Is the realestate bubble bursting?

[Katsmeow]

I am curious to understand when/how you learn the actual sales price. All the resources I know don’t report the sales price until some time after the property closes. Sometimes it takes months to be published.

This will vary by state. In Texas it is not reported publicly at all. However you can get it from a real estate agent in most cases as they report the sale price to MLS.

In Delaware it seems to be reported on redfin pretty quickly. We closed on our house almost 3 weeks ago and it is there now. But, I have seen some houses we were following and it was online at redfin within days. I suspect the agents report it to MLS.

 

[jazz4cash]

This will vary by state. In Texas it is not reported publicly at all. However you can get it from a real estate agent in most cases as they report the sale price to MLS.



In Delaware it seems to be reported on redfin pretty quickly. We closed on our house almost 3 weeks ago and it is there now. But, I have seen some houses we were following and it was online at redfin within days. I suspect the agents report it to MLS.

Same experience with Redfin. DD closed and they show sale price within 10 days. Zillow seems slower.

Edit. DC area sales are still at or a bit over ask (unless distressed property). DD had to extend her search to Balt ‘burbs to find starter condo. She was outbid 6 times before getting her deal.
Home across the street went on MLS Thursday, had open house on Sat and Sun. It was under contract Tues. Nicest home on the block listed 45% above the 2014 sale price. Assuming it sold over list and waiting to confirm.

 

[pjigar]

As a "it's a bubble and will burst" adherent, it's just a matter of time. Affordability is at all-time lows, sales volume is in the ditch, and rates are not dropping any time soon. Could be wrong, stupidity often lasts longer than a rational person's patience.

I can't agree more. People buying rental properties at significantly negative cash flow in North Texas which has never happened in my life here (22 years) or may be longer before I arrived. FOMO is in the air and you can feel it. Land market is really out of whack. People are paying over 30K per acre for land 30 minutes away from the nearest Walmart. Crazy.

 

[Markola]

^^^^ Regarding rental properties, I did notice a spike of duplexes for sale last spring in my Midwestern city neighborhood. I figured it was long time landlords cashing in to buy bonds that yield as much, but that’s a guess. Who would buy duplexes in these conditions is even more of a mystery to me.

 

[jazz4cash]

I am not sure this is a bubble that will burst. Seems to be slowly deflating in my HCOL. Yes affordability is ridiculous because they only build upscale.

 

[COcheesehead]

We just had two, $2m ish homes sell in our neighborhood within days of being listed. Not sure what that says, but I think the value of my home is still going up.
Real estate has always been local. Western Colorado where I live is still highly desirable.

 

[LateToFIRE]

I have homes/properties in the Northeast. Bigcity values have steadily risen over past couple decades, sale market is still operating on short supply for large, renovated, private spaces, mortgage rates have not made much of a dent in demand at the upper-middle end of market. Bigcity rental market has been on fire, literally bidding wars for well-priced rental units, especially at the larger end. Work from home has shifted requirements - people need SPACE, lots of space, and they need to live near amenities like parks and restaurants. Yes, some left the city during pandemic, others moved in, many moved back - either got bored or discovered just how costly owning a suburban house could be. They love living in the city, they don't like going to an office. I get it - if you have the $$$ to afford prime r.e. and you own your own time, big city life can be very cool.

Values in well-known, desirable semi-rural vacation properties (Tri-State area) jumped 50-100% during pandemic, have not come down, and I am seeing more excessively-priced properties coming on the market and sitting on the market longer - fewer buyers, more selective, mortgage rates have had an impact. But, this is in contrast to a blistering pace past couple years where stuff would sell in days, sight unseen, no contingencies, cash buyers, at insanity level prices. Things seem to have settled into a higher equilibrium - quality still sells, crappy stuff asking crazy prices will have to come down to Earth. Sales for vacation/weekend properties also tend to be seasonal, usually Spring is peak.

 

[JoeWras]

Anecdote: one of our big realtors who advertises on radio a lot has changed her tune. She's pivoted away from "use our 'coming soon' service" to "we're here in tough markets."

She's seeing something.

 

[Aerides]

In our area, if someone lists their home slightly above the Jan 2022 prices but less than April 2022 prices, it has an offer within the week, often the day it lists.

In my area there is almost zero new construction, and for the SFH market, it's mostly well above $1M for that.

As a result, April 2022 is way in the rearview mirror. That's when the house opposite ours sold for $750k, $379per SF.

