How are people affording these crazy home prices?

[Bubblehide]

In LA, the market is slowing with houses getting only 1 maybe 2 offers within the first week on the market. That is way better that 20+ offers on the first day; if you're a purchaser.

 

[BroncoAZ]

In LA, the market is slowing with houses getting only 1 maybe 2 offers within the first week on the market. That is way better that 20+ offers on the first day; if you're a purchaser.

Similar story in the two markets that I watch. I just sold my home in AZ for more than double what I paid in late 2017. The market there was white hot in February and March with multiple offers and 6-12% over asking. We went to market with a high price for the comps in early April and immediately had two offers that were both over asking. We only received the two offers. We accepted the all cash no contingencies offer at 7% over, unfortunately those buyers walked the day of closing but we did keep their $10K earnest money. We went back to the second offer and they increased their number from their first bid, about 3% over. We accepted and waited to close. While we were waiting the inventory was increasing, houses were sitting, and interest rates were spiking. We made sure to nurse the deal across the finish line as going back to market would’ve cost us probably $30-50K. My neighbor listed his house 2 weeks after I did, he overshot on price by 10%. After a week he dropped back to where he should’ve started, a week later had a full price offer. That one fell through during the inspection period, he reduced it another $10K and is still on the market 3 weeks later. His house is 200 square feet bigger than mine with 5 bedrooms to my four. He also spent $60K on his yard that I didn’t. Right now his asking price is only $32K more than my sale price.

Similar story on Cape Cod, things are still going for over asking, but not the $150K-300K over asking they were going for in February. Some houses are sitting and some are doing significant price reductions after a couple weeks on market. I’ve got the cash from my AZ house to put down on something in MA, but I think I’m going to wait until the fall to see where things are headed. I have a place to live, so I can afford to wait for a market dip.

 

[Loggerdude]

If your debt free and own it you are probably good at risk management. Or came by money from somewhere else. A dump down the road just sold for 375 k unless your talented all the good contractors are busy and reaping the profits of there skills.
Renting or leasing has no guarantees either.

 

[WRM]

Similar story in the two markets that I watch.

At this point, most major markets appear to be oversold and now we're at the beginnings of the "backside" of all that demand. It'll likely get ugly, maybe really ugly in some markets.

The recent interest rate increases have added several hundreds of dollars to the monthly nut on the "average home". That prices many, many buyers out of the market. So, prices have to fall in order to push demand back up and get things closer to "sustainable". But, we'll possibly overshoot there too and really crush the market. Meanwhile, the folks who bought at the height of the market will get crushed if we really head to the depths, and it looks like we will. It happens over and over--we just never learn. The lemmings just continue to launch off the cliff.

 

[TheGrayRider]

Interest rates doubled recently. Probably going up to 13 to 15% before this recession is over. Ugly, to say the least!

 

[Pony Soldier]

Life is a collection of experiences. We bought our first place in a climbing market. After puting in the entire infrastructure plus a basement for our future home we sold for less than we bought it for and lost all of our investment. My new job cut wages by 1/3 but we left the restrictive control of Washington state and could now get loans to build in the country.

We moved back to Montana and bought into a depressed market for minimal investment. We spent 20 years upgrading the existing house and then expanded the house when the kids left. One of them moved back and raised two kids in our expansion.

We now have everything paid off, have our house to ourselves and spend the time contemplating the increase in taxes caused by the purchase price of the surrounding parcels.

Life is a struggle right up to the end. We are very glad to not be at the beginning again.

 

[WRM]

have our house to ourselves and spend the time contemplating the increase in taxes caused by the purchase price of the surrounding parcels.

No matter how hard you try, some lemmings comes along and screw it up! Sounds like you are in a pretty enviable position tho, to anyone with much common sense. Good luck! Maybe the descent will see your "values" and taxes back down.

 

[WRM]

Interest rates doubled recently. Probably going up to 13 to 15% before this recession is over. Ugly, to say the least!

