Real Estate Bubble?

[Ready]

I have always assumed that the term bubble refers to a market that has been rising for a long time and is about to crash, just like a bubble that you blow up larger and larger until it pops.

I never ask realtors what their opinion is on real estate. Their answer always favors whatever they have to say to get your business.

No real estate market goes up indefinitely. At some point it will soften. I won’t try to predict when or by how much. That’s as futile as trying to guess what the stock market will do next week.

[JoeWras]

We're waaay beyond 2008 pre-crash highs. Our market then didn't have the big highs that other markets had, though. So we also didn't have a big crash either.

This time we are 100% participating in the upside of whatever is going on.

[rk911]

we're not moving, selling or buying but we'll be soon offering for sale my late BIL's 2BR/2Bath condo in San Jose as part of settling his affairs/estate. we're looking for a quick "as-is" sale so i'm hoping the demand sticks around for a few more months.

[PandaBear]

Quote:

Originally Posted by rk911 we're not moving, selling or buying but we'll be soon offering for sale my late BIL's 2BR/2Bath condo in San Jose as part of settling his affairs/estate. we're looking for a quick "as-is" sale so i'm hoping the demand sticks around for a few more months.

My daughter just bought a 1BR/1Bath condo in San Jose. I’d say a 2/2 should sell, because so many are 2/1 or 2/1.5
Q

[2HOTinPHX]

Quote:

Originally Posted by rk911 we're not moving, selling or buying but we'll be soon offering for sale my late BIL's 2BR/2Bath condo in San Jose as part of settling his affairs/estate. we're looking for a quick "as-is" sale so i'm hoping the demand sticks around for a few more months.

Have you read this thread lots of good feedback on realtor...
https://www.early-retirement.org/for....php?p=2593206


I will try and keep this brief so feel free to ask any questions you might have.<br />
4 siblings inherited house we grew up in when both our parents passed away in late 2019 and early 2020. Its in the SF bay area and no one party can afford to buy out the others and keep it even if we all agreed to give the buying party a deep discount. Plus the house could really use total remodel inside.<br />
Due to Covid we had delayed the sale till now. Two brothers who live in the area have been clearing things out and getting the place ready for selling. Parents were smokers so they removed the carpet and had the inside repainted. Still things are going to look outdated.<br />
The one brother who has done the majority of the planning and work has lined up a realtor he knows of who is going to do the sale at 5%. They are suggesting listing it on the lower side of what houses in the area are going for. Expecting multiple offers in the hot housing market.<br />
One sibling who is watching Redfin and Zillow estimates and recent sales thinks we should list it much higher because of the hot market.<br />
<br />
I can see both points of view. Any thoughts would be appreciated.

[harley]

Quote:

Originally Posted by JoeWras We're waaay beyond 2008 pre-crash highs. Our market then didn't have the big highs that other markets had, though. So we also didn't have a big crash either. This time we are 100% participating in the upside of whatever is going on.

We built and moved into our house at the MD shore on Jan 2008. A few months ago the Zillow estimate showed that the price was almost back to what we paid. But not quite.

Interestingly, when I checked the value guess a few days ago it said "We don’t have enough information to calculate a Zestimate for this home." There hasn't been a lot of sales around here over the last decade, so that seems reasonable to me and makes me feel more comfortable with the Zestimate.

However, we're seriously considering taking advantage of this (IMHO) bubble, and selling our house in FL. It's Zestimate is more than double what we paid 8 years ago, and this owning 3 houses thing is wearing us down. We'd still go to FL for a few months in the winter, but now that we're almost down to one dog we should be able to rent instead of owning. And that would allow us to try some other parts of FL. Plus, our neighbor/friend that lived next door and watched out for our house for us has moved, so we're feeling a bit exposed and out of control now. The big negative for this would be giving up FL residency, so we'll have to think about it some more. Hopefully the bubble won't burst while we're still thinking.

[rk911]

Quote:

Originally Posted by JDPascale Have you read this thread lots of good feedback on realtor... https://www.early-retirement.org/for....php?p=2593206 ...

i did see that, thanks. the good news is there are no siblings or other beneficiaries...just my wife. we are going for a quick sale as we have zero desire to keep it either to rent or live in, even as a snowbird destination.

[RAE]

The crazy thing about this hot real estate market is that it does not seem to be location-dependent. I live in a rural area (our town is 4,000 population), where the real estate market had been pretty dead for MANY years, prior to last year. It started to pick up last year (2019), and this year, it has been absolutely nuts. Even houses that need a lot of work are selling, and houses in decent condition are getting multiple offers and selling above asking price. And apparently there is NOTHING available to rent at all. I never thought I would see anything like this around here. The local paper is attributing much of this demand to people moving here from the cities.........especially white-collar workers who can now work remotely. They interviewed several folks who moved here recently, and they all basically said they wanted to improve their quality of life by buying a piece of rural property closer to nature, and that their ability to work remotely now was a big factor influencing them to make the move now.