Since then, more recent sales have gone for $450-500 per SF. Nothing has listed below $800k, most recent sales of updated 2000 sf homes going for $980 and $1m. Prices are basically double what they were 4 years ago here.

 

[Badger]

In my area there are numerous large scale (3-4 story apartments) communities being built. Many of the complexes must have 200 - 400+ units. The average price of existing apartments is about $1.5k/month and go up to $3+k.
I thought construction would have slowed down a couple of years ago but every time I drive around town I see land being cleared for another large scale apartment community.
I'm glad I settled at the beach decades ago where I have everything I need and away from all the people, traffic, and confusion. No traffic from the east (ocean), no through traffic north (fenced military base), and most people coming to the beach don't use our beach because it is all residential and there are very few places to park their cars.
Prices are high but doesn't affect us since I bought 40+ yrs ago. I would hate to have to find an affordable home to buy these days.

Cheers!

 

[tmm99]

I don't know how anybody could afford a house when the house prices are so high, with such high mortgage rates.

I'm sure we wouldn't qualify for the house we bought just 7 years ago.

 

[mojavesue]

We own property in Las Vegas NV and a small community outside of Albuqerque. Things seem to have slowed down some in both places. Sales have really slowed down in Vegas, but inventory is still very low. In Corrales where we are currently, activity is still good. Prices here have gone up probably 40 percent or more the past 3 years. But still affordable compared to other areas in the SW. Unless people start losing their jobs en masse, I really dont see a crash. Most people are sitting on sub 4 percent mortgages if they dont own free and clear. That fact will keep inventory low for years. Plus the millenials coming in to home buying age will only keep pressure on demand. And builders havent kept pace with demand since before the great recession. I just dont see people giving up a 3 percent mortgage for a 7 plus. I was told by a realtor in Las Vegas that around 35 to 40 percent of homes are owned free and clear. The rest have sub 4 percent mortgages. Things would have to REALLY get bad for them to walk away from a 3 percent mortgage and become renters.

 

[Katsmeow]

I just dont see people giving up a 3 percent mortgage for a 7 plus. I was told by a realtor in Las Vegas that around 35 to 40 percent of homes are owned free and clear. The rest have sub 4 percent mortgages.

There are a lot of reasons people sell and buy. Some people really have no choice as they have to move due to work. When we thought we might move to Las Vegas we visited in the summer of 2022. We went to some open houses in the Providence area. At least a couple of them were Air Force people who obviously had been sent somewhere else. So, they needed to sell. Even non-military folk often have to move due to work. Also, houses often sell when their are divorces. Sometimes people really need a larger house or they want to downsize.

We recently bought a house in Maryland. We gave up a 3.5% mortgage and now have one that is under 7% but not by a huge amount. Of course, I don't like that my mortgage payment went up. It costs me an extra $7600 a year.

But we are still better off financially!

In Texas, our real estate taxes (with the over 65 exemption which froze our school taxes) were about $6700 a year.

In Delaware the taxes on the house we just bought (2000 SF v. 2400 SF in Texas) are about $2200.

In Texas my homeowner's insurance was $6840 (never having had a claim). In Delaware my homeowner's insurance is $1171.

In Texas my HOA was $600 a year. In Delaware my civic association is $25 a year.

Just on those things I am saving about $10740 a year.

So the net is that the saving on taxes and insurance for the house are $10740 a year and the extra mortgage payments are $7600 a year so I still save $3140 a year even with the high mortgage rate.

And, really it is better than that. Delaware has no sales tax. (It has an income tax but since Social Security is not taxed our income taxes will be either nothing or a few hundred dollars.).

This house also doesn't have a pool so I won't have pool maintenance costs. There are a number of areas where the upkeep on this house are less.

The point is that in deciding whether to take a higher mortgage rate you have to look at the totality of the circumstances. In Delaware virtually every house was getting multiple offers.

 

[Sunset]

There are a lot of reasons people sell and buy. .....

We recently bought a house in Maryland. We gave up a 3.5% mortgage and now have one that is under 7% but not by a huge amount. Of course, I don't like that my mortgage payment went up. It costs me an extra $7600 a year.

.....

When I had mortgages even on a rental and they were over 5% , I lump sum paid on them to pay them off in ~7 years instead of 30.

 

[MatatuPuncher]

I got a funny feeling that all those people that paid $450,000 and up for homes in my subdivision over the past year, year and a half, are going to be a little shell shocked soon.

Mike

Lol! I bet this didn't age well.

