Real Estate Bubble?

[ShokWaveRider]

Unfortunately it seems that inflation is not a measure against things that actually affect most every day people. Food, Fuel, housing, all not counted. Seems like a made up metric to me. Our costs have gone up 20% over the past 2 years, but inflation is ~0, go figure.

 

[Dtail]

Unfortunately it seems that inflation is not a measure against things that actually affect most every day people. Food, Fuel, housing, all not counted. Seems like a made up metric to me.

As you have stated in the past, it is one's personal inflation rate which really matters.

 

[ShokWaveRider]

As you have stated in the past, it is one's personal inflation rate which really matters.

That is true, but that does not affect interest rates.

 

[RunningBum]

Unfortunately it seems that inflation is not a measure against things that actually affect most every day people. Food, Fuel, housing, all not counted. Seems like a made up metric to me. Our costs have gone up 20% over the past 2 years, but inflation is ~0, go figure.

I've owned my house for 20 years. I could easily live here for another 20. Housing prices are not affecting me daily or even yearly. Even my property tax has only gone up 10-20% in those 20 years.

 

[NW-Bound]

A local real-estate office sent me a postcard soliciting business. The postcard showed a dozen houses in the area with deals recently closed. They stayed on the market from 0 to 5 days. The 5 day is an outlier, as most are 2 and 3 days.

My 2 new neighbors immediately spent more money on their home after moving in. One had a landscaper tearing out the front yard to build a courtyard for a sitting area. The other tore out all the interior and trashed all cabinets and appliances.

When I was at a nearby Home Depot, I saw that they had 4 or 5 booths to accept returned merchandise. Previously, there were at most 2 positions manned for this service. Foot traffic must be very good.

 

[SecondCor521]

It seems like someone who was a good reporter would be able to do better digging and find out why this is happening and do a pretty good 60 Minutes-style report / story on it.

Ask a bunch of buyers:

1. Buying to live in, rent out, or second home?
2. Upgrading, downgrading?
3. Source of down payment funds?
4. Age and income?

One could also find some statistics to determine where people are moving from and to on a state-level and urban vs. rural basis.

 

[troutnut1]

I’m 67 now and I started in real estate when I was 18. I’ve been a broker in three states, an investor in 4, a mortgage loan officer, and an appraiser for over 19 years. And I don’t have a clue. Anyone who tells you they do is a fool or has an agenda. Not long ago there was a big thread here about how a crash was imminent because the boomers wouldn’t want our houses.

 

[Keim]

I don't understand your comment about "that means the market is down somewhere"...that makes no sense.

We have a finite number of potential home buyers. If people are buying here, they must be selling where they are coming from.

Specifically, in this case the realtor had stated one of the reasons our market is hot is because of COVID. People are leaving cities and moving to our rural community. If that's a mass phenomenon, the market should be going down in the cities people are fleeing.

Get it, Finance Dave?

 

[ut2sua]

Looking from another angle, RE is super cheap right now. Only a handful of bitcoins will buy any house you want.

 

[RAE]

We have a finite number of potential home buyers. If people are buying here, they must be selling where they are coming from.

Not necessarily - some of these folks buying homes now could have been renting previously. Some younger home buyers may have even been living with parents. You can't assume everyone buying a house now just sold one somewhere else.

 

[Markola]

Not necessarily - some of these folks buying homes now could have been renting previously. Some younger home buyers may have even been living with parents. You can't assume everyone buying a house now just sold one somewhere else.

Yeah, like the massive Millennials Generation entering their prime home-buying years.

 

[2HOTinPHX]

Are Redfin and Zillow helping to create the real estate frenzy..AKA bubble with overly optimistic estimates? Making everyone feel like a real estate expert?
Last week my siblings and I listed and sold our parents house we inherited just before Covid. Redfin had the home estimate listed much higher than what we listed it for. Then when it was listed Redfin estimate adjusted same day to within 10,000 of listing price...WTH? Not that it affected the final selling price or did it? Its one of the great unknowns...

This morning I was looking at few very recent sales in the same area and noticed the new Redfin estimates were below the actual sale price...one by 82000. Is this all just Redfin manipulation or is this a sign the market is actually cooling?

