Real estate prices......are they going crazy where you are too?

1988RedT2 said:

No idea.  Not selling, not buying.  Don't care. 

Same here, but realtors keep calling me making offers on my house. I don't even know how they get my number. The Dallas/Fort Worth Metroplex is insane. 

Not buying because housing prices are stupid high here. Not selling because of Covid and because rent here is even more stupid expensive here. 

I have been running from high real estate prices all my life. I left Northern California after graduating from college because I couldn't afford the housing prices or the rent. I left Denver when housing prices spiked there and I couldn't afford to move out of my studio apartment. When I moved to Dallas housing was cheap and I bought my first house. I had my choice of fixer uppers on every block. Now I see the same real estate insanity here but this time I am an owner and not a renter. And the sleazy real estate people keep calling me wanting me to sell, sell, SELL! I get two phone calls and about four letters a week. Sell and move WHERE?? An overpriced apartment? A cardboard box on the sidewalk? I am staying put. They can bury me in my backyard when I die. 

Oh, and I hate sleazy real estate people. My sister's ex-husband was one. He lived off of her and my parents financially and his drunk driving exploits were legendary. His favorite words were upgrade, upgrade, UPGRADE!

Since I bought my house in early 2016:

Tax assessment is up 60%

Zestimate is up 77%, and doesn't include my extra 1.6 acre lot with pole barn

The house diagonal (across the street and down one) sold last fall. It had 1000sqft less, 1 bed less, 1 bath less, 2 acres less, and isn't quite as nicely finished. It sold for $8k more than I paid for mine. It's various "value estimates" are around 7% higher than it's most recent selling price in less than 10 months since it closed.

I'm sure there are more extreme examples in the current environment, but the local market has definitely gone up, and I'm in a fairly rural exurb of a medium sized Midwestern city that's always had pretty low cost of living (Not too different from OKC)

Rates obviously, but I suspect some of it is: finding a safe place to put money.

I don't know what true percentage it represents (way more in some than other I am sure), but allowing foreign nationals to buy up real estate as investments is certainly not helping (real estate in the US is WAY more stable then many other countries).

We had our hour refinanced last December & the drive-by appraisal showed it was worth about $10k more than when we bought it 4-years prior. 
 

However, what I've noticed in our neighborhood is that what should be cheaper properties are getting bought before they hit the market, remodeled and attempted to flip for a major profit. That's only started less than a year ago, as 2 houses across the street from us that sold previously had been on the market for months before they sold & the prices dropped significantly during that time. 

Flynlow (FS) said:

It feels very 2007-ish, to me.  Prices are high, everyone is saying it can't possibly drop, and this is just the new normal.  But I don't care how many $400k+ houses change hands, eventually you come up against the wall of having to actually pay for it with real money, and for that you need to look at household incomes, and to a lesser extent, corporate earnings.  Everyone can close a deal right now, that doesn't mean they can pay for it long term.  Similar to bragging about "buying" a $50K car.  There's a difference between, "I wrote a check to the dealer for $50K", and "I have the ability to get financing for $50K", and one is a lot less impressive than the other. 

It is possible we can inflate it all away with the Fed buying everything (incl. junk bonds....), and the Dept. of the Treasury printing money to support that, but we can't just inflate asset prices, we would eventually need to inflate (raise) incomes/wages/salaries to match.  And I haven't seen any evidence of that so far.  If anything, just the opposite, we took a 7% pay cut at work last week.

Going to be very interesting to see what the next 12-24 months bring.  As long as most people keep the money coming in, we might be OK.  If the income stops, so does the financing game of musical chairs.

 

 

You bring up an interesting point. Incomes to pay high prices.  My dad bought a new house in a development after WW2 and paid the monstrous   price of $3995. In those days a good income was $5 a day /$25 a week/ $100 a month/$1200 a year. My mother went to work at $3 a day to help buy groceries.  Today those are still starter houses around $200,000. - $250,000.  
 

Traditional appreciation is based on inflation. 2% inflation results in 2% appreciation. Except preferred properties such as great school districts, lake shore, river frontage, ocean view etc. there multiples of inflation drive up real estate.  The more desirable  the location the greater the appreciation. 
 

It's not all stupid people paying crazy prices.  It's successful people moving up, being more and more selective. Able and willing to pay a premium for the desirable.  
There are people willing and able to pay millions for a car and accepting rapid depreciation and  high maintenance costs. Ferrari  Aston Martin Maybach Bugatti. 
 

The same applies to real estate. 
 

