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Old 04-22-2021, 02:38 PM   #101
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Originally Posted by ExFlyBoy5 View Post
I would argue that for those that have ZERO desire to move the great increases in price would be more nauseating than entertaining; greater costs mean greater assessments which means more taxes and more expensive insurance. This is even more bothersome for those that are older and/or on a fixed budget. They can quite literally be run out of their homes because of these rapid increases in value. Yes, some places have restrictions in place (senior exemptions, value caps, etc.) but they aren't universal.

My Dad's neighbor was always so impressed at how the value of their house had increased since they purchased in the early 80s. As far as I know, they are still in that house, but the taxes are SIGNIFICANTLY more than they were a few years ago. I wonder if they are as thrilled with the run up in values today?
I feel like such a dunce! I forgot that not everyone has the same tax assessment situation as what we have here, something I should have mentioned. Anyway because I'm over 65, and my AGI is under $100K, my tax assessment is frozen for as long as my AGI stays under that limit. Millages are not frozen, so my taxes could go up, but the increase in home prices won't be the reason for it.
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Old 04-22-2021, 02:42 PM   #102
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Careful - what if he suggests selling his and moving in with you to reap the riches!
He's smarter than that, I hope! We do so well living next door to one another. Besides, I only have two bedrooms so there's no place for him to put his 345098756 ham radios and associated amateur radio stuff. Well, except for my detached garage.....
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Old 04-22-2021, 03:19 PM   #103
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Same in FLA, but with a maximum increase of 3% yearly.

Yes, for homestead property in FL, 3% is the cap. But if it's a non-homestead property, the cap is 10%.
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We Just Bought a House in this Crazy Real Estate Market; This is What We Did
Old 04-22-2021, 06:07 PM   #104
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We Just Bought a House in this Crazy Real Estate Market; This is What We Did

Submitted a cash offer with an escalation addendum, with zero contingencies, and set the maximum price (the limit) higher than any sane person would. That is how we got our offer accepted on a really nice house in a choice/upscale neighborhood. Although in our case, the maximum price in the escalation clause was a sane amount we believe, given the current market dynamics and what we have been through in our current living situation.

The only reason we bought now is because we have to move; otherwise there is no way I would attempt a home purchase in this market (it's because of a serious wood smoke issue that has put our health at risk and made our lives unbearable over the last year and a half).

Over the past 2 months we looked at several properties in Virginia, the state we live in. Most were about 75 to 100 miles away. We had a rough start. At the first place we looked at, DW caught her foot on a big crack in the owners' walkway and tripped and fell face first on the concrete and we spent 4 hours in the local hospital ER (she is doing fine now).

Our requirements were 3+ bedrooms, master on main level, 2+ car garage, 1/4 acre or larger yard, no more than 20 years old, public sewer and water and natural gas for heating.

Inventory while we were looking was a month or less of supply and all properties we looked at had multiple offers, except a house in a 55 plus community that was a maintenance nightmare (it was on the "deferred maintenance plan" as I call it). All but 2 of the houses had a general lack of maintenance, but were cleaned up to look good for listing pictures, but dirty if you looked beneath the surface. The two nice ones were the only two we made offers on. In each case we accessed the County real estate records and noted how many times each house in the immediate vicinity changed owners, including the one for sale. These two houses and neighborhoods passed our stability test. After visiting each house and seeing each one was well maintained I paid a home inspector $325 each for a pre-purchase inspection of each house. They were performed by booking a 2nd showing time slot. The inspections were to help us decide whether or not to make an offer, and for no other reason (other than to identify what I should fix if we were the successful bidder).

The house we were out offered on fit our requirements, was in an upscale neighborhood, and about 50 miles from a major city, so we were competing with commuters. The only negative was my research revealed the town had been attempting for about 20 years to build a parkway that would be within 200 feet of the house if approved (project kept getting tabled due to strong citizen opposition). We knew we were taking a chance on this item. The house also had fairly high taxes for its location ($5,500 per year) and an $80 monthly HOA fee. It listed for $600k and the owners put about $200k in upgrades, including a $75k gunnite pool. Our offer was presented as an "escalation addendum" attached to the standard realtor sales contract, which included an initial offer of $625k, cash. The only contingency was the termite inspection at seller's expense, with seller fixing any damage found (and possibly with seller option to void if damage was extensive). The escalation addendum had a price limit or cap of $685k, and would better any other offer by $10k, up to the cap. It also stipulated, if accepted, the next highest offer had to be shared with us to make sure we paid the correct amount. Our realtor thought we should have set a higher limit. This house sold to someone else for $700k per Zillow; I don't know the terms. This house had over 40 offers.