DW and I bought a small house in central Florida two years ago, and now I am very happy we bought it when we did. We are getting post cards, text messages, etc from realtors every week asking if we would like to list our house. I'm sure we could sell it right now for a pretty good profit, but I have no interest in selling, as that is our home for the winter months, and we love the house and the location.

[CRLLS]

I've been watching Zillow increase my home value for a while. About 1 year ago we finally had a "value" that was above what we paid in 2005. I do believe several things.

1)Existing homes are buoyed by the cost of new homes. i.e. inflated building material costs.

2) Low interest rates could be raising housing costs but that doesn't explain the las couple of years of low rates.

3) When people feel more comfortable with Covid, more homes will go on the market and the price escalation will stop.

4) When the bubble in cost of building materials bursts, existing homes will stabilize. or drop to more reasonable rates

5) When the foreclosure moratorium is over, then ~12-18 months later there will be lots of foreclosed homes on the market again lowering the value of other homes.

Who knows how high it will go or when it will stop? I think now is a perfect storm in reverse for those selling.

[chassis]

No bubble. No consumer debt issue at the moment.

Demand is being driven by population growth, migration out of urban areas and low financing cost.

Supply is low because of underbuilding after the GFC and natural elimination of housing units due to obsolescence, rezoning, demolition, etc.

I have seen articles on real estate softness in urban centers. The net effect however is a strong market across the country.

It's time to make money in the market on companies that service the industry. Many companies to choose from in this sector. The debaters can debate, or they can make money in the stock market. Or both.

[RobbieB]

The prices will go down when the demand goes down. Easy.

[stephenson]

Florida - western corner of the Panhandle.

Seems like a bubble - except fewer mortgages ... lots of cash deals. Prices have doubled in five years. Multiple offers for pretty awful properties.

We have single family rental properties and receive several offers a week from flip companies. Prices shown on zillow up 10% a month over last six months.

Bought our current home in March 2020 - up 25-30% since then - this in one of most expensive neighborhoods.

[teej1985]

Quote:

Originally Posted by chassis No bubble. No consumer debt issue at the moment. Demand is being driven by population growth, migration out of urban areas and low financing cost. Supply is low because of underbuilding after the GFC and natural elimination of housing units due to obsolescence, rezoning, demolition, etc. I have seen articles on real estate softness in urban centers. The net effect however is a strong market across the country. It's time to make money in the market on companies that service the industry. Many companies to choose from in this sector. The debaters can debate, or they can make money in the stock market. Or both.

Then why isn't urban areas going down? I moved to Long Beach, CA and the prices are insane. I'm already considering moving back to Arizona, lol.

[Another Reader]

Quote:

Originally Posted by JDPascale Have you read this thread lots of good feedback on realtor... https://www.early-retirement.org/for....php?p=2593206 I will try and keep this brief so feel free to ask any questions you might have.<br /> 4 siblings inherited house we grew up in when both our parents passed away in late 2019 and early 2020. Its in the SF bay area and no one party can afford to buy out the others and keep it even if we all agreed to give the buying party a deep discount. Plus the house could really use total remodel inside.<br /> Due to Covid we had delayed the sale till now. Two brothers who live in the area have been clearing things out and getting the place ready for selling. Parents were smokers so they removed the carpet and had the inside repainted. Still things are going to look outdated.<br /> The one brother who has done the majority of the planning and work has lined up a realtor he knows of who is going to do the sale at 5%. They are suggesting listing it on the lower side of what houses in the area are going for. Expecting multiple offers in the hot housing market.<br /> One sibling who is watching Redfin and Zillow estimates and recent sales thinks we should list it much higher because of the hot market.<br /> <br /> I can see both points of view. Any thoughts would be appreciated.

List it for sale at the lower end of the range of sales that have closed in the last 60 days on a Wednesday afternoon or Thursday morning. Say sold "as is." All offers will be reviewed after 5 PM Monday. Submit your highest and best offer by then. That creates the urgency and starts the bidding war. If you don't like any of the offers, pull it and start over.

[Another Reader]

Quote:

Originally Posted by rk911 we're not moving, selling or buying but we'll be soon offering for sale my late BIL's 2BR/2Bath condo in San Jose as part of settling his affairs/estate. we're looking for a quick "as-is" sale so i'm hoping the demand sticks around for a few more months.

Same advice. List at the lower end of the market, and set a date and time for offers. Create the auction frenzy. Do clean it up and get it on the market ASAP, before rates move up.

[FlaGator]

Quote:

Originally Posted by chassis No bubble. No consumer debt issue at the moment. Demand is being driven by population growth, migration out of urban areas and low financing cost. Supply is low because of underbuilding after the GFC and natural elimination of housing units due to obsolescence, rezoning, demolition, etc. I have seen articles on real estate softness in urban centers. The net effect however is a strong market across the country. It's time to make money in the market on companies that service the industry. Many companies to choose from in this sector. The debaters can debate, or they can make money in the stock market. Or both.

Interesting perspective.....How many RE cycles have you lived through?