In reply to Snowdoggie :

High real estate price means higher gains during fast appreciation. Cheap property means appreciation only about the level of inflation. In other words you never get ahead. 
I bought an expensive for me property in 1976 nine years later it had more than tripled in price. My new higher income allowed me to buy better and I've rode that to its present value.  If I cashed out today My property will have yielded me 52 times what I paid for  for my original  place. 
In addition to the appreciation I've had great tax deductions and a secure place to raise my family. 

In reply to frenchyd :

True, but the people at that level aren't the ones driving up rent/values for the average person.

For example, my mortgage/taxes/insurance come to about 15% of my gross salary, add in my girlfriend's it drops to around 9% of our gross. And banks encourage people to spend nearly 30%. That would put us in a $400k+ home. That's bananas on our salary and we don't even have children or education costs to deal with. 

I guess more and more people are just willing to be house poor? 

z31maniac said:

In reply to frenchyd :

True, but the people at that level aren't the ones driving up rent/values for the average person.

For example, my mortgage/taxes/insurance come to about 15% of my gross salary, add in my girlfriend's it drops to around 9% of our gross. And banks encourage people to spend nearly 30%. That would put us in a $400k+ home. That's bananas on our salary and we don't even have children or education costs to deal with. 

I guess more and more people are just willing to be house poor? 

Probably. Our M/T/I is now 33% of our gross, about to be 30% after our refinance is complete. This is a recent change due to Covid, my side gig is on hiatus as is my wife's job. We were at 17% to 24% depending on how many jobs/hours we were both working prior to Covid. We bought the house with the understanding that if E36 M3 hit the fan, we'd still be ok on one income... Well, we're ok, but it is not fun. I can't imagine living like this by choice, and we're still relatively comfortable.

My house is up about 38% since January really.  Around here, houses are selling in hours, not days.  Usually with bidding wars.  We have a huge housing shortage at the moment.  A coworker put his up for sale recently, it sold in less than 12 hours with a more than a dozen bids, for far more than the listing price.  It is indeed crazy around here.

In reply to frenchyd :

The cheap fixer upper I bought in Dallas 23 years ago is also worth 3X what I originally paid for it. It's a small house surrounded by bigger ones in a desirable neighborhood that wasn't so desirable when I bought there.  Far above the rate of inflation. I think I did well on it. If I cashed out today I might be able to buy one just like it here in Dallas for more money if I won the bidding wars going on around here. I wouldn't have enough money for a house in California or an apartment in New York City. I might be able to get a house in Detroit or in the middle of the poor part of Mississippi and have some cash left over, but I would need it because there are no jobs in those areas doing what I do. Rent seems to be stoopid all over and landlords hate large dogs. Buying a bigger place would triple my electric bill here in 105 degree summer Dallas and also increase property taxes, maintenance costs and so forth. Since there are only two of us, why do I need to pay more for a house where three bedrooms will sit empty all the time. Why do I want to pay the a/c bill for such a big place? My place is almost paid off now and I really don't like borrowing money so I won't be gettting a bigger one. 

I don't really feel that much better off. If I cash out, anything else I can buy is expensive. I also have a funny feeling that with wages going down and younger people being priced out of the market, this whole thing is going to come crashing down soon. 

I sold my house in Colorado Springs 3 months ago. I packed up and left 8:50am on a Friday, with the first showing being at 9am. Within 5 hours I had a full price offer and closed in less than 2 weeks. In the 3 years I lived there the house gained $102,500 (or 40%) in value. The market is nuts!

WillG80 said:

I sold my house in Colorado Springs 3 months ago. I packed up and left 8:50am on a Friday, with the first showing being at 9am. Within 5 hours I had a full price offer and closed in less than 2 weeks. In the 3 years I lived there the house gained $102,500 (or 40%) in value. The market is nuts!

Wow!  Selling my parents house in the Black Forest area of Colorado Springs.  24 showings in 10 days.  One offer!  The house has delayed maintenance so it was sold 'as is'.  Value was $50k more than when mom passed in August 2019.  Closing is 9/2/2020.

Yeah. Because of the growth in Denver (Basically any Single Family is $450K+) the Colorado Springs market is growing big time. My house is on the high end of the COS market so it's not going as nuts but the 250K to 450K house market is going through the roof there. I was looking for a few income houses and just stepped back for a while. 

mtn (Forum Supporter) said:

z31maniac said:

In reply to frenchyd :

True, but the people at that level aren't the ones driving up rent/values for the average person.

