Real Estate Bubble?

[Markola]

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Originally Posted by RAE 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]

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Originally Posted by RunningBum 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]

Quote:

Originally Posted by JDPascale 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]

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Originally Posted by ncbill 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]

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Originally Posted by JoeWras 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-...earch-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]

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Originally Posted by 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!

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]

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Originally Posted by karen1972 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]

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Originally Posted by JoeWras .... 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?

[38Chevy454]

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Originally Posted by 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?

I define a bubble as unsustainable conditions. Examples such as prices rising higher than they can stay long term, or demand that is significantly above normal.
The problem is that knowledge of a bubble is best seen in hindsight.

[FlaGator]

Quote:

Originally Posted by 38Chevy454 I define a bubble as unsustainable conditions. Examples such as prices rising higher than they can stay long term, or demand that is significantly above normal. The problem is that knowledge of a bubble is best seen in hindsight.

+1
Not every bubble is caused by debt, but easy money makes any bubble bigger, and more painful on the downside, than it would have otherwise been.

If someone is looking for a clear definition/metrics on what constitutes a bubble so they know how high it will go, and when to get out, good luck.

[Montecfo]

Quote:

Originally Posted by FlaGator +1 Not every bubble is caused by debt, but easy money makes any bubble bigger, and more painful on the downside, than it would have otherwise been. If someone is looking for a clear definition/metrics on what constitutes a bubble so they know how high it will go, and when to get out, good luck.

Of course in this case, credit has not been relaxed. Though rates are low they have been about this low for quite a number of years.

I think rapid home price rise in the US is always unsustainable given people have to qualify for loans based on income. I do not like the term "bubble" because in this case home price rise is based on fundamentals, not juiced via relaxed loan terms.

We have had below trend growth in home ownership for years. This is simply beginning to reverse that trend, and Covid has caused people to re-think where they want to live, while reducing people wanting to sell. But high prices and end of covid will bring more sellers.

[CaliKid]

Who cares if it's a "bubble" or not!? What does that matter?

I just bought a house but I sold my other house so it's a wash. That is, for personal residences I don't see why it matters. If you want to move you want to move.

If I were buying a rental property then maybe I would think twice as prices seem "high" but if the rents support it then still who cares what the market is or is not.

Seems like a lot of talk about nothing.

[ExFlyBoy5]

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Originally Posted by CaliKid Who cares if it's a "bubble" or not!? What does that matter?...Seems like a lot of talk about nothing.

Or, it could be an issue. Values are at record high numbers in some areas. People get loans on these and let's say there is a bubble (or wildly over valued homes) or whatever you want to call it. Inflation gets ugly. Interest rates on a fixed 30 year mortgage creep up to 7% and home values crater. Lots of people are now upside down and well...

So, it can matter.