I seriously doubt Ol Jerome and JoePa can stomach coming even remotely close to what the Sith Lord of the FED--Darth Volcker---did back in the late 70s early 80s. If they have the sack to even get rates to 8% I'll be shocked. Which just means the pain will drag on as they yap about "soft landings" from the "transitory" inflation which Putin elevated to "real" inflation.

But, yes, in theory we should probably be in that range and sooner rather than later. They waited too late, as usual, to "take away the punch bowl".

 

[WeiserBucks]

Betcha a 12 pack it hits 8%.

 

[WRM]

Betcha a 12 pack it hits 8%.

It OUGHT to be there now. SO, let's hope it does.

I'd be happy to share a 12 pack with you regardless, assuming I can still afford one.

 

[dtrkyman]

We just purchase a place about a month ago, luckily still got a good interest rate. Craziest issue ever dealing with the lender! Not getting into that train wreck!!!

We were out bid on 5 houses and we bid 50k over asking on one. Looked at two or three dumps that were all over 400k

I would have never bought at this time, but we moved across the country recently and were renting due to the wife going to school for two years and not where we wanted to live long term. Problem is we were paying as much or a little more in rent than we are on our mortgage and all expense now anyway, so waiting for the market to slow or drop made no sense, especially with the rates now!

Got hosed on the 08 crash and looks like a possibility I will get hosed in this market again? Issue here is there is still low inventory on available houses.

Hopefully the market wont tank so bad this time, but with my prior real estate experience(luck) it probably will.

 

[Silveroddo]

I don't have the energy to go back and quote the post, but I believe it was in this thread. If I remember correctly someone doubted that some of this increase in value was tied to the low interest rate and peoples increased ability to borrow inflating the market. Here's the case study, watch your local market and see what 8% does to sales prices.

 

[11boo]

It sounds bad guys, but he said….
BUILD
BACK
BETTER.

He didn’t say it would be in 2024.

 

[WRM]

I don't have the energy to go back and quote the post, but I believe it was in this thread. If I remember correctly someone doubted that some of this increase in value was tied to the low interest rate and peoples increased ability to borrow inflating the market. Here's the case study, watch your local market and see what 8% does to sales prices.

You likely won't even need it to get that high to see the direct impact on prices. Even an extra 1% adds so much in interest costs to the "average price" that the vast majority of buyers "should" get priced out pretty soon. Only market response then (really) is to lower prices. But, let's just see if 100% financing and no doc loans makes a big time comeback across the board. That'll be the lever they likely pull to allow the SFR market to wallow along with higher interest rates--all the while setting us up for another potential collapse.

We need to have the pain inflicted stat, endure the pain, and not jump right back on the merry go round to repeat the past mistakes. It'll never happen tho.

 

[dtrkyman]

Lot of homes here being bought cash…interest rates won’t bother those folks!


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[Silveroddo]

We need to have the pain inflicted stat, endure the pain, and not jump right back on the merry go round to repeat the past mistakes. It'll never happen tho.

100% The deferred consequences of what we've done to try to avoid discomfort are going to be so exponentially worse than the natural corrections would of been........... not for the architects of it all, but for the average American.

 

[WRM]

Lot of homes here being bought cash…interest rates won’t bother those folks!


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Corporations and investment trusts are building entire SFR subdivisions for rentals here now. People with plenty of cash will make money, as they so often do. The rest of us will suffer, as we mostly always do.

 

[dtrkyman]

That is happening here, but individuals are doing this as well.

 

[WRM]

That is happening here, but individuals are doing this as well.

The risk, particularly for individuals, is the musical chairs that happens in these situations. Around here, a good analog a few years ago was mini warehouses. It was "the thing" to do and became a supposed investment opportunity. Didn't take long for supply to outstrip demand and then it took years to catch up. Meantime, many minis went into foreclosure.

Houses are different in that they are "more needed" than minis, but, still, plenty will get burned. And the big guys will scoop up the remains for pennies on the $1.

 

[Broomd]

It sounds bad guys, but he said….
BUILD
BACK
BETTER.

He didn’t say it would be in 2024.

LOL....he doesn't know what he said or what's going on.