For example, my mortgage/taxes/insurance come to about 15% of my gross salary, add in my girlfriend's it drops to around 9% of our gross. And banks encourage people to spend nearly 30%. That would put us in a $400k+ home. That's bananas on our salary and we don't even have children or education costs to deal with. 

I guess more and more people are just willing to be house poor? 

Probably. Our M/T/I is now 33% of our gross, about to be 30% after our refinance is complete. This is a recent change due to Covid, my side gig is on hiatus as is my wife's job. We were at 17% to 24% depending on how many jobs/hours we were both working prior to Covid. We bought the house with the understanding that if E36 M3 hit the fan, we'd still be ok on one income... Well, we're ok, but it is not fun. I can't imagine living like this by choice, and we're still relatively comfortable.

Mine is 8.3% 

I really don't get it. Who is buying right now? We are in the middle of a pandemic and nobody wants buyers walking in and sniffing around their residence. Everybody is getting laid off or getting their hours cut. 

Jacking up property taxes for people right now is just adding to the malaise. 

Snowdoggie said:

I really don't get it. Who is buying right now? We are in the middle of a pandemic and nobody wants buyers walking in and sniffing around their residence. Everybody is getting laid off or getting their hours cut. 

I find it surprising too.

Vacation houses, retirement homes, make sense.  I know where my mom lives (on a lake) houses are snapped up right away, but I see that as people that probably said 'berkeley it, that's my cue to retire', or are heading in that direction.

In reply to ProDarwin :

We can actually see the lake from where we are, but this is a suburb of Dallas and everybody commutes. It's not exactly a vacation spot. Traffic is horrible here. 

Is the volume of sales going up? I wonder if there is less supply. But based on what I see on Zillow, that isn't the case. 

Anyone live out in the middle of no-where? 

Some place with an increasingly bad job market, far from groceries, etc? 

I'd bet what we're seeing is that in general people are moving closer to job markets. Maybe losing their job in bumblefudge has finally convinced them to move closer to the city. 

Meanwhile, city dwellers, no-longer constrained by proximity to the office are moving the burbs for more indoor space - but they can't give up the Starbucks, Wegman's or Costco. 

Combine that with snowbird and retirees who, now, free from jobs, can move anywhere, including more "climate centric" areas. 

Maybe the question should be, why would I want to sell? Why would my neighbors want to sell? They don't. There are no for sale signs in my neighborhood and brokers are calling aggressively making offers.  The job market here is still better than most places. Nobody wants to move to bumblefudge. Anyplace I move to will cost me more and there is the chance of Covid infection with all the shuffling around. 

I think that is the problem. Most people in good areas want to stay put except for a few who want to retire. Construction is slowing down because of COVID. I would imagine that people trying to sell a house in bumblefudge would also have trouble raising the money for a home where the jobs are if there were any for sale.  

Snowdoggie said:

I really don't get it. Who is buying right now? We are in the middle of a pandemic and nobody wants buyers walking in and sniffing around their residence. Everybody is getting laid off or getting their hours cut. 

Jacking up property taxes for people right now is just adding to the malaise. 

Property management companies are buying up the cheap ones right now. They are making a killing in the rent and I am FLOORED that people are renting these house for more than what the mortgage would be for it. 

Snowdoggie said:

I really don't get it. Who is buying right now? We are in the middle of a pandemic and nobody wants buyers walking in and sniffing around their residence. Everybody is getting laid off or getting their hours cut. 

Jacking up property taxes for people right now is just adding to the malaise. 

Everybody?  Perhaps in your group but don't forget there is a whole group of people who are trust fund babies or upper management.  Successful  people, errr perhaps I should say financially  successful.  
Those are the ones who are paying what you think are silly prices.  
 

Sine_Qua_Non said:

Snowdoggie said:

I really don't get it. Who is buying right now? We are in the middle of a pandemic and nobody wants buyers walking in and sniffing around their residence. Everybody is getting laid off or getting their hours cut. 

Jacking up property taxes for people right now is just adding to the malaise. 

Property management companies are buying up the cheap ones right now. They are making a killing in the rent and I am FLOORED that people are renting these house for more than what the mortgage would be for it. 

Without a down payment you can't get  a fixed interest mortgage  but you can rent.  

I live in bumblefudge TN. Wouldn't hurt my feelings if everybody got the hell out.

I felt certain in the Spring that the pandemic would drive prices sharply down- but they continue rising sharply. Just like the stock market.
 

It's a twilight zone situation where many (myself included) are able to WFH... While others are suffering a worst case scenario.