Real Estate Frenzy

[laurence]

So after years of thinking about it, my wife and I just went into escrow on a rental property. Wow, the market is CRAZY right now. We competed for units against 12-15 other offers. People are offering no contingency, all cash, 15 day closings, way over asking. Incredible. By way of background, this is north san diego county, townhomes between 300-400k. When we asked our agent if we should move up price points, she told me she's selling her $600k listings to all cash buyers. The rumor floating through the agent community is it's just one or two persons/entities as it's the same agent(s) with the highest/best bid. Swirling talk of offshore chinese hedge funds etc. - not sure the Asian Illuminati is likely to take personal interest in rinky dink properties in my neck of the woods.

Anyway, it looks like we got it for a price where we should be cash flow neutral at first, which we consider a major win. But at the rate prices are increasing that window is closing fast. It's a 20% increase from last fall, at least.

Of course, now that we can lock interest rates have moved up! At least it's a small mortgage.

 

[FANOFJESUS]

Not much of a frenzy here in MO LOL. But it sounds like a good deal for you.

 

[LakeTravis]

Austin R/E is on fire, with current housing supply in the 1-2 month range.

But I have a property just 30 minutes from downtown Austin on (currently dry) Lake Travis and there is absolutely no interest.

It appraised for close to $600K almost three years ago. It's currently sitting on the market at $400K with maybe one showing every couple of weeks and zero offers. I'm pulling it off the market next month and hoping for a hurricane to fill the lake.

All depends on where you are - the hot pockets have extremely high resolution boundaries.

 

[Dawg52]

Not much of a frenzy here in MO LOL. But it sounds like a good deal for you.

Houses galore around here for sale. Might be improving a little, but not much.

 

[haha]

All depends on where you are - the hot pockets have extremely high resolution boundaries.

I am not sure I catch your meaning. You mean the geographic limits of this buying heat are tightly drawn?

Ha

 

[Kimo]

If you want to see a real frenzy, come here to Hawaii and take a look around....amazing!

 

[Kimo]

PS. I should say Oahu, more than the outer Islands.....

 

[rbmrtn]

Houses galore around here for sale. Might be improving a little, but not much.

Yea, nothing here. If anything it's gone down. More inventory on the market, sitting longer without moving. I think a lot of people heard real estate bottomed and have tried to sell.

 

[Elbata]

A friend/RE agent just bought in N. San Diego too.

He told me he thinks it's because interest rates are so low, and he said it is foreigners buying most of the properties. All cash, as you've said.

I sent him an email of what you said, I'll be interested to hear back from him.

 

[LakeTravis]

I am not sure I catch your meaning. You mean the geographic limits of this buying heat are tightly drawn?

Ha

That is how it currently seems around here, yes.

 

[SJ1_]

So after years of thinking about it, my wife and I just went into escrow on a rental property. Wow, the market is CRAZY right now. We competed for units against 12-15 other offers. People are offering no contingency, all cash, 15 day closings, way over asking. Incredible. By way of background, this is north san diego county, townhomes between 300-400k. When we asked our agent if we should move up price points, she told me she's selling her $600k listings to all cash buyers. The rumor floating through the agent community is it's just one or two persons/entities as it's the same agent(s) with the highest/best bid. Swirling talk of offshore chinese hedge funds etc. - not sure the Asian Illuminati is likely to take personal interest in rinky dink properties in my neck of the woods.

Anyway, it looks like we got it for a price where we should be cash flow neutral at first, which we consider a major win. But at the rate prices are increasing that window is closing fast. It's a 20% increase from last fall, at least.

Of course, now that we can lock interest rates have moved up! At least it's a small mortgage.

Atlanta is doing pretty good. We live in town and I would guess we are about 20% + off the bottom. Nice change - until the property tax bill comes.

 

[FIREd]

The market is on fire in the Bay Area too. I've been casually looking for months but I really don't see any good value in this market. So we've decided not to buy here and return to the south when DW gets tired of her job. For what we would spend on a so-so home here, we could turn our place in the south into a palace.