 

[1242Vintage]

Feel like we are being stalked by potential home buyers these days. Getting letters from relators and these fake sappy letters supposedly from young families looking for their “forever home” on a weekly basis. Sorry, I’m in my forever home and it’s not for sale!

The last one used images off of Google Streetview and Earth, pointing out and complementing various features of my home, shop, creek, orchard, RV access, pool, etc. Kind of creeped me out so I put in a request to Google to blur street view and aerial images.

Now all you see is a blur in Google street view and aerial photos of where my home sits. Will see if that slows down the letters.

 

[ncbill]

I've owned my house for 20 years. I could easily live here for another 20. Housing prices are not affecting me daily or even yearly. Even my property tax has only gone up 10-20% in those 20 years.

You have been fortunate.

My personal home has just been revalued, up ~25% from prior, which is every 4 years here by law.

They'll lower the tax rate for a year to soften the blow but after that I'll be paying ~25% more.

The large house where I grew up here in the same city last sold for ~3x what my mother sold it for 30 years prior.

But the annual property tax on it is now ~6x what she paid, even here in flyover country.

 

[FlaGator]

Are Redfin and Zillow helping to create the real estate frenzy..AKA bubble with overly optimistic estimates? Making everyone feel like a real estate expert?
Last week my siblings and I listed and sold our parents house we inherited just before Covid. Redfin had the home estimate listed much higher than what we listed it for. Then when it was listed Redfin estimate adjusted same day to within 10,000 of listing price...WTH? Not that it affected the final selling price or did it? Its one of the great unknowns...

This morning I was looking at few very recent sales in the same area and noticed the new Redfin estimates were below the actual sale price...one by 82000. Is this all just Redfin manipulation or is this a sign the market is actually cooling?

I'm nearly certain their estimates are *not* being manipulated.

My understanding is the models use public record data and agent-provided info where public records are not available. The models/algorithms may put some weight on listing prices, but the historic practice was to use legit sales data when available.

There are really only a couple of ways to generate a model/algorithm derived value estimate. The first in widespread used only sale price changes of the same property. This is the "Case/Shiller" price index approach. The second method requires a more comprehensive data set, including property and dwelling size, bed and bath counts, etc. The second is most similar to that used by an appraiser.

As many have seen from a 'zestimate', the models don't take into account many factors that are not in the public record. Examples include proximity to water, interior upgrades and condition, age of roof, etc. If your county releases substantial descriptive information ("property characteristics"), the model will be more accurate on an aggregate basis.

 

[CRLLS]

You have been fortunate.

My personal home has just been revalued, up ~25% from prior, which is every 4 years here by law.

They'll lower the tax rate for a year to soften the blow but after that I'll be paying ~25% more.

The large house where I grew up here in the same city last sold for ~3x what my mother sold it for 30 years prior.

But the annual property tax on it is now ~6x what she paid, even here in flyover country.

Is that a 25% raise in the assessed value, or the tax bill. They are very loosely related here. If my assessed value went up 25% and everybody else's did to, and the individual taxing jurisdictions do not raise their dollar needs, my tax dollars stay the same. Only when those taxing bodies do raise their needs, or my assessed value rises faster than the others do my tax dollars increase.

 

[karen1972]

We're way ahead of the 2008 highs in this market. Every market is different.

NC also has the unique issue of migrants from higher priced markets. I think karen mentioned this earlier. We've seen waves in the past, but this influx seems huge. We get folks coming from NY, for example, who are used to half million dollar homes. They come here and see the equivalent at 300k and have no problem making a rising cash bid.

well given the Apple announcement following the recent Google one and that large BioTech firm, I am not sure how frothy it is going to get before it cools a bit. More so as they are talking wages that are more in range with what I've seen in other locations, Colorado, Chicago, etc which is nearly twice what some of these companies have been getting away with. Its going to put a lot of pressure on the current RTP companies to adjust wages to retain talent and if you start having salary adjustments its just going to drive prices even higher.

The only thing that concerns me in the area is # of homes used for renting. Its shocking to me to see $400k+ homes being bought specifically to be made into rentals and they get people to rent because the person who was going to buy just got priced out and is forced to rent.