-Late 70's-early 80's - oil patch overbuilding due to "oil prices can only go up". Other things going on then as well-high interest rates/inflation and Volker aggressively moving to squeeze out both.
-Late 80's-early 90's - high defense spending and employment growth in that sector. RE was collapsing in MA and CA even before the USSR folded.
-Institution-based overbuilding, primarily in the Sunbelt. Much of it concurrent with the tail end of the defense spending in the late 80's. That's how we ended up with the Resolution Trust Corporation to liquidate S&Ls.
-Easy credit due to regulatory push for "affordable" housing and housing finance, coupled with an investment demand for yield. Both substantial contributors to the decline starting in 2008. I think this is what you would characterize as a "consumer debt issue". Which, BTW, was not a significant factor in the earlier declines.

Different factors at play now-high construction costs, tight labor market, people fleeing some states for others. The price action lately tells me we are much closer to the top than a year ago, but there is no way to know when, or how, it will end.

When I was in the game, I had interactions with the economists at the major trade groups and finance companies. They knew who they worked for .
Most of what passes for "analysis" is substantially based on the prognostications of those folks.

Fortunately, I'm out of the game-no longer working and content to stay in my current home for several more years. No "debate" for me. I played the game, pushed back from the table and cashed in my chips. I'm a spectator now.

Make your money now, but don't be greedy. And don't bet your financial future on being able to accurately predict when and how it will end.

[Buckeye]

Quote:

Originally Posted by teejayevans Here in Florida, that’s pretty common for any desirable property...you’ll have plenty of company.

A 3/2 in our average little Central FL neighborhood just sold for $184 per square foot, if it sold for asking price. It was on the market for 10 days. It was rehabbed and flipped in Dec 2016. No pool but interior was all updated. Nice finishes, nothing high end.

It appears our house has gone up about 15% in less than a year. Crazy!

[Telly]

Bubble Bubble Bubble!

I think the driver that has really blown it up large is Covid-19 and the "work from home, so home can be anywhere" issue.

But I think with a bit of time, there will be some strong currents the other way:

1) A return to work in-person for many. Problems bringing on new people, and getting them up to speed when so many/all are "remote" workers. Loss of intellectual critical mass, where big new things start/problems are solved due to hallway or overheard conversations. How to decide who to promote, when remote (catchy phrase, eh?). Remote workers may unknowingly put themselves onto the gig-worker track. They may like the idea at first, but losing stability, benefits, the next recession... Not everyone is cut out to be a one-person consultant company. If they think that they can do it sitting at home in their PJs getting up at 10 AM to use their laptop, and that's the way it will be, good luck. A few can do it, till their star fades, I think most can't.

2) Moving from another state, or from urban to rural... may be many dropouts out of that after the initial excitement wears off. May miss a lot of things they had before. May hate many things that are "new" in their new location. Can go on and on on the possible negatives on this one, after starry eyes start to smart. So they move back, and those property prices then take a big drop, takers few and far between. I strongly doubt that the US migration to cities/suburbs is going to reverse for any real length of time.

3) Recency bias. This one is self-explanatory!

4) No matter what the mortgage rates are down to, a bad buy is a bad buy. All the "grab it while you can, quick quick quick!" won't make it feel any better when it's over.

5) I wonder what the increase in the divorce rate will be. Remember, divorce often means somebody has to sell, somebody loses big $, somebody has a tough time financially and or mentally.

I could keep thinking up things here, but to me, the whole situation screams of "Bubble!"

[RetireeRobert]

Quote:

Originally Posted by RAE The crazy thing about this hot real estate market is that it does not seem to be location-dependent.

People are not dumb. They see Washington DC printing presses running overtime, printing money out of thin air, for one multi trillion dollar extravaganza after another. People are running to put their rapidly devaluing dollars into some real asset---houses! And the good thing about a house is, you can live in it. Better to have a house with an inflating value, than to leave one's wealth in dollars which are being rapidly devalued.

[jrcunniff]

Quote:

Originally Posted by Telly Bubble Bubble Bubble! I think the driver that has really blown it up large is Covid-19 and the "work from home, so home can be anywhere" issue. But I think with a bit of time, there will be some strong currents the other way: 1) A return to work in-person for many. Problems bringing on new people, and getting them up to speed when so many/all are "remote" workers. Loss of intellectual critical mass, where big new things start/problems are solved due to hallway or overheard conversations. How to decide who to promote, when remote (catchy phrase, eh?). Remote workers may unknowingly put themselves onto the gig-worker track. They may like the idea at first, but losing stability, benefits, the next recession... Not everyone is cut out to be a one-person consultant company. If they think that they can do it sitting at home in their PJs getting up at 10 AM to use their laptop, and that's the way it will be, good luck. A few can do it, till their star fades, I think most can't.

This is an aside, but I can’t imagine working a corporate/office job that’s 100% WFH. Not saying it can’t be done, but for me I needed that face-to-face interaction to build relationships, provide feedback, etc. I often wonder how I would have managed being forced to WFH for the past year.