 

[brewer12345]

The Denver market is nuts as well. There is little on the market and what does show up gets multiple offers within a day or three. I am really glad we bought a couple years ago.

 

[Fishingmn]

Twin cities market is pretty hot too. I just wrote an offer tonight for a couple (first timers). It is our 5th try - we've lost to multiple offers on the previous 4 tries.

I also invest and have purchased 9 townhouses as rental units in the past 2+ years. Inventory is really tight and prices are way up. As an example, I bought 2 identical units in January 2012 for around $76k. The exact same unit just sold 2 weeks ago for $109k. Rents are up too as I just raised rent on 1 of those from $1,050 to $1,100. These units sold at the peak for $150k.

 

[haha]

I also invest and have purchased 9 townhouses as rental units in the past 2+ years. Inventory is really tight and prices are way up. As an example, I bought 2 identical units in January 2012 for around $76k. The exact same unit just sold 2 weeks ago for $109k. Rents are up too as I just raised rent on 1 of those from $1,050 to $1,100. These units sold at the peak for $150k.

I had no idea that homes in Twin Cities might be this cheap. Very so-so 1200-1350 ft2 units near me are 4 times as much. The ratio of rent to purchase price is much more favorable on your places, too. Not sure, but I think these units near me which are 8 years old and pretty well finished out, but dark except for the end units probably would go for $2200/mo. Mostly people buy them to live in them.

Ha

 

[W2R]

I had no idea that homes in Twin Cities might be this cheap. Very so-so 1200-1350 ft2 units near me are 4 times as much. The ratio of rent to purchase price is much more favorable on your places, too. Not sure, but I think these units near me which are 8 years old and pretty well finished out, but dark except for the end units probably would go for $2200/mo. Mostly people buy them to live in them.

Ha

Ha, if housing prices are on their way back up in Seattle too, then it sounds like you bought yours at just the right time. You love living in Seattle, too. Sounds like a good deal.

 

[haha]

Ha, if housing prices are on their way back up in Seattle too, then it sounds like you bought yours at just the right time. You love living in Seattle, too. Sounds like a good deal.

You are right, W2R. I am very glad I bought, when I did and in the neighborhood where I did. I'd say our market is somewhat spotty, with some places still lowering their asking prices, and some getting multiple offers way over list. It is nothing like as wild as the best coastal California areas. I was just being lazy to go on renting, since I dislike real estate shopping, but I am a constitutional bottom fisher, and I have a reasonably good internal clock that tends to tell me "now idiot, don't mess around any longer". I get redfin info from my neighborhood and the surrounding neighborhoods between Elliot bay and Lake Washington W to E, and Montlake Cut on the north to the hospital district on the south. I tend to go to transit meetings and neighborhood meetings and a few meetups where there are lot of intelligent, articulate people, mostly women, who are frequently moving and buying and selling so I don't get way out of touch about what is going on.

My friend lived in North Seattle and wanted to buy a place here in the central city, and she was being very picky which made me think that she might miss out. But she did very well buying this winter. Her value has jumped at least $50-$75k already. But like me, she has no selling plans, just avoiding being priced out of where you want to be by rising rents and prices.

Ha

 

[laurence]

We bought the house we live in back in 2009 during a mini-frenzy, and we thought we got a great deal. Six months later everything was calmed down and we were down ~30k. Not a big deal because this is our long term residence, we love it here. But with this property, I was quite nervous as it feels the same as 2009 and after some period of rising rents, they've flattened out as supply for rentals has ballooned with all us wanna-be slumlords moving into the market. Rising interest rates, rising home prices and flat rents means the window for an intelligent investment is narrowly quickly. If this falls out of escrow I'm not sure we'll be landlords at all.

For those who do landlord, what's your rules for buying? Cash flow positive, period? Are you willing to go cash flow negative at all for appreciation/speculation purposes? We are right on the bubble of cash flow neutral on this one, but hey, put enough down payment and any property can be cash flow positive, right? I was ultra nervous, though, so we made sure it was a mortgage we could afford even if the property sat empty.