 

[JoeWras]

Anecdote. All of the sudden I'm seeing a bunch of "For Sale" signs up in local neighborhoods. These were rare over the last 5 years. They were always "Coming Soon" signs which resulted in instant sales. Those signs seem to have disappeared.

 

[Major Tom]

I just don't see people giving up a 3 percent mortgage for a 7 plus.

As Katsmeow said, there are quite a few reasons that people with a very low interest rate mortgage might sell. If we head into a recession in the next year or two, the accompanying job losses could force some recent home buyers to sell. Not everyone with a 3 or 4% mortage is "sitting pretty". Some of those folk used a low interest rate mortgage to buy a house at the recently inflated prices, and came very close to over-extending themselves financially. All it would take for some of these folk, is a few months without income, and they'll end up selling, or losing their homes. These folk won't be giving up their 3% mortgages for a 7-8% loan. They'll be out of the property market completely. There has been a lot of "exuberance" in the housing market in the last few years. I suspect that quite a few people bought houses, who shouldn't really have been buying a house.

 

[JoeWras]

DW and I tried to think of the reasons people would leave a 3% mortgage. She came up with a few:

- Death in the family
- New job
- Lost job
- New children in the family
- Old children move back in
- Mother in law moves in
- Divorce
- Tired of the commute
- Bad commute, can work from home, but have no space
- House too big, really want to downsize from 4,000 to 1,800 (empty nest)
- Tired of the weather
- Tired of not having insurance in FL, gotta move back north ( )

 

[tryan]

Little bit interesting... a young (early 30's) couple learned they have ~300k equity in the house. Decided to sell and rent "for a while". 3 showings so far ... no offers. Dropped the price 10k. Now deciding between further price decreases or staying for the winter.

Said the $$ would be "life changing and a college fund for jr".

 

[Another Reader]

Anyone seeing any drastic changes in the market where they live? No bubble bursting is Phoenix yet despite rising interest rates and temperatures.

From Refin for Phoenix:

In August 2023, Phoenix home prices were up 2.3% compared to last year, selling for a median price of $440K. On average, homes in Phoenix sell after 36 days on the market compared to 38 days last year. There were 1,373 homes sold in August this year, down from 1,586 last year.

That was August, this is now. Closings in August generally reflect late June and July contracts. Pendings in many areas have dropped significantly. Prices are dropping in the West Valley and houses are not selling. The rental I could have sold in January for $475k would list at $395k today. Not sure we will get back to the prices in 2009-2012, but the correction will be substantial.

 

[Fermion]

That was August, this is now. Closings in August generally reflect late June and July contracts. Pendings in many areas have dropped significantly. Prices are dropping in the West Valley and houses are not selling. The rental I could have sold in January for $475k would list at $395k today. Not sure we will get back to the prices in 2009-2012, but the correction will be substantial.

I don't know the age of the house you are talking about, but for a bigger house that is relatively new, $395k is getting close to build cost, so there is a floor (unless we get deflation in materials and labor).

 

[HawkeyeNFO]

Little bit interesting... a young (early 30's) couple learned they have ~300k equity in the house. Decided to sell and rent "for a while". 3 showings so far ... no offers. Dropped the price 10k. Now deciding between further price decreases or staying for the winter.

Said the $$ would be "life changing and a college fund for jr".

Depending on a bunch of other circumstances, a HELOC might be a better source of cash, given the high cost of Real estate teransactions.

 

[ShokWaveRider]

Definitely slow in our area. Homes over 1.3m seem to be sitting but have not seen many if any price drops. Even the homes below $900k are sitting around, but again not noticing any price reductions. Folks are just holding on I guess and not in a hurry to move. Moat homes are owned outright. The two I know of that have mortgages at sub 3% are not for sale.

 

[Ian S]

Well, if our home is any indication, prices in the Sedona area have stabilized. Homes around here are still selling but it's taking longer. A nearby older 70's home recently came on the market - it's been vacant since before we moved here 4.5 years ago and, talk about truth in advertising, the realtor's sign says fixer-upper. Listed at $900K for 1700 sq.ft. It has a gorgeous location on nearly 3 acres. However, it abuts the National Forest and I'm not sure how easy it would be to build a much larger footprint home due to the sloped lot.

Here's our home's latest pricing history from Zillow:

 

[Another Reader]

I don't know the age of the house you are talking about, but for a bigger house that is relatively new, $395k is getting close to build cost, so there is a floor (unless we get deflation in materials and labor).

In 2008-2012, houses sold well below replacement cost. Building pretty much stopped. Prices can and do drop below the cost to build.