 

[Another Reader]

I got a solicitation from an agent bounty hunting for these people.

https://rentprogress.com/houses-for-rent/market-phoenix-az/page-1/rows-20/search-results/

Progress Phoenix owns over 1,200 SFR's in the Phoenix area. They focus on newer homes, and pick new over better located older properties.

The offer was for $375k for a small, newer property in the city of Gilbert. There are 3 recent comps of the same model. One in February at $340k, one with a pool and nicely done paver patio at $356k at the beginning of April, and one at $345k for a relatively basic house 11 days ago.

Agent says they are looking to add, even at these prices. Based on their website, they would probably ask around $2,195 for my house. Good luck with that. I would put it up at $1795 -$1,850, with recent tile, carpet and paint.

Yes, people are moving to the Phoenix area and the employment picture looks rosy, but this isn't Silicon Valley. It ended badly in 2007 and a few times before that. The demographics are a little stronger than in the past, but it's not different this time.

 

[flintnational]

The perfect portfolio. Everyone will be rich!

20% residential real estate
20% SPACs
20% Bitcoin
20% Gamestop
20% NFTs

This portfolio is so diversified, some of the assets don't even exist!

 

[MichaelB]

The perfect portfolio. Everyone will be rich!

20% residential real estate
20% SPACs
20% Bitcoin
20% Gamestop
20% NFTs

This portfolio is so diversified, some of the assets don't even exist!

Hmmm .. needs more cowbell.

Other than that, a perfect portfolio for the modern millennial. Well done!

 

[Live Free]

Two anecdotal stories - I have neighbors on either side of me. One bought in late 2018 and just sold his house for $230K more than he paid for it 2 years ago ($610K). The other is a renter, paying more than $4.3k/month for a no frills, middle class home in suburbia.

Inventory is low for both rental of and sale of single family homes. I'm assuming that is because of Covid and low interest rates, but I have no idea.

It feels like a bubble to me, but I am no expert.

 

[JoeWras]

well given the Apple announcement following the recent Google one and that large BioTech firm, I am not sure how frothy it is going to get before it cools a bit. More so as they are talking wages that are more in range with what I've seen in other locations, Colorado, Chicago, etc which is nearly twice what some of these companies have been getting away with. Its going to put a lot of pressure on the current RTP companies to adjust wages to retain talent and if you start having salary adjustments its just going to drive prices even higher.

The only thing that concerns me in the area is # of homes used for renting. Its shocking to me to see $400k+ homes being bought specifically to be made into rentals and they get people to rent because the person who was going to buy just got priced out and is forced to rent.

I must have been in a cave today. Actually, I was enjoying the day gardening. So Apple finally did it, huh? They practically had the buildings ready to go in 2018 before taking off.

Hold on and buckle up. After the 91-93 recession, Money magazine declared RTP #1. A huge roar came in housing and wages, which lasted through 2000 or so. Since then, it has been a kind of stasis, with both drifting up at near inflation rate. Actually, my wage dropped post 2008 both in real and inflationary terms. It was one reason I ER'd. I had enough of the bullsh. As you say, they could "get away with it" due to a few factors including local job market pressure (low) and significant and widespread off-shoring.

So, yeah, I agree with you on all points, including the rental thing.

 

[camfused]

I am in the Research Triangle Park NC area. My niece was looking for an apartment here. A month ago, one place we were looking at was $1050/month. This week, the same place is about $1400/month. BTW, she signed last week, at my urging to get a place as fast as possible.

In October, my house was worth $384K in Zillow. This week it is worth $450K in Zillow.

Smells like a bubble to me too.

 

[pb4uski]

.... Zillow isn't perfect, but it shows this curve for a nearby home which I find is matching sales prices pretty well:

You made me look for our winter condo. The Zesstimate went up 7.56% from March 2021 to April 2021. Yikes!

DW was wanting to do some renovations but I said no because we would have more into it than we could get out of it... I hope that DW doesn't see this thread.

 

[chassis]

Did "bubble" get defined in this thread? Rising prices and transaction volume does not constitute a bubble. Where is the debt component of the alleged bubble?