It's a 3 bedroom, 2.5 bath with 2 car garage townhome, and the location is such that we may seriously consider downsizing to it in retirement, really close to most of our favorite things in San Diego.

 

[kramer]

May I ask, where in North San Diego County?

Even just a few months ago my cousin's 2 bed 2 bath townhome located in La Costa (Carlsbad) was worth significantly less than she paid for it in 2003 (she paid $303,000, I think). She just got rejected maybe 2 or 3 months ago for a permission to sell the place by the bank (I forget the term, permission to sell and not pay the bank the excess on the loan). She is still paying 6% interest, cannot refinance, I don't think she has paid any principal in 10 years. Until recently, it was renting for $1800/month (negative cash flow of around $550/month) but she just moved back in. I just sent her email to find out the latest.

I would have let the townhome go to the bank many years ago.

 

[bld999]

"and the location is such that we may seriously consider downsizing to it in retirement"
____________________________________________________________
That alone may have enough strength to characterize it as "some people are agreeing to pay our mortgage and property taxes while we prepare to retire there"

Most people I have ever talked to about rentals will admit to relying somewhat on the prospect of appreciation [including myself]. If they don't cash flow, they hurt. Sometimes we stand pain by choice.

You are in a coastal gateway city, with some strength in housing [first to crash,first to recover, etc.] Generally a good bet assuming you buy right and understand the local market, Spreadsheeting the hell out of them doesn't always tell the whole story.

 

[laurence]

Kramer, literally a street away from the La Costa border.

If she's still underwater, short sales are very difficult. It's the traditional sales that are getting swamped with offers. But if she only paid $303k she shouldn't be underwater anymore. We nearly offered on a 2 bedroom in La Costa (1000 sq feet) that only had a car port vs. garage that was just under 300k.

But if it's a 2 bedroom, 1 bath with just an assigned parking spot, it's probably getting a lot less attention. Another place we bid on was a 2 bedroom, 2.5 bath, 1150 sq feet but it had an attached 2 car garage and was walking distance from the university (San Marcos). It sold for 315k.

bld999, I don't pretend to know a thing. But we can't imagine leaving San Diego completely. This townhome isn't the dream home, but it's nice and the location is good. If I had my choice I'd like a bit of a veiw and possibly a token back yard so I can grill with charcoal! It's close to a ton of stuff, but nothing really in true walking distance (3 miles from front gate of La Costa spa, though!)

 

[Fishingmn]

For those who do landlord, what's your rules for buying? Cash flow positive, period? Are you willing to go cash flow negative at all for appreciation/speculation purposes? We are right on the bubble of cash flow neutral on this one, but hey, put enough down payment and any property can be cash flow positive, right?

Personally, I wouldn't buy if it didn't cash flow but I'm in a very different market. I also don't factor appreciation or depreciation into my numbers at all and want them to be a solid investment based on cash flow alone and that's using pretty generous estimates for vacancy and repairs.

1-2 years ago it was pretty easy to get an 8%+ cap rate and a 15% cash on cash rate with 20% down. Now I'm guessing the cap rates are more in the 6-7% range which makes them a lot less attractive to me.

 

[Chuckanut]

Yes, there seems to be a real shortage of properties at the moment. Combine that with the ultra low interest rates caused by the [-]war on savers[/-] desire to increase housing starts, and we have a real seller's market.

A friend recently sold his house for $100,000 over the asking price. The buyer put 50% down. Still, the prices are lower than they were at the peak of the housing boom a few years ago.

 

[clifp]

The craziness in Vegas real estate market continues according to my realtor, with dozen above list offers being common.

I have stopped buying because there hasn't been an increase in rents to keep with the hassles and raising prices.

 

[M Paquette]

Around here the frenzy seems to be sharply bounded by school district borders. Live in an area where kids will be assigned to the 'right school', and the seller gets all-cash offers well over asking within days of listing. Live across the street, where the school scores 2% lower on some sort of standardized profile, and it will be weeks before there's a nibble.

I personally think these people are crazy. For what they are (over)paying, they could put several kids through the best private schools in the region.