving in droves. A lot of born and raised getting priced out of the roof over head situation if they're not part of a multi-generation household. Off to PNW, Texas, Nevada and Arizona mostly. For years now.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Ralph Furley
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Re: Tales from this insane real estate market

Post by Ralph Furley »

Sandtrap wrote: Tue Mar 23, 2021 9:41 pm From a R/E investor's point of view:
In a flat R/E market there is a lot of "low hanging fruit" (great opportunities)
In a hot R/E market (now) there is still "low hanging fruit" but they are harder to find and one has to be very quick (morning of open MLS listing) to get them.

Suggestions:
1. Have a really great and ambitious buyers Realtor agent. One in touch with what is coming on the market, soon to be, etc and well versed in your areas of search. His might be an Associate Broker, etc, but not the average sales realtor agent.
2. Have all your documents ready, pre bank approvals, proof of funds, etc, . . . work that out with your realtor agent.
3. Have a very close and active day to day contact relationship with your realtor agent who is very interested in "you" and very experienced and full time or more than full time and extremely professional. (These are the agents that kick other agents to the curb, real pros). This means that your buyers agent realtor is known in the industry and area and if he/she says you are a hot buyer who will put a signed (all cash is better) DROA in her hand at a moments notice, then that will work great.
4. Be extremely persistent and a sincere and aggressive buyer. Don't waste people's time if you are indecisive or need to "kick tires" or go home and think about things for a week and banter about things endlessly. Be ready to buy the home of your dreams when you find it. When your agent knows that you are committed to that search, then they will work hard for you.
5. Be a little flexible in what and where you want to buy.

Great advice!
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HomerJ
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Re: Tales from this insane real estate market

Post by HomerJ »

lazynovice wrote: Sat Mar 27, 2021 1:59 pm As someone who spent a solid month scraping wallpaper out of our first house, I regret to inform you that wallpaper is making a comeback.
I don't want to live on this planet anymore.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
lazynovice
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Re: Tales from this insane real estate market

Post by lazynovice »

HomerJ wrote: Sat Mar 27, 2021 10:51 pm
lazynovice wrote: Sat Mar 27, 2021 1:59 pm As someone who spent a solid month scraping wallpaper out of our first house, I regret to inform you that wallpaper is making a comeback.
I don't want to live on this planet anymore.
There, there...you are starting to sound like the anti-vaulted ceilings folks up thread.

I am sure if we sell our house, people will walk through and say “Look at all this...PAINT!” In our last neighborhood, everyone, including us, got rid of all carpet. Just had hard surfaces- tile and hard woods. Great for allergies and in a warm climate. When we moved to a colder climate... back to carpet. Different strokes for different folks.
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Beensabu
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Re: Tales from this insane real estate market

Post by Beensabu »

Cycle wrote: Sat Mar 27, 2021 10:23 pm Yes definitely need many tools, like affordable housing, but one needs a very low income to qualify for that and there is insatiable demand for vouchers.
There's subsidized "affordable" housing and there's general connotation "affordable" housing. One generally needs to be below 50% of median area income to qualify for Section 8 vouchers. Where I am, a $40k household income puts you there, so yeah, there is definitely demand and a years long waitlist...
What happens to the people above this level is that they must buy or rent market rate housing and when neighborhood orgs block new housing for historic preservation or maintaining the neighborhood charm they can't afford the house payments on a $1M bungalow.
There are tiers. There are plenty of people who just want to be able to rent a place for $2k/mo and please take 50-70% of their income, but it's near impossible when a RV in someone's driveway is going for $1500... Or the glorified garden shed in someone's backyard. It's been this way in VHCOL places for over a decade. Sad to see this creeping to other places too.
Here is an example of a developer getting criticized for making money, when the effect is the housing unit cost in this neighborhood is reduced from $1M to $600k. The developer made money of course, but now a housing unit is within reach of people with budgets of $600k. People who buy this $600k unit are no longer competing for rentals with lower income people, so demand is alleviated a little at the lower income tier and that alleviates some pressure from the government sponsored affordable housing units.
Trickle down doesn't work for housing either. People who can afford a $600k condo/apartment were never competing for rentals with lower income people. They were competing for rentals with each other.
This is how housing becomes affordable in big cities and near the downtowns of suburbs, building 6plexes where there used to be single family homes. These are the missing middle type of buildings.
I'd agree if they weren't all luxury apartments. But they are. They're all luxury apartments.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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JonnyDVM
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Re: Tales from this insane real estate market

Post by JonnyDVM »

foo.c wrote: Sat Mar 27, 2021 1:56 pm The Zestimate graph for my home has gone hyperbolic. I'm inclined to think Zillow is way off, but stories like these add some anecdotal support for it.
The last time we sold a house I mocked the oversized Zestimate and it sold for 5k more than that. Zillow uses pretty good data was my conclusion.
I’d trade it all for a little more | -C Montgomery Burns
as9
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Re: Tales from this insane real estate market

Post by as9 »

JonnyDVM wrote: Sun Mar 28, 2021 7:05 am
foo.c wrote: Sat Mar 27, 2021 1:56 pm The Zestimate graph for my home has gone hyperbolic. I'm inclined to think Zillow is way off, but stories like these add some anecdotal support for it.
The last time we sold a house I mocked the oversized Zestimate and it sold for 5k more than that. Zillow uses pretty good data was my conclusion.
At least in our area I think Zillow is doing a better job of accurately reflecting the market.

Zillow’s estimate on our house has grown much faster than other sources (eg Redfin). It’s currently $40k higher and I think if we were to sell our house right now it would go for $15-20k more than what Zillow says.
catfish48084
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Re: Tales from this insane real estate market

Post by catfish48084 »

stocknoob4111 wrote: Tue Mar 23, 2021 9:11 pm The real estate market is once again in an epic bubble, probably more acute than 2008, history tells us time and again that these things end badly, very badly. History also tells us that there are a large number of people who are active participants in the frenzy who will eventually claim that they were victims and were blindsided.

The only thing to do is to stand back and watch from the sidelines as the mania plays out.
Amen
BradJ
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Re: Tales from this insane real estate market

Post by BradJ »

FIREchief wrote: Sat Mar 27, 2021 4:05 pm What will happen if/when mortgage rates increase 2% from today's record low rates? For those who buy today and stay put. Probably nothing. For those who buy today and then need to sell in 3 - 5 years, the same buying demographic will likely be forced to offer a lot less due to their abilities to qualify and make payments. "Underwater" may again become part of the vernacular in the residential real estate realm.
I agree 100% with this worry. Example: If I price my house 10-15k above worth and a bidding war results in an offer 20k above asking AND worth of the home, how does that new homeowner recover if the market tanks in 3-5 years and they have to move?
WhyNotUs
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Re: Tales from this insane real estate market

Post by WhyNotUs »

ASpenderInRecovery wrote: Tue Mar 23, 2021 8:11 pm Bogleheads,

Fortunately for us we are happy to stay put in our townhouse, and this whole experience taught us how fortunate we are to live in a modest townhouse, have a generous dual income, and high savings rate by living far beneath our means. I know we won't live in this townhouse forever, but we won't consider moving again for several years. Since losing the last house, I've decided to take it as a learning lesson and immediately paid off my wife's remaining low interest student loans, and will be moving a good chunk of the former down payment into my taxable.
This is an incredibly sane response to the situation. Thankful for what one has, accepting the unreal reality of the moment, and taking actions that can set the OP up for future choices. Bravo
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