The house we had our offer accepted on was very well maintained and met our requirements, except it had a septic system and propane for heat (the furnace was the back up to an 18 SEER heat pump) and hot water. I decided I can't be too picky about the septic system and propane. The inspector found no major problems with the home.

We were at a decision point, because if this offer was not accepted, we were moving our search to North Carolina to try our luck there. Our son and grandson are in Virginia, about 70 miles from the house we were making an offer on. That, and taking into consideration we know very little about North Carolina, and considering what we have been through over the past two winters with the wood smoke problem (and feel an urgent need to resolve our living situation), we knew we were going to offer big.

To better our chances, we decided to forego the septic system inspection because the offer deadline was the next day, and we accepted the fact that we may have to replace it at some point (would be $15k to $30k). We also omitted the termite inspection. I did carefully inspect all areas of the house I could get to. (What I found odd was the inspector and I were the only people up to that point who visited the house that opened the crawl space door and inspected the crawl space. We knew this because we had to dig out around the small door to get it open). I also walked around the yard to look for septic system leakage and soft spots; I found none.

The list price on this house was $515k. I asked our realtor what our offer limit price should be. She said, $650,000, minimum. I said, "I won't do that, but will set the escalation limit at $725,000." She just gave me this surprised look. So we presented our offer with escalation clause to better any other offer by $5000, up to a maximum price of $725,000, cash, with supporting documentation, and with zero contengencies. Since the sellers wanted settlement in 45 days, we included a June 3 closing date. Our offer was accepted and the house cost us $622k. This was $5k over the next highest offer, which we received a copy of from the listing agent as proof we paid the correct amount. The next highest offer had a home inspection (with option to void contract), radon, septic, and termite inspection contingencies and settlement in 20 days.
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Old 04-22-2021, 06:28 PM   #105
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It better be a bubble or my kids are screwed.
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Old 04-22-2021, 06:38 PM   #106
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My wife sent me this video when were discussing this. It's really funny in my opinion, and a good analogy of the bubble

https://www.facebook.com/JohnsonFile...66364668023681
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Old 04-23-2021, 08:35 AM   #107
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Originally Posted by W2R View Post
I feel like such a dunce! I forgot that not everyone has the same tax assessment situation as what we have here, something I should have mentioned. Anyway because I'm over 65, and my AGI is under $100K, my tax assessment is frozen for as long as my AGI stays under that limit. Millages are not frozen, so my taxes could go up, but the increase in home prices won't be the reason for it.
Oh no worries! Property taxes are all over the map in how they are calculated so it's all good. We have the 5% cap where we are which isn't terrible, but it's not nearly as generous as what we would have had in Georgia (no school taxes after 62 which is the bulk of the tax).
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Old 04-23-2021, 08:55 AM   #108
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I have to think that there is a few factors in play

For years I have heard the younger generations are refusing to own homes and its causing housing issues... and Covid gave them a reason to finally buy into the market whether they didn't want to infect their parents or didn't trust their roommates being as safe as they wanted them to be or just the fact you wanted space because you were going to be home all the time.

Not all markets are the same regardless of what the real estate people say. There is an exit of people from certain areas, I live in the NC triangle area and we have so many people moving here its ridiculous, they have to be coming from somewhere. So when net migration into your city is massive, its a simple supply/demand situation.

Everything about housing is having a supply issue, whether its the ridiculous jump in lumber prices, not being able to get appliances for 6 months or the labor shortage, you can't build fast enough because the material just isn't there, thus putting even more pressure on existing home sales.

Lastly interest rates... they are ridiculously low which makes the renting vs buying equation skew very heavy towards buying.

So long term, interest rates will likely inch up, supply will hopefully do some catching up, the question is will the "want my own space" revert?? Hard to tell but I think its much more likely prices will stop skyrocketing and level out vs. a bubble burst situation.
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Old 04-23-2021, 09:55 AM   #109
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There seems to be a lot of fear driving the housing market now -- fear of the virus, of rising interest rates, of prices going even higher, of missing out on opportunities, such as to work from home from anywhere. This means many big decisions are being made under extreme stress, the worst time to make big decisions. I wonder what will happen when nerves settle down and people realize what they've done.
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Old 04-23-2021, 10:33 AM   #110
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I just don’t understand where all these people are coming up with down payments, especially when you hear statistics about the majority having no or little savings. Is a year working from home really enough to save 100k for 20% down on an “average” 500k home?
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Old 04-23-2021, 10:56 AM   #111
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I just don’t understand where all these people are coming up with down payments, especially when you hear statistics about the majority having no or little savings. Is a year working from home really enough to save 100k for 20% down on an “average” 500k home?


Maybe it’s their second home and they “cleaned up” when they sold their starter home?
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Old 04-23-2021, 11:04 AM   #112
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I just don’t understand where all these people are coming up with down payments, especially when you hear statistics about the majority having no or little savings. Is a year working from home really enough to save 100k for 20% down on an “average” 500k home?
Savings have been through the roof for a year. Add to that everyone that was going to or in the process of buying when Covid hit and there is a ton of demand.

https://fred.stlouisfed.org/series/PSAVERT

Plus the down payment issue only really applies to first homes, not suburban McMansions. And IIRC, FHA-approved loans are only 5% down.
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Old 04-23-2021, 11:29 AM   #113
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It better be a bubble or my kids are screwed.
+1

DW and I purchased a 1300sf starter home in our current neighborhood for $170K in 1996. That was about 1.5x our combined salary at the time. That home would sell for over $700K today. For my teenagers, unless they’re earning huge salaries or get extensive financial help from us (which is not part of my current plan), I don’t think they’ll be able to afford to live in the area where they were born and raised. At these RE prices, I’m not sure I’d want them to.
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Old 04-23-2021, 12:11 PM   #114
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I just don’t understand where all these people are coming up with down payments, especially when you hear statistics about the majority having no or little savings. Is a year working from home really enough to save 100k for 20% down on an “average” 500k home?
Maybe they all rode Gamestop to the moon.
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Old 04-23-2021, 02:48 PM   #115
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I hope the bubble bursts in the summer of 2022 when I retire and start looking for real estate!

I do think another factor driving prices is simply supply and demand. There is a very limited supply of houses for sale compared to previous years. Many don’t want to put their house up for sale due to COVID, and some don’t want to sell for fear that they won’t find a new place of their own before their old home closes.

Once interest rates rise and more people start to put their houses on the market, the craziness might subside. It won’t totally disappear, but percentage increase will be smaller.
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Old 04-23-2021, 03:07 PM   #116
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I was speaking with my friend of 40 years who has been in the RE business his whole life. When I asked him about the nutty real estate market (residential only) right now he said (seriously):

"It's a great time to make a bad deal."

(you can interpret that however you like)
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Old 04-23-2021, 05:09 PM   #117
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NateW if the story you just told isn't an example of a bubble forming , I don't know what is.
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Old 04-23-2021, 08:25 PM   #118
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I've been having a bit of fun looking at home price estimates. I got message from Chase, my mortgage holder, with an estimate of $1.6M. That's the highest I've ever seen, so I did some comparisons. Zillow (and Trulia, who they own) don't have enough info for an estimate. Moveto has us at $1.2M, which I think is probably pretty close. Realtor has us at $840K, and Redfin says $647K. That's about a $1M difference between high and low. How very useful!

Both Realtor and Redfin show the last sold price as the cost of the lot we bought in 2005. They seem to not realize a $1M home was built 3 years later and has been there for 13 years. I wonder who writes their algorithms?
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Old 04-24-2021, 03:03 AM   #119
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Rent/borrow a copy of the Big Short movie. Observe how Steve Carell's character investigates the real estate market before putting his funds out there. Ask yourself it any of that looks familiar today (stripper in Vegas owning 3 houses, vacant homes in new neighborhoods, etc).

Have you overheard numerous recent conversations about the high prices of RE (while waiting in a grocery check out line, for example)?

Are network morning news shows doing a "hot real estate story" every day?

Are friends/family members justifying paying too much because they are afraid they will be priced out of the market if they wait too long?

If yes, you just may be in a housing market bubble.....
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Old 04-24-2021, 05:29 AM   #120
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Interesting.... Immediately house prices go up in the US, we call it a bubble. Mostly IMHO because of greedy lenders taking advantage of folks, investors going overboard or creating sketchy investment vehicles, with the inevitable "Burst" to follow. Hopefully that is not so common since the last RE crash.

In Canada and other countries Home prices have been increasing for the last 15 years with no sign of retreat. Not a bubble there. Why Here?
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