Real Estate Bubble?

[48Fire]

I was at a presentation by a Realtor discussing our local market. Like many, it is really hopping. Home values going up $15k every two weeks, limited inventory, offers with no contingencies going $50k over asking on first bid. The realtor discussed her thoughts on why-Covid making our rural market more desirable, etc.

I asked-if people are moving here they must be leaving somewhere. Supply and Demand what it is, that means the market is down somewhere. Where?

She claimed the market was up everywhere, but insisted she expected no imminent crash and we weren't in a bubble. How's that work?

Hmmm...interesting. I think asking a realtor whether we are in a bubble is like asking a barber if you need a haircut There is a little bias there

I believe this is a bubble. Our daughter and SIL just went through the process. They lost out on a house they "only" offered $5,000 over asking price. The house they eventually bought was $12,000 over asking, one day on the market. They sold their house $15,000 over asking, one day on the market, after considering an offer $30,000 over offer, but were concerned about the flaky buyer and realtor.

Their realtor was quite honest about the likelihood of a bubble in the near future. She said that their analyst at Century 21 said that it could occur in weeks or months. If they were comfortable losing $100,000 of equity and riding that out for several years, then make a strong offer.

The other thing that makes this feel like a bubble to me is that many people I have talked to have said crazy things lately. They want to buy now, before prices go up more, or before interest rates go up. So the bubble continues to grow, driven by an insane demand, reduced supply, and a growing optimism about the future.

We were considering upgrading from our condo to a SFH, but not at these prices. It's really getting crazy

 

[RetireeRobert]

What do the "experts" think:

https://www.marketwatch.com/story/i...erts-say-11619023745?siteid=yhoof2&yptr=yahoo

 

[Bamaman]

This.

My 22 yr. old HVAC is having issues, with a small slow coil leak finally occurring. I could limp it for an unknown time (week, month, year?) by refilling the refrigerant (R-410). (I saw one guy on bogelheads claim he has a barrel of R-22 so he just refills every now and then and keeps his unit running 'forever.' Never mind the ozone layer.)

But due to changing efficiency laws, I can't even get a coil that will fit in the space of my unit. So, it is time to look at both a new furnace and compressor.

I don't like the price quotes, but you know what? I don't see them going down. So instead of playing chicken with inflation, I just bit the bullet and sprung for a new unit which will go in this week. Time to Blow That Dough.

I'm in the same point as you, however my compressor locked up on my 26 year old heat pump. It's time for a new unit.

You can see the prices online==$2250-2500 for 3 ton heat pumps.

I was quoted $5300, $7200 and $8900. I'm sorry, but I'm not going to pay anyone for a $3000, $4500 or $6000 profit for one day's labor.

I finally got a $4100 bid and jumped on it. The guy is a small HVAC firm without all the overhead of the contractors with 30-50 employees.

 

[steelyman]

Hmmm...interesting. I think asking a realtor whether we are in a bubble is like asking a barber if you need a haircut [emoji23] There is a little bias there

Yes. The realtor phrase I’ve heard around here is that the market is “hot”. Sounds more upbeat but less near-term gloomy than “bubble”.

 

[48Fire]

What do the "experts" think:

https://www.marketwatch.com/story/i...erts-say-11619023745?siteid=yhoof2&yptr=yahoo

Interesting article, thanks for posting. This is the best analysis I have seen, and it lines up mostly with my thinking and my eyes. The one line that caught my attention was, "It's different this time." Crashes are always different, but irrational exuberance seems to be a common denominator

BTW, love the wine in your area We're considering flying out there soon.

 

[48Fire]

Yes. The realtor phrase I’ve heard around here is that the market is “hot”. Sounds more upbeat but less near-term gloomy than “bubble”.

Haha, yeah, and in the article just posted, they said they expect some "cooling of the market." It might feel like liquid Nitrogen if your timing is bad

 

[Markola]

There’s a tidal wave of Millennials between 25-40 who are into their professions and are expanding their families. That plus record low interest rates creeping back up is driving the frenzy.

https://www.cnbc.com/2020/02/04/mil...st-houses-this-year-how-they-can-prepare.html

 

[Chuckanut]

When I was in college many decades ago, my father had a 6.6% 30 mortgage on our house.

I predict that a return to 6.6% 30 year mortgages will result in lower real estate prices. Amazing!

The market is being driving by interest rates I would never have dreamed possible when I was in my 20's, 30's, 40's and 50's. My 2¢.

 

[USGrant1962]

Zillow has been reasonably close in my neighborhood and yes, it shows my house up 16% this year. But we're still 6% or so under what we paid in 2005 when MegaCorp moved me from a LCOL to HCOL area. So bubble away.

 

[RetireeRobert]

When I was in college many decades ago, my father had a 6.6% 30 mortgage on our house.

The market is being driving by interest rates I would never have dreamed possible when I was in my 20's, 30's, 40's and 50's. My 2¢.

When I bought my first house I paid interest rate of 9.25%, in the last half of the 1970's.

When I sold my second house some years down the line in the late 1980's, I sold it on contract at 10.25%.

The Millenials now days don't know what it is to pay any real interest.

 

[cooch96]

What many call Bubble is just another incarnation of Inflation. Which many refuse to admit is rampant right now.

+1. I just had my roof replaced this month. Quoted hourly rates for roofers ranged from $40-$80! We'll be seeing carpenter work billed at $100/hr soon in these parts; labor costs are up. Millennials are moving from downtown into the suburbs, so demand is up. Lumber and plywood prices have screamed upwards the last 9 months, so material costs are up.

I think high housing prices are here to stay for long while, just like medical care costs and higher education.

 

[MRG]

I think bubbles are fun.There's little inventory here, realtors have been advertising for anyone who wants quick cash to call. I look at inventory and it's overpriced junk at 600k. Our county is trying to limit short term rentals and some folks are pretty upset.

 

[doneat54]

Yes. The realtor phrase I’ve heard around here is that the market is “hot”. Sounds more upbeat but less near-term gloomy than “bubble”.

We met with our realtor last week about possible future plans. We said that she must be loving the "hot" market. She said she hates it. She has 14 buyers from out of state looking for properties, ready to pay 100% cash (including one wanting a $1M horse farm) and she can't find any sellers.

We have decided to try an pull in the sale of our primary home from '23 to '22 as not to miss this "hot" market.

 

[48Fire]

When I bought my first house I paid interest rate of 9.25%, in the last half of the 1970's.

When I sold my second house some years down the line in the late 1980's, I sold it on contract at 10.25%.

The Millenials now days don't know what it is to pay any real interest.

Yep, just had this conversation with daughter and SIL. We had 12% adjustable rate for our first house in 1984

 

[Dtail]

When I bought my first house I paid interest rate of 9.25%, in the last half of the 1970's.

When I sold my second house some years down the line in the late 1980's, I sold it on contract at 10.25%.

The Millenials now days don't know what it is to pay any real interest.

My first co op bought in 1983 came with a 12.25% fixed 30 yr.

 

[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]

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]

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/forums/showthread.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]

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]

Have you read this thread lots of good feedback on realtor...
https://www.early-retirement.org/forums/